From Mike Uzor, Lagos
Transnational Corporation of Nigeria [Transcorp] has begun to reap the rewards of its venturing into the energy sector, which has become its largest revenue provider. The conglomerate’s power sector subsidiary – Transcorp Power Ltd, has achieved a significant increase in power generation after improving its operating capacity and securing improved gas supplies to its power generating plants.
From 505 megawatts in 2016, the company raised its electric power generation to 701 megawatts in 2017. Its target is to exceed 800 megawatts power generation mark by the end of 2018.
Energy business has been the largest revenue provider for Transcorp group as well as the leading revenue growth driver since 2017. It provided the strength for the turnaround the group achieved last year – pulling out of a loss of N1.13 billion in 2016. It is again the spur for outstanding profit performance for the group so far this year.
Transcorp group is experiencing a heightened earnings growth in the current year with after tax profit already exceeding the 2017 full year figure at the close of half year operations. A healthy growth in revenue and a gain in profit margin are the company’s key operating strengths this year.
At the end of half year operations, the company recorded a turnover of N54.09 billion, a year-on-year growth of 58%. This is an accelerating growth from the increase of 35% in turnover to about N80 billion in 2017.
After tax profit amounted to N10.87 billion for Transcorp at the end of June 2018, an outstanding growth of 161% year-on-year. This is already above the full year profit figure of N10.61 billion the company recorded in the 2017 full year operations. If the performance is maintained in the second half of the year, the company is likely to reap the biggest harvest ever in its operating history this year.
Apart from the strong growth in revenue, costs slowed down generally over the review period. Profit margin therefore improved from 12.2% in the same period last year to 20% at the end of June 2018. It is also a significant improvement from the closing profit margin of 13.2% at the end of 2017.
Growing revenue with improving profit margin is the good news for Transcorp in the current year. It provides the strength for the impressive earnings story coming from the company this year.
A good margin of cost saving was recorded from cost of sales, which moderated relative to sales revenue at the end of June. Gross profit therefore rose sharply by 65% to N24.57 billion over the period.
Further cost saving was also made from administrative expenses, which moderated relative to revenue and with an increase in other income, the company registered an 82% advance in operating profit, which amounted to N17.35 billion at the end of half year.
The biggest cost saving came from finance expenses, which increased only moderately at 6.6% to about N5 billion against declining debts. The company has cut down its interest bearing debts from over N112 billion at the end of 2017 to about N100 billion at the end of the second quarter.
Transcorp group operates 14 subsidiaries across hospitality, power, agro-allied and oil and gas sectors. The summary of the company’s operations at the end of half year is that 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.