Oando Plc’s stock price has lost 8.9 per cent of its value to settle at N11.85 after its financial accounts cast doubt over its ability to continue as a going concern.
The company has topped the losers’ chart on the Nigerian Exchange Limited in the last two days following the facts presented in its 2021 audited financial report which it released on September 18, 2023.
Analysis of Oando’s stock reveals investors’ sentiment to the report cut the company’s market capitalization down by N34bn between September 20, 2023 to September 22 from N181.49bn to N147.3bn respectively.
During the review period, the company’s shares lost 8.9 per cent of its value from N14.6 per share to N11.85 per share on Friday.
The company’s setback began with the revelation that the Group recorded total comprehensive income for the year ended 31 December 2021 of N30.6 billion (2020: N132.8 billion total comprehensive loss) and negative operating cash flows of N38.8 billion (2020: N36.2 billion negative).
As of that date, Oando (the Group) also recorded net current liabilities of N674.8 billion (2020: net current liabilities of N578.2 billion) and net liabilities of N129.0 billion (2020: net liabilities of N67.7 billion).
The Group revealed that Oando could not achieve payment of the outstanding principal on the Medium-Term Loan (“MTL”) of N92.2 billion and the Corporate Facility (“CF”) of N97.4 billion; total accrued interest of N65.6 billion; and settlement of other net current liabilities (excluding current borrowings and accrued interest) of N315.7 billion.
It further revealed that after the reporting date, the Group has continued to incur significant level of borrowings which it channeled to funding of operations and partial repayment of borrowings.
Although Oando recorded an increase in revenue from N477bn in 2020 to N803.46bn in 2021, the auditors, BDO Professional Services (Chartered Accountants), said the “the increase in revenue did not translate to a corresponding proportionate increase in gross margin and positive cash flows from operations.
“Consequently, the Group could not achieve planned repayment of outstanding borrowings during the year. Furthermore, the Company and Group recorded unaudited total comprehensive loss, net current liabilities and net liabilities at the end of 2022.”
Oando has outstanding borrowings amounting to N506.7bn (unaudited) excluding interest as of 31 December 2022.
According to the books, N402.4bn out of the N506bn is the Group’s outstanding borrowings due for repayment within twelve months after 31 December 2022.
Oando has a funding gap of N768.1bn in the Group forecast for the year ending 31 December 2023.
To manage the funding gap Oando’s management said it has progressed work with the financial adviser that was engaged on 25 April 2022 to coordinate group refinancing of the existing borrowings through a N568.6bn ($750 million) ten-year bond with a view to obtain approval from the regulators prior to the end of 2023.
Auditors Cast Doubt On Company’s Going Concern
Oando management forcast that it would return to profitability by 2024 but the auditors, BDO Professional, argued that the forecast largely depends on “stability of crude oil prices within the current range, ability to engage in activities that will increase production volume and revenues from OML 60-63 through execution of approved well workover activities and intensified security surveillance to arrest crude oil theft.
“The above conditions indicate the existence of a material uncertainty which may cast significant doubt on the Company’s and Group’s ability to continue as a going concern and, therefore may be unable to realize its assets and discharge its liabilities in the normal course of business.
“If successful, the initiative will address 74 per cent of the Group’s projected funding gap at 31 December 2023. However, management is uncertain of its timing and success.”
Oando Files For Voluntary Delisting From NGX
It was reported that on March 30, 2023 Oando notified NGX and JSE Limited of Ocean and Oil Development Partners Limited (OODP) intentions to acquire all the shares held by minority shareholders.
Each minority shareholder that qualifies will receive N7.07 in cash or its equivalent in South African Rand (ZAR) per share, based on the deal.
Oando would consequently delist from NGX and JSE and re-registered as a private company, it said in a regulatory filing
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