| Mon 23 Nov 2009, 10:30 | | OAO - Oando - Unaudited results for the third quarter ended 30 September 2009 |
|
OAO
UNTP
OAO - Oando - Unaudited results for the third quarter ended 30 September 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: NGOANDO00002NG
("Oando" or "the Company" or "the Group")
Unaudited results for the third quarter ended 30 September 2009
Highlights
- Turnover of $2,335m
- Gross profit of $111m
- Operating profit of $96m
- Profit after tax of $45m
- Attributable profit after tax of $45m
- Earnings per share of 0.04c
- Significant contribution from upstream operation
- Marked growth in non-fuel revenue income
- Acquisition of additional rigs bringing the total to five
- Marked improvement in contribution from non marketing business
- Exceptional income earned on debt factoring for an upstream company
- Local currency lost over 26% against USD in relation to 2008
- Government has not taken a position on full deregulation of downstream
sector
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 three quarters ended 30 September, 2009 of $45.20m.
Income statement analysis
As a result of depreciation of the local currency (Naira) to the USD by about
26%, the Group revenue reduced by about 15% compared with the corresponding
period of 2008. Our Marketing and Supply & Trading arms of the business were
affected by lack of clarity of government policies on the petroleum sector
deregulation. In addition, gross margins of Supply & Trading businesses were
eroded by delay in receiving reimbursement on petroleum products imported on
behalf of the Government, which resulted in increased costs of those
products.
The upstream assets that commenced revenue generation last year continues to
positively impact the Group`s bottom line. We are working towards ensuring
that other assets in the upstream portfolio are monetised.
Other Income increased significantly driven by one-off fees arising from
mobilisation of rigs and other income earned through ancillary upstream
activities.
The increase in administrative expenses arose primarily from significant
depreciation charged on the revenue-generating upstream assets. These costs
were not incurred during the same period last year.
Financing cost also rose over the figures for 2008 as a result of interest on
acquisition costs on revenue-generating upstream assets, hitherto capitalised
which were charged to income statement during the period under review. In
addition, the financiers increased interest rates on borrowings by over 30%
as a result of the global economic issues.
Consolidated PAT marginally reduced by 4% due to a combination of increased
cost of financing and deteriorating exchange rate. Similarly, PAT
attributable to ordinary shareholders reduced for the same reasons.
Balance sheet analysis
In spite of additional investments by the Group on upstream, rigs and
pipeline assets, total assets and total liabilities dropped by 8% because of
devaluation of the Naira by about 26% when compared with the same period in
2008. The additional capital investment brought about the growth in Property
Plant and Equipment (PPE) by about 129% from $306m in 2008 to $696m during
the year. The increase in PPE was as a result of additional investments in
the acquisition of new rigs, pipeline and power projects and upstream assets.
We continue to improve our working capital management to ensure efficiency.
Trade account receivables (TAR) and inventory were kept lower than prior
periods. However, the banking sector reforms with the resulting liquidity
squeeze made the company close the period with lower cash than prior periods.
Long term borrowings reduced by about 20% from $403m in 2008 to $322m in
2009. The reduction occurred due to exchange rate fluctuation as most of the
facilities were not due for repayment. The short term borrowings were
bridging facilities used in the acquisition of our upstream and rigs assets.
We are at advanced stages of raising various long term funding to refinance
the short term liabilities.
Expectations and Prospects for the Future
We have made significant progress in the efforts at generating revenue and
cash from other upstream assets apart from OML 125 & 134. To this end, our
OML 90 and OML 56 fields are expected to start production within the next two
quarters. We shall also take advantage of the opportunities provided by the
strategic alliance formed with major producers to accelerate our block-to-
production process for identified assets in the division. In an attempt to
increase our upstream assets portfolio, we are at advanced stages of
concluding the acquisition of controlling interests in Equator Exploration
Limited for about $US21.2 million.
We continue to connect valuable customers to the gas grid as a result of
additional capacity created by the Greater Lagos II Gas project. This has
increased the volume of gas sold. Construction work on the 124km East Horizon
gas pipeline project at the Eastern part of the country is progressing
steadily and this is expected to contribute to further improving the Group`s
gas revenue. 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. Furthermore, our Gas and Power Division has been shortlisted in
the projects to be executed under the Nigerian gas Masterplan programme. We
were also part of the consortium selected to execute a $1billion gas project
in Ghana.
Our Energy Services Division has stamped its feet as a leader in the swamp
rig business in the country, with the acquisition of two more rigs. One of
our rigs has commenced revenue generation while another one is expected to be
mobilised before the end of the year.
The Federal Government has announced a definite position about the petroleum
sector deregulation. However, our Marketing and Supply and Trading Divisions
have instituted appropriate strategies towards taking full advantage of the
opportunities inherent in the deregulation while also minimising the side
effects. We are also constantly improving our service stations and adding
ancillary services to make them stations of choice by customers.
We expect these initiatives to translate into better bottom lines in not
distant future.
Consolidated Balance Sheet
As at 30 September 2009
ASSETS 2009 2008
$`millions $`millions
Non-current assets
Property Plant & Equipment 696.33 306.52
Intangible Assets 152.23 256.31
Long Term Investments 0.01 2.88
Long Term Receivables 111.65 118.08
960.23 683.79
Current Assets
Inventories 128.12 327.28
Trade & Other Receivables 745.44 675.93
Cash & Cash Equivalents 78.88 391.29
952.44 1,394.50
Total assets 1,912.67 2,078.29
EQUITY
Capital & Reserves attributable to equity
holders
Share Capital 3.08 3.90
Share Premium 202.40 232.91
Revaluation Reserve 49.14 85.20
Foreign Exchange Difference - 5.74
Retained Earnings 73.33 39.99
327.96 367.74
Minority Interest 1.03 1.70
Total equity 328.99 369.44
LIABILITIES
Non-Current Liabilities 322.85 402.59
Deferred income tax liabilities 38.88 5.80
Retirement benefit obligation 7.82 0.38
Provisions - -
369.55 408.77
Current Liabilities
Trade & Other Payables 399.30 525.58
Current Income Tax Liabilities 28.91 22.64
Borrowings 779.70 730.03
Dividend payable 6.22 21.83
1,214.13 1,300.08
Total Liabilities 1,583.68 1,708.85
Total Equity & Liabilities 1,912.67 2,078.29
Consolidated Income Statement
for the third quarter ended 30 September 2009
Details 2009 2008
$`millions $`millions
Sales 2,334.94 2,754.84
Cost of Sales (2,224.03) (2,616.18)
Gross Profit 110.91 138.66
Selling & Marketing Costs (9.66) (37.04)
Administrative Expenses (99.48) (33.44)
Other Operating Income 93.82 4.59
Operating Profit 95.59 72.77
Shares of Profit of Associates - -
Finance Costs (32.71) (9.92)
Profit Before Taxation 62.88 62.85
Income Tax Expense (17.69) (14.93)
Profit After Tax Expense 45.20 47.92
Attributable to:
Non-Controlling Shareholders 0.08 0.08
Equity Holders of the Company 45.12 47.84
45.20 47.92
Consolidated Statement of changes in Shareholder`s Equity Attributable to
equity holders of the Company for the third quarter ended 30 September 2009
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31 December 2008 3.45 227.28 55.18 6.15
Retained profit for the period
Exchange difference (0.37) (24.88) (6.04)
Balance as at 30 September 2009 3.08 202.40 49.14 (1.02)
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2008 56.16 1.15 349.37
Retained profit for the period 45.20 0.08 45.28
2008 dividend paid in 2009 (18.47) (18.47)
Exchange Difference (9.56) (0.20) (48.22)
Balance as at 30 September 2009 73.33 1.03 327.96
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31 December 2007 2.90 232.91 85.20
Retained profit for the period
Bonus issue of shares
Dividend paid
Exchange difference (0.34) (5.63) (0.47) (6.10)
Reversal of revaluation surplus (29.55)
Deferred tax on revaluation
surplus
Share Issue Cost
Balance as at 31 December 2008 3.24 227.28 55.18 0.22
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2007 53.74 1.61 376.36
Retained profit for the period 63.80 0.03 63.83
Bonus issue of shares
Dividend paid (55.87) (0.48) (56.35)
Exchange Difference (5.51) (0.01) (17.72)
Reversal of revaluation surplus (29.55)
Deferred tax on revaluation surplus (4.78)
Share Issue Cost
Balance as at 31 December2008 56.16 1.15 343.23
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 and 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 2008
Profit attributable to equity holders of the Company 45.20 47.92
($`m)
Average number of shares in issue (millions) 904.88 904.88
Basic Earnings Per Share (cents) 0.04 0.05
Diluted
Profit attributable to equity holders of the Company 45.20 47.92
Weighted average number of shares in issue (millions) 904.88 904.88
Adjustment for Bonus issues
Weighted average number of shares for diluted Earnings 904.88 904.88
Per Share (millions)
Diluted Earning Per Shares (cents) 0.04 0.05
Headline Earnings Per Share 0.02 0.05
Profit Attributable to equity holders of the Company 45.20 47.92
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 0.04 0.05
basis (cents)
Headline Earnings Per Share attributable to diluted 0.04 0.05
earnings basis (cents)
Net Assets Per Share (cents) 211 229
Tangible Assets Per Share (cents) 106 75
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 any material impact on the accounts herein presented.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive
16 November 2009
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 Ex. Director
5 Mr. O. Adeyemo Group Ex. Director
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
23 November 2009
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 23/11/2009 10:30:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
