03-09-2020, 11:27 AM
11 Plc: Operational costs hurt earnings
March 9, 2020 Chris Ugwu writes
![[Image: mobil.png?fit=666%2C330&ssl=1]](https://i0.wp.com/www.newtelegraphng.com/wp-content/uploads/2020/03/mobil.png?fit=666%2C330&ssl=1)
… as oil firm seeks delisting
Volatility in the overall economic and business climate is taking a toll on the earnings of 11 Plc as it proposes to exit NSE. Chris Ugwu writes
Oil and gas sector of the Nigerian economy like other sectors has remained very challenging with enormous economic and security issues.
The consequence of rapid devaluation of naira has wiped out billions of naira in market capitalisation for Nigeria’s fledgling oil and gas companies.
Challenges of insecurity and other high cost of operations attributable to poor infrastructure have also continued to make the business operating environment difficult – especially for the oil and gas sector of the economy.
The industry has also continued to experience sustained pressure on its cash flow due to delay in payments of subsidies resulting in huge financial expenses.
11 Plc (formerly Mobil Oil Nigeria Plc) like others has continued to get its fair share of the mixed fortune, as it continues to struggle under pressure of high cost of operating environment.
Market watchers attribute the situation primarily to ongoing weaker global commodity demand and pricing environment coupled with the rising refining expenditures. The oil firm’s earnings have been heavily hurt following increasing and challenging operating milieu.
Analysts believe these operating challenges are some of the key reasons the board of directors’ meeting held on February 27, 2020 considered and approved the proposal for the oil firm to voluntarily exit the Nigerian Stock Exchange.
According to analysts, the current results reflect 11’s natural vulnerability to volume slowdown due to hash operating environment.
The share price, which closed at N177.00 in April 31, 2019, has recorded a dip in growth that when the closing gong rang on Friday, the company’s share price stood at N146.50, a decrease of N30.5 or 17 per cent year to date.
Financials
11 Plc. began the year 2018 on a positive note, as Q1 2018 results showed that sales were up 79 per cent y/y to N45.1 billion, while PBT grew by a similar magnitude to N4.1 billion. The sales growth combined with a 30 per cent y/y rise in other income offset a 25 per cent y/y rise in opex, leading to the PBT growth of 79 per cent y/y. 11’s sales are the strongest on record despite petroleum product shortages in January.
Analysts at FBNQuest Capital said: “We believe the new ownership/management deserve most of the credit. Below the PBT line, there were no one-off expenses during the quarter, similar to the last three quarters. As such, the growth of 115 per cent y/y on the PAT line was more significant.
“The Q1 PBT beat our N3.2 billion estimate by 27 per cent. The variance was primarily driven by positive surprises on the sales line.”
In the second quarter of 2018 ended June 2018, the company’s financials sustained positivity, Q2 sales and PBT of N40.8 billion and N4.0 billion up 32 per cent y/y and 10 per cent y/y, respectively. PAT grew more significantly (up 126 per cent y/y) to N2.7 billion due to base effects. 11 Plc posted a loss of –N1.3 billion on the other comprehensive income line in Q2 2017).
According to the analysts, the positive surprises on the opex and other income lines are also commendable. Rental income, which is up +12 per cent y/y to N2.0 billion, is similar to magnitude to Q1 figures and perhaps could be more predictable going forward after several volatile quarters.
“Compared with our estimates, while sales were in line with our N40.4 billion forecast, PBT beat by 22 per cent,” the experts said.
“The variance was driven by positive surprises on the opex and other income lines. On an annualised basis, H1 PBT of N8.1 billion is tracking ahead of consensus estimates of N14.4 billion,” they added.
For the nine months ended September 30, 2018, the oil firm maintained impressive results with a 71.36 per cent growth in profit after tax to N7.871 billion in 2018 from N4.593 billion recorded a year earlier.
Profit before tax equally grew by 70.61 per cent to N11.646 billion in 2018 from N6.826 billion posted in 2017. Revenue rose by 41.69 per cent from N88.246 billion to N125.042 billion reported in 2018.
11 Plc. sustained bullish outlook to report 24 per cent growth in profit after tax for the full year ended December 31, 2018.
According to the financial results released to the Nigerian Stock Exchange (NSE), the oil firm recorded a profit after tax of N9.325 billion in 2018 as against N7.518 billion reported in 2017, accounting for a growth of 24 per cent.
Its profit before tax stood at N13.695 billion, from N13.366 billion in 2017, representing a growth of two per cent, while revenue grew by 31 per cent from N125.3 billion in 2017 to N164.6 billion during the period under review.
Based on the results, 11 Plc. announced final dividend payment of 825 kobo per ordinary share for the period ended December 31, 2018.
The dividend payment is, however, subject to appropriate withholding tax and would be paid electronically to shareholders whose names appear on the Register of Members as at Thursday, May 2, 2019. Holders will be closed from Friday, May 3 to Friday, May 10, 2019.
However, following increasing cost of sales, the oil company began the 2019 financial year on a disappointing note, with a drop of 26 per cent in profit before tax for the first quarter ended march 31, 2019.
In a filing with the exchange, the unaudited Q1 financial report showed that the oil company reported a profit after tax of N2.089 billion for the period under review as against N2.756 billion posted in 2018, representing a decline of 26 per cent.
Profit before tax equally decreased by 26 per cent, to N3.018 billion in 2019 from N4.076 billion posted in 2018.
However, the revenue grew marginally by two per cent from N45.076 billion in 2018 to N46.072 billion in 2019. But cost of sales grew to N42.424 billion during the first quarter from N40.059 billion, accounting for 5.9 per cent increase.
11 Plc’s Q2 2019 sales of N46.7 billion were up 14 per cent y/y, driven by improved sales across all key categories. 11 also posted liquefied petroleum gas sales of N316 million. In H1, 11 reported LPG sales of N608 million.
However, Q2 PBT and PAT both declined by -21 per cent y/y to N3.2 billion and N2.1 billion respectively, primarily driven by a gross margin contraction of -228bps y/y to 8.3 per cent, completely offsetting a -4 per cent y/y decline in operating expenses. Additionally, other income fell by -12 per cent y/y to N2.0 billion.
According to analysts at FBNQuest, “sequentially, PBT and PAT both advanced by five per cent y/y. Compared with our forecasts, sales and PBT beat by 12 per cent and seven per cent respectively. 11 Plc’s Q2 2019 earnings of N2.1bn beat our estimate by around six per cent, primarily on the back of positive surprises on the topline and opex line. As such, we have made negligible changes to our earnings forecast over the 2019-21E period. As anticipated, sales, up 14 per cent y/y to N46.7 billion, improved across all key business segments.
The company closed the Q3 with 19.4 per cent decline in profit before tax to N6.343 billion from N7.871 billion in 2018. Profit before tax equally dropped by 19.3 per cent from N11.646 in 2018 to N9.3 billion in 2019. Revenue however grew by 13.2 per cent to N141.511 billion from N125.042 billion in 2018.
The oil firm delivered a five per cent drop in profit after tax for the Q4 ended December 31, 2019 to N8.855 billion from N9.328 billion posted in 2018. Profit before tax stood at N13.123 billion in 2019 from N13.695 billion in 2018.
The unaudited results for period ended December 31, also showed cost of sales rising to N175.035 billion from N148.015 in 2018, accounting for an increase of 18.25 per cent. However , revenue grew by 16 per cent to N191.676 billion from N164.609 billion in 2018.
Intention to delist/outlook
The board of directors of 11 Plc has said that sequel to its meeting held on February 27, 2020, it considered and approved the proposals for the oil firm to voluntarily exit from the Nigerian Stock Exchange.
In a statement obtained from the NSE, the company noted that its decision to exit the Nigerian bourse would be subject to shareholders’ approval at the next annual general meeting slated for June 3, 2020, according to the notice filed to the stock exchange.
In line with the NSE rules, shareholders of the company will have a 90-day window on voluntary delisting to decide on the exit plan to offer shareholders.
In addition to this, the oil company also seeks to restructure its business by transferring its real estate unit to 11 Hospitality Limited, the new subsidiary of the company, for optimum return on investment, whilst 11 Plc will concentrate more on the downstream sector of its business.
11 recently finalised discussions with the Asset Management Company of Nigeria to acquire the Lagos Continental Hotel.
The company said in a statement filed at the Nigerian Stock Exchange that the acquisition was subject to terms and conditions between both parties.
The company said it aimed to diversify its interests, given a challenging environment in the downstream sector of the petroleum industry.
According to the statement, the new asset will require significant investment to raise standard from the current state to the level consistent with similar facilities in major cities around the world.
It said: “Fuel margins in the industry have remained stagnant for several years in the highly competitive and regulated industry. We anticipate that this asset will contribute positively to earnings and underlines the faith of its stakeholders in the future of the Nigerian economy.”
Last line
With the ongoing weak global commodity demand and pricing decline, many forecast that oil firms may take more time to settle unless government fast-tracks people oriented programmes to lift the economy from the current state of despondency.
March 9, 2020 Chris Ugwu writes
… as oil firm seeks delisting
Volatility in the overall economic and business climate is taking a toll on the earnings of 11 Plc as it proposes to exit NSE. Chris Ugwu writes
Oil and gas sector of the Nigerian economy like other sectors has remained very challenging with enormous economic and security issues.
The consequence of rapid devaluation of naira has wiped out billions of naira in market capitalisation for Nigeria’s fledgling oil and gas companies.
Challenges of insecurity and other high cost of operations attributable to poor infrastructure have also continued to make the business operating environment difficult – especially for the oil and gas sector of the economy.
The industry has also continued to experience sustained pressure on its cash flow due to delay in payments of subsidies resulting in huge financial expenses.
11 Plc (formerly Mobil Oil Nigeria Plc) like others has continued to get its fair share of the mixed fortune, as it continues to struggle under pressure of high cost of operating environment.
Market watchers attribute the situation primarily to ongoing weaker global commodity demand and pricing environment coupled with the rising refining expenditures. The oil firm’s earnings have been heavily hurt following increasing and challenging operating milieu.
Analysts believe these operating challenges are some of the key reasons the board of directors’ meeting held on February 27, 2020 considered and approved the proposal for the oil firm to voluntarily exit the Nigerian Stock Exchange.
According to analysts, the current results reflect 11’s natural vulnerability to volume slowdown due to hash operating environment.
The share price, which closed at N177.00 in April 31, 2019, has recorded a dip in growth that when the closing gong rang on Friday, the company’s share price stood at N146.50, a decrease of N30.5 or 17 per cent year to date.
Financials
11 Plc. began the year 2018 on a positive note, as Q1 2018 results showed that sales were up 79 per cent y/y to N45.1 billion, while PBT grew by a similar magnitude to N4.1 billion. The sales growth combined with a 30 per cent y/y rise in other income offset a 25 per cent y/y rise in opex, leading to the PBT growth of 79 per cent y/y. 11’s sales are the strongest on record despite petroleum product shortages in January.
Analysts at FBNQuest Capital said: “We believe the new ownership/management deserve most of the credit. Below the PBT line, there were no one-off expenses during the quarter, similar to the last three quarters. As such, the growth of 115 per cent y/y on the PAT line was more significant.
“The Q1 PBT beat our N3.2 billion estimate by 27 per cent. The variance was primarily driven by positive surprises on the sales line.”
In the second quarter of 2018 ended June 2018, the company’s financials sustained positivity, Q2 sales and PBT of N40.8 billion and N4.0 billion up 32 per cent y/y and 10 per cent y/y, respectively. PAT grew more significantly (up 126 per cent y/y) to N2.7 billion due to base effects. 11 Plc posted a loss of –N1.3 billion on the other comprehensive income line in Q2 2017).
According to the analysts, the positive surprises on the opex and other income lines are also commendable. Rental income, which is up +12 per cent y/y to N2.0 billion, is similar to magnitude to Q1 figures and perhaps could be more predictable going forward after several volatile quarters.
“Compared with our estimates, while sales were in line with our N40.4 billion forecast, PBT beat by 22 per cent,” the experts said.
“The variance was driven by positive surprises on the opex and other income lines. On an annualised basis, H1 PBT of N8.1 billion is tracking ahead of consensus estimates of N14.4 billion,” they added.
For the nine months ended September 30, 2018, the oil firm maintained impressive results with a 71.36 per cent growth in profit after tax to N7.871 billion in 2018 from N4.593 billion recorded a year earlier.
Profit before tax equally grew by 70.61 per cent to N11.646 billion in 2018 from N6.826 billion posted in 2017. Revenue rose by 41.69 per cent from N88.246 billion to N125.042 billion reported in 2018.
11 Plc. sustained bullish outlook to report 24 per cent growth in profit after tax for the full year ended December 31, 2018.
According to the financial results released to the Nigerian Stock Exchange (NSE), the oil firm recorded a profit after tax of N9.325 billion in 2018 as against N7.518 billion reported in 2017, accounting for a growth of 24 per cent.
Its profit before tax stood at N13.695 billion, from N13.366 billion in 2017, representing a growth of two per cent, while revenue grew by 31 per cent from N125.3 billion in 2017 to N164.6 billion during the period under review.
Based on the results, 11 Plc. announced final dividend payment of 825 kobo per ordinary share for the period ended December 31, 2018.
The dividend payment is, however, subject to appropriate withholding tax and would be paid electronically to shareholders whose names appear on the Register of Members as at Thursday, May 2, 2019. Holders will be closed from Friday, May 3 to Friday, May 10, 2019.
However, following increasing cost of sales, the oil company began the 2019 financial year on a disappointing note, with a drop of 26 per cent in profit before tax for the first quarter ended march 31, 2019.
In a filing with the exchange, the unaudited Q1 financial report showed that the oil company reported a profit after tax of N2.089 billion for the period under review as against N2.756 billion posted in 2018, representing a decline of 26 per cent.
Profit before tax equally decreased by 26 per cent, to N3.018 billion in 2019 from N4.076 billion posted in 2018.
However, the revenue grew marginally by two per cent from N45.076 billion in 2018 to N46.072 billion in 2019. But cost of sales grew to N42.424 billion during the first quarter from N40.059 billion, accounting for 5.9 per cent increase.
11 Plc’s Q2 2019 sales of N46.7 billion were up 14 per cent y/y, driven by improved sales across all key categories. 11 also posted liquefied petroleum gas sales of N316 million. In H1, 11 reported LPG sales of N608 million.
However, Q2 PBT and PAT both declined by -21 per cent y/y to N3.2 billion and N2.1 billion respectively, primarily driven by a gross margin contraction of -228bps y/y to 8.3 per cent, completely offsetting a -4 per cent y/y decline in operating expenses. Additionally, other income fell by -12 per cent y/y to N2.0 billion.
According to analysts at FBNQuest, “sequentially, PBT and PAT both advanced by five per cent y/y. Compared with our forecasts, sales and PBT beat by 12 per cent and seven per cent respectively. 11 Plc’s Q2 2019 earnings of N2.1bn beat our estimate by around six per cent, primarily on the back of positive surprises on the topline and opex line. As such, we have made negligible changes to our earnings forecast over the 2019-21E period. As anticipated, sales, up 14 per cent y/y to N46.7 billion, improved across all key business segments.
The company closed the Q3 with 19.4 per cent decline in profit before tax to N6.343 billion from N7.871 billion in 2018. Profit before tax equally dropped by 19.3 per cent from N11.646 in 2018 to N9.3 billion in 2019. Revenue however grew by 13.2 per cent to N141.511 billion from N125.042 billion in 2018.
The oil firm delivered a five per cent drop in profit after tax for the Q4 ended December 31, 2019 to N8.855 billion from N9.328 billion posted in 2018. Profit before tax stood at N13.123 billion in 2019 from N13.695 billion in 2018.
The unaudited results for period ended December 31, also showed cost of sales rising to N175.035 billion from N148.015 in 2018, accounting for an increase of 18.25 per cent. However , revenue grew by 16 per cent to N191.676 billion from N164.609 billion in 2018.
Intention to delist/outlook
The board of directors of 11 Plc has said that sequel to its meeting held on February 27, 2020, it considered and approved the proposals for the oil firm to voluntarily exit from the Nigerian Stock Exchange.
In a statement obtained from the NSE, the company noted that its decision to exit the Nigerian bourse would be subject to shareholders’ approval at the next annual general meeting slated for June 3, 2020, according to the notice filed to the stock exchange.
In line with the NSE rules, shareholders of the company will have a 90-day window on voluntary delisting to decide on the exit plan to offer shareholders.
In addition to this, the oil company also seeks to restructure its business by transferring its real estate unit to 11 Hospitality Limited, the new subsidiary of the company, for optimum return on investment, whilst 11 Plc will concentrate more on the downstream sector of its business.
11 recently finalised discussions with the Asset Management Company of Nigeria to acquire the Lagos Continental Hotel.
The company said in a statement filed at the Nigerian Stock Exchange that the acquisition was subject to terms and conditions between both parties.
The company said it aimed to diversify its interests, given a challenging environment in the downstream sector of the petroleum industry.
According to the statement, the new asset will require significant investment to raise standard from the current state to the level consistent with similar facilities in major cities around the world.
It said: “Fuel margins in the industry have remained stagnant for several years in the highly competitive and regulated industry. We anticipate that this asset will contribute positively to earnings and underlines the faith of its stakeholders in the future of the Nigerian economy.”
Last line
With the ongoing weak global commodity demand and pricing decline, many forecast that oil firms may take more time to settle unless government fast-tracks people oriented programmes to lift the economy from the current state of despondency.