FOCUS: This hospitality company’s finances suffered recently

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Capital Hotels Plc - FOCUS: This hospitality company’s finances suffered recently

The Nigerian hospitality industry is a very vibrant one. Every now and then, new hotels of different grades spring up in major cities and towns across the country. And what’s more, people keep patronising them. But the vibrant nature of the industry notwithstanding, the truth is that only a few of these hotels are prominent. One of them is Capital Hotels Plc, which is also our company focus for this week.

As you should already know, the Nairametrics company focus is a weekly column that aggregates vital information about small-cap companies on the Nigerian Stock Exchange. This is done for the benefit of the investing public, especially those who may be contemplating whether or not to acquire new shares in some of these companies.

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So, get to know more about Capital Hotels Plc. Learn about its business model, the company’s ownership structure, business model, its competitors, financial performance, possible opportunities for investors, and many more details.

About Capital Hotels Plc

As one of the leading players in the Nigerian hospitality industry, Capital Hotels Plc manages a chain of hotels, restaurants, night clubs, apartments, and recreational facilities around the country. A notable example is the Sheraton Abuja Hotel, which is one of the top hotels in Nigeria’s capital city, Abuja. The Sheraton Abuja Hotel offers a wide range of hospitality services, including lobby experience, food services, socialisation hub, etc.

Capital Hotels Plc’s business model is such that besides the basic hospitality services it offers, it also provides other services such as the furnishing of hotels, accommodation lettings/sales, food services, and more. It also operates a business centre which contributes to its overall annual revenue generation.

The company’s incorporation and listing on the NSE

Capital Hotels Plc was initially incorporated on January 16, 1981 as a limited liability company, but became a quoted company five years later (1986) following its listing on the Nigerian Stock Exchange, NSE. But four years after its NSE debut, Capital Hotels’ shares were suspended until August 14th 2008 when its NSE listing status was restored. Today, the company has a market capitalisation of about N4.8 billion, and a share price of N3.1, which it doesn’t seem prepared to change anytime soon.

A look at the company’s segments

Capital Hotels’ businesses are broadly categorised into three segments – room services, food and beverages services, and other services. Going by information contained in the company’s 2017 full-year financial report, the rooms segment typically generates the most revenue, followed by the food and beverage segment, lastly, the other services segment.

Capital Hotel’s target market

It is a no brainer that as a major provider of hospitality/hotel services, Capital Hotels Plc’s target market include anyone who has the need for such services. In other words, the company market focus includes anyone (both private individuals and corporates), who needs hotel lodgings/room services, hotel room decoration, conference centres, meet up venues and more.

Note that due to the somewhat deluxe nature of its services, Capital Hotels Plc’s services may often be unreachable to low net worth individuals. This further defines the company’s business model to entail the provision of services to middle and high income earners in the country.

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The company’s competition

Due to the capitalist nature of the Nigerian economy, seldom does any company operate alone within any given sector. Therefore, the absence of monopoly in the Nigerian hospitality industry means that competition thrives. Having established this fact, some of Capital Hotels’ main competitors include the likes of Transcorp Hotels Plc, Intercontinental Hotel, Eko Hotels and Suites, Protea Hotel, etc. The company also competes with the likes of Quilox, in terms of night club business.

Brief overview of the company’s board

Capital Hotels Plc has about 450 employees on its payroll. Out of this number, only about ten individuals make up the company’s board of directors. These people are:

  1. Chief Anthony Idigbe, Chairman
  2. Barr. Chuma Anosike, Director
  3. Alhaji Abatcha Bulama, Director
  4. Barr. Akpofure Ibru, Director
  5. Chief Nicholas E. Dortie, Director
  6. Dr Alexander Thomopulos, Director
  7. Mr Toke Alex-Ibru, Director
  8. Mr Robert Itawa, Director
  9. Ms Helen Da-Souza, Director
  10. Mrs Fadeke Olugbemi, Director

Corporate governance and legal issues

In December 2018, Capital Hotels Plc issued a statement informing the NSE and the investing public that the sum of N503.6 million was deducted from one of its bank accounts, in compliance with a garnishee order. Apparently, the money had been deducted and used to pay a former client who had filed a suit against the company, claiming that he incurred damages to his valuables after lodging in the Sheraton Abuja Hotel. The company made known its determination to seek further redress over the execution of the court order.

In the meantime, the company’s shares are classified as “below listing standard” (BLS) by the Nigerian Stock Exchange, NSE. As we reported last month, the NSE’s X Compliance Report indicated that the company is among a list of eighteen companies with this classification. And the reason is because shareholding is concentrated in the hands of the company’s board members, thereby leading to the absence of free float.

The company’s recent financial performance

The company’s latest financial disclosure is for the third quarter period ended September 30th 2018. According to this report, revenue stood at N4.3 billion compared to N3.9 billion for the same period in 2017. Profit after tax for Q3 2018 was N379.2 million, compared to N489.9 million PAT in Q3 2017.

In conclusion

Going back to the garnishee order, an earlier analysis by Nairametrics shows that the half a billion naira that was deducted from the company’s account late last year, amounts to about 14% of its cash reserves. With this in perspective, the chances of a positive result for full-year 2018 is very slim.

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