Tourist Company of Nigeria Plc, owners of the iconic Federal Palace Hotel have reported a pre-tax loss of almost N31.6 billion for the fiscal year that concluded in December 2023.
This figure marks a near 900% increase in losses compared to 2022, which saw a pre-tax loss of N3.2 billion. According to Nairametrics, the significant financial woes can be attributed primarily to a hefty N30.3 billion in foreign exchange (forex) losses due to its foreign currency loans.
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 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.
