Transcorp Hotel aggressive expansion pays off as earnings spike

Transcorp hotels Plc’s aggressive expansion drive has paid off as first quarter earnings spiked amid a tough and unpredictable macroeconomic environment undermining the growth of operators in the hospitality and tourism sector.

 

For the first three months through March 2016, Transcorp Hotels net income increased by 35.25 percent to N964.80 million as against N713.23 million as at March 2015.

 

Sales were up by 14.31 percent to N3.67 billion as addition of luxury properties contributes to top lines.

The double digit growth at the top and bottom lines impacted positively on margins as the hotel and hospitality giant’s net margin, a measure of profitability and efficiency, jumped to 26.28 percent in March 2016 from 22.63 percent as at March 2015.

 

Gross margins were up by 76.30 percent to N2.80 billion in the period under review, which means the hospitality company is efficient in managing direct costs.

 

Transcorp hotels is investing and increasingly seeking financing for its copious capital projects that will pave the way for the firm to increase share of the market.

 

The hospitality subsidiary of Transnational Corporation of Nigeria (Transcorp) – has listed its N10 billion bond on the Nigerian Stock Exchange (NSE) and the FMDQ OTC Securities Exchange.

 

The company has raised a total of N19.758 billion from the issuances.

 

The listing comes after the company successfully closed the first and second tranches of a N30 billion bond programme in the last quarter of 2015. The bond issue will also help the company finance the renovation of some of hotels in Lagos Port Harcourt.

 

However, the stellar performance of Transcorp Hotels is not a representation of the industry as operators groan under  infrastructure deficits, multiply taxation, rising inflation, and insecurity.

 

Experts say the drop in oil price since mid 2015 to date and a weak currency that caused economic downturn has undermined the growth of hotel and tourism business in Africa’s largest economy.

 

When economic activities are a state of lethargy, International travel arrivals into Nigeria will dwindle and the demand for hotel accommodation will suffer.

 

Economic growth slowed to 2.8 percent, the lowest in a decade while inflation rate increased to 12.80 percent for the month of March.

 

Further analysis of the financial statement of Transcorp Hotels showed operating expenses reduced by 5.81 percent to N1.62 billion, a cost control strategy that resulted in a 43.07 percent rise in operating income to N1.19 billion as at March 2015.

 

The board of directors of the hospitality giant approved the sum of N2.81 billion as dividend, which translated to 40 kobo per share for the 2015 financial year.

 

BALA AUGIE