Transcorp Hotels Plc rode on the back of a 77 per cent jump in revenue to N7 billion in the first quarter to pull back from a loss of N204 million in the same period last year to an after-tax profit of N854 million at the end of March 2022.
The hospitality company is maintaining high revenue growth momentum for the second year after turnover more than doubled to N21.7 billion at the end of last year. Its three main revenue lines are maintaining impressive advances this year.
Leading the growth is the food and beverages income line, which more than doubled year-on-year at 112 per cent to N2.2 billion. This is followed by the company’s main revenue line – rooms, which grew by 76.5 per cent to N4.5 billion. The third main income line of the company is shop rental, which grew by 23.6 per cent to N249 million.
The company added some cost savings from two major angles to reinforce the strong revenue growth, which provided room for a big rebound in the bottom line. Operating expenses provided a substantial cost saving during the period with a moderated growth.
At about N3.2 billion, operating costs grew by 38 per cent over the period – about one-half as fast as turnover. The second cost-saving area is the cost of finance, which ended flat at about N1 billion for the first quarter.
However, the cost of sales failed to follow the moderated behaviour and grew almost at par with revenue. At N1.9 billion for the first quarter, the cost of sales grew by 76.5 per cent year-on-year. The increase was led by the cost of food and beverages, which advanced by 84 per cent and the cost of rooms, which went up by 69 per cent over the review period.
While the cost of sales afforded no room for cost-saving, it also didn’t encroach on revenue during the period. That preserved gross profit margin at 73 per cent and enabled gross profit to grow virtually at par with sales at 77.7 per cent to close at a little over N5 billion for the first quarter.
The slowdown in operating expenses stretched out margins, which powered a stronger growth in operating profit. At N2.1 billion, operating profit surged up a clear 156 per cent in the first quarter.
A finance cost of N1 billion in the same period last year had thrown the bottom line into the red. This year, the figure ended flat at N1 billion and claimed about half of the operating profit.
The flat finance expenses over the period reflect the state of balance sheet borrowings, which are virtually unchanged at about N24 billion.
The company earned 8 kobos per share at the end of the first quarter trading, which is a recovery from 2 kobo loss per share in the same quarter last year.
Transcorp Hotel was able to heal from its losses last year in the second half and ended the year with a profit of N1.1 billion after building a loss of N6.3 billion in 2020. The company gave out N717 million of the profit in 2021 in cash dividends to shareholders at 7 kobos per share.
The earnings outlook indicates the upturn, which has been running for the company since the second half of last year, looks very likely to follow it to a full year in 2022.
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