Transnational Corporation of Nigeria plc’s half-year (H1) profit rose 177.42 percent on investment diversification and aggressive expansion, analysis of financial statement shows.
The company that has interest in hotel, oil and agricultural sub-sectors grew revenue by 176.53 percent to N21.21 billion in the second quarter of the year, from N7.67 billion in the same period of the corresponding year (HY) 2013.
The bottom-line level also increased as profit before tax (PBT) spiked by 121.88 percent to N8.01 billion in HY 2014, compared with N3.61 billion as of (HY) 2013.
Profit after tax spiked by 177.42 percent to N6.88 billion, from N2.48 billion as of HY 2013.
The company also plans to raise N15 billion to refinance power projects and expand its investment in oil exploration and hotels. The investment will be financed by a combination of equity and the sale of bonds.
Based on BusinessDay analysis, Transcorp is highly geared as it has a large debt in its capital structure.
Debt-to-equity in the period under review was as high as 226.75 percent, which means over 200 percent of the company’s operations are funded by lenders, while total borrowing stood at N43.29 billion in the review period.
The 1000 megawatt of gas plant it plans on building by 2015 will help increase earnings and play down debt.
Total assets were up by slightly by 5.95 percent to N158.18 billion in HY 2014, compared with N149.46 billion as of HY 2013.
If diversification is the spreading of investment in more than one portfolio in other to reduce risk, then Transcorp has demonstrated that as its agric, oil and hotels are contributing to top-line.
The company plans on upgrading its Transcorp Hilton Abuja Hotel for better efficiency and increased contribution to profits. It has also earmarked $500 million to start the construction of three hotels in Abuja, Port Harcourt and Lagos.
It also plans to build eight more hotels under the Hilton brand by 2018.
Its agric business is in growth spurt as one of the most diversified listed company opened a fruit concentrate company in the central Nigerian state of Benue with the capacity of 26500 metric tons a year.
Earnings per share (EPS) moved by 105.45 percent to 11.30k as against 5.50k as of HY 2013.
The owner’s resources have been deployed efficiently to generate higher profits as the return on average equity (ROaE) jumped to 7.51 percent in 2014, from 2.86 percent in 2013, while return on average assets (ROaA) increased to 4.35 percent in 2014, from 2.86 percent in 2013.
The company’s share price closed at N5.47 on the floor of the Nigerian Stock Exchange, while market capitalisation was N211.80 billion.