| Mon 3 Nov 2008, 11:00 | | OAO - Oando Plc - Unaudited Results For The Third Quarter Ended 30 September |
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OAO
UNTP
OAO - Oando Plc - Unaudited Results For The Third Quarter Ended 30 September
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" or "the Group")
Unaudited results for the third quarter ended 30 September 2008
Highlights
- Turnover of $1.71bn
- Gross profit of $138.63m
- Operating profit of $76.21m
- Profit after tax of $47.90m
- Attributable profit after tax of $47.82m
- Earnings per share of 5.28c
- Marked improvement in gross margin
- Marked growth in non-fuel revenue income
- Acquisition of additional rig
- Completion of Lagos Phase Three Project of our gas distribution network
- Marked improvement in contribution from non marketing business
- Improved performance over previous year on all major indicators
- "First Oil" in "OML 56"
Review of results
Oando, which has a primary listing on the Nigerian Stock Exchange ("NSE") and a
secondary listing on the JSE Limited ("JSE"), reports profit after tax ("PAT")
for the third quarter year ended 30 September 2008 of $47.90m.
Income statement analysis
Our third quarter performance continues the recent trend of improvement in our
operational efficiency. The increase of 22% recorded in consolidated turnover
from $1.41bn in September 2007 to $1.71bn in September 2008 is attributable to
the following: increased business activities along the supply chain within the
Group especially our Supply & Trading division; improvement in our supply chain
management; on-time delivery across the businesses; stability in the business
environment; and improved product availability during the third quarter.
The positive growth in turnover coupled with strong improvement in margin
efficiency subsequently led to an increase in gross profit as the Group recorded
a 63% increase over the $85.03m of gross profit recorded over the same period in
the last year.
In addition to the foregoing, the results for the period under review bring to
the fore the significant success achieved in growing our non-fuel income line
as like for like non-fuel revenue increased by 50% against prior year (included
in prior year performance is a once-off income of $4.4m). Operational efficiency
and effective cost containment effort resulted in a 3% reduction in the
combination of our selling and marketing expenses and administrative costs.
Overall net interest expense increased by 48% compared to the same period in
2007. This was driven by higher borrowings as a result of increased volume of
activities and higher product costs as well as higher cost of funds which has
been on the upward trend since the beginning of the second quarter of the year.
We have consistently relied on effective management of our trade receivables
while taking steps to secure more competitive credit facilities under more
favourable agreements with our financial institution partners.
Consolidated profit after taxation increased by 66% from $128.77m to $47.90m in
the third quarter of 2008. This growth is, as highlighted earlier, attributable
to increased sales and improved margin recovery, both of these coupled with
growth in non-fuel revenue. Profit after taxation attributable to ordinary
shareholders rose by 105% to $47.82m from $23.31m while adjusted earnings per
share increased by the same margin from 2.58c to 5.28c.
Balance sheet analysis
Oando increased total assets by 119% from $950m compared to $2.01bn as at
September 2008 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 investments made by the Company in the last quarter of 2007 as total
assets increased by 30% when compared to the audited position of December 2007.
The Group during the period under review continued its expansion drive, which
includes diversification from the lower margin segments, progressing to higher
value areas of the energy value chain like Upstream Exploration & Production and
high margin-based services and rigs drilling system; a strategy which we believe
will yield significant returns in the near future.
Specific and strategic acquisitions in the upstream sector has led to
significant increase in our fixed asset balances especially in the Energy
Services and Exploration & Production businesses as the Company continues its
drive towards building a sustainable business profile anchor on upstream
business operation
Increased business activities have also brought about significant increases in
our short and long term borrowings to support our operation and ensure re-
alignment of our working capital management.
Expectations and Prospects for the Future
As we have stressed before we look at the up stream and midstream parts of our
business, including the gas and power division, as the main drivers of our
growth in the mid to long term. Our Gas & Power division is in the process of
building an independent power plant, potentially the first of many to come,
while the additional capacity provided by Lagos phase three gas distribution
expansion project is expected to be practically spoken for by the end of the
year. Our plan to unlock value imbedded in our marketing division to fast-track
the growth phases identified within the gas and energy divisions is ongoing. We
intend to complete this latest by the first quarter of the coming year. This
product diversification will provide us with the capacity to explore emerging
opportunities in our Gas & Power and upstream businesses, thus ensuring a
sustainable growth and robust profitability anchored on diversified platforms.
Our Marketing division is expected to sustain its current leadership role in
supply management and on-time delivery of petroleum products to all our outlets.
The Company recently signed an agreement with a major fast moving consumer goods
player thus boosting its non-fuel revenue potential. Efficient management of its
working capital; effective supply chain management and trade receivable balances
will ensure the Company sustains its current profitability and surpasses set
targets by year-end. The Company will also continue its cost containment effort
while proactive cash management procedures put in place will be upheld through
the year.
Our Supply & Trading business`s quest to dominate the West African market is
gradually yielding results with the Company`s strategic alliances with major
marketers within the axis. As the largest private importer of petroleum products
into Nigeria, the Company is expected to leverage on the market acceptability
and niche that it has created to deliver strong performance before year-end and
guarantee its sustainable growth in the coming years. The strategic alliances
formed with the Group`s upstream operations amongst other partners appear
brighter with the attainment of "first Oil".
Our Energy Services company added another rig during the third quarter to its
fleet of rigs while the previous two acquired have been fully refurbished and
awaiting commencement of operation. The company lodged a bid for 2 major
upstream drilling contracts advertised by Agip Exploration and intends to use
the acquired rigs to execute the transactions.
Lastly, our upstream stream operation recorded a major milestone with the
attainment of "first Oil" in one of our upstream assets, "OML 56". This
milestone underscores our unwavering commitment towards moving the Company from
its traditional downstream business to mid and upstream emerging businesses
through strategic acquisition of value-adding portfolio of assets.
Consolidated Balance Sheet
As at 30 September 2008
2008 2007
ASSETS $`millon $`millon
Non-current assets
Property Plant & Equipment 306.52 133.72
Intangible Assets 256.31 229.77
Long Term Investments 2.88 40.60
Long Term Receivables 118.08 40.60
683.79 404.09
Current assets
Inventories 327.28 124.17
Trade & Other Receivables 675.93 350.82
Cash & Cash Equivalents 391.29 70.93
1,394.50 545.92
Total assets 2,078.29 950.01
Equity
Capital & Reserves attributable to equity
holders
Share Capital 3.90 2.94
Share Premium 232.91 237.27
Revaluation Reserve 85.20 19.26
Exchange Difference 5.74 -
Retained Earnings 39.99 41.47
367.75 301.20
Minority Interest 1.70 6.47
Total equity 369.45 307.67
Liabilities
Non-Current Liabilities 402.59 117.56
Deferred income tax liabilities 5.80 5.34
Retired benefit obligation 0.38 1.32
Provisions - 0.31
408.77 124.53
Current Liabilities
Trade & Other Payables 525.58 192.11
Current Income Tax Liabilities 22.64 9.63
Borrowings 730.02 315.87
Dividend Payable 21.83 0.20
1,300.07 642.34
Total Liabilities 1,708.84 642.34
Total Equity & Liabilities 2,078.29 950.01
Consolidated Income Statement
for the third quarter ended 30 September 2008
2008 2007
$`million $`million
Sales 1,711.56 1,406.63
Cost of Sales (1,572.94) (1,321.60)
Gross Profit 138.63 85.03
Selling & Marketing Costs (37.04) (40.28)
Administrative Expenses (11.37) (9.85)
Other Operating Income 4.59 7.45
Operating Profit 72.75 42.35
Shares of Profit of Associates - -
Finance Costs (9.92) (6.70)
Profit Before Taxation 62.83 35.65
Income Tax Expense (14.93) (6.88)
Profit After Expense 47.90 28.77
Attributable to:
Non-Controlling Shareholders 0.08 5.46
Equity Holders of the Company 47.82 23.31
47.90 28.77
Segment reporting showing inter-segment revenue and profit and loss.
Below is the Group performance on a divisional basis for the third quarter ended
September 2008.
The Group`s segment results are as follows:
30-Sep-08 30-Sep-07
$`million Refining & Gas & Group Refining & Gas & Group
Marketing Power Marketing Power
Total gross 2,650 104 2,754 1,654 84 1,738
segment sales
Inter-segment (1,043) - (1,043) (331) - (331)
sales
Sales 1,608 104 1,712 1,323 84 1,407
Operating 45 0 73 33 9 42
Profit
Finance cost (4) (1) (10) (6) (1) (7)
Exceptional - - - 4 - 4
item
Profit before 63 36
income tax
Income tax (15) (7)
expense
Profit for the 48 29
year
Consolidated Statement of changes in Shareholder`s Equity Attributable to
equity holders of the Company For the third quarter ended 30 September 2008
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31
December 2007 2.89 232.91 56.95 28.25
Retained profit for
the period
Bonus issue of shares 1.01
Dividend paid
Exchange difference 5.74
Balance as at 30
September 2008 3.90 232.91 56.95 33.99
Retained Minority Total equity
earnings interest
US$m US$m US$m
Balance as at 31
December 2007 53.74 1.61 376.35
Retained profit for
the period 47.82 0.08 47.90
Bonus issue of shares (1.01)
Dividend paid (60.56) (60.56)
Exchange Difference 5.74
Balance as at 30
September 2008 39.99 1.70 369.45
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31
December 2006 2.16 120.74 11.37 7.11
Revaluation surplus on
property plant and
equipment 66.31
Deferred tax effect of
residual value
restatement (20.55)
Issue of shares 0.73 112.17
Fair value gain/loss
on available for sale
investments (0.173)
Currency Translation
adjustment 21.14
Profit for the year
Final Dividend for
2006
Balance as at 31st
December 2007 2.89 232.91 56.95 28.25
Retained Minority Total equity
earnings interest
US$m US$m US$m
Balance as at 31
December 2006 28.03 14.65 184.05
Revaluation surplus on
property plant and
equipment 66.31
Deferred tax effect of
residual value
restatement (20.55)
Issue of shares (13.23) 99.67
Fair value gain/loss
on available for sale
investments (0.173)
Currency Translation
adjustment 21.14
Profit for the year 43.94 0.19 44.13
Final Dividend for
2006 (18.23) (18.23)
Balance as at 31st
December 2007 53.74 1.61 376.35
Notes to reviewed results
1. General information
Oando (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 third quarter 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 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 (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) 47.82 23.31
Average number of shares in issue (millions) 904.88 592.5
Basic Earnings Per Share (cents) 5.28 3.09
Diluted
Profit attributable to equity holders of the Company 47.82 23.31
Weighted average number of shares in issue (millions) 904.88 754.0
Adjustment for Bonus issues
Weighted average number of shares for diluted Earnings 904.88 572.30
Per Share (millions)
Diluted Earning Per Shares (cents) 5.28 3.93
Headline Earnings Per Share 5.28 3.09
Profit Attributable to equity holders of the Company 47.82 23.31
Adjusted for:
Profit on sale of buildings associated with 0 0
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) 5.28 3.09
Headline Earnings Per Share attributable to diluted
earnings basis (cents) 5.28 3.93
Net Assets Per Share (cents) 408.28 408.01
Tangible Assets Per Share (cents) 125.02 103.30
4. Independent audit by the auditors
This condensed consolidated result has not been audited by our auditors
PricewaterhouseCoopers being the third quarter of our financial year
5. Post balance sheet events
There are no significant post balance sheet events that in the opinion of the
Directors will have a material impact on the accounts herein presented.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive
October 31 2008
Directorate:
1 Major General M. Magoro (Rtd.) OFR, Galadiman Zuru 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 CFR Director
9 Mr. O. Ibru Director
10 Alhaji H. Mahmud Walin Mubi 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
Sandton
3 November 2008
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 03/11/2008 11:00:01 Produced by the JSE SENS Department.
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