Q1 2016 Q1 2015 - Transnational Corporation of Nigeria Plc

Transnational Corporation of Nigeria Plc
Rencap
p Investors’ Conference
10 May 2016
1
Disclaimer

From time to time, Transnational Corporation of Nigeria Plc (“Transcorp”) and its subsidiaries (“the Group”) make
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
to, statements regarding the Group’s
Group s objectives and priorities for 2015 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
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,
carefully as well as other uncertainties and potential events,
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
Group’ss investors and analysts in understanding the Group
Group’ss
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.
2
Outline
1
2
3
4
5
6
OPERATING ENVIRONMENT REVIEW
FINANCIAL REVIEW
OUTLOOK
KEY TAKEAWAYS
QUESTIONS AND ANSWERS
APPENDIX – BUSINESS UPDATES
3
OPERATING ENVIRONMENT REVIEW
4
Macro Economic Environment
Real GDP Growth Rate
8
7
6
5
4
3
2
1
6.77
4 45
4.45
5.4 5.17
Volatility of the Stock Market
6.21 6.54 6.23 5.94
3.96
2.35
2.84
*
2.11 2.05
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016
40,000
1900
35 000
35,000
1600
30,000
20,000
Dec-14
GDP reached a record low of 2.11% in Q4 2015. Q1 2016 forecast is 2.05%
Avg. Monthly External Reserves and Brent Crude Price
130
37,000
32,000
80
27,000
22,000
Jan-14
1000
Mar-15
Jun-15
NSE Index
Real GDP growth Rate
42,000
1300
25,000
Sep-15
Dec-15
Mar-16
NSE 30
NSE ASI declined 17% in 2015 . Bearish run driven by concerns of
declining oil prices and depreciation of the Naira. ASI declined
by13.2% in Q1 2016 (YTD)
Exchange Rate Trend
200.00
190.00
180.00
170.00
160.00
Jul-14
Feb-15
Aug-15
30
Mar-16
150.00
Average Monthly External Reserves
Brent Crude Price
Pressure on external reserves following declining oil prices
CBN N/$ Official Exchange Rate
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
5
Strong Q1
Occupancy
Stranded Capacity
Increase in Tariff
Reducing Margins
THP
TPL
TPL
TPL
Strong Q1 traffic
following resumption
of economic activities
j , constitution
in Abuja,
of the cabinet and
VIP/State visit.
Significant reduction in
utilization due to non
availability of gas which is
caused by vandalization.
vandalization
Continue to maintain
strong traffic through
active marketing
Working with gas
producers to secure
alternative sources of gas
that will be closer to the
plant to reduce impact
from vandalization
Stronger traffic
expected following
the signing of 2016
budget
Tariff increase took off in
February 2016 effectively
supporting our revenue
levels
Tariff increased from
N9,858 to N15,033.
Support government
effort to move toward
binding industry
agreement
 Gas price has also increased by
154% from $1.3 to $3.30
 However margins were
significantly eroded because of
reduced production levels.
Improved gas supply will drive
utilization levels to achieve
stronger margins in Q2 – Q4
Impact
Respon
nse/Follow
up Action
Issu
ues
Key Issues That Affected Our Business in Q1 2016
6
Q1 2016 Performance Summary
Financial Position
Income Statement
Gross earnings (N’bn)
Gross profit (N’bn)
(N bn)
Q1 2016
Q1 2015
13.19
9.99
5.91
5 91
5.70
5 70
Admin expenses
(N’bn)
-2.70
-2.58
Other Income ((N’bn))
0.04
0.65
Operating profit (N’bn)
3.25
3.78
Net finance cost
(N’bn)
-1.52
-1.21
PBT (N’bn)
1.73
2.57
PAT (N’bn)
1.21
2.19
Q1 2016 Q1 2015
%
▲▼
Total assets
(N’bn)
209.23
170.76
23%
Borrowings
(N’bn)
76.14
47.78
59%
Total equity
(N’bn)
(N
bn)
88 60
88.60
89 75
89.75
-1%
1%
▲
▲
▼
Key ratios
Q1 2016
Q1 2015
Gross margin
45%
57%
PBT margin
13%
22%
Pre-tax ROE
2%
3%
Post tax ROE
1%
2%
7
FINANCIAL REVIEW
8
Q1 2016 Group Statement of Financial Position
Assets
Year to Date
Explanation of major variances
Q1
Dec
2016
2015
N’mn
N’mn
Items
%▲
%
1
Non current asset
PPE
Other non-current asset
112,365
,365 109,761
09,76
42,331
2
42,363
0
154,696 152,124
2
Current Asset
Inventories
Trade and other
receivables
Prepaid lease rental
(short term)
Debt and equity
securities
Cash and cash
equivalents
Total Asset
4,511
4,597
-2
37,215
31,354
19
30
30
0
340
359
-5
12,440
14,420
-14
54,536
50,760
7
209,232 202,884
3
2
3
Yoy ▲
Non
Current
Assets
Trade &
receivables
i bl
▲N2.57bn
Cash & cash
equivalents
▼N1.98bn
▲N5.86bn
Comments
Increase in PPE due
to THP expansion
projects
Largely due to
i
increase
iin
receivables owed
by NBET
Cash utilization for
THP expansion
projects and debt
service
9
Q1 2016 Group Statement of Financial Position
Explanation of major variances
Liabilities
Year to Date
Q1 2016
Dec
N’mn
N’mn
%▲
Liabilities
Items
Yoy ▲
1
Trade and
other
payables
▲N6.3bn
Largely comprises
of sums due to gas
suppliers for TPL
2
Borrowings
(Long and
Short term)
▼N1.06bn
Q1 Debt service
Current liabilities
26,461
20,098
32
5,648
5,695
-1
11,548
15,364
-44
1,875
1,875
0
45,532
43,032
33
Borrowings (long term)
64,594
61,845
67
Deferred
f
tax
10,502
10,502
-9
72,347
72,347
48
115,379 115,379
42
Trade and other payables
Taxation
Borrowings (short term)
Advance deposits
Comments
Non-current liabilities
Total liabilities
Equity
54 125
54,125
53 779
53,779
-5
5
Non controlling interest
34,478
33,726
1
Total equity
88,603
87,505
-3
209 232 202,884
209,232
202 884
19
Net equity and liabilities
10
Q1 2016 Group Income Statement
Year to Date
Q1
2016
N’mn
Q1
%▲
2015
N’mn
%
1. Revenue increased by 32% largely due to
increased electricity tariffs for Transcorp Power in
which took effect in March 2016 and improved
occupancy levels for Transcorp Hotels in Q1 2016.
2016
Revenue
13,193
9,992
32
Cost of sales
-7,282
-4,290
-70
5,910
5,702
4
2. Cost of sales (“COS”) increased by 70% YoY largely
due to increase gas tariffs in Q1 2016 and
translated cost of gas following naira devaluation
-2,697
-2,576
5
3. Administrative expense is 5% slightly above Q1 2015
36
655
-95
3,249
3,781
-14
293
250
17
Finance cost
-1,812
-1,460
-24
Net fin. cost
-1,519
-1,210
-26
PBT
1,730
2,570
-33
Tax
-524
-377
-39
PAT
1,206
,
2,193
,
45
-108
-
NA
1,098
,
2,193
,
50
Gross profit
Admin Expenses
Other income
Oper. profit
Finance income
4. Other income reduced due to fair value gains on
AFS equities securities recognized in Q1 2015.
“
“available
il bl for
f sale”
l ” loss
l
now reported
t d iin OCI 2016.
2016
5. Net finance cost increased by 25% YoY due to
additional borrowings
OCI:
AFS losses
p Income
Total Comp.
11
Q1 2016 Group Income Statement
Quarterly Revenue Trend
Revenue Contribution Per Subsidiary
13,193
14,000
12 000
12,000
10,000
9,992
10,261
10,172
Q1 2016
Q1 2015
10,329
8,000
TPL
6,000
67.19
%
72.10
%
4,000
2,000
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Quarterly PBT Trend
3,000
2,570
2,593
2,000
2 000
2,025
Transcorp
Hotels
34.39
%
36.44
%
1,730
1,000
-1,000
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
-2,000
-3,000
-4,000
-3,868
-5,000
5,000
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Impact of FX loss
Q1 2016
12
Segment Review - Hospitality
Transcorp Hotels Plc – Summary of Income Statement
Q1 2016 Q1 2015
N'M
N'M
Var.
%
COMMENTS
Revenue
3,520
3,163
11
Cost of sales
-819
819
-719
719
14
Increase YoY is due to improved traffic in Q1 2016 following
the renewed government activities in Abuja in addition to
VIPs from South Africa & Turkey
Consistent with trend in revenue
Gross profit
Admin
Expenses
2,701
2,444
11
Consistent with Revenue and cost of sales numbers
-1,523
-1,616
-6
Cost management
21
45
-53
Exchange gain from FX reduced compared to prior period in
Q1 2015
1,199
873
37
190
112
70
1,389
985
41
-421
-229
84
968
756
28
Other income
Oper. profit
Fin income
PBT
Tax
PAT
Interest income earned on local currency deposit compared
with prior period in Q1 2015
Higher PBT level
13
Segment Review - Hospitality
Q1 2015 – Q1 2016 Quarterly Revenue Trend
4,500
3,500
2,500
4,025
4,000
Q1 2015 – Q1 2016 PBT Trend
3 520
3,520
3,337
3,216
3,000
1,976
,
2,000
2,805
1,504
1,500
2,500
2,000
1,000
,
1,389
1,018
978
1,500
500
1,000
500
-
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q1 2014 – Q1 2016 Product Mix
80%
70%
60%
69%
68%
63%
50%
40%
30%
20%
10%
23%
8%
0%
29%
23%
Q1 2016
8%
8%
Q1 2015
Rooms
Food&Beverages
Q1 2014
Others
14
Segment Review - Hospitality
Monthly Occupancy
75
69.8
68.1
68 1
74.2
60.3
55
48.8
47.4
60.8
60.3
52.4
41.4
64.0
51.2
40.7
42.5
Jul-15
Aug-15
46.0
47.0
Sep-15
Oct-15
67.9
67 9
67.0
59.2
50.0
53.0
44.0
44.8
Dec-15
Jan-16
THP
Peers
54.6
65.6
53.9
35
Mar-15
Apr-15
May-15
Jun-15
THP
Monthly ADR
Nov-15
Feb-16
Mar-16
Peers
Monthly RevPAR
70,000
50,000
60 000
60,000
40,000
50,000
40,000
30,000
30,000
20,000
20,000
10,000
10,000
-
-
THP
Peers
15
Segment Review - Power
Revenue
Q1 2016 Q1 2015
LY
Q1
2016
Q1
2015
554MW
552MW
Utilisation
52%
58%
Gas outages
39%
23%
N'M
N'M
%
9,505
6,714
42
Cost of sales
-6,388
-3,476
84
Gross profit
3,117
3,239
-4
Transmission issues
1%
8%
-427
-588
-27
Generated power
290
320
0
0
0
Oper. profit
2,690
2,651
1
Net finance cost
-1,515
-1,074
41
PBT
1,175
1,577
-25
Revenue
Admin expenses
Other income
Avail capacity
Increase in tariff from Jan 2016 which made 2015
t iff lower
tariff
l
-N.044bn
+N3.23bn
Cost of sales
 154% increase in Gas price
Admin Cost
 Reduced due to cost management measures
Finance Cost
 Higher finance cost id due increased working capital
borrowing
16
Segment Review - Power
Generated Vs Available Capacity
700
600
500
400
300
585
552
364
288
281
268
436
435
393
554
513
512
320
282
339
296
327
290
200
100
0
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Generated (MW)
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Available capacity (MW)
Tariff Trend FY 2014 – Q4 2015
Capacity / MWh (a)
Energy / MWh (b)
Total (a)+(b)+(C)
Spinning / Mwh (c)
Jan - May
2014
4,499
5,758
10,257
-
May - Dec
2014
4,303
5,555
9,858
2,250
Jan - Dec
2015
4,303
5,555
9,858
2,250
Jan – Mar
2016
5,051
9,982
15,033
2,,250
Average Utilisation
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
58%
51%
66%
64%
52%
After a year of stagnation in tariff prices, tariff was increased in Jan 2015
to N14
N14,183/MWH
183/MWH to adjust for gas price and subsequently increased to
N15,033 /MWH in line with the new 2016 MYTO tariff
17
Segment Review - Power
Q1 2015 – Q1 2016 Revenue Trend
10,000
9,000
8,000
7,000
6,000
5,000
4 000
4,000
3,000
2,000
1,000
-
Q1 2015 – Q1 2016 PBT Trend
9,505
2 000
2,000
6,714
6,900
6,244
6,789
1 576
1,576
1 652
1,652
1,742
Q1 2015
Q2 2015
Q3 2015
1,175
1,000
-1,000
Q4 2015
Q1 2016
-2,000
-3,000
-4,000
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
60%
50%
54%
53%
46%
52%
45%
3,967
-3,967
-5,000
Impact of fair
value loss on
g currency
y
foreign
loan
Q1 2014 – Q1 2016 Product Mix
40%
3,000
48%
30%
20%
10%
1%
0%
2015
Capacity charge
2%
2014
Energy sent out
2013
Ancilliary service
18
OUTLOOK
19
Outlook
Business
H
Hospitality
it lit
Agenda
Implication
Transcorp Hilton Ikoyi
 Increased market coverage
g
 Finalise Piling of Ikoyi Hilton by Q1 2016
 Obtain final approval for the hotel design by Q3 2016
 Commence full construction at the site by Q4 2016
 New revenue sources
Transcorp Hilton Abuja Upgrade
 Funding upgrade of Hilton
 Conclusion of upgrade by 2017
 Finalise design of MBC - 2016
 Market share protection
Abuja
Transcorp Hilton Port Harcourt
 Finalize schematics design – H2 2016
 Ground breaking and construction
 Target 895MW available capacity and generated
Power
power of 650MW.
650MW
 Engage a strategic partner/Review of the agriculture
Agriculture
i
Oil and gas
Increased revenues
business
Commence exploratory drilling campaign having
obtained
bt i d drilling
d illi
permit
it
Leverage technical expertise
and financial contribution
Contribution expected in 2018
20
Key Takeaways
 Despite the various macro economic and business challenges that limited
our 2015 financial results, we wish to reiterate our near term prospects for
growth highlighting our drivers of value in the next 2
2-3
3 years :
2016-2017
2017-2018
 St
Steady
d run off hotel
h t l business
b i
with
ith average
annual revenue of N15bn and EBITDA of
N6bn
Additi
off revenue ffrom c. 500 rooms
 Addition
from Ikoyi and Port Harcourt
 Additional revenue from MBC
 FX loss of N6.06bn in FY 2015 not
expected to recur in same magnitude




 Higher tariff in place for electricity
business
Commercial production of OPL 281
Available capacity
p
y of 1,000MW
expected utilisation at over 75%
Truly cost reflective tariff
Stable exchange rate regime and
significantly
g
yp
paid down debt
 Expected higher utilisation and
availability power
 Improved working capital position and
reduced cost of borrowing from
TPL and Group
21
QUESTIONS & ANSWERS
22
APPENDIX – BUSINESS
23
Transcorp Hotels Plc
Transcorp Hilton Abuja
Key Events Hosted So Far
 Transcorp Hilton
i
Abuja
j was
recognized as 2015 Hilton Hotels &
Resorts Brand Award.
 The hotel was honored with the
awards of 2015 Director of Sales,
Sales

2015 Sales Team of the Year and

2015 Best Tactical Marketing
Campaign for Middle East & Africa
(MEA/
 Hosted state visit from SA/Turkey
Funding
 Tranche
T
h I off N30 bond
b d issuance
i
was successfully closed via 2 series
 Series I - Proceeds of N10bn at a
coupon – 16.5% p.a on a 7-year
tenor
 Series II – Proceeds of N9.8bn
N9 8bn at a
coupon – 15.5% p.a on 5-year tenor
 Both Series 1 and 2 bonds have now
been listed on NSE and FMDQ
exchanges
 The proceeds are being applied
toward the upgrade of Hilton Abuja
Transcorp Hotel Cabar
Currently undertaking a strategic
review to outsource management
and follow up with a process of
selecting best fit management
partners
24
Transcorp Hotels Plc
Project updates
Transcorp
p Hilton
Port Harc
court
Tran
nscorp Hilton
n Ikoyi
Scope
 Hotel: 312 rooms, junior
ballroom, meeting rooms,
fine dining, bars/lounges,
fitness amenities and spa
 Luxury tower: parking
podium, main ballroom
(1,000 seating capacity),
offices, and penthouse
apartment.
D
Development
l
t off a 250
guestroom Hilton Hotel Port
Harcourt, River State.
Update
Timelines/opening
 Detailed
D t il d D
Design
i
to
t b
be
completed Q3 2016
 Tender for Design and Build
targeted to commence Mid
2016
 Trevi piling ongoing. To be
completed by May 2016.
 Negotiation for adjoining land
to add to the hotel size is still
ongoing.
i
Expected
in
t d opening
i
i
2018
 Following
F ll i
lland
d clearing
l
i
and
d
site expansion, revised concept
and schematic design to be
prepared. Talks ongoing to
engage
g g international architect
to support local firm to deliver
revised designs by Q2 2016
 Construction schedule to be
determined once the architect
i on b
is
board
d
E
Expected
t d opening
i
iin
2018/2019
25
Transcorp Hotels Plc
Upgrade of Hilton Abuja
Update
Scope
Transcorp Hilton A
Abuja
Upgrades
• Upgrade of public areas
• Refurbishment of g
guest
rooms
• External works
• Refurbishment of
congress hall
• Gallery strip
Replacement of Guest Elevators
has commenced, to be
completed Apr 2017
Guestrooms and meeting
rooms: Procurement
P
t and
d
preparatory works ongoing.
construction Work schedule: Jun
2016 to December 2017
Public Areas: Vendor selection
to be completed Q3 2016 and
construction will be
coordinated with guestrooms
schedule
External Works: Site work has
commenced, to be completed
by Oct 2017
Upgrade to be
completed in Q4 2017
 Tender ongoing
ongoing, vendor to be
selected by May 2016
 Target is to complete
construction within 24 months of
commencement
MBC to be completed
in 2018




MBC
5,000 capacity
Multipurpose Banquet
Centre
Timelines/opening
26
Transcorp Power Ltd
Capacity Profile
Takeover
Nov-2013
Jan- 2014
Dec 2014
Dec 2015
Delta II
10MW
38MW
95MW
95MW
Delta III
10MW
20MW
95MW
119MW
Delta IV
149MW
284MW
420MW
420MW
Total
169MW
342MW
610MW
634MW
63
Key Takeaways
275% increase in generating capacity
 Ughelli Power Plc has experienced a significant increase in generating capacity by 275% since
takeover
 Achieved 95% of the 5-year 670MW target set by the Bureau of Public Enterprises (“BPE”) by
December 2015.
 Initial 2015 target of 850MW revised due to rescheduling of the availability of two turbines (GT 15 & 20)
27
Transcorp Power Ltd
Commercial update
 2015 ended on same track of NBET paying on a best effort basis whilst a
g
amount of receivables remain unpaid
p
significant
 However, the new minister of power is championing a number of
initiatives which has started to yield positive results:
Market Update
 Implementation of 2016 MYTO tariff which was announced December
2015
2015.
 Payment of a significant amount of receivables. TPL received about
N6.4bn in February 2016 . There are plans to release balance of the
2014 CBN intervention fund as well as a CBN backed securitization
arrangementt tto clear
l
allll legacy
l
debts
d bt
 Push towards enforcement of binding industry agreements
 Receivables – N25.1bn, (MO – N1.9bn, CBN – N9bn and NBET – N14.2bn)
 Payables to gas vendors – N14.5bn
Working
W
ki
Capital
C it l
Update
 Collections as a percentage of total receivables – 22% (No collection
was made in Q1 on YTD revenue)
 Debt service as a percentage of collections – 53%
 Gas
G paymentt as a percentage
t
off collections
ll ti
– 16%
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OPL 281
OPL 281 – Exploratory Drilling Work Programme
OPL 281 – Hydrocarbons in Place
OIL
GAS
MMSTB
BSCF
Proven
174.64
346.74
Prospects
15.09
30.74
Total
189.73
377.48
) *Billion Standard Cubic
*Million Stock Tank Barrels ((MMSTB),
Feet (BSCF)
Reservoir
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For Further Enquiries Contact:
Ibikunle Oriola
[email protected]
www.transcorpnigeria.com
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