The 176 per cent growth in profit recorded by Transnational Corporation of Nigeria (Transcorp) for the half year ended June 30, 2014 has given investors reasons to expect another profitable year, writes Goddy Egene
Stakeholders in the capital have been looking up to the half year corporate results of companies with high hopes. Based on the high hopes, the share prices of some of the equities attracted high demand from investors. While some investors had hoped that traditional interim dividend paying companies would compensate them, others believed that with improved half year results, their hopes for higher dividend at the end of the year would been rekindled.
Besides, with higher financial results, investors would be able to position themselves and take position in the various companies. Although companies began reporting their half year results last week, some of the results are weaker than expected. However, few companies met the expectations of the investors with performances higher than the previous year's. Transnational Corporation of Nigeria (Transcorp) is among those companies that have recorded significant growth in their half year results. Transcorp ended the period with growths in all performance indicators.
Corporate history Transcorp,which is listed in the conglomerate sub-sector of the Nigerian Stock Exchange (NSE) was incorporated on 16 November 2004 with the objective of creating a truly Nigerian conglomerate with the ability to compete successfully on a global scale. One of the major goals the minds of its founders was setting up a company capable of mobilising local and international capital in the development of world-class enterprises, under strong Nigerian management and leadership. Today, Transcorp is a publicly quoted conglomerate with a diversified shareholders base of about 290,000 investors, the most prominent is Heirs Holdings Limited, a pan-African proprietary investment company. The Transcorp portfolio comprises strategic investments in the hospitality, agriculture and energy sectors. The company's notable businesses include: Transcorp Hilton Hotel, Abuja; Transcorp Hotels, Calabar; Teragro Commodities Limited, operator of Teragro Benfruit juice concentrate plant, Transcorp Ughelli Power Limited and Transcorp Energy Limited, operator of OPL281. The company's vision is "To create sustainable value for our stakeholders in our chosen markets," while its mission is "To build a conglomerate of successful businesses underpinned by excellence, execution and entrepreneurship." Mr. Tony Elumelu is the chairman of Transcorp while Obinna Ufudo is chief executive officer. Other directors are: O'tega Emerhor; Kayode Fashola; Alhaji Mohammed Nasir Umar; Dr. Stanley Lawson; Emmanuel Nnorom; and Chibundu Edozie.
Improving financial trend After many years of underperforming, Heirs Holding bought into Transcorp in 2011, a development that charged the fortunes of the company. The positive change manifested further last year when the shareholders got N1.9 billion as dividend, the first seven years of the company's operations. Though the dividend translated into five kobo, shareholders commended the decision of the board to pay the dividend, saying it has broken the barren years of no dividend. Transcorp's financial performance has shown a progressive trend, which reflected the efforts of the board and management to reposition the company and deliver results to stakeholders. Turnover has grown from N12 billion in 2009 to N18.8 billion in 2013 while profit before tax (PBT) rose from N3.2 billion in 2009 to N12.9 billion. Profit after tax (PAT) grew from N1.2 billion in 20009 to N6.9 billion. Networth, which is the total value of the company, improved from N22 billion in 2009 to N86 billion in 2013. The profit margin of the company, which indicates its efficiency in turning revenue to profit, improved from nine per cent in 2009 to 36 per cent. This implied that from N9 profit the company was making out of every N100 revenue, it has improved to N36 out of every N100 revenue as at December 31, 2013. Ufudo had said the 2013 reflected the company's commitment to its long term strategic plan, translating into strong and sustainable growth. "We are excited about the achievements we recorded across our businesses within the past year. Our entry into the power sector has been a significant driver and we are already running ahead of our 2014 estimates. We expect significantly better results this year, as our diversification and growth strategies continue to gain momentum." Elumelu was also excited about the results, especially the payment of dividend. "This is the beginning of a very bright future for all our patient and loyal shareholders. With the tremendous progress we have already recorded in our power business - taking the Ughelli plant's power output from 160mw when we took over on November 1, 2013 to 360mw within 3 months - 2014 promises to be a very rewarding year for the company and our 300,000 shareholders," he said. Apart from the directors of the company, Renaissance Capital, a leading international financial advisory firm a leading investment services firm, said they were pleasantly surprised that Transcorp decided to pay dividend (for the first time) at all especially as they are entering into a growth period. According to the analysts, they are optimistic that there would be dramatic changes in Transcorp's numbers going into 2014 as the transformation process continues.
2014 half year results As projected by RenCap's analysts that Transcorp's numbers would witness dramatic changes in 2014, its the company's HI has indicated that 2014 would be rosy for investors. Transcorp ended the H1 of 2014 with a revenue of N21.21 billion, up from N7.6 billion in the corresponding period of 2013. Operating profit rose by 148 per cent from N3.9 billion to N9.75 billion, while profit before tax grew by 122 per cent from N3.61 billion to N8.0 billion. PAT increased by 176 per cent from N5.54 billion to N11.30 billion, with PBT margin improving from 36 per cent in 2013 to 38 per cent in 2014. Total assets for the group grew by six per cent from N149.64 billion as at December 31, 2013 to N158.18 billion as at June 30, 2014. However, given the huge investments the company is making, its cost of funds rose to N2.126 billion in 2014, up from N1.1 billion in 2013. Market operators said that once the company's pay down its borrowings to finance its investments in power and hospitality businesses, its bottom-line would recorded higher growth. The company ended the H1 with earnings per shares of 11.30, up from 5.53 kobo in the corresponding period of 2013. Doubling the EPS by end of the year would mean an EPS of about 22 kobo, which will translate into a dividend above the five kobo paid in 2013. Explaining the H1 results of Transcorp, Ufudo said: "Our half year results for 2014 consolidates the significant growth achieved in first quarter 2014 and firmly sets us on course for the attainment of full year 2014 financial targets." According to him, the company is very pleased with the continued growth in capacity and output at its Ughelli Power plant. He said the plant's available capacity and output peaked at 453 MW during the period, up from the 160MW when the plant was taken over on November 1, 2013. "We are on course to reach our target available capacity of 715MW by end of the year. In addition, our flagship hotel, Transcorp Hilton Abuja achieved strong revenue growth through increased traffic from its successful hosting of the World Economic Forum for Africa event in May 2014," he said. "Overall, we remain focused on achieving our medium term objectives to develop new hotels, expand our available power generation capacity, diversify and increase scale of our agribusiness and exploit opportunities within the oil and gas industry. We expect steeper growth rate for the rest of the year as our turnaround strategies take firmer root," Ufudo noted.