Transcorp may double profit at full year

Transnational Corporation of Nigeria (Transcorp) is likely to close the 2018 financial year with double the profit figure of N10.61 billion it posted in 2017. The company’s interims show an elevated performance in 2018, sustaining a big turnaround and earnings growth for the second year.

Management has steered operations out of a loss position in 2016 and the new momentum is driving revenue and profit growth satisfactorily. The company looks likely to post a higher profit figure for 2018 than all the profits it earned in five years to 2015.

The new strength is coming from the company’s energy business, which has become the largest revenue provider. With capacity improvement, Transcorp Power Ltd, the subsidiary in the power sector, has achieved a significant increase in power generation and gas supply to its plants. Its power generating capacity is estimated to have exceeded 800 megawatts power generating capacity by the end of 2018.

A healthy growth in revenue remained one of the key strengths of the company in the year. Turnover for the group grew by 41% year-on-year to about N80 billion at the end of the third quarter operations. Revenue for the 2018 full year is estimated at N107 billion for Transcorp, an expected growth of 34% over the N80 billion turnover figure in 2017.

Costs maintained their generally moderate increases against the strong growth in revenue during the review period. Cost of sales moderated relative to turnover at the end of the third quarter and this permitted a healthy growth of 45% in gross profit to N37 billion.

Administrative expenses also remained moderated relative to revenue and despite a decline in other income, the company still achieved an increase of 55% in operating profit to N26 billion at the end of the third quarter.

Favourable cost behaviour continued in respect of finance expenses, which increased moderately at 4% to about N7.5 billion. A foreign exchange loss of N1.62 billion however raised net finance expenses to over N8 billion. The company’s balance sheet borrowings declined from over N112 billion at the end of 2017 to N101.5 billion at the end of September 2018.

Transcorp’s 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.

Profit margin has improved from 14.4% in the same period in 2017 and from 13.2% at the end of the year to 20% at the end of September 2018. Growing revenue and the improved ability to convert same into profit were the key operating strengths underlying Transcorp’s strong profit growth in 2018.

The corporation closed the third quarter operations with an after tax profit of about N16 billion, a year-on-year advance of 95%. This was already ahead of the full year profit the company posted in 2017. That leaves a good chance for the company doubling its preceding year’s profit figure, as the result of the 2018 financial year is around the corner.

The company earned over 17 kobo per share at the end of the third quarter compared to 8 kobo per share in the same period in the prior year. It paid a final cash dividend of 2 kobo per share for the 2017 operations.