Transnational Corporation of Nigeria’s [Transcorp] raised optimism on the earnings front this year with a forward jump of 60 percent in turnover in the first quarter.
It closed the first quarter trading with a turnover of over N24 billion, representing additional earnings of N9 billion raked in on the year-on-year reading.
The revenue gain produced a massive swelling of the bottom line from less than N81 million in the same period last year to over N2 billion at the end of March. The figure represents 54 percent of group profit in 2020, a positive signal for a major turnaround for Transcorp this year.
Rebuilding revenue represents the right and proper step for the conglomerate this year after it lost revenue for the second year in 2020, ending the year with the lowest turnover in four years. Loss of revenue was at the center of the company’s challenges last year, resulting in a drop of 80 percent in pre-tax profit.
The new strength in revenue came from a major improvement in the company’s main income line – electricity generation. An improvement of 96 percent in the income line year-on-year was achieved in the first quarter, representing over 55 percent of turnover. This was supported by a 61 percent rise in revenue from capacity charge over the same period.
The reversed position on revenue in the first quarter also happened on the side of costs. Unlike in the preceding financial year when costs grew all the way from input expenses to finance charges, a general moderation in costs was recorded in the first quarter.
Cost of sales grew at a slower pace than revenue at 75 percent to N14 billion compared to a 96 percent rise in turnover. The moderation enabled the revenue gains to pass down to gross profit – which grew by 42 percent to over N10 billion at the end of the quarter.
This is a reversal of the position last year when the cost of sales increased against a decline in sales revenue. It is also a strong turnaround from a drop of about 7 percent in gross profit at the end of the 2020 financial year.
Impairment loss on financial assets, which was as large as N4 billion at the end of last year amounted to N90 million in the first quarter. Administrative expenses increased moderately at less than 10 percent to N3.6 billion year-on-year while other operating income grew by 96 percent to N244 million over the period.
The resulting moderated cost behaviour powered an increase of 67 percent in operating profit to almost N7 billion at the end of the first quarter. This is a rebound from a drop of 20 percent in operating profit at the end of last year.
Net finance expenses also reversed from an increase of 12 percent at the end of the prior financial year to a decrease of 11 percent year-on-year to N3.7 billion in the first quarter. While net finance cost was slightly above the operating profit in the same period in 2020, it dropped sharply to 53 percent in the first quarter of 2021.
The only pressure from the side of cost for Transcorp so far this year is a foreign exchange loss of N727 million. This is a shift from a foreign exchange gain of N144 million in the same period last year.
The company’s debt portfolio increased from N119 billion at the end of 2020 to over N121 billion at the end of March 2021.
Transcorp closed the first quarter of 2021 with an after-tax profit of N2 billion, which is a major upturn from less than N81 million profit in the same period last year. The company’s profit records have been considerably down for the past two years from the over N20 billion mark in 2018.
The first quarter has given a signal that the first significant profit recovery may be expected from Transcorp this year. How far the company can keep this hope alive will be the key developments to watch in subsequent interims.
The bottom line for the owners of the company shows a turnaround from a loss of N504 million in the first quarter of last year to a net profit of N729 million in the first quarter of 2021.
Transcorp closed the first quarter of 2021 operations with earnings per share of less than 2 kobo.
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