| Wed 8 Jul 2009, 12:44 | | OAO - Oando - Unaudited results for the first quarter ended 31 March 2009 |
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OAO
UNTP
OAO - Oando - Unaudited results for the first quarter ended 31 March 2009
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: NGOANDO00002
("Oando" or "the Company" or "the Group")
Unaudited results for the first quarter ended 31 March 2009
Highlights
- Turnover of $534m
- Gross profit of $44m
- Operating profit of $21m
- Profit after tax of $13m
- Attributable profit after tax of $13m
- Earnings per share of $0.01
- Marked improvement in gross margin
- Significant contribution from upstream operation
- Marked growth in non-fuel revenue income
- Acquisition of additional rigs
- Marked improvement in contribution from non marketing business
- Completion of 15% stake in OML 125 & 134
- 25% Depreciation of local currency against USD
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 First quarter ended 31 March 2009 of $13m.
Income statement analysis
The performance of our exploration division, the latest contributor to the
platform, coupled with our traditional downstream business contributed towards
the improved performance recorded within the quarter compared to the same
period in the previous year. Our marketing business delivered strong result,
performing well above prior year against improved trade volume and efficient
supply chain management. Our non-marketing businesses continue to contribute
significantly to the Group bottom-line, further underscoring our strategic
decision of diversifying our earning platform.
In addition, the growth in earnings is a reflection of improved margin
efficiency experienced on white products; seamless supply chain management
processes; proactive cash management; efficient working capital re-alignment
and strong organic growth especially within our upstream operation. This
improved performance was recorded against mixed macros economic factors
represented by reduction in pump price of PMS, fluctuating exchange rate,
increasing fear over the continuous availability of supply of petroleum
products and uncertainties surrounding the full deregulation of the downstream
sector.
The increase in turnover was overshadowed by the growing volatility of the
Naira that has seen the local currency lose over 25% in value against the US
Dollar since the beginning of the year. Improved operational efficiency
however ensured that the Company recorded a modest 14% growth at margin level.
The positive growth in turnover coupled with strong improvement in margin
efficiency subsequently led to an increase in operating profit as the Group
recorded a 20% increase over the $18m of operating profit recorded over the
same period in the last year.
The Company recorded significant gains in its cost curtailment drive as
selling and marketing expense was almost flat when compared to the
corresponding period last year. Administrative expense however increased
appreciably due to operational activities in the Upstream and Energy sector.
Major milestones were also recorded at the non-fuel income level as the
Company recorded a massive $5m increase over the same period in the previous
year.
Overall net interest expense increased by 79% compared to the same period in
2008. This was driven by a combination of higher borrowings, increased trading
activity as well as spike in total cost of funds. Delay in Government settling
its PSF debt and other claims, also account for the increase in interest
expenses as we had to resort to borrowing to meet our working capital needs.
We expect that government will improve at meeting its obligation in the coming
months.
Consolidated profit after taxation marginally increased by 4% due to a
combination of increased cost of financing and the deteriorating exchange
rate. Similarly Profit after taxation attributable to ordinary shareholders
also increased by the same margin to $13m while adjusted earnings per share
stood at 0.01c.
Balance sheet analysis
Oando increased total assets by 18% from $1.5bn to $1.8bn as at March 2009
while total liabilities grew by the 31% to close at $1.5bn all driven mainly
by the increased level of business activities. The growth in assets is due to
continued investment in value-adding assets within the upstream sector of the
energy chain. The ongoing construction of a 124km pipeline for our East
Horizon gas pipeline project and the captive power plant also brought about
massive increase in our long-term receivables. Management believes these
projects once completed will drive future profitability and sustainability of
our group company
Continuous and efficient working capital management ensured the Company
maintains a robust cash and bank balance of $227m, albeit slightly lower by
$102m compared to $329m in prior period. Our stock level is efficiently
managed and is consistent with the growth in turnover while our volume of
trade debtor and other non-trade balances has only grown significantly on the
back of delayed in government settlement of PSF receivables.
Long-term liabilities increased to N47.3b in 2009 from N40.6b in 2008 by 16%.
This increase underscores management`s decision to finance long-term
investment in the upstream sector and our gas and power division with long-
term finances. The 96% increase in current liabilities is largely driven by
short-term loan to finance expanded trade business in the face of unexpected
delay by Government in settling PSF receivables.
Expectations and Prospects for the Future
Our upstream division buoyed by the recent acquisition of 15% Shell`s stake in
OML 125 &134 is expected to contribute significantly to the bottom-line.
Aggressive effort is also in place to bring other non-producing assets to
production within the current year. It is expected that the Company will
explore all strategic alliance formed with major producers to accelerate our
block-to-production process for identified assets in the division.
Following the completion of the Greater Lagos II Gas project and commencement
of gas supply, we expect a huge contribution to our margin from our Gas and
power division as more customers are connected to the supply grid. Eastern
Horizon, our 124km pipeline project is expected to become operational by the
end of the second quarter of this year while the captive power plant, a
pioneering effort of the Gas and Power division is also expected to be
commissioned for use before the end of this year.
The uncertainties surrounding the deregulation of the downstream sector
notwithstanding, our marketing division is poise to improve its current upward
trend in profitability and maintain its current leadership role in supply
management and on-time delivery of petroleum products. High trade witnessed
during the first quarter will be sustained and business strategy anchored on
operational efficiency will be relentlessly pursued. Our Non-fuel revenue
drive will continue and be improved upon while cost curtailment drive will
permeate all our business actions. We expect profitability for the rest of the
year to improve on the back of envisaged improvement in turnaround time in PSF
receivables settlement and bridging claims.
Our plan to unlock value imbedded in our marketing division to fast-track the
growth phases identified within the gas and energy divisions is expected to be
consummated this year. This plan was put in abeyance following the downturn
experienced in the country`s capital market for the greater path of last year.
The intending diversification will provide us with the capacity to explore
emerging opportunities in our Gas & Power and upstream businesses, thus
ensuring sterling growth and robust profitability anchored on sustainable
diversified platforms.
Our energy service business is poised to deliver strong performance following
the commencement of drilling operations by two of our rigs following the
successful bid for 2 major upstream drilling contracts advertised by Agip
Exploration.
Finally our supply and trading division would continue to leverage on its
consistent high performance and emerging brand muscle along the petroleum
supply chain to deliver superior returns. The Company is well positioned to
take maximum advantage of the proposed full deregulation of the sector. The
division`s intention to gained strong foothold in the West African sub region
will be sustained while concerted effort will be deployed to leverage on its
emerging brand as the supplier of choice of petroleum products to engage in
other ancillary business opportunities that may arise along the energy chain.
Consolidated Balance Sheet
As at 31 March 2009
ASSETS 2009 2008
$`000 $`000
Non-current assets
Property Plant & Equipment 268,753 225,802
Intangible Assets 207,858 259,583
Long-term Investments 69 90
Long-term Receivables 152,519 45,133
629,198 530,608
Current ASSETS
Inventories 129,247 318,126
Trade & Other Receivables 794,042 325,877
Cash & Cash Equivalents 226,997 329,199
1,150,287 973,202
Total assets 1,779,485 1,503,810
EQUITY
Capital & Reserves attributable to equity holders
Share Capital 3,116 2,896
Share Premium 204,662 232,909
Revaluation Reserve 49,695 85,201
Foreign Exchange Difference 184 0
Retained Earnings 62,862 65,779
320,518 386,785
Minority Interest 1,040 1,633
Total equity 321,559 388,418
LIABILITIES
Non-Current Liabilities 330,610 396,030
Current Liabilities
Trade & Other Payables 200,916 88,344
Current Income Tax Liabilities 24,426 12,298
Borrowings 901,973 618,720
1,127,315 719,362
Total Liabilities 1,457,926 1,115,392
Total Equity & Liabilities 1,779,485 1,503,810
Consolidated Income Statement
for the First quarter ended 31 March 2009
2009 2008
$`000 $`000
Sales 533,984 597,955
Cost of Sales 490,171 559,386
Gross Profit 43,813 38,569
Selling & Marketing Costs 17,706 17,224
Administrative Expenses 10,952 5,052
Other Operating Income 6,027 1,414
Operating Profit 21,181 17,707
Shares of Profit of Associates
Finance Costs 4,414 2,466
Profit Before Taxation 16,768 15,241
Income Tax Expense 4,244 3,177
Profit After Tax Expense 12,523 12,064
Attributable to:
Non-Controlling Shareholders 1 21
Equity Holders of the Company 12,522 12,043
Consolidated Statement of changes in Shareholder`s Equity Attributable to
equity holders of the Company for the First quarter ended 31 March 2009
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31 December 2008 3.12 204.66 49.69 28.25
Retained profit for the period
Exchange difference (28.07)
Balance as at 31 March 2009 3.12 204.66 49.69 0.18
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2008 55.90 1.16 342.79
Retained profit for the period 12.55 0 12.55
Exchange Difference 0
Balance as at 31 March 2009 68.45 1 321.56
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
Revaluation reserve released (7.25)
during the year
Exchange difference (0.78) (28.25)
Balance as at 31st December 3.12 204.66 49.70 28.25
2008
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2007 53.74 1.61 376.35
Retained profit for the period 63.73 0.03 63.76
Bonus issue of shares (1.01) 0.00
Revaluation reserve released during (7.25)
the year
Dividend paid (60.56) (60.56)
Exchange Difference (0.48) (29.51)
Balance as at 31st December 2008 55.90 1.16 342.79
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 First 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.
- The Group has recently obtained approval for its share-based option
scheme, all share based payments will be accounted for under IFRS 2.
The operational framework for the scheme is still being worked out.
- 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.
2009 2007
Profit attributable to equity holders of the Company
($`m) 12.52 12.04
Average number of shares in issue (millions) 904.88 754.07
Basic Earnings Per Share (cents) 0.01 0.02
Diluted
Profit attributable to equity holders of the Company 12.52 12.04
Weighted average number of shares in issue (millions) 904.88 754.07
Adjustment for Bonus issues
Weighted average number of shares for diluted Earnings 904.88 754.07
Per Share (millions)
Diluted Earning Per Shares (cents) 0.01 0.02
Headline Earnings Per Share 0.01 0.02
Profit Attributable to equity holders of the Company 12.52 12.04
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) 0.01 0.02
Headline Earnings Per Share attributable to diluted
earnings basis (cents) 0.01 0.02
Net Assets Per Share (cents) 354.73 559.21
Tangible Assets Per Share (cents) 189.28 310.69
4. Independent audit by the auditors
This condensed consolidated result has not been audited by our auditors
PricewaterhouseCoopers being the First 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 any material impact on the accounts herein presented.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive
3 June 2009
Directorate:
1 Major General M. Magoro (Rtd.) OFR, Galadiman Chairman
Zuru
2 Mr. J. A. Tinubu Group CEO
3 Mr. O. Boyo Deputy Group CEO
4 Mr. B. Osunsanya Group Ex. 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
8 July 2009
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 08/07/2009 12:44:01 Produced by the JSE SENS Department.
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