| Thu 8 Nov 2007, 16:25 | | OAO - Oando Plc - Unaudited results for the 9 mont |
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OAO
UNTP
OAO - Oando Plc - Unaudited results for the 9 months ended 30 September 2007
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)
JSE share code: OAO
Nigerian Stock Exchange share code: UNTP
ISIN: NG00000UNTP0
("Oando" or "the Group")
Unaudited results for the 9 months ended 30 September 2007
Highlights
- Turnover of $1,406.63 million
- Gross profit of $85.03 million
- Gross profit margin of 6%
- Operating profit of $42.35 million
- Profit after tax of $28.77 million
- Attributable profit after tax of $23.31 million
- Earnings per share of 3.09c
- Adjusted earnings per share of 3.93c
- Consolidation of our gas distribution and power companies into one group
- Evolving Energy Service Company with recent acquisition of 2 rigs for
upstream operation
- Improved pump price margin efficiency
- Improved non-fuel revenue base
Review of results
Oando, which has a primary listing on the Nigerian Stock Exchange and a
secondary listing on the JSE Limited ("JSE"), reports profit after tax ("PAT")
for the 9 months ended 30 September 2007 of $28.77 million.
Income statement analysis
The increase of 14% recorded in consolidated turnover from $1,231.17 million for
the 9 months ended September 2006 to $1,406.63 million for the 9 months ended
September 2007 is explained by three major underlying drivers:
increased business activities along the supply chain within the Group,
especially our Supply & Trading company;
Increase in pump price of our base products; and
Improved product availability during the third quarter.
The third quarter results show a huge improvement in non-marketing contribution
to profits and further underscore our strategic decision to continually
diversify our operating base along the energy supply chain. Our performance,
which has largely been driven by our downstream marketing business, received a
boost from non-marketing contribution, particularly, our Supply and Trading
business.
Our year to date position continues to reflect the marked improvement in
performance as recorded in the previous quarters when compared against the
equivalent period of last year. This was mainly as a result of the strong
performance of our Supply and Trading Business, as well as improved margins in
the business. The Supply and Trading business continues to benefit from the
Federal Government`s Petroleum subsidy fund which makes it easier for the
business`s clients to better plan and control availability of products.
As a result of increased turnover, as well as better margins, overall gross
profit increased by 16% from $73.46 million in 2006 to $85.03 million. With this
increase in gross profit, combined with improved non-fuel revenue income base
and efficient cost curtailment efforts by management that have seen
administrative expenses increasing marginally despite increases in volume of
business activities, operating profit recorded a 42% increase from $29.77
million in the previous year, to $42.35 million.
The increase in operating profit is supported by efficient utilisation of
working capital coupled with sound business policies which has brought about a
significant reduction in wastage along the value chain resulted in a 57%
increase in PAT from $18.36 million in 2006 to $28.77 million for the equivalent
period in 2007. PAT attributable to ordinary shareholders rose by 47% to $23.31
million from $15.83 million in the 9 months to September 2006. The net effect of
the improvement in performance as well as the recent corporate restructuring is
a 42% increase in attributable profit, a rise in adjusted earnings per share
from 2.77c to 3.93c for the 9 months ended 30 September 2007.
Balance sheet analysis
Oando`s total assets increased by 7% to $950.01 million compared to $891.58
million in the third quarter of 2006 and total liabilities fell by 9% to $642.34
million from $707.37 million. Long term liabilities increased significantly to
$124.53 million from $30.16 million in the same period last year. This is due to
a realignment of our working capital management and efficient utilisation of
interest bearing liabilities.
Current assets reduced by 17% to $545.92 million from $660.07 million in the
same period last year. This is due to efficient working capital management and
reduction in stock levels as the Group seeks to efficiently manage its
production, ware-housing, and distribution of products.
In all, the Group`s net assets in the quarter closed at $307.67 million
representing a 67% increase over the prior year position of $184.21 million,
arising mainly from the conclusion of the corporate restructuring that was
approved by the shareholders at the last annual general meeting. The Group is
determined to keep focus on improving asset productivity rather than just
increasing the asset base.
Prospects
With increasing opportunities in the upstream, exploration & production, gas and
power, Oando is geared towards attaining the apex position in the energy sector
by continually diversifying and expanding our business lines. Our valuable
shareholders are guaranteed to benefit from the benefits that would accrue as a
result.
We shall relentlessly seek to expand our diversified platform in our bid to
become the largest integrated energy solutions provider in Africa. Our current
performance and future projection supports this strategic insight. Already our
Supply and Trading business is well positioned to fully tap into opportunities
along the supply chain; our Energy services business has been fully re-
engineered to meet the immediate and future challenges of energy servicing and
our Gas and Power company is poised to continue to maintain its leadership
position in natural gas distribution in Nigeria and West African coastal region.
With our aggressive cost containment strategies, ambitious and promising
initiatives, and a management staff alert to the enormous opportunities in the
business, there is a huge potential for growth in the coming months and years.
The Board is of the view that the third quarter results, highlight the success
the Group has continued to achieve in meeting the challenges of managing its
diversified platform with a view of actualising its vision of becoming Africa`s
integrated energy company driven by excellence.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive Officer
Directors:
1. General M. Magoro (Rtd.) - Chairman
2. Mr. J. A. Tinubu - Group CEO
3. Mr. O. Boyo - Deputy Group CEO
4. Mr. O. P. Okoloko - Director
5. Prince F. N. Atako JP. - Director
6. Mr. A. Akinrele SAN - Director
7. HRM Oba A. Gbadebo - Director
8. Mr. O. Ibru - Director
9. Alhaji H. Mahmud - Director
10. Mr. I. Osakwe - Director
11. Mr. O. Osunsanya - Director
Company Secretary: Mrs. Oredeji Delano
Registered office in Nigeria: 2, Ajose Adeogun Street, Victoria Island, Lagos,
Nigeria
Registered office in South Africa: 1st Floor, 32 Fricker Road, Illovo,
Boulevard, Sandton, 2146, South Africa
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
Auditors: PricewaterhouseCoopers, Plot 252E Muri Okunola Street, Victoria
Island, Lagos
E-mail: info@oandoplc.com
Consolidated Balance Sheet
As at 30 September 2007
ASSETS 2007 2006
US$m US$m
Non current assets
Property, plant and equipment 133.72 102.17
Intangible assets 229.77 103.73
Long-term receivables 40.60 25.63
404.09 231.53
Current assets
Inventories 124.17 154.63
Work-in-progress - 1.05
Trade and other receivables 350.82 447.82
Held for sale investment - -
Cash and cash equivalents 70.93 56.57
545.92 660.07
Total assets 950.01 891.60
EQUITY
Capital and reserves attributable
to equity holders
Share capital 2.94 2.22
Share premium 237.27 123.88
Revaluation reserve 19.26 18.79
Retained earnings 41.73 27.74
301.20 172.63
Minority interest 6.47 11.58
Total equity 307.67 184.21
LIABILITIES
Non current liabilities
Borrowings 117.56 26.97
Deferred income tax liabilities 5.34 1.79
Retired benefit obligation 1.32 1.22
Provisions 0.31 0.18
124.53 30.16
Current liabilities
Trade and other payables 192.11 187.67
Dividend payable 0.20 0.02
Current income tax liabilities 9.63 8.12
Borrowings 315.87 481.42
517.81 677.23
Total liabilities 642.34 707.39
Total equity and liabilities 950.01 891.60
Consolidated Income Statement
For the 9 months ended 30 September 2007
2007 2006
US$m US$m
Sales 1,406.63 1,231.09
Cost of sales (1,321.60) (1,157.64)
Gross profit 85.03 73.45
Selling and marketing costs (40.28) (38.51)
Administration expense (9.85) (9.42)
Other operating income 7.45 4.25
Operating profit 42.35 29.77
Finance costs (6.70) (5.92)
Profit before tax 35.65 23.85
Income tax expense (6.88) (5.49)
Profit after tax 28.77 18.36
Attributable to:
Non-Controlling Shareholders 5.46 2.53
Equity holders of the company 23.31 15.83
28.77 18.36
Summarised Consolidated Cash Flow Statements
As at
Sept 2007 Sept 2006
US$m US$m
Cash and cash equivalents at the
beginning of the period (52.44) (167.75)
Net cash inflow used in operating activities (19.99) 36.52
Cash used in investing activities (50.89) 67.91
Net cash flows (used in)/generated from financing
activities 96.33 47.96
Exchange gains/(losses) in cash and cash
equivalents 0.45 2.19
Cash and bank overdrafts at end of period (26.54) (12.45)
Consolidated Statement of changes in Shareholders` Equity
Attributable to equity holders of the Company
As at 30 September 2007
Cummulative
Share Share Revalaution translation
capital premium reserve adjustment
US$m US$m US$m US$m
Balance as at
1 January 2006
Currency translation
adjustments 2.16 120.74 10.65
Net expense recognised 7.83
directly into equity
Retained profit
for the period
Dividends: Final for 2005
Balance as at 31st
December 2006 2.16 120.74 18.48
Balance as at 1st
January 2007 2.16 120.74 18.48
Currency translation
adjustments 0.78
Increase in Share
Capital/Premium after
share swap 0.78 116.53
Total recognised income
for year to date
Dividend relating to 2006
Balance as at 30
September 2007 2.94 237.27 19.26
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 1 January 2006
Currency translation
adjustments 20.03 10.79 164.38
Net expense recognised 19.27 1.10 19.27
directly into equity
Retained profit for the period 2.76 2.76
Dividends: Final for 2005 (11.28) (11.28)
Balance as at 31 December 2006 28.03 14.65 184.05
Balance as at 1 January 2007 28.03 14.65 184.05
Currency translation
adjustments 9.39 0.11 10.28
Increase in Share
Capital/Premium after
share swap (13.75) 103.56
Total recognised income for year to date 23.31 5.46 28.77
Dividend relating to 2006 (19.00) (19.00)
Balance as at 30 September 2007 41.73 6.47 307.67
Notes to the condensed unaudited results for the 9 months ended 30 September
2007
1. General information
Oando (formerly Unipetrol Nigeria Plc) was registered by 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 the
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 in December 2003.
The Group has its 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. During the year, the Group`s
beneficial ownership in 5 of the subsidiaries, Oando Trading (Bermuda), Oando
Energy Service Limited, Oando Petroleum and Development Company, Oando
Exploration and Production Limited and Oando Supply and Trading, was increased
from 51% to 100%. The Group further increased its stake in Gaslink Nigeria
Limited to 96% from 53% through a combination of a share swap and a buy-out from
existing shareholders.
Ocean and Oil Holdings through Ocean and Oil Investment Limited now owns 34% of
the Group.
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.
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.
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; and
- 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
Basic earnings per share is calculated by dividing the profit attributable to
the equity holders of the Company by the weighted average number of shares in
issue during the period.
2007 2006
Profit attributable to equity holders of the Company ($`m) 23.31 15.83
Weighted average number of shares in issue (thousands) 592.5 572,301
Profit attributable to equity holders of the Company ($m) 3.09 2.77
Basic earnings per share (cents) 3.09 2.77
Weighted average number of shares in issue (thousands) 754.0 572,301
Weighted average number of shares for diluted EPS 592.5 572,301
(thousands)
Diluted earnings per share (cents) 3.93 2.77
Headline earnings per share (for JSE listing purposes)
Profit attributable to equity holders of the Company 23.31 15.83
Headline earnings per share to earnings basis (cents) 3.09 2.77
Headline earnings per share diluted earnings basis (cents) 3.93 2.77
Net assets per share (cents) 36 32
Tangible assets per share (cents) 123 138
4. Adjustments to prior year results
We have made adjustments to prior year results to enable like for like
comparisons with current year results
5. Post balance sheet events
There are no significant post balance sheet events.
6. Independent review by the auditors
These results for the 9 months ended 30 September 2007 have not been reviewed by
Oando`s auditors.
Lagos, Nigeria
08 November 2007
Sponsor to Oando:
Deutsche Securities (SA) (Proprietary) Limited
Date: 08/11/2007 16:25:01 Produced by the JSE SENS Department.
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