Transcorp Seals Costs To Lift Profit To N19bn At Q3 Close

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Transcorp Plc brought costs under seal in the third quarter, which enabled management to defend profit in the quarter and lift closing profit for the nine months of operations by 41 percent to N19 billion. The company’s management applied a strict cost-revenue matching strategy in the third quarter that shielded its operations from the impact of inflation-driven cost increases on corporate bottom lines.

Cost management became imperative in the face of the inability to grow revenue in the third quarter. The company’s third-quarter interim report at the end of September 2022 shows that turnover edged up by 3 per cent quarter-on-quarter to N33.3 billion, which afforded no room for cost increases.

Strict balancing of cost and income saw the company through to an after-tax profit of N7 billion for the third quarter, an uptick from N6.96 billion in the same quarter last year.

The cost of sales could not be firmly controlled, which grew more than twice as fast as turnover at 7.8 per cent to N17.8 billion for the third quarter. The resulting slight decline in gross profit to N15.6 billion was remedied by a shift from a net impairment loss on financial assets of N284 million in the same quarter in 2021 to a net write-back of almost N50 million in the third quarter of the current financial year.

An increase of 53 per cent in other income to N510 over the same period also helped to strengthen operating profit, which closed flat at N11 billion for the quarter. A further improvement came from a sharp drop in foreign exchange loss on financing activities from N795 million to N3 million over the review period.

The cost savings with the improvement in other income enabled an increase of 6 per cent in pre-tax profit for the quarter to N7.5 billion.

Transcorp’s nine-month earnings position reflects much stronger growth in revenue and profit in the preceding quarters. It closed the third quarter with a turnover of over N96 billion, which is an increase of 12.4 per cent year-on-year.

Cost of sales grew less rapidly over the same period at 7 per cent to N49.5 billion, which powered an impressive growth of over 26 per cent in gross profit to N46.7 billion.

A challenge on the side of the cost came from administrative expenses that rose by almost 31 per cent year-on-year to nearly N16 billion. The impact of the increase was partly diluted by a drop of 48.7 per cent in impairment loss on financial assets and an increase of 29 per cent in other income to N1.2 billion over the same period.

An increase in other losses from N26 million to N141 million over the review period however added to the strain. Through the strengths and weaknesses, the company was able to improve operating profit by 14.5 per cent to N31.5 billion.

The growth margin was extended by significant drops in net finance cost and foreign exchange loss. Net finance cost went down by 15 percent to N9.6 billion and foreign exchange loss dropped by over 50 per cent to a little over N1 billion.

With the cost savings, the company stretched out its profit margin, raising pre-tax profit by 47.7 percent to N20.9 billion and after-tax profit by 41 per cent to N19 billion at the end of the third quarter.

The summary of the company’s earnings story at the end of the third quarter is that costs slowed down, which extended revenue improvement to drive profit growth. Net profit margin increased from 15.7 per cent in the same period last year to 19.8 per cent at the end of September 2022.

The company earned almost 22 kobo per share at the end of the third quarter, improving from over 17 kobo per share in the same period last year.