Says ‘COVD-19 Outbreak Could Materially’ Impact Hotel Segment
It was a bad start in the 2020 financial year for conglomerate- Transnational Corporation of Nigeria Plc (Transcorp), as revenue for the first quarter ended March 31, fell by 15.92%, while net profit was almost wiped off by a N1.262bn or 43.87% growth in net finance cost.
There is, therefore, no doubt that the Owen Omogiafo-led management of Transcorp must do much in the remaining three quarters of this year if shareholders must smile to their bank by this time next year.
According to the first quarter score-card presented through the Nigerian Stock Exchange (NSE) on Monday, revenue fell from N18.306bn in the corresponding period of 2019, to N15.391bn; even as management successfully cut cost of sales by 20.84% to N8.045bn from N10.163bn. The cost continues to be driven by natural gas and fuel costs at N5.489bn, a drop from N7.691bn.
The group’s revenue was impacted by the hospitality business which reported a flat revenue of N4.175bn, as against N4.186bn in 2019, in what may not be unconnected with the coronavirus pandemic that drastically impacted the sector in the twilight of the quarter under review, especially annual general and political meetings, most of which were done through virtual means.
The power segment performed relatively worse, given that total income therefrom dropped to N11.216bn, as against the previous N14.119bn, even as finance income from the segment rose to N76.382m from N37.684m
Gross profit, therefore, stood at N7.346bn, as against the previous N8.142bn.
While administrative expenses rose to N3.344bn from N3.079bn, other income jumped to N124.918m from N55.931m; just as other (net) gains nose-dived from N34.167m to N7.223m; resulting in operating profit of N4.134bn, a decline from N5.153bn.
Finance cost (interest expense on loans) soared from N3.334bn in 2019 to N4.479bn, while net finance cost rose from N2.878bn to N4.141bn; driven by finance cost from the power business which jumped to N2.393bn from N1.463bn, while that of the hospitality segment soared from N674m in 2019 to N1.347bn, while income fell from N1.349bn to just N22,000.
Foreign exchange gain for the period dropped to N144.306m from N277.829m.
Profit before tax therefore stood at mere N137.262m, down by 94.62% from N2.552bn in the 2019Q1; net profit declined by 96.14% from N2.091bn to N80.79m, indicating that the company could have been pushed into a loss, but for the significantly lower tax expenses of N56.472m, as against the prior first quarter’s N460.758m.
Loss per share arising from other comprehensive loss for the period stood at 1.24 kobo, as against the previous earnings of 1.58 kobo.
A further breakdown of the revenue showed that energy sent out by its Transcorp Power Generation Company dropped from N9.117bn to N6.905bn; followed by the N4.301bn capacity charge, down from N4.953bn. Revenue from room occupancy rose from N2.57bn to N2.636bn; food and beverages was down marginally to N1.115bn from N1.234bn, among others.
In an explanatory note, the directors of Transcorp lamented the global outbreak of COVID-19 within the period under review, which negatively impacted the world economy, including Nigeria.
In response to the outbreak, “the Federal Government of Nigeria, state governments and health authorities issued regulations, directives and guidelines aimed at curbing the spread of the virus and disease. The combined effect of these regulations, directives, and guidelines, amongst other things, is the lockdown of certain States and restriction of movement in other States.
The impact of COVID-19, the directors noted, negatively affected Transcorp’s two major revenue sectors: Power, which contributes about 70% of the Group’s Revenue; and Hospitality, about 30%.
Whereas Transcorp Power was not materially affected by the negative impact of the COVID-19 pandemic and continued to receive payments under the Federal Government’s N600bn Payment Assurance Facility, Transcorp Hotel plc and its operations have been negatively impacted in this period.
The future results of Transcorp Hotel, which started the year 2020 optimistic with detailed plans and budget to surpass the N20bn revenue performance achieved in 2019, the group warned, “will be materially impacted by the coronavirus outbreak.”
Furthermore, it added, “given the speed and frequency of continuously evolving developments with respect to this pandemic, the company cannot reasonably estimate the magnitude of the impact on its results and its operations, and, if the outbreak continues on its current trajectory, such impact could grow and become material to its liquidity or financial position.”
