Dissecting the Financial Results of Companies in Nigeria's Hospitality Sector - TRANSCOHOT

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Thursday, April 29, 2021   /06:00 AM  / By Proshare Research /  Header Image Credit: EcoGraphics


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All the hotels listed on the Nigeria Stock Exchange (NSE) had a turbulent 2020 as they all recorded a significant decline in their profits and revenues. Amongst the listed companies on the NSE, Transcorp Hotel Plc recorded the highest percentage decline in its profits by -1,122.80% while Ikeja Hotel plc recorded a decline in its profit by -905.8%, Capital Hotels Plc -160.2%. On the other hand, Tourist Company of Nigeria Plc recorded an increase in its loss position by +439.67%.  The losses incurred by the various hotels were the following: Ikeja Hotel Plc N6.72bn, Tourist Company of Nigeria Plc N6.53bn, Transcorp Hotel Plc N6.28bn, and Capital Hotel Plc N241.86m.

 

All the firms also recorded a decline in their revenue in 2020 with Tourist Company of Nigeria Plc recording the highest decline of -64.31% while the other hotels also saw the following decline in revenue; Capital Hotel Plc -62.36%, Ikeja Hotel Plc -59.5%, and Transcorp Hotel Plc -50.25%. Transcorp Hotel Plc recorded the highest revenue of N10.15bn in 2020 while Ikeja Hotel Plc recorded a revenue of N5.07bn, Capital Hotel Plc revenue was N1.95bn, and Tourist Company of Nigeria Plc N1.31bn (see Table 6).

 

Table 6: Snapshot of Companies in the Hospitality Sector Results in 2020

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Transcorp Hotel Plc

 

PAT

Transcorp Hotel Plc recorded a loss of N6.28bn in 2020 from a profit of N614m in 2019. The loss could be attributed to the lockdown imposed and the decline in confidence in the hospitality sector (see Chart 8).

 

Chart 8: Transcorp Hotel Plc PAT (N'bn)

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Revenue

Transcorp Hotel Plc revenue declined by -50.25% to N10.15bn from N20.4bn in 2019. The decline in revenue was attributed to the low patronage of hotels caused because of the lockdown (see Chart 9).

 

Chart 9: Transcorp Hotel Plc Revenue (N'bn)

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Its various revenue sources were rooms N6.5bn, food & beverage N2.51bn, shop rental N693.79m, service charge N83.66m, and other operating revenue N362.15m. Furthermore, all its revenue segments recorded a decline in 2020. The largest decline of -95.10% was recorded in service charge while segments like rooms declined by -50.79%, foods & beverages -61.54%, shop rental -13.16%, other operating revenue -57.5% (Table 7).

 

Table 7: Breakdown of Transcorp Hotel Plc Revenue (N'bn)

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Administrative Expenses

Transcorp administrative expenses fell by -20.37% to N8.29bn in 2020 from N10.41bn in 2019. The decline in administrative expenses was attributed to a fall in economic activities because of the pandemic. The decline in administrative expenses was attributed to the decline in staff cost -32.3%, auditors remuneration -16.12%, management and incentive fees -64.11%, director's remuneration -56.93%, bank charges -35.18%, repairs and maintenance -30.21%, energy cost -13.66%, group services and benefits -50.76%, health, safety and medical -30.8%, IT, telecommunication and securities -20.48%, licenses, fees and rates -46.17%, marketing, sales & advertisement -54.42%, travel, logistics & accommodation -57.08%, stationery, printing and office supplies -34.13%, other administrative expense -7.513%  (see Chart 10).

 

Chart 10: Transcorp Hotel Plc Administrative Expenses (N'bn)

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Total Assets

Transcorp Hotel Plc’s total assets declined slightly by -1.59% to N113.1bn in 2020 from N114.75bn in 2019. Some components of the total assets recorded decline while others recorded increases. Components that increased were inventories +10.55%, prepayments +34.23% while other components that recorded declines were property, plant & equipment -0.83%, intangible assets -9.57%, cash and short-term deposit -25.05% (see Chart 11).

 

Chart 11: Transcorp Hotels Plc Total Assets (N'bn)

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Net debt to Equity

Transcorp Hotel's net debt to equity ratio declined from 51.95% in 2019 to 31.3% in 2020. Despite the decline in cash and short-term deposit by -25.05%, the net debt to equity ratio declined when compared to previous years as Transcorp Hotel Plc reduced its borrowing drastically by -35.22% in 2020 (see Chart 12).

 

Chart 12: Transcorp Hotels Plc Net-debt to Equity

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Current Ratio

The hotelier's current ratio declined from 0.26 in 2019 to 0.177 in 2020. This means that Transcorp Hotel had liquid assets of N0.17 for every N1 in short-dated liabilities. The decline in the current ratio could be attributed to the decline in current assets by -16.42% in 2020 and the rise in current liabilities by +25.45% (see Chart 13).

 

Chart 13: Transcorp Hotel Plc Current Ratio

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Acid-test Ratio

The hospitality group's acid-test ratio slumped from 0.24 in 2019 to 0.156 in 2020.  This suggests that for every N1 of current liabilities, Transcorp Hotel had N0.156 of very liquid assets to cover its immediate obligations. Furthermore, the acid-test ratio is lesser than the current ratio of 0.16. The difference can be attributed to the rise in inventory by +10.55% rising from N528.78bn in 2019 to N584.54bn in 2020 (see Chart 14).

 

 

Chart 14: Transcorp Hotel Plc Acid-test Ratio

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research

 

Equity

The company's equity rose by +6.19% from N57.54bn in 2019 to N61.1bn in 2020. There was an increase in its equities despite the decline in retained earnings by -12.63%. The rise in equities could be attributed to a rise in share capital by +34.74% and share premium +211.41% (see Chart 15).

 

Chart 15: Transcorp Hotel Plc Equity (N'bn)

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Source: Transcorp Hotel Plc Financial Statement, Proshare Research


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Downloadable Version of Proshare Confidential: Hospitality Post-COVID-19: Making the Future Count

1.      Full Report: Hospitality Post-COVID-19: Making the Future Count - Apr 23, 2021

2. Executive Summary: Hospitality Post-COVID-19: Making the Future Count - Apr 23, 2021


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Related Links

  1. Hotels - A Peep into Performance
  2. Hospitality: COVID-19 Related Policy Shifts
  3. Hospitality Before and After - The Unmaking of Hotels
  4. Hospitality: A Post-COVID-19 Reality
  5. Hospitality Post-COVID-19: Making the Future Count

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