Transnational Corporation of Nigeria’s [Transcorp] survived a pre-tax profit crash of 80 percent in 2020 through an inflow of tax credit of N2.2 billion.
That overturned the drop in pre-tax profit to a marginal improvement in after-tax profit for the year.A shift from a tax expense of N4.2 billion in the prior financial year to a tax credit last year was the most significant event in the company’s earnings story in 2020. The cost-saving provided N2.1 billion of the N3.8 billion after-tax profit the company posted at the end of the year.
The conglomerate, therefore, managed to escape from profit drop for the second year after losing 82 percent of the previous year’s profit in 2019.
Loss of revenue is at the centre of the company’s challenges. Turnover went down for the second year to close at the lowest figure in four years. Costs however grew all the way from input expenses to finance charges.
The adverse pressure that ruled the company’s interim reports persisted on both sides of cost and income to a full year. Cost increases were led by termination benefits of N2.2 billion that was completely off the books in the preceding financial year.
Also, impairment loss on financial assets multiplied 11 times in the year to almost N4 billion. Cost of sales increased while sales revenue declined. Net finance expenses increased against a strong drop in operating profit.
Two major favourable developments in the company’s operations in the year are a drop of 19 percent in administrative expenses and a leap of 62 percent in other operating income to N2.6 billion.
Transcorp closed the 2020 operations with a turnover of over N75 billion, which is a marginal decline of 1.4 percent. This is further to a drop of nearly 27 percent in turnover in 2019. That led the turnover figure for the year down below the 2017 closing level.
Most of the company’s revenue lines faced significant drops at the end of the year. Only power generation and capacity charges recorded an increase of 16.5 percent during the year. The energy business accounted for over 86 percent of group turnover for Transcorp in 2020.
While revenue declined, input cost increased by 3 percent to N42 billion. This caused a decline of 6.7 percent in gross profit – which amounted to N33 billion.
Management cut down administrative cost by 19.4 percent to N11.4 billion but the cost-saving was countered by the appearance of termination benefits of N2.2 billion during the year.
Operating profit dropped by 20 per cent to N18 billion at the end of the year. The finance cost of almost N17 billion consumed much of the operating profit.
The relatively high cost of finance reflects the company’s huge debt portfolio. Balance sheet borrowings amounted to N119 billion at the end of 2020, rising from N114 billion at the end of 2019.
Transcorp closed the 2020 financial year with an after-tax profit of N3.8 billion, creeping up from N3.7 billion in the preceding financial year. Profit remains considerably down for the second year from the over N20 billion mark the company posted in 2018.
The owners of the company however counted a loss of N862 million for the year against a net profit of N1.5 billion in 2019.
Transcorp, therefore, closed the 2020 operations with a loss per share of 2 kobo a drop from earnings per share of 4 kobo in 2019.
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