| Fri 30 Mar 2007, 13:59 | | OAO - Oando Plc - Reviewed results for the 12 mont |
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OAO
UNTP
OAO - Oando Plc - Reviewed results for the 12 months ended 31 December 2006
Oando Plc
(Incorporated in Nigeria and registered as an external company in South
Africa)
Registration number: RC 6474
(External company registration number: 2005/038824/10)
Share Code on the JSE Limited: OAO
Share Code on the Nigerian Stock Exchange: UNTP
ISIN: NG00000UNTP0
("Oando" or "the Company")
Reviewed results for the 12 months ended 31 December 2006
Highlights:
- Turnover of $1,629m
- Gross profit of $139m
- Gross profit margin of 8.56%
- Operating profit of $55m
- Profit after tax of $24m
- Attributable profit after tax of $21m
- Earnings per share: 3.66c
- Continued expansion and consolidation of efforts across the companies
within the Group
- Gaining competency, improved efficiency and seamless work processes
Review of results
Oando which has a primary listing on the Nigerian Stock Exchange and a
secondary listing on the JSE Limited (JSE) reports 12 months Group Profit
After Tax (PAT) for the financial year ended 31 December 2006 of $23.90m, an
increase of 50% over the prior year when the Company closed with a profit
figure of $16.49m.
Income statement analysis
The strong growth recorded in consolidated Turnover of 18% to $1,629m during
2006 reflects a number of important underlying drivers - firstly, the
significant price increase in crude oil, our base product, which exceeded
$70 per barrel for significant periods during the course of 2006, averaging
a 70% increase on the year. Secondly, the Nigerian Government introduced the
Petroleum Subsidy Fund which enabled the Company to directly import fuel
rather than rely solely on the Nigerian National Petroleum Company.
The price at which fuel is sold at the pump to retail consumers in
particular will continue to be a matter that has deep social and political
ramifications globally, hence the need that some Governments feel that these
prices should be firmly controlled. The Federal Government of Nigeria, on
the back of the unprecedented price spiral seen in the commodity during the
year decided to freeze pump prices - Premium Motor Spirit (PMS)
particularly. As the Marketing business segment still represents the largest
part of our Turnover and the PMS product line well over 50% of that unit`s
revenues, it was inevitable that this inability to reflect the full extent
of the price hike in crude at the pump would negatively impact our margins
despite the increase in volume.
Further expansion into the low margin but high capital return Supply &
Trading segment also negatively impacted total Group margin. So while Cost
of Sales rose by 19% to $1,490m, Turnover only increased by 18% which meant
that Profit Margins at the Gross level reduced to 8.56% from 9.55% in 2005
At the Operating level, Oando`s profit increased significantly on 2005 to
$55m as a result of a higher Other Income component which rose by 150% to
$10m, driven by non fuel revenues that leveraged on our extensive retail
network. This achievement was further buoyed by the operational and
administrative efficiency which saw a 9% reduction in our selling, marketing
and administrative expenses.
The total PAT increase of 50% to $23.90m was lower than the increase in
Operating Profit would have suggested due to finance costs which increased
by $15m (155%). The main driver of the large increase in financing costs was
a change in operating model due to the introduction of the Petroleum Subsidy
Fund which meant that as the Company imported fuels for its own account the
working capital days increased by the shipment period to get the products to
market.
Attributable PAT to majority shareholders rose by 42% to $20.67m from
$14.54m in 2005, while minority shareholders` position increased by 65% to
$3.23m in 2006 from $1.95m the previous year. This indicated the strong
showing of other subsidiaries vindicating our strategic belief in the
setting up of the companies.
Balance sheet analysis
Oando`s Total Assets rose by 18% to $742m compared to $630m in 2005 and
Total Liabilities advanced 20% to $552m from $458m as the Group continued
its expansion drive away from the lower margin segments and into higher
value areas of the energy value chain like Upstream Exploration &
Production, a strategy which we believe will yield significant returns in
future driven by continued strong crude prices over the medium term.
Prospects
Our primary ambition remains the development of our current platform into
becoming one of the foremost integrated energy players in Africa. This
desire is based on the central assumption that the underlying price of crude
will minimally remain at current levels over the next few years essentially
driven by the inability of new discoveries to outpace current and near term
consumption levels. We therefore believe that the capital investments we are
currently undertaking through expansion into higher value business segments
such as Exploration and Production will help deliver substantial revenue and
earnings growth to shareholders in the future.
This however does not diminish the fact that we anticipate improved and
strong performance of the existing businesses on a continuous basis -
Marketing, Supply & Trading, Energy Services and Gaslink - all of which
showed better top and bottom line numbers than previous years.
Consolidated Balance Sheet
As at 31 December 2006
ASSETS 2006 2005
$`000 $`000
Non-current assets
Property Plant & Equipment 109,271 112,756
Intangible Assets 111,685 101,999
Long Term Investments 78 -
Long Term Receivables 27,080 28,689
248,114 243,444
Current assets
Inventories 131,185 75,623
Trade & Other Receivables 302,933 252,712
Debenture 190
Cash & Cash Equivalents 59,943 57,769
494,061 386,294
Total assets 742,175 629,738
EQUITY
Capital & Reserves
attributable to equity
holders
Share Capital 2,228 2,162
Share Premium 124,408 120,792
Revaluation Reserve 18,871 18,322
Exchange Difference (300)
Retained Earnings 29,778 20,143
175,285 161,119
Minority Interest 14,928 10,969
Total equity 190,213 172,088
LIABILITIES
Non-Current Liabilities
Borrowings 12,078 13,866
Deferred Income Tax 4,984 5,140
Liabilities
Retirement Benefit 1,076 8,612
Obligation
Provisions 4,111
Other non-current 5,500 5,730
Liabilities
23,638 37,459
Current Liabilities
Trade & Other Payables 207,231 138,224
Dividend Payables 15 13
Current Income Tax 7,383 4,782
Liabilities
Borrowings 313,695 277,172
528,324 420,191
Total Liabilities 551,962 457,650
Total Equity & Liabilities 742,175 629,738
Consolidated Income Statement
For the year ended 31 December 2006
2006 2005
$`000 $`000
Sales 1,629,142 1,381,200
Cost of Sales (1,489,654) (1,249,369)
Gross Profit 139,488 131,831
Selling & Marketing Costs (41,995) (50,734)
Administrative Expenses (56,460) (54,550)
Interest Income Received 3,554 2,440
Other Operating Income 10,042 3,930
Operating Profit 54,629 32,917
Shares of Profit of - -
Associates
Finance Costs (25,464) (10,019)
Profit Before Taxation 29,165 22,898
Income Tax Expense (5,269) (6,405)
Profit After Expense 23,896 16,493
Attributable to:
Minority Interest 3,228 1,952
Equity Holders of the
Company 20,668 14,541
23,896 16,493
Summarised Consolidated Cash Flow Statement
For the year ended 31 December 2006
2006 2005
US$`000 US$`000
Cash and cash equivalents at the
beginning of the period 57,769 74,235
Net cash inflow used in operating
activities 20,274 (132,520)
Cash used in investing activities (8,079) (53,340)
Net cash flows (used in)/generated from
financing activities (11,651) 169,393
Exchange gains / (losses) in cash and
cash equivalents 1,628 1
Cash and bank overdrafts at end of
period 59,943 57,769
Consolidated Statement of changes in Shareholder`s Equity
Attributable to equity holders of the Company
Share Share Revaluation Cummulative
Capital Premium reserve translation
US$m US$m US$m adjustment
US$m
Balance as at 31
December 2005 2.16 120.79 18.32 (0.3)
Dividend relating to
2005
Minority interest in
subsidiary
Interest in subsidiary
excluded from
consolidation
Interest in share
capital transferred
Currency Translation 0.07 3.62 0.55 0.3
adjustment
Attributable to
majority shareholder
Balance as at 31
December 2006 2.23 124.41 18.87
Balance as at 1 Jan. 2.16 120.74 18.31 (0.25)
2005
Currency translation
adjustments 0.10 0.01 (2.13)
Restatement of residual
value of Property,
plant and equipment
Deferred tax effect of
residual value
restatement
Net expense recognised
directly into equity (2.13)
Retained profit for the
period
Total income recognized
for half year (2.13)
Dividend relating to
2004
Minority interest in
subsidiary
Interest in subsidiary
excluded from
consolidation
Interest in share
capital transferred
Balance as at 31
December 2005 2.16 120.84 18.32 (2.38)
Retained Minority Total equity
earnings interest US$m
US$m US$m
Balance as at 31
December 2005 20.143 10.97 172.09
Dividend relating to
2005 (11.03) (11.03)
Minority interest in
subsidiary 3.23 3.23
Interest in subsidiary
excluded from
consolidation
Interest in share
capital transferred
Currency Translation
adjustment 4.54
Attributable to majority
shareholder 20.67 21.67
Balance as at 31
December 2006 29.78 14.93 191.21
Balance as at 1 Jan.
2005 11.96 10.73 163.65
Currency translation
adjustments (1.59) (3.62)
Restatement of residual
value of Property, plant
and equipment 7.09 7.09
Deferred tax effect of
residual value
restatement (2.13) (2.13)
Net expense recognised
directly into equity 4.96 (1.59) 1.35
Retained profit for the
period 15.81 1.95 17.79
Total income recognized
for half year 20.77 0.36 19.11
Dividend relating to
2004 (8.65) (8.65)
Minority interest in
subsidiary (2.67) (2.67)
Interest in subsidiary
excluded from
consolidation (0.07) (0.07
Interest in share
capital transferred 0.02 0.02
(11.32) (0.05) (11.37)
Balance as at 31
December 2005 21.41 10.97 171.32
Notes to the reviewed results
1. General information
Oando Plc (formerly Unipetrol Nigeria Plc) was registered by a special
resolution as a result of the acquisition of the shareholding of Esso Africa
Incorporated (principal shareholder of Esso Standard Nigeria Limited) by the
Federal Government of Nigeria. The Company was partially privatised in 1991.
It was however fully privatised in the year 2000 consequent upon the sale of
Federal Government`s 40% shareholding in the Company. 30% was sold to core
investors (Ocean and Oil Investments Limited) and the remaining 10% to the
Nigerian public. In December 2002, the Company merged with Agip Nigeria Plc
following its acquisition of 60% Agip Petroli`s stake of Agip Nigeria Plc in
August of the same year. The Company formally changed its name from
Unipetrol Nigeria Plc to Oando Plc in December 2003.
Oando and its subsidiaries (together "the Group") have their primary listing
on the Nigerian Stock Exchange.
The Group has marketing and distribution outlets in Nigeria, Ghana and Togo
and other smaller markets along the West African coast.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise
stated.
2.1 Basis of preparation
The consolidated financial statements of Oando have been prepared in
accordance with International Financial Reporting Standards (IFRS). The
consolidated financial statements have been prepared under the historical
cost convention, as modified by the revaluation of land and buildings, and
financial assets and financial liabilities at fair value through profit or
loss.
The preparation of financial statements in accordance with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise judgement in the process of applying the Group`s accounting
policies.
Early adoption of standards
In 2004, the Group early adopted the IFRS below, which are relevant to its
operations. These have been consistently applied in these financial
statements for 2006.
IAS 2 (revised 2003) Inventories
IAS 8 (revised 2003) Accounting Policies, Changes in Accounting Estimates
and Errors
IAS 10 (revised 2003) Events after the Balance Sheet Date
IAS 16 (revised 2003) Property, Plant and Equipment
IAS 17 (revised 2003) Leases
IAS 21 (revised 2003) The Effects of Changes in Foreign Exchange Rates
IAS 24 (revised 2003) Related Party Disclosures
IAS 27 (revised 2003) Consolidated and Separate Financial Statements
IAS 28 (revised 2003) Investments in Associates
IAS 32 (revised 2003) Financial Instruments: Disclosure and Presentation
IAS 33 (revised 2003) Earnings per share
IAS 36 (revised 2004) Impairment of Assets
IAS 38 (revised 2004) Intangible Assets
IAS 39 (revised 2003) Financial instruments: Recognition and measurement
IFRS 2 (issued 2004) Share-based payments
IFRS 3 (issued 2004) Business Combinations
IFRS 5 (issued 2004) Non-current Assets Held for Sale and Discontinued
Operations
The early adoption of IAS 10 has resulted in a change in the accounting
policy for dividends. Proposed dividends, which were previously recognised
in the year prior to the declaration, have been adjusted in accordance with
IAS 10 and 37 respectively.
The application IAS 16 has affected the accounting for fair value reserve
relating to revalued land and buildings upon disposal.
Under previous GAAP, the revaluation surplus included in equity in respect
of an item of property, plant and equipment were transferred to the income,
when the asset is disposed of, to determine profit on disposal. Adjustments
have been passed to transfer the related amounts directly to retained
earnings in accordance with IAS 16. Also, early adoption of IAS 16 (revised
2004) has necessitated the disclosure of prior year comparatives for all
movements in property plant and equipment.
IAS 21 (revised 2003) has affected the translation of foreign entities`
income statements, on which closing rates were previously applied but now
amended and translated at average rates. The functional currency of each of
the consolidated entities has also been re-evaluated based on the guidance
to the revised standard. All the Group entities have the same functional
currency as their presentation currency. These financial statements have
been presented in a currency other than the Company`s functional currency,
being US Dollars, to meet the filing requirements of the JSE.
IAS 24 (revised 2003) has affected the identification of related parties and
some other related-party disclosures.
IAS 27 (revised 2004) has affected the consolidation of subsidiaries.
Certain subsidiaries, which were not included in the consolidation under
previous GAAP have now been consolidated.
The early adoption of IAS 33 has resulted in a change in the computation of
earnings per share. Earnings per share, which were previously computed on
the basis of the number of shares in issue at the end of the reporting
period, have been adjusted on the basis of the weighted average number of
shares in accordance with IAS 33
The early adoption of IAS 39 has resulted in a change in accounting for
financial assets and liabilities.
Although the Group did not have any share-based payments as at the balance
sheet date, upon adoption of a scheme, which is currently being considered
by the Group, all share based payments will be accounted for under IFRS 2.
The early adoption of IFRS 5 has resulted in a change in the accounting for
non-current assets held for sale and discontinued operations as qualifying
assets have been reclassified accordingly.
The early adoption of IFRS 3, IAS 36 (revised 2004) and IAS 38 (revised
2004) resulted in a change in the accounting policy for goodwill. Until 31
December 2002, goodwill was:
- Amortised on a straight line basis over a period ranging from 5 to 20
years; and
- Assessed for an indication of impairment at each balance sheet date.
In accordance with the provisions of IFRS 3:
- The Group ceased amortisation of goodwill from 1 January 2003;
- Accumulated amortisation as at 31 December 2002 has been eliminated with a
corresponding decrease in the cost of goodwill;
- Goodwill was tested for impairment at 1 January 2003, the transition date.
Also, from the year ended 31 December 2003 onwards, goodwill is tested
annually for impairment, as well as when there are indications of
impairment. The Group has also reassessed the useful lives of its intangible
assets in accordance with the provisions of IAS 38. No adjustment resulted
from this reassessment.
All changes in the accounting policies have been made in accordance with the
transition provisions in the respective standards.
The early adoption of IAS 1, 2, 8, 17 28, and 32 (all revised 2003) did not
result in substantial changes to the Group`s accounting policies. In
summary:
- IAS 1, 2, 28 and 32 had no material effect on the Group`s policies.
- IAS 8 (revised 2004) has resulted in the disclosure of the impact of new
standards
2.2 Consolidation
(a) Subsidiaries
Subsidiaries include all entities (including special purpose entities) over
which the Group has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting
rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether
the Group controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of the acquisition is measured as the
fair value of the assets given, equity instruments issued and liabilities
incurred or assumed and the date of plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair value
of the Group`s share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognised directly in
the income statement. All balances and unrealised surpluses and deficits on
transactions between group companies have been eliminated. Where necessary,
accounting policies for subsidiaries have been changed to be consistent with
the policies adopted by the Company. Separate disclosure (in equity) is made
of Minority Interests.
(b) Associates
Associates are all entities over which the Group has significant influence
but not control, generally accompanying a shareholding of between 20% and
50% of the voting rights. Investments in associates are accounted for by the
equity method of accounting and are initially recognised at cost. The
Group`s investment in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition. The Group`s share of its
associates` post-acquisition profits or losses is recognised in the income
statement, and its share of post acquisition movements in reserves is
recognised in reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment.
When the Group`s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the
Group does not recognise further losses, unless it has incurred obligations
or made payments on behalf of the associate. Unrealised gains on
transactions between the Group and its associates are eliminated to the
extent of the Group`s interest in the associates. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the
asset transferred. The accounting policies of the associates are consistent
with the policies adopted by the Group.
Goodwill included in the carrying amount of an investment is neither
amortised nor tested for impairment separately by applying the requirements
for impairment testing goodwill in IAS 36, Impairment of Assets. Instead,
the entire carrying amount of the investment is tested under IAS 36 for
impairment.
All subsidiaries and associates have uniform calendar year ends.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are
different from those of other business segments. A geographical segment is
engaged in providing products or services within a particular economic
environment that are subject to risks and return that are different from
those of segments operating in other economic environments.
2.4 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group`s entities
are measured using the currency of the primary economic environment in which
the entity operates (`the functional currency`). The functional currency of
the Group is the Naira. The consolidated financial statements are presented
in US dollars, which is the company`s presentation currency for the purpose
of filing outside Nigeria.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in
the income statement, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
c) Group Companies
The results and financial position of all the group entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
1. Assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet;
2. Income and expenses for each income statement are translated at average
exchange rates; and all resulting exchange differences are recognised as a
separate component of equity.
3. On consolidation, exchange differences arising from the translation of
the net investment in foreign entities are taken to shareholders` equity.
Upon disposal of part or all of the investment, such exchange differences
are recognised in the income statement as part of the gain or loss on sale.
3. Earnings Per Share
Profit Attributable to the equity holders of the Company by the weighted
average number of shares in issue during the period.
2006 2005
Profit attributable to equity holders of 20,667 14,541
the Company ($`000)
Weighted average number of shares in issue 572,301 572,301
(thousands)
Basic Earnings Per Share (cents) 3.66 2.54
Diluted
Profit attributable to equity holders of 20,667 14,541
the Company
Weighted average number of shares in issue 572,301 572,301
(thousands)
Adjustment for Bonus issues -
Weighted average number of shares for 572,301 572,301
diluted Earnings Per Share (thousands)
Diluted Earning Per Shares (cents) 3.66 2.54
Headline Earnings Per Share
Profit Attributable to equity holders of 20,667 14,541
the Company
Adjusted for: - -
Profit on sale of buildings associated
with discontinued operations
Profit/(Loss) on sale of other assets (4,785) (32)
Loss on sales of investment in affiliate - 25
companies
Tax thereon - -
15,882 14,534
Headline Earnings Per Share attributable 2.78 2.54
to earnings basis (cents)
Headline Earnings Per Share attributable 2.78 2.54
to diluted earnings basis (cents)
Net Assets Per Share (cents) 34 30
Tangible Assets Per Share (cents) 19.7 19.7
4. INDEPENDENT AUDIT BY THE AUDITORS
These condensed consolidated results are currently being audited by our
auditors PricewaterhouseCoopers who perform their audit in accordance with
the International Standards on Auditing. The results have been reviewed by
PricewaterhouseCoopers whose unqualified review opinion is available for
inspection at the Company`s registered office.
5. POST BALANCE SHEET EVENTS
There are no significant post balance sheet events.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive Officer
30 March 2007
Directorate:
1 General M. Magoro (Rtd.) Chairman
2 Mr. J. A. Tinubu Group CEO
3 Mr. O. Boyo Deputy Group CEO
4 Mr Onajite Okoloko Director
5 Mr. A. Akinrele SAN Director
6 Prince F. N. Atako JP Director
7 Mr. O. Ibru Director
8 Alhaji H. Mahmud Director
9 Mr. I. Osakwe Director
10 Mr. O. Osifo Director
11 HRM. Oba. A. Gbadebo Director
Company Secretary: Mrs. Oredeji Delano
Registered office: 2, Ajose Adeogun Street, Victoria Island, Lagos, Nigeria
Auditors: PriceWaterhouseCoopers, Plot 252E Muri Okunola Street, Victoria
Island, Lagos
E-mail: info@oandoplc.com
Registered office in South Africa: 1st Floor, 32 Fricker Road, Illovo
Boulevard, Sandton, 2196, South Africa
Office of the South African transfer secretaries: Computershare Investor
Services 2004 (Proprietary) Limited (Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
Date: 30/03/2007 13:59:51 Produced by the JSE SENS Department.
