It has emerged that five out of the six hotels the Social Security and National Insurance Trust (SSNIT) is planning to offload 60% of shares to a private company have not paid the debt owed SSNIT to date.
They have not paid dividends in the past five years.
Dividends are often expected by shareholders as a reward for their investment in a company.
The hotels can’t fund maintenance capex
With the exception of Labadi Beach Hotel, none of the hotels can fund maintenance capex, and the additional periodic significant investment capex needed.
Labadi GH₵48.1m dividends in 5 years
Documents revealed that only Labadi Beach Hotel has paid a total of GH₵48.1 million (GH₵48,128,821) in the last five years.
The rest—La Palm Royal Beach Hotel, Elmina Beach Resort, Busua Beach Resort, Ridge Royal Hotel, and Trust Lodge—did not pay any dividends during this period.
More disturbing is the fact that SSNIT made total payments, including shareholder loans of GH₵233.8 million in respect of La Palm, Elmina, and Busua.
However, the Trust has made no return on equity in the form of dividends on this amount, and none of the loans have been serviced.
The average five-year profitability of the six hotels is as follows: Labadi Beach – GH₵18 million (GH₵18,055,626), La Palm Royal Beach – GH₵6.7 million (GH₵6,750,751), Ridge Royal – GH₵5 million (GH₵5,010,852), Elmina Beach – GH₵740,604, Trust Lodge – GH₵97,973, and Busua Beach – GH₵32,268.
Labadi Beach
Labadi Beach made losses in two out of the past 14 years (2010 to 2023) and has consistently paid dividends to SSNIT.
Despite this, the average return on equity was 1.7% (2012-2017), and has averaged 5.2% for the period 2012 to 2022.
La Palm
La Palm recorded losses in 11 out of the past 14 years and has not paid dividends in all its years of operation.
The documents show that outstanding amounts owed to SSNIT also includes workers’ SSNIT contributions.
The average return on equity for the period before the start of the sale process between 2012 and 2017 is negative 4.2%.
Ridge Royal
Ridge Royal posted losses in all eight years of operation and has not paid dividends in all its years of operation.
Records reveal that the average return on equity for Ridge Royal is negative 33.1% for the period 2016 to 2017 and has had a negative shareholders’ equity position since.
Elmina Beach
Elmina Beach made losses in nine out of the past 14 years.
This hotel has not paid dividends in all its years of operation, while the average return on equity for Elmina Beach Resort is negative 4.8% for the period 2010 to 2017.
Busua Beach
The documents show that Busua Beach recorded losses in nine out of the past 14 years and has not paid dividends in all its years of operation.
The documents also indicate that the average return on equity for Busua Beach Resort is negative 31.7% for the period 2010 to 2017.
Generally speaking, a return on investment of 20% per year is considered good in the hotel industry and ROE should also be higher than the cost of capital.
ROE is considered a gauge of a corporation’s profitability and how efficient it is in generating profits.
The higher the ROE, the more efficient a company’s management is at generating income and growth from its equity financing.
It is obvious the ROE of the six hotels including that of Labadi beach are below industry standards.
