Company Analysis

Transcorp beats last year’s profit in six months


Transnational Corporation of Nigeria [Transcorp] has closed half year operations with an after tax profit of N10.87 billion, already ahead of the N10.61 billion profit it reported for the 2017 full year trading. The conglomerate made a big return to profit last year and its reconditioned growth engines are firing at an increased momentum this year.

The company’s subsidiary in the power sector – Transcorp Power Ltd, has achieved a significant increase in power generation with capacity improvement and improved gas supply to its plants. Its power generating capacity grew from 505 megawatts in 2016 to 701 megawatts in 2017. The company expects to exceed the 800 megawatts power generating capacity by the end of 2018.

Energy business is the largest revenue provider for the company and has been the leading revenue growth since 2017. Transcorp Group consists of 14 subsidiaries operating across hospitality, power, agro-allied and oil and gas sectors. Its hospitality business remains in good shape despite high competition while it is also expanding its capacity there with an upgrade project in Transcorp Hilton, Abuja.

Last year, the group pulled out of a loss of N1.13 billion in 2016 and looks likely to post a higher profit figure this year than all the profits it earned in five years to 2015. A healthy year-on-year growth of 58% in turnover at the end of half year operations is one of the key strengths of the company this year.

The group closed the second quarter operations with a turnover of N54.09 billion and based on the current growth rate, revenue may close in the region of N114 billion at the end of 2018. Turnover had grown by 35% to over N80 billion in 2017.

The strong growth in revenue was reinforced by a general moderation of costs during the review period. Cost of sales moderated relative to sales revenue at the end of the second quarter and that permitted a healthy growth of 65% in gross profit to N24.57 billion.

Administrative expenses also moderated relative to revenue and with an increase in other income, the company saw a big leap of 82% in operating profit to N17.35 billion at the end of half year trading.

Even a more favourable cost behaviour happened in respect of finance expenses, which increased moderately at 6.6% to about N5 billion. The company’s balance sheet borrowings have declined from over N112 billion at the end of 2017 to a little over N100 billion at the end of the second quarter.

Transcorp’s profit capacity has been reinforced further from the significantly enhanced position in 2017. This reflects strong growth in revenue and a general slowdown in costs.

Profit margin has improved from 12.2% in the same period in 2017 and from 13.2% at the end of the year to 20% at the end of June 2018. Growing revenue and improving ability to convert same into profit is the driving force of Transcorp’s exceptional profit growth this year.

The corporation closed the half year operations with an after tax profit of N10.87 billion, a year-on-year advance of 161% and already ahead of the full year profit the company posted in 2017. That leaves good prospects for the company doubling last-year’s profit figure at the end of the current financial year.

The company earned over 11 kobo per share at the end of the second quarter compared to less than 4 kobo per share in the same period last year. It paid a final cash dividend of 2 kobo per share for the 2017 operations.


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