| Tue 18 Aug 2009, 15:23 | | OAO - Oando - Unaudited results for the second quarter ended 30 June 2009 |
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OAO
UNTP
OAO - Oando - Unaudited results for the second quarter ended 30 June 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 Second quarter ended 30 June 2009
Highlights
- Turnover of $1,128m
- Gross profit of $96m
- Operating profit of $49m
- Profit after tax of $26m
- Attributable profit after tax of $26m
- Earnings per share of 2.88c
- Marked improvement in gross margin
- Two more rigs were acquired
- Continued depreciation of the Local currency
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 Second quarter year ended 30 June 2009 of $26m.
Income statement analysis
Our exploration division consolidated its contribution to the performance of the
company compared with the corresponding period of the prior year. The marketing
section of the business also delivered strong results. However, the impact of
the devaluation of the local currency against the USD and the unclear stance of
the Federal Government on petroleum subsidy adversely affected the supply and
trading part of the business.
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 petroleum products and uncertainties surrounding the full deregulation of the
downstream sector.
In spite of reduction in the value of naira against USD by about 25%, the
Group`s turnover increased by about 7% over prior year. The increase was from
revenue earned on the upstream assets.
Profit after tax was however 16% below the level in prior year driven by
increased operating costs, an increase in finance costs as a result of higher
interest rates (up to 22% from about 16% in 2008) and the increase in
depreciation charges arising from the newly introduced upstream assets.
Balance sheet analysis
Total assets rose by about 37% from $1.4bn $2.0bn as at June 2009. Also,
Total liabilities increased from $1.2bn to $1.7bn. The increase
in assets and borrowings arose from acquisition of more rigs, investment in
upstream assets and natural gas pipelines construction projects.
The company continue to improve working capital management technique in order to
ensure a robust liquidity. However, the significant capital investment and
delayed settlement of PSF receivables by the Federal Government exerted some
pressures on the cash position. We expect this trend to reverse soon after the
capital investments enter their cash generation phases. Furthermore, the process
of raising additional long-term funding, (a combination of debt and equity, of
about $1.3bn) to finance its growth aspirations. This is expected to be
finalised during the second half of 2009.
Expectations and Prospects for the Future
The impact of the upstream assets has started to manifest in the performance of
the company. It is expected that the company will explore strategic alliances
formed with major producers to accelerate our block-to-production process for
identified assets in the division.
We are aggressively selling the additional natural gas distribution capacity
created by the completion of the Greater Lagos Phase III Gas project. We expect
a leap in contribution to the Group`s performance from the Gas and power
division as more customers are connected to the supply grid. In addition, work
has reached advanced stages in the construction of the East Horizon, 124km gas
pipeline project and this is expected to become operational by the end of this
year. The Akute power plant, a pioneering effort of the Gas and Power division
is also expected to be commissioned for use before the end of the financial
year.
Although, government has not taken a definite position on petroleum sector
deregulation, we do not expect any negative effect on the marketing division.
Our Non-fuel revenue in the downstream sector 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.
The proposed divestment of part of Company`s interest in Marketing`s business,
which was put on hold due to olatility in the capital market, shall be
resuscitated during the second half of 2009. The proceeds of this divestment
shall be deployed into higher margin segments of the energy value chain to
enhance shareholders` value.
Our Energy service division has acquired two additional rigs and now control
more than 50% market share of that part of the swamp business. We expect
drilling operations and consequently revenue generation to commence by two of
our rigs that have signed 2 major upstream drilling contracts with Agip
Exploration.
Consolidated Balance Sheet
As at 30 June 2009
ASSETS 2009 2008
$`Millions $`millions
Non-current assets
Property Plant & Equipment 732.27 284.54
Intangible Assets 152.83 251.81
Long Term Investments 0.07 2.83
Long Term Receivables 115.74 117.79
1,000.90 656.97
Current ASSETS
Inventories 251.57 287.58
Trade & Other Receivables 493.02 345.31
Cash & Cash Equivalents 298.53 525.15
1,043.12 1,158.04
Total assets 2,044.02 1,815.01
EQUITY
Capital & Reserves attributable to equity holders
Share Capital 3.09 3.83
Share Premium 203.19 232.91
Revaluation Reserve 49.81 85.20
Foreign Exchange Difference
Retained Earnings 76.25 45.69
332.34 367.63
Minority Interest 1.04 1.61
Total equity 333.38 369.24
LIABILITIES
Non-Current Liabilities 383.62 404.05
Current Liabilities
Trade & Other Payables 342.95 275.42
Current Income Tax Liabilities 34.57 18.78
Borrowings 949.50 747.53
1,327.02 1,041.73
Total Liabilities 1,710.64 1,445.78
Total Equity & Liabilities 2,044.02 1,815.01
Consolidated Income Statement
for the Second quarter ended 30 June 2009
2009 2008
$`millions $`millions
Sales 1,128.45 1,054.37
Cost of Sales (1,032.18) (967.06)
Gross Profit 96.27 87.30
Selling & Marketing Costs (21.13) (13.70)
Administrative Expenses (39.23) (25.45)
Other Operating Income 13.52 3.02
Operating Profit 49.43 45.36
Shares of Profit of Associates - -
Finance Costs (13.38) (5.28)
Profit Before Taxation 36.06 40.08
Income Tax Expense (10.01) (8.95)
Profit After Expense 26.04 31.13
Attributable to:
Non-Controlling Shareholders 0.01 0.03
Equity Holders of the Company 26.03 31.10
Consolidated Statement of changes in Shareholder`s Equity Attributable to equity
holders of the Company for the Second quarter ended 30 June 2009
Share Share Revaluation
Capital Premium reserve
US$m US$m US$m
Balance as at 31 December 2008 3.46 227.28 55.10
Retained profit for the period
Exchange difference (0.37) (24.09) (5.29)
Balance as at 30 June 2009 3.09 203.19 49.81
Cumulative Retained Minority Total
translation earnings interest equity
adjustment
US$m US$m US$m US$m
Balance as at 31 December 2008 56.16 1.15 57.31
Retained profit for the period 26.03 0.00 26.03
Exchange difference (29.75) (5.94) (0.12) (6.06)
Balance as at 30 June 2009 76.25 1.03 77.28
Share Share Revaluation
Capital Premium reserve
US$m US$m US$m
Balance as at 31 December 2007 2.89 232.91 85.20
Retained profit for the period
Bonus issue of shares 0.94
Dividend paid
Balance as at 31st June 2008 3.83 232.91 85.20
Cumulative Retained Minority Total
translation earnings interest equity
adjustment
US$m US$m US$m US$m
Balance as at 31 December 28.25 53.74 1.61 376.35
2007
Retained profit for the 31.10 0.03 31.13
period
Bonus issue of shares (0.94) 0.00
Dividend paid (38.24) (38.24)
Balance as at 31st June 2008 28.25 45.66 1.64 369.24
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.
The interim results are prepared in accordance with IAS 34 Interim Financial
Reporting and have not been audited.
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 Second 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.
30 30
June June
2009 2008
Profit attributable to equity holders of the Company 26.03 31.10
($`m)
Average number of shares in issue (millions) 904.88 754.07
Basic Earnings Per Share (cents) 0.03 0.04
Diluted
Profit attributable to equity holders of the Company 26.03 31.10
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) 0.03 0.04
Headline Earnings Per Share 0.03 0.04
Profit Attributable to equity holders of the Company 26.03 31.10
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 0.03 0.04
basis (cents)
Headline Earnings Per Share attributable to diluted 0.03 0.04
earnings basis (cents)
Net Assets Per Share (cents)
Tangible Assets Per Share (cents)
4. 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
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
29 July 2009
Directorate:
1 Major General M. Magoro (Rtd.) OFR, Chairman
Galadiman Zuru
2 Mr. J. A. Tinubu Group CEO
3 Mr. O. Boyo Deputy Group CEO
4 Mr. B. Osunsanya Group Ex. Director
5 Mr.Femi Adeyemo Group Executive Director, Finance
6 Mr. A. Akinrele SAN 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
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
18 August 2009
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 18/08/2009 15:23:27 Produced by the JSE SENS Department.
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