Transcorp Hotels maintains strong profit position

Transcorp Hotels Plc, one the largest operator in the hospitality business in Africa’s largest economy has maintained a strong bottom line amid economic downturn as the company posted a profit after tax of N2.34 billion in the third quarter of the year.

Analysts say the plan by the company to invest the proceeds N8 billion initial public offering into two luxury Nigeria properties means it will further consolidate its position as market leader.

Transcorp Hotels is also building a solid footprint in high population cities across the West Africa region.

Industry expert also added that such monolithic investments will inevitably trickle down to the bottom line as the company expects net income to probably increase to N7 billion in 2017 from N4.4 billion last year.

However the cancellation of major events due to the scourge in the Ebola Virus and political instability in the north part of the country took a toll on top and bottom lines.

“Indeed, last year was tough because we were affected by a number of things. For example, the insurgency and insecurity in the North,” said Chief Executive Officer Valentine Ozigbo said in a recent interview in Lagos.

“More specifically, the incidence at Banex Plaza and the Nyanya bombing affected our business — directly because of an immediate lull in the travel and accommodation business, including the cancellation of high profile events, and indirectly when some embassies send out travel warnings to Nigeria.”

As a result of the aforementioned challenges, Transcorp Hotels net income reduced by 15.21 percent in the review period.

Sales were down by 8.56 percent to N10.46 billion in September 2015 compared with N11.44 billion last year. Gross profit fell by 10.01 percent to N8 billion in the review period.

Gross profit margins dipped to 76.48 percent in 2015 from 77.70 percent last year.

The company cost of sales ratio increased to 23.51 percent in 2015 as against 22.21 percent in 2014.

Operating expenses were up by 2.12 percent to N5.23 billion in 2015 from N5.12 billion the last year. Operating expense margin increased to 50 percent in 2015 from 44.12 percent last year.

With economic growth that fell to 2.38 percent in the third quarter of 2015 from 6.38 percent last year on the back of more than 50 percent fall in the price of oil and pressured consumer wallets, Hoteliers in Africa’s largest economy should brace up for more challenges.

Transcorp Hotels, which accounts for about 40 to 45 percent of parent Transnational Corp. of Nigeria Plc revenue, is planning four more luxury hotels in Lagos and Portharcourt two populous and commercial cities, the company said in its website.

The number of hotels in the West African nation rose 88 percent to 6,200 in the two years through December, according to the country’s tourism development agency.

Transcorp Hotels share price closed at N6.42 on the floor of the exchange while market capitalization was N48.82 billion.

“When these things happen, they impact on our revenue, our profitability and in fact we start to spend money that was never budgeted, as we had to buy equipment and chemicals, train our staff and take some additional precautions to ensure prevention and provide safety to our guests,” said Ozigbo.

 

BALA AUGIE