Company Analysis

11 Plc: Out of exceptional item, into exceptional profit


1 Plc, the former Mobil Oil Nigeria, shows an up and down pattern of profit performance and the current year is indicating a big upturn for the company from a decline last year. The profit decline last year followed mainly the occurrence of exceptional item of N2.23 billion. The company has moved out of exceptional item into exceptional profit growth in the current year.

The exceptional item had claimed virtually all the pre-tax profit in the first quarter of last year while its absence has given the company an exceptional profit leap at the end of the first quarter ended March 2018.

The company ended first quarter operations with an after tax profit of N2.76 billion, an upsurge from only N13 billion in the same period in 2017. That seems to define a year of outstanding growth for the company in 2018, in which a new profit peak is likely to be established.

A similar outstanding growth happened for the company in 2016 with a 67% growth in profit from a 46% increase in sales revenue. That growth momentum staggered in the 2017 financial year and profit declined by close to 8% against a 33% growth in revenue. At the end of the first quarter, the company had already earned close to 37% of the 2017 full year profit.

Apart from the absence of exceptional item, another favourable development is helping the company’s performance this year. That is sustaining growth in sales revenue for the third year running. Sales revenue amounted to over N45 billion at the end of the first quarter, a clear 79% advance year-on-year.

A strong growth in sales revenue is not only being maintained but is also accelerating again in the current year after a slowdown in 2017. The strongest revenue growth in many years looks likely for 11 at the end of 2018. The company had grown sales revenue by 33% to over N125 billion in 2017.

Gaining revenue and gaining profit is the summary of the company’s performance at the end of its first quarter trading in March. A further boost to the bottom line has come from an increase of 28% in other income to over N2 billion during the review period.

Cost of sales however remains a challenge for the company – growing ahead of sales revenue and claiming a large share of turnover. At over N40 billion, cost of sales grew by 82% year-on-year compared to the 79% growth in sales revenue over the same period. That raised the claim of cost of sales on sales revenue at 89% and therefore encroached on gross profit margin.

The strong growth in other income moderated increases in selling/distribution cost and administrative expenses, which permitted a top record growth of 87% in operating profit at close to N4 billion at the end of the first quarter.

A major underlying strength for the company is the virtual absence of finance expenses and its maintenance of a net finance income position. This explains its ability to maintain a good profit margin by its industry standard. Its net profit margin at 6.1% at the end of the first quarter is top on the petroleum company’s records – a position the company has held for many years.

Earnings per share has rebounded for 11 from only 4 kobo in the same period last year to N7.64 at the end of the first quarter. The company closed last year with earnings per share of a little over N20 and paid a final cash dividend of N8 per share on 2nd July 2018.

11 is a rebranding of Mobil Oil Nigeria after the US-based ExxonMobil Oil Corporation, the majority shareholders of Mobil Oil Nigeria sold its entire 60% equity holding in the company to Nipco Investment Ltd.


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