On behalf of the Board of Directors of Zara Investment (Holding) Company, it is my pleasure to welcome you and thank you for your response to the Boards’ invitation to attend the 13th annual meeting of the company’s general assembly. You will be briefed on the company’s activities, achievements, consolidated financial statements for the fiscal year ending 31/12/2006 and outlook for 2007.
As you may know, your company is considered one of the largest Jordanian companies in the tourism sector, either on the scale of paid up capital of 125 million JD/share, net book value of its property and equipment of JD 165.65 million as of the end of 2006 or on the scale of the 1825 five-star hotel rooms it owns, which represent 32% of the total of five-star rooms in Jordan. In addition, your company, since inception in 1994 has been applying the most conservative International Accounting Standards in disclosing the value of its assets which include a network of six 5-star hotels, two of which are located in Amman, namely Hotel Inter-Continental Jordan, Grand Hyatt Amman Hotel and Hyatt Tower for furnished apartments; two in Petra, namely Mövenpick Resort and Mövenpick Nabatean Castle; in the Dead Sea, Mövenpick Resort & Spa; and in Aqaba, the Mövenpick Resort and Residence Aqaba.
Furthermore the company owns plots of land of about 452 donums on the southern beach of Aqaba gulf / Ras Al-Yamaniya area, a plot of 34 donums on the Dead Sea / Sweimeh area, and a third plot of 66 donums on Wadi Musa -Tybeh road. Although the market value of these assets exceed their book value, the company has disclosed throughout the past years the value of its assets at the cost price, and continues to apply the maximum legally allowable depreciation limits on its depreciable property and equipment, as the total accumulated depreciation as of 31/12/2006 has reached the value of JD 98.55 million.
Owing to the application of the maximum depreciation limits, the annual depreciation volume is expected to witness as of 2007 a significant drop to about JD 6.3 million versus the JD 11.11 million for 2006. This difference will have a positive impact on the company’s net income.
As you may notice from the annual report, the company has executed a number of new projects in 2006 with the aim to enhance the competitive edge of its hotels, where it has undertaken projects in 2006 such as restoration and overhauling of the Mövenpick Resort & Spa Dead Sea beach zone by adding 22 guest rooms with unobstructed sea views; a collection of other auxiliary facilities; renovation of the Grand Hyatt Amman Hotel which began immediately after the terrorist attack on the hotel in November 2005; Block C upgrade project at the Hotel Inter-Continental Jordan; Zara car park project adjacent to Zara Center and Grand Hyatt Amman Hotel and Zara Hotel project within the Tala Bay project on the southern coast of Aqaba. The total capital cost of these projects combined is estimated at approximately JD 40 million, of which JD 15 million were expended in 2006.
The company also acquired most of the minority shares in the South Coast Hotels and South Coast Real Estate Development companies, the proprietors of the 452-donum plot in Ras Al-Yamaniya, thus has become the owner of 82% of the total shares in these companies instead of 55%. The total cost of acquiring these shares has reached JD 7.32 million approximately.
The total operational revenues of the company’s hotels reached JD 43.78 million in 2006, while the total operational profits were JD 14.33 million. The drop in 2006 versus 2005 of the total operational revenues was due to the renovation of Hotel Inter-Continental Jordan and Grand Hyatt Amman hotel coupled with the unfavorable events which the tourism sector encountered, whether as a result of the terrorist attacks on three of the Kingdoms’ hotels at the end of 2005 which had their impact on the financial results for the first quarter of 2006; or the negative impact on tourism sector in the regional states due to the war in southern Lebanon in July and August 2006.
In conclusion, please allow me, on your behalf, to extend my sincere thanks to all those official and private entities supporting the company’s goals and to all company personnel wishing them success and prosperity.
Sabih Taher Masri
Chairman of the Board of Directors
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