Tourist Company of Nigeria’s Auditors Cast Doubt Over Company’s Future

Tourist Company of Nigeria (TCN) Plc owners of the Federal Palace Hotel & Casino, said its auditors BDO Professional Services issued a disclaimer which cast “significant doubt” over the company’s ability to continue as a going concern.

In the audited financial statement for the year December 2022, the auditors drew the attention of shareholders to the loss before tax of N3.17 billion from a loss of N2.32 billion the previous year and accumulated loss of N27.50 billion in December 2022 from a similar loss position of N24.30 billion as at December 2021.

“These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter,” its auditors said.

The hotel and hospitality giant current liabilities exceeded current assets by N600 million.

While the Tourist Company of Nigeria or TCN witnessed a continuous solid improvement in the gaming and hospitality industries in the second half of 2022, it capitulated to the global geopolitical tensions such as the war between Russia and Ukraine that triggered rising inflation, diesel, gas prices, and persistent supply disruption.

Even before the bedlam in the Middle East, Nigeria’s economy had been reeling from foreign exchange crisis, decrepit infrastructure, punitive regulatory environment, deteriorating consumer purchasing power, and price increases.

Of course, the intense insecurity across the country and high unemployment rate and poverty rates are also a stumbling block.

Nigeria’s Gross Domestic Product (GDP) growth slowed to 2.31 per cent in the first quarter (Q1) of 2023 from 3.52 per cent in the fourth quarter of 2022.

The country’s inflation rate rose to 22.41 percent in May 2023, marking the fifth consecutive increase. Despite monetary policies to control inflation, it remains at an over 17-year high.

Analysis of the company’s financial statement shows expenditures or total operating cost of N4.65 billion is 1.26 times revenue of N3.97 billion as competition remained aggressive, and price increases  were increasingly challenging to pass on to the customer.

Indeed, TCN is exposed to financial risk as it does not have earnings to pay up interest on debt as it finances most of its operations or balance sheet via debt.

It has finance costs of N2.50 billion in December 2022 from N1.61 billion as at December 2021; it has a debt to equity of 159.60 in the period under review from 2,331 as at December 2021.

There has been a shareholder dispute over ownership structure and composition of directors that had already been resolved by the Security and Exchange Commission (SEC).

The global hotel and hospitality industry has recovered from the pandemic that paralyzed global a few years ago.

The hotel and hospitality sector in Africa is expected to reach $13.80 billion by 2027, with an annual growth rate of 8.68 percent over the next five years, according to Statista.