Transcorp's net profit slumps by 57%
Transnational Corporation of Nigeria (Transcorp) Plc suffered a major reversal in its last year operations year as sluggish sales compounded high costs to shave off more than N3.3 billion from the net profit of the conglomerate.
Audited report and accounts of Transcorp for the year ended December 31, 2012 showed that net profit after tax slumped by 56.8 per cent from N5.86 billion in 2011 to N2.53 billion in 2012. The decline depressed earnings per share from 7.74 kobo to 4.38 kobo.
The report showed a top-down negative performance with marginal decline in sales magnified down the line by external and internal costs. Turnover dropped slightly from N13.90 billion to N13.24 billion. Gross profit slipped from N10.44 billion to N9.77 billion while operating profit dropped from N4.59 billion to N3.76 billion.
Substantial increase in interest income moderated equally significant increase in interest expense, mitigating the adverse impact of the conglomerate's huge debt exposure. Finance income jumped from N276.67 million to N1.04 billion while finance cost rose from N261.32 million to N860.25 million. With these, profit before tax dropped from N4.61 billion in 2011 to N3.95 billion in 2012.
Transcorp is seeking to recapitalise its business through a rights issue of 12.91 billion ordinary shares of 50 kobo each at N1 per share. The rights issue, pre-allotted on the basis of one new share for every two held, is expected to close on Friday.
The net proceeds of the rights issue estimated at N12.52 billion would be used mainly to refinance the loan taken to acquire its power business-Ughelli Power Plc. About 79 per cent of the net proceeds amounting to N9.84 billion would be used to refinance Ughelli Power. The conglomerate would use N1.63 billion, 13 per cent of net proceeds, for exploration and development of its oil block, Oil Prospecting Licence (OPL) 281.
The balance of N1.05 billion, representing 8.0 per cent of net proceeds, would be used to develop new hotels Port Harcourt and Lagos; in order to boost the conglomerate's hospitality business in the South-South and South-West of Nigeria.
Chairman, Transnational Corporation of Nigeria (Transcorp) Plc, Mr Tony Elumelu, in the rights circular to shareholders, said the recapitalisation was in recognition of the need to reposition the company for future challenges and business opportunities.
He said the company's vision is to create sustainable value for its stakeholders in its chosen markets.
'In order to realise this long-term objectives, the company is making every effort to identify and take advantage of every investment opportunity that will complement its long-term strategic objectives. We will continue to look out for investment opportunities that will enhance value creation for our stakeholders,' Elumelu said.
He urged shareholders to pick up their rights in order to continue to enjoy the full benefits of their investments pointing out that the company's future holds plenty of interesting opportunities as it would continue to achieve progressive levels of success in all areas of its business.