| Tue 11 May 2010, 11:15 | | OAO - Oando Plc - Unaudited results for the first quarter ended 31 March 2010 |
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OAO
UNTP
OAO - Oando Plc - Unaudited results for the first quarter ended 31 March 2010
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 2010
Highlights
- Turnover of $618 million
- Gross profit of $86 million
- Operating profit of $56 million
- Profit after tax of $21 million
- Attributable profit after tax of $21 million
- Earnings per share of 2.38 cents
- The Group`s first independent power project (IPP) was commissioned
during the period
- Rig upgrade revenue income was recognized in the income statement
- Increase in crude oil production from OML 125 & 134 during the period
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 full period ended 31 March 2010 of $21.20 million.
Income statement analysis
The Group`s revenue increased by 15% when compared with 2009 figures. In
addition, profit after tax rose by about 69% over the same period in 2009. This
improved performance levels relative to 2009 can be attributed to the following
factors:
- the Group commenced revenue generation from Lagos State Water
Corporation (LSWC) IPP project during the period;
- one of the rigs deployed to operation in 2009 generated income
throughout the first quarter of 2010 whereas the rigs were yet to be
put into use during the corresponding period of 2009; and
- in order to improve the bottom line, the Group embarked upon processes
improvement initiatives which have started manifesting positive impacts
in efficiency and cost reduction.
Expenses review
Marketing and selling expenses reduced by about 37% due to our Marketing
Division expenses experiencing petroleum products supply shortages during the
early part of the quarter, emanating from suspension of petroleum products
importation during the last quarter of 2009.
Administrative expenses increased over previous years due to operational costs
in respect of rigs and IPP project which were charged to the income statements
in 2010. Similar costs were not incurred during the same period in 2009 because
the assets have not been put into use. In addition, the rigs and IPP assets were
depreciated during the period whereas no depreciation was charged on the assets
in 2009.
Finance costs also increased during the period compared with the corresponding
period in 2009 as a result of recognition of finance costs on rigs and IPP
assets in the income statement during the period, whereas the finance charges
were previously capitalised before the assets were put into use.
Balance sheet analysis
Non-current assets including property, plant and equipment and pipeline assets`
costs included in long term receivables, rose by 25% over the balance in March
2009 as a result of additional capital expenditure on ongoing projects like LSWC
IPP, East Horizon Gas pipeline project, upstream assets` development, etc.
during the period.
Inventory increased by about 17% over the level recorded during the same period
of 2009 due to ordering of more petroleum products cargoes by our Supply and
Trading business towards the end of first quarter of 2010, to make up for
shortages experienced during suspension of products importation in the last
quarter of 2009. Trade and other receivables reduced by 40%. This was
attributable to deliberate efforts at reducing working capital requirements.
Prospects for the future
We are desirous of enhancing revenue and cash generation from the investments
hitherto made in rigs, upstream and gas & power assets.
In order to actualise this, we have intensified development efforts on our
upstream assets. We have also strategically positioned ourselves to acquire
upstream assets with immediate or near term cash flow generation capabilities.
With the commissioning of the LSWC IPP project, the contribution of the gas and
power arm of the business to the Group`s revenue is set to increase
significantly. We have also strengthened the marketing team to fully sell out
the additional capacity provided by the recently completed Greater Lagos Phase 3
pipeline project, by connecting more customers to the gas distribution
infrastructure. We continue to vigorously pursue to ongoing construction work at
the Eastern Horizon Company`s 128km pipeline project, and this is expected to be
completed before the year runs out.
The Federal Government of Nigeria (FGN) recently passed the Local Content Bill
into Law, however we are still awaiting for the FGN`s announcement of a definite
position on the deregulation of the downstream sector of the petroleum industry,
while the draft Petroleum Industry Bill (PIB) before the National Assembly is
yet to be promulgated into law. In spite of these delays, our Supply and Trading
and Marketing businesses continue to wax stronger by improving product delivery
channels within Nigeria while also consolidating entry into other markets within
the West African Sub region.
We shall also take full advantage of the FGN`s revision of Petroleum Subsidy
Fund administrative processes.
In addition, we are working tirelessly to ensure that the remaining rigs are
awarded contracts and are deployed into drilling operation. While another rig is
about to be mobilised, refurbishment of the others are at various stages of
completion.
We believe that all these investments will significantly improve the returns the
Group would deliver to the stakeholders going forward.
Consolidated Balance Sheet
as at 31 March 2010
2010 2009
ASSETS US$ million US$ million
Non-current assets
Property Plant & Equipment 1,058.53 268.75
Intangible Assets 167.77 207.86
Long term investments 0.01 0.07
Long Term Receivables 126.07 152.52
1,352.37 629.20
Current assets
Inventories 151.63 129.25
Trade & Other Receivables 476.42 794.04
Cash & Cash Equivalents 336.20 226.99
964.25 1,150.28
Total assets 2,316.63 1,779.48
Equity
Capital & Reserves attributable to equity
holders
Share Capital 3.06 3.12
Share Premium 201.06 204.66
Revaluation Reserve 50.53 49.70
Exchange Difference 7.52 0.19
Retained Earnings 119.85 62.86
374.50 320.53
6.26 1.04
Minority Interest
Total equity 388.28 321.57
Liabilities
Non-Current Liabilities
Borrowing 172.82 330.61
Deferred income tax liabilities 24.34
Retired benefit obligation 8.47
Provisions
205.634 330.61
Current Liabilities
Trade & Other Payables 677.88 200.92
Current Income Tax Liabilities 33.58 24.43
Borrowings 1,010.19 901.97
Dividend payable 0.5 -
1,927.78 1,457.93
Total Liabilities
Total Equity & Liabilities 2,316.06 1,779.50
Consolidated Income Statement
For the period ended 31 March, 2010
2010 2009
US$ million US$ million
Sales 617.83 533.98
Cost of Sales (531.46) (475.67)
Gross Profit 86.37 58.31
Selling & Marketing Costs (11.21) (17.71)
Administrative Expenses (35.17) (10.95)
Other Operating Income 15.83 6.03
Operating Profit 55.82 35.68
Shares of Profit of Associates -
Net Finance Costs (21.44) (18.91)
Profit Before Taxation 34.38 16.77
Income Tax Expense (13.18) (4.24)
Profit After Expense 21.20 12.53
Attributable to:
Non-Controlling Shareholders 0.04 0.02
Equity Holders of the Company 21.17 12.51
21.20 12.53
The Group is organised into six main business divisions:
- Exploration and production of oil and gas (E&P) is involved in the
exploration and production of oil and gas through the acquisition of
rights in oil blocks on the Nigerian continental shelf and deep
offshore. The E&P segment of the business owns interest OML 56, OML 90,
OML 123 and OML 134 and OPL`s 236 and OPL 278, amongst others.
- Refining and Terminals is involved in the refining of crude and storage
and logistics for distribution of petroleum products. This division was
recently carved out of the downstream marketing business. It has
initiated steps towards establishing a refinery at the Lekki Free Trade
Zone in Lagos.
- Gas and power is involved in the distribution of natural gas through
its subsidiaries, Gaslink Nigeria Limited (GNL) and East Horizon Gas
Company Limited (EHGC). GNL operates about 100kilometers Greater Lagos
natural gas distribution franchise and has connected over one hundred
industrial customers. EHGC is constructing 128km natural gas pipeline
network to supply natural gas to United Cement Company (UNICEM) and
other customers at Calabar, Eastern Nigeria. The Division also
incorporated Akute Power Limited that is building an Independent Power
Plant to supply electricity to LSWC.
- Energy services is involved in the provision of services such as
drilling and completion fluids and solid control waste management; oil-
well cementing and other services to upstream companies. The Division
presently has five swamp rigs.
- Marketing division is involved in retailed and commercial sales of
refined petroleum products with over 600 retail outlets in Nigeria and
West African countries.
- Supply and Trading imports cargoes of petroleum products for sale to
marketing companies and other corporate bodies within and outside
Nigeria.
Consolidated Statement of changes in Shareholder`s Equity Attributable to equity
holders of the Company for the period ended 31 March, 2010
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31 December, 2009 3.54 231.66 39.84 (17.54)
Retained profit for the period
Bonus issue of shares
Dividend paid
Exchange difference (0.48) (30.60)
Reversal of revaluation surplus 10.69
Deferred tax on revaluation
surplus
Share Issue/acquisition Cost
Balance as at 31 March 2010 3.06 201.06 50.53 (1.95)
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2009 124.56 6.22 366.70
Retained profit for the period 21.17 0.04 21.20
Bonus issue of shares
Dividend paid (7.52)
Exchange Difference (25.91)
Reversal of revaluation surplus
Deferred tax on revaluation surplus
Share Issue/acquisition Cost
Balance as at 31 March, 2010 119.85 6.26 388.28
Consolidated Statement of changes in Shareholder`s Equity Attributable to equity
holders of the Company for the period ended 31 March 2009
Share Share Revaluation Cumulative
Capital Premium reserve translation
adjustment
US$m US$m US$m US$m
Balance as at 31 December 2008 3.54 231.53 39.84
Retained profit for the period
Bonus issue of shares
Dividend paid
Exchange difference (0.42) (26.87) (9.86)
Reversal of revaluation surplus
Deferred tax on revaluation
surplus
Share Issue Cost
Balance as at 31 March2009 3.12 204.66 49.70 (0.19)
Retained Minority Total
earnings interest equity
US$m US$m US$m
Balance as at 31 December 2008 66.43 1.65 342.99
Retained profit for the period 12.51 0.02 12.53
Bonus issue of shares
Dividend paid
Exchange Difference (16.08) (0.63)
Reversal of revaluation surplus
Deferred tax on revaluation surplus
Share Issue Cost )
Balance as at 31 March,2009 62.86 1.04 321.57
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 FGN. The Company
was partially privatised in 1991. It was however fully privatised in the year
2000 consequent upon the sale of FGN`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.
The principal activity of the Company locally and internationally is to have
strategic investments in energy companies across West Africa. The Group is
involved in the following business activities via its subsidiary companies:
- marketing of petroleum products, manufacturing and blending of
lubricants - Oando Marketing Limited;
- distribution of natural gas for industrial customers - Gaslink Nigeria
Limited;
- supply and distribution of petroleum products - Oando Supply and
Trading, Nigeria and Oando Trading, Bermuda;
- energy services to upstream companies - Oando Energy Services; and
- Exploration and Production - Oando Exploration and Production.
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 Audited financial
report for the full year of 2009.
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 obtained approval for its share option scheme from the
regulatory authority in February 2009. Accordingly all shared-based
payment in operation has been subjected to and accounted for under IFRS
2 for the first time in 2008.
- 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; and
- 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; and
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 (EPS)
Basic 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.
2010 2009
Profit attributable to equity holders of the Company ($`m) 21.17 12.51
Average number of shares in issue (millions) 904.88 904.88
Basic EPS (cents) 2.34 1.38
Diluted
Profit attributable to equity holders of the Company 21.17 12.51
Weighted average number of shares in issue (millions) 904.88 904.88
Adjustment for bonus issues
Weighted average number of shares for diluted EPS 904.88 904.88
(millions)
Diluted EPS (cents) 2.34 1.38
Headline Earnings Per Share (HEPS) 2.34 1.38
Profit attributable to equity holders of the Company 21.17 12.51
Adjusted for:
Profit on sale of buildings associated with discontinued 0 0
operations
Profit/(Loss) on sale of other assets 0 0
Loss on sales of investment in affiliate companies 0 0
Tax thereon 0 0
HEPS attributable to earnings basis (cents) 2.34 1.38
HEPS attributable to diluted earnings basis (cents) 2.34 1.38
Net assets per share (cents) 42 35
Tangible assets per share (cents) 149 110
4. Independent audit by the auditors
These condensed consolidated results have 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 a material impact on the accounts herein presented.
For and on behalf of the Board
Mr J Adewale Tinubu
Group Chief Executive
10 May 2010
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 Exec. Director
5 Mr. O. Adeyemo Exec. Director
6 Chief S. Anthony Director
7 Mr. Navaid Burney Director
8 HRM. Oba. A. Gbadebo CFR Director
9 Mr. Onajite Okoloko Director
10 Ms. A. Pepple Director
11 Ms. G. Sangudi 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
11 May 2010
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 11/05/2010 11:15:02 Produced by the JSE SENS Department.
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