Transcorp Plc Ltd, a Nigerian company whose business is the investment in and operation of portfolio companies in the hospitality, power, agro-allied and oil & gas sectors reported unimpressive results today, with total comprehensive income for 2015, down by 56 percent to N1.4 billion from N3.3 billion in 2014.
After going through the 50 pages of notes attached to the results, what struck us at Nairametrics was the huge debt burden the company is carrying.
Transcorp had N40 billion in revenues but spent N12.8 billion as finance costs.
The firms total debt burden was N77.2 billion up 61.8 percent from N47.7 billion in 2014.
Fig 1 : Transcorps total borrowings
The Company says in one of the notes on page 40 that it “has over time liquidated or disposed off some of the collateral securities pledged for different borrowings with the bank. This represents a violation of the loan covenant with the bank.”
This could be a troubling sign for us at Nairametrics that cash flow management and liquidity is an issue for Transcorp.
Another troubling issue is the foreign exchange losses amounting to N6.06 billion that Transcorp reported.
Fig 2
According to the firm “The movement in foreign exchange differences is as result of the decline in the value of the Nigerian Naira against the US Dollars by N41/$1 from December 2014 to December 2015.”
With the naira expected to depreciate against the dollar in coming months if oil prices don’t recover, this could pose further problems for Transcorp in the future.
Transcorp has about $221 million (N41.5 billion) in foreign currency loans outstanding but derives 100 percent of its revenues in Naira, making the firm highly exposed to FX losses.