About Transcorp - Transnational Corporation of Nigeria Plc

Transnational Corporation of Nigeria Plc
H1 2015 Investors’ Conference Call
August 2015
1
Disclaimer

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.
2
Outline
1
TRANSCORP OVERVIEW
4
2
OPERATING ENVIRONMENT REVIEW
6
3
BUSINESS UPDATES
9
4
FINANCIAL REVIEW – H1 2015
18
5
OUTLOOK
26
6
QUESTIONS AND ANSWERS
28
3
TRANSCORP OVERVIEW
4
Group Structure
50.01%
Transcorp Ughelli
Power Limited
100%
BUSINESS HIGHLIGHTS
Ughelli Power Plc
83%
Transcorp Hotels Plc
100%
76%
100%
Transcorp Energy
Limited
Transcorp Hotels
Calabar
Transcorp Hotels
Ikoyi
100%
Transcorp Hotels
Port Harcourt
100%
Transcorp Hilton
Abuja
 Owner and operator of
972 MW power plant in
Ughelli Delta State
 Owner of Transcorp Hilton
Hotel Abuja
 Gas fired power
plant
 Owner/operator of 146
room Transcorp Hotel
Calabar
 Sale of power to
national grid via
long term PPA
100%
Teragro Commodities
Ltd
 5 star, 670 rooms
 Owner/developer of
proposed 5-star 300 room
Hilton Hotels in Ikoyi &
250 rms in Port Harcourt
Subsidiaries
Assets
 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
5
OPERATING ENVIRONMENT REVIEW
6
Macro Economic Environment
Volatility of the Stock Market
Real GDP Growth Rate
6.77
7
5.4
6
5
6.21
6.54
6.23
45000
5.94
40000
5.17
4.45
3.96
3.99
30000
4
3
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
Q2
2015 2015*
Real GDP growth Rate
25000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
NSE Index
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.
Q2 2015 GDP growth lowest in 1year space
Average Monthly External Reserves and Brent Crude Price
50,000.00
35000
150
Exchange Rate Increase
200.00
40,000.00
30,000.00
20,000.00
100
190.00
50
180.00
10,000.00
170.00
0.00
0
160.00
150.00
Jan-14
Average Monthly External Reserve
Brent Crude Price
Pressure on external reserves following declining oil prices
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
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
*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.
7
H1 2015 Performance Summary
Income Statement
Financial Position
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
%▲
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% ▲
Key ratios
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%
8
BUSINESS UPDATES
9
Transcorp Hotels Plc
Transcorp Hilton Abuja
Key Events Hosted So Far
 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
Awards and Recognition
Upgrade of existing infrastructure
Scope
WTA
Leading
Hotel
Suite
WTA
Leading
MICE
Hotel
WTA
Leading
Business
Hotel
(AFRICA)
WTA
Leading
Business
Hotel
WTA
Leading
Hotel
Five awards at World Travel Awards 2015
 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
10
Transcorp Hotels Plc
Transcorp Hilton Abuja Renovation
Transcorp Hilton Ikoyi
11
Transcorp Hotels Plc
Transcorp Hilton Ikoyi
•
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
•
•
Transcorp Hilton Port
Harcourt
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
Transcorp Hotels Calabar
•
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
12
Transcorp Ughelli Power Ltd
Capacity Profile
Takeover
Nov-2013
Jan- 2014
Dec 2014
Expected
Dec 2015
Delta II
10MW
38MW
95MW
71MW
Delta III
10MW
20MW
95MW
139MW
Delta IV
149MW
284MW
420MW
640MW
Total
169MW
342MW
610MW
850MW
403% increase in generating capacity
Key Takeaways

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
13
Transcorp Ughelli Power Ltd
Capacity Expansion Plan
3,000
Delivery Options
2,500
2,500
2,000
1,500
1,500
1,000
1,000
 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
850
Key Development issues
2015
 Market/tariff framework
 Long term reliable supply of
gas
 Reliable, modern and
expanded transmission network
500
0
2016
2017
2018
Megawatt (MW)
14
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
15
Teragro Commodities Limited
Teragro Extraction cup
Concentrates Supply
100,000
Transcorp Hilton Ikoyi
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
Q2 2014
Q3 2014
Orange
Q4 2014
Mango
Q1 2015
Q2 2015
*Q3 2015
Pineapple
*Based on confirmed orders received
 Installation of cup extractor increased orders
from off taker (Coca cola) driving sale volume
by 64%
 Extractor cup technology installed a potential
of reducing cost per kg of orange concentrate
by 30%
16
OPL 281
OPL 281 – Exploratory Drilling Work Programme
S/N OPL 281 Work Programme
Q1 2015
1
Environmental Impact Assessment (EIA)
2
Seismic analysis and reporting
interpretation
3
Rig contract
4
Rig Move to Location
5
Spud well
Q2 2015
Q3 2015
Q4 2015
OPL 281 – Update On Reserves
OIL
GAS
MMSTB
BSCF
Shallow
148.7
39.59
Intermediate
91.3
12.9
Deep
32.4
4.83
Total
272.4
241.8
Reservoir
*Million Stock Tank Barrels (MMSTB), *Billion Standard Cubic Feet (BSCF)
UPDATE ON EXIT OF SACOIL
 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.
17
FINANCIAL REVIEW – H1 2015
18
Key Issues That Affected Our Business in H1 2015
Foreign Exchange
Actions/Mitigants
Issues
TUPL
THP
Devaluation impact
affected cost of
debt service for
foreign loans and
operations generally
Gas availability and
grid stability
TUPL
 Reduced utilisation from
Q1 following acute gas
shortage in Feb/March
 Reduced generation due
to capacity limitation of
the transmission network.
 Restructuring of
 Engagement with
foreign currency
NPDC for increased
facility
supply. Commitment
 Renegotiation of
obtained
major transactions
 Proximity to gas field
to local currency
generally reduces
 New borrowings to
incidence s of supply
be denominated in
shortage
local currency
 Sharp improvement in
 Advocacy for
supply in Q2 2015. Gas
review of MYTO tariff
shortage lowest in June
to reflect exchange
rate changes
Concerns on 2015
general elections
THP
Delay in implementation of
TEM terms and MYTO 2.1
TUPL
Postponement of major
events and security
concerns from foreign
visitors impacted
occupancy
 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
 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
 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.
19
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)
Other income/expenses
944
(65)
7,590
9,753
Operating profit
8%
1554%
-
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
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.
-22%
-
Finance income
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.
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.
-36%
20
H1 2015 Group Income Statement
Quarterly Revenue/PBT Trend
10,800
Revenue Contribution Per Subsidiary
10,676
H1 2015
10,600
10,400
10,261
10,191
10,200
9,935
10,000
H1 2014
TUPL
9,992
61.9%
61.1%
9,800
9,600
9,400
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Transcorp
Hotels
34.1
%
38.023
%
Quarterly Revenue/PBT Trend
4,500
4,246
4,000
3,500
3,000
2,570
2,593
Q1 2015
Q2 2015
Teragro
0.26
%
0.025
%
2,500
1,694
2,000
1,500
1,000
500
Q2 2014
Q3 2014
21
Segment Review - Hospitality
Q2 2014 – Q2 2015 Quarterly Revenue Trend
4,500
4,000
3,941
3,662
3,377
3,500
4,025
Q2 2014 – Q2 2015 PBT Trend
1,600
1,504
1,482
1,400
3,216
1,200
3,000
978
1,000
2,500
778
800
2,000
542
600
1,500
1,000
400
500
200
-
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
FY 2014 – Q1 2015 Product Mix
 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.
80%
70%
60%
69%
64%
63%
50%
40%
30%
20%
10%
0%
29%
28%
23%
5%
H1 2015
Rooms
3%
4%
2014
Food & beverages
 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.
2013
Shop rental
22
Segment Review - Hospitality
Monthly Occupancy
85
75
65
55
45
35
THP
Monthly ADR
Peers
Monthly RevPAR
60,000
80,000
70,000
50,000
60,000
40,000
50,000
30,000
40,000
30,000
20,000
20,000
10,000
10,000
0
Jan 15
Feb 15
Mar 15
THP
Apr 15
Peers
May 15
Jun 15
0
Jan 15
Feb 15
Mar 15
THP
Apr 15
May 15
Jun 15
Peers
23
Segment Review - Power
Q2 2014 – Q2 2015 Revenue Trend
6,900
6,800
Q2 2014 – Q2 2015 PBT Trend
3,500
6,810
6,732
6,714
3,000
6,700
6,600
2,500
6,500
2,000
6,400
6,243
6,300
6,200
1,577
1,648
Q1 2015
Q2 2015
1,500
500
6,000
5,900
Q2 2014
Q3 2014
Q1 2015
Q2 2015
FY 2013 – H1 2015 Product Mix
50%
2,101
1,000
6,100
60%
3,169
55%
53%
48%
• Average generation in Q2 2015 was 319MW April,
267MW May, and 370MW June.
40%
30%
20%
10%
2%
1%
0%
0%
H1 2015
Capacity charge
2014
Energy sent out
Q3 2014
• Available capacity remains 610MW
52%
45%
43%
Q2 2014
2013
Ancillary Service
• 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.
24
Segment Review - Power
Generated Vs Available Capacity (Jun. 2014 – Jun. 2015)
700
600
500
Average Utilisation
400
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
83%
79%
81%
65%
54%
300
200
100
0
Jan-15
Feb-15
Mar-15
Generated (MW)
Apr-15
May-15
Jun-15
Available capacity (MW)
Tariff Trend 2013/2014/H12015
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
10,257
10,257
9,858
9,858
9,858
-
-
2,250
2,250
2,250
Total (a)+(b)+(C)
Spinning / Mwh (c)
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.
25
OUTLOOK
26
Outlook
Agenda
Hospitality
Power
Agriculture
Oil & Gas
Implication
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
 Increased market coverage
 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
 Increased earnings in 2015
 Reduction of forex risks and
resolution of multiple taxes
 Commence development of farmland and orchard
 Increase production/sales to anchor off taker and
others
 Improve margin through cost reduction
 Increased earnings in 2015
 Longer term sourcing of
inputs
 Commence exploratory drilling campaign.
 New revenue sources
 Market share protection
Contribution expected in
2017/2018
27
QUESTIONS & ANSWERS
28
For Further Enquiries Contact:
Ibikunle Oriola
[email protected]
www.transcorpnigeria.com
29