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Transcorp breaks cycle of no dividend payment with N9billion profit

By BusinessNews Staff on March 10, 2014

One of the issues that will excite shareholders of Transcorp Plc at the March 31 annual general meeting of the company is the historic payment of N1.9billion dividend to shareholders of the company, reports Festus Akanbi

From the investors’ point of view, activities in the Nigerian capital market, so far, this year has been bearish.
Although trading activities have continued to oscillate between bullish and bearish performance for most part of the first quarter of the year, analysts said the bears appeared to be having an upper hand.
However, market intelligence has shown that as more quoted companies make their 2013 full year results available on the floor of the Nigerian Stock Exchange, robust trading sessions are bound to take place in the course of the remaining part of the first quarter.

Transcorp’s First Dividend Payment
Last week, Transnational Corporation of Nigeria Plc (Transcorp) announced it will pay a dividend for the first time in its history. This announcement is contained in the group’s audited and consolidated financial statements for the year ended December 31, 2013. The directors recommended a dividend of N1.93 billion to be paid to shareholders on the basis of five kobo per share.
The group also announced a strong increase in turnover of N18.8 billion, representing a 42 per cent rise over the N13.2 billion recorded in the corresponding period in 2012. Profits before tax rose by 129 per cent from N3.9 billion in 2012 to N9.0 billion in 2013.
To capital market stakeholders, including the company’s numerous shareholders who are billed to discuss the results at the company’s annual general meeting slated for March 31 in Lagos, the news of the impressive performance of the company did not come as a surprise given the pledge of the Transcorp’s management last year to end the cycle of no dividend in the company.
The Figures
The board of directors recommended a dividend of N1.9 billion at 5 kobo per share. The company recorded gross earnings of N25.23billion and net income rose by 129 per cent from N3.9 billion in 2012 to N9.03 billion in 2013.
In 2013 , Transcorp took significant steps to strengthen its position in the market with new investments in power and expansion in its hospitality and agri-business.
In 2013, Heirs Holdings became a strategic shareholder under the Chairmanship of Mr. Tony Elumelu.
The company is said to have witnessed a complete turnaround and transformation.
‘The demand for Transcorp shares is very strong’ said UrlBlockedError.aspx, a Lagos-based stockbroker. Transcorp’s share price rose from N1.05 to N4.35 – a record increase of 314.29 per cent between January and December 2013.
The international financial advisory firm, Renaissance Capital, in its analysis of the result said it found the numbers very impressive with 42 per cent year on year growth in turnover versus corresponding period in 2012.
It noted that finance cost as expected was up by 194 per cent on the back of the acquisition of the Ughelli Power asset.” Profit before tax and Profit after tax was up by 129 per cent and 175 per cent respectively to N9 billion and N6.9 billion.
“We are pleasantly surprised that Transcorp decided to pay dividend (for the first time) at all especially as they are entering into a growth period.
“We are optimistic that there would be dramatic changes in their numbers going into 2014 as the transformation process continues,” a statement by Vice President, Africa Equity Sales, Equities/African Equity Product Distribution, Renaissance Capital, Akinbamidele Akintola, said.
And expectedly, Transcorp’s recent dividend announcement has spurred widespread excitement amongst many stakeholders and this is because the company is paying its first dividend since it was listed on the Nigerian Stock Exchange (NSE) on November 23, 2006.
Analysts say the announcement signals the beginning of an era where dividend payments will become regular and investors begin to reap the benefits of their investments.
The Projection
Addressing some stakeholders last year, the management had said in 2013 it would come up with a profit before tax (PBT) of N7 billion, projected to increase to N23 billion in 2014, N32 billion in 2015 and N51 billion in 2016.
According to financial programme drawn for the company, the PBT will further rise to N102 billion in 2017 and N140 billion in 2018.
The company had recorded a PBT of N3.949 billion in 2012 and had posted N5.148 billion PBT as at nine months ended September 30, 2013.
Speaking during the presentation of ‘Facts Behind the Figures’ at the Nigerian Stock Exchange (NSE) in Lagos sometime in December last year, the Chief Executive Officer (CEO) of Transcorp, Mr. Obinna Ufudo, said a PBT of N7 billion should be expected at the end of this year.
According to him, the profit will be made from revenue of N18 billion expected at the end of the year.
He said the conglomerate, which has portfolio across the hospitality, agribusiness and energy sectors, is now in the second phase of its turnaround agenda.
He explained that under the second phase, Transcorp acquired and successfully took over Ughelli Power Plant, commenced renovation and upgrade of the Transcorp Hilton Hotel Abuja, executed a management agreement for Transcorp Hilton, Ikoyi, Lagos and acquired a site for five-star hotel in Port Harcourt, Rivers State.
In the agribusiness, Ufudo said Transcorp commenced production of orange, mango and pineapple concentrates while in the oil and gas sector, the company commenced pre-drilling planning for Oil prospecting lease (OPL 281). The company, he added, was also exploring opportunities for acquisition of oil and gas assets available from on-going divestiture of onshore assets by international oil companies and sale of marginal fields by the federal government.
The CEO stated: “We are delighted to be able to come to the Exchange having delivered on our promises. We believe the Transcorp transformation is only the beginning and we look forward to recording further success for our shareholders, stakeholders and staff. We also pay tribute to the critical role our strategic investor, Heirs Holdings, has played in catalysing change.”
While commenting on the latest figures last week, Ufudo stated: “Our full year audited accounts reflect our commitment to our long term strategic plan, translating into strong and sustainable growth. We are excited about the achievements we recorded across our businesses within the past year. Our entry into the power sector has been a significant driver and we are already running ahead of our 2014 estimates. We expect significantly better results this year, as our diversification and growth strategies continue to gain momentum.”
Transcorp Chairman, Tony Elumelu, said, “We are particularly pleased to be able to recommend a dividend to shareholders for the first time in the company’s history. This is the beginning of a very bright future for all our patient and loyal shareholders. With the tremendous progress we have already recorded in our power business – taking the Ughelli plant’s power output from 160mw when we took over on November 1, 2013 to 360mw within 3 months – 2014 promises to be a very rewarding year for the company and our 300,000 shareholders.”
Transcorp in NSE 30 Index
To show for a cocktail of reforms in the company, Transcorp was in December last year enlisted into the NSE 30 Index, a league of the Exchange’s most capitalised stocks, thereby commencing the new year as one of the elite stocks in one of Africa’s most viable bourses.
The NSE in February 2009 began publishing a new index called the NSE 30 Index, with the primary objective of providing an investable benchmark to capture the performance of the Nigerian stock market. The NSE 30 includes the top 30 companies in terms of market capitalisation and liquidity. NSE stakeholders and analysts attributed Transcorp’s exemplary price appreciation and growth on the Exchange to the company’s incremental performances in 2013, and its investments in Nigeria’s power sector – seen by many as the next nexus of growth in the Nigerian economy.
Explaining the latest performance, Ufudo said the result reflects strong balance sheet, substantial liquidity, diversified earnings and robust cash flow. “The returns to shareholders are consistent with our priorities and are an important signal of our confidence in our plans for a continuing profitable future.”
He added: “We expect significantly better results this year as our diversification and growth strategies take firmer roots.”
Transcorp emerged the preferred bidder for the $300million for 100 per cent equity in Ughelli Power Plc operator of Ughelli Power Plant which it took over on November 1, 2013.
Currently, the plant generates 360MW of electricity, up from 160MW on November 1, when Transcorp took ownership of the plant. With the additional 115MW, as well as other rehabilitation works planned at the plant, output at the Ughelli plant is set to increase to 700MW by December 2014.
Transcorp’s substantial investments in agriculture, hospitality and the oil and gas sectors are well on track and providing superior returns.
The premier Transcorp Hilton Hotel Abuja continues to outperform in the local and African hotel industry. The planned expansion in hospitality following the recent Management Agreement executed in partnership with Hilton Worldwide to open additional hotels in Lagos and Port-Harcourt is bound to consolidate the company’s position as the pacesetter in that space.
A shareholder of the company said, “I believe we will see more and better from them.
‘This is a developing success story that will excite any strategic investor. From the look of things, Transcorp has regained its strong footing and it is here to stay. We as shareholders of the company are pleased with what is coming through.”