Parent of Serena Hotels sees profit decline to $6.1 million as FX gains fade in Kenya

TPS Eastern Africa Plc, the Nairobi-listed operator of Serena Hotels, reported a 40% decline in profit after tax to Ksh787.15 million ($6.1 million) for the year ended Dec. 31, 2025, as foreign exchange gains that boosted prior-year earnings largely disappeared.

Revenue remained stable at Ksh10.12 billion ($78.35 million), underscoring resilience in Kenya and Tanzania’s tourism sector despite protests, travel advisories, and reduced NGO travel demand.

FX gains fade, dragging earnings lower

The earnings decline was driven by a sharp drop in unrealized foreign exchange gains.

In 2024, appreciation of the Kenyan shilling generated Ksh654.53 million ($5.1 million) in FX gains from dollar-denominated liabilities. That figure fell to just Ksh38.84 million ($300,709) in 2025 as the currency stabilized, removing a key earnings tailwind.

Excluding FX effects, underlying operations remained relatively stable, reflecting steady demand across the group’s hospitality portfolio.

Revenue stability masks early weakness

Revenue dipped slightly by 0.68%, weighed down by a weak first half. The company posted a net loss in the first six months as protests and travel advisories disrupted bookings, particularly from NGOs and institutional clients.

A stronger second half, driven by peak tourism seasons in Kenya and Tanzania, helped offset earlier declines.

Margins tighten as EBITDA declines

EBITDA fell 7% to $17.6 million, marking a second consecutive annual decline. Operating cash flow improved due to disciplined cost management, while inventory costs declined and employee expenses remained stable.

However, rising operating costs and softer demand in some segments continued to pressure margins.

Balance sheet strengthens as debt declines

Total assets rose 10.1% to $172 million, supported by property revaluations across its East African portfolio.

Borrowings declined significantly as the company continued deleveraging after pandemic-era debt accumulation.

Investment rises despite lower earnings

Capital expenditure increased to its highest level since 2017, reflecting continued investment in hospitality assets.

The company maintained its dividend despite lower earnings, signaling confidence in long-term cash flow stability.

Outlook: gradual recovery amid persistent risks

TPS Eastern Africa expects gradual earnings stabilization in 2026, supported by growth in corporate and leisure travel.

However, risks remain, including geopolitical disruptions, high fuel costs, and uneven global travel demand.