The Federal Palace Hotel’s owners, Tourist Company of Nigeria Plc, have disclosed a pre-tax loss of almost N31.6 billion for the fiscal year that concluded in December 2023. The company’s losses from 2022, when it reported a pre-tax loss of N3.2 billion, grew by about 900%.
Due to the extent of the losses, the company’s shareholder funds were almost destroyed, leaving it with N7.8 billion in negative equity.
The company’s foreign currency loans were the primary cause of its staggering N30.3 billion in forex losses, which set off the losses. Its related companies, Ikeja Hotel, Sun Hotel, and Omamo Investment Ltd., are the recipients of the $67.7 million in loans, which are split into $22.1 million, $23.8 million, and $21.7 million, respectively.
The loans to Omamo Investments Ltd are in question as mentioned in the result files.
The Federal Palace Hotel’s hospitality operation brought in N2.93 billion during the fiscal year, a 25% increase over N2.36 billion in 2022. Nonetheless, the casino’s earnings decreased by 18% in 2022, from N1.63 billion to N1.34 billion.
The hotel’s cost of sales for food and beverages decreased by 24% over the course of the year, from N281.3 million to N215 million, which is a sign of lower food and beverage sales.
The company’s fuel and electricity expenses went from N981 million to N1.06 billion, an increase of 8% over the course of the year.
The majority-owned South African hospitality group Sun International has a history of debt to Omamo Investment Corporation, a business that is connected to a few of its directors, regarding Federal Palace. Some of these loans have been the subject of court battles for more than ten years.
The board of directors of Tourist Company of Nigeria, which is owned by Sun International Limited, reached an agreement in July 2021 with Omamo Investment Corporation Limited and Ikeja Hotels Plc, the company’s lenders and stockholders.
A provision of the agreement is the waiver of interest that would have accrued on loans to connected parties and shareholders of the business from March 1, 2020, until a mutual agreement was achieved by the parties.
The company’s responsibility to its shareholders increased by N30.3 billion as a result of the Naira’s devaluation in 2023, notwithstanding a waiver on interest charges. As of FYE 2023, the related party and shareholder loans had grown from N31.25 billion in FYE 2022 to N61.5 billion.
