LAGOS – Total Nigeria plc Q4 2015 results show a Sales decline of -22% year-on-year (Y/Y) to N48.7billion, Profit before Tax(PBT) and Profit after Tax (PAT) falling to -5% y/y and -28% y/y to N2.5bn and N1.9bn respectively, according to its financials.
While Total has existing General Assistance and Cost Sharing contracts with related entities, Total Oute Mer (TOM) and Total Raffinage Marketing (TRM) respectively, these agreements with TOM and TRM were expected to be registered by NOTAP and on that basis an accrual was recorded in the financial statements.
However, as at 31 December 2015, NOTAP had still not registered the agreements. Additionally, the Financial Reporting Council (FRC) recently issued a rule that obligations arising from agreements within the scope of NOTAP that have not been registered by NOTAP should not be accrued for in a Company’s financial statements.
Similarly, the recent judgment of the Federal High Court, Lagos, dated 14 December 2015, on the interpretation of the NOTAP Act maintained that any contract within the purview of the NOTAP Act, which is not registered by NOTAP is illegal, void and unenforceable. As such, both events have led to a reassessment of the accounting treatment adopted by the company for the obligations arising from these agreements in the current and previous years.
Consequently, no charges related to the General Assistance and Cost Sharing Agreements have been recognised in the 2015 financial statements and charges recognised in the previous years’ financial statements have also been reversed. We expect management to provide clarity on the registration of its technical agreements going forward.
A gross margin expansion of 123bp y/y to 12.6% and a -23% y/y decline in operating expense (opex) partly offset the negative impact from the y/y topline decline and a 51% y/y rise in net finance charges.
The company however declared a final dividend of N12.0. On a full year basis, sales, PBT and PAT all declined, by -14% y/y, -5% y/y and -24% y/y respectively.
Even though full year PBT declined y/y, Total’s strong dividend is likely to attract investor’s attention in the near term.
