| Tue 29 Jul 2008, 11:00 | | OAO - Oando Plc - Unaudited results for the half year ended 30 June 2008 |
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OAO
UNTP
OAO - Oando Plc - Unaudited results for the half year ended 30 June 2008
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")
Unaudited results for the half year ended 30 June 2008
Highlights:
* Turnover of $1.05bn
* Gross profit of $87.30m
* Operating profit of $45.36m
* Profit after tax of $31.13m
* Attributable profit after tax of $31.10m
* Earnings per share of 3.44c
* Interim dividend of N3.00 proposed
* Improved margin recovery on petroleum products
* Efficient supply chain management
* Stable supply of petroleum products
* Marked improved in contribution from non marketing business
* Efficient working capital re-alignment and proactive cash management
* Strong organic growth; and
* Improved performance over previous year on all major indicators
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 half year ended 30 June 2008 of $31.13m.
Income statement analysis
Our half year position is a reflection of the consistent improvement in
operational efficiency that has since become our hallmark. The half year
results show a marked improvement in performance compared to our first quarter
and previous year`s results. The results are driven by superior return anchored
on operational excellence especially from our supply and trading; and
downstream marketing businesses.
Turnover for the first half of the year increased by 25% from $884.09m to
$1.05bn in 2008.The increase in turnover can be attributed to efficient
management of our supply chain logistics; stable supply of petroleum products;
on-time delivery across all our outlets and stable macro economic factors. Our
supply and trading and marketing divisions accounted for the bulk of this huge
increase in the Group turnover.
The positive growth in turnover has the same impact on gross profit as the
Group recorded a 66% increase over prior year profit of $52.72m. In addition to
high volume of trade, the company recorded marked improvement in its margin
recovery effort thus boosting the margin level.
Growth in our energy service division, other business activity driven and
general increase in the cost of doing business account for the increase in
operating and administrative expense by 63% over prior year. Our non-fuel
revenue showed an increase of 48% from previous year. The 2008 performance
reflects success recorded at growing our non- fuel income line as the prior
year level was boosted by income accruing from the disposal of a non core
asset.
Efficient management of our cash and proactive working capital realignment has
ensured that interest expense on borrowed fund increased moderately by 23% over
corresponding period of 2007 despite higher borrowings. This is a benefit from
the efforts undertaken last year to improve trade debt and secure more price
competitive facilities under better deal/arrangement from our financial
institution partners. With the increase in sales and improved margin recovery
coupled with growth in non-fuel revenue, consolidated PAT increased by 69% from
$18.38m to $31.13m in the half year of 2008. PAT attributable to ordinary
shareholders rose by 110% to $31.10m from $14.81m reflecting the promise made
to all stakeholders on the benefit that will accrue following the share swap
exercise. Finally, the net effect of all the foregoing was a 110% rise in
adjusted earnings per share from 1.64c to 3.44c.
Balance sheet analysis
Oando`s total assets rose by 167% to $680m compared to $1,815bn as at June 2007
while total liabilities grew by the same margin all driven mainly by the
increased level of business activities. The growth in assets is due to
strategic investment made by the company in the last quarter of 2007 as total
asset increased by 30% when compared to the audited position of December 2007.
The Group during the period under review continued its expansion drive, which
involves moving away from the lower margin segments and into higher value areas
of the energy value chain like Upstream Exploration & Production and high
margin mud-engineering services and rigs drilling system, a strategy which we
believe will yield significant returns in future.
Strategic acquisitions in the upstream sector carried out in the last 12 months
culminated in a significant increase in fixed asset balances especially in the
energy service division while the need to tap into emerging opportunities
within the energy chain brought about increased short-term borrowing to support
business growth and market development.
Prospects:
Investments in gas and power distribution and acquisition of strategic upstream
assets remain the corner stone our future profitability and viability. We
intend leveraging on the immense value imbedded in our marketing division to
unlock the potential that these two sectors hold for the immediate and future
benefit of all stakeholders within the Group. We shall be exploring in
the immediate future, this opportunity to create a future of growth and robust
profitability anchored on a diversified platform.
We expect our marketing division to sustain its current leadership role in
supply management and on-time delivery of petroleum products to all our
outlets. Non-fuel revenue is also expected to improve significantly as new
products introduce during the early part of the year gains market acceptance.
The company will also continue its cost containment effort while the proactive
cash management procedure put in place will be sustained through the year.
Our Supply and Trading business is better poised than before to further improve
and solidify its presence as products supplier of choice in Nigeria and
neighbouring countries in West Africa. The company is expected to leverage on
the market acceptability and niche that it has created for itself to deliver
strong performance in the coming months, The strategic alliances formed with
the Group`s upstream operations amongst other partners will also aid the
trading of crude production while the emergence of other identified business
opportunities will contribute to ensure that its goals are met.
Our energy service company has been re-engineered to offer superior and world
class mud- engineering, drilling system and drilling rig (swamp and land)
services to companies operating in the upstream sector of the energy chain. The
recently acquired rigs have been refurbished and are scheduled to commence
operation before the end of this year while our activities in other high margin
services are also expected to boost profitability within this division.
Lastly, major milestones have been achieved within our portfolio of upstream
assets paving the way for the arrival of our "first oil".
Consolidated Balance Sheet
As at 30 June 2008
2008 2007
ASSETS $`mn $`mn
Non-current assets
Property Plant & Equipment 284.54 102.28
Intangible Assets 251.81 113.37
Long Term Investments 2.83 0.44
Long Term Receivables 117.79 22.36
656.97 238.44
Current ASSETS
Inventories 287.58 114.66
Trade & Other Receivables 345.31 233.88
Cash & Cash Equivalents 525.15 92.98
1,158.04 441.52
Total assets 1,815.01 679.95
EQUITY
Capital & Reserves attributable to equity
holders
Share Capital 3,83 2.16
Share Premium 232.91 120.47
Revaluation Reserve 85.20 18.48
Exchange Difference 7.75
Retained Earnings 45.69 23.84
367.63 172.70
Minority Interest 1.61 18.33
Total equity 369.24 191.03
LIABILITIES
Non-Current Liabilities 398.03 15.93
Deferred income tax liabilities 5.73 5.32
Retired benefit obligation 0.29 1.15
404.05 22.40
Current Liabilities
Trade & Other Payables 275.42 218.87
Current Income Tax Liabilities 18.78 9.82
Borrowings 747.53 237.83
1,041.73 466.53
Total Liabilities 1,445.78 488.92
Total Equity & Liabilities 1,815.01 679.95
Consolidated Income Statement
For the half year ended 30 June 2008
2008 2007
$`mn $`mn
Sales 1,054.37 844.09
Cost of Sales (967.06) (791.38)
Gross Profit 87.30 52.72
Selling & Marketing Costs (13.70) (8.68)
Administrative Expenses (25.45) (15.42)
Other Operating Income 3.02 6.39
Operating Profit 45.36 23.34
Shares of Profit of Associates - -
Finance Costs (5.28) (4.28)
Profit Before Taxation 40.08 23.42
Income Tax Expense (8.95) (5.04)
Profit After Expense 31.13 18.38
Attributable to:
Minority Interest 0.03 3.57
Equity Holders of the Coy 31.10 14.81
31.10 18.38
Segment reporting showing inter-segment revenue and profit and loss
Below is the Group performance on divisional basis for the half year ended
30June 2008:
The Group`s segment results are as follows:
30-Jun-08
Refining $ Gas &
$mn marketing power Group
Total gross segment
sales 1,513 50 1,563
Inter-segment sales -509 -509
Sales 1,004 50 1,054
Operating Profit 45 0 45
Finance cost -4 -1 -5
Exceptional item - - -
Profit before income
tax 40
Income tax expense -9
Profit for the year 31
30-Jun-07
Refining & Gas &
$mn marketing power Group
Total gross segment
sales 941 49 991
Inter-segment sales -147 - -147
Sales 795 49 844
Operating Profit 20 3 23
Finance cost -4 -0 -4
Exceptional item 4 - 4
Profit before income
tax 23
Income tax expense -5
Profit for the year 18
Consolidated Statement of changes in Shareholder`s Equity Attributable to
equity holders of the Company For the half year ended 30 June 2008.
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 2.89 232.91 56.95 28.25
31st December
2007
Retained profit
for the period
Bonus issue of 0.94
shares
Dividend paid
Balance as at
31st June 2008 3.83 232.91 56.95 28.25
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 53.74 1.61 376.35
31st December
2007
Retained profit 31.10 0.03 31.13
for the period
Bonus issue of -0.94 0
shares
Dividend paid -38.24 -38.24
Balance as at 45.66 1.64 369.24
31st June 2008
Share Capital Share Revaluation Cumulative Retained
Premium reserve translation earnings
adjustment
US$m US$m US$m US$m US$m
2.16 120.74 11.37 7.11
Balance as at
31st December
2006
Revaluation 66.31
surplus on
property plant
and
equipment
Deferred tax -20.55
effect of
residual value
restatement
Issue of shares 0.73 112.17
Fair value -0.173
gain/loss on
available for
sale
investments
Currency 21.14
Translation
adjustment
Profit for the
year
Final Dividend
for 2006
Balance as at
31st December 2007 2.89 232.91 56.95 28.25
Share Capital Minority Total Share
interest equity Capital
US$m US$m US$m US$m
28.03 14.65 184.05
Balance as at
31st December
2006
Revaluation 66.31
surplus on
property plant
and
equipment
Deffered tax -20.55
effect of
residual value
restatement
Issue of shares -13.23 99.67
Fair value -0.173
gain/loss on
available for
sale
investments
Currency 21.14
Translation
adjustment
Profit for the 43.94 0.19 44.13
year
Final Dividend -18.23 -18.23
for 2006
Balance as at
31st December 2007 53.74 1.61 376.35
Notes to 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 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.
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 this unaudited financial
report for the first half of 2008.
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
IFRIC 10 (Issued 2006) Interim Financial Reporting and
Impairment.
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 Segmental 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 (EPS) 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.
2008 2007
Profit attributable to equity holders of the Company ($`m) 31.10 14.81
Average number of shares in issue (millions) 904.88 572.30
Basic Earnings Per Share (cents) 3.44 2.59
Diluted
Profit attributable to equity holders of the Company 31.10 14.81
Weighted average number of shares in issue (millions) 904.88 572.30
Adjustment for Bonus issues
Weighted average number of shares for diluted Earnings
Per Share (millions) 904.88 572.30
Diluted Earning Per Shares (cents) 3.44 2.59
Headline Earnings Per Share 3.44 2.59
Profit Attributable to equity holders of the Company 31.10 14.81
Adjusted for: 0 0
Profit on sale of buildings associated with discontinued
operations
Profit/(Loss) on sale of other assets 0 0
Loss on sales of investment in affiliate companies 0 0
Tax thereon 0 0
Headline Earnings Per Share attributable to earnings
basis (cents) 3.44 2.59
Headline Earnings Per Share attributable to diluted
earnings basis (cents) 3.44 2.59
Net Assets Per Share (cents) 40.81 33.34
Tangible Assets Per Share (cents) 172.75 118.81
4. INTERIM DIVIDEND
The Board has declared an interim dividend of Naira 3.00 for each ordinary share
of 50 kobo each, payable on 30th September 2008 to those shareholders, whose
names appear in the Company`s Register of Members (Nigerian & South African) at
the close of business on Friday, 15th August, 2008. A dividend announcement will
be released shortly on SENS.
5. INDEPENDENT AUDIT BY THE AUDITORS
This condensed consolidated result has not been audited by our auditors
PricewaterhouseCoopers being the second quarter of our financial year.
6. POST BALANCE SHEET EVENTS
The company has entered into an agreement with Nigerian AGIP Exploration Limited
("AGIP") to acquire a 15.0% interest in the Production Sharing Contracts
("PSCs") in respect of offshore Nigeria Oil Mining Licence ("OML") 125 and OML
134. This was agreed with AGIP subsequent to AGIP`s exercise of its pre-emption
rights over Shell Nigeria Exploration and Production Company Limited`s entire
40.81% interest in the PSCs in respect of OML 125 and OML 134. Barring this,
there are no significant post balance sheet events that in the opinion of the
Director will have material impact on the accounts herein presented.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive
July 25 2008
Directorate:
1. General M. Magoro (Rtd.) - Chairman
2. Mr. J. A. Tinubu - Group CEO
3. Mr. O. Boyo - Deputy Group CEO
4. Mr. B. Osunsanya - Group Executive Director
5. Mr. A. Akinrele SAN - Director
6. Prince F. N. Atako JP. - Director
7. Mr. Navaid Burney - Director
8. HRM. Oba. A. Gbadebo - Director
9. Mr. O. Ibru - Director
10. Alhaji H. Mahmud - Director
11. Mr Onajite Okoloko - Director
12. Mr. I. Osakwe - 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 registrars: Computershare Investor Services
(Proprietary) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 29/07/2008 11:00:02 Produced by the JSE SENS Department.
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