Federal Palace Hotel owners report N31.6 billion loss in 2023, shareholders’ funds wiped out
Tourist Company of Nigeria Plc, the owners of Federal Palace Hotel have reported a loss before tax of about N31.6 billion for the financial year ended December 2023.
The company’s losses increased by almost 900% from 2022 when it recorded a pre-tax loss of N3.2 billion.
The size of the losses effectively wiped out the shareholder funds of the company leading to a negative equity of N7.8 billion.
Key Highlights FY 2023 vs FY 2022
- Revenue: N4.26 billion, +7% YoY
- Expenditure: N5.6 billion, +21% YoY
- Operating loss: N1.4 billion, +104% YoY
- Net finance costs: N30.3 billion, +1111% YoY
- Loss before tax: N31.6 billion, +896% YoY
- Loss for the year: N31.7 billion, +886% YoY
- Net cash generated from operating activities: N145.2 million, -38% YoY
The losses incurred by the company was triggered by a whopping N30.3 billion in forex losses mostly due to its foreign currency loans.
The loans totalling $67.7 million, divided into $22.1 million, $23.8 million, and $21.7 million are owed to its related companies, Ikeja Hotel, Sun Hotel, and Omamo Investment Ltd respectively.
The loans to Omamo Investments Ltd are in dispute as stated in the result filings.
Commentary: In the financial year, Federal Palace Hotel generated N2.93 billion from its hospitality business, a 25% increase from the N2.36 billion generated in 2022. However, its casino’s revenue by 18% to N1.34 billion from N1.63 billion in 2022.
During the year, the hotel’s cost of sales on food and beverages declined by 24% to N215 million, from N281.3 million, indicative of reduced sales of food and beverages in the year.
The company’s power and fuel costs also increased by 8% during the year to N1.06 billion, from N981 million.
Federal Palace Hotel’s shareholder’s loans
Federal Palace which is majorly owned by the South African hospitality group, Sun International has a history of indebtedness to Omamo Investment Corporation, a company related to some of its directors.
For more than 10 years, some of these loans have been issues of legal disputes.
In July 2021, the board of directors of Sun International Limited, the majority shareholder in Tourist Company of Nigeria, agreed with Ikeja Hotels Plc, which are shareholders and lenders to the company, as well as Omamo Investment Corporation Limited.
Part of the agreement is a waiver of the interest that would have accumulated on the company’s shareholders and related party loans from March 1, 2020, till an agreement was reached by the parties involved.
Even though there’s been a waiver on the company interest expenses, the devaluation of the Naira in 2023 led to a N30.3 billion addition in the company’s liability to its shareholders.
The shareholders and related party loans increased from N31.25 billion as of FYE 2022 to N61.5 billion as of FYE 2023.
