Company Analysis

Transcorp: Bouncing back into profit


Transnational Corporation of Nigeria (Transcorp) will expectedly finish the 2017 financial year with a big rebound from a loss last year into a new profit high. A big foreign exchange loss that caused a loss of N1.13 billion in 2016 is out of the way as at the end of the third quarter last September. Strong improvements in revenue and other operating income as well as cost moderations have further brightened the company’s profit prospects for the year.
Third quarter reading shows a turnover of N56.76 billion for Transcorp, which is a year-on-year growth of 35.4%. The growth momentum is considered strong enough to push sales revenue to about N77 billion at full year. The company raised turnover by 46% to over N59 billion in 2016.
Energy business, which is the largest revenue provider for the conglomerate, is also the revenue growth driver in 2017. Transcorp Group consists of 14 subsidiaries operating across hospitality, power, agro-allied and oil and gas sectors.
Other operating income rose by over 60% to N583 million at the end of the third quarter. At an increase of 4.8%, administrative expenses moderated considerably relative to sales revenue. These permitted an increase of 45% in operating profit, which amounted to N16.81 billion at the end of the third quarter.
Cost of sales is the only expense line of the company that grew ahead of turnover at 40% to N31.13 billion at the end of September. That still permitted a 29% improvement in gross profit. All other cost lines of the company, including finance expenses, moderated relative to revenue.
A 94% drop in foreign exchange loss to N1.15 billion at the end of the third quarter is the most significant change in the company’s income statement as at the end of September. It is also the central factor in the company’s return to profit in the 2017 financial year.
Transcorp’s profit capacity has been significantly reinforced as per the 2017 interims. Profit margin has recovered from -34% in the same period in 2016 to 14.4% at the end of September 2017.
The company closed third quarter operations with an after tax profit of N8.18 billion, up from a loss of N14.21 billion in the same period last year. That is already more than any full year profit the company has reported in years. Earnings growth is expected to improve further in the final quarter, which could see profit settle in the region of N11 billion for Transcorp at the end of 2017.
The company is bouncing back into profit after it lost the growth momentum in 2014. The loss in 2016 followed two years of sharp profit drops.
It reported earnings per share of 8 kobo at the end of the third quarter with a full year expectation of 11 kobo.

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