11 PLC FY’19 – Lower Margins Weaken FY’19 Earnings

Must Read

UCH Chief Medical Director tests positive for Coronavirus

Prof Jesse A. Otegbayo, the chief medical doctor, University College Hospital, Ibadan UCH has tested positive for coronavirus. This...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is...

Top 10 Most Expensive Universities In Nigeria

For many Nigerians, high-quality higher education is a luxury. There are many private universities who are known not only...
11 PLC FY'19 - Lower Margins Weaken FY’19 Earnings11 PLC FY'19 - Lower Margins Weaken FY’19 Earnings
  • Revenue advances 16% y/y
  • FY’19 rental income dips 7% y/y
  • Records a PAT of ₦8.9 billion (-5% y/y)
  • Target price revised to ₦283.15 (previous: ₦282.03)

Turnover climbs 16% y/y

In its recently released unaudited FY’19 results, MOBIL grew its turnover 16% y/y to ₦192 billion, while its after-tax earnings declined 5% y/y to ₦9 billion. Despite the impressive growth in FY’19 turnover, gross profit came in flat at ₦16.6 billion, as gross margin worsened to 9% (FY’18: 10%)— highlighting the lean margins in the downstream space. Meanwhile, rental income from the company’s real estate property dropped 7% y/y to ₦8.0 billion, bringing FY’19 operating profit to ₦13.1 billion (down 1% y/y). That said, operating margin came in lower at 7% (FY’18: 8%). Overall, MOBIL registered an after-tax profit of ₦8.9 billion (down 5% y/y), resulting in an ROAE of 24% (FY’18: 31%).

Improved margins support Q4 earnings

In Q4’19, revenue advanced 3% q/q to ₦50.2 billion, in line with our estimate. Although revenue breakdown has not been released by the firm, we presume that the growth in revenue was driven by the lubricants business, as the border closure might have weighed on fuel sales during the quarter. Furthermore, Q4’19 gross margin moved higher to 10% (Q3’19: 8%), taking gross profit for the quarter to ₦5.2 billion (up 31% q/q). The improvement in gross margin trickled down the income statement, resulting in a 14% q/q increase in operating profit to ₦3.6 billion (Vetiva estimate: ₦3.3 billion)— this was despite a 3% q/q drop in rental income, which contributes 55% of operating profit. Overall, profit before tax came in at ₦3.7 billion (+16% q/q).

Read:  Heineken unveils Jidenna as host of Heineken’s Live Your Music Parties in Abuja & Lagos
- Advertisement -
Read:  11 Plc 9M'19 - Sustained cost pressures drag EPS lower

Return on equity to stay flat at 24%

Given our base expectation that the borders will remain closed for most of H1’20, we are somewhat conservative about MOBIL’s revenue performance in 2020. As such, we project modest revenue growth of 2% for 2020. Meanwhile, we expect gross margin to improve to 10% (FY’19: 9%), stemming from our expectation of higher lubricants contribution alongside anticipated lower landing costs. On this basis, we expect gross profit to advance 14% y/y to ₦19.0 billion. While we expect operating expenses to come in at ₦11.8 billion (up 2% y/y), we envisage that rental income will remain flat at ₦8.1 billion, taking operating profit to ₦15.4 billion (FY’19: ₦13.1 billion). Overall, we project a 15% y/y growth in profit after tax to ₦10.2 billion, translating to an ROAE of 24% (flat y/y). Our 12-month target price has been revised slightly to ₦283.15 (previous: ₦282.03). We maintain our BUY rating on the stock. However, this rating is subject to change upon release of the company’s audited financial statements. Additionally, while no corporate action has been announced by the company, we expect FY’19 dividend per share to come in flat at ₦8.25, translating to a payout ratio of 34% (FY’18: 32%).

Read:  Nipco launches $16m offer for Mobil Oil shares


- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Famfa Oil Pledge N1 Billion Naira to Support Nigeria’s Fight Against COVID-19

Mr. and Mrs. Modupe and Folorunso Alakija through Famfa Oil Pledge N1 Billion Naira to Support Nigeria’s Fight Against COVID-19. ⁣ As the world rallies to...

COVID 19: Nigerian Air Force postpones entrance examination into AFMS, AFGMS

The Nigerian Air Force (NAF) has postponed the entrance examination into its Military secondary schools for males and females in Jos owing to the...

Covid-19: Oyo State Taskforce impounds 22 cars from errant clubs (Photos)

The Oyo State Covid-19 Taskforce saddled with the responsibility to carry out the State’s effort to mitigate the spread of the virus and enforce...

Best SEO Marketing’s 3 tips to instantly increase sales for your business to tide through the COVID-19 pandemic

SINGAPORE - Media OutReach - 30 March 2020 - Amidst the COVID-19 pandemic, many business owners might be worried on how to tide through this period.  ...
- Advertisement -
BrandsPur Weekly Cartoons
%d bloggers like this: