From Rotimi Asher,  Lagos 

Ikeja Hotel has adopted cost savings measures that resulted in some of its workers losing their jobs, as the management struggled to make the company a going concern in 2023.

AljazirahNigeria learnt that Ikeja Hotel downsized its workforce by 211 in 2022, reducing its staff strength to 201 from 412 employees working at the hospitality company in 2021.

During the same period, its market rival, Transcorp Hotels increased its workforce, hiring 226 staff, to rise from 998 employees to 1,224 workers.

The elimination of jobs in Ikeja Hotel was amid an increase in its losses, as the firm recorded N3.93 billion loss after tax last year, up from N180.61 million loss in 2021.

While the company grew its revenue to N12.89 billion last year, surpassing the N9.86 billion turnover generated in 2021, Ripples Nigeria’s analysis of the company’s financials showed that cost and expenses gulped 120.05 per cent of Ikeja Hotel’s income in 2022, up from 92.39 per cent the year before.

Cost of Sales, Sales and Distribution Expenses, as well as Administrative and General Expenses, rose by N6.36 billion or 69.81 per cent year-on-year (more than the 30.68 per cent growth in revenue) to N15.48 billion, in contrast to N9.11 billion reported in 2021.

The management’s failure to curb expenses and prevent loss from rising resulted in Ikeja Hotel’s retained earnings declining by 13.43 per cent from N6.41 billion posted in 2021 to N5.55 billion the year after.

The decline weakens Ikeja Hotel’s ability to distribute wealth to shareholders and invest in the firm’s growth in the long term, as investors holding the company’s shares are paid dividends from the retained earnings. Also, capital for reinvestments is sourced from retained earnings as well.

Further analysis of the firm’s H1 2023 financials showed the job cut and other cost savings measures like reduction in operating overheads in 2022 and this year paid off in the first half of 2023, as Ikeja Hotel reported a 230 per cent year-on-year increase in net profit despite suffering a 34 per cent decline in revenue.

Ikeja Hotel’s revenue for H1 2023 was N4.56 billion, falling short of the N6.89 billion generated in the same period last year.

However, its net profit grew to N397.54 billion in the first half of this year, against the N120.47 billion posted in the corresponding period of 2022, after cost and expenses were reduced by 38.12 per cent, from N6.19 billion spent between January to June last year to N3.83 billion this year.

Consequently, Ikeja Hotel’s retained earnings increased to N5.91 billion at the end of June this year, rising from the N5.55 billion it closed with last year.

Meanwhile, the Hotel is also planning to sell 1.13 billion shares, representing a 40.9 per cent stake in the company, through the Rights Issue programme to existing shareholders to raise funds.

The company had initially planned to sell each share at N1 (the average price the share was trading in July 2022, when the Rights Issue was first announced), which puts the proposed fundraising at N1.13 billion.

However, following the surge in the share price to above N3 in H1 2023, the firm in a statement released on Wednesday said the board of directors will decide the rate, which could increase the capital to be raised to over N3 billion.