Serena Hotels Operator Issues Profit Warning After Half-Year Loss of KShs 16 Million (UGX 448 million) TPS Eastern Africa, the operator of Serena Hotels, has slipped into a rare half-year loss of KShs 16 million and issued a profit warning for 2025, citing weakened bookings, rising operating costs, and the absence of last year’s large foreign-exchange gains that had boosted performance.

TPS Eastern Africa PLC, the operator of Serena Hotels, has issued a profit warning for the financial year ending 31 December 2025 after slipping into a half-year loss, marking a sharp reversal from the strong earnings momentum recorded in the previous year. 

The Group, which operates some of East Africa’s most prominent luxury and upscale lodges and city hotels, reported a loss after tax of KShs 16 million (UGX 448 million) for the first half of 2025, compared to a profit of KShs 696 million (UGX 19.49 billion) in the same period last year. 

The announcement, made in compliance with capital markets disclosure rules, indicates that the full-year profit after tax will fall by more than 25%, triggering the regulatory threshold for issuing a warning to investors.

The deterioration in performance was driven by a mix of revenue pressure, tighter margins, and the disappearance of last year’s extraordinary foreign-exchange gains. 

The Group’s revenue for the six-month period declined to KShs 4.1 billion (UGX 114.8 billion) from KShs 4.5 billion (UGX 126 billion) a year earlier. 

The 11% decline occurred against a backdrop of regional instability, inflationary pressures, rising fuel and electricity costs, and widespread public demonstrations in Kenya, one of Serena’s core markets.

These external shocks dampened travel bookings, especially from international guests, and forced the Group to increase provisions for doubtful receivables as required under IFRS 9, factors which pushed margins down and weighed heavily on profitability.

Even with these conditions, Serena Hotels maintained an underlying operational strength. 

Profit before depreciation, financing charges, results of associates and taxation stood at KShs 540 million (UGX 15.12 billion), down from KShs 756 million (UGX 21.17 billion) in the first half of 2024. 

While the drop reflected reduced operating margins, management described the results as evidence of resilience, noting that operations continued to generate positive cashflow, allowing the Group to maintain liquidity and continue funding its strategic capital investments. 

During the six-month period, Serena generated KShs 600 million (UGX 16.8 billion) in operating cashflow and spent KShs 500 million (UGX 14 billion) on refurbishments, sustainability upgrades and guest-experience improvements across its portfolio.

A significant factor behind the swing into a loss was the absence of the foreign-exchange windfall that boosted the 2024 half-year results.

Last year, the sharp appreciation of the Kenya Shilling against the US Dollar resulted in sizeable non-cash unrealised gains on the Group’s Dollar-denominated loans and lease liabilities. 

The revaluation gains gave the 2024 performance a substantial uplift. However, the first half of 2025 experienced relative exchange-rate stability. 

While beneficial for operational planning, this stability eliminated the exceptional gains that had inflated last year’s bottom line, leaving the 2025 results to reflect purely operational realities.

The knock-on effects of this were compounded by challenges in the tourism sector, including geopolitical tensions, security concerns, travel advisories, and macroeconomic headwinds across East Africa.

Booking cancellations were reported in key markets, putting additional pressure on revenue forecasts and prompting management to revise business projections downward. 

The Group confirmed in its profit-warning announcement that these combined effects are expected to reduce the full-year profit after tax by more than 25% compared to 2024, necessitating the issuance of the warning to shareholders.

Despite the setback in profitability, TPS has retained a solid financial footing. 

The Group’s total assets stand at KShs 20 billion (UGX 560 billion), with shareholders’ equity exceeding KShs 11 billion (UGX 308 billion).

Importantly, the Group’s US Dollar-denominated revenue stream continues to provide sufficient coverage for its Dollar loan obligations due in 2025 and beyond, offering reassurance on debt-service capacity.

The current difficulties come after a relatively strong 2024 in which TPS Eastern Africa reported growth in turnover and profitability.

Turnover for 2024 rose 5.18% to KShs 10.19 billion (UGX 285.32 billion) from KShs 9.68 billion (UGX 271.04 billion) in 2023. 

The Group delivered KShs 2.45 billion (UGX 68.6 billion) in earnings before unrealised exchange differences, interest, depreciation and taxation. 

The appreciation of the Kenya Shilling produced significant non-cash gains of KShs 830 million (UGX 23.24 billion), compared to a loss of KShs 1.03 billion (UGX 28.84 billion) the previous year. 

As a result, profit after tax in 2024 rose sharply to KShs 1.32 billion (UGX 36.96 billion) from KShs 460 million (UGX 12.88 billion) in 2023.

These favourable currency effects, however, created a high comparative base for 2025. With the one-off exchange gains no longer present and operational pressures mounting, the Group’s earnings trajectory has shifted downward.

In its warning, TPS emphasised that the unrealised gains recorded in 2024 “are not expected to recur in the current year,” affirming that the bottom line will be materially weaker.

Even so, the board maintains confidence in its long-term strategy, stressing that the Group continues to protect shareholder value, defend market share and enhance guest experiences through ongoing product upgrades and technology investments. 

The board also believes that the business remains fundamentally strong, with sufficient liquidity, operational resilience and strategic positioning to weather current market disruptions.