Transcorp: Maximising Shareholder Value via Share Reconstruction

Kayode Tokede writes on the   recent share reconstruction exercise embarked upon by Transnational Corporation Plc on the Nigerian Exchange and its benefits to shareholders

Transnational Corporation(Transcorp) Plc  recently announced the successful completion of its share reconstruction, a strategic action aimed at maximising long-term shareholder value.
Nigeria’s leading  conglomerate’s share reconstruction involved a consolidation of the total number of issued shares at a ratio of 1 to 4, reducing the total issued and fully paid shares of Transcorp Group from  40.6 billion shares to 10.2 billion shares.

While the number of shares reduced pro rata, the total value of shareholders’ investments remain unchanged with no dilutive impact to shareholders.
The company in a statement on the Nigerian Exchange Limited  (NGX) said  that the reconstruction would  result in the cancellation of three out of every four shares held by Transcorp’s shareholders and a reduction of the issued share capital to N5,080,998,787.00, comprising 10,161,997,574 ordinary shares of N0.50 each.
The share reconstruction initiative by Transcorp offers several potential benefits for investors part of which include enhanced share value, improved financial ratios, simplified capital structure and potential for future capital raising exercise.

When the reconstruction was completed on October 28, 2024, the stock price of Transcorp increased to N48.60 per share on NGX from N11.00 per share.
The share reconstruction ratio was determined taking into consideration the company’s prevailing market capitalisation, the number and price of its shares, its effect on the post-reconstruction share price sustainability, amongst other factors.
For shareholders, this reconstruction does not dilute ownership, as the process is proportional across all investors, thus maintaining their percentage of ownership while potentially enhancing per-share metrics. Overall, these changes aim to boost investor confidence and long-term shareholder value.
Commenting,  President/Group Chief Executive Officer  of Transcorp, Owen Omogiafo, said: “This share reconstruction is in line with the company’s corporate strategy and growth plan and is aimed at maximising shareholder value. The reconstruction will bring the company’s capital structure to a manageable position.”
According to her, the  company remains committed to driving growth and creating value for its shareholders through strategic actions that align with its business objectives.

Financial performances
The Group announced impressive financial results for third quarter (Q3) ended September 30, 2024, showcasing remarkable year-on-year growth.
The Group’s Q3 2024 unaudited results demonstrate strength across key financial performance measures, highlighting the success of its growth-driven strategy.

For the period ending September 30, 2024, Transcorp recorded revenue of N298 billion, a remarkable 133 per cent increase from the N128 billion reported in the same period of 2023.
Profit before tax (PBT) surged by 303 per cent, reaching N105.5 billion compared to N26.2 billion in Q3 of the previous year, further consolidating the group’s standing in Nigeria’s competitive business environment.
Its total assets increased by 29 per cent, climbing from N530 billion in December 2023 to N684 billion by the third quarter of 2024. The asset growth was paralleled by a 34 per cent increase in shareholders’ funds, which rose from N187 billion in December 2023 to N251 billion by Q3 2024.

The growth was largely attributed to retained earnings, showcasing the Group’s commitment to creating shareholder value. Operating expenses saw a 38 per  cent rise to N32 billion in Q3 2024, reflecting the impact of inflation on operating costs, while net finance costs rose by 12 per cent to N12 billion, attributed to higher interest rates.
Omogiafo attributed the group’s impressive  performance to its focus on innovation, operational excellence, and ability to navigate a complex market environment.
She said: “We are proud of our consistent year-on-year growth. This remarkable financial performance is a reflection, once again, of our vision and spirit of execution.

“As we approach year end, we will focus on enhancing operational efficiency, investing in high-growth sectors, and delivering long-term value to our shareholders. We are investing for the future, particularly in the energy and hospitality sectors, delivering for our shareholders and our nation.”
The financial results of Transcorp for the year ended December 31, 2023, had shown  an impressive  robot performance as profit before tax (PBT) stood  at N58.8 billion, a growth of nearly 94 per cent from N30.4 billion reported in 2022 financial year.
The Group had achieved substantial growth in its financial indicators, reinforcing its market leadership and strategic positioning as profit after tax (PAT) for 2023 increased to N32.6 billion in 2023, representing 91 per cent growth from N17.1 billion in 2022.

Earnings Per Share (EPS), however, increased to N40.00 per share in 2023 compared to N19.00 per share in 2022.
On the backdrop of impressive 2023 financial year result and accounts, the board of directors of Transcorp  paid a dividend payment of N4.06 billion in 2023 (2022: N2.03billion), being 10 kobo per share on the outstanding ordinary shares of 40,647,990,293 shares of 50 kobo each for 2023.
In its audited results, Transcorp reported significant year-on-year growth, with revenue rising to N197 billion in the year 2023, from N134 billion in 2022, representing a 47.3per cent increase. The strong performance is further demonstration of the Group’s strategic focus and effective execution.
The Group’s operating expenses saw an increase of 22.6 per cent year on year, totaling N26.9 billion in 2023, reflecting the impact of inflation.

From balance position, Transcorp’s total assets hits N529.9 billion in full year 2023, a growth of 20per cent from N442.7 billion in 2022.
Transcorp with strategic investments in the power, hospitality, and energy sectors, is driven by its mission to improve lives and transform Africa.
The combination of Transcorp, Transcorp Power Plc and Transcorp Hotels generated N203.05 billion profit before tax in Q3 2024, representing about 244 per cent increase from N59.06billion reported in Q3 2023.
Transcorp Power in Q3 2024 reported N81.1 billion PBT, about 198 per cent increase from N27.3 billion in the previous year.
The company also achieved a PAT of N58.5 billion in Q3 2024, about 186 per cent growth from N20.4 billion reported in Q3 2023.

In its Q3 2024 unaudited results, Transcorp Power reported revenue of N223.6 billion, representing a significant 153per cent growth over N88.4 billion in Q3 2023.
Transcorp Hotels, the hospitality subsidiary of Transcorp declared N16.44 billion profit before tax, an increase of 192 per cent from N5.64 billion in Q3 2023.
The company reported a strong performance with a 67per cent revenue growth from N28.97 billion in Q3 2023 to N48.49 billion in Q3 2024, fueled by strategic pricing initiatives and robust sales efforts across all business segments, with a particular emphasis on the targeted Group and International Business segments.

Conclusion
Transcorp has been a significant player in Nigeria’s economy since its founding in 2004. Transcorp has contributed substantially to economic growth, infrastructure development, job creation, and social impact initiatives.
Transcorp Power is one of the largest power producers in Nigeria. It operates the Transcorp Power Plant in Ughelli, Delta State, which generates about 800 MW of electricity, contributing to over 10 per cent of Nigeria’s power generation capacity.
The company has invested heavily in expanding and improving power infrastructure, addressing one of Nigeria’s most pressing issues—insufficient electricity supply. This helps stimulate growth across various sectors by providing more reliable power to businesses and households.

Transcorp Hotels, operates Transcorp Hilton Abuja, one of Nigeria’s most prominent luxury hotels, and Transcorp Hotels Calabar. These hotels have been central to Nigeria’s hospitality sector, attracting tourism, hosting international conferences, and providing services for dignitaries and business leaders.
Through its various subsidiaries and operations, Transcorp has created thousands of jobs in Nigeria, both directly and indirectly. The company employs professionals across power, oil and gas, hospitality, and other sectors, helping to reduce unemployment and improve livelihoods.

Transcorp’s resilience as a Nigerian-owned corporation have boosted investor confidence, making Nigeria more attractive for foreign direct investment (FDI). Its partnerships with international companies in various ventures reflect positively on Nigeria’s business environment, encouraging other investors to consider Nigeria as a viable investment destination.
Transcorp’s ventures contribute to Nigeria’s GDP and generate significant revenue for the government through taxes, levies, and royalties. This revenue is crucial for national development and infrastructure improvement efforts.