FY 2012 Annual Report - Orascom Development

10 Orascom Development 2012 Annual Report 11
2.2 CEO’s Statement
Dear Shareholders,
Gerhard Niesslein
Chief Executive Officer
In the year 2012 we advanced the development
and funding of our destinations, adopted our
business model to focus on capital-light growth
and continued to optimize internal structures
and processes.
The year 2012 was another challenging year for Orascom
Development, but we managed to make important steps forward in
many business areas. We were able to increase tourist inflows into
our destinations by about 10% to almost half a million, managed to
raise hotel room rates, continued construction works as planned,
and our combined real estate efforts resulted in significantly higher
sales than in the year before. Still, we operated another year under
adverse market conditions with a restrained European economy and
an unstable situation in the MENA region. Against this backdrop we
advanced the development and funding of our destinations, adopted
our business model to focus on capital-light growth and continued to
optimize internal structures and processes.
Steady development progress in several destinations
Our destinations made significant progress during the last year.
A milestone was reached in October 2012 when the Technische
Universität Berlin opened its satellite campus in El Gouna. The first
branch outside of Germany offers three master studies for sustainable
town development and marks an essential milestone of education
as well as of sustainable development in Egypt and will support the
promotion of El Gouna as a self-sufficient town.
In Taba Heights the marina was successfully reopened in September
2012 which allows guests to visit Jordan and the ancient city of
Petra, one of the most popular tourist attractions in the region. The
reopening is a good example of effective collaboration between
Orascom Development and various ministries to support tourism in
Egypt and was a turning point in terms of tourist inflows into Taba.
After several years of development and construction in Oman,
we finally celebrated the opening of the marina in Jebel Sifah.
Furthermore the Juweira hotel in Salalah Beach opened its doors
during summer 2012.
In our Swiss destination Andermatt we successfully sold 73
apartments to Acuro, a real estate investment vehicle, while we
retained ownership of the Chedi Hotel which will open in December
2013. During November 2012, we finished the core and shell of
the first villa while construction of the first two apartment houses is
well underway. Additionally, we completed the friendly tender offer
to the shareholders of the two local ski operators and reached an
agreement with the environmental associations to further expand
and upgrade the ski arena Andermatt-Sedrun. We expect to start
construction for the ski arena already by the end of this year.
Increased focus on capital-light growth
While our business performance was not satisfactory, we improved
the operating cash flow during the period under review, which remains
one of the key priorities for 2013. At the same time, we plan to further
invest into our core destinations in Egypt and Oman. While we remain
committed to the Andermatt destination as an important minority
shareholder, the Andermatt Swiss Alps transaction releases Orascom
Development from further investment obligations. This significant
step improves the strategic flexibility of the Group and enables us to
focus our resources on our other destinations under development. By
engaging in additional relationships with strategic partners, we can
access a new range of funding options which we are confident to put
in place in the coming years.
Strengthened organization
Operationally, we became more efficient and effective in the last
twelve months as we launched a company-wide re-engineering
program named “Synchro“ to adapt our company’s structures and
processes to the challenging market environment and to increase
our overall performance in the mid-term. Part of this exercise
was to streamline our business and organization and to make use
of synergies and best practices across the group. Based on the
outcome of this project, several other initiatives have been launched
such as the planned set-up of shared service centers and the
alignment of cross functional workflows in project management,
planning and design, as well as construction and procurement.
The implementation of the established processes will continue this
year with company-wide training sessions and other measures to
continuously improve our performance.
Outlook for 2013
In 2013 we will continue to focus on the advancement and funding
of our destinations and further optimization of our internal structures
and processes. In this respect, we have no plans to add additional
development projects to our portfolio in the near future as our
existing land bank offers enough potential for organic growth for
the next decade.
At the end of 2012, the Group operated 6,654 hotel rooms. This
number will increase within the next 12 months through the upcoming
hotel openings in Switzerland (The Chedi Andermatt), Oman
(Rotana) and Egypt (Makadi near Hurghada on the Red Sea).
On behalf of the Executive Management, I like to take the opportunity
to thank all our employees for their commitment put forward during
the last year. I also like to thank our clients and business partners for
their confidence in Orascom Development. Last but not least, let
me thank you, our dear shareholders, for the trust you have placed
in the Group.
Gerhard Niesslein
Chief Executive Officer