The theme part operator says a loss was expected, as it only opened in a phased manner in December, but the amount was still steeper than anticipated.
DXB Entertainments to cut costs after posting loss
The theme parks operator DXB Entertainments said it planned to cut operational costs by 20 per cent this year, compared with initial projections, after it missed analysts’ forecasts and posted a wider-than-expected first-quarter loss on higher expenses.
The net loss in the three months ending March 31 was Dh292 million, compared with a loss of Dh38m during the same period last year when none of the theme parks at the Dubai Parks and Resorts complex were open, it said in a statement on the Dubai Financial Market.
The Egyptian investment bank EFG Hermes had forecast a Dh110m loss for the first quarter.
General, administrative and operating expenses rose to Dh333.9m in the first quarter from Dh39.6m in the year-earlier period.
DXB Entertainments, which posted a net loss of Dh235m in the fourth quarter, opened its theme parks in a phased manner in December.
“A key strategic imperative for the business for the year is to reduce our operational cost base by 20 per cent compared with initial projections,” said the chief executive, Raed Al Nuaimi.
The target is expected to be met by year end.
“Some costs have been lower than our original expectations and we have been able to identify efficiencies by streamlining some of the functions across the parks,” said a company spokesman. “The cost reductions are in relation to the original costs we had anticipated in our projections.”
He did not say what the initial projections were.
DXB Entertainments, which reported 586,355 visits during the first quarter, said revenue more than doubled to Dh160m in the first quarter from Dh76m in the fourth quarter. The theme parks earned Dh214 per visitor on average, lower than current ticket prices for a single park.
“Our loss for the first quarter of 2017 ... reflects the normal trajectory of a business in its early phase of development, as well as Dh71m in pre-operating expenses,” Mr Al Nuaimi said. “We are also well advanced in our sales and marketing plans and are actively generating demand for Dubai Parks and Resorts internationally and domestically.”
About 40 per cent of the visitors were from outside the UAE during the first quarter, according to the company, and about 14 per cent of the total visitors during the quarter booked their tickets through tour and travel agencies, up from 5 per cent the quarter before.
Overall tourist numbers to Dubai increased by 11 per cent to 4.57 million compared with the same period last year, according to Dubai Tourism.
“Looking ahead, in the coming two quarters we expect to experience a dip in attendance as we will go through Ramadan and the summer months,” Mr Al Nuaimi said.
Of the company’s total revenue, the theme parks complex generated Dh125 million, or 79 per cent.
About Dh14.4 million of the total revenue came from the retail strip Riverland Dubai, where 84 per cent of the available leasable space, comprising 51 retail units, was leased out at the end of March.
The Lapita Hotel, which opened in January, generated Dh10.4 million of the total revenue, with an average occupancy rate of 21 per cent and average daily rate of Dh795 during the quarter.
Dubai Parks and Resorts will begin operating the last remaining rides next quarter.
“We expect our visitor numbers to stabilise by the fourth quarter of 2017, as we gain further traction with global tour and travel operators,” Mr Al Nuaimi said.
Its total assets stood at Dh12.5 billion, including Dh10.3bn in property and equipment. At the end of March, it had drawn down Dh3.8bn of its Dh4.2bn financing facility.
By the end of the quarter it had signed seven ride agreements, and close to 90 per cent of the design works had been completed for the Six Flags theme park, which is the second phase of development of the Dubai Parks and Resorts complex.
DXB Entertainments’ shares fell 5.02 per cent to 90.9 fils in Dubai yesterday.
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