Transcorp Enhances Shareholders’ Interest with Divestment

Kayode Tokede

Transnational Corporation Plc (Transcorp), a diversified conglomerate with a presence in the Power, Oil & Gas, and Hospitality sectors have witnessed an extension in revenue and profit on the heels of giving back to shareholders and contributing to Nigeria’s economy.

The conglomerate in its third quarter (Q3) ended September 30, 2022 reported 12.45 per cent increase in revenue to N96.3billion from N85.6billion reported in Q3 2021, driven primarily by 76.55per cent contribution of revenue generated from power.

The breakdown of revenue revealed that Power sector reported N73.6billion revenue in Q3 2022, representing an increase of 3.7per cent from N70.99billion Q3 2021, while revenue from its Hospitality business grew by 55 per cent to N22.65billion in Q3 2022 from N14.6billion in Q3 2021.

In addition, the Corporate centre saw its revenue at N7.6billion in Q3 2022 from N5.46billion in Q3 2021.

As cost of sales moved to N49.55billion in Q3 2022, representing an increase of 7.2 per cent from N46.22billion in Q3 2021, gross profit grew by 18.6 per cent to N46.7billion in Q3 2022 from N39.4billion in Q3 2021.

The group closed Q3 2022 with N15.98billion administrative expenses, representing an increase of 31 per cent from N12.2billion in Q3 2021, while Foreign exchange loss on financing activities dropped to N1.05billion in Q3 2022 from N2.11billion in Q3 2021.

With the moderation in operating expenses, Transcorp shows its cost-to-income dropping to 78per cent in Q3 2022 from 83 per cent in Q3 2021.

In all, the group reported a profit before tax that grew by 47.71per cent to N20.87billion in Q3 2022 from N14.13billion in Q3 2021. With 177.15per cent increase in tax expenses to N1.83billion, the group reported profit after tax of N19.04billion in Q3 2022, representing an increase of 41.38 per cent from N13.5billion in Q3 2021.

The group, thus closed Q3 2022 with 11.6per cent post-tax return on equity in Q3 2022 from 9.2 per cent in Q3 2021, while Post-tax return on assets increased to 4.5 per cent in Q3 2022 from 3.3per cent in Q3 2021.

Amidst the current economic situation; inflation, foreign exchange volatilities and insecurities,  the President/GCEO, Transcorp, Owen Omogiafo addressing capital market stakeholders recently in Lagos said, “We continue to sweat our existing assets, aiming to ensure that we consistently deliver superior service to our guest, while we maximum revenue and creatively seek ways to optimise our key business segments whilst driving consistent growth  in leisure & Staycations.”

She added that customer experience remains a key focus for the group.

“We listen and are in tune with customers’ preferences, allowing us to create memorable experiences,” she added.

Contributing factors to Q3 2022 performance

Transcorp presence in the power/energy sectors is made up of Transcorp Power Limited, TransAfam Power Limited and Transcorp Energy Limited, while in the Hospitality business segment, it has Transcorp Hilton Abuja, Transcorp Hotels Calabar and Aura by Transcorp Hotels.

The combination of Transcorp Power Limited, TransAfam Power have a combined installed capacity of 1,938 Megawatt (MW) which accounts for 15.5per cent of the total installed capacity in Nigeria which is about 12,522MW.

Transcorp Power Limited has a capacity of 972MW and an available capacity of 670MW, as TransAafam Power Limited has an installed capacity of 966MW and 188 MW available capacity.

Transcorp Power Limited in 2022 successfully increased its available capacity from an average of 470MW in January to an average of 638MW as at September when its commissioned GT15 and GT16 with a combined capacity of 200MW.

In addition, in order to improve efficiency and secure reliable and steady gas supply, Transcorp Power Limited signed firm gas contract agreements with the following: NPDC/NDW; Chevron; and Seplat  Petroleum.

Also, TCN installed and energized a new 150MWA 330/132/33KV interbus transformer at Delta IV Transmission substation Ughelli, Delta State. Thereby, improving TPL’s evacuation capacity.

Given the recent increase in available capacity, steady gas supply and improved evacuation capacity, Transcorp Power Limited is looking to exceed it average generating capacity in the coming years.

Transcorp Energy Limited is covered by a production-sharing contract with NNPC.

For TransAafam Power Limited, the management since March 2021 handover has successfully increased and maintained the available plant capacity from 48MW at the time of takeover to 188MW with minimum CAPEX requirements between March 2021 to September 2022.

However, with the ongoing gas challenges impacting generation capacity, the management of TransAafam Power Limited has undertaken: commissioning of GT20 with additional capacity of 138MW in September. GT20 has been non-operational for 15 years; Execution of a gas supply agreement with AccuGas and HHOG and having discussing with other gas supply to ensure a steady gas supply.

Omogiafo stated that, “With the improvement in installed capacity and gas supply, we are looking forward to finishing strong in 2022 and solid start in 2023.”

For the hospitality business segment, the group has Transcorp Hilton Abuja which has 670 rooms. 20 meeting rooms and seven restaurants. Transcorp Hotel Calabar has 132 rooms, two meeting rooms and one restaurant. Aura by Transcorp Hotels, a digital platform that connects travelers to unique properties, restaurants and experiences across Africa is made up of 108 hotels, 645 apartments and 37 restaurants.

All the group business segment recorded improvement highlighted by occupancy in Transcorp Hilton Plc that improved from 62per cent to 78per cent in Q3 2022, while in the period under review, it generated capacity improved from 310MW to 374MW in Transcorp Power Limited.

TransAfam Power Limited’s generating capacity increased to 188MW from 46MW.

Moderation in debt-to-equity ratio

Transcorp reported decline in its total borrowing in the period under review and it impacted on debt-to-equity ratio.

The group reported a total borrowing of N103.49billion as of September 30, 2022 from N106.09billion in 2021 financial year and significant increase in shareholders fund to N165.8billion, representing an increase of 13.3 per cent from N146.29billion reported in 2021.

The interplay between total borrowing and shareholders’ fund impacted on debt-to-equity ratio that dropped to 0.64 per cent in Q3 2022 from 0.73 per cent in 2021FY.

The group’s total assets rose by 2.2 per cent to N425.2billion as of September 30, 2022 from N416billion in 2021, while total liabilities dropped by 3.8 per cent to N259.37billion as of September 30, 2022 from N269.7billion reported in 2021 financial year.

2022 strategic targets

Omogiafo “Our overall strategic objective is to fully optimize our existing assets to ensure we consistently deliver value and high returns to our stakeholders.

“In 2022, our key priority is to achieve our set targets for the year across the various operating segments. As a Group, we will remain resolute as we execute our strategic priorities in 2022.”

The group planned to increase the available and generating capacity of Transcorp Power Limited to 690 MW target average available capacity in 2022 and 553MW target generating capacity.

For Transafam Power Limited, it planned 349MW target average available capacity and 271MW target generating capacity.

The group planned to commence the actualization of its gas-to-power strategy at Transcorp Energy Limited, while for Transcorp Hilton Abuja and Transcorp Hotels Calabar, it planned to redefine hospitality standards in Nigeria.

On Transcorp key projects/initiatives

Omogiafo noted that the company launched a state-of-the-art Spa and wellness centre in Transcorp Hilton, adding that an upgrade of the existing Gym facilities was also carried out.

“We have commenced the construction of an event centre in Transcorp Hilton Abuja that would cater to the growing demand for large scale gathering.

“This Event Centre, with a seating capacity of over 2,500 for multi-purpose events, is expected to be completed Q4 2023. We intend to build a 5-star hotel, with relaxation and lifestyle features, located in the heart of Ikoyi. The project would be delivered by Q1, 2027.

“Transcorp Hotels Plc remains committed to strong corporate governance practices.  Within the year, we obtained CGRS Re-certification by the Nigerian Exchange Group (NGX).

“THP continues to exceed the benchmark. Our key focus going forward is to achieve the required Free Float percentage; 20per cent of the issued shares”.

The group’s 2022 outlook

Omogiafo on Power sector outlook said, “Our focus is to sustainably recover and increase our available capacity, improve our operational efficiency and automate our processes to ensure maximum utilization of our resources.”

She explained that the focus on the hospitality segment would be a continued investment in innovation that allows the group to be dynamic and agile whilst delivering superior offerings and service to all guests.

She stressed that the strategic priorities include: optimize its existing hospitality asset, leverage the Aura platform to redefine hospitality standards across Africa and continuous innovation and optimization of existing businesses from operational efficiency to guest experience.

On the oil & gas, she added that “We are focused on accelerating minimum work program activities and achieve planned production in 2023.”