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Transnational Corporation of Nigeria Plc
H1 2015 Investors’ Conference Call
August 2015
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From time to time, Transnational Corporation of Nigeria Plc (“Transcorp”) and its subsidiaries (“the Group”) makes written and/or oral forward-looking statements, including in this presentation and in other communications. In addition, representatives of the Group may make forward-looking statements orally to analysts, investors, the media and others. All such statements are intended to be forward looking statements. Forward looking statements include, but are not limited to, statements regarding the Group’s objectives and priorities for 2014 and beyond and strategies to achieve them, and the Group’s anticipated financial performance. Forward looking statements are typically identified by words such as “will”, “should”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “may” and “could”.
By their very nature, these statements require the Group to make assumptions and are subject to inherent risks and uncertainties, general and specific. Especially in light of the uncertainty related to the financial, economic and regulatory environments, such risks and uncertainties – many of which are beyond the Group’s control and the effects of which are difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause such differences include: exchange rate, market exchange, and interest rate), operational, reputational, insurance, strategic, regulatory, legal, environmental, and other risks. All such factors should be considered carefully, as well as other uncertainties and potential events, and the inherent uncertainty of forward looking statements, when making decisions with respect to the Group and we caution readers not to place undue reliance on the Group’s forward looking statements.
Any forward looking statements contained in this presentation represent the views of management only as of the date hereof and are presented for the purpose of assisting the Group’s investors and analysts in understanding the Group’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. The Group does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf, except as required under applicable securities legislation.
The information used in the presentation is obtained from several sources the Group believes are reliable. Whilst Transcorp has taken all reasonable care to ensure the accuracy of the information herein, neither Transcorp nor its subsidiaries/affiliates makes representation or warranty, express or implied, as to the accuracy and correctness of the information, Thus, users are hereby advised to exercise caution in attempting to rely on these information and carry out further research before reaching conclusions regarding their investment decisions.
Disclaimer
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Outline
FINANCIAL REVIEW – H1 2015
BUSINESS UPDATES
OPERATING ENVIRONMENT REVIEW
OUTLOOK
TRANSCORP OVERVIEW
QUESTIONS AND ANSWERS
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TRANSCORP OVERVIEW
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Group Structure
Transcorp Ughelli
Power Limited Transcorp Hotels Plc
Teragro Commodities
Ltd
Transcorp Energy
Limited
BU
SIN
ESS
HIG
HLI
GH
TS Owner and operator of
972 MW power plant in
Ughelli Delta State
Gas fired power
plant
Sale of power to
national grid via
long term PPA
Owner of Transcorp Hilton
Hotel Abuja
5 star, 670 rooms
Owner/operator of 146
room Transcorp Hotel
Calabar
Owner/developer of
proposed 5-star 300 room
Hilton Hotels in Ikoyi &
250 rms in Port Harcourt
Operator/lessee of
26,500 MT capacity
Teragro Benfruit juice
concentrate plant in
Benue State
First-of-its-kind fruit
juice concentrate
plant in Nigeria
Produces orange,
and mango juice
concentrates
Owner and operator
of OPL 281 oil block in
Nigeria
272.4 MMSTB P2
reserves
Contains 4 trillion
standard cubic feet of
gas
Ughelli Power Plc
Transcorp Hotels Calabar
Transcorp Hotels Ikoyi
Transcorp Hotels Port Harcourt
50.01%
100%
83%
100%
76%
100%
100% 100%
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OPERATING ENVIRONMENT REVIEW
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Macro Economic Environment
Volatility of the Stock Market
Average Monthly External Reserves and Brent Crude Price Exchange Rate Increase
Bearish market in H2 2014 due to oil price shock and
depreciation of the Naira. Political risks reduced by
successful conclusion of the 2015 elections.
Real GDP Growth Rate
Q2 2015 GDP growth lowest in 1year space
Pressure on external reserves following declining oil prices Sharp depreciation of the Naira from Q1 2015
Source: National Bureau of Statistics, Central Bank of Nigeria, Nigerian Stock Exchange and US. Energy Information Administration
*Real GDP Growth Rate for Q2 2015 is an estimate from LBS Executive Breakfast Report. Actual rate was unavailable as at the time of this report.
25000
30000
35000
40000
45000
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15
NSE Index
150.00
160.00
170.00
180.00
190.00
200.00
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15
CBN N/$ Official Exchange Rate
0
50
100
150
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
Average Monthly External Reserve Brent Crude Price
4.45
5.4 5.17
6.77 6.21 6.54 6.23 5.94
3.96 3.99
3
4
5
6
7
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015*
Real GDP growth Rate
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H1 2015 Performance Summary
Income Statement
H1 2015 H1 2014
Gross earnings (N’bn) 20.25 21.21
Gross profit (N’bn) 12.21 14.96
Admin expenses (N’bn) 5.56 5.15
Operating profit (N’bn) 7.59 9.75
Net finance cost (N’bn) 2.43 1.74
PBT (N’bn) 5.16 8.02
PAT (N’bn) 4.28 6.89
EPS (company – Kobo) 6.13 11.30 H1 2015 H1 2014
Gross margin 60% 71%
PBT margin 25% 38%
Pre-tax ROE 5.6% 8.9%
Post tax ROE 4.7% 7.7%
Debt/Equity 58% 53%
H1 2015 H1 2014 % ▲
Total assets
(N’bn) 177.02 170.76 4% ▲
Borrowings
(N’bn) 53.01 47.78 11% ▲
Total equity
(N’bn) 91.72 89.75 2% ▲
Financial Position
Key ratios
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BUSINESS UPDATES
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Transcorp Hotels Plc
Transcorp Hilton Abuja
Scope
Awards and Recognition Upgrade of existing infrastructure Hosted c.40 Heads of States
and delegates during the presidential swearing in ceremony Hosted the National Assembly
induction ceremony in April. Achieved 100% occupancy for the week Hosted Nigeria Customs
Services Conference Hosted the APC Transition
committee
Key Events Hosted So Far
WTA
Leading
Hotel
Suite
WTA
Leading
Business
Hotel
WTA
Leading
MICE
Hotel
WTA
Leading
Hotel
WTA Leading Business
Hotel (AFRICA)
Upgrade of rooms and common areas
Addition of new revenue outlets
External works
5,000 capacity Multi purpose banquet
centre (MBC) capacity
Update
Design of MBC concluded Mock up rooms concluded MEP and civil works contracts awarded Interior designer appointed Five awards at World Travel Awards 2015
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Transcorp Hotels Plc
Transcorp Hilton Ikoyi
Transcorp Hilton Abuja Renovation
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• Final planning approvals received. Expected to break ground before the end of Q3 2015
• Contractor appointed for piling works
• Site expansion through acquisition
of adjoining lands for expanded utilities and additional parking
• Expected opening in Q1-Q2 2018
• Currently finalizing the preliminary design including schematics for architectural, structural, mechanical,
electrical and plumbing works
• Executed hotel management agreement with Hilton Worldwide
• Expected ground breaking in Q4 2015
• Planning approval received
• Occupancy expected to improve following number of economic projects under development in
Calabar
• Focus on developing additional revenue streams:
• Upgraded lounge & bar
• Expanded swimming
pool area
• Renegotiation of leases
in lettable areas
• Focus on cost optimisation
particularly energy cost
Transcorp Hotels Plc
Transcorp Hotels Calabar Transcorp Hilton Port
Harcourt Transcorp Hilton Ikoyi
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Ughelli Power Plc has experienced a significant increase in generating capacity by 261% since takeover, reading 403% by year end
Achieved 91% of the 5-year 670MW target set by the Bureau of Public Enterprises (“BPE”) and surpassing same by August 2015
Key Takeaways
Transcorp Ughelli Power Ltd
Capacity Profile
Jan- 2014 Dec 2014 Takeover
Nov-2013
10MW
10MW
149MW
169MW
38MW
20MW
284MW
342MW
95MW
95MW
420MW
610MW
Delta II
Delta III
Delta IV
Total
403% increase in generating capacity
Expected
Dec 2015
139MW
640MW
850MW
71MW
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Transcorp Ughelli Power Ltd
Greenfield development
Fast power options – Aero derivatives gas turbines (LM or TM’s)
Relocation and assembly of power plants from Asia
M & A of power generation companies
Delivery Options
Market/tariff framework
Long term reliable supply of gas
Reliable, modern and expanded transmission network
Key Development issues
Capacity Expansion Plan
850
1,000
1,500
2,500
0
500
1,000
1,500
2,000
2,500
3,000
2015 2016 2017 2018
Megawatt (MW)
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Teragro Commodities Limited
Acquisition of extractor cup improved product quality
and yield resulting in additional 95,250kg of OJC from
Coca cola to drive revenue for Q3.
Acquisition of 350 ha of land for cultivation to actualise
backward integration strategy
Invested in transportation/logistics assets for movement
of products across the country and pick up orange raw
material from farm gate *Based on confirmed orders received
-
20,000
40,000
60,000
80,000
100,000
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 *Q3 2015
Orange Mango Pineapple
Concentrates Supply
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OPL 281
S/N OPL 281 Work Programme Q1 2015 Q2 2015 Q3 2015 Q4 2015
1 Environmental Impact Assessment (EIA)
2 Seismic analysis and reporting interpretation
3 Rig contract
4 Rig Move to Location
5 Spud well
Sacoil/EER gave intention to withdraw from the farm in arrangement in line with its revised portfolio strategy.
On going engagements to finalise details of the exit.
Withdrawal does not impact technical and
financial ability to develop oil block.
No major balance sheet impact as provision
for farm in fees is being carried in the books to date.
UPDATE ON EXIT OF SACOIL Reservoir
OIL GAS
MMSTB BSCF
Shallow 148.7 39.59
Intermediate 91.3 12.9
Deep 32.4 4.83
Total 272.4 241.8
*Million Stock Tank Barrels (MMSTB), *Billion Standard Cubic Feet (BSCF)
OPL 281 – Exploratory Drilling Work Programme
OPL 281 – Update On Reserves
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FINANCIAL REVIEW – H1 2015
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Key Issues That Affected Our Business in H1 2015
Concerns on 2015
general elections
Delay in implementation of
TEM terms and MYTO 2.1
Devaluation impact
affected cost of
debt service for
foreign loans and
operations generally
Restructuring of
foreign currency
facility
Renegotiation of
major transactions
to local currency
New borrowings to
be denominated in
local currency
Advocacy for
review of MYTO tariff
to reflect exchange
rate changes
Reduced utilisation from
Q1 following acute gas
shortage in Feb/March
Reduced generation due
to capacity limitation of
the transmission network.
Peaceful conclusion
of elections
General
optimism/confidence
in new administration
Sharp recovery in Q2
for occupancy and
revenue per room
Renewed political
and government
activities to drive
traffic in Abuja
MYTO 2.1 announced in Nov
2014 is yet to be implemented
Despite declaration of TEM, basis
of revenue recognition and
payment terms yet to be
implemented
NBET fully in place. Expectation
of convergence towards
contractual terms once all
teething issues are resolved.
Resolution is expected once
policy direction of new
government is clarified
Ongoing advocacy on
resolution of market issues
Progress made on
disbursement of CBN
intervention funds. Gas
operators were recently paid.
Generation firms should be
paid next in line with the value
chain.
Foreign Exchange
Issu
es
Ac
tio
ns/
Mitig
an
ts
TUPL THP
Gas availability and
grid stability
TUPL
Engagement with
NPDC for increased
supply. Commitment
obtained
Proximity to gas field
generally reduces
incidence s of supply
shortage
Sharp improvement in
supply in Q2 2015. Gas
shortage lowest in June
THP TUPL
Postponement of major
events and security
concerns from foreign
visitors impacted
occupancy
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H1 2015 Group Income Statement
H1 2015
H1 2014
Variance
N’’mn N’’mn %
Revenue 20,253 21,212 -5%
Cost of sales (COS) (8,045) (6,249) 29%
Gross profit 12,209 14,963 -18%
- -
Administrative expenses (5,562) (5,145) 8%
Other income/expenses 944 (65) 1554%
Operating profit 7,590 9,753 -22%
- -
Finance income 588 389 51%
Finance cost (3,015) (2,126) 42%
Net finance (cost)/ income (2,427) (1,738) 40%
- -
Profit before taxation 5,163 8,015 -36%
1. Revenue expectations dropped slightly
by 5% YoY due to (1) gas availability and
grid stability issues in UPP and (2) security
concerns about March general elections
which reduced Q1 occupancy for THP.
2. Cost of sales (“COS”) increased by 29%
YoY due to higher translated cost of gas
following naira devaluation.
3. Other income/expenses increased from a
negative N65mn in H1 2014 to positive
N944mn in H1 2015 due to fair value gains
on listed equity portfolio.
4. Net finance cost increased by 40% YoY
due to higher interest cost from FX
devaluation. Major restructuring initiatives
underway to reduce cost of FX impact.
5. Group PBT declined by 35% YoY.
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H1 2015 Group Income Statement
Quarterly Revenue/PBT Trend
Quarterly Revenue/PBT Trend
H1 2015 H1 2014
TUPL
Transcorp Hotels
Teragro
61.1%
34.1
%
0.26
%
61.9%
38.023
%
0.025
%
Revenue Contribution Per Subsidiary
4,246
1,694
2,570 2,593
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Q2 2014 Q3 2014 Q1 2015 Q2 2015
10,676
10,191
9,935 9,992
10,261
9,400
9,600
9,800
10,000
10,200
10,400
10,600
10,800
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
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Q2 2014 – Q2 2015 Quarterly Revenue Trend Q2 2014 – Q2 2015 PBT Trend
Segment Review - Hospitality
Significant recovery in occupancy numbers for
hotel business post election. Occupancy for May –
June 2015 of 64.1% significantly higher than Jan –
Apr 2015 of 52% and 60% in Q2 2014.
Q3 2015 is expected to be a strong quarter for THP
as political activities including appointment of
ministers and others office holders will drive traffic.
FY 2014 – Q1 2015 Product Mix
69% 64% 63%
23% 28% 29%
5% 4% 3% 0%
10%
20%
30%
40%
50%
60%
70%
80%
H1 2015 2014 2013
Rooms Food & beverages Shop rental
3,941
3,377 3,662
3,216
4,025
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
1,482
778
542
978
1,504
-
200
400
600
800
1,000
1,200
1,400
1,600
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
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Segment Review - Hospitality
35
45
55
65
75
85
THP Peers
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15
THP Peers
0
10,000
20,000
30,000
40,000
50,000
60,000
Jan 15 Feb 15 Mar 15 Apr 15 May 15 Jun 15
THP Peers
Monthly Occupancy
Monthly ADR Monthly RevPAR
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Q2 2014 – Q2 2015 Revenue Trend Q2 2014 – Q2 2015 PBT Trend
Segment Review - Power
• Available capacity remains 610MW
• Average generation in Q2 2015 was 319MW April, 267MW May, and 370MW June.
• Improved gas supply compared to Q1. Lowest gas outage was in June 2015. However, there is still a utilisation gap caused by lack of reliable gas supply and grid instability.
• Lower YoY PBT performance in Q2 2015 due to impact of naira devaluation on repayment of acquisition interest.
FY 2013 – H1 2015 Product Mix
55%
45%
52%
43%
53% 48%
1% 2% 0% 0%
10%
20%
30%
40%
50%
60%
H1 2015 2014 2013
Capacity charge Energy sent out Ancillary Service
6,732 6,810
6,714
6,243
5,900
6,000
6,100
6,200
6,300
6,400
6,500
6,600
6,700
6,800
6,900
Q2 2014 Q3 2014 Q1 2015 Q2 2015
3,169
2,101
1,577 1,648
-
500
1,000
1,500
2,000
2,500
3,000
3,500
Q2 2014 Q3 2014 Q1 2015 Q2 2015
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Segment Review - Power
Nov - Dec 2013 Jan - May 2014 May - Dec 2014 Jan - Mar 2015 Apr - Jun 2015
Capacity / MWh (a) 4,499 4,499 4,303 4,303 4,303
Energy / MWh (b) 5,758 5,758 5,555 5,555 5,555
Total (a)+(b)+(C) 10,257 10,257 9,858 9,858 9,858
Spinning / Mwh (c) - - 2,250 2,250 2,250
Generated Vs Available Capacity (Jun. 2014 – Jun. 2015)
Tariff Trend 2013/2014/H12015
Revised higher tariffs in
Dec 2014 of
N10,920/MWH
(capacity and energy)
is yet to be
implemented despite
introduction of TEM.
Tariff in use has been in
force since June 2014.
0
100
200
300
400
500
600
700
Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
Generated (MW) Available capacity (MW)
Average Utilisation Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
83% 79% 81% 65% 54%
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OUTLOOK
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Outlook
Transcorp Hilton Ikoyi
Conclude acquisition of additional land for site
expansion
Obtain final approval for the hotel design
Commence full construction activities at the site.
Transcorp Hilton Abuja Upgrade
Commence full upgrade activities and external works
Transcorp Hilton Port Harcourt
Finalize design of schematics
Ground breaking and construction
Hospitality
Power Target 850MW by December 2015.
Two Frame 9 turbines (over 115MW each) to be
operational
Major inspections and maintenance for Hitachi H25
turbines
Concluded corporate restructuring initiatives
Agriculture Commence development of farmland and orchard
Increase production/sales to anchor off taker and
others
Improve margin through cost reduction
Oil & Gas Commence exploratory drilling campaign.
Agenda Implication
Increased market coverage
New revenue sources
Market share protection
Increased earnings in 2015
Reduction of forex risks and resolution of multiple taxes
Increased earnings in 2015
Longer term sourcing of inputs
Contribution expected in 2017/2018
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QUESTIONS & ANSWERS
