Fayed’s fightback

Just over a year ago, Egyptian born tycoon Mohamed Al Fayed was feeling the financial pressure, with profits falling across his empire. But as Anil Bhoyrul reveals, Fayed has proved the critics wrong, finishing 2005 richer than he ever has been.

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By  Anil Bhoyrul Published  January 1, 2006

|~|f2-200.jpg|~|MONEYMAKER: Estimates place Al Fayed’s wealth at almost US$2.5 billion.|~|What Mohamed Al Fayed wants, Mohamed Al Fayed usually gets. In recent years, this has included the world’s most famous shop, a private jet and helicopter, a Scottish estate, an English soccer club and several luxury hotels. But last Christmas, the tycoon was starting to feel the pinch. His lavish spending sprees were reported to have drained nearly US$1 billion from the Fayed family kitty, and the outlook was hardly promising. Britain’s best-known department store, Harrods — owned by Al Fayed — was facing increased competition from other luxury good purveyors, including Burberry, which has opened a shop opposite Harrods. In 2001, Fayed remortgaged the Knightsbridge store to the Royal Bank of Scotland to raise money to build a new stadium for his football club. The low point came in February 2004, when Harrods’ auditor PricewaterhouseCoopers resigned and Fayed later abandoned plans to sell shares in the company on the New York Stock Exchange. In July that year, finance director William Najdecki left the company. At least 11 senior executives left Harrods around the same time. All of which mean that, whereas in 1998 annual sales were approaching $2 billion, the figure was down by around 35% in 2004. Harrods Holdings lost nearly US$16 million in 2002-3 while its net asset value fell to below US$600 million. Five years ago, the company was worth twice as much. But the most recent accounts filed in Britain’s Companies House (which registers all corporate accounts in the UK), suggest Al Fayed is again having the last laugh. They show that Al Fayed and his family collected nearly US$75 million in dividend payments. According to the filed accounts, Harrods managed an operating profit of just under US$80 million in the year to 29 January 2005, compared to around US$60 million the year before. Revenues at the world famous shop were also up by a similar margin, touching close to US$700 million for the year. It is little wonder that Fayed’s dividend payment for the year is up nearly 50% on the previous year. The Al Fayed family has now taken nearly US$200 million in dividend payments from Harrods in the last four years alone — technically speaking, that makes them the best paid shop owners in the world over the past four years. More importantly, things are also looking positive at his beloved Premiership soccer club Fulham, which he bought eight years ago. At the time, he claimed it would be the new Manchester United. Over US$200 million later, that hasn’t happened, but at least the books are starting to balance. Much of the change in financial fortunes is attributed to manager Chris Coleman who brought in lesser known and cheaper players such as Ahmad Elrich – whilst getting rid of the highly paid “stars” Andy Cole and Edwin van der Sar. According to The Times newspaper, Fulham still has debts of nearly US$200 million — although the club’s accounts don’t clarify this. However, the same paper reported that the club announced a profit in April for the first time since Al Fayed bought the club in 1997. If so, given the assets that come with the club, the chances are he could still sell it for a profit if need be. Which leads to the big question — just how rich is Al Fayed? In 2004, Arabian Business placed him at eighteenth in our annual rich list, with an estimated personal fortune of US$1.63 billion. By July last year, we pushed him down to 34th in the list, bringing his wealth closer to US$1.2 billion. Much of that was attributed to his property portfolio slipping in value by 12% over the year, and the fact that losses at Harrods were running at US$16 million a year. But the latest set of accounts, which were filed in December 2005, now paint a far rosier picture. They suggest the property assets alone may be worth US$1.2 billion. With Harrods is revenues increasing, the store’s valuation is now at least US$600 million. After taking into account his dividend payments and other interests, the wealth figure by the end of 2005 is around the US$2.4 billion mark. That would put him at No.21 in our rich list. Not bad for half a year’s work. But the question is can he hold on to it? He is no stranger to big spending. Reportedly, Al Fayed once got off his helicopter in Scotland after flying in from London, and realised he had forgotten to bring his favourite packet of peanuts from Harrods. The unfortunate helicopter pilot was ordered to fly back to London immediately to bring the peanuts to Scotland. A family friend explains: “It is one of many examples of Mohamed Al-Fayed doing whatever he likes, regardless of the cost. In the past, this has often led to him going a bit over the top. I suppose you could say, a bit out of control. But what you have to admire about him is that somehow, he always seems to make that spent money back again." Other associates are less certain, suggesting that Al-Fayed may be considering the question of his retirement and succession. Privately, he has earmarked his 21 year old son Omar to take over the Harrods empire, with the remaining assets split between the rest of the family. Time will tell.||**||

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