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Company Results

2020 Q2 Analysis: Conoil Plc, hanging by the thread

Conoil must stay aware and strive in Q3 to maintain a positive net cash position.

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Conoil Plc, NSE, Conoil Plc's shares, NSE suspends shares from trading shares, Conoil Plc declares dividend payment for FY 2019, announces AGM soon

A profit decline worth over N600 million within a 1-year period is more than enough to throw any concerned shareholder in a frenzy. Sadly, this is the reality for Conoil Plc, according to its latest unaudited earnings report.

The company’s Q1 2020 result seemed impressive, with about N260 million worth of profit after tax (PAT) reported. Ideally, this ought to have been a sign of good performances for the subsequent quarters of the year. Unfortunately, this hasn’t quite been the case.

The appalling nature of the second quarter (Q2) results was partly caused by the COVID-19 pandemic, as well as the recent reduction in fuel pump price by the federal government. As you may well know, the virus hit Nigeria at the start of April 2020, thereby ushering Q2 economic activities and operations into a compulsory lockdown. These notwithstanding, no one could have anticipated a revenue plunge 70% deep in the span of 6 months between Q1 and Q2.

Conoil Plc has an impressive reputation as a market leader playing in Nigeria’s downstream oil and gas sector. Due to the company’s positioning in the downstream sector, it is seldom directly affected by events in the often volatile global oil market… until now.

The Nigeria-based company was also hit hard when the federal government decided to allow market forces to determine the price of the pump in the country. The price was reduced to 125p/ltr from 145 p/ltr in late March this year. This contributed to the derisory N19.3 billion posted as Q2 revenue.

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The oil giant is in the business of marketing, distributing, and manufacturing under three business products, representing its operating segments. They market refined petroleum products and manufacture lubricants and household Liquified petroleum gas (LPGs) for domestic and industrial use. The three segments; White products (PMS, DPK, LPFO AGO), Lubricants, and Liquefied petroleum gas (LPG), individually and respectively experienced poor turnover in Q2.

Worst quarter

Conoil’s recently released financial statement exposes arguably its worst Q2 figure in a couple of years, with Profit after tax (PAT) standing at a paltry N78.3 million. This pales significantly in comparison to Q1 PAT figure of N260 million representing a colossal 70% negative change and an 88.9% decline when compared to Q2 of 2019 with PAT of N707 million.

Revenue for the H1 peaks at N57.5 billion (although comparatively way below H1 2019 at N72 billion YoY) with Q2 Contributing a meager 16% N19.3 billion. Fundamental analysis of the financials, exposes that the sporadic shrink in turnover for Q2 could be attributable to these two major reasons. Firstly, the general lull in economic activities sponsored by the COVID-19 pandemic. This affected CONOIL’s marketable segment, halving the sales figures for white products by approximately 50% from N36.5 billion to N18 billion in Q1 & Q2 respectively. Manufactured lubricants also experienced a 7.7% dip in Q2 at N1.2 billion from N1.7 billion in Q1.  The second cause as hitherto stated was the reduction in fuel pump price N145 to N125, for the first time since 2016.

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The impact of such a decline in revenue is humongous. It questions the company’s ability to effectively service its debt obligations in the next quarter as well as providing adequate cover for its cost of sales and other expenses.

Investors are reputed to be ruthless pragmatics who accord more importance to the fine-prints than selling price when making purchasing decisions. Thus they often would place emphasis on the statement of cash flow as opposed to the income statement.

Conoil must stay aware and strive in Q3 to maintain a positive net cash position since Q1 & Q2 bear negative balances of N2billion and N1.2billion respectively. Negative cash flow is always a worrying omen. With current ratio for Q2 at 1.47:1 indicating the Oil giant’s relatively unconvincing ability to comfortably settle its liquidity problems if they arise.

 

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Ekene Onyeama is a Chartered Accountant currently plying one of the Tier one Banks in Nigeria. He started out his career at Ideascorp Limited, a private company in the hospitality industry where he served as the accountant before switching to banking. Ekene enjoys analyzing companies. He likes to write and is very excited by company valuations. He can be reached on Twitter @Ekenergy_

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Company Results

SET Plc recorded N14.4m post-tax loss in Q3 2020

Secure Electronic Technology Plc (SET Plc) recorded a post-tax loss of N14.4 million in Q3 2020.

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Gaming

Secure Electronic Technology Plc (SET Plc) recorded a post-tax loss of N14.4M in Q3 2020, triggered by a high dealer’s commission. 

A cursory analysis of the Q3 2020 results of Secure Electronic Technology Plc (SET Plc) indicates that the Q3 2020 post-tax loss reduced by 33.7% from N21.7M in the same quarter last year. 

READ: For SET Plc, failure in lottery shifts focus to online gaming

Highlights 

  • Revenue increased by 1.0% 
  • Prizes/winnings increased by 0.52% 
  • Dealers commission increased by 3.42%    
  • Net income decreased by 14.71% 
  • Administrative expenses decreased by 21.21%  
  • Operating loss decreased by 34.62% 
  • Financial charges increased by 68.23% 

READ: MTN: Data subscriptions triggered surge in Q2 2020 Revenues

What you should know

  • A cursory analysis of the latest results of the company reveals that revenues generated from lottery sales and gaming products increased by 1% in Q3 2020 relative to Q3 2019despite COVID-19 pandemic disruptions that have affected revenues of most businesses worldwide.
  • YoY, revenue decreased by 2.15% from N3.18B in 2019 (9-months) relative to N3.11B in 2020 (9-months) – indicating that COVID-19 might have impacted the activities of the company, when considered on a yearly basis.   
  • While the company was able to increase revenues by 1%, reduce its operating loss by 34.62%, and reduce its administrative expenses by 21.21%; high dealers commission and administrative expenses as well as finance charges which increased by 68.23% contributed to the post-tax loss recorded.  
  • Dealers commission and administrative expenses constitute a drag on the company’s profitability. Dealer’s commission was 36.12% of revenues in the period under consideration while prizes/winnings were 60.35%. Administrative expenses was 137.16% of net income in the quarter under consideration. 
  • The post-tax loss is an indication that there was no distributable profit. Thus, the Earnings Per Share (EPS) of the company would be a deficit; so that Q3 2020 EPS was –0.26 kobo.  

READ: Infinity Trust Mortgage Bank Plc suffers 2.21% drop in Q3 revenues

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The shares currently trade at N0.20 per unit. The highest price for a unit of share in 52 weeks was N0.20 and the lowest N0.20, indicating that the share price of the company has been stable. A total of 20,212 units was sold in the last seven days trades. Shares outstanding is 5.63 billion units and its market capitalization as at close of business Friday 16th October 2020 was N1.13 billion. 

Interlinked Technologies Plc operates in the same sub-sector as SET Plc – SpecialityIts share price is N2.91. The highest price for a unit of share in 52 weeks was N2.91 and the lowest N2.91 – indicating that the share price of the company has been stable. A total of 141,020 units was sold in the last seven days trades. Shares outstanding is 236.7 million units and its market capitalization as at close of business Friday 16th October 2020 was N688.80 million 

READ: Pharmaceuticals: Pharma-Deko’s revenue declines by 49.4% in H1 2020

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Background

Secure Electronic Technology Plc (SET Plc), formerly known as National Sports Lottery was incorporated in 2000 with an exclusive 30-year license granted by the FG to operate the National Lottery in Nigeria.

SET Plc started out as a gaming/lottery company. While online gaming remains a major part of its operationsAside from lottery and gaming, the company now explores other business areas within the ambit of technology and data management. 

READ: SAHCO suffers 92% decline in profit, as travel restrictions bite harder

Today, the company is involved in the vending of airtime, provision of card payment solutions, trivia promo syndication, provision of central database and information processing services, as well as treasury/asset management services 

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Company Results

Presco Plc projects N24.53 billion turnover in Q4 2020

Presco’s forecast is coming amid the negative economic impacts of the coronavirus pandemic.

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Presco Plc has projected an 82.03% rise in Profit after Tax to N6.99 billion in Q4 2020, up from N3.84 billion in Q4 2019. Also, its projected turnover of N24.53 billion indicates a 24.39% increase when compared to the N19.72 billion made in Q4 2019.

The Earnings Forecast sent to the Nigerian Stock Exchange (NSE) today, estimated the Gross Profit to be N14.18 billion and the Profit before Tax to be N9.13 billion.

This forecast is coming amid the negative economic impacts of the coronavirus pandemic. It is generally expected that the firm should have downgraded their earnings and profitability forecasts, but renewed optimism based on the reopening of the economy and growing demands for consumer goods have been factors that influenced the projections.

Backstory

Presco Plc had earlier held its Annual General Meeting, with the unaudited accounts for the tQ3 2020 ended September 30, 2020, were deliberated upon among other resolutions.

What you should know

Presco Plc is a fully-integrated agro-industrial establishment with oil palm plantations, palm oil mill, palm kernel crushing plant, and vegetable oil refining plant. They produce specialty oil and fats.

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Company Results

Regency Alliance Insurance Plc forecast N730.72 million profit for Q4 2020

Regency Alliance Insurance Plc released its earnings forecast for Q4 2020, with a projected profit after tax of N730.72 million.  

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Regency Alliance dividend

Regency Alliance Insurance Plc, a major player in Nigeria’s insurance industry has released its earnings forecast for Q4 2020 to the Nigerian Stock Exchange (NSE), with a profit after tax of N730.72 million 

While awaiting its Q3 2020 financials, the projected profit after tax figures is up by 32.75%, from N550.46 million recorded in Q2 2020 to a projected figure of N730.72 million for the last quarter of the year. 

READ: Nigeria’s GDP grew by 2.28% in Q3 2019, as border closure hits trade sector

Other key projected financial metrics which recorded an increase are: 

  • Profit before tax recorded a 28.3% increase from N670.11 million recorded in Q2 2020 to a projected sum of N859.67 million. 
  • Taxation grew by 7.8% from N119.65million recorded in Q2 2020 to a projected sum of N128.95 million 

READ: COVID-19 boosts Fidson Healthcare Plc’s Q2 2020 performance

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Other key figures in the forecast for Q4 2020 include; the projected sums of N4.28 billion for Gross premium earned, N2.82 billion for Net premium, N855.9 million for Net claims incurred, N928.65 million for Underwriting/Management Expenses, and N487.3 million for Net cash generated from operating activities. 

READ: Credit to households increases in Q2 2020 – CBN

Backstory 

Regency Alliance Insurance Plc had earlier announced 28th October 2020, as the date for its board meeting, to consider its Q3 2020 financials for the period ended 30th September 2020. In lieu of this, its closed period will be from October 13, 2020. 

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On this basis, the projected key financial metrics were compared with the last reported financials in Q2 2020.  

READ: Non-Performing loans in Nigerian Banks rise to N1.21 trillion in H1 2020

What this means 

The increase in projected Q4 2020 might be connected to the drive to meet up with recapitalization requirements for insurance firms in Nigeria. Recall that Nairametrics had earlier reported on how the aforementioned firm had planned to raise more capital through various strategic means including issuing a N10 billion additional ordinary shares at N0.50K each. 

READ: PZ Cussons Nigeria drops to 10 year low this week

Theoretically, the projected increase in profit is realizable when a number of factors such as optimization of underwriting skills, lower claims ratio, higher gross premium, and efficient optimization of technology, amongst others are satisfied. 

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READ: See excuses these companies are giving ahead of late filing 2018 results

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What you should know

Regency Alliance Insurance Plc is an insurance company in Nigeria with its headquarters in Lagos. It is licensed to cover all classes of non-life insurance. The company also has business interests in property investments in the form of real estate development and leasing, finance leasing, retail and microfinance banking, and vehicle tracking and fleet management services.  

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