Transnational Corporation of Nigeria (Transcorp) Plc, at the weekend, outlined the key initiatives and business environment that will drive its performance in the year. It also assured shareholders that it would deliver improved returns in the new business year.
Transnational Corporation of Nigeria (Transcorp) Plc, President, Mr. Emmanuel Nnorom, who spoke against the backdrop of the challenges in 2016, said the new business year has started on a positive note with the improvement in gas supply and foreign exchange situation as well as the decision of the Federal Government to provide guaranteed payment for power supply. Its power business, Transcorp Power Limited, contributes 75 per cent of the groupโs earnings.
According to him, the three main challenges faced by the groupโs power business are being resolved and the operating environment is improving. These include the Federal Governmentโs renewed commitment to the power sector by way of the recent N701 billion guarantees to NBET for payment for energy sold and associated invoices.
He said the N701 billion NBET guarantee would boost confidence among the power sector stakeholders and attract new investors into the sector with Transcorp power, which ranks among the top three in the sector, being one of the major beneficiaries. The NBET owed Transcorp Power Limited about N50 billion by December 31, 2016.
โThe first thing international investors want to know is how we get paid for the power we generate. In 2016 that question had become near impossible to answer. The undeniable fact is that if we truly intend to develop Nigeria we must first develop the power sector. This recent move by the Federal Government appears to be a step in the right direction,โ Nnorom said.
He added that the complete disbursement of Central Bank of Nigeria (CBN) NEMSF N309 billion intervention fund awaiting National Assembly approval would also enhance the liquidity in the sector.
He pointed out gas supply has increased tremendously since mid February, thus making the Transcorp Power Limited to increase capacity utilisation, which had dropped from 65 per cent in 2015 to 55 per cent in 2016, to an average of 70 per cent and a peak of 90 per cent since mid-last month.
He added that the conglomerate has also been working to secure alternative sources of gas to complement existing supply while laying the groundwork for future expansion in anticipation of increased gas supply.
He added that the conglomerate has secured provisional commitments from its lenders to convert Dollar-based loan to Naira subject to liquidity, noting that the NBET new initiative of paying power generating companies (Gencos) in Dollars for power sold to neighbouring countries, will also help to ameliorate foreign exchange situation as well as the pricing of the forex impact on increased gas cost into the tariff.
โThe value of the Naira is headed in the right direction. As the Naira regains its value, it instantly improves the bottom line of Transcorp as foreign exchange loans were solely responsible for reported loss. As long as 2017 maintains the positive momentum it has started with, the future looks bright for Transcorp and its investors,โ Nnorom said.
He pointed out that in spite of the challenging operating environment in 2016, the conglomerate was able to close the year with revenue growth of 46 per cent, which he described as impressive, given the fact that Transcorpโs power business contributes 75 per cent of the groupโs earnings.
He noted that the groupโs hospitality business, Transcorp Hotels Plc, has continued to show resilience and profitability as it ended the 2016 business year with a profit of N5 billion. Transcorp Hotel is paying gross dividend of N3.04 billion or dividend per share of 40 kobo to shareholders.
Key extracts of the audited report and accounts of Transcorp Hotels for the year ended December 31, 2016 showed that its turnover rose from N13.98 billion in 2015 to N15.31 billion in 2016. Profit before tax stood at N5.24 billion in 2016 as against N5.38 billion in 2015. Profit after tax rose by 17.1 per cent from N3.5 billion in 2015 to N4.1 billion in 2016.
They showed considerable improvements in operating activities. Total sales rose by 45.8 per cent while gross profit and operating profit rose by 24 per cent and 37.9 per cent respectively. However, foreign exchange loss leapt by 208.6 per cent and compounded other finance costs to increase the conglomerateโs net finance loss by 127.5 per cent, turning the bottom-line to red.
Group turnover rose from N40.75 billion in 2015 to N59.42 billion in 2016. Gross profit also improved from N24.33 billion to N30.17 billion. Operating profit rose to N20.72 billion in 2016 as against N15.03 billion in 2015. Forex loss, however, worsened from N6.06 billion in 2015 to N18.70 billion in 2016. With this, net finance loss stood at N26.64 billion in 2016 compared with N11.71 billion in 2015.
With these, the conglomerate suffered a pre-tax loss of N5.93 billion in 2016 compared with a pre-tax profit of N3.32 billion in 2015. After taxes, net loss reduced to N1.13 billion in 2016, still a significantly worse position than net profit of N2.03 billion posted in 2015.
