The coronavirus pandemic that forced the government to impose a lockdown policy that crippled economic activities in commercial hubs has ravaged Capital Hotels Plc as the company faces a liquidity crisis.
Capital Hotels, which owns and operates Sheraton Hotels Abjua, posted a loss after tax of N256.51 million in the first six months through September 2020, from a profit position of N322.75 million the previous year.
The loss was precipitated by a sharp slump in revenue as the number of loggers and customers shrank during the lockdown period, raising concerns about the company’s balance sheet and liquidity strength.
Revenues dipped by 61.45 percent to N1.43 billion as at September 2020, from N3.71 billion the previous year.
A breakdown of the top line figures shows Rooms dipped by 63.38 percent to N701 million while Food and Beverages was down 67.09 percent to N475 million.
The hospitality sector has been one of the hardest-hit since the Covid-19 broke out in late February. Data from the National Bureau of Statistics also reveal the sector contracted by as much as 40 percent in the second quarter of 2020, officially falling into recession.
Operators in the hotel and hospitality industry are cutting workforce and scaling back on capital expenditure spending, so as to conserve cash and stay afloat.
Transcorp Hotel, the largest hotelier by market capitalization, said it lost about N1 billion every month since March due to the Covid-19 pandemic.
The company had suspended further commitments to buy fixed assets and operating equipment in the foreseeable future.
Analysts have warned that the deteriorating cash position of companies could make it difficult for them to pay interest on money borrowed from financial institutions to fund their expansion plans.
Capital Hotel has a negative cash flow from operating activities of N507.85 million as at September 2020, and it did not buy property plant and equipment due to slow economic activities.