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Mar 12 2009

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Kingdom Hotel Investments 2008 preliminary results

Revenue and KHI EBITDA growth were driven by strong first half results as well as revenue recognition from the handover of 32 villas at the Four Seasons Mauritius in the second half.

KHI Adjusted EBITDA was driven by strong hotel performance at associated properties as well as real estate sales in our associated Four Seasons properties in Egypt.

Reported net profit growth was mainly impacted by non-recurring write-offs related to the development costs of projects that are cancelled or on hold and gains on disposals.

Balance sheet remains conservatively leveraged, net debt $149.1 million, net debt to equity ratio of 13%

Strategic highlights

Geographic diversification continues to deliver benefits as strong profit performance of most Middle East North Africa and Sub Sahara Africa hotels helped offset renovation driven losses in Kenya, as well as mitigate the effects of second half softness.

KHI continued to advance its portfolio rationalization strategy despite a challenging environment with the disposals of our minority investments (Dubai Pearl, Fairmont Palm, Fairmont Zanzibar) and the step-up acquisitions of our El Quseir and Kenya properties.

Active capital reallocation in line with changing market conditions and opportunities. KHI decided to reallocate its capital on operating assets and minimize its exposure to early stage development projects. The Company wrote-off or provided against US$ 26.4 million of development related costs.

Operating highlights

System RevPAR growth of 12% (10% on a currency neutral basis) driven by a strong first half. Slowdown from the previously announced first half growth of 23% (16% on a currency neutral basis) was driven by occupancy declines and slower rate growth in the latter part of 2008 primarily in our resort properties, Cairo, Paris and Dubai hotels.

Ancillary real estate sales progressed well. 40 of the 45 villas at the Four Seasons Mauritius have been sold and KHI recognized gains on 32 of these in December 2008. KHI has pre-sold 111 units (47% of inventory) of the Raffles Residences Manila development.

Developments projects were rationalized and construction is progressing at remainder. KHI opened the Four Seasons Mauritius, cancelled or put on hold four development and expansion projects (Langkawi, Da Nang, Phang Nga, Uganda) and advanced construction activities at the remaining five development projects (Four Seasons Beirut, Four Seasons Marrakech, Raffles Seychelles, Fairmont Raffles Hotel and Residences Makati, M?venpick Ambassador Accra).

All remaining renovation programs were completed. Renovation of the Fairmont Norfolk Fairmont Mount Kenya and InterContinental Lusaka as well as the capacity expansion project at the M?venpick Dubai and the renovation and integration of the adjacent Bur Dubai Residences building were all completed.

Changes to senior management

On 31 March 2009, Mr. Ghaith Shocair, Senior Vice President Finance and Chief Financial Officer and Director will leave KHI and resign from his position on the Board to pursue other opportunities. Mr. Shocair will remain as an advisor to the Company on selected projects and continue as a Director of a number of subsidiaries in that context. His responsibilities will be assumed by KHI Finance Director Mr. Gordon Drake. A qualified accountant, Mr Drake joined KHI in July 2007 and will assume Mr Shocair's position on the Board of KHI . Mr. Drake has extensive experience and his appointment to the Board ensures a high degree of continuity.

Mr. David Mandefield, Senior Vice President Legal Affairs and Corporate Counsel will also retire from the Company at the end of March 2009. His responsibilities will be assumed by Ms. Shazmah Hakim, Vice President Legal Affairs.

Subsequent events

In early January, KHI successfully completed a buy-back of 6.2 million of its Global Depository Shares ("GDS") at a purchase price of $1.00 per GDS in a tender auction for 7.5 million GDS.

KHI continued to execute on its portfolio rationalization.

In February 2009, the Company completed the sale of its 15% equity investment in the Fairmont Nile City Cairo project (total consideration $11.5 million).

Organizational restructuring and G&A cost savings.

Starting in December 2008 and continuing into January of this year, KHI initiated a plan that includes voluntary and involuntary staff reductions at its offices in Dubai and Singapore. 17 employees will depart the Company during this year, representing slightly over a quarter of the total 2008 year-end headcount of 65. As of this date the majority of these employees have left the Company.

Outlook

We expect reduced visibility on hotel trading performance and system-wide RevPAR declines. As a result, KHI is suspending RevPAR guidance until visibility improves. KHI expects to maintain a defensive position with respect to asset management and is partnering with our strategic operators to execute a series of profit protection initiatives.

Our focus is on cash protection and prudent balance sheet management.

KHI 's very strong cash position ($256 million) and consolidated debt ($ 411 million) leave the Company with a 13% net-debt-to-equity ratio. KHI 's development pipeline and commitments are fully-funded. Discretionary capital expenditures at all properties have been minimized. KHI will draw on new loan commitments to fund existing developments and selectively add debt where it sees recapitalization opportunities and access to credit.

Given the dislocation in capital markets and global liquidity issues, we expect the current standstill in real estate transactions to continue. KHI does not foresee any resumption of its acquisition activities until the second half of the year at the earliest but will continue to take advantage of portfolio rationalization opportunities.

The remaining 13 villas in the Four Seasons Mauritius development will be delivered in the first half of the year. We expect to open the Four Seasons Beirut in the second half of the year. Construction will also continue to advance on our other development projects in Morocco, Seychelles, Manila and Ghana, all of which are fully-funded.

Commenting on the results Sarmad Zok, Chief Executive Officer, said:

" KHI has delivered strong results in 2008 despite the global economic challenges. We took decisive early action to conserve cash, including the cancellation of early-stage projects and aggressive restructuring and management of the Group's cost base. Our prudent approach to balance sheet management means the Group is cash-rich and our commitment pipeline is fully funded. Looking ahead KHI is well placed to weather current markets and take advantages of opportunities as and when conditions begin to improve."

-Ends-

KHI , headquartered in Dubai (UAE), is the leading international hotel and resort acquisition and development company focused on high growth emerging markets such as the Middle East, Asia, and Africa.

The company has ownership interests in 28 properties in 19 countries including 23 operating hotels and resorts and five hotels and resorts currently under construction or in the initial stages of development. KHI is listed on NASDAQ Dubai and the London Stock Exchange.

Enquiries
Kingdom Hotel Investments
Eric Chang
+971 4 361 1800

Brunswick Group
Kate Holgate (London)
+44 207 404 5959

Rupert Young / Jeehan Dahman Balfaqaih (Dubai)
+971 4 365 8260

A conference call for analysts will take place today at 09.30am (GMT). The dial-in arrangements for the call are as follows:
Telephone: +44 (0) 1452 541 076
Participant Code: 89856111

A recording of the conference call will be available until the 25 March 2009

on: Telephone: +44 (0) 1452 55 00 00

Access Code: 89856111#

© Press Release 2009