Capital Hotels : HOTEL PLC- QUARTER 3 - FINANCIAL STATEMENT FOR 2023

UNAUDITED FINANCIAL STATEMENT

FOR THE 3RD QUARTER (9 MONTHS) ENDED

30 SEPTEMBER 2023

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CAPITAL HOTELS PLC

Interim Financial Report

FOR THE 3RD QUARTER (9) MONTHS ENDED 30 SEPTEMBER, 2023

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CAPITAL HOTELS PLC

CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED 30 SEPTEMBER, 2023

The accompanying notes on pages 7 to 31 form an integral part of these financial statements.

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The accompanying notes on pages 7 to 31 form an integral part of these financial statements.

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STATEMENT OF CASH FLOWS

FOR THE THIRD QUARTER ENDED 30 SEPTEMBER, 2023

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CAPITAL HOTELS PLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 30 SEPTEMBER, 2023

1.1The Company

Capital Hotels Plc. was incorporated on 16 January 1981 as a private limited liability company. It became a public liability company (Plc.) on 31 May 1986. Its Hotel, Abuja Continental Hotel commenced business in January 1990.

The Hotel which is located at 1 Ladi Kwali Way, Zone 4, Wuse, Abuja is owned and operated by Capital Hotels Plc, and trading under the name of Abuja Continental Hotel.

2. Basis of preparation

1. These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the IASB. Additional information required by local regulators is included where appropriate.
2. Functional/presentation currency
   These financial statements are presented in Naira, which is the Company's functional currency. Except as indicated in these financial statements, financial information presented in Naira has been rounded to the nearest thousand.
3. Basis of measurement
   These financial statements are prepared on the historical cost basis .
4. Use of estimates
   The preparation of the financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
   The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
   In particular, the Company has identified the following areas where significant judgments, estimates and assumptions are required. Changes in these assumptions may materially affect the financial position or financial results reported in future periods. Further information on each of these areas and how they impact the various accounting policies are described below and also in the relevant notes to the financial statements.

1. Recovery of deferred tax assets
   Judgment is required to determine which types of arrangements are considered to be tax on income in contrast to an operating cost. Judgment is also required in determining whether deferred tax assets are recognised in the statement of financial position. Deferred tax assets, including those arising from un-utilised tax losses require management assessment of the likelihood that the Company will generate sufficient taxable earnings in future periods in order to utilise recognised deferred tax assets.
   Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by sales volume, operating costs and capital expenditure) and judgment about the application of existing tax laws. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realise the net deferred tax assets recorded at the reporting date could be impacted.
   Future changes in tax laws could also limit the ability of the Company to obtain tax deductions in future periods.
2. Contingencies
   By their nature, contingencies will only be resolved when one or more uncertain future events occur or fail to occur. The assessment of the existence, and potential quantum, of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.

After their initial recognition, contingent liabilities that are recognised separately in business combinations are subsequently measured at the higher of:

• The amount that would be recognised as a provision; and• The amount initially recognised less cumulative amortisation.

Contingent assets and contingent liabilities are not recognised. See Note 29 for full disclosure of contingent liabilities.

1. Allowances on trade receivables
   In assessing collective impairment, the Company uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
   An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in income statement and reflected in an allowance account against receivables. Interest on the impaired asset where applicable continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through income statement.
2. Defined benefit obligation
   The present value of defined benefit obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the defined benefit obligation include the discount rate.

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CAPITAL HOTELS PLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 30 SEPTEMBER, 2023

The Company determines the discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Company considers the interest rates of high- quality corporate bond that are denominated in the currency in which the benefits will be paid, and have terms to maturity approximating the terms of the defined benefit obligation.

Determination of impairment of property and equipment, and intangible assets

Management is required to make judgements concerning the cause, timing and amount of impairment. In the identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other circumstances that could indicate that impariment exist.

Depreciation and carrying value of property and equipment

The estimation of the useful lives of assets is based on management's judgement. Any material adjustment to the estimated useful lives of items of property and equipment will have an impact on the carrying value of these items.

1. Summary of Standards and Interpretations effective for the first time

1. IAS 24 Related parties
   The revised standard provides some exemptions for certain government related entities, clarifies the definition of a related party and includes an explicit requirement to disclose commitments to related parties. The revised standard specifically defines associates of the ultimate parent company as related parties of the Company and they have been treated as such in these financial statements.
2. IAS 1 Presentation of financial statements
   Clarifies that entities may present the analysis of each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements.
3. IFRS 7 Financial instruments
   The amended standard clarified that additional disclosure of maximum exposure to credit risk is only required where the exposure is not reflected in the carrying amount. It requires disclosure of the financial effect of collateral held as security for financial assets and removed the requirement to specifically disclose financial assets, where the terms have been renegotiated. It also clarifies that disclosure of financial instruments obtained by calling on security or collateral is only required where those assets are still held at the reporting date.

1. New standards and interpretations not yet adopted
   A number of new standards, amendments to standards and interpretations are not yet effective for the first quarter 31 March 2014, and have not been applied in preparing these financial statements. A summary of those relevant to Capital Hotels Plc have been disclosed in these financial statements:

1. IFRS 9 Financial instruments Nature of change:
   IFRS 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.
   IFRS 9 introduces a new model for classifying and measuring financial assets. In respect of financial liabilities, all IAS39 requirements are carried forward to IFRS 9. The classification of financial assets depends on its contractual cash flow characteristics and the entity's business model for managing the financial assets.
   Impact:
   The Company does not have financial assets that are classified as fair value though profit or loss, held to maturity or available for sale. Financial assets in its books are classified as loans and receivables. This type of financial asset shall be measured at amortized cost if the following conditions are met:
   ( a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;

(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principals and interest on the principal amount outstanding.

The financial assets of the Company - trade receivables, rent receivables and employees' loans meet the contractual cash flow test which aims to identify whether the contractual cash flows are 'solely payments of principal and interest on the principal amount outstanding'. Such assets are managed to realize cash flows by collecting contractual payments over the life of the instrument.

The method of subsequent measurement for the financial assets within the Company will remain the same and measured at amortized cost.

There will be no impact on the Company's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Company does not have any such liabilities. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement to IFRS 9 and no changes arose.

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39.

In applying the IFRS 9 impairment requirements, an entity needs to follow one of the approaches below:

• The general approach
• The simplified approach, and
• The purchased or originated credit-impaired approach

This model applies to the Company's trade receivables, rent receivables and staff loans. Capital Hotels Plc will adopt the simplified approach for calculating its impairment loss on trade and other receivables.

The Company has a policy choice between using the general approach or the simplified approach for rent receivables while staff loans will be calculated using the general approach.

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CAPITAL HOTELS PLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 30 SEPTEMBER, 2023

A detailed assessment of the impairment provisions under the new model may result in an earlier recognition of credit losses.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Company's disclosures about its financial

instruments particularly in the year of the adoption of the new standard.

5. Summary of significant accounting policies

5.1 Foreign currencies

5.1.1 Foreign currency transactions

Transactions in foreign currencies are recorded in Nigerian Naira at the rates of exchange prevailing at the date of the transaction. Monetary items denominated in foreign currencies are retranslated at the exchange rates applying at the reporting date. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognized in profit or loss in the period in which they arise except for:

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Exchange differences on foreign currency borrowings which are regarded as adjustments to interest costs, where those interest costs qualify for capitalization to assets under construction.

Exchange differences on transactions entered into to hedge foreign currency risks.

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Exchange differences on loans to or from a foreign operation for which settlement is neither planned nor likely to occur and therefore forms part of the net investment in the foreign operation, which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

5.2.1 Financial instruments

Financial instruments carried at the statement of financial position date include the loans and receivables, cash and cash equivalents and borrowings. Financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. The various classifications of financial instruments, their measurement subsequent to initial recognition, reclassifications and derecognition are stated as follows:

Subsequently, the loans were measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortized cost of a financial liability. Interest expense calculated on the effective intrest method is included in profit or loss in fincance cost.

However, the short-term loan under consideration was granted at zero interest rate.

5.3 Financial assets

1. Non-derivativefinancial assets
   The Company initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
   The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.
   Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
   The Company has loans and receivables as its non-derivative financial assets.
2. Loans and receivables
   Cash and cash equivalents comprise cash at banks, cash on hand and short-term deposits. These are subject to insignificant risk of changes in value and are stated at carrying amount, which is deemed to be fair value. Bank Overdrafts that are repayable on demand and form part of the Company's cash management are included as components of Cash and Cash equivalent for the purpose of the Statement of Cash Flows
3. Accounting Policy for Cash and cash equivalents
   Cash and cash equivalents comprise cash at banks, cash on hand and short-term deposits. These are subject to insignificant risk of changes in value and are stated at carrying amount, which is deemed to be fair value. Bank Overdrafts that are repayable on demand and form part of the Company's cash management are included as components of Cash and Cash equivalent for the purpose of the Statement of Cash Flows.
4. Non-derivativefinancial liabilities
   The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument.
   The Company derecognises a financial liability when its contractual obligations are discharged or cancelled or expires. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

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CAPITAL HOTELS PLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED 30 SEPTEMBER, 2023

The Company has the following non-derivative financial liabilities: loans, bank overdrafts, trade and other payables.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

1. Share Capital and Equity
   An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares are recognised at par value and classified as 'share capital' in equity. Any amounts received from the issue of shares (net of issuing expenses) in excess of par value is classified as 'share premium' in equity. Dividends are recognised as a liability when declared.
   Where any Company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the Company's equity holders. Where such shares are subsequently sold, reissued or otherwise disposed of, any consideration received is included in equity attributable to the Company's equity holders, net of any directly attributable incremental transaction costs and the related income tax effects.
2. Property, plant and equipment

Information relating to movement in property, plant & equipment is shown in Note 8 to the financial statements. In the opinion of the Directors, the market values of the Company's properties are not less

1. than the value shown in these financial statements.
   All property, plant and equipment are stated at cost less accumulated depreciation less accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
   Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and borrowing costs on qualifying assets for which the commencement date for capitalisation is on or after 1 January, 2011.
   Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.
   When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
   Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss.
2. Subsequent costs
   The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
   Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.
   Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

Land is not depreciated

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

5.5.3 Derecognition of property, plant and equipment

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the income statement in operating income. When revalued assets are sold, the amounts included in the revaluation surplus are transferred to retained earnings.

1. Inventories
   Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.
   Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
2. Intangible assets

1. Other intangible assets
   Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.
2. Subsequent expenditure
   Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

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