Rising from a loss of N3.85billion it recorded in the year ended December 31, 2021, Ardova Plc recorded loss of N1.148billion in the half year (H1) ended June 30, 2022.
The H1’2022 scorecard
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.
INVESTOR’s look at the notes to Ardova Plc’s unaudited interim financial statements for the period ended June 30, 2022 shows loan receivables of N19.732billion. This represents amounts lent to Ardova’s subsidiaries and it is made up of a loan of N12.326billion to Enyo Retail and Supply Limited and a loan ofN6.261billion to Axles and Cartage Limited.
The loan to Axles and Cartage was advanced on December 31, 2021 in the sum of N6.261billion with a maturity date of December 31, 2029. The loan has a moratorium on principal and interest of eighteen (18) months. The interest rate is 14percent; the loan to Enyo Retail and Supply Limited was advanced on November15, 2021 in the sum of N12.326billion with a maturity date of November 15, 2029. The loan has a moratorium on principal and interest of twelve (12) months. The interest rate is 14percent. Gross profit was also high at N7.640billion from N7.368billion in H1’2021. Disappointingly, its reported loss before income tax (LBT) of N1.148billion as against profit before tax (PBT) of N2.614billion in H1’2021. The group’s retained earnings decreased to N5.442billion in H1’22 from N6.590billion in H1’21.
The consolidated financial statements include the financial statements of Ardova Plc and its subsidiaries; AP LPG Limited, AP Renewables Limited, Bags & Kegs Limited, Axles and Cartage Limited, Enyo Retail and Supply Limited and Ardogreen Limited. Ardova Plc has 100percent stake in all of these subsidiaries except Ardogreen Energy Limited which it owns 53.05percent.
Ardova Plc was awarded an interest in Olua Marginal field by the Nigerian Upstream Petroleum Regulatory Commission. The vehicle that holds this interest is Ardogreen Energy Limited which it owns 53.05percent of its equity. The vehicle is yet to commence operations as at year end. Bags and Kegs Limited is the acquisition vehicle used by the company to acquire 100percent stake in Enyo Retail and Supply Limited.
Shares seen yielding negative returns despite buy ratings
Ardova is currently trading near its 52-week low of N11.55. Investors holding till date the shares of the company priced at N12 per share as at August 1 have recorded negative return of -7.7percent. This negative comes amid ‘Buy’ ratings earlier given to the stocks by research analysts at Vetiva, United Capital and Meristem respectively who expected the price to trend upwards. The Group’s H1 financial results show basic/diluted loss per share (LPS) of 0.88kobo as against earnings per share (EPS) of 0.38kobo in H1’21.
The group’s basic (loss)/earnings per share of 0.88 kobo (June 2021: N1.32kobo) is based on the profit/(loss) attributable to ordinary shareholders of (N1.148billion) (June 2021: N1.72billion) on the 1,305,030,180 (June 2021: 1,305,030,180) ordinary shares of 50kobo each.
“For the full year period, we expect revenue from the company’s fuel business to print at N228.5 billion (up 32percent year-on-year) as the increased sales volumes from ENYO is expected to drive this growth. Similarly, turnover from the company’s lubricant operations is expected to come in at N31.36 billion (up21percent y/y).
“Thus, given improved performance from its 2 major business units, and growth expectations from other business segments, we expect revenue for full year 2022 to print at N261billion (FY’21: N200.5 billion), up 30percent year-on-year (y/y). Meanwhile, given Ardova’s healthy cash position, our projections for finance costs comes in 1percent lower y/y, at N3.9 billion. That will bring PBT to N1billion. With that said, EPS is expected to print at N0.77kobo. Thus, we have revised our target price to N19.43 and maintain our BUY rating for the stock,” Victoria Ejugwu, analyst at Vetiva had said in July 18 note while justifying their Buy rating for the stock. The analysts noted that finance costs are pressuring Ardova’s bottom-line.
Read also: NGX suspends trading in shares of Ardova, C&I Ieasing, Mutual Benefit, 6 others
Acquisition of 100% equity stake in Enyo retail and supply limited
Following its announcement on June 14, 2021 wherein Ardova Plc notified the Nigerian Exchange Limited, its shareholders and the investing public of the execution of a share purchase agreement to acquire 100percent equity stake in Enyo Retail and Supply Limited (Enyo), Ardova Plc had on November 15 completed the transaction, noting that all conditions were satisfied. The acquisition of Enyo was completed through a wholly owned subsidiary of the Company, Bags and Kegs Limited, and with effect from November 16, Enyo became a wholly owned subsidiary of Ardova.
Stanbic IBTC Capital Limited and Banwo & Ighodalo advised Ardova while Rand Merchant Bank and Herbert Smith Freehills Paris LLP acted as financial and legal advisers respectively to Enyo. Ardova had told the investing public that the successful conclusion of this transaction will among others strengthen the quality of earnings for the Company, saying that the “acquisition is another step towards our broader vision of becoming the leading brand in the downstream petroleum sector.”
Quality of Ardova earnings yet to strengthen after Enyo acquisition
Ardova had noted that the losses from its subsidiaries Axles and Cartage, and newly acquired Enyo Retail and Supply Limited created a group net loss position of N3.8billion in year ended December 31, 2021. There was no dividend declared in this period, and with the loss in H1, investors will have to wait longer for dividend.
“As a group, we were negatively impacted by our subsidiaries, Axles & Cartage Limited, which faced operational environment issues and the newly acquired Enyo, which is presently undergoing a transformation process to drive operational efficiency and profitability. When subsidiaries are taken consideration the group loss amounts to N3.8billion”.
Adeosun stated that “the loss experienced in 2021 are an expected reflection of the strategic inorganic growth programme of the company, and do not affect the viability of the company, especially as some of the immediate benefits of this programme were illustrated by the better year on year performance recorded in our Q1 2022 results,” Moshood Olajide, Ardova’s Chief Financial Officer had noted when the company’s delayed full year financials were released.
Sentiment perceived muted after lifting of suspension on shares trading
Recall that 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.
“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.
N60billion debt issuance programme
Last year (November 16) Ardova established its N60billion bond issuance programme and announced thesuccessful issuance of N11.444billion 7-year 13.3% fixed rate bonds and N13.856billion 10-year 13.65% fixed rate bonds being tranches A and B respectively of the series 1 bonds under the Programme.
The bonds which were duly registered with the Securities and Exchange Commission (SEC) and listed on the FMDQ Securities Exchange Limited had Vetiva Capital Management Limited and Stanbic IBTC Capital Limited as Joint Issuing Houses, whilst Banwo& Ighodalo acted as Transaction Counsel. The trustees were advised by Aluko & Oyebode.
“We are pleased with the successful conclusion of this transaction which again demonstrates investors’ confidence in the Company and provides additional resources for the Company to continue its expansion projects, ”Olumide Adeosun, CEO of the Company had said on the transaction.
Ardova and its subsidiaries
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.
On November 15, 2021, the Ardova Plc 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.
