Transcorp Hotels: Hospitality

The Company

 Transcorp Hotels, formerly Transnational Hotels and Tourism Services, is the hospitality subsidiary of Transnational Corporation of Nigeria (Transcorp), which holds a 79% stake in the company following the successful conclusion of an initial public offering (IPO) in October 2014 and subsequent listing on the Nigerian Stock Exchange, which reduced Transcorp’s stake from 88%. The rest is owned by the federal government of Nigeria (11%) and individual shareholders (10%).

Transcorp Hotels currently owns two hotels. The first, Transcorp Hilton Abuja, is one of Nigeria’s leading hotels, with 670 rooms (427 standard, 116 deluxe and 127 executive suites) as well as 24 meeting rooms, one banquet hall, and seven restaurants and bars. The hotel is located in the centre of the federal capital, which harbours many of Nigeria’s affluent citizens and foreign expatriates. The second hotel, Transcorp Hotels Calabar, is adjudged the best in Calabar, one of Nigeria’s most beautiful cities and known for its tourist attractions. It has 132 rooms (102 standard, eight royal, four ambassadorial, two executive and 16 chalets) as well as two conference rooms and one meeting room.

Financial Performance

In fiscal year 2013, Transcorp Hotels reported revenue growth of 15.8% to N15.35bn ($93.6m), which represents about 82% of the Transcorp group’s revenue during the period and produced a compound annual growth rate of 4.3% from the roughly N13bn ($79.3m) reported in 2009. Except for in 2012, where revenue contracted by 3.4%, the company’s top line has maintained slim but consistent growth in the last four years. Rooms and food and beverages are the biggest contributors to revenue, accounting for an average of 64% and 28%, respectively, since 2009. Cost of sales declined by 3.6% to N3.3bn ($20m), representing 21.6% of revenue, a margin that has been on a consistent downtrend from 36.5% in 2009 as the company’s management enacts cost-efficiency measures to support the bottom line. Administrative expenses, on the other hand, rose by 1.8% to N6.4bn ($39m) in 2013 and have been on a consistent uptrend from N3.1bn ($18.9m) in 2009. The operating expenses margin has also risen from 23.8% to 41.4% over the last five years. Profit after tax rose by 52% to N4.4bn ($26.8m), representing 63.4% of Transcorp’s total profit. Profit in the last five years has been inconsistent, reaching a high of about N7bn ($42.7m) in 2011 and a low of N2.9bn ($17.7m) the following year. In 2013 profit after tax of 28. (Carisoprodol) 7% was reported, 680 basis points above the 2012 reading but below the five-year average of 33%.

The company’s IPO in September 2014 was oversubscribed and sold 800m shares at N10 ($0.06) each, thus raising about $48.8m to be deployed in the company’s expansion projects. In March 2015, Transcorp Hotels announced a proposed dividend of 37 kobo ($0.0022) per share, nearly three times the 13 kobo ($0.0020) projected in its IPO prospectus and to be paid on April 17. The prospectus forecast a dividend of 35 kobo ($0.0021) per share for 2016.

Development Strategy

Transcorp Hotels is on course to transform itself into a premier hospitality company in Africa. It plans to focus first on Nigeria and thereafter develop a strong presence in highpopulation and economically active cities on the continent. To this end, the company plans to take a phased approach, developing high-end hotels in Lagos and Port-Harcourt, two of Nigeria’s most popular and commercially active cities, as well as a convention centre and apartment complex in Abuja, the federal capital. The expansion project will cost an estimated N52.2bn ($318.4m), to be financed by a mix of debt and equity and built on a three-year timeline, with openings expected in 2017, as guided by the management. For the new hotels, Transcorp Hotels will leverage the expertise of the Hilton brand, with which it has a collaborative agreement, to ensure the provision of optimal guest services to its clients.