HALF YEAR RESULTS: BEFORE HONEYMOON ENDS FOR TRANSCORP HOTELS.

It is obvious that since 2015 when N2.4bn deposit for shares was received by Transcorp Hotels PLC, it found itself in a honeymoon of sorts.

By June 2015, Transcorp  earned N190.2m as finance income. By June this year, according to figures released recently for the half year, this had jumped to N828.9m.

Cool money, in fact, the leading growth in income within the period as core revenue rose by only 5.06% to N7607.6m and other operating income dropped by 15.4% to N221.3m.

Unfortunately, it may not be that cool for long. This is because the company had to squeeze receivables down by 22.9% to N8554.5m and watch cash drop by 45% in order to pay for 11.4% futuristic increased investment in fixed assets to N70561.6m closing balance in spite of depreciation and make trade creditors happy by reducing payables by 42.9% to N3896.3m.

In the end, its rather strong working capital surplus of N12984.8m by June 2015 went down 41.1% to N7653.5m. Decoded: There is less room to earn finance income in the second half unless there is higher interest rate or deposit becomes full bloom shareholders new money inflow.

However, only one obstacle is between the company and higher profit margin this year: Cost of sales growth.

Up 11.3% to N1832m, cost of sale growth depressed gross margin so much that even very low and well controlled 0.47% growth in overhead to N3580.4m and the leap in finance income could not totally absorb it.

Thus, from a 12.5% rise in total income to N8657.8m, Transcorp  managed 10.5% increase in profit before tax leading to easing of margin to 31.7% from 32.3%.

TRANSCORP HOTELS: Nm
                   Half year
                    2016.      2015
Total inc.  8657.8.   7693.4
Core inc.   7607.6.   7241.3
C of sale.  1832.0.   1645.3
Overhead  3580.4.   3563.6
Other inc.    221.3.     261.9
Finance inc.828.9.     190.2
Profit          2746.0.   2484.4
Margin %     31.7.       32.3
W. Capital 7653.4.  12984.8

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