TheCable

Transnational Corporation of Nigeria Plc (Transcorp) multiplied after tax profit more than eight times year-on-year to close the half year operations at N6.5 billion. The conglomerate experienced a further upswing in earnings performance in the second quarter when it generated N4.5 billion or 69 percent of the closing profit figure for the half year in June 2021.

Already the high hopes for a turnaround the company raised with first quarter results have been realised at half year. The closing profit figure for the six months of the 2021 financial year represents 171 percent of the company’s 2020 full year profit of N3.8 billion. 

Group profit had dropped from the region of N21 billion in 2018 and the first significant recovery is being recorded this year. The results so far indicate that Transcorp has overcome its challenges and that one of the biggest profit numbers in the company’s records can be expected in the 2021 financial year. 

Also, the new momentum in revenue generation seen in the first quarter was sustained in the second. The company is experiencing an upswing from loss of revenue for the second year in 2020 – when it closed with the lowest turnover figure in four years. 

The increased profit delivery in the second quarter follows a strong growth in revenue against a general moderation of costs. The company grew turnover by over N9 billion or 47 percent quarter-on-quarter in the second quarter, well ahead of a 29 percent increase in cost of sales. 

Other cost elements slowed down generally relative to revenue, which jerked up profit margin from 3.6 percent in the same quarter last year to 15.5 percent in the second quarter.

The year-on-year position for Transcorp at the end of June 2021 shows that turnover grew by 52 percent or over N18 billion to close at more than N53 billion. A further increase in momentum expected in the second quarter has been realised and the prospects for the company beating its 2018 turnover high of N104 billion have brightened as well.

The company’s main income line – electricity generation continues to lead revenue growth so far this year. Earnings from the income line rose by 55 percent year-on-year to about N30 billion at half year. This contributed close to 56 percent of the company’s turnover at the end of June 2021. 

The second largest revenue line – capacity charge also maintained a strong growth at roughly 35 percent year-on-year to close at nearly N15 billion at half year. Virtually all the other revenue lines of the company recorded strong growths over the review period.

Transcorp also made further progress towards cost moderation in the second quarter, which reinforced the strong growth in revenue to boost profit capacity. A major development in this regard is in respect of input cost, which reversed from growing ahead of turnover in the first quarter to growing below it at half year. 

Compared to the over 52 percent growth in turnover, cost of sales grew by below 47 percent to N29.7 billion over the review period. This is a major positive change in the company’s cost structure from the first quarter position when input cost grew ahead of revenue at 75 percent compared to 59 percent. 

Cost of sales claimed a reduced proportion of revenue at half year at less than 56 percent compared to 58 percent in the same period last year. Gross profit therefore accelerated from 42 percent growth in the first quarter to 60 percent at the end of the half year operations to stand at N23.5 billion. 

Administrative cost maintained a moderated behaviour that permitted some cost saving for the company. Administrative expenses increased by 20 percent to N7.5 billion year-on-year, which claimed a reduced share of revenue.

Despite an impairment loss of N273 million on financial assets during the period and a drop of 42 percent in other income to N620 million, the company still closed the half year operations with a major improvement in operating profit. 

At over N16 billion, operating profit rose by 71.5 percent year-on-year for Transcorp at the end of June. This is a big rebound from a drop of 20 percent in operating profit at the end of 2020. 

Finance cost was flat at roughly N8 billion at half year compared to a drop of 11 percent in the first quarter. This follows additional borrowings of N4 billion in the second quarter that have raised interest bearing debts to N125 billion at half year. 

A major cost increase emanated from the swelling of foreign exchange loss from N624 million in the same period in 2020 to N1.3 billion at the end of June 2021. 

Overall, Transcorp achieved a general moderation in costs at half year – resulting in a big leap in net profit margin from 2.2 percent in June last year to 12.2 percent this year. It is also a further improvement in profit margin from 8.4 percent in the first quarter. 

At the end of half year trading, Transcorp recorded an upsurge in after tax profit from N778 million in the same period last year to N6.5 billion.  It is yet a bigger upturn for the owners of the parent company from a loss of N1.1 billion to a profit of N3.2 billion over the review period.