There are only a few conglomerates who have survived to tell the story after passing through harsh economic realities that have seen stocks of some of the strongest global brands crashing. Many of the big brands who have operations in Nigeria and Africa are either evaluating their holdings or relocating. The stories of United Airline and Barclays Africa are still very fresh.
Any big business operating within the volatile regions like Nigeria, knows it takes more than grit to survive. There are elements of prudence, pragmatic business decisions, innovation with technology and strategic partnerships to consider in the stories of big corporations like Transcorp PLC.
From a beginning of unclear governance processes, where many investors worried about the direction the big ship was taking with backlogs of dividends, and an unsavoury but largely unfair public opinion that associated it with corrupt politicians, Transcorp has merged into a new era in which it has become the favourite toast of investors at the local and international level. That is what is about 300,000 investors can appreciate.
Incorporated in 2004, Transcorp Corporation of Nigeria Plc, focuses on acquiring and managing strategic businesses that create long term shareholder returns and socio-economic impact. Its main holdings are in the sectors of power with Transcorp Power Limited, energy with Transcorp Energy limited, operator of OPL 281, hospitality with Transcorp Hotels and agriculture with Teragro Benfruit Plant.
How did the story change? Emmanuel Nnorom, President/CEO of the company told BusinessDay that “In the past, there were no clear governance processes in place but that has been put in place.
“We have proper subsidiaries running and also accounting for their results, boards have been constituted and things are being done in the expected way. So that is showing in terms of the way the company is perceived. In the past, the company was not able to pay dividends because of losses and so on. But in the last three years we have paid dividends. In this year the bonus was N1.20. In a way, there is consistency in the results and in the performance and also with the strategy and the vision that people can see.”
The turbulence in the market hay have affected the amount of dividends paid out in the last three years however, Nnorom explains that the inconsistency is not exclusive to Transcorp as the company or any other company cannot determine the share price. It is the market and factors that work within and outside the stock exchange that detects a share price.
“For instance, there are some foreign investors who for some reasons in the economy are selling or dumping shares. When you have more sellers than buyers it affects the price of the shares. It cuts across most shares in the market. We believe that by the time more domestic investors start going into the market, then there could be some stability,” said Nnorom.
The company is in a better position with regards to some of its holdings. Transcorp Hotels for instance has been listed on the Nigeria Stock Exchange and revenue from the business contributes a significant percentage of the entire company’s earnings. Turnover in the past two years from the hotels was between N13 billion to N14 billion. The stock exchange has granted an exception till the end of 2017 to bring more shares to the market. There are expansion plans as a result. Two hotels Transcorp Hilton Hotels in Lagos and Port Harcourt are currently ongoing and could cost as much as N5 billion.
“The biggest job we have going on now is the Ikoyi Transcorp Hilton. We have increased expenditure to make sure that the work is carried out to the letter. So quite a lot is going on in terms of utilization and under SEC requirement you send returns every quarter,” said Nnorom.
There are foreseeable challenges. For instance, the foreign exchange policy of the Central Bank which has given rise to dollar scarcity and high exchange rate for the naira affects availability. It also has a ripple effect on the loan payment. However for a company with a stringent policy of not missing out on payday, the impact is mitigated.
Another challenge the company faced was the lateness in the passage of the 2016 budget which saw room rates dropping. Many events slated for the hotels had to be cancelled. But with the passage, activities are expected to swing back to normal and even more in view of the refurbishments taking place in the Transcorp Hilton Hotel in Abuja.
In the area of power, the main challenge is assessing raw material – gas. “It is affecting us. But I will say, generally our lines of businesses are fairly strong. They are not just businesses where you will go commercial; they are businesses where you will also earn in foreign currency. There is no doubt a slow down and the direction that government needs to point is still not very clear. I think that is something that will become clear in the coming days,” said Nnorom.
Transcorp plans to evaluate its investment in its agriculture subsidiary Teragro Benfruit Plant.
“We are reviewing that business because the oranges that will sustain the business are not enough. It is not because we cannot produce, but because they are not enough. I don’t want to link it up to the crisis happening around some areas. We cannot sustain a long term plan that will enable us break even. For the juice concentrate market, part of the things that we will do will be to not only process but also to have a farm so you can grow the oranges the way you want to grow it. The oranges we have in Benue at the moment were planted by local farmers and for them is like just put it there. But when you look at the proper way of planting oranges, even the fertilizers that go with it go through processes,” said Nnorom.
The future however is projected to be bright for the company. Transcorp has big dreams of producing 25 percent of the general power output in the country and it is on course to achieving that dream as it has started putting strategies in place.
Also “In five years time we would have finished the Port Harcourt hotel, the multi-business centre and every other thing that we needed to have a constant stream of income. If you look at the turnover of the hotel, in the last two years it has been about 13 to 14 billion naira. But our projection by the time the two hotels are up and running we should have like 45 billion naira. So the future is quite bright.”
FRANK ELEANYA
