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Ardova may see ‘Sell’ as Zenon battles Prudent Energy over N2.6bn debt

Olumide Adeosun

Stock investors may decide to take sell position in shares of foremost Nigerian integrated energy group, Ardova Plc over recent court case that affects its parent company Prudent Energy and Services Limited.

Zenon Petroleum & Gas Limited in a suit at the Federal High Court, Lagos, with No. FHC/L/CP/1450/2022 has asked the Court to wind up Prudent Energy and Services Limited over the inability of the company to pay a $6 million. At official exchange rate of N428/$ this alleged debt is worth about N2.6billion.

Prudent Energy and Services Limited through its entity, Ignite Investments and Commodities Limited owns 74percent of Ardova Petroleum a company listed on the Nigerian Exchange. Ardova Plc with a market capitalisation of about N16.9billion traded at N13 per share on Friday August 5.

AbdulWasiu Sowami, a billionaire investor is the chairman of Ardova Plc as well as the Chief Executive Officer of Prudent Energy and Services. The debt was alleged in the suit no. FHC/L/CP/1450/2022 to have arisen from the sale conducted in 2018 where Zenon Petroleum & Gas Limited and its affiliates sold 74.02 percent of the issued share capital of Forte Oil Plc (now Ardova Plc) to Sowami and Ignite Investment and Commodities Limited.

The company changed its name to Ardova Plc in 2019 upon restructuring and rebranding with Ignite Investments and Commodities Limited as its major shareholder. Listed on the Petroleum and Petroleum Product subsector of the Nigerian Exchange Limited (NGX) Oil & Gas sector, Ardova Plc has 1,302,481,103 shares outstanding.

Currently, while Ignite Investments and Commodities Limited accounts for 74.06percent of Ardova Plc shares, other investors account for 25.94percent.

It further stated that as security for the deferred consideration for the sale of the shares, Prudent Energy and Services Limited and Sowami had provided a guarantee in favour of Zenon Petroleum & Gas Limited and its affiliates for the prompt payment of the deferred consideration as at when due.

Zenon Petroleum & Gas Limited alleged that the sum of $6 million being part of the deferred consideration became due on June 18, 2022, saying that despite the demand letters served on Prudent Energy and Services Limited and its CEO, the debt was not paid. As result, Zenon Petroleum & Gas Limited urged the Court to wind up Prudent Energy and Services Limited on the ground of inability to pay its debts.

The Nigerian Exchange Limited (NGX) had effective Friday July 1, suspended trading in shares of Ardova and eight other companies for defaulting in filing their audited financial statements for the year ended December 31, 2021.

Thereafter, Ardova allayed concerns over the then suspension of trading of the company’s securities on the Nigerian Exchange Limited (NGX) over the late filing of its 2021 Audited Financial Statements, saying in a statement signed by Oladeinde Nelson-Cole, Company Secretary, Ardova that the delay in submission of its 2021 Audited Financial Statements was primarily due to the accounting reconciliations that followed the acquisition of Enyo Retail and Supply Limited (ERSL), a transaction which was concluded in November 2021.

Ardova Plc on November 15, 2021 completed the acquisition of ENYO Retail & Supply Limited (ERS), through a Special Purpose Vehicle (SPV)-Bags and Kegs Limited. Both entities are owned 100percent by the Group. ERS is primarily engaged in the sale and marketing of refined petroleum products through its 95 retail service stations across 19 states in Nigeria.ERS also trades in other products and services such as premium engine lubricants, LPG, Velox Fuel card and auto care services.

“Enyo’s accounting has now been harmonised with the IFRS accounting standard already in place at Ardova Plc, following which the group’s Consolidated Financial Statements were completed and duly audited,” the statement read.

Thereafter, Ardova Plc filed its audited financial statements for the year ended December 31, 2021 and Unaudited Financial Statements for the quarter ended March 31, 2022. As a result, trading licence holders and the investing public were notified that then suspension placed on trading on the shares of Ardova Plc was lifted on July 7.

Read also: Fidson grows profit by 157%, declares 50k per share dividend

Ardova Plc recorded loss of N1.148billion in the half year (H1) ended June 30, 2022. The company had reported a loss of N3.85billion it recorded in the year ended December 31, 2021.

The group’s unaudited interim consolidated financial statements for the H1 period ended June 30, 2022 show that its revenue grew to N126.649billion from N86.770billion in H1’2021.The group’s total finance cost of N2.18billion in H1’22 far outweighs N489.031million it reported in H1’2021 before Enyo was acquired. The total finance cost accumulated from: finance cost on loans and borrowings, interest on long term bond and interest expense on bank loans and overdrafts.

In 2021 (November 16) Ardova established its N60billion bond issuance programme and announced the successful issuance of N11.444billion 7-year 13.3% fixed rate bonds and N13.856billion 10-year 13.65percent fixed rate bonds being tranches A and B respectively of the series 1 bonds under the Programme.

“From a broader perspective, the company’s H1 performance came in below expectations, as Q2 results dragged H1 performance. In H1, gross margin saw a 2 percentage points (ppts) contraction to 6percent (H1’21: 8percent) and given this, gross profit only saw a 3percent increase year-on-year (y/y) to N7.6 billion, despite a strong topline performance.

“Also, as the company made an operating loss in Q2, H1 operating profit came in 68percent lower y/y. Thus, given weak operating results, and higher finance charges, Ardova made a net loss of N1.1 billion in H1,”, according to Victoria Ejugwu, Lagos-based research analysts at Vetiva in her August 5 commentary on Ardova titled “Margin contraction weighs on earnings”. Though the analysts had set a target price of N16.24 per share for Ardova, saying it is a Buy.

Ardova Plc is a leading indigenous, integrated energy company in Nigeria involved in the marketing of petroleum products. The Company operates a network of over 450 retail outlets spread across the Country with major petroleum storage installations at both Apapa (Lagos State) and Onne (Rivers State).

On March 11, 2020, Ardova Plc incorporated a wholly owned subsidiary, Axles and Cartage Limited as a private limited liability company in Nigeria. The subsidiary provides transport and haulage services to customers. Axles and Cartage Limited commenced operations in August 2020.

On March 22, 2021, AP LPG was incorporated. AP LPG is an energy company in Nigeria involved in the business of processing, storage, and trade in Butane, Propane, Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG). The Company is also into the business of transportation (Excluding Air And Sea) Of Butane, Propane, Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG).

The Company is currently developing state-of-the art coastal storage facility with a capacity of 20,000 MT.The Facility is equipped with Propane-Butane blending and processing capability.

On March 24, 2021, the Company incorporated AP Renewables. AP Renewables was set up to carry on businesses of procurers, Generators, Suppliers, Distributors, Transformers, Converters, Transmitters, Manufacturers, Processors, Developers, Storers, Carriers, Importers And Exporters Of, And Dealers In, Electricity, Derived from whatever renewable energy source including without limitation Heat, Solar, Wind, Hydro, Wave, Tidal, Geothermal, Biological And Nuclear Energy, or any other forms of Renewable Energy, and any products derived from or connected with any of these activities.