| Fri 31 Mar 2006, 12:00 | | Oando Plc - Reviewed results For 12 months ended 3 |
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OAO
UNTP
Oando Plc - Reviewed results For 12 months ended 31 December 2005
Oando Plc
(Incorporated in Nigeria and registered as
an external company in South Africa)
Registration number RC6474
(External company registration number 2005/038824/10)
Share code on the JSE Limited: OAO & ISIN: NG00000UNTP0
Share code on the Nigerian Stock Exchange: UNTP
("Oando" or "the Company")
Reviewed results For 12 months ended 31 December 2005
Highlights
Turnover of $1,486.2m
Gross profit of $115.0m
Gross profit margin of 7.7%
Operating profit of $33.3m
Profit After Tax of $17.8m
Attributable Profit After Tax of $15.8m
Earnings Per Share: 2.76c
Continued expansion of the Group into new business areas - Oil field and
Energy Services, Oil field exploration and Production, Refinery, and Power
Review of Results
Oando Plc which has a primary listing on the Nigerian Stock Exchange and a
secondary listing on the JSE Limited ("JSE") reports 12 months Group Profit
After Tax (PAT) for the financial year ended 31 December 2005 of $17.759m, an
increase of 94% on the same period for 2004 when a figure of $9.131m was
reported.
Income Statement Analysis
The strong growth recorded in consolidated Turnover of 91% to $1,486m during
2005 from $776m in 2004 reflects two important underlying drivers - one, the
significant price increase in crude oil, our base product, which reached an
all time high of over $70 during the course of 2005, averaging a 45% increase
on the year. Second, new businesses which were not part of the Oando Group in
the previous period, such as Oando Energy Services, incorporated in January
2005, enhanced overall Turnover in the year. The core business, the Marketing
division, which accounted for 83% of revenues in 2004 saw its contribution
diluted to 59% for the 2005 financial year.
The price at which fuel is sold at the pump to ordinary consumers in
particular will continue to be a matter that has deep social and political
ramifications globally, hence the need that some Governments feel that these
prices should be firmly controlled. The Federal Government of Nigeria, on the
back of the unprecedented price spiral seen in the commodity during the year
decided to freeze pump prices - PMS (Petrol) particularly. As the Marketing
business segment still represents the largest part of our Turnover and the PMS
product line well over 50% of that unit"s revenues, it was inevitable that
this inability to reflect the full extent of the price hike in crude at the
pump would negatively impact our margins.
Further expansion into the low margin but high capital return Supply & Trading
segment also negatively impacted total Group margin. So while Cost of Sales
rose by 103% to $1,370.9m, Turnover only increased by 91% which meant that
profit margins at the Gross level almost halved to 7.7% in 2005, from 13% in
2004.
Despite the difficult margin environment, overall Gross Profit was able to
expand by 15% to $115.0m mainly due to Oando"s ongoing strategic drive to
increase volumes of higher margin products such as lubricants, and
contributions made by new businesses.
At the Operating level, Oando"s profit improved marginally on 2004 to $33.3m
as a result of a higher Other Income component which rose by 88% to $19.6m,
which was offset by increased administrative expenses, mainly pre operating
expenses for new businesses, which cannot be capitalised under IFRS, and
expenses the Company incurred on the JSE secondary listing.
The total PAT increase of 94% to $17.8m partly highlights the significantly
lower levels of debt payments required by the Group after successfully
completing a rights issue and offer for subscription at the end of 2004.
Overall finance costs fell 60% from $22.3m in 2004 to $8.9m in 2005.
Further, it is worth noting that the effective rate of tax provisioning for
2005 is likely to increase substantially from the 9% tax rate in 2004 as a
result of the favourable treatment given to certain asset disposals last year
which the Group will no longer have the benefit of this year.
Attributable PAT to ordinary shareholders rose by a wider margin of 139% to
$15.8m from $6.6m in 2004, highlighting the lower proportion of minority
interest participation at the Group level. Attributable EPS correspondingly
went up from 1.16c to 2.76c for the period.
Balance Sheet Analysis
Oando"s Total Assets rose by 31% to $625m compared to $476m in 2004 and Total
Liabilities advanced 44% to $451m from $312m as the Group continued its
expansion drive away from the lower margin segments and into higher value
areas of the energy value chain like Upstream Exploration & Production, a
strategy which we believe will yield significant returns in future, driven by
continued strong crude prices over the medium term.
Prospects
Our primary ambition is to develop our current platform into becoming one of
the foremost integrated energy players in Africa. This desire is based on the
central assumption that the underlying price of crude will minimally remain at
current levels over the next few years essentially driven by the inability of
new discoveries to outpace current and near term consumption levels. We
therefore believe that the capital investments we are currently undertaking
through expansion into higher value business segments such as Exploration and
Production will help deliver substantial revenue and earnings growth to
shareholders in the future.
This however does not diminish from the fact that we anticipate the continued
strong performance of the existing businesses - Marketing, Supply & Trading,
Energy Services and Gaslink - all of which showed better top and bottom line
numbers than the year before.
Consolidated balance sheet
As at 31 December 2005
2005 2004
$"000 $"000
ASSETS
Non-current assets:
Property, plant and equipment 110 874 90 824
Intangible assets 103 803 71 418
Investments in associates - 193
Long term receivables 27 479 28 163
242 156 190 603
Current assets
Inventories 75 623 41 607
Trade and other receivables 246 253 169 466
Held for sale investments - 75
Cash and cash equivalents 57 769 74 226
379 645 285 374
Total Assets 621 801 475 977
EQUITY
Capital and
reserves attributable
to equity holders
Share capital 2 162 2 162
Share premium 120 842 120 742
Revaluation reserve 18 322 18 314
Exchange difference (2 380) (246)
Retained earnings 21 409 11 959
160 355 152 931
Minority interest 10 969 10 730
Total equity 171 324 163 661
LIABILITIES
Non-current liabilities:
Borrowings 14 596 12 534
Deferred income tax liabilities 5 008 1 600
Retirement benefit obligation 8 612 10 049
Provisions 4 111 3 596
Other non-current liabilities 3 735 9 674
36 062 37 453
Current liabilities
Trade and other payables 183 729 185 787
Dividend payable 8 13
Current income tax liabilities 4 782 174
Borrowings 225 897 88 889
414 416 274 863
Total liabilities 450 477 312 316
Total equity and liabilities 621 801 475 977
Consolidated income statement
For the year ended 31 December 2005
2005 2004
$"000 $"000
Sales 1 486 208 776 414
Cost of sales (1 371 165) (675 947)
Gross profit 115 043 100 467
Selling and marketing cost (47 517) (44 136)
Administrative expenses (56 263) (36 696)
Interest received 2 439 2 295
Other operating income 19 571 10 384
Operating profit 33 273 32 313
Share of profit of associates - 19
Finance costs (9 110) (22 310)
Profit before tax 24 164 10 022
Income tax expense (6 405) (891)
Profit after taxation 17 759 9 131
Attributable to:
Minority interests 1 952 2 517
Equity holders of the company 15 807 6 614
17 759 9 131
Summarised cash flow statement
For the year ended 31 December 2005
2005 2004
$"000 $"000
Cash and equivalents at the
beginning of the period 53 625 (9 136)
Cash used in operating activities (81 409) (7 143)
Cash used in investing activities (36 075) (5 367)
Cash from financing activities 67 328 75 869
Exchange gains/(losses) in
cash and equivalents 500 (597)
Cash and equivalents at
the end of the period 3 969 53 625
Consolidated statement of changes in shareholders" equity
Attributable to equity holders of the Company
Cumulative
Share Share Revaluation Translation
Capital Premium Reserve adjustment
Balance at
1 January 2004 1 195 9 300 22 865 (266)
Currency translation
adjustments 46 290 692 20
Revaluation surplus
on disposal of land
and building - - (5 243) -
Net expense recognised
directly in equity 46 290 (4 551) 20
Retained profit for
the year
Total recognised income
for the year 46 290 (4 551) 20
Bonus shares to
shareholders 299 - - -
Issue of shares:
Public offer 119 23 028 - -
Rights issue 77 14 555 - -
Supplementary offer 426 82 670 - -
Issue costs (9 101) - -
Dividend relating to
2003 - - -
921 111 152 - -
Balance at
31 December 2004 2 162 120 742 18 314 (246)
Balance at
1 January 2005 2 162 120 742 18 314 (246)
Currency translation
adjustments - 100 8 (2 134)
Restatement of residual
values of property plant
and equipment
Deferred tax effect of
residual value
restatement
Net expense recognised
directly in equity - 100 8 (2 134)
Retained profit for
the period
Total recognised income
for the period - 100 8 (2 134)
Dividend relating to
2004 -
Minority interest
dividend
in subsidiary
Interest in share
capital
of subsidiaries
previously
excluded from
consolidation - - - -
Interest in share
capital
transferred
- - - -
Balance at
31 December 2005 2 162 120 842 18 322 (2 380)
Retained Total
Earning Interest Equity
Balance at
1 January 2004 5 308 6 502 44 904
Currency translation
adjustments - 209 1 257
Revaluation surplus
on disposal of land
and building 5 243 - -
Net expense recognised
directly in equity 5 243 209 1 257
Retained profit for
the year 6 614 2 517 9 131
Total recognised income
for the year 11 857 2 726 10 388
Bonus shares to
shareholders (299) - -
Issue of shares:
Public offer - - 23 147
Rights issue - 1 502 16 134
Supplementary offer - - 83 096
Issue costs - - (9 101)
Dividend relating to 2003 (4 906) - (4 906)
(5 205) 1 502 108 370
Balance at
31 December 2004 11 959 10 730 163 662
Balance at
1 January 2005 11 959 10 730 163 661
Currency translation
adjustments - (1 659) (3 685)
Restatement of residual
values of property plant
and equipment 7 092 7 092
Deferred tax effect of
residual value
restatement (2 128) (2 128)
Net expense recognised
directly in equity 4 965 (1 659) 1 280
Retained profit for
the period 15 807 1 952 17 759
Total recognised income
for the period 20 771 293 19 039
Dividend relating to 2004 (8 650) (8 650)
Minority interest dividend
in subsidiary (2 672) (2 672)
Interest in share capital
of subsidiaries previously
excluded from
consolidation - (71) (71)
Interest in share capital
transferred 18 18
(11 322) (53) (11 375)
Balance at
31 December 2005 21 409 10 969 171 324
Analysis of performance by business ($"000)
Business Revenue Gross Margin PBT PAT
Supply and Trading 552 725 11 393 8 500 8 116
Gaslink 17 798 3 240 1 713 1 544
Energy Services 63 623 4 016 338 162
Marketing 954 166 100 511 17 730 12 054
Consolidation Adjustment (102 040) (4 117) (4 117) (4 117)
Total 1 486 208 115 043 24 164 17 759
Notes to the condensed provisional financial statements
31 December 2005
1. General information
Oando Plc (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
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 and its subsidiaries (together "the Group") have their 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. During the year, the
Group"s beneficial ownership in two subsidiaries, Oando Trading (Bermuda) and
Oando Supply and Trading, was increased from 49% to 51%.
Oando Trading and Oando Supply and Trading have been treated as subsidiaries.
The other investors currently having 49% respectively of Oando Trading and
Oando Supply and Trading are Ocean and Oil Holdings (Nigeria) Limited and
Ocean and Oil Holdings (BVI) Limited respectively.
Furthermore, the Group invested in a new subsidiary, Oando Energy Services, in
January 2005 to carry out its energy services business, holding a 51%
interest while the remaining 49% is owned by Ocean and Oil Holdings (Nigeria)
Limited.
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 these financial statements
for 2005.
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
Operations
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
statement, when the asset is disposed of, to determine profit on disposal.
Adjustments have been passed to transfer the related amounts directly to
retained earnings in accordance with IAS 16. Also, early adoption of IAS 16
(revised 2004) has necessitated the disclosure of prior year comparatives for
all movements in property plant and equipment.
IAS 21 (revised 2003) has affected the translation of foreign entities" income
statements, on which closing rates were previously applied but now amended and
translated at average rates. The functional currency of each of the
consolidated entities has also been re-evaluated based on the guidance to the
revised standard. All the Group entities have the same functional currency as
their presentation currency. These financial statements have been presented in
a currency other than the Company"s functional currency, being US dollars, to
meet the filing requirements of the JSE.
IAS 24 (revised 2003) has affected the identification of related parties and
some other related-party disclosures.
IAS 27 (revised 2004) has affected the consolidation of subsidiaries. Certain
subsidiaries, which were not included in the consolidation under previous GAAP
have now been consolidated.
The early adoption of IAS 33 has resulted in a change in the computation of
earnings per share. Earnings per share, which were previously computed on the
basis of the number of shares in issue at the end of the reporting period,
have been adjusted on the basis of the weighted average number of shares in
accordance with IAS 33.
The early adoption of IAS 39 has resulted in a change in accounting for
financial assets and liabilities.
Although the Group did not have any share-based payments as at the balance
sheet date, upon adoption of a scheme, which is currently being considered by
the Group, all share based payments will be accounted for under IFRS 2.
The early adoption of IFRS 5 has resulted in a change in the accounting for
non-current assets held for sale and discontinued operations as qualifying
assets have been reclassified accordingly.
The early adoption of IFRS 3, IAS 36 (revised 2004) and IAS 38 (revised 2004)
resulted in a change in the accounting policy for goodwill. Until 31 December
2002, goodwill was:
- amortised on a straight line basis over a period ranging from 5 to 20 years;
and
- assessed for an indication of impairment at each balance sheet date.
In accordance with the provisions of IFRS 3:
- the Group ceased amortisation of goodwill from 1 January 2003;
- accumulated amortisation as at 31 December 2002 has been eliminated with a
corresponding decrease in the cost of goodwill;
- goodwill was tested for impairment at 1 January 2003, the transition date.
Also, from the year ended 31 December 2003 onwards, goodwill is tested
annually for impairment, as well as when there are indications of impairment.
The Group has also reassessed the useful lives of its intangible assets in
accordance with the provisions of IAS 38. No adjustment resulted from this
reassessment.
All changes in the accounting policies have been made in accordance with the
transition provisions in the respective standards.
The early adoption of IAS 1, 2, 8, 17 28 and 32 (all revised 2003) did not
result in substantial changes to the Group"s accounting policies.
In summary:
- IAS 1, 2, 28 and 32 had no material effect on the Group"s policies; and
- 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 as 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.
2005 2004
Profit attributable to equity
holders of the Company ($"000) 15 807 6 614
Weighted average number of shares
in issue (thousands) 572 301 367 183
Basic earnings per share (cents) 2.76 1.80
Diluted:
Profit attributable to equity holders
of the Company ($"000) 15 807 6 614
Weighted average number of shares
in issue (thousands) 572 301 367 183
Adjustment for bonus issues - -
Weighted average number of shares
for diluted EPS (thousands) 572 301 367 183
Diluted earnings per share (cents) 2.76 1.80
Headline earnings per share (for JSE
listing purposes)
Profit attributable to equity holders
of the Company 15 807 6 614
Adjusted for:
Profit on sale of buildings associated
with discontinued operations - (5 099)
Profit/(Loss) on sale of other assets 2 95
Tax thereon - 1 097
15 809 2 707
Headline earnings per share attributable
to earnings basis (cents) 2.76 0.74
Headline earnings per share attributable
to diluted earnings
basis (cents) 2.76 0.74
Net assets per share (cents) 30 45
Tangible assets per share (cents) 194 246
4. Independent audit by the auditors
These condensed consolidated results are currently being audited by our
auditors PricewaterhouseCoopers who perform their audit in accordance with the
International Standards on Auditing. The results have been reviewed by
PricewaterhouseCoopers whose unqualified review opinion is available for
inspection at the Company"s registered office.
5. Post-Balance Sheet events
There are no significant post balance sheet events.
For and on behalf of the Board
Mr J. Adewale Tinubu
Group Chief Executive Officer
31 March 2006
Registration number: RC 6474 External company registration number:
2005/038824/10
Share code on the JSE Limited: OAO Share Code on the Nigerian Stock Exchange:
UNTP
ISIN: NG00000UNTP0
Directorate
1. General M. Magoro (Rtd.) - Chairman
2. Mr. J. A. Tinubu - Group CEO
3. Mr. O. Boyo - Deputy Group CEO
4. Mr. O. P. Okoloko - Executive Director
5. Prince F. N. Atako JP. - Director
6. Mr. A. Akinrele - Director
7. Mr. O. Ibru - Director
8. Alhaji H. Mahmud - Director
9. Mr. I. Osakwe - Director
10. Mr. O. Osifo - Director
Company Secretary: Mrs. Oredeji Delano
Registered office:
Stallion House, 2, Ajose Adeogun Street, Victoria Island, Lagos, Nigeria
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 2004 (Proprietary) Limited
(Registration number: 2004/003647/07)
70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107
Auditors:
PriceWaterhouseCoopers, Plot 252E Muri Okunola Street, Victoria Island, Lagos
Sponsor:
Deutsche Securities (SA) (Proprietary) Limited
E-mail: info@oandoplc.com
Date: 31/03/2006 12:01:09 PM Produced by the JSE SENS Department
