Transcorp Hotels Plc, more than doubled its gross revenues to N22billion in 2021, from the N10billion reported the previous year, and also paid a total dividend of N717 million to its shareholders, translating to 7 kobo for every ordinary share held.
The new revenue figure also surpassed its 2019’s pre-COVID revenue of N20bn.
The hotel which brags as the best performing hospitality brand in Nigeria recorded a 142% year-on-year growth in Gross Profit in 2021 as compared to 2020, to close at N16.2b.
A gross profit margin of 75% was achieved, representing an improvement of 900 basis points from 2020.
At N106bn, Transcorp Hotels’ long-term assets remained largely unchanged from the 2020 figure of N108bn, and comprised property, plant and equipment (98%), goodwill, intangibles and other non-current assets (2%).
But the Company’s total liabilities as at December 31, 2021, stood at N54billion representing a 4% increase from N52b in 2020. The liabilities were made up of non-interest- bearing liabilities (NIBL) – 56% and interest-bearing liabilities (IBL) – 44%.
At the Hotel’s 8th Annual General Meeting held at the Transcorp Hilton Abuja on Monday, Emmanuel Nnorom, Chairman, Transcorp Hotels said their disciplined approach to financial management has continued to yield results as reflected in reduced finance cost during the year.
“During the year, Transcorp Hotels maintained its credit rating for the Company and the Bonds, as two prominent rating agencies affirmed the Company’s “Stable” outlook,” Nnorom said.
“The pandemic changed the customer behaviour, arrival and departure patterns and the geographical business mix of the hotel. We harnessed all these and dominated the market as we outperformed the industry average and the N10bn revenue recorded in 2020,” the chairman added.
Nnorom said the hotel’s greatest challenge has been energy costs which gulped as much as N1.67 billion in 2021 to power the hotel outlets across the country.
“Energy is our biggest cost because we have 670 rooms in this hotel and continuously we have to ensure that there’s adequate power not only for the guests but also for other facilities,” Nnorom told reporters after the AGM.
According to him, “there are customers in this promises also and everybody needs power. It is our biggest cost; it’s going to rise because we all know that the price of diesel has gone up. Also in a way the power cost is also up, but we will continue to do well to have good returns for our shareholders”.
On whether the hotel is considering energy sources like solar to tame rising costs, Nnorom confirmed such plans, but will only be deployed to power some facilities while the main hotel building will remain on the national grid.
“Yes, we have plans for that but it’s not something that will take the whole hotel out completely from the grid. It’s going to be some distributed areas.
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“We have an event centre coming up that could be powered by solar and the Fulani Bar, where we have some level of a stand alone unit. But for the main hotel building it’s still on the national grid”.
Despite huge costs, Nnorom doused concerns of a possible raise in room rates, assuring that the hotel will continue to maintain reasonable price for its customers.
“Not so much in terms of the price of the rooms and other services; we will maintain reasonable prices, the power cost notwithstanding, because there is a limit to what we can peg. We can always make income from other sources.
He also confirmed that exchange rate issues, inflation, increased cost of diesel, among others remain real challenges, but that they have figured out the best ways to proactively manage the resources and make quite alot of savings.
Nnorom disclosed that the hotel chain is “also looking at substituting some of the imported items for local, quality, acceptable alternatives.
“So with all that in place, we will be able to cope with the increase in cost,” he noted.
He further revealed the hotel’s plans to start repaying the N20 billion loan it secured from Bank of Industry (BoI) to make up for the huge losses during the peak of COVID-19 pandemic.
According to him, “during the covid, the hotel wasn’t operating, occupancy was about six percent and meanwhile the cost are fixed, so, there were some losses that we made during that period.
“As part of the process we also took some facilities from BoI about N20bn as part of a way to ensure that we will continue with the upgrade what we are doing and new areas we are venturing into like an event center coming up, the kitchenette that was upgraded and the laundry and so many facilities we did. We are going to start paying back”.
Nnorom told the shareholders that Transcorp Hotels has liquidated all the dollar loans in its portfolio thereby hugely minimizing the Company’s exposure to forex loss risks that have arisen from the continuous Naira devaluation. A total of $ 6m was repaid during the year.
Also speaking at the AGM, Dupe Olusola, Managing Director/Chief Executive Officer of Transcorp Hotels said the great progress reflects the growth achieved in most of their business segments and the strengthening of the leisure business.
“We became more innovative in our leisure business segment as a response to the COVID-19 pandemic which was a key success factor for us in 2020.
“We pushed further in 2021 and grew revenues from this segment by 118% from N1.7b in 2020 to N3.7b at the end of 2021,” Olusola told the shareholders.
According to her, despite rising inflation rate and Naira devaluation, and the resultant high energy and rising raw material cost, the hotel continued to drive cost management imperatives, mostly a focus on import substitution in response to the volatile forex regime.
“At the hotel one thing to note is actually our cost of sales have actually increased and our efficiency has gotten a lot better, so prior to this year, last year it was our cost of sales, margin was 35 percent, we are now at 25 percent so in terms of efficiency we have actually done a lot better than previous years.
“You have all the things like employees cost related to actually running a business but what we are doing proactively is to ensure that we are more efficient and that we are able to return better in terms of our bottom line,” she told reporters.
She also corroborated what the Chairman said about the hotel now looking at actually developing the domestic manufacturing market, in a way that it can source inputs locally rather than import.
“A lot of our food stuff is locally sourced, we are working with manufacturers to see where even guest amenities can also be sourced locally as well. Over the next week or two weeks, you will see an RFB that will come out which is actually calling all local manufacturers to put in their bid in terms of what they are able to do for guest amenities, soap, lotion”.
“So what we want to do critically is actually to even develop the local manufacturing and be able to source locally, this is very important to us and it is actually one of the things we are driving”.
She said in line with the commitment to continuously stabilise the balance, and consequently reduce the impact of the high cost of borrowing on our overall financial position, the hotel successfully redeemed and repaid 65% of the outstanding Series 1 bond principal balance, and made repayment due during the year, the CEO stated.
This brought down the balance from N4.4bn at the start of the year to N823m as at December 31, 2021.
“We are confident that we will continue to meet the remaining Series 1 Bond obligations which is expected to be fully redeemed by October 2022,” Olusola assured.
