Annual Report and Financial Statements Plc 2019...50 52 Independent Auditor’s Report 53 59 Proxy...
Transcript of Annual Report and Financial Statements Plc 2019...50 52 Independent Auditor’s Report 53 59 Proxy...
ardova plc
Annual Reportand Financial StatementsFOR THE YEAR ENDED 31 DECEMBER, 2019
www.ardovaplc.com
2Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Contents
Corporate information
Origins and key historical milestones
Corporate governance Report
Directors’ Report
Report of the Statutory Audit Committee
Statement of Directors’ responsibilities in Relationto Financial Statements
9
26
41
50
52
Independent Auditor’s Report 53
59
Proxy Form 135
Admission Card 139
Postage 140
CO
NT
EN
TS
ardova plc
Notice of Annual General Meeting
11
Chairman’s Statement 17
Profile of Directors 35
Statement of Profit or Loss and Other Comprehensive Income
58
Statement of Cash flows
60Statement of Changes in Equity
61
Notes to the Financial Statements
65
Statement of Value Added 133
Financial summary 134
E-Dividend Mandate 141
Authority to ElectronicallyReceive Corporate Information 142
4
Statement of FinancialPosition
CEO’s Statement 21
Stations Nationwide
2019 Total Revenue
176,550,766,0002019 Profit After Tax
3,915,140,000
450 +2018
2019
631,471,000
3,915,140,000
Profit A�er Tax
Ardova Plc is a leading
indigenous, integrated
e n e r g y c o m p a n y i n
Nigeria involved in the
marketing of petroleum
products.
The Company operates a
network of 450 retail
outlets spread across
the Country with major
p e t r o l e u m s t o r a g e
instal lations at both
Apapa (Lagos State) and
Onne (Rivers State).
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ardova plc
2019 AT A GLANCE
Ardova Plc (Formerly Forte Oil Plc)
CorporateInformation
01 ardova plc
Ardova Plc is a leading indigenous, integrated
energy company in Nigeria involved in the
marketing of petroleum products.
450Retail Outlets
The Company operates a network of 450 retail outlets spread across
the Country with major petroleum storage installations at both Apapa
(Lagos State) and Onne (Rivers State). Ardova Plc also provides aircraft
refuelling operations at its Aviation Joint User's hydrants in Ikeja and Joint
Aviation depots in Abuja, Port Harcourt and Kano making the Company a
leading Nigerian provider of aviation fuel for local and international
airlines. The Company also procures and markets Liquefied Petroleum
Gas
ardova plc
ardova plc
ardova plc
The Company manufactures and distributes a wide range of quality
lubricants, which include Super V, Visco 2000, Diesel Motor Oil from its
lubricating oil blending plant at its Apapa terminal in Lagos. Apart from
our range of lubricants, AP is also the sole authorised distributor of the
Texaco branded Havoline Engine Oils and Lubricants for the Nigerian
market.
In addition to its strategic retail and commercial network in Nigeria,
Ardova Plc has embarked on providing clean energy hubs and mini-grids
and renewable energy solutions through its solar brand, which
distributes low cost solar power solutions to domestic customers.
ardova plc
People-First Oriented and Star Service Company
As Ardova Plc, the Company remains committed to the
practice of strong corporate governance and compliance
at all levels, culture of strong ethics and discipline and an
enhanced safety, health and sustainability policies.
Ardova Plc's business philosophy is premised on a people-
first oriented and star service Company, with sound
management in place to deliver a holistic brand vision, via
deep investments in technology and exceptional service
delivery across the energy value chain.
Further to a special resolution passed at the
Extraordinary General Meeting of the Company held on
December 17, 2019, the Corporate Affairs Commission
("the Commission") has approved the change of name of
the Company to ARDOVA PLC.
ardova plc
6Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Corporate Information
Board Of Directors
AbdulWasiu O. SowamiChairman
Olumide AdeosunChief Executive Officer
Moshood Olajide - Executive Director, Finance & Risk Management
Mohammed Aminu UmarNon-Executive Director
Olusola AdeeyoIndependent Non-Executive Director
Oladeinde Nelson-ColeAg. Company Secretary/General Counsel
Aniola Durosinmi-EttiIndependent Non-Executive Director
7Ardova Plc (Formerly Forte Oil Plc)
ardova plc
Registered Office 13, Walter Carrington Crescent, Victoria Island, Lagos, Nigeria
Registrars and Transfer Office Veritas Registrars Limited,Plot 89A, Ajose Adeogun Street, Victoria Island, Lagos
Auditors Deloitte and Touche Civic Towers, Plot GA1, Ozumba Mbadiwe Road, V.I, Lagos
Bankers First Bank of Nigeria Limited, Guaranty Trust Bank Plc,
Union Bank of Nigeria Plc, Zenith International Bank Plc,
Keystone Bank Limited, Stanbic IBTC Bank Plc
ardova plc
8Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Corporate Information
Origins and KeyHistorical Milestones
02
From its incorporation as British
Petroleum (Nigeria) in 1964,
Ardova Plc (AP) has emerged
the leading diversified energy
solutions provider, a publicly
listed and widely renowned
corporation with one of the
fastest growing business
portfolios within the energy
sector.
1964Incorporation
As British Petroleum (Nigeria) 1978
Indigenization:
NNPC acquires 60% stake, with Nigeria public buying 40%
1979Name Change
To African PetroleumLimited (AP)2000
Privatization
NNPC sold to40%the Nigerian public
2005NNPC buys equitystake and increasesinterest by convertingAP debt
2007New Era:
Zenon Petroleum, led by Mr Femi Otedola acquires majorityinterest from NNPC ushering in a new era.
2010-11Rebrand:
To Forte Oil with newmanagement and 3-yearturn-around program2012-15
Transformation program result
Profits up by .Acquired 342%414 mw Thermal IPP Resumed dividend payments, capital re-organization
2016-18New Frontiers
Consolidated growth,build resilience andentrench best practices2019
New Acquisition
Ignite investments andcommodities Ltd concludesacquisition of 74.02% equitystake in Forte Oil Plc’s downstream operations.
2019-20New Frontiers
To Ardova Plc (AP)
ardova plc
10Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Origins and Key History Milestones
Notice of Annual General Meeting
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NOTICE OF 41ST ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 41st Annual General Meeting of the Members
�
�
Civic Centre, Victoria Island, Ozumba Mbadiwe, Lagos to transact the following business:
ORDINARY BUSINESS
of ARDOVA PLC will hold on the 28th day of August 2020, 10:00a.m at The Panoramic View Hall,
Ÿ “That Article 98 of the Articles of Association of the Company be is hereby amended to read as follows:
“The Quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed shall be “three. A meeting of the Board of Directors may be held by conference call, video call or other digital or electronic means. A Director shall be entitled to participate in a Board.
Meeting by any digital or electronic means and where a Director so participates, he shall be counted for the purpose of determining whether a quorum has been constituted and for determining the outcome of any vote taken at the Meeting.”
SPECIAL BUSINESS
Ÿ To elect/re-elect the members of the Statutory Audit Committee.
Ÿ To re-elect Mr. Aminu Umar to the Board of Directors as a Director whose term expires in accordance with Articles 88 and 89 of the Company’s Articles of Association.
Ÿ To fix the remuneration of the Directors
Ÿ Amendments to the Articles of Association
Ÿ To authorize the Directors to fix the remuneration of the External Auditors for the ensuing year.
Ÿ To consider the Audited Financial Position with the Statement of Profit or Loss and other Comprehensive Income for
the year ended 31st December 2019, the Report of the Directors and the Report of the Auditors and Statutory Audit Committee thereon.
To consider and, if thought fit, pass the following resolution as a special resolution:
12Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Notice of 41st Annual General Meeting
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“A Resolution in writing signed (or approved by letter, electronic mail, telegram or telex, or by any other electronic means whatsoever) by all the Directors or (unless either the Directors appointing the Committee or the regulations imposed by the Directors on such Committee shall otherwise direct), by all the members of a Committee for the time being shall be as valid and effectual as if it had been passed at a meeting of the Directors or as the case may be, such Committee duly called and constituted. Such resolution may be contained in one document or electronic transmission, or in several documents or electronic form (email or otherwise), each signed or approved by the Directors or Members of the Committee concerned. For the purpose of this Article, the signature or electronic approval as aforesaid of an alternate Director (if any) entitled to notice of meeting of Directors shall suffice in place of the signature or approval the Director appointing him.
Dated this 17th day of July 2020
b. To consider and if thought fit pass the following as a Special Resolution:
“That the Articles of Association of the Company be and is hereby amended by introducing a new Article 99, which shall read as follows:
c. That subsequent Articles shall be renumbered accordingly.”
FO House, 13 Walter Carrington Crescent
BY ORDER OF THE BOARD
Relevant documents in connection with the Meeting are available to all Shareholders from the date of this notice on the Company’s Website www.ardovaplc.com
NOTES
FRC/2019/00000019918
Lagos. Victoria Island,
Ag. Company Secretary OLADEINDE NELSON - COLE
13Ardova Plc (Formerly Forte Oil Plc)
ardova plc
NOMINATED PROXIES
In view of the above, Members entitled to vote are advised to appoint any of the under listed proxies to attend and vote in their stead:
2. Sir Sunny Nnamdi Nwosu, KSS
PROXY
Attendance at the Annual General Meeting shall be limited to the maximum crowd size stipulated by Lagos State Government for gatherings.
Members of the Company, entitled to attend and vote, are entitled to appoint proxies to attend and vote in their stead. A proxy need not be a member of the Company. A proxy form is provided with this Annual Report and Financial Statement. The Proxy form has been pre-stamped for the use of the shareholders. To be valid for the purpose of the meeting, the form must be completed and deposited at the office of the Registrars, Veritas Registrars Limited., not later than 48 hours before the time appointed for holding the meeting..
1. Mr. AbdulWasiu Sowami
Due to the safety challenges posed by the COVID-19 pandemic, public safety, the Government’s Directive on the restriction of large gatherings and social distancing measures, the Company has under the guidelines issued by the Corporate Affairs Commission (CAC), obtained the approval of the CAC to hold the Annual General Meeting by proxy. Members are hereby informed, that the Annual General Meeting shall only be held by proxy in line with the said guidelines. The proceedings of the meeting shall also be streamed live.
3. Mrs. Adebisi Oluwayemisi Bakare
Each duly completed proxy form shall be counted as one.
Each Member is to appoint a Proxy by ticking the relevant box in the Proxy Form attached hereto to indicate how his/her vote is to be cast for each proposed resolution on the agenda.
For the appointment to be valid, a completed and duly stamped proxy form by the Commissioner of Stamp Duties must be deposited at the office of the Registrar, Veritas Registrars Limited, Plot 89A Ajose Adeogun Street, Victoria Island, Lagos or submitted via their email addresses [email protected] or [email protected], not less than 48 hours before the time fixed for the meeting.
4. Mr. Patrick Ajudua
5. Mr. Boniface Okezie
14Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Notice of 41st Annual General Meeting
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APPOINTMENT OF MEMBERS OF THE STATUTORY AUDIT COMMITTEE
The Statutory Audit Committee consists of 3 shareholders and 3 Directors in accordance with Section 359(5) of the Companies and Allied Matters Act of 2004. Any member may nominate a shareholder as a member of the Statutory Audit Committee by giving written notice of such nomination to the Secretary of the Company at least 21 days before the Annual General Meeting. Nominees to the Statutory Audit Committee must be compliant with the laws, rules and regulations guiding listed companies in Nigeria. Accordingly, we would, therefore, request that the nominations be accompanied by a copy of the nominee’s curriculum vitae..
RIGHT TO ASK QUESTIONS
Members have a right to ask questions, in writing prior to the meeting, on their observations or concerns arising from the Annual Report and Financial Statement 2019, provided that such questions in writing are submitted no later than 18th August 2020. For ease of submission a dedicated email address, has been created yo [email protected] submissions from shareholders.
UNCLAIMED DIVIDENDS
RE-ELECTION OF DIRECTORS
In accordance with Articles 88 and 89 of the Company’s Articles of Association, the Director retiring by rotation is
The Company notes that some dividend warrants sent to shareholders are yet to be presented for payment and some shareholders are yet to mandate their bank accounts for the payment of e-dividends. Therefore, all shareholders with “unclaimed dividends” should address their claim(s) to the Registrars, Veritas Registrars Limited, Plot 89A Ajose Adeogun Street, Victoria Island, Lagos or to the Company Secretary at the address of the registered office. Members are being urged to avail themselves of the use of the forms provided to update their information, particularly as it relates to the mandate of their dividend(s) and use of the Central Securities Clearing System (CSCS).
The Unclaimed dividend list will be uploaded on the Company’s Website for your attention and www.ardovaplc.com necessary action.
Mr. Aminu Umar, and being eligible, offers himself for re-election.
15Ardova Plc (Formerly Forte Oil Plc)
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The Meeting will be streamed live online to enable Shareholders and other Stakeholders who will not be attending physically to follow the proceedings. The link for the live streaming of the meeting will be made available on the Company’s website at www.ardovaplc.com
E-REPORT
The CAC has approved that the matters under Special Business be tabled at the Annual General Meeting. SPECIAL BUSINESS
VIEWING OF THE PROCEEDINGS OF THE MEETING
CLOSURE OF REGISTER
The Register of Members will be closed from 13th August 2020 for the purpose of updating the Register of Members.
Shareholders who wish to receive only the electronic version of the Company’s Annual Report are please requested to complete the detachable form inserted in the Annual Report and return same to the Registrars.
The Company’s Annual Reports are available online for viewing and downloading from our Website at www.ardovaplc.com www.veritasregistrars.com and the registrars website,
16Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Notice of 41st Annual General Meeting
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Chairman’sStatement
04
18Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Chairman’s Statment
Dear valued shareholders, on behalf of the board and
management, I am delighted to share our 2019 Annual
Report, our first since we became Ardova Plc. This
report highlights the significant advancements that
have been made in our company since acquisition of
majority shareholding by Ignite Investment on June 21,
2019. Our three-pronged strategy which focused on
Ÿ Improving operational efficiencies
Ÿ Leveraging existing core assets and
Ÿ Positioning the company to be at the forefront
of renewable energy distribution in Nigeria,
yielded results throughout the year in the face of a
challenging operating environment.
These improvements have yielded
positive impact as we have seen our
P r e m i u m M o t o r S p i r i t ( P M S )
throughput increased by 85% from
48million litres to peak at 105 million
litres in December, which in turn grew
our market share and the throughput
of different white products to our own and partner
service stations. The topline revenue growth shows
improved operating efficiency and a healthier balance
sheet achieved over the year have created a foundation
on which we can continue to build a sustainable energy
company for the future.
Observations of the Macro Economic Environment
In 2019, advanced and emerging markets experienced
slow economic growth caused by rising political tension
in the Middle East and sustained trade wars between
the United States (US) and China. The ripple effect of
this saw global oil prices rise from its 2019 opening price
of $59.4 per barrel to about $67.2 per barrel at year-
end. The Brexit negotiations, which saw the exit of one
British Prime Minister and the election of another also
contributed to the slow pace in global economic growth
The Central Bank of Nigerian sustained its monetary
policy stance primarily to attract foreign investments
and support the local currency. The availability of credit
to private economic players remained restricted for
most of the year, with the Central Bank of Nigeria (CBN)
enforcing strict policies to commercial lenders by
growing the Loan-to-Deposit Ratio (LDR) to 65% in a
bid to stimulate growth in the private sector.
With the prevailing foreign exchange shortages and oil
marketers' restrictions on importing PMS products, the
retail pump price traded at N145 with the NNPC being
the biggest supplier to marketers throughout the year.
As a member of the Major Oil Marketers Association of
Nigeria (MOMAN), we continued to call for a deregulated
downstream sector that will allow for a free-market
framework in which market forces determine PMS pump
prices at attractive margins for all stakeholders.
Within our own shores, 2019 was an election year for
Nigeria, and characteristically foreign investors
exhibited caution in their investment decisions and took
pre-emptive measures as they awaited policy direction
from the new administration. At the federal level, the
election result saw the ruling party return to office, but
economic activities remained challenging with a slight
pick-up in the last quarter of the year.
which by the end of 2019 measured 2.3%, the slowest
in recent times.
2019 Key Business Initiatives At the heart of our reemergence as Ardova Plc is the
drive to improve energy sufficiency in a manner that
positively impacts our customers & their communities,
creates economic opportunity and that we minimize our
impact on the environment. We have encapsulated this
ambition in our mantra to provide "Energy for a Brave
New World", a reflection of a paradigm change from our
historical fossil fuel driven business to becoming a
market leader in cleaner energy and low carbon
solutions for the Nigerian market.
85%PMS throughput increase
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As I earlier highlighted, we have repurposed our
business model to improve the operational efficiencies
that will drive us quicker towards our goal of building an
end-to-end energy company with diversified product
offerings. We are also maximizing value from our core
assets which has accelerated our expected growth.
The combination of this increased operational
efficiency and core asset value maximization will enable
us easily adapt to ever changing consumer demand
patterns, and bridge energy sufficiency.
We recognise that building the Ardova Plc we envision
necessitates attracting and retaining the right talent,
so we have adopted a people-first philosophy to ensure
that we have the required talent to support our
executive team in driving and sustaining our
transformation agenda. We also implemented product-
led management structure over the entire value chain
which among other initiatives, helped strengthen
control and oversight in our supply chain and increased
our throughput from 48million litres of PMS to over
95million litres within six months of taking over the
company.
To improve our balance sheet, our core asset
optimization strategy, led to the acquisition of eight
new company-owned (CODO) and dealer-owned &
dealer operated (DODO) stations in 2019. Plans are
currently underway to complete renovations and
rebrand these retail stations. For our LPG business, we
began bulk retail sales with a total of 1 million sales
registered
Our plans to emerge as Nigeria's renewable energy
space are on course, and we have begun channelling
more resources towards leading edge research &
development teams in solar and waste to energy
conversion. In 2019, we conducted a feasibility study
with prospective partners and academia to build a
renewable energy model capable of catering to
Nigerians in rural areas and then extending the solution
to those in the cities. Following the completion of these
feasibility studies, we will roll out proof of concept
solutions to test market fit in 2020.
We are committed to being a business that operates at
the highest standards of sustainability, and creating
social impact through positive contributions to our local
communities, environment, economy and society. With
this focus, we realigned our focus on three strategic
pil lars of Corporate, Social Responsibil ity and
Sustainability (CSRS): Environment, Community and
Workplace.
Looking ahead, we will continue to improve our focus on
silent running of our fuels and lubes business whilst
future-proofing the company and balance sheet. Where
necessary we will leverage synergistic partnerships,
and we expect our investments in cutting edge
technology to yield positive returns in short to medium
term.
By focusing on these areas, we are reinforcing our
commitment to being a catalyst for energy sufficiency
and opening new vistas of opportunities that directly
motivate and positively affect our customers,
communities, stakeholders and investors. These focus
areas are also aligned with the United Nations
Sustainability Developments Goals (SDGs).
By pursuing growth opportunities with the required
funding mix of debt and equity, we intend to create
value without compromising on the company’s liquidity.
In parallel, we will consistently evaluate the operations
and regulatory landscape within the energy value chain
to ensure we are operating compliantly and at the
highest standards, whilst we will continue to pursue
opportunities for organic and inorganic growth across
our businesses.
The board has directed management to assiduously to
increase our network of company owned and operated
liquefied petroleum gas skids to drive distribution of
clean energy. This increase is imperative to achieving
our projected renewable revenue targets in addition to
solar, mini-grids and waste to energy conversion.
A Clearer CSRS Focus
Looking to the Future
19Ardova Plc (Formerly Forte Oil Plc)
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20Annual Reports and Financial Statements - Yr End, 31 Dec, 2019
Despite the current challenges, we are committed to
value creation through the implementation of our
strategy, and I believe that the management team will
aim to achieve the targets we have set for the 2020
Financial Year outlined in the statement by the CEO.
Finally, I would like to thank the members of the board,
management team, employees, distributors, dealers,
transporters, vendors for their year-round continuous
support. I would also like to extend my heartfelt
gratitude to our investors, regulators and customers for
their ongoing trust in the company.
Once again thank you for support of Ardova Plc, we have
only just begun.
Chairman’s Statment
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CEO’sStatement
04
22Annual Reports and Financial Statements - Yr End, 31 Dec, 2019CEO’s Staement
As part of our strategy to effectively overhaul our
business operation, we divested from our subsidiary
businesses, which resulted in a cleaner balance sheet
and a stronger core asset base, setting the platform for
growth. We also accrued interest on subsidy claims and
discounted promissory notes to further strengthen the
working capital position. On this backdrop, we delivered
a 31% year-on-year growth in revenue and a 520%
year-on-year growth in profitability.
Energy for a Brave New World
Distinguished Shareholders, It is my pleasure to present
to you our operational and business performance for
the full year ended 31st December 2019. To mark the
start our repositioning agenda, we took deliberate
steps to evaluate our operations, identify gaps and built
on areas of core competence. We further leveraged our
long-standing heritage to transition the business to a
formidable integrated downstream energy company
that will be fully operational and relevant in the coming
years.
Following the approval of shareholders to change the
company name to Ardova Plc, we embarked on a journey
to create an identity that connects our brand purpose
and vision of driving the growth and transformation of
t h e c o n t i n e n t . W o r k i n g w i t h a r e n o w n e d
communication company, we came up with a compelling
narrative that we believe resonates easily with our
consumers. The next few months in 2020 and beyond,
will see a phased rollout of the Ardova identity across
our retail outlets.
In line with the company’s business restructuring drive,
our transformational plan was premised on four key
pillars which include;
Ÿ Engaging with our customers and stakeholders
Ÿ Connecting with our people
In 2019, we focused on retooling our people to align
with the new era of change whilst positioning the
company as an employer of the first choice. Through
tailored-made training and employee engagement
forum, we have made significant progress in this aspect.
Our customers and stakeholders were also not left out
as we focused extensively on ensuring better customer
integration with regulators, marketers, transporters,
and other stakeholders through industry organized
workshops, conferences, and marketers forum. We will
continue to ensure we deepen these relationships as
befits a customer-centric organization.
Ÿ Future-proofing our business.
Building on our rich heritage and areas of strength, our
strategy also focused on enhancing the business’s
profitability position through improved operational
efficiency. Consequently, throughput volume for
premium motor spirit (PMS) increased to over 95million
liters monthly from 48million litres in June 2019,
similarly, market volumes on lubricants, diesel, and
aviation fuel also increased. In a bid to create
sustainable value for our shareholders, the business has
remained keen on full optimization of its core assets
with the ongoing remodeling of service stations to
create clean energy/power hubs and stimulate socio-
economic developments in rural areas. We also
increased our retail footprints and geographical reach
through the acquisition of new retail outlets.
Ÿ Creating value for our shareholders and
Environmental and business sustainability is at the
heart of our business operations as an end-to-end
energy company, and to build a company that will thrive
in the coming years, the need to promote product
diversification with less reliance on hydrocarbons
became a front burner for the business. With the right
31%Year-on-Yearrevenue growth
520%Year-on-Year growth in profitability
ardova plc
partners, we extensively and exhaustively explored this
opportunity to future proof our business. Our mainstay
for clean energy was the expansion of our liquefied
petroleum gas (LPG) business and renewable energy
solutions in the form of solar, waste to energy, and
battery as a service. In the first six months of operation,
we reactivated the LPG business and achieved a 288MT
monthly threshold by year-end 2019. LPG will become a
more material addition to our product portfolio and form
an integral part of our rebalancing our energy portfolio.
The company currently runs four LPG facilities
nationwide and we plan to invest towards increasing
our LPG capabilities and footprint within this space. With
the right mix of renewable and low carbon energy, we
aim to revolutionize our retail stations and value
proposition to the Nigerian market.
The progress achieved so far is attributed to the
transformation of our business model and our drive to
building a financially sustainable and resilient franchise.
2019 Financial Performance
Operating expense (comprising administrative and
distribution expense) growth of 4.5% was below the
headline inflation rate of 11.9% in FY 2019 a testament
to our efficiency drive to reduce cost while maximizing
revenue streams. Consequently, Profit before
Revenue grew by 31.1% y-o-y, to N176.5 billion in FY
2019 (N134.7 billion: FY 2018). The increase was driven
primarily from 31.8% growth in the fuels business which
constitutes 90% of revenue and a 25.7% growth in the
lubricant business constituting 9.8% of total revenue.
tax increased by 352% to N4.6 billion in FY 2019
(N1.0 billion in FY 2018) on the back of divestment
proceeds from the sale of other operating subsidiaries.
Profitability margins pitched in higher at 2.8% and 2.6%
for operating income and profit before tax respectively.
Our capital position remained strong with a well-
optimized balance sheet structure, fol lowing
discontinued operations and subsequent disposal of
assets available for sale. Consequently, Total assets
dipped by 23% year-on-year to N47.02 billion
from N60.73 billion in 2018.
In terms of business segment performance, the fuels
segment grew by 31.8% to N159billion in FY 2019
compared to N120billion in FY 2018. The fuels business
(comprising premium motor spirit, automotive gas oil
and aviation turbine kerosene), contributed 90.2% to
total revenue. Market share within our fuels segment
closed the year at 18.9%, The main driver for this was
improved products supply across our retail outlets and
to all customers.
Shareholders' funds grew by 15.6% y-o-y, to N17.5
billion in FY 2019 (FY2018: N15.1 billion) as a result of a
38% growth in retained earnings. The final dividend
payout for shareholders in 2019 amounted to N1.15
per 50kobo ordinary share.
The company’s working capital position remained
adequate for business operations for the financial year
and the growth in earnings effectively covered the cost
of borrowings. Borrowing cost reduced significantly in a
bid to fully optimize the company’s capital structure.
Similarly, the gearing ratio improved to 34.6% in FY
2019 compared to 136.2% ach ieved in the
corresponding period. Elsewhere our interest cover
printed at 1.8x relative to 1.5x in 2018 reflecting that
our earnings sufficiently cover the cost of borrowing.
Profit after tax also grew by 520% y-o-y to N3.9 billion
from N0.6 billion achieved in the corresponding period.
Adjusting for the one-off items (accrued interest on
PSF receivables and gain on disposal of subsidiaries) in
2019, Profit after tax grew by 122.7% to N1.41billion.
31.8%growth in the fuels business
25.7%growth in the lubricant business
23Ardova Plc (Formerly Forte Oil Plc)
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24Annual Reports and Financial Statements - Yr End, 31 Dec, 2019
Acquisition of Selected Assets
The renewable energy segment (solar home systems)
achieved revenue of N39.1million in FY 2019 compared
to N141million in the corresponding period. This
segment is a key pillar to driving our non-fuel revenue as
we focus on exploring various operating models to
commoditize electrical power and leverage our retail
network for last-mile distribution of low-cost energy for
domestic use. We have also identified opportunities
within the liquified petroleum gas (LPG) space and will
be investing in this business for higher margins in the
coming period. In 2019, our LPG business achieved a
revenue of N17.4million. This is a new business
segment and we intend to fully optimize margins within
this space.
Lubricants and grease segment contributed 9.8% to
total revenue in FY 2019 closing at N17.2billion
from N13.7billion in FY 2018. Our flagship products,
SuperV and Visco 2000 sustained high market demand
during the year. Similarly, the market share on sales in
our lubricant business closed the year at 17.7%.
Production and distribution capacity of our lubricant
business will be sustained to further improve revenue in
our volume of sales.
Our resolve to improve operational efficiency and
increase volumes and margins on all products, resulted
in aggregate volume growth of 37.4% y-o-y to
1.1billion in FY 2019 from 804.7million in FY 2018.
Further to the approval of the Shareholders at the 40th
Annual General Meeting (AGM) of Ardova Plc held on
September 3, 2019, the Board of Directors of the
Company identified selected downstream assets
Setting the Stage for Future Growth
An independent valuation of the selected assets was
carried out by Dele Olaiya and Associates (Estate
Surveyors and Valuers) for the Company, as well as by
Unigwe & Co. (Estate Surveyors & Valuers) for PESL. The
Company also engaged the services of Vetiva Capital
Management L imited (Vet iva) to provide an
independent fairness opinion on the value of the assets
based on the Valuers’ reports. Vetiva recommended a
fair value of N3billion for the purchase of the selected
assets and upon review, was approved by the Board
including but not limited to plant, machinery, trucks, and
stations, which subject to an independent valuation,
could be acquired from Prudent Energy and Services
Limited (PESL) to improve the operating activities of the
Company
The Company subsequently entered a contract of sale
with PESL for the purchase of the assets, which
included 43 trucks, 12 LPG assets, and 8 retail outlets,
subject the approval of the Securities and Exchange
Commission (SEC). The Company has sought the
approval of SEC, and SEC has taken note of the
acquisition of the assets from PESL by the Company,
subject to disclosure to the shareholders of the
Company at its 41st AGM
We are intentional about building an energy company
designed for the future, and our performance over the
latter half of 2019 shows that moving forward on this
course will set us on the right path to our long-term
goals. We will achieve these goals through diversified
product offerings and improvements in the efficiency of
our core assets
Consequently, in FY 2020 we will focus on five (5) broad
transformation themes; Sustainability, Brand, Core-
Asset Optimisation, People, and Strategic Partnership.
The overarching drivers of this transformational path
are as follows
N17.4million2019 revenue in LPG
CEO’s Staement
ardova plc
In a bid to fully optimize our assets, the focus will be to
increase business efficiency and quality management
by modernization, automation, and digitization.
Specifically, we will maximize value from the forecourt
and backcourts of our retail outlets and identify new
opportunities and non-fuel revenue partnerships to
increase revenue. We will also enhance our fleet and
distribution capabilities and explore options to increase
the fleet portfolio.
Sustainability
Brand
Core Asset Optimization
Our focus on sustainability is premised on diversifying
and evolving our product base, expanding into new
territories, lead thoughts, and shape policies. As a
socially responsible and environmentally aware
organization, we will continue to make investments in
lower carbon fuels and broaden our customer base to
become a dominant player in the energy space. In 2020,
we will focus on a greening pilot of our retail outlets
using renewables energy solutions to create energy
retail stations of the future
We will position the company to become the leading
African energy solutions provider of choice, committed
to delivering superior customer experience. Our official
brand launch is expected to be finalized by the first
quarter of 2020. Corporate artifacts and websites will
also be changed and will be substituted with a
completely new look indicating the new face of the
brand. Rebranding of all our stations will be carried out in
phases throughout 2020 and beyond.
We are building for the future, a people-first oriented
and star service company. We aim to become the
employer of first choice in the energy sector. We will
focus on building world-class talent and develop a
corporate culture that imbibes our shared value of
Growth, Responsibility, Innovation, and Partnership.
Outlook and ConclusionIn the short-to-medium-term, we wil l commit
extensively to strategy execution and investment in
our people, processes, infrastructure, and technology
while constantly appraising their fitness for purpose.
People
On behalf of the Board of Ardova Plc, I express my
profound gratitude to all stakeholders, your support and
continued patronage on this journey is recognized and
appreciated.
Strategic PartnershipThrough strategic partnerships, we will open new vistas
of opportunities and positively impact our customers,
communities, stakeholders, and investors. To drive our
clean energy and low carbon initiatives, we will continue
to foster relationships with right-fit partners and
explore organic and inorganic expansion to achieve our
desired ambition.
25Ardova Plc (Formerly Forte Oil Plc)
ardova plc
ardova plc
CorporateGovernance Report
05
The Board of Ardova Plc (formerly Forte Oil Plc) believes
that the proper application of world-class corporate
governance practice is a key pillar towards achieving
long term value for all our shareholders and
stakeholders.
At Ardova Plc, we believe that sound corporate
governance goes beyond adhering to rules and policies
of the regulators, but also about accountability and
stakeholder engagement at all times. The Board of
Directors during the year under review complied with
the corporate governance requirements as set out in
the report below:
The Board is committed to ensuring that all business
conducted by the company is in compliance with all
applicable laws and regulations, including the
regulations of the Nigerian Stock Exchange, the
Securities and Exchange Commission's Code of
Corporate Governance, Financial Reporting Council of
Nigeria and the Nigerian Code of Corporate
Governance.
The Board of DirectorsThis is the highest decision making body of the
Company. It is responsible for the overall long-term
In this period, the Board was made up of
success and the strategic direction of the Company as
well as providing effective oversight to ensure the
delivery of long term value to shareholders and
stakeholders.
January 1 – 20 June 2019:
All resigned with effect from 20 June, 2019.
The Board’s Composition
June 20 – 31 December, 2019: In this period, the Board was made up of
in keeping with the Nigerian Code of Corporate
Governance. All were appointed with effect from
20 June, 2019.
members,(the chairman
inclusive) 8 2
2 4
Non-ExecutiveDirector
Independent Non-Executive
Directors
Executive Directors
members,(the chairman
inclusive) 6 2
2 2
Non-ExecutiveDirector
Independent Non-Executive
Directors
Executive Directors
27Ardova Plc (Formerly Forte Oil Plc)
ardova plc
The Board met seven (7) times in 2019.
1 Mr. Femi Otedola (con) * Chairman
Mr. Akin Akinfemiwa * Director2
Mr. Julius Omodayo-owotuga *
Director
Mr. Nico Vervelde * Director
Dr. (mrs.) Mairo Mandara * Director
Mrs. Salamatu Suleiman * Director
Mr. Christoper Adeyemi * Director
Mr. Anil Dua * Director
Mr. AbdulWasiu Sowami ** Chairman
Mr. Mohammed Aminu Umar **
Director
Mrs. Aniola Durosinmi-etti **
Director
Mr. Moshood Olajide ** Director
Mr. Olusola Adeeyo **Director
Mr. Olumide Adeosun ** Director
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
3
4
5
6
7
8
9
10
11
12
13
14
NAME POSITION6 Feb
2019
26 Mar
2019
30 April
2019
26 June
2019
2nd Sep
2019
29th Oct
2019
5th Dec
2019S/N
KEY MEANING
***N/A
Present
Absent
Resigned with effect from 20 June, 2019
Appointed with effect from 20 June, 2019
Not a member in the given period
ardova plc
28Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Corporate Governance Report
The Committee held two (2) meetings in year 2019.
NAMES/N 26th March2019
28th Oct2019
1 Mr. Christopher Adeyemi
Dr (Mrs.) Mairo Mandara 2
Mrs. Salamatu Suleiman
Mrs. Aniola Durosinmi-Etti
Mr. Mohammed Aminu Umar
Mr. Olusola Adeeyo
3
4
5
6
N/A
N/A
N/A
N/A
N/A
N/A
The Board implements its oversight function through
Board Committees, with each committee addressing
specific topics based on its charter. The charter of each
committee sets out its composition, agenda, frequency
of meetings and responsibilities.
The Committees of the Board include:
Ÿ Risk Management Committee
The Board Committees
Ÿ Corporate Governance and Remuneration Ÿ Statutory Audit Committee
Each committee meets regularly to discuss matters in
accordance with its charter, in addition to regular
reports provided through the company secretariat on
any significant issue to be considered by the various
committees. Outside of these Board Committees,
other management committees exist namely;
Management Committee , R isk Management
Committee, Credit Risk Committee and Bid Committee.
Corporate Governance and Remuneration Committee
The committee is also responsible for the review of the
company`s governance structure and ensures
compliance with the code of corporate governance. It
also oversees the succession planning process of the
board and the company.
The corporate governance and remuneration
committee's role is to assist the board in fulfilling its
responsibilities in relation to corporate governance and
remuneration.
The committee comprises of one non–executive director two independent non-executive and
directors who oversee the nomination and board
appointment process, board and company-wide
remuneration and human resources issues.
29Ardova Plc (Formerly Forte Oil Plc)
ardova plc
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Statutory Audit CommitteeThe Statutory Audit Committee is comprised of six (6)
members; three (3) shareholders' representatives, one
(1) non-executive director and two (2) independent
non-executive directors.
The functions of the committee are set out in section
359 (6) of CAMA 2004. The committee reviews the
company's control policies, management accounting
and reporting systems, internal control and overall
standard of business conduct.
The committee in addition, approves both the audit
plan and internal audit review plan for the year, as well
as the financial statement. The committee also
monitors and reviews key audit matters.
The Statutory Audit Committee held five (5) meetings in the year 2019.
1Mr. Tokunbo Shofolawe- Bakare
Mr. Emmanuel Okoro 2
Mr. Suleman Ahmed
Mrs. Salamatu Suleiman
Mr. Christopher Adeyemi
Mr. Anil Dua
Mr. Olusola Adeeyo
Mr. Mohammed Aminu Umar
Mrs. Aniola Durosinmi - Etti
Mr. Safiu Okunola
Mrs. Adebisi Oluwayemisi Bakare
Mr. Job Ihejirika Onwughara
3
4
5
6
7
8
9
10
11
12
NAME1st March
2019
26 Mar
2019
29th July
2019
28th Oct
2019S/N
5th Dec
2019
N/A
N/A
N/A
N/A
N/A
N/A
N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A N/A N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A N/A
N/A
30Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Corporate Governance Report
N/A
N/A
N/A
The risk management committee assists the board in
fulfilling its oversight responsibilities regarding the
enterprise risk management of the company.
Risk Management Committee
This includes but is not limited to the identification,
assessment, management of risk and adherence to
internal risk management policies and procedures.
The committee is further responsible for development
of an effective risk governance framework and
disclosure process, reviewing of changes in the
economic and business environment and reviewing of
company's compliance with regulations that impact on
its activities.
The Committee held two (2) meetings in the year 2019.
1 Mr. Anil Dua
Dr. (mrs) Mairo Mandara 2
Mr. Akin Akinfemiwa
Mr. Julius Omodayo-owotuga
Mr. Mohammed Aminu Umar
Mrs. Aniola Durosinmi - Etti
3
4
5
6
NAMES/N
N/A
26th March2019
29th Oct2019
N/A
N/A
N/A
N/A
Mr. Olumide Adeosun
Mr. Moshood Olajide
7
8
N/A
N/A
N/A
31Ardova Plc (Formerly Forte Oil Plc)
ardova plc
ardova plc
The positions of the Chairman of the board and the
Chief Executive Officer of the company are occupied
by different individual persons.
The Chief Executive Officer is fully responsible for the
execution of the company's business strategy and the
day-to-day management of the business, while the
chairman is responsible for ensuring compliance with
the company's strategic goals and that directors
receive accurate and timely information to enable the
Board take informed decisions.
The Chairman also facilitates the contribution of
directors and promotes effective relationships and
open communications between executive and non-
executive directors.
Board Evaluation Report
The governance structure of the company is designed
to ensure that the board discharges its functions and
responsibilities as provided for in the board charters
and in accordance with all legislative and regulatory
standards.
Communication with Stakeholders
The Board is committed to the equitable treatment of
The Board is committed to sustaining regular
interactions with the company's shareholders and
other stakeholders through a well-established
communication and complaint management process.
Separation of the Positions of Chairman and Chief Executive Officer
The annual board assessment is conducted to ensure
the board, committees and individual directors are
e f f e c t i v e a n d p r o d u c t i v e , a n d t o p r o m o t e
opportunities for improvement.
shareholders, protection of their rights and complete
disclosure and transparency at all times by the
management of the company.
To this end, the company has in place, a well-managed
Investor Relations Unit to attend to all enquiries on the
c o m p a n y ' s fi n a n c i a l p e r f o r m a n c e , fi n a n c i a l
statements, corporate actions, strategy and all other
corporate information.
All other related information on the company's
business operations and allied matters can be obtained
by all stakeholders and the public from the company's
website www.ardovaplc.com
Directors RemunerationThe remuneration of directors is governed by the
Company's Policy on Directors. During the year under
review, the Non-Executive Directors and Chairman
each received a prorated annual directors' fee as
stated below:
Amount per Annum (N)
Chairman 800,000,.00
Executive Directors
Non-Executive Directors
Directors
600,000,.00
NIL
32Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Corporate Governance Report
Statement of Compliance with the Corporate Governance Code
As a public quoted company, the company is compliant
in its corporate governance practices and operations
regarding the Listing Rules of the Nigerian Stock
Exchange, the directions of the Securities and
Exchange Commission, the Nigerian Code of Corporate
Governance and international best practices.
Ardova Plc affirms its commitment to adhere to the
principles of excellent corporate governance practices.
The company always strives to carry out its business
operations on the principles of integrity and
professionalism through transparent conduct.
Corporate Governance Rating System Certification
Ardova Plc is a Corporate Governance Rating System
(CGRS) certified company.
The Securities Trading Policy is available on the website of the Company. www.ardovaplc.com
To this end, the Company is committed to the support of environmentally sustainable initiatives and investments that will impact the lives of our immediate community and the society as a whole.
The Board of Directors have an approved securities trading policy which prescribes a code of behavior for directors, management of the company, external advisers and other related persons in possession of market sensitive information.
The code prohibits these persons from dealing in the company's securities during closed periods in accordance with the provisions of the Investments and Securities Act Cap 124 Laws of the Federation of Nigeria, 2004 and the Post Listing Rules of the Nigerian Stock Exchange.
All insiders are notified of closed periods via written or electronic communication from the company secretary.
Sustainability ReportArdova Plc firmly believes in the importance of contribution to the creation of a thriving society in Nigeria.
During the period under review, the Company supported and implemented a variety of initiatives in the advancement of the above objectives.
e
Under the policy, no dir ctor or principal officer of the company, or a close family of the director and/or the principal officer of the company who is aware of material non-public information relating to the company may directly or through family members or other persons buy or sell shares of the company or engage in any other action to take advantage of that information during closed periods.
Insider Trading
33Ardova Plc (Formerly Forte Oil Plc)
ardova plc
ardova plc
THE GENERAL MANDATE LETTER
34Ardova Plc (Formerly Forte Oil Plc)
ISSUED IN COMPLIANCE WITH CLAUSE 6 OF THE RULES OF THE NIGERIAN STOCK EXCHANGERELATED PARTIES OR INTERESTED PERSONS
The rationale for the transactions is that they are necessary for the operations of the company, the discharge of legal and contractual obligations currently binding on the company, are of strategic importance to the continued operations of the company, they guarantee the uninterrupted supply of goods and services necessary for the operations of the company as a going concern, are carried out on a transparent basis and are cost effective and performed efficiently.
In order to ensure that its operations are carried out in the most efficient manner possible, the company seeks for the grant of a general mandate in respect of all recurrent transactions entered into with a related party or interested person which are of a revenue or trading nature or are necessary for the company’s day to day operations. These transactions have been assessed to cumulatively exceed 5% of the value of the net tangible assets or issued share capital of the company.
The class of related parties and interested persons with which the company will be transacting include; shareholders, employees and their family members, companies or entities within the company.
Profile of Directors
05
ardova plc
AbdulWasiu O. Sowami Appointed on 20 June, 2019
Olumide AdeosunAppointed on 20 June, 2019
The names of the Directors as at the date of this report and those who held office during the year are as follows:
36Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Profile of Directors
Mr. Sowami is also well-known for his philanthropy. He established the Abdul-Lateef & Sanni Foundation to build schools and provide scholarships to indigent students.
By developing and leveraging on first tier relationships with the leadership of top international trading companies including Glencore, Shell Trading Rotterdam, Vitol and BP Oil International LTD., Mr. Sowami has amassed a combined trading line of over US$100m.
Mr. Sowami is the Founder & Chief Executive Officer of Prudent Energy & Services LTD., a $600m gross-revenue mid to downstream company. He sits on the boards of several companies including Prudent E&P LTD., FES Energy Limited (UAE), Ignite Investment & Commodities Limited, Prudent Gas LTD., and Prudent Effsow Commodities LTD.
Education & Certifications: Mr. Sowami holds an M.Sc. in Corporate Governance from Leeds Beckett University, England and a B.Sc. in Sociology from the University of Maiduguri. He is a member of the Institute of Directors, Nigeria.
AbdulWasiu Sowami (Chairman)
Olumide Adeosun (Chief Executive Officer)
Olumide holds an M.Sc in Mathematics from Royal Holloway College, University of London and graduated from Woodbury University, California with a B.Sc in Architecture
Prior to his appointment as Chief Executive Officer of Ardova Plc, Olumide led the Energy & Power (West Africa) Practice at PwC, where he held various leadership roles including Head of Strategy Consulting for West Africa and Head of Capital Projects and Infrastructure. Notably, he co-led the buy-side advisory of one of the largest acquisition deals in the Nigerian downstream oil and gas sector.
Mr Adeosun is a respected thought leader in the energy sector, with a proven track record of senior leadership and strategic advisory, and has gained over 18 years’ experience in oil and gas finance, renewable energy, power and strategy.
Olumide provided advisory services to multinational clients at PricewaterhouseCoopers (PwC), London and then worked across a range of Finance with BP Plc (formerly British Petroleum). He moved to commercial roles in BP’s supply & trading subsidiary, BP Oil International, where his roles included Vice President, Commercial Development & Operations for BP’s West Africa Trading business.
Moshood OlajideAppointed on 20 June, 2019
ardova plc
Mohammed Aminu UmarAppointed on 20 June, 2019
Very early on his career and prior to joining the Forte Oil PLC team as Chief Financial Officer, he had a stint with Aluko & Oyebode Law Firm where he had the responsibilities for general legal advisory, company secretariat, negotiation of commercial agreements, litigation and arbitration.
Moshood Olajide (Chief Financial Officer)
Education & Certifications: Moshood holds an LL.B from Obafemi Awolowo University and an LL.M Degree from Columbia Law School. He is a member of the Association of Chartered Certified Accountants (ACCA), the Nigerian Bar Association (NBA), the New York County Lawyers’ Association (NYCLA ) and the Chartered Institute of Taxation of Nigeria (CITN).
His responsibilities at Price Waterhouse Cooper (PwC), a multi-disciplinary firm, spanned financial reporting and regulatory services, statutory audits, capital projects, infrastructure deals energy, utility and mining deals advisory and structuring, general tax advisory compliance services; client training services and company secretarial services spanning multiple sectors of the economy and more notably in Oil and Gas.
Due to his versatility and diligent work ethic, Mr. Moshood has experienced rapid growth as a Chartered Accountant and Tax Professional.
Mohammed Aminu Umar (Non-Executive Director)
Mr. Umar started his career as an accountant with the Overseas Agency Nigeria Limited (OAN) and eventually rose to become the Managing Director between 2001 and 2007.
He is Founder and CEO of Sea Transport Services Nig. LTD., one of the leading commercial managers of Tanker vessels in Nigeria. As MD/CEO of the Sea Transport Services Group, Mr. Umar has led the company on a consistent growth trajectory over the last ten (10) years with the business conservatively valued at over $100 million and growing his fleet to a total capacity of 350,000 Metric Tonnes. Mr. Umar is also Founder and Managing Director of Integrated Shipping Services Nig. LTD., the largest indigenous tanker port agency firm in Nigeria for Products, Crude and LNG tankers.
Education & Certifications: Mr. Umar holds a B.Sc. in Accounting from the University of Maiduguri.
Mr. Umar has over 20 years of experience in the oil, gas and energy sector. Over time, he has played a significant role in shaping the maritime industry evidenced by the various roles and capacity he has served in. He currently serves as the President of Nigeria Ship-Owner’s Association (NISA) and is a member of the Ministerial Committee on establishing Nigerian National Fleet, the Ministerial Committee on Nigerian Fleet Implementation Committee Member and the Advisory Council to the Executive Management of Nigerian Maritime Administration and Safety Agency (NIMASA).
37Ardova Plc (Formerly Forte Oil Plc)
Aniola Durosinmi-EttiAppointed on 20 June, 2019
ardova plc
- The Chief Executive’s Program of Lagos Business School and the IESE Business School, in Barcelona Spain.
Throughout her career she embarked upon several educational courses in different fields in pursuit of knowledge to enhance her performance and productivity.
In 1985, she joined the law firm Udo Udoma & Co as an Associate of the firm where she developed extensive experience in various aspects of commercial law including preparation of key international joint venture agreements, syndications and conveyances. In 1988, she moved to Credit Transactions and Investment Company Limited , an Oil Consultancy and Investments Company where she served as a Legal and Administrative Manager. In 1992, she went on to operate her own legal practice under the name of A.I. Durosinmi-Etti & Co. She remained a consultant to Udo Udoma & Belo-Osagie till date.
Aniola is an experienced lawyer called to the Nigerian Bar in 1982. She holds a Master’s degree in Law from the University of Cambridge in England, which she obtained in 1984. Her undergraduate study was at the University of Lagos where she graduated with an LL.B (Second class upper division) in 1981. She was awarded the prize for the best student in Jurisprudence in her graduating class.
In 2002 Aniola joined Linkage Assurance Plc as Legal Adviser & Head of Corporate Services. She successfully piloted the company through landmark transformational phases of growth including an IPO in 2003 and subsequently a secondary offering in 2005. In August 2006, as a reflection of her strong performance and dedication, Aniola was appointed the Acting Managing Director of the company. In this capacity, she steered the company through the challenges of recapitalization and a subsequent merger with Central Insurance Company Ltd. Aniola was appointed the Deputy Managing Director of the company following a successful merger. As part of the new executive management, she ensured a seamless integration and stabilization of the post-merger entity prior to her resignation in 2013.
Aniola served on the board of directors of Stanbic IBTC Pensions Limited, one of Nigeria’s largest pension managers, from 2009-2013. She also served on the board of Mediplan Limited, a health management company, providing healthcare services to corporate organizations and members of the public.
She is an Alumni of The Lagos Business School having undergone
Aniola Durosinmi-Etti (Independent Non-Executive Director)
38Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Profile of Directors
Olusola AdeeyoAppointed on 20 June, 2019
Education & Certifications: Mr. Adeeyo holds an M.A. in International Relations from North Eastern University, Boston, USA in addition to a B.A. in Political Science from the University of New York, Albany, USA.
He previously served as an independent director and the Chairman of the Corporate Governance and Renumeration Committee of the Central Securities and Clearing Systems PLC. He is the Chairman of AXA Mansard Insurance Plc and sits on the boards of several other reputable companies in Nigeria.
Mr. Adeeyo is a tested, trusted and seasoned professional in the finance, banking and business fields. He is Founder and CEO of Astral Waters Limited, a leader in quality water delivery. He is also the founder of Protea Hotel Oakwood Park Lekki, a 4-Star Hotel which is part of an international hotel brand managed by Protea Hotel Group of South Africa. Previously, he was the Managing Director of Asset & Investment Limited, a financial services company which he founded and managed.
Olusola Adeeyo (Independent Non-Executive Director)
He was also a part of the founding management team/owner group of IBTC Ltd now Stanbic IBTC Bank Plc. Prior to this, he worked in the Treasury Unit at Nigeria International Bank (NIB) a subsidiary of Citibank New York before joining other associates to start IBTC Ltd.
39Ardova Plc (Formerly Forte Oil Plc)
ardova plc
ardova plc
3
4
7
RESIGNED
Femi Otedola (CON) 20 June, 2019
Akin Akinfemiwa
Julius B. Omodayo-Owotuga, FCA, CFA
Christopher Adeyemi
Anil Dua
Mairo Mandara
Nicolaas A. Vervelde
1
2
5
6
The names of the directors who resigned during the year are as follows:
NAMES
20 June, 2019
20 June, 2019
20 June, 2019
20 June, 2019
20 June, 2019
20 June, 2019
6 Salamatu Suleiman 20 June, 2019
40Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Profile of Directors
Directors’Report
07 ardova plc
The Federal Government of Nigeria (FGN) acquired 60% share capital held originally by BP, for the Nigerian National Petroleum Corporation (NNPC). This step transformed the Company into an entirely Nigerian concern necessitating the subsequent change of name to African Petroleum Plc (AP) in 1979.
The Company was incorporated in 1964 as British Petroleum (BP) Nigeria Limited with the marketing of BP Petroleum Products as the main focus.
2007
1989
Legal Form
In accordance with the provisions of the Companies
and Allied Matters Act Cap C20, Laws of the Federation
of Nigeria, 2004, the Board of Directors of Ardova Plc
("the Company") is pleased to present its report on the
affairs of the Company together with the audited
financial statements and the auditor's report for the
year ended 31st December 2019.
1964
1978
1979
In March 1989, FGN sold of its share-holding to 20%the Nigerian public, thus making AP the first public company privatized under the Privatization and Commercialization Policy. The FGN, under its privatization programme in year 2000 divested its remaining shareholding in AP, thus making AP a 40%privately owned Company, with over 153,000 shareholders.
The Company changed from a private to public company in 1978, when of the shares were sold 40%to Nigerian citizens in compliance with the provisions of the Nigerian Enterprises Promotion Decree of 1977.
In 2007, the Company was acquired by a majority shareholder, Zenon Petroleum and Gas Limited which led to the change of name from AP to Ardova Plc.
In June 2019, Ignite Investments and Commodities Limited became the majority shareholder in the Company after the former majority shareholder disposed off his majority shares in the Company. This led to the change of name from Forte Oil Plc to Ardova Plc.
The Company procures and
markets petroleum products which include Premium
Motor Spirit (PMS), Automotive Gas Oil (AGO), Dual
Purpose Kerosene (DPK), Fuel Oils, Liquefied
Petroleum Gas (LPG) and Aviation Turbine Kerosene
(ATK) amongst others.
Principal Activity
The Company manufactures and distributes a wide
range of lubricants foremost amongst them are the
SUPER V and VISCO 2000 brands and has also
obtained exclusive rights for the distribution of
Chevron's Havoline Motor Oils.
T h e C o m p a n y i s a m a j o r
marketer of refined petroleum
p r o d u c t s w i t h a s t r o n g
presence in the thirty-six (36)States of Nigeria and the
Federal Capital Territory, Abuja.
During the period, the Company divested from its subsidiaries AP Oil and Gas Ghana, Forte Upstream Service Limited and Amperion Power Distribution Company Limited.
Further, the Company develops clean energy hubs and
mini-grids and provides renewable energy solutions
through its solar brand, which distributes low cost solar
power solutions to domestic customers.
2019
ardova plc
36States + FCT
42Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Directors’ Report
The following is a summary of the Company's operating results for the year ended December 31, 2019:
Operating Results:
Dividend :The Board of Directors, pursuant to the powers vested in it by the provisions of section 379 of the
Companies and Allied Matters Act (CAMA) of Nigeria on the 10th of June, 2019 paid an interim dividend of
N1.15 per 50k ordinary share. This is the final dividend for the year ended 31 December, 2019.
Property, plant and equipment:Information relating to changes in property, plants and equipment during the year is given in Note 13 to the
financial statements.
ardova plc
3
4
7
COMPANY
N'000
Profit before income tax 4,654,147
Income tax expense 739,007
Profit after tax
Total Comprehensive income for the period
Retained earnings, at 1 January
Retained earnings, at 31 December
Basic earnings per share
3,915,140
3,915,140
6,418,039
8,829,683
3.00
1
2
5
6
43Ardova Plc (Formerly Forte Oil Plc)
ardova plc
Directors Interests The Directors of the Company who held office during the year together with their direct and
indirect interest in the share capital of the Company were as follows:
1
2
Abdulwasiu O. Sowami
DIRECT HOLDING31/12/19
Olumide Adeosun
Moshood Olajide
Mohammed Aminu Umar
Olusola Adeeyo
Aniola Durosinmi-Etti
Mr. Femi Otedola, Con
Mr. Akin Akinfemiwa
Mr. Julius Omodayo-owotuga
Mr. Nicolaas Vervelde
Mr. Anil Dua
Mrs. Salamatu Sulieman
Dr. Mairo Mandara
Mr. Christopher Adeyemi
INDIRECT HOLDING 31/12/19
DIRECT HOLDING 31/12/18
INDIRECT HOLDING 31/12/18
NIL
NIL
NIL
NIL
NIL
NIL
NIL
24,000
NIL
96,582
NIL
NIL
NIL
NIL
970,666,694
NIL
NIL
NIL
NIL
NIL
7,133,272
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
186,260,357 838,472,441
24,000 NIL
NIL
NIL
NIL
NIL
NIL
NIL
NIL
96,582
NIL
NIL
NIL
NIL
3
4
5
6
7
8
9
10
11
12
13
14
44Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Directors’ Report
Ignite Investments and Commodities Limited :
970,666,694 Number of shares
74.06% % Holding
For the purpose of section 277(1) and (3) of
Companies and Allied Matters Act of Nigeria,
(CAMA), all contracts with related parties during the
year were conducted at arm's length. Information
relating to related parties transactions are
contained in Note 33 to the financial statements.
Acquisition of Share:
According to the Register of Members, the
shareholders under-mentioned held more than 5%of the issued share capital of the Company as at 31
December 2019:
Major Shareholding:
Contracts:
The Company did not purchase any of its own shares
during the year.
The Directors did not partake in any share option
scheme during the year under review.
Share Options Scheme:
ardova plc
45Ardova Plc (Formerly Forte Oil Plc)
ardova plc
Share Capital History
AUTHORIZED CAPITAL ISSUED AND FULLY PAID CAPITAL
FROM (N) TO (N) DATE FROM (N) TO (N) CONSIDERATION (N)
06/08/86
DATE
22/06/78
28/08/82
04/08/84
17/07/80
12/07/88
29/07/93
29/07/93
28/11/97
26/11/13
19/02/99
15/11/02
6,000,000
7,500,00
11,250,000
22,500,000
30,000,000
36,000,000
43,200,000
72,000,000
86,400,000
108,000,000
144,000,000
5,000,000,000
7,500,000
11,250,000
30,000,000
36,000,000
43,200,000
72,000,000
86,400,000
108,000,000
144,000,000
5,000,000,000
22,500,000
2,000,000,000
28/02/79
17/07/80
24/08/82
10/08/84
16/09/86
03/08/88
24/09/90
10/01/94
28/11/99
13/09/04
25/11/04
30/09/05
28/10/06
20/04/09
20/04/09
6/12/13
6,000,000
7,500,00
11,250,000
22,500,000
30,000,000
36,000,000
43,200,000
72,000,000
86,400,000
108,000,000
216,000,000
234,263,450.50
281,116,141
394,393,919
443,271,555
543,535,383
7,500,000
11,250,000
30,000,000
36,000,000
43,200,000
72,000,000
86,400,000
108,000,000
22,500,000
216,000,000
234,263,450.50
281,116,141
394,393,919
443,271,555
543,535,383
543,535,383
Bonus (1:2)
Bonus (1:1)
Bonus (1:3)
Bonus (1:5)
Bonus (2:3)
Rights Issue
Bonus (1:4)
Rights Issue
Rights Issue
Bonus (1:5)
Placement
Rights Issue
Public Offer
-
-
Underwriting of 2008/2009
Hybrid Offer 546,095,528 543,535,383 11/07/14
15/04/15 546,095,528 655,314,633 Bonus (1:5)
46Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Directors’ Report
The analysis of the distribution of the shares of the Company at
the end of the 2019 financial year is as follows:
Analysis Of Shareholding
RANGE NO OFHOLDERS
HOLDERS’ %
1
UNITS UNITS %
1,001
5,001
10,001
100,001
500,001
1,000,001
10,000,001
100,000,001
1,000
10,000
100,000
500,000
1,000,000
10,000,000
100.000.000
1,000,000,000
5,000
132,740
3,209
2,541
210
25
18
1
3
23,559
81.78%
1.98%
1.57%
0.12%
0.02%
0.01%
0.00%
0.00%
14.52%
44,358,268
22,305,181
61,634,867
42,260,866
18,433,970
77,966,862
29,400,929
966,105,654
44,162,671
3.38%
1.70%
4.70%
3.24%
1.41%
5.95%
2.24%
73.71%
3.67%
162,304 100.00% 1,310,629.268 100.00%
ardova plc
47Ardova Plc (Formerly Forte Oil Plc)
ardova plc
1
4
5
8
AMOUNT
Donation to Capital Market Correspondence Association of Nigeria 500,000
Donation to National Association of Energy Correspondents Agency 500,000
Donation to Photojournalist Association of Nigeria
Donation to Nigerian Guild of Editors
Donation to Government Of Enugu State
Diesel supply to Maouagwu Community Masha
Diesel supply to Lagos State Motherless Babies Home Lekki
500,000
500,000
3,000,000
282,000
470,000
2
3
6
7
The Company identifies with the aspirations of the community as well as the environment within
which it operates and made charitable donations to the under-listed organizations amounting to
N12, 484,000 during the year under review as follows:
Donations and Charitable Gifts
The details of the borrowings and
maturity dates are stated in Note 25
to the financial statements.
Ÿ Borrowing and Maturity Dates
DISCLOSURES
A r d o v a P l c h a s a s t r u c t u r e d
e n t e r p r i s e r i s k m a n a g e m e n t
framework that puts in place and
u n d e r t a k e s a t h o r o u g h r i s k
assessment of all aspects of the
business. The risk assessment is
based on two criteria, 'Business
Impact' and 'Likelihood of Occurrence'
and for every identified business risk,
m i t i g a t i n g m e a s u r e s a r e
implemented by the Company.
Ÿ Risk Management and Compliance System
The Directors are of the view that an
effective internal audit function
The Directors are responsible for the
total process of risk management as
well as expressing their opinion on
the effectiveness of the process.
The risk management framework of
the Company is integrated into the
day-to-day operat ions of the
company and provides guidelines and
standards for administering the
a c c e p t a n c e a n d o n - g o i n g
management of key risks such as
operational, reputational, financial,
market and compliance risk.
exists in the company and that risk
management control and compliance
systems are operating efficiently and
effectively in all respects.
Ÿ Related Party Transactions The Company has contractual
relationship with related companies
in the ordinary course of business.
The details of the outstanding
amounts arising from the related
party transactions are stated in Note
31 to the financial statements.
ORGANIZATION/BODY
Donation to Five Cowries Art Education Initiatives 6,732,000
48Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Profile of Directors
By Order Of The Board
Oladeinde Nelson-cole Ag. Company Secretary
FRC/2019/NBA/00000019
918 FO House, 13 Walter
Carrington Crescent Victoria
Island, Lagos.
27 February, 2020
Health, Safety and Welfare of Employees
The Company cons iders hea lth , safety and
environmental issues as important as our core
businesses and assumes the responsibility of providing
a healthy, safe and secure work environment for our
employees and contractors as required by law. Our
objective is to minimize the number of cases of
occupational accidents, illnesses, damage to property
and environmental degradation.
Employment of Physically Challenged Persons
In the event of any employee becoming disabled in the
course of employment, the Company will arrange
appropriate training and facilities upgrade to ensure
the continuous employment of such a person without
subjecting him/her to any disadvantage in his/her
career development.
Our vision is to achieve leadership role in sustainable
health, safety and environment practices through the
establishment and implementation of effective
business management principles that are consistent
with local and international regulations and standards.
As at 31 December 2019, the Company had no disabled
persons in its employment.
The Company is an equal opportunity employer and will
not discriminate on any grounds.
The Company operates a non-discriminatory policy in
the consideration of applications for employment,
including those received from physically challenged
persons.
It is the policy of Ardova Plc to carry out its activities in
a manner that safeguards the health and safety of its
workers and other stakeholders, the protection of the
Company's facilities and the environment and
compl iance with al l regulatory and industry
requirements.
The Company encourages participation of employees
in arriving at decisions in respect of matters affecting
their well-being. To this end, the Company provides
opportunities for employees to deliberate on issues
affecting the Company and employees' interests, with
a view to making inputs to decisions thereon.
Post Year End Events
In accordance with Section 357(2) of the Companies
and Allied Matters Act (Cap C 20) Laws of the
Federation of Nigeria 2014, Messrs. Deloitte & Touche
have indicated their willingness to continue in office as
External Auditors of the Company. A resolution will be
proposed at the Annual General meeting authorising
the Directors to determine their remuneration.
Employee Involvement and Training
All post year end events have been reviewed and
considered for materiality. Appropriate disclosures and
adjustments, where necessary, were also made with
respect to the events.
Auditors Messrs. PKF Professional Services resigned their
appointment as Auditors to the Company during the
year; Messrs. Deloitte & Touch were appointed on 13
November, 2019 by the Directors to fill the vacancy
created in line with Section 357(6); and hold office till
the end of 2019 Annual General Meeting.
The Company places a high premium on the
development of its human capital. Consequently, the
Company sponsored its employees for various training
courses in the year under review.
ardova plc
49Ardova Plc (Formerly Forte Oil Plc)
Report of the Statutory Audit Committee
03 ardova plc
ardova plc
Report of the Statutory Audit Commi�ee
To the Members of Ardova Plc
In accordance with the provision of Sec�on 359(6) of the Companies and Allied Ma�ers Act, Cap C 20, Laws of the Federa�on of Nigeria, 2004; we, the members of the Audit Commi�ee of Ardova Plc, having carried out our statutory func�ons under the Act hereby confirm that the accoun�ng and repor�ng policies of the Company are in accordance with legal requirements and agreed ethical prac�ces.
In our opinion:
1.
The scope and planning of the audit for the year ended 31 December, 2019 were adequat e.
2.
The External Auditor’s findings on Management le�ers and Management’s responses thereto were sa�sfactory.
3.
We have kept under review the effec�veness of the Company’s system of accoun�ng and internal controls.
Dated this 27th day of February 2020.
Olusola Adeeyo
Chairman, Statutory Audit Commi�ee
FRC/2013/NIM/00000001919
S/N
NAME
REPRESENTATION
POSITION
1.
MR. OLUSOLA ADEEYO
INDEPENDENT NON-EXECUTIVE DIRECTOR
CHAIRMAN
2.
MRS. ANIOLA DUROSINMI-ETTI
INDEPENDENT NON-EXECUTIVE DIRECTOR
MEMBER
3.
MR. MOHAMMED AMINU UMAR
NON-EXECUTIVE DIRECTOR
MEMBER
4.
MR. SAFIU OKUNOLA
SHAREHOLDER REPRESENTATIVE
MEMBER
5
MRS. ADEBISI OLUWAYEMISI BAKARE
SHAREHOLDER REPRESENTATIVE
MEMBER
6.
MR. JOB IHEJIRIKA ONWUGHARA
SHAREHOLDER REPRESENTATIVE
MEMBER
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Report of the Statutory Audit Committe 51
ardova plc
Statement of Directors' responsibili�es For the prepara�on and approval of the financial statements
The Directors of Ardova Plc ("the company") are responsible for the prepara�on of the financial statements that give a true and fair view of the financial posi�on of the Company as at 31 December 2019 and the results of its opera�ons, cash flows and changes in the equity for the year ended, in compliance with the Interna�onal Financial Repor�ng Standards (“IFRS”) and in the manner required by the Companies and Allied Ma�er Act of Nigeria and the Financial Repor�ng Council of Nigeria Act, 2011.
In preparing the financial statements, the Directors are responsible for:
•
Properly selec�ng and applying accoun�ng policies
•
Presen�ng informa�on, including accoun�ng policies, in a manner that provides relevant, reliable, comparable and understandable informa�on, and
•
Making an assessment of the Company’s ability to con�nue as a going concern.
The Directors are responsible for:
•
Designing, implemen�ng and maintaining an effec�ve and sound system of internal controls throughout the Company;
•
Maintaining adequate accoun�ng records that are sufficient to s how and explain the Company’s transac�ons and disclose with reasonable accuracy at any �me the financial posi�on of the Company, and which enable them to ensure that the financial statements of the Company comply with IFRS;
•
Maintaining statutory accoun�ng records in compliance with legisla�on of Nigeria and IFRS;
•
Taking such steps as are reasonably available to them to safeguard the assets of the Company; and preven�ng and detec�ng fraud and other irregulari�es.
Going Concern:
The Directors have assessed the Company’s ability to con�nue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead.
The financial statements of the Company for the year ended 31 December 2019
were approved by Directors on 28 February, 2020.
On behalf of the Directors of the Company
__________________________
___________________________
Adeosun Olumide
Moshood Olajide
Managing Director/CEO
Execu�ve Director, Finance
FRC/2020/003/00000020356
FRC/2018/MULTI/00000017818
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Report of the Statutory Audit Committe 52
Independent Auditor’s Report
04 ardova plc
Independent Auditor’s Report
To the Shareholders of Ardova Plc (formerly Forte Oil Plc) Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of Ardova Plc (“the Company”) which comprise the statement of financial posi�on as at 31 December 2019, the statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows for the year then ended and the notes to the financial statements including a summary of significant accoun�ng policies. In our opinion, the financial statements give a true and fair view of the financial posi�on of Ardova Plc as at 31 December 2019 and the financial performance and statement of cash flows for the year then ended in accordance with the I nterna�onal Financial Repor�ng Standards, the Companies and Allied Ma�ers Act Cap C20 LFN 2004 and the Financial Repor�ng Council of Nigeria Act , 2011. Basis for Opinion We conducted our audit in accordance with Interna�onal Standards on Audi�ng (IS As). Our responsibili�es under those standards are further described in the Auditor’s Responsibili�es for the Audit of the Financial Statements sec�on of our report. We are independent of the Company in accordance with the requirements of the Ins�tute of Chartered Accountants of Nigeria Professional Code of Conduct and Guide for Accountants (ICAN Code) and other independence requirements applicable to performing audits of financial statements in Nigeria. We have fulfilled our other ethical res ponsibili�es in accordance with the ICAN Code and in accordance with other ethical requirements applicable to performing audits in Nigeria. The ICAN Code is consistent with the Interna�onal Ethics Standards Board for Accountants Code of Ethics for Profes sional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other Ma�ers The consolidated and separate financial statements of Forte Oil Plc (now Ardova Plc) and its subsidiaries for the year ended 31 December 2018 were audited by another who expressed an unmodified opinion on those statements on 26 March, 2019. Key Audit Ma�er Key audit ma�er is the ma�er that, in our professional judgment, was of most significance in our audit of the financial statements of the current year. This ma�er was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this ma�er.
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 54
Other Informa�on The Directors are responsible for the other informa�on. The other informa�on comprises the Directors’ Report and Audit Commi�ee’s Report, which we obtained prior to the date of this auditor’s report. The other informa�on does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other informa�on and we do not express any form of assurance conclusion thereon. In connec�on with our audit of the financial statements , our responsibility is to r ead the other informa�on and, in doing so, consider whether the other informa�on is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Based on the work we have performed on the other informa�on that we obtained prior to the date of this auditor’s report, if we conclude that there is a material misstatement of this other informa�on, we are required to report that fact. We have nothing to report in this regard.
Key Audit Ma�er How the ma�er was addressed in the audit
Revenue Recogni�on Our review of the en�ty business processes, reveals that revenue recogni�on is triggered only when the customers acknowledges receipt of dispatched products from the company. This is done through the use of an electronic device that synchronizes with the company’s financial system applica�on. A manual waybill is also signed in addi�on to this. However, whereas customers signed the manual waybill upon receipt of products; in some cases, the device is not ac�vated, thus making the transac�on process incomplete in the financial system. Consequently, a significant number of delivered products remained in Goods-in-Transit account at year end. Following from the above, we iden�fied significant risks around the completeness and cut-off of revenue balances recorded in the year i.e. revenue earned by the Company within the year may not have been fully recorded due to customers’ omission to electronically confirm product delivery.
In addressing this ma�er, we performed procedures that involved
assessing the design and implementa�on of controls surrounding revenue
recogni�on, tested the opera�ng effec�veness of these controls and
further carried out detailed substan�ve procedures which included the
following:
• Evaluated that the revenue recogni�on policies and methods are
appropriate and applied consistently in compliance with IFRS 15
• Obtained an understanding of the controls put in place by management to iden�fy product deliveries (performance obliga�on) which are yet to be confirmed by the customer;
• Performed test of control to confirm the design, implementa�on and opera�ng effec�veness of the controls around revenue completeness and cut-off across individual product lines.
• In conjunc�on with our specialists, we tested the design, implementa�on and opera�ng effec�veness of the ap plica�ons involved in the revenue recogni�on process and also the integrity of the IT infrastructure.
• Performed substan�ve tests to ensure that revenue earned in the
current year has been completely captured appropriately by
performing the following procedures:
▪ Performed a sales volume reconcilia�on taking into considera�on the
opening and closing inventory ledgers and purchases made in the year
to arrive at expected sales for the year.
We selected samples of sales made in the year and traced to support
documents ensuring that performance obliga�on to customers had
occurred before sales were recorded, and that they were sold at
approved prices.
We selected samples and tested early and late cut-off of sales. We
focused on sales made before period end, sales invoices a�er period
end to ensure they were recorded in the appropriate period.
Based on the procedures followed, we considered the revenue
recogni�on method adopted by the management appropriate.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 55
ardova plc
Responsibili�es of the Directors for the Financial Statements The Directors are responsible for the prepara�on of the financial statements that give a true and fair view in accordance with Interna�onal Financial Repor�ng Standards and the requiremen ts of the Companies and Allied Ma�ers Act CAP C20 LFN 2004, Financial Repor�ng Council Act, 2011 and for such internal control as the Directors determine is necessary to enable the prepara�on of financial statements that are free from material misstatem ent, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to con�nue as a going concern, disclosing, as applicable, ma�ers related to going concern and using the going co ncern basis of accoun�ng unless the Directors either intend to liquidate the Company or to cease opera�ons, or have no realis�c alterna�ve but to do so.
Auditor’s Responsibili�es for the Audit of Financial Statements Our objec�ves are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scep�cism throughout the audit. We also:
• Iden�fy and assess the risks of material misstatement of the financial statements , whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detec�ng a material misstatement resul�ng from fraud is higher than for one resul�ng from error, as fraud may involve collusion, forgery, inten�onal omissions, misrepresenta�ons, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effec�veness of the Company’s internal control.
• Evaluate the appropriateness of accoun�ng policies used and the reasonableness of accoun�ng es�mates and related disclosures made by the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accoun�ng and b ased on the audit evidence obtained, whether a material uncertainty exists rela�ng to events or condi�ons that may cast significant doubt on the Company’s ability to con�nue as a going concern. If we conclude that a material uncertainty exists, we are required to draw a�en�on in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or condi�ons may cause the Company to cease to con�nue as a going concern.
• Evaluate the overall presenta�on, structure and content of the financial statements, including the disclosures, and whether the Company’s financial statements represent the underlying transac�ons and events in a manner that achieves fair presenta�on.
We communicate with the audit commi�ee and the Directors regarding, among other ma�ers, the planned scope and �ming of the audit and significant audit findings, including any significant deficiencies in internal control that we iden�fy during our audit
We also provide the audit commi�ee and Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all rela�onships and other ma�ers that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the ma�ers communicated with the audit commi�ee and/or the Directors, we deter mine those ma�ers that were of most significance in the audit of the financial statements of the current year and are therefore the key audit ma�er . We describe this ma�er in our auditor’s report unless law or regula�on precludes public disclosure about the ma�er or when, in extremely rare circumstances, we determine that a ma�er should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the benefits derivable by the public from such communica�on.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 56
ardova plc
Report on Other Legal and Regulatory Requirements
In accordance with the Sixth Schedule of Companies and Allied Ma�ers Act CAP C20 LFN 2004 we expressly s tate that:
i) We have obtained all the informa�on and explana�on, which to the best of our knowledge and belief were necessary for the purpose of our audit.
ii) The Company has kept proper books of account, so far as appears from our examina�on of those books.
iii)
The Company’s financial posi�on and its statement of profit or loss and other comprehensive income are in agreement with the books of account and returns.
Olufemi Abegunde (FRC/2013/ICAN/00000004507)
For: Deloi�e & Touche
Chartered Accountants
Lagos, Nigeria
28 February, 2020
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 57
ardova plc
Statement of profit or loss and other comprehensive income
31-Dec-19 31-Dec-18
Notes N’000 N’000
Revenue 7 176,550,766 134,706,306
Cost of sales 7 (165,269,049) (123,376,240)
Gross profit
11,281,717 11,330,066
Other income
8
4,317,155 1,859,809
Distribu�on expenses
9
(2,280,966)
(2,245,688)
Administra�ve expenses
9
(8,393,460)
(7,995,101)
Opera�ng profit
4,924,446
2,949,086
Finance income
10
4,555,095
1,181,038
Finance cost
10
(4,825,394)
(3,101,580)
Net finance cost
(270,299)
(1,920,542)
Profit before income tax
4,654,147
1,028,544
Income tax expense
11
(739,007)
(397,073)
Profit a�er tax
3,915,140
631,471
Other Comprehensive Income:
Items that may be reclassified subsequently to profit or loss
Total other comprehensive income net of taxes
-
-
Total comprehensive income for the period
3,915,140
631,471
Earnings per share
Basic/diluted in (N)
12
3.00
0.48
The accompanying notes and significant accoun�ng policies form an integral part of these financial statements.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Statement of financial posi�onAt 31 December 2019
Note
31-Dec-19
31-Dec-18
N’000
N’000Assets
Non-current assets
Property, plant and equipment
13
11,116,680
8,789,910Right of use assets
14
1,376,470
-
Investment property
15
1,506,546
1,531,995
Intangible assets
16
72,753
143,811Deferred tax assets
17
783,157 577,571
Long term investments (employee benefits) 24 36,735 563,910
Total non-current assets
14,892,341 11,607,197
Current assets Inventories
18
12,834,373
9,528,146Trade and other receivables
19
16,677,971
28,611,871Short term investments (employee benefits)
24
610,302
-Restricted cash
20
19,707
-Cash and cash equivalents
21
1,984,260
1,154,269
32,126,613
39,294,286Assets classified as held for sale
22.1
-
10,296,796
Total current assets
32,126,613
49,591,082
Total assets
47,018,954
61,198,279
Equity
Share capital
23
655,314
655,314Share premium
23
8,071,943
8,071,943Other reserves
23
(5,041)
(7,752)Retained earnings
23
8,829,683
6,418,039
Total equity a�ributable to equity holders of the Company
17,551,899
15,137,544Treasury stock
23
(1,388,574)
(1,388,574)
Total equity
16,163,325
13,748,970
Liabili�es
Non-current liabili�es
Deferred tax liabili�es
17
1,463,956
1,490,741
Loans and borrowings
25
-
634,369Medium term bond
25
2,735,388
5,041,359
Total non-current liabili�es
4,199,344
7,635,015
Current liabili�es
Trade and other payables
26
22,823,177
26,473,273Current income tax liabili�es
11
976,632
296,217Loans and borrowings
25
-
1,437,094Employee benefits
24
262,902
-Medium term bond
25
2,476,801
2,134,164Bank overdra�
21
116,773
9,473,546
Total current liabili�es
26,656,285
39,814,294
Total liabili�es
30,855,629
47,449,309
Total equity and liabili�es 47,018,954 61,198,279
The financial statements were approved by the Board on 28 February 2020 and signed on its behalf by:
________________________ ______________________________Olumide Adeosun Moshood OlajideChief Execu�ve Officer Execu�ve Director, FinanceFRC/2020/003/00000020356 FRC/2018/MULTI/00000017818
The accompanying notes and significant accoun�ng policies form an integral part of these financial statements.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 59
ardova plc
Employee benefits 24 - 468,546
Stat
em
en
t o
f ch
ange
s in
eq
uit
y
Shar
e
cap
ital
Shar
e
pre
miu
m
R
ese
rve
s
Re
tain
ed
e
arn
ings
Tota
l
Tre
asu
ry
shar
es
Tota
l e
qu
ity
N
’00
0
N
’00
0
N
’00
0
N
’00
0
N
’00
0
N
’00
0
N
’00
0
Bal
ance
at
1 J
anu
ary
20
19
6
55
,31
4
8
,07
1,9
43
(7,7
52
)
6,4
18
,03
9
1
5,1
37
,54
4
(1
,38
8,5
74
)
13
,74
8,9
70
Ch
ange
s in
eq
uit
y fo
r 2
01
9:
A
dju
stm
ent
2,7
11
(2,7
11
)
-
P
rofi
t o
r lo
ss f
or
the
year
-
-
-
3
,91
5,1
40
3,9
15
,14
0
-
3
,91
5,1
40
D
ivid
end
-
-
-
(1
,50
0,7
85
)
(1,5
00
,78
5)
-
(1
,50
0,7
85
)
Bal
ance
at
31
De
cem
be
r 2
01
9
65
5,3
14
8,0
71
,94
3
(5
,04
1)
8
,82
9,6
83
17
,55
1,8
99
(1,3
88
,57
4)
1
6,1
63
,32
5
Shar
e
cap
ital
Shar
e
pre
miu
m
R
ese
rve
s
Re
tain
ed
e
arn
ings
Tota
l
Tre
asu
ry
shar
es
Tota
l e
qu
ity
N
’00
0
N
’00
0
N
’00
0
N
’00
0
N
’00
0
N
’00
0
Bal
ance
at
1 J
anu
ary
20
18
6
55
,31
4
8
,07
1,9
43
(7,7
52
)
5,8
05
,85
9
1
4,5
25
,36
4
(1
,38
8,5
74
)
13
,13
6,7
90
Ch
ange
s in
eq
uit
y fo
r 2
01
8:
Effec
t o
f re
tro
spec
�ve
ad
op
�o
n o
f IF
RS
9
-
-
-
(1
9,2
91
)
(19
,29
1)
-
(1
9,2
91
) P
rofi
t o
r lo
ss f
or
the
per
iod
-
-
-
6
31
,47
1
6
31
,47
1
-
6
31
,47
1
Bal
ance
at
31
De
cem
be
r 2
01
8
65
5,3
14
8,0
71
,94
3
(7
,75
2)
6
,41
8,0
39
15
,13
7,5
44
(1,3
88
,57
4)
1
3,7
48
,97
0
The
acco
mp
anyi
ng
no
tes
and
sig
nifi
can
t ac
cou
n�
ng
po
licie
s fo
rm a
n in
tegr
al p
art
of
thes
e fi
nan
cial
sta
tem
ents
.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 60
ardova plc
Statement of cash flows 31-Dec-19 31-Dec-18
Notes N’000 N’000
Cash flows from opera�ng ac�vi�es
Profit for the period 3,915,140 631,471
Adjustment for:
Deprecia�on of property, plant and equipment 13b 2,054,952 1,324,413
Deprecia�on of investment property 15
25,449 25,449
Amor�za�on of intangible asset 16
71,058 72,236
Gain on disposal of subsidiaries 8
(2,674,891) -
(Profit)/Loss on disposal of property, plant and equipment 13
30,067 (6,537)
Finance income
10
(4,555,095)
(1,181,038)
Finance cost on loans and borrowings
10
4,825,394
3,101,580
Current service cost
24
254,680
97,347
Increase in impairment allowance for trade receivables
9
69,436
443,944
Provisions no longer required
(23,055)
77,402
Effect of retrospec�ve adop�on of New standard
-
(19,291)
Income tax expense
11
739,007
397,073
4,732,142
4,964,049
Changes in:
Inventories
18
(3,306,227)
(4,909,760)
Trade and other receivables
19a
9,204,260
4,675,901
Trade and other payables
26
(3,912,260)
(303,620)
Non trade payables and other creditors
26
(295,696)
83,745
Cash generated from opera�ng ac�vi�es
6,422,219
4,510,315
Employee benefit paid
24
(530,084)
(102,173)
Income taxes paid
(209,058)
(241,852)
Net cash generated from opera�ng ac�vi�es
5,683,077
4,166,290
Cash flows from inves�ng ac�vi�es
Proceeds from sale of property, plant and equipment
13
212,821
32,263
Acquisi�on of property, plant and equipment
13
(816,036)
(371,798)
Acquisi�on of intangibles
-
(19,397)
Acquisi�on of ROU assets
14
(245,542)
-
Proceeds from disposal of subsidiaries
8
12,960,887
-
Interest received
539,103
1,106,542
Net cash generated from inves�ng ac�vi�es
12,651,233
747,611
Cash flows from financing ac�vi�es
Loan repayment
25
(5,438,107)
(10,442,422)
Dividend paid
(1,500,785)
-
Interest paid
10
(1,188,948)
(3,101,580)
Net cash used in financing ac�vi�es
(8,127,840)
(13,544,002)
Net
increase
/
(decrease) in cash and cash equivalents
10,206,470
(8,630,100)
Restricted cash
20
(19,707)
-
Cash and cash equivalents as at 1 January
21
(8,319,276)
310,823
Cash and cash equivalents at 31 December
21
1,867,487
(8,319,277)
The accompanying notes and significant accoun�ng policies form an integral part of these financial statements.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Independent Auditor’s Report 61
ardova plc
ardova p
lc
Operating segment
04 ardova plc
Op
era
�n
g se
gme
nt
The
Co
mp
any
has
fo
ur
rep
ort
able
seg
men
ts, a
s d
escr
ibed
bel
ow
, wh
ich
are
th
e C
om
pan
y's
stra
tegi
c b
usi
nes
s u
nit
s. T
he
stra
tegi
c b
usi
nes
s u
nit
s o
ffer
diff
eren
t p
rod
uct
s, a
nd
are
man
aged
sep
arat
ely.
Fo
r ea
ch o
f th
e st
rate
gic
bu
sin
ess
un
its,
th
e C
om
pan
y's
CEO
rev
iew
s in
tern
al m
anag
emen
t re
po
rts
on
at
leas
t m
on
thly
bas
is. T
he
follo
win
g su
mm
ary
des
crib
es t
he
op
era�
on
s in
eac
h o
f th
e C
om
pan
y's
rep
ort
able
seg
men
ts.
Segm
en
t
De
scri
p�
on
Fue
ls
This
seg
men
t is
res
po
nsi
ble
fo
r th
e sa
le a
nd
dis
trib
u�
on
of
pet
role
um
pro
du
cts
(wh
ite
pro
du
cts)
an
d A
via�
on
Tu
rbin
e K
ero
sen
e (A
TK)
in r
etai
l ou
tlet
s an
d t
o in
du
stri
al c
ust
om
ers.
Lub
rica
nts
an
d G
reas
es
This
seg
men
t m
anu
fact
ure
s an
d s
ells
lub
rica
nts
an
d g
reas
es.
Sola
r sy
ste
m
This
seg
men
t se
lls s
ola
r sy
stem
.
LPG
an
d C
ylin
de
r Sa
les
This
seg
men
t se
lls L
iqu
efied
Pet
role
um
Gas
an
d c
ylin
der
Sal
es.
As
at 3
1 M
arch
201
9,
the
sub
sid
iari
es
Fort
e U
pst
ream
Ser
vice
s, A
P O
il an
d G
as-
Gh
ana
and
Am
per
ion
Po
wer
Dis
trib
u�
on
Co
mp
any
Lim
ited
, wh
ich
had
bee
n p
revi
ou
sly
clas
sifi
ed a
s h
eld
fo
r sa
le a
t th
e en
d o
f Ju
ne
20
18
, wer
e d
isp
ose
d o
f. D
etai
ls o
f th
e p
rofi
t o
r lo
ss f
rom
dis
po
sal h
as b
een
incl
ud
ed
in N
ote
8.5
The
acco
un
�n
g p
olic
ies
of
the
rep
ort
able
seg
men
ts a
re t
he
sam
e as
des
crib
ed in
no
tes
2 t
o 5
.
Info
rma�
on
reg
ard
ing
the
resu
lts
of
each
rep
ort
able
seg
men
t is
incl
ud
ed b
elo
w:
31
DEC
EMB
ER 2
019
31
DEC
EMB
ER 2
018
Fue
ls
Lub
rica
nts
an
d g
reas
es
Sola
r sy
ste
m
LPG
an
d
Cyl
ind
er
Sale
s
TOTA
L
Fue
ls
Lub
rica
nts
an
d g
reas
es
Sola
r sy
ste
m
LPG
an
d
Cyl
ind
er
Sale
sTO
TAL
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
€
0
.61
€
0.3
9
€
(0
.00
)
(0.0
0)
€
0
.75
€
0.2
5€
0.0
0€
-
Rev
enu
e
15
9,2
45
,19
6
17
,249
,004
39
,097
17
,469
17
6,5
50
,766
12
0,8
44
,44
0
13
,720
,830
14
1,0
36
-1
34
,70
6,3
06
Co
st o
f Sa
les
(15
2,3
87,3
20
)
(12
,822
,179
)
(41
,102
)
(18
,448
)
16
5,2
69
,049
11
2,3
46
,53
6
10
,909
,732
11
9,9
72
-1
23
,37
6,2
40
Gro
ss P
rofi
t /
(lo
ss)
6,8
57,8
76
4,4
26,8
25
(2,0
05)
(97
9)
11
,28
1,7
178
,49
7,9
04
2,8
11
,09
82
1,0
64-
11
,330
,066
Oth
er in
com
e2
,61
8,6
45
1,6
94
,00
63
,02
71
,47
74
,317
,15
51
,394
,91
54
61
,43
63
,458
-1
,859
,80
9D
istr
ibu
�o
n e
xpen
ses
(1,3
85,
33
6)
(89
5,0
27
)(4
05
)(1
98
)(2
,280
,966
)(1
,684
,336
)(5
57
,177
)(4
,175
)-
(2,2
45,6
88)
Ad
min
istr
a�ve
exp
ense
s(5
,09
7,7
36
)(3
,29
3,5
04
)(1
,49
2)
(72
8)
(8,3
93,4
60)
(5,9
96,5
76)
(1,9
83,6
61)
(14
,86
4)-
(7,9
95,1
01)
(3,8
64,4
27)
(2,4
94,5
25)
1,1
305
51
(6,3
57,2
71)
(6,2
85,9
97)
(2,0
79,4
02)
(15
,58
1)-
(8,3
80,9
80)
Op
era
�n
g P
rofi
t2
,993
,44
91
,932
,30
0(8
75
)(4
28
)4
,924
,44
62
,211
,90
77
31
,69
65
,483
-2
,949
,08
6
Net
fin
ance
co
st(1
64
,21
2)
(10
6,0
16
)(4
8)
(23
)(2
70
,29
9)
(1,4
40,
46
7)
(47
6,5
05
)(3
,57
0)-
(1,9
20,
54
2)
Pro
fit
bef
ore
inco
me
tax
2
,829
,23
71
,826
,28
4(9
23
)(4
51
)4
,65
4,1
47
77
1,4
40
25
5,1
91
1,9
13-
1,0
28,5
44
Inco
me
tax
exp
ense
(44
9,2
24
)(2
89
,97
8)
13
16
4(7
39
,007
)(2
97
,81
7)
(98
,518
)(7
38
)-
(39
7,0
73)
Pro
fit
a�er
tax
2
,380
,01
31
,536
,30
6(7
92
)(3
87
)3
,915
,14
04
73
,62
31
56
,67
31
,175
-6
31
,47
1
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
63Operating Segments
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
64Operating Segments
ardova plc
Opera�ng Segment (cont’d)
The Company's CEO measures performance based on segment profit before income tax, as included in the internal management reports. Segment profit is used to measure performance as management believes that such informa�on is the most relevant in evalua�ng the results of these segments.
The measurement policies the Company uses for segment repor�ng are the same as those used in its financial statements. There have been no changes from prior years in the measurement methods used to determine
reported segment profit or loss.
Revenue of approximately NGN52 billion are derived from ten external customers. 90% of these revenues are a�ributable to the fuels segment.
The geographical loca�on of the company
opera�ons is Nigeria, opera�ons outside Nigeria are non-existent and do not cons�tute a segment.
There is no disclosure of assets and liabili�es per business segment because the assets and liabili�es of the Company are not directly related to a par�cular business segment.
Notes to the financial statements
05 ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 66
ardova plc
Notes to the financial statements
1.
The Company
1.1
General informa�on
The Company was incorporated on 11 December 1964 as Bri�sh Petroleum. It became African Petroleum through the na�onalisa�on policy of the Federal Government of Nigeria in 1979. The Company changed its name to Forte Oil Plc in December 2010 as a result of a restructuring and rebranding exercise. In June. 2019, Ignite Investments and Commodi�es Limited became the majority shareholder in Forte Oil Plc a�er the former majority shareholder disposed off his shares in the Company. The company's name was changed to Ardova Plc in December
2019.
During the period, the Company disposed off its Upstream Services, Power and a por�on of its Fuel segments. The Company disposed AP Oil and Gas Ghana, Forte Upstream Service Limited and Amperion Power Distribu�on Company Limited.
Principal ac�vi�es
The Company engages in the marke�ng of petroleum products, which is divided into fuels, lubricants and greases.
1.2
Statement of compliance
These financial statements have been prepared in accordance with Interna�onal Financial Repor�ng Standard (IFRS) as issued by the Interna�onal Accoun�ng Standard Board (IASB) and in compliance with the Financial Repor�ng Council of Nigeria Act. The financial statements for the year ended 31 December 2019, have been prepared in accordance with Interna�onal Financial Repor�ng Standard (IFRS).
1.3
Composi�on of Financial statements
This financial
statement is presented in Naira, which is the Company's func�onal currency.
Except as indicated in this financial statements, financial informa�on presented in Naira has been rounded to the nearest thousand.
* Statement of profit and loss and other comprehensive income
* Statement of financial posi�on
* Statement of changes in equity
* Statement of cash flows
* Segment informa�on.
The Directors also provided the following addi�onal statements in complian ce with Companies and Allied Ma�ers Act:
* Value added statement * Five-year financial summary 1.4 Financial Period
These financial statements cover the period from 1 January 2019 to 31 December 2019 with comparat ive figures for the financial year from 1 January 2018 to 31 December 2018.
Notes to the financial statements
2.0 Adop�on of new and revised IFRS standards
2.1 New and amended IFRS Standards that are effec�ve for the current year, adopted by the Company
2.1.1 Impact of ini�al applica�on of IFRS 16 Leases
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpreta�ons (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Opera�ng Leases-Incen�ves’ and SIC 27 ‘Evalua�ng the Substance of Transac�ons Involving the Legal Form of a Lease’).
The adop�on of this new Standard has resulted in the company recognising a right-of-use asset in connec�on with all former opera�ng leases except for those iden�fied as low-value or having a remaining lease term of less than 12 months and no related lease liability was recognised because future lease payment were made at the incep�on of all the opera�ng lease contract from the date of ini�al applica�on
The new Standard has been applied using the modified retrospec�ve approach; however,
in our case we have no
cumula�ve effect of adop�ng IFRS 16 to be recognised
in equity to the opening balance of retained earnings for the current period. Prior periods have not been restated.
For contracts in place at the date of ini�al applica�on, the Company has elected to apply the defini�on of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not iden�fied as lease under IAS 17 and IFRIC 4.
The Company has elected not to include ini�al direct costs in the measurement of the right-of-use asset for opera�ng leases in existence at the date of ini�al applica�on of IFRS 1 6, being 1 January2019. At this date, the Company has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transi�on.
Instead of performing an impairment review on the right-of-use assets at the date of ini�al applica�on, the Company has relied on its historic assessment as to whether leases were onerous immediately before the date of ini�al applica�on of IFRS 16.
On transi�on, for leases previously accounted for as opera�ng leases with a remaining lease term of less than 12 months and for leases of low-value assets the Company has applied the op�onal exemp�ons to not recognise right -of-use assets but to account for the lease expense on a straight line basis over the remaining lease term.
The Company has benefited from the use of hindsight for determining the lease term when considering op�ons to extend and terminate leases.
The Company recognises lease payments received under opera�ng leases as income on a straight-line basis over the lease term as part of ‘other income’.
The following is a reconcilia�on of the financial statement line items from IAS 17 to I FRS 16 at 1 January 2019:
31-Dec-19
31-Dec-18
1-Jan-18
N’000
N’000
N’000
Right of use asset
1,376,470
1,934,210
2,701,972
In the current year, the Company did not apply any other amendments to the IFRS Standards and Interpreta�ons issued by the IASB that are effec�ve for an annual period that begins on or a�er 1 January 2019.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 67
ardova plc
Notes to the financial statements
2.2 New Standards and interpreta�ons issued but not yet effec�ve.
2.2.1 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
IFRS 17 is effec�ve for annual periods beginning on or a�er January 1, 2021, well a�er the effec�ve date of IFRS 9 Financial Instruments, January 1, 2018. IFRS 9 will cover a majority of an insurer’s investments; therefore, the expected differing effec �ve dates created concerns rela�ng to temporary vola�lity and accoun�ng mismatches in profit or loss. Some companies have also expressed concerns about the need to implement two significant changes in accoun�ng on different dates, which will increase costs and complexity.
In September 2016, the IASB issued amendments to its exis�ng insurance contracts standard, IFRS 4. The amendments introduced two approaches that supplement exis�ng op�ons in the Standard that can be used to address
the temporary vola�lity as a result of the different effec�ve dates of IFRS 9 and the
forthcoming insurance contracts standard.
The amendments:
-
provide a repor�ng en�ty (whose predominant ac�vity is to issue insurance contracts) a temporary exemp�on from applying IFRS 9 un�l the earlier of: a) the applica�on of IFRS 17; or b) January 1, 2021 (to be applied at the repor�ng en�ty level) (referred to as the ‘ temporary exemp�on’); and
-
give en��es issuing insurance contracts the op�on to remove from profit or loss the incremental vola�lity caused by changes in the measurement of specified financial assets upon applica�on of IFRS 9 (referred to as the ‘overlay approach’). This op�on will be in place un�l IFRS 17 comes into effect.
Impact on Ini�al Applica�on
The amendment to the standard might not have any impact on the Company financial statements when it becomes effec�ve in 2021
2.2.2
IFRS 10 and IAS 28 (amendments) Sale or
Contribu�on of Assets between an Investor and its Associate or Joint Venture
The amendments to IFRS 10 and IAS 28 deal with situa�ons where there is a sale or contribu�on of assets between an investor and its associate or joint venture. Specifically, the amendments state that gains or losses resul�ng from the loss of control of a subsidiary that does not contain a business in a transac�on with an associate or a joint venture that is accounted for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests in that associate or joint venture. Similarly, gains and losses resul�ng from the remeasurement of investments retained in any former subsidiary (that has become an associate or a joint venture that is accounted for using the equity method) to fair value are recognised in the former parent’s profit or loss only to the extent of the unrelated investors’ interests in the new as sociate or joint venture.
The amendment to the standard might not have any impact on the Company financial statements when it becomes effec�ve in 2021.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 68
ardova plc
Notes to the financial statements
2.2.3 Amendments to IFRS 3 Defini�on of a business
The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of ac�vi�es and assets to qualify as a business. To be considered a business an acquired set of ac�vi�es and assets must include, at a minimum, an input and a substan�ve process that together significantly contribute to the ability to create outputs. Addi�onal guidance is provided that helps to determine whether a substan�ve process has been acquired.
The amendments introduce an op�onal concentra�on test that permits a simplified assessment of whether an acquired set of ac�vi�es and assets is not a business. Under the op�onal concentra�on test, the acquired set of ac�vi�es and assets is not a business if substan�ally all of the fair value of the gross assets acquired is concentrated in a single iden�fiable asset or
group of similar assets.
"The amendments are applied prospec�vely to all business combina�ons and asset acquisi�ons for which the
acquisi�on date is on or a�er the first annual repor�ng period beginning on or a�er 1 January 2020, with early applica�on permi�ed."
2.2.4
Conceptual Framework for Financial Repor�ng
Purpose: -
The revised Conceptual Framework for Financial Repor�ng (the Conceptual Framework) is not a standard, and none of the concepts overrides
those in any standard or any requirements in a standard. The
purpose of the Conceptual Framework is to assist the Board in developing standards, to help preparers develop consistent accoun�ng policies if there is no applicable standard in place and to assist all par�es to understand and interpret the standards.
Key provisions: The
IASB issued the Conceptual Framework in March 2018. It sets out a comprehensive set of concepts for financial repor�ng, standard se�ng, and guidance
for preparers in developing consistent accoun�ng policies and assistance to others in their efforts to understand and interpret the standards. The Conceptual Framework includes some new concepts, provides updated definitions and recogni�on criteria for assets and liabili�es and clarifies some important concepts. It is arranged in eight chapters, as follows:
• Chapter 1 –
The objec�ve of financial repor�ng
• Chapter 2 –
Qualita�ve characteris�cs of useful financial informa�on
• Chapter 3 –
Financial statements
and the repor�ng en�ty
• Chapter 4 –
The elements of financial statements
• Chapter 5 –
Recogni�on and derecogni�on
• Chapter 6 –
Measurement
• Chapter 7 –
Presenta�on and disclosure
"• Chapter 8 –
Concepts of capital and capital maintenance.
The Conceptual Framework is accompanied by a Basis for Conclusions."
There are exemp�ons in developing accoun�ng policies for regulatory
account balances for two standards, namely, IFRS 3 Business Combina�ons and for those applying IAS 8 Accoun�ng Policies, Changes in Accoun�ng Es�mates and Errors
For preparers who develop accoun�ng policies based on the Conceptual Framework, it is effec�ve for annual periods beginning on or a�er 1 January 2020.
The changes to the Conceptual Framework may affect the applica�on of IFRS in situa�ons where no standard applies to a par�cular transac�on or event
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 69
ardova plc
Notes to the financial statements
2.2.5 Defini�on of Material (Amendments to IAS 1 and IAS 8)
The Interna�onal Accoun�ng Standards Board (IASB) has issued 'Defini�on of Material (Amendments to IAS 1 and IAS 8)' to clarify the defini�on of ‘material’ and to align the defini�on used in the Conceptual Framework and the standards themselves.
Changes and reasoning behind the changes
The changes in Defini�on of Material (Amendments to IAS 1 and IAS 8) all relate to a revised defini�on of 'material' which is quoted below from the final amendments:
The defini�on of material, an important accoun�ng concept in IFRS Standards, helps companies decide whether informa�on should be included in their financial statements. The updated defini�on amends IAS 1 Presenta�on of Financial Statements and IAS 8 Accoun�ng Policies, Changes in Accoun�ng Es�mates and Errors.
The amendments are a response to findings that some companies experienced difficu l�es using
the old defini�on when judging whether informa�on was material for inclusion in the financial statements.
The amendments clarify the defini�on of material and how it should be applied by including in the defini�on guidance that un�l now has featured elsewhere in IFRS Standards. In addi�on, the explana�ons accompanying the defini�on have been improved. Finally, the amendments ensure that the defini�on of material is consistent across all IFRS Standards.
Informa�on is material if omi�ng, missta�ng or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial informa�on about a specific
repor�ng en�ty.
Three new aspects of the new defini�on should especially be noted:
Obscuring. The exis�ng defini�on only focused on omi�ng or missta�ng informa�on, however, the Board concluded that obscuring material informa�on with informa�on that can be omi�ed can have a similar effect. Although the term obscuring is new in the defini�on, it was already part of IAS 1 (IAS 1.30A).
Could reasonably be expected to influence. The exis�ng defini�on referred to 'could inf luence' which the Board felt might be understood as requiring too much informa�on as almost anything ‘could’ influence the decisions of some users even if the possibility is remote.
Primary users. The exis�ng defini�on referred only to 'users' whic h again the Board feared might be understood too broadly as requiring to consider all possible users of financial statements when deciding what informa�on to disclose.
The amendments are effec�ve for annual repor�ng periods beginning on or
a�er 1 January 2020.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 70
ardova plc
Notes to the financial statements
3.0 Summary of significant accoun�ng policies
The accoun�ng policies set out below have been applied consistently to all years presented in these
financial statements, unless otherwise indicated.
3.1 Basis of measurement
This financial statements are prepared on the historical cost basis except as modified by actuarial valua�on of staff gratuity and fair valua�on of financial assets and liabi li�es where applicable. There are other assets and liabili�es measured at amor�sed cost.
3.1.1
Foreign currency transac�ons
Transac�ons in foreign currencies are translated to the respec�ve func�onal currencies of the en��es within the Company.
Monetary items denominated in foreign currencies are re-translated at the exchange rates applying at the repor�ng date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non -monetary items that are measured in terms of historical cost in a foreign currency are n ot re-translated.
Exchange differences are recognised in profit or loss in the year in which
they arise except for:
-
exchange differences on foreign currency borrowings which are regarded as adjustments to interest costs , where those interest costs qualify for capitalisa�on to
assets under construc�on;
-
exchange differences on transac�ons entered into to hedge foreign currency risks; and
-
exchange differences on loans to or from a foreign opera�on for which se�lement is neither planned nor likely to occur and therefore forms part of the net investment in the foreign opera�on, which are recognised ini�ally in other comprehensive income and reclassified from equity to profit or loss on disposal or par�al disposal of the net investment.
Foreign currency gains and losses on financial assets and financial liabili�es are reported on a net basis.
3.1.2
Foreign opera�ons
The func�onal currency of the parent Company and the presenta�on currency of the financial statements is Naira. The assets and liabili�es of the Company's foreign opera�ons are translated to Naira using exchange rates at year end. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuated significantly during that year, in which case the exchange rate on transac�on date is used. Goodwill acquired in business combina�ons of a foreign opera�on are treated as assets and liabili�es of that opera�on and transl ated at the closing rate.
Exchange differences are recognised in other comprehensive income and accumulated in a separate category of equity.
On the disposal of a foreign opera�on, the accumulated exchange differences of that opera�on, which is a�ributable to the Company are recognised in profit or loss.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 71
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es Recogni�on and ini�al measurement
A financial instrument is any contract that gives rise to a financial asset of one en�ty and a financial liability or equity instrument of another en�ty.
Financial assets Ini�al recogni�on and measurement of financial assets
Financial assets are classified, at ini�al recogni�on, as subsequently measured at amor�sed cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.
The classifica�on of financial assets at ini�al recogni�on depends on the financial asset’s contractual cash flow characteris�cs and the Company’s business model for managing them. With the excep� on of trade receivables that do not contain a significant financing component or for which the Company has applied the prac�cal expedient, the Company ini�ally measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transac�on costs. Trade receivables that do not contain a significant financing component or for which the Company has applied the prac�cal expedient are measured at the transac�on price determined under IFRS 15.
In order for a financial asset to be classified and measured at amor�sed cost or fair value through OCI, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an
instrument level
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collec�ng contractual cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a �me frame established by regula�on or conven�on in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three
categories:
•
Financial assets at amor�sed cost (debt instruments)
•
Financial assets designated at fair value through OCI with no recycling of cumula�ve gains and losses upon derecogni�on (equity instruments)
•
Financial assets at fair value through profit or loss (the Company however has no financial instrument in this category)
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow characteris�cs of the asset.
There are three measurement categories into which the Company classifies its debt instruments:
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 72
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es (cont’d) Amor�sed cost:
Assets that are held for collec�on of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amor�sed cost. A gain or loss on a debt investment that is subsequently measured at amor�sed cost and is not part of a hedging rela�onship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in finance income using the effec�ve interest rat e method.
Fair value through other comprehensive income (FVOCI):
Assets that are held for collec�on of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recogni�on of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumula�ve gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in finance income using the effective interest rate method.
Fair value through profit or loss:
Assets that do not meet the criteria for amor�sed cost or FVOCI are measured at fair value through profit or loss. A gain or loss on
a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging rela�onship is recognised in profit or loss and presented net in the profit or loss statement within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in the interest income.
Other financial assets:
Other financial assets are non-deriva�ve financial assets with fixed or determinable payments that are not quoted in an ac�ve market. They are presented as current assets, except for those maturing later than 12 months a�er the repor�ng date which are presented as non-current assets. These are ini�ally recognized at fair value and subsequently measured at amor�zed co st using the effec�ve interest method, less any impairment losses. These comprise trade receivables, unbilled revenues, cash and cash equivalents and other assets.
Expected credit losses
The Company applies the IFRS 9 simplified approach to measuring expected credit losses ECLs for trade receivables at an amount equal to life�me ECLs. The ECLs on trade receivables are calculated based on actual credit loss experience over the preceding three on the total balance of non-credit impaired trade receivables.
The Company considers a trade receivable to be credit impaired when one or more detrimental events have occurred such as:
significant financial difficulty of the customer; or
it is becoming probable that
the customer will enter bankruptcy or other financial reorganiza�on.
Impairment losses related to trade and other receivables are not presented separately in the income statement but are reported under the heading, administra�ve expenses
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 73
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es (cont’d) Business model:
The business model reflects how the Company manages the assets in order to generate cash flows. That
is, whether the Company’s objec�ve is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of ‘other’ business model and measured at fair value through profit or loss (‘FVTPL”). Factors considered by the Company in determining the business model for a Company of asse ts include past experience on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated.
Solely
Payment of Principal and Interest (SPPI):
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Company assesses whether the financial instruments’ cash flows represent solel y payments of principal and interest (the ‘SPPI test’). In making this assessment, the Company considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only considera�on for the �me value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or vola�lity that are inconsistent with a basic lending arrangement, the related fina ncial asset is classified
and measured at FVTPL.
The Company reclassifies debt investments when and only when its business model for managing those assets changes. The reclassifica�on takes place from the start of the first repor�ng period followin g the change. Such changes are expected to be very infrequent and none occurred during the period.
Equity instruments
The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassifica�on of fair value gains and losses to profit or loss. Dividends from such investments con�nue to be recognised in profit or loss as other income when the Company’s right to receive payments is established.
Changes in the fair value of financial assets at fair value through profit or loss are recognised in other gain/ (losses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 74
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es (cont’d) Derecogni�on A financial asset is derecognised when: The rights to receive cash flows from the asset have expired;
The Company has transferred its rights to receive cash flows from the asset or has assumed an obliga�on to pay the received cash flows in full without material delay to a third party under a ‘pass -through’ arrangement; and either:
(a) the Company has transferred substan�ally all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained substan�ally all the risks and rewards of the asset, but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained su bstan�ally all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Company’s con�nuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obliga�ons that the Company has retained.
Con�nuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of considera�on that the Company could be required to repay.
Financial liabili�es
Ini�al recogni�on and measurement
The Company has classified all financial liabili�es within the scope of IFRS 9 under loans and borrowings and other financial liabili�es as appropriate. The Company determines the classifica�on of its financial liabili�es at ini�al recogni�on.
All financial liabili�es are recognised ini�ally at fair value and, in the case of loans and borrowings and other financial liabili�es, net of directly a�ributable transac�on costs.
Subsequent measurement
The measurement of financial liabili�es depends on their classifica�on as described below:
Loans and borrowings
A�er ini�al recogni�on, interest-bearing loans and borrowings are subsequently measured at amor�sed cost using the Effec�ve Interest Rate (EIR) method. Gains and losses are recognised in the income statement when the liabili�es are derecognised as well as through the EIR amor�sa�on process.
Amor�sed cost is calculated by taking into account any discount or premium on acquisi�on and fees or costs that are an integral part of the EIR. The EIR amor�sa�on is included as finance costs in the income statement.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 75
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es (cont’d)
Derecogni�on
A financial liability is derecognised when the obliga�on under the liability is discharged or cancelled, or expires. When an exis�ng financial liability is replaced by another from the same lender on substan�ally different terms, or the terms of an exis�ng liability are substan�ally modified, such an exchange or modifica�on is treated as the derecogni�on of the original liability and the recogni�on of a new liability. The difference in the respec�ve carrying amounts is recognised in th e income statement.
Offse�ng of financial instruments
Financial assets and financial liabili�es are offset and the net amount is reported in the statement of financial posi�on if there is a currently enforceable legal right to offset the reco gnised amounts and there is an inten�on to se�le on a net basis, or to realise the assets and se�le the liabili�es simultaneously.
3.2.1 Trade and other receivables
Trade receivables are stated at their original invoiced value , as the interest that would be recognised from discoun�ng future cash receipts over the short credit year is not considered to be material. Trade receivables are reduced by appropriate allowances for es�mated irrecoverable amounts. Interest on overdue trade receivables is recognised as it accrues.
Trade and other receivables are recognised ini�ally at their transac�on price and subsequently measured at amor�zed cost less loss allowances.
3.2.2
Cash and cash equivalents
Cash equivalents comprise short-term, highly liquid investments that are readily conver�ble into known amounts of cash and which are subject to an insignificant risk of changes in value. An investment with a maturity of three months or less is normally classified as being short-term.
3.2.3
Non-deriva�ve financial liabili�es
Bank overdra�s that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
3.2.4
Trade and other payables
Trade payables are stated at their original invoiced value, as the interest that would be recognised from discoun�ng future cash payments over the short payment year is not considered to be material.
3.2.5
Loans and borrowings
3.2.5a
Interest-bearing borrowings
Interest-bearing borrowings are stated at amor�sed cost using the effec�ve interest method. The effec�ve interest method is a method of calcula�ng the amor�sed cost of a financial liability and of alloca�ng interest expense over the relevant year. The effec�ve interest rate is the rate that exactly discounts es�mated future cash payments through the expected life of t he financial liability.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 76
ardova plc
Notes to the financial statements
3.2 Financial assets and financial liabili�es (cont’d)
3.2.5b Debt instruments
Financial instruments issued by the Company are qualified as debt instruments if there is a contractual obliga�on to deliver cash or another financial asset to the holder of the instrument. The same applies if the Company is required to exchange financial assets or financial liabili�es with another en�ty under condi�ons that are poten�ally unfavourable to the Company.
Issues of bonds are recorded at their ini�al fair value which normally reflects the proceeds received, net of direct issue costs less any repayments. Subsequently these are stated at amor�sed cost, using the effec�ve interest method. Any difference between the proceeds a�er direct issue costs and the redemp�on value is recognised over the term of the borrowing in the income statement using the effec�ve interest method.
3.2.6
Compound instruments
At the issue date, the fair value of the liability component of a compound instrument is es�mated using the market interest rate for a similar non -conver�ble instrument. This amount is recorded as a liability at amor�sed cost using the effec�ve interest method un�l ex�nguished upon conversion or at the instrument’s redemp�on date.
The equity component is determined as the difference of the amount of the liability component from the fair value of the instrument. This is recognised in equity, net of income tax effects, and is not subsequently remeasured.
3.2.7
Investments in subsidiaries
Investments in subsidiaries are carried at cost less accumulated impairment losses in the Company's balance sheet. On disposal of investments in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.
3.3.1
Share capital
Ordinary shares are classified as equity. Incremental costs directly a�ributable to the issue of ordinary shares and share op�ons are recognised as a deduc�on from equity, net of any tax effects and costs directly a�ributable to the
issue of the instrument.
3.3.2
Dividend distribu�on
Dividend distribu�on to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the year in which the dividends are approved by the Company’s shareholders.
Dividends which remained unclaimed for a year exceeding twelve (12) years from the date of declara�on and which are no longer ac�onable by shareholders in accordance with Sec�on 385 of Companies and Allied Ma�ers Act of Nigeria, are wri�en back to retained earnings.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 77
ardova plc
Notes to the financial statements
3.4 Property, plant and equipment
3.4.1 Recogni�on and measurement
Items of property, plant and equipment are measured at cost less accumulated deprecia�on and accumulated impairment losses, if any.
Cost includes expenditure that is directly a�ributable to the acquisi�on of the asset. Items of property, plant and equipment under construc�on are disclosed as capital work-in-progress. The cost of construc�on
recognised
includes the cost of materials and direct labour, any other costs directly
a�ributable to bringing the assets to a working condi�on for the intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and borrowing costs on qualifying assets.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Gains and losses
on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within other income in profit or loss.
3.4.2
Reclassifica�on of investment property
When the use of a property changes from owner-occupied to investment property, the property is transferred to investment proper�e s at its carrying amount.
3.4.3
Subsequent costs
The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is probable that future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred.
3.4.4
Deprecia�on
Deprecia�on is calculated over the depreciable amount, which is the cost of an asset, or other amount subs�tuted for cost, less its residual value.
Deprecia�on is recognized in profit or loss on a straight -line basis over the es�mated useful life of each part of an item of property, plant and equipment which reflects the expected pa�ern of consump�on of the future economic benefits embodied in the asset.
Leased assets are depreciated over the shorter of the lease term and their useful life unless it is reasonably certain that the Company will obtain ownership by the end of the lease term in which case the assets are depreciated over the useful life.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 78
ardova plc
Notes to the financial statements
3.4.4 Deprecia�on (cont’d) The es�mated useful lives for the current and compara�ve year are as follows: Land Over lease year Buildings 25 years Building improvements 5 years
Plant, equipment and tanks
5-20 years
Furniture and fi�ngs
4 years
Computer equipment
3 years
Motor vehicles
5-8years
Deprecia�on methods, useful life and residual values are reviewed at each financial year end and adjusted, if appropriate. Capital work-in-progress is not depreciated. The a�ributable cost of each asset is transferred to the relevant asset category immediately the asset is available for use a nd depreciated accordingly.
3.5 Investment property
Investment proper�es are measured at cost less accumulated deprecia�on and accumulated impairment losses, if any. Cost includes expenditure that is directly a�ributable to the acquisi�on of the property. Investment proper�es under construc�on are disclosed as capital work -in-progress. The cost of construc�on
recognised includes the cost of materials and direct labour, any other costs directly a�ributable to bringing the property to a condi�on of commercial lease to third par�es.
Land held for an undefined future use is recognised as investment property.
Property that is being constructed or developed for future use as investment property is recognised as investment property.
Deprecia�on is calculated over the depreciable amount, which is the cost of a property, or other amount subs�tuted for cost, less its residual value. Deprecia�on is recognised on a straight -
line basis over the useful life of the investment property.
The es�mated useful lives for the current and compara�ve year are as follows:
Land
Over lease year
Buildings
25 years
The criteria used by the Company to dis�nguish investment property from owner occupied property are as follows:
-
The property must not be ac�vely used for the running of the core business ac�vity of the Company that is, produc�on and marketing of petroleum products.
-
The property generates cash flows which have no direct connec�on with core business ac�vity of the Company.
-
The property is held primarily
for rental income genera�on and/or value apprecia�on.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 79
ardova plc
Notes to the financial statements
3.6.0 Intangible assets
3.6.1 Intangible assets acquired separately
Intangible assets acquired separately are shown at historical cost less accumulated amor�sa�on and impairment losses.
Amor�sa�on is charged to profit or loss on a straight-line basis over the es�mated useful lives of the intangible assets unless such lives are indefinite. These charges are included in other expenses in profit or loss.
Intangible assets with an indefinite useful life are tested for impairment annually. Other intangible assets are amor�sed from the date
they are available for use. The es�mated useful live for the current and compara�ve year is:
So�ware costs -
3
to 8 years
Amor�sa�on years and methods are reviewed annually and
adjusted if appropriate.
3.6.2
Intangible assets generated internally
Expenditures on research or on the research phase of an internal project are recognised as an expense when incurred. The intangible assets arising from the development phase of an internal project are recognised if, and only if, the following condi�ons apply:
-
it is technically feasible to complete the asset for use by the Company;
-
the Company has the inten�on of comple�ng the asset
for either use or resale;
-
the Company has the ability to either use or sell the asset;
-
it is possible to es�mate how the asset will generate income;
-
the Company has adequate financial, technical and other resources to develop and use the asset; and
-
the expenditure incurred to develop the asset is measurable.
If no intangible asset can be recognised based on the above, then development costs are recognised in profit and loss in the year in
which they are incurred.
3.6.3
Intangible assets recognised in a business combina�on
Intangible assets acquired in a business combina�on and recognised separately from goodwill are ini�ally recognised at their fair value at the acquisi�on date.
3.6.4
Subsequent expenditure
Subsequent expenditure on so�ware assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 80
ardova plc
Notes to the financial statements
3.6.5 Amor�sa�on
Amor�sa�on is calculated over the cost of the asset, or other amount subs�tuted for cost, less its residual value.
Amor�sa�on is recognised in profit or loss on a straight - line basis over the es�mated useful lives of intangible assets from the date
that they are available for use, since this must closely reflect the
expected pa�ern of consump�on of the future economic benefits embodied in the asset. The es�mated useful life for the current
and compara�ve year is:
Computer so�ware:
3 to 8 years
Amor�sa�on methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.
3.7
Leases
Policy applicable from 1 January 2019
At incep�on of a contract, the Company assesses whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract conveys the right to control the use of an iden�fied asset for a period
in exchange for considera�on. To assess whether a contract c onveys the right to control the use of an iden�fied asset, the Company assesses whether:
�
the contract involves the use of an iden�fied asset –
this may be specified explicitly or implicitly, and should be physically dis�nct or represent substan�ally all of the capacity of a physically dis�nct asset. If the supplier has a substan�ve subs�tu�on right, then the asset is not iden�fied;
�
the Company has the right to obtain substan�ally all of the economic benefits from use of the asset throughout the period of use; and
�
the Company has the right to direct the use of the asset. The Company has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Company has the right to direct the use of the asset if either:
�
the Company has the right to operate the asset; or
�
the Company designed the asset in a way that predetermines how and for what purpose it will be used.
This policy is applied to contracts entered into, or changed, on or a�er 1 January 2019.
At incep�on or on reassessment of a contract that contains a lease component, the Company allocates the considera�on in the contract to each lease component on the basis of their rela�ve stand -alone prices. However, for the leases of retail sta�on (property) in which it is a lessee, the Company has elected not to separate non-lease
components and account for the lease and non-lease components as a single lease component.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 81
ardova plc
Notes to the financial statements
3.7 Leases
(cont’d)
Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, the Company determined whether the arrangement was or contained a lease based on the assessment of whether:
� fulfilment of the arrangement was dependent on the use of a specific asset or assets; and � the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use
the asset if one of the following was met:
� the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;
� the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or
� facts and circumstances indicated that it was rem ote that other par�es would take more than an insignificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output.
As a lessee
The Company recognises a
right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is ini�ally measured at cost, which comprises the ini�al amount of the lease liability adjusted for any lease payments made at or before the commencement dat e, plus any ini�al direct costs incurred and an es�mate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incen�ves received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The es�mated useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In addi�on, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is ini�ally measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, ini�ally measured using the index or rate as at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase op�on that the Company is reasonably certain to exerc ise, lease payments in an op�onal renewal period if the Company is reasonably certain to exercise an extension op�on, and penal�es for early termina�on of a lease unless the Company is reasonably certain not to terminate early.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 82
ardova plc
Notes to the financial statements
3.7 Leases (cont’d) As a lessee (cont’d)
The lease liability is measured at amor�sed cost using the effec�ve interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s es�mate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termina�on op�on.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Company has elected not to recognise right-of-use assets and lease liabili�es for short-term leases of property that have a lease term of 12 months or less and leases of low-value assets. The Company recognises the lease payments associated with these leases as an expense on a straight -line basis over the lease term.
Under IAS 17
In the compara�ve period, as a lessee the Company classified leases that transfe r substan�ally all of the risks and rewards of ownership as finance leases. When this was the case, the leased assets were measured ini�ally at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any con�ngent rent.
Subsequently, the assets were accounted for in accordance with the accoun�ng policy applicable to that asset.
Assets held under other leases were classified as prepayment and were not recognised in the Company’s statement
of financial posi�on. Payments made under opera�ng leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incen�ves received were recognised as an integral part of the total lease expense, over the term of the lease.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 83
ardova plc
Notes to the financial statements
3.7 Leases (cont’d) As a lessor
When the Company acts as a lessor, it determines at lease incep�on whether each lease is a finance lease or an opera�ng lease.
To classify each lease, the Company makes an overall assessment of whether the lease transfers substan�ally all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an opera�ng lease. As part of this assessment, the Company considers certain indicators such as whether the lease
is for the major part of the economic
life of the asset.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classifica�on of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short -term lease to which the Company applies the exemp�on described above, then it classifies the sub-lease as an opera�ng lease.
If an arrangement contains lease and non-lease components, the Company applies IFRS 15 to allocate the considera�on in the contract.
The Company recognises lease payments received under opera�ng leases as income on a str aight-
line basis over the lease term as part of ‘other income’.
The accoun�ng policies applicable to the Company as a lessor in the compara�ve period were not different from IFRS 16. However, when the Company was an intermediate lessor the sub -leases were classified with reference
to the underlying asset.
3.8
Borrowing costs
Borrowing costs that are directly a�ributable to the acquisi�on, construc�on or produc�on of a qualifying asset are capitalised as part of the cost of that
asset. Other borrowing costs are expensed in the year in which they are incurred.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 84
ardova plc
Notes to the financial statements
3.9 Taxa�on
Income tax for the year is based on the taxable income for the year. Taxable income differs from
profit as reported in the statement of comprehensive income for the year as there are some items which may never be taxable or deduc�ble for tax and other items which may be deduc�ble o r taxable in other years.
The Company offsets the tax assets arising from withholding tax credits and current tax liabili�es if, and only if, the en�ty has a legally enforceable right to set -off the recognised amounts, and it intends to either se�le on a net basis, or to realise the asset and se�le the liability simultaneously. The tax asset is reviewed at each repor�ng date and wri�en down to the extent that it is no longer probable that future economic benefit would not be realised.
Deferred tax is the future tax consequences of temporary difference s between the carrying amounts and tax bases of assets and liabili�es shown on the statement of financial posi�on. Deferred tax assets and liabili�es are not recognised if they arise in the following situa�ons: the ini�al recogni�on of goodwill; or the ini�al recogni�on of assets and liabili�es that affect neither accoun�ng nor taxable profit. The amount of deferred tax provided is based on the expected manner of recovery or se�lement of the carrying amount of assets and liabili�es, using tax rates enacted or substan�ally enacted at the statement of financial posi�on date.
The Company does not recognise deferred tax liabili�es, or deferred tax assets, on temporary differences associated with investments in subsidiaries, joint v entures and associates where the parent Company is able to control the �ming of the reversal of the temporary differences and it is not considered probable that the temporary differences will reverse in the foreseeable future. It is the Company's policy to reinvest undistributed profits arising in Company companies.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be u�lised.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deduc�ble temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based
on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of exis�ng temporary differences, are
considered, based on the business plans approved by the board for the Company.
Deferred tax assets are reviewed at each repor�ng date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such re duc�ons are reversed when the probability of future taxable profits improves. Unrecognised deferred tax assets are reassessed at each repor�ng date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substan�vely enacted at the repor�ng date. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Company expects, at the repor�ng date, to recover or se�le the carrying amount of it s assets and liabili�es.
Deferred tax assets and liabili�es are offset only if certain criteria are met.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 85
ardova plc
Notes to the financial statements
3.10 Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of deregulated inventories -
AGO, ATK, LPFO is based on the weighted average cost principle, and includes expenditure
incurred in acquiring the inventories, produc�on or conversion costs and other costs incurred in bringing them to their exis�ng loca�on and condi�on. The cost of regulated inventories -
PMS and DPK is also
based on the weighted average cost principle. In the case of manufactured inventories and work in progress, cost includes an appropriate share of produc�on overheads based on n ormal opera�ng capacity.
Packaging Materials, Solar inverters, Lubricants, and Greases are valued based on Weighted Average Cost. Inventories -in-transit are valued based on purchase cost incurred to date.
Perpetual inventory system where cost of sales and ending inventory is updated con�nuously is in use.
Net realisable value is the es�mated selling price in the ordinary course of business, less the es�mated costs of comple�on and selling expenses.
The produc�on costs comprise direct materials, direct labour and an appropriate propor�on of manufacturing fixed and variable overheads.
Allowance is made for obsolete, slow moving or defec�ve items where appropriate.
Spare parts and consumables
Spare parts, which are expected to be fully u�lized in produc�on within the next opera�ng cycle and other consumables,
are valued at weighted average cost.
3.11 Impairment
3.11.1
Impairment of financial assets
The Company recognises an allowance for Expected Credit Losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approxima�on of
the original effec�ve interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms
ECLs are recognised in two stages. For credit expos ures for which there has not been a significant increase in credit risk since ini�al recogni�on, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since ini�al recogni�on, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespec�ve of the �ming of the default (a life�me ECL).
For trade receivables and contract assets, the Company applies a simplified approach in calcula�ng ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on life�me ECLs at each repor�ng date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 86
ardova plc
Notes to the financial statements
3.11
Impairment
3.11.1
Impairment of financial assets
(cont’d)
The Company considers a financial asset in default when contractual payments are 60 days past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external informa�on indicates that the Company is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is wri�en off when there is no reasonable expecta�on of recovering th e contractual cash flows.
3.11.2 Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets are reviewed at each repor�ng date to determine whether there is any indica�on of impairment. If any such indica�on exists, then the asset’s recoverable amount is es�mated. For intangible assets that have indefinite useful lives or that are not yet available for use, the r ecoverable amount is es�mated each year at the same �me.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the es�mated future cash flows are discounted t o their present value using a pre-tax discount rate that reflects current market assessments of the �me value of money and the risks specific to the asset.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior years are assessed at each repor�ng date for any indica�ons that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the es�mates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of deprecia�on or amor�za�on, if no impairment loss had been recognised.
3.12
Employee benefits
The Company operates both defined contribu�on plans and defined benefit plans.
3.12.1
Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribu�on plan. The Company’s net obliga�on in respect of defined benefit post-re�rement plans is calculated separately for each plan by es�ma�ng the amount of future benefit that employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value and any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the repor�ng date on government bonds that have maturity dates approxima�ng the terms of the Company’s obliga�ons and that are denominated in the same currency in which the benefits are expected to be paid.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 87
ardova plc
Notes to the financial statements
3.12.1 Defined benefit plan (cont’d)
A qualified actuary using the projected unit credit method performs the calcula�on annually . When the calcula�on results in a benefit to the Company, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reduc�ons in future contribu�ons to the plan. In o rder to calculate the present value of economic benefits, considera�on is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realisable during the life of the plan, or on se�lement of the plan liabili�es.
When the benefits of a plan are improved, the por�on of the increased benefit related to past service by employees is recognised in profit or loss on a straight-line basis over the average year un�l the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.
3.12.2
Defined contribu�on plan
A defined contribu�on plan is a post-employment benefit plan under which an en�ty pays fixed
contribu�ons into a separate en�ty and will have no legal or construc�ve obliga�on to pay further amounts. Obliga�ons for contribu�ons to defined contribu�on pension plans are recognised as an employee benefit expense in profit
or loss in the year during which services are rendered by employees.
In rela�on to the defined contribu�on plan, the Company has in place
the Pension fund scheme.
3.12.3
Pension fund scheme
In accordance with the revised provisions of the Pension Reform Act, 2014, the Company has ins�tuted a Contributory Pension Scheme for its employees, where both the employees and the Company contribute 8% and 10% respec�vely of the employee's emoluments (basic salary, housing and transport allowances).
The Company’s contribu�on under the scheme is charged to the profit and loss account while employee contribu�ons are funded through payroll deduc�ons.
3.12.4
Terminal benefit
Termina�on benefits are recognised as an expense when the Company is commi�ed demonstrably, without realis�c possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal re�rement date, or to provide termina�on benefits as a result of an offer made to encourage voluntary redundancy. Termina�on benefits for voluntary redundancies are recognised as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be es�mated reliably. I f benefits are payable more than 12 months a�er the repor�ng year, then they are discounte d to their present value.
3.12.5
Short term benefits -
Profit-sharing
and bonus plans
This recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into considera�on the profit a�ributable to Ardova's shareholders a�er certain adjustments. It
recognises a provision where contractually obliged or where there is a past prac�ce that has created a construc�ve obliga�on.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 88
ardova plc
Notes to the financial statements
3.13
Provision,
con�ngencies and decommissioning costs
3.13.1
Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or construc�ve obliga�on that can be es�mated reliably, and it is probable that an ou�low of economic benefits will be required to se�le the obliga�on.
Provisions for environmental restora�on, restructuring costs and legal claims are recognised when: the Company has a present legal or construc�ve obliga�on as a result of past events; it is probable that an ou�l ow of resources will be required to se�le the obliga�on; and the amount has been reliably es�mated. Restructuring provisions comprise lease termina�on penal�es and employee termina�on payments. Provisions are not recognised for future opera�ng losses.
Where there are a number of similar obliga�ons, the likelihood that an ou�low will be required in se�lement is determined by considering the class of obliga�ons as a whole. A provision is recognised even if the likelihood of an ou�low with respect to any one item included in the same class of obliga�ons may be small.
Provisions are measured at the present value of the expenditures expected to be required to se�le the obliga�on using a pre-tax rate that reflects current market assessments of the �me value of money and the risks specific to the obliga�on. The increase in the provision due to passage of �me is recognised as interest expense.
3.13.2
Con�ngent liabili�es
Con�ngent liabili�es are possible obliga�ons whose existence will only be confirmed by future events not wholly within the control of the Company. Con�ngent liabili�es are not recognised in the financial statements but are disclosed. However if the possibility of an ou�low of economic resources is considered remote, such con�ngent
liabili�es are recognised in the financial statements.
3.13.3
Con�ngent assets
Con�ngent assets are possible assets that arise from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the en�ty. Con�ngent
assets are only disclosed when an inflow of economic benefit is probable. Asset is recognised when the realisa�on of income is virtually certain, in which case the related asset is no more con�ngent.
3.13.5
Decommissioning costs
Liabili�es for decommissioning costs are recognised when the Company has an obliga�on to dismantle and remove a facility or an item
of property, plant or equipment and to restore the site on which it is located, and when a reliable es�mate of the liability can be made. Where an obliga�on exists for a new facility such as a retail outlet, this will be on construc�on. An obliga�on f or decommissioning may also crystalize during the year of opera�on of a facility through a change in legisla�on or through a decision to terminate opera�ons. The amount recognised is the present value of the es�mated future expenditure determined in accordance with local condi�ons and requirements. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also recognised. This is subsequently depreciated as part of the asset.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 89
ardova plc
Notes to the financial statements
3.14
Models used for impairment test, valua�ons, actuarial results
The new impairment requirements in IFRS 9 are based on an expected credit loss model and replaces the IAS 39 incurred loss model. The expected credit loss model applies to debt instruments (such as bank deposits, loans, debt securi�es and trade receivables) recorded at amor�sed cost or at fair value through other comprehensive income, plus lease receivables, contract assets and loan commitments and financial guarantee contracts that are not measured at fair value through profit or loss. The
guiding principle of the expected credit loss model is to reflect the general pa�ern of deteriora�on or improvement in the credit quality of financial instruments.
In line with the requirements of IFRS 9, the Company recognize losses on all receivables including receivables
that are not past due. I.e.
it is no longer necessary for a credit event to have occurred before credit losses are recognized. The Company calculates expected credit losses on trade receivables using a provision matrix based on historical, current and forecasted credit condi�ons. All receivables are computed based on different customer a�ributes and different historical loss pa�erns.
The Company's trade receivables by their nature do not include a significant financing component, they are
measured at transac�on price and do not have a contractual interest rate. Thus the Effec�ve Interest Rate (EIR) would be zero (0). As a result of this, the discoun�ng of cash shor�alls when measuring our ECL would not be required. The following approach is adopted by the Company in determining the expected credit loss on all receivables. In line with the requirements of IFRS
9, all receivables have an ECL provision, including
receivables that are not past due.
Default based on our internal ra�ng system is considered a�er 60days. All receivables are categorized based on the ageing of the receivables, associated risk ra�ng and the impairment allowance rela�ve to the risk class as analysed
below. All receivables with credit balances have no associated risk. Also, receivables that are not
past due have a risk ra�ng of 1. In determining historical default rate, we considered internal ra�ng over a prior period of three years for the trade receivables and compared with the ra�ng as at repor�ng date. This was used to determine if there had been a significant increase in credit risk (SICR).
"The Company considers forward-looking informa�on using reasonable and supportable forecasts of future economic condi�ons that is available without undue cost or effort. We considered infla�on rate and GDP growth rate as the macro-economic factors that influence the default rate. The historical default rate is adjusted with the forecasts of future economic condi�on to arrive at a credit loss rate.
The expected credit loss is calculated by applying the credit loss rate to the receivables balance at the repor�ng period. Es�mates for our ECL computa�on reflect cashflows expected from collaterals ( i.e.
transporters freight costs) and other credit enhancements that are part of the credit terms. These collaterals are recognized alongside the receivables being tested for impairment."
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than inventories and deferred tax assets are reviewed at each repor�ng date to determine whether there is any indica�on of impairment. If any such
indica�on exists, then the asset’s recoverable amount is es�mated. For intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is es�mated each financial year at the same �me.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the es�mated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the �me value of money and the risks specific to the asset.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 90
ardova plc
Notes to the financial statements
3.15
Revenue from contract with customers
Revenue from sale of petroleum products, Avia�on Turbine Kerosene, lubricants and greases, and solar panel
Revenue arises mainly from the sale of petroleum products (white products), Avia�on Turbine Kerosene
(ATK), lubricants and greases, and solar panel.
To determine whether to recognise revenue, the Company follows a 5-step process:
1.
Iden�fying the contract with a customer 2.
Iden�fying the performance obliga�ons
3.
Determining the transac�on price 4.
Alloca�ng the transac�on price to the
performance obliga�ons
5.
Recognising revenue when/as performance obliga�on(s) are sa�sfied.
The transac�on price for a contract excludes any amounts collected on behalf of third par�es. Customers obtain control of products when the products are delivered to and have been accepted and revenue is recognised at that point in �me. Invoices are usually payable within 30days.
3.15.1
Rental income
Rental income from investment property is recognised as revenue on a straight -line basis over the term of the lease. Lease incen�ves granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from other property is recognised as other income.
3.15.2 Throughput income
Throughput income represents fees earned from the use of the Company's storage facili�es by third par�es on one hand and the Nigerian Na�onal Petroleum Corpora�on product discharge into these storage facili�es. These are recognised as other income.
3.16 Finance, dividend income and finance cost.
3.16.1 Finance and dividend income
Finance income comprises interest income on funds invested, credit bank balances, reimbursement of any foreign loss and /or interest from Petroleum Product Pricing Regulatory Agency (PPPRA). Interest income is recognised using the effec�ve interest method. When a loan and receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the es�mated future cashflow discounted at the original effec�ve interest rate of the instrument, and con�nues unwinding the discount as interest income. Interest income on impaired loan and receivables recognised using the original effec�ve interest rate. Dividend income is recognised in pr ofit or loss on the date that the Company's right to receive payment is established.
3.16.2
Finance cost
Finance costs comprises interest expense on borrowings.
Borrowing costs that are not directly a�ributable to the acquisi�on, construc�on or produc�on of a qualifying asset are recognised in profit or loss using the effec�ve interest method.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 91
ardova plc
Notes to the financial statements
3.17 Earnings per share The Company presents basic/diluted earnings per share data for its ordinary shares.
Basic earnings per share is calculated by dividing the profit or loss a�ributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.
Diluted earnings per share adjusts the figures used in the determina�on of Basic earnings per share to take into account the weighted average number of addi�onal shares that would have been outstanding assuming the conversion of all dilu�ve poten�al ordinary shares.
3.18
Segment repor�ng
An opera�ng segment is a component of the Company that engages in business ac�vi�es from which it may earn revenues and incur expenses. Segment results that are report ed to the Company's CEO (the chief opera�ng decision maker) include items directly a�ributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly of head office expenses, and tax assets and liabili�es.
3.19
Petroleum subsidies
Petroleum Products Pricing Regulatory Agency (PPPRA) subsidises the cost of importa�on of certain refined petroleum products whose prices are regulated in the Nigerian market. The subsidies
are recognised when there is reasonable assurance that they will be recovered and the Company has complied with the condi�ons a�ached to receiving the subsidy. The subsidies are recognised as a reduc�on to the landing cost of the subsidised petroleum product.
3.20
Trade and other receivables
The fair value of trade and other receivables is es�mated as the present value of the future cash flows, and discounted at market rates of interest at the repor�ng date. For trade and other receivab les with a remaining life of less than one year, the no�onal amount is deemed t o reflect the fair value.
Fair value which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows,
discounted at market rates of interest at the repor�ng date. For trade and other creditors with a remaining life of less than one year, the no�onal amount is deemed to reflect the fair value.
3.21
Effec�ve interest method
The effec�ve interest method is a method of calcula�ng the amor�sed cost of a financial instrument and of alloca�ng interest income or expense over the relevant year. The effec�ve interest rate is the rate that exactly discounts es�mated future cash rece ipts or payments (including all fees on points paid or received that form an integral part of the effec�ve interest rate, transac�on costs and other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a sho rter year. Income and expense is recognised on an effec�ve interest basis for debt instruments other than those financial instruments “at fair value through profit or loss”.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 91
ardova plc
Notes to the financial statements
3.22 Offse�ng financial assets and liabili�es
Financial assets and liabili�es are offset and the net amount presented in the statement of financial posi�on when, and only when, the Company has a legal right to offset the amounts and intends either to se�le on a net basis or to realise the asset and se�le the liability simultaneously.
3.23 Repurchase and reissue of share capital (Treasury shares)
When share capital recognised as equity is repurchased, the amount of the considera�on paid,
which includes directly a�ributable costs, net of any tax effects, is recognised as deduc�on from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resul�ng surplus or deficit on the transac�on is presented in share premium.
3.24 Statement of cash flows
The statement of cash flows is prepared using the indirect method. Changes in items in the statement of financial posi�on that have not resulted in cash flows have been eliminated for the purpose of preparing the statement. Dividends paid to ordinary shareholders are included in financing ac�vi�es. Finance cost is also included in financing ac�vi�es while finance income received is included in inves�ng ac�vi�es.
3.25
Related par�es
Related par�es include the holding Company and other Company en��es. Directors, their close fa mily members and any employee who is able to exert a significant influence on the opera�ng policies of the Company, are also considered to be related par�es. Key management personnel are also regarded as related par�es. Key management personnel are those persons having authority and responsibility for planning, direc�ng and controlling the ac�vi�es of the en�ty, directly or indirectly, including any director (whether execu�ve or otherwise) of that en�ty.
3.26
Customers security deposits
Customers’ security deposits relate to the amounts that dealers have paid to the Company
at the onset of their agreements. These deposits are short term in nature and are repayable to the dealers at the end of the agreements or upon termina�on subject to the clauses within the agreement.
3.27
Event occurring a�er the balance sheet date
The value of asset and liabili�es at the balance sheet date are adjusted if there is evidence that subsequent adjus�ng event warrant a modifica�on of these values. These adjustment are made up to the date of approval of the financial statements by the Board of Directors.
Other non-adjus�ng event are disclosed in the notes.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 92
ardova plc
Notes to the financial statements
4.0
Cri�cal accoun�ng judgement and key sources of es�ma�ng uncertainty
In the applica�on of the Company's accoun�ng policies, which are described in Note 3, The Directors
are required to make judgements, es�mates and assump�ons about the carrying amounts of assets and liabili�es that are not readily apparent from other sources. The es�mates and associated assump�ons are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these es�mates. The es�mated underlying assump�ons are reviewed on an ongoing basis. Revisions to accoun�ng es�mates are revised and the revision affects only that year or in the year of the revision and the future years if the revision affects both cur rent and future years.
4.1 Cri�cal judgement in applying accoun�ng policies
The following are the cri�cal judgements, apart from those involving es�ma�on (which are dealt with separately below) that the Directors have made in the process of appl ying the Company's accoun�ng policies and that have a significant effect on the amounts recognised in the financial statements.
4.1.1 In making its judgement, management considered the detailed criteria for the recogni�on of revenue
set out in IFRS 15 and, in par�cular, whether the en�ty had transferred control of the goods to the customer. Following the detailed quan�fica�on of the en�ty’s liability in respect of rec�fica�on work, and the agreed limita�on on the customer’s ability to require further work or to require replacement of the goods, the directors are sa�sfied that the significant risks and rewards have been transferred and that recogni�on of the revenue in the current year is appropriate, in conjunc�on with recogni�on of an appropriate provision for the rec�fica�on costs .
4.2 Key sources of es�ma�ng uncertainty
The key assump�ons concerning the future and other key sources of es�ma�ng uncertainty at the repor�ng date that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabili�es within the next financial year are discussed below:
4.2.1
Recoverability of assets carrying amount
The Company
assesses its property plant and equipment for possible impairment if there are events or changes in circumstances that indicate that carrying values of the assets may not be recoverable, or at least at every repor�ng date. Such indicators include changes
in the, Company’s business plans, changes in commodity prices, evidence of physical damage and, for oil and gas proper�es, significant downward revisions of es�mated recoverable volumes or increases in es�mated fu ture development expenditure.
The assessment for impairment entails comparing the carrying value of the cash-genera�ng unit with its recoverable amount, that is, value in use. Value in use is usually determined on the basis of discounted es�mated future net cash flows. Determina�on as to whether and how much an asset is impaired involves management es�mates on highly uncertain ma�ers such as future commodity prices, the impaired involves management es�mates on highly uncertain ma�ers such as future commodity prices, the effects of infla�on on opera�ng expenses, discount rates, produc�on profiles and the outlook for regional market supply-and-demand condi�ons for crude oil, natural gas and refined products.
The Company
makes es�mates and assump�ons concerning the future. The resul�ng accoun�ng es�mates will, by defini�on, seldom equal the related actual results. Such es�mates and assump�ons are con�nually evaluated and are based on historical experience and other factors, including expecta�ons of future events that are believed to be reasonable under the circumstances.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 93
ardova plc
Notes to the financial statements
Use of es�mates and judgements
(cont’d)
4.2.2
Con�ngencies
By their nature, con�ngencies will only be resolved when one or more uncertain future e vents occur or fail to occur. The assessment of the existence, and poten�al quantum, of con�ngencies inherently involves the exercise of significant judgement and the use of es�mates regarding the outcome of future events.
4.2.3
Es�mated useful lives and residual values of intangible assets and property, plant and equipment
The Company’s management determines the es�mated useful lives and related deprecia�on charge for
its items of property, plant and equipment on an annual basis. The Company has carried out a review of the residual values and useful lives of property, plant and equipment as at 30 June 2019 and that has not highlighted any requirement for an adjustment to the residual lives and remaining useful lives of the assets for the current or future periods.
4.2.4
Recoverability of financial assets
The Company
reviews all financial assets at least annually and when there is any indica�on that the asset might be impaired. Loss allowance for trade receivables is measured at an amount equal to twelve months ECL. The expected credit losses on trade receivables are es�mated using a provision matrix by reference to past default experience of the debtor and analysis of the debtor’s current financial posi�on, adjusted for factors that are specific to the debtors, general economic condi�ons of the industry in which the debtors operate and an assessment of both the current as well as the forecast direc�on of condi�ons at the repor�ng date. The Company
has recognised a loss allowance of 100% against all receivables over
365 days past due, because historical experience has indicated that these receivables are generally not recoverable. There has been no change in the es�ma�on techniques or significant assump�ons m ade during the current repor�ng year. The Company writes off a trade receivable when there is informa�on indica�ng that the debtor is in severe financial difficulty and there is no realis�c prospect of recovery, e.g. when the debtor has been placed under liquida�on or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, except where there is adequate security. None of the trade receivables that have been wri�en off are subject to enforcement ac�vi�es. T rade receivables are considered to be past due when they exceed the credit period granted.
4.2.5 Fair value hierarchy
Where the fair value of financial assets and financial liabili�es recorded in the statement of financial posi�on cannot be derived from ac�ve markets, their fair value is determined using valua�on techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgme nt is required in establishing fair values. The judgments include considera�ons of inputs such as liquidity risk, credit risk and vola�lity. Changes in assump�ons about these factors could affect the reported fair value of financial instruments
4.2.6
Provisions for employee benefits
The actuarial techniques used to assess the value of the defined benefit plans involve financial assump�ons (discount rate, rate of return on assets, medical costs trend rate) and demographic assump�ons (salary
increase rate, employee turnover rate, etc.). The Company uses the assistance of an
external independent actuary in the assessment of these assump�ons. For more details refer to Note 24.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 94
ardova plc
Notes to the financial statements
5. Determina�on of fair values
A number of Company's accoun�ng policies and disclosures require the determina�on of fair value, both for financial and non-financial
assets and liabili�es. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transac�on between market par�cipants at the measurement date, regardless of whether that price is directly observable or es�mated using another valua�on technique. In es�ma�ng the fair value of an asset or a li ability, the Company takes into account the characteris�cs of the asset or liability that market par�cipants would take into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in this and separate financial statements is determined for measurement and / or disclosures purposes based on the following methods.
When applicable, further informa�on about the assump�ons made in determining fair values is disclosed in the notes specific to that asset or liability.
6. Financial risk management
Overview
Our risk management objec�ve is to ensure sustainable business growth with stability by promo�ng a pro-ac�ve approach in iden�fying, evalua�ng, mi�ga�ng and repor�ng risks associated with the business. In order to achieve these objec�ve, we have established a structured and disciplined approach to Risk Management, including the development of the Risk Matrix, in order to guide decisions of the Company on risk related issues. The Company has a risk management system embedded in our day to day business ac�vi�es which guides our business opera�ons and is being followed in a consistent and systema�c manner to increase value to our shareholders. Our Enterprise Risk Management framework focuses on enterprise wide risk of the Company with the objec�ve to protect and enhance each en�ty’s value and by extension the Company’s value.
Risk Management framework
The Board of Directors sets our overall risk appe�te, approve the risk management strategy and is ul�mately responsible for the effec�veness of the risk management process and system of internal control within the Company.
Specific objec�ves of the Company’s Risk Management framework are:
-
To ensure that all the current and future material risk exposures of the Company are iden�fied, assessed, quan�fied, appropriately mi�gated and managed.
-
To establish a framework for the Company's risk management process and to ensure Company-wide implementa�on.
-
To ensure systema�c and uniform assessment of risks related wit h the Company’s opera�ons.
-
To reduce opera�onal surprises and losses.
-
To enable compliance with appropriate regula�ons, wherever applicable, through the adop�on of best prac�ces.
-
To assure business growth with financial stability.
The Board oversees risk management through the following Commi�ees:
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 95
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d) Board Risk Management Commi�ee
The Board Risk Management Commi�ee is responsible for developing and monitoring the Company’s risk management policies which are established to iden�fy and analyse the risks faced by the Company, to set appropriate risk limit and controls, monitor risks and adherence to risk limits. The Commi�ee ensures that risk management policies are integrated into the Company’s culture. The Commi�ee also reviews quarterly risk management reports and direct appropriate ac�ons to be taken by senior management. The commi�ee reports quarterly to the Board of Directors on its various act ivi�es.
Statutory Audit Commi�ee
The Audit Commi�ee oversees how management monitors compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in rela�on to the risks faced by the Company.
Corporate Governance and Remunera�on Commi�ee
The Corporate Governance and Remunera�on Commi�ee assists the Board in fulfilling its responsibili�es in rela�on to Corporate Governance & remunera�on ma�ers. It ensures the Company meets all legal and regulatory requirements for business opera�ons, thus protec�ng the Company from incurring opera�onal and reputa�onal liabili�es that can affect the achievement of our goals and objec�ves.
Risk Management Commi�ee
The Risk Management Commi�ee is a Management Commi�ee of the Company which evaluates the risks inherent within the business and ensures that they are captured appropriately within the business risk profile. The commi�ee monitors residual risk exposures and provides assurance as to adequacy
of controls implemented to manage risks to the agreed level of appe�te. The commi�ee meets monthly, however risk reports are provided quarterly to the Board Risk Commi�ee. Principal risk events are however escalated immediately.
Credit Risk Management Commi�ee
The Credit Risk Management Commi�ee is a Sub-Commi�ee of the Risk Management Commi�ee that assesses the credit risk of the Company. The Commi�ee reviews and approves credit request in line with the Company’s credit policy.
The commi�ee also meets at least monthly to review payment performance of credit customers, the adequacy of Bank Guarantees, credit limits of customers and also take appropriate ac�ons to ensure zero tolerance for bad debts.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 96
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d)
Risk Management Structure & Governance
Risk Management Governance Structure
External Audit
Internal Audit
Third line of Defence
Risk Management Committee CEO
First line of Defence
1st Line: Primary Risk
Responsibility
* Operational management manages
the Company’s risks by implementing and maintaining effective
internal control
procedures on a day-to-day basis.
2nd Line: Challenge and Risk
Control.
* The Risk Management department collaborates with operational
management to develop and monitor processes and controls to mitigate identified risks.
* They facilitate risk assessment sessions, develop risk management
programs and alert management to emerging issues and changing risk
scenarios.
3rd Line: Assurance
* Independent
assurance of the
effectiveness of the risk management process
and methodology
Credit Risk Management Committee
Risk Management Department Internal Audit
Second line of Defence
Board/Board Risk Management Committee
Management Team
Functional/Departmental Risk Champions
First line of Defence
FO Plc Management Committees including –Risk Management & Credit Management
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 97
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d) Risk Profile
In the course of our daily opera�ons, we are exposed to various risks. The Company has a risk management func�on that manages these risks with various repor�ng done as required. We have categorised the risks into the following:
Opera�onal Risk
HSE Risk
Financial Risk
Credit risk
Liquidity risk
Market risk
Capital risk management
Reputa�onal Risk
Strategic Risk
Opera�onal Risk
Opera�onal risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s processes and controls, personnel, technology and infrastructure, and from external factors other than credit, market and liquidi ty risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Opera�onal risks arise from all of the Company’s opera�ons.
The Company’s objec�ve is to manage opera�onal risk
to
be within its risk appe�te thus ensuring that the overall control processes and procedures do not restrict ini�a�ve and crea�vity. The primary responsibility for the development and implementa�on of controls to address opera�onal risk is assigned
to senior management within each business unit. This responsibility is supported by the development of overall Company standards for the management of opera�onal risk in the following areas:
-
Requirements for appropriate segrega�on of du�es, including the independent authoriza�on of transac�ons/processes.
-
Requirements for the reconcilia�on and monitoring of transac�ons.
-
Compliance with regulatory and other legal requirements.
-
Documenta�on of controls and procedures.
-
Requirements for the yearly assessment of opera�onal risks faced, and the adequacy of controls and procedures to address the risks iden�fied.
-
Requirements for the repor�ng of opera�onal losses a nd proposed remedial ac�on.
-
Development of con�ngency
plans.
-
Training and professional development.
-
Ethical and business standards.
-
Risk mi�ga�on approach such as adequate insurance cover on the assets of the Company.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 98
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d) Opera�onal Risk (cont’d)
The Opera�onal risk of the Company is iden�fied and monitored through risk management review of opera�onal processes and procedures across departments with the use of Risk Management tool k it such as Risk registers, Control Self-
Assessments, Top 20 Risk of the business and Key Risk Indicators
Review.
Compliance with the Company's opera�ng standards is also supported by a programme of yearly reviews undertaken by Business Assurance & Compliance (BAC). The results of BAC's reviews are discussed with the management of the business unit while the summaries are submi�ed to the Audit Commi�ee and Execu�ve Management of the Company.
HSE Risk
The Company is commi�ed to managing a Health, Safety & Environmental system that promotes a safe working environment for all employees, contractors, customers and visitors to our sites. At the Company, Health and Safety has equal importance with all other business ac�vi�es.
It is the policy of the Company to carry out its ac�vi�es in a manner that guarantees health and safety of its workers and other stakeholders, the protec�on of the Company’s facili�es and the environment and compliance with all regulatory and industry requirements. We consider health, safety and environmental issues as important as our core businesses and assume the responsibility of providing healthy, safe and secure work environment for our workers as required by law.
Our objec�ve is to minimize the number of cases of occupa�onal accidents, illnesses, damage to property and environmental degrada�on. 45 incidents were reported by various staff from different departments at different loca�ons 2019 while 49 incide nts were reported in 2018
Financial Risk
The Company’s overall risk management focuses on the unpredictability of financial markets and the adverse effect on the Company’s financial and opera�onal performance. The Company has a risk management func�on that manages the financial risks rela�ng to the Company’s opera�ons under the policies approved by the Board of Directors.
The Company has exposure to the following risks from its use of financial instruments:
Credit Risk
Liquidity Risk
Market Risk
Foreign Exchange Risk
Currency Risk
Interest Rate Risk
Other Market Risk
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 99
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d) Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obliga�ons resul�ng in financial loss to the Company. The Company has a policy of only dealing with creditworthy customers as a means of mi�ga�ng the risk of financial loss from defaults. We also secure our credits with Bank Guarantees from Company selected Banks.
The Company uses other publicly available financial informa�on and its own trading records to evaluate its major customers using the Credit Applica�on. All credits are administered in line with the company’s Credit policy.
Warning signs for default are promptly iden�fied based on our Credit Management & Repor�ng tools. Mi�ga�ng ac�ons such as reduced credit term, aggressive cash collec�on and downw ard review of credit limits are highlighted and implemented for high-risk customers based on approval by Execu�ve Management and Management Credit Commi�ee.
Trade and other receivables
The Company has established a credit policy under which each new customer is analysed individually for creditworthiness. Credit limit is established for each customer, which represents the maximum exposure to the customer. These limits are reviewed annually by management credit commi�ee based on customer’s performance and credit worthiness. Customers that fail to meet the Company’s credit criteria may transact with the Company on a cash-and-carry basis or provide a Bank Guarantee.
Our exposure to credit risk for trade and other receivables and related i mpairment losses at the repor�ng date is as disclosed in note 19.
Allowance for impairment losses
The Company establishes an allowance for impairment that represents its es�mate of expected credit losses in respect of trade and other receivables. Please refer to Note 27
for the ageing of trade and other receivables and related impairment allowances for the Company at the repor�ng date. The historical provision rates are updated with current and forward looking informa�on
The model used for impairment is explained in note 4.14 above
Investments
The Company ac�vely monitors the credit ra�ng of companies and only invest in liquid securi�es with companies with high credit ra�ngs. The Company does not
expect any counterparty to fail to meet its obliga�ons.
Guarantees
The Company’s policy is to provide financial guarantees only to related par�es a�er a careful review of the underlying transac�on. Where the underlying transac�on does not meet the Company’s risk appe�te, such transac�ons are exited.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 100
ardova plc
Notes to the financial statements
6. Financial risk management (cont’d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in mee�ng the obliga�ons associated with its financial liabili�es that are se�led by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabili�es when due, under both normal and stressed condi�ons, without incurring unacceptable and avoidable losses or risking damage to the Company’s reputa�on. Cash flow projec�on is performed by the treasury unit of the Company to an�cipate the cash & liquidity requirements of the Company.
The Company has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturing debt obliga�ons. As part of the liquidity management process, the Company has various credit arrangements with some banks and related par�es which can be u�lised to meet its liquidity requirements.
The Company manages its liquidity process by:
-
Day to day funding, managed by monitoring future cash flows to ensure that requirements can be met.
-
Monitoring balance sheet liquidity ra�os against internal requirements.
-
Managing the concentra�on and debt profile.
-
Usage of overdra� facility to meet liquidity needs.
Lastly, the Company ensures that it has sufficient cash on demand to meet expected opera�onal expenses for a year of 365 days, including the servicing of financial obliga�ons; this excludes the poten�al impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objec�ve of market risk management is to manage and control market risk exposures within acceptable parameters, while op�mizing the return.
Foreign Exchange Risk
The foreign exchange (FX) risk management policy shall be considered in all FX transac�ons. This policy provides guidelines on how foreign exchange risk is managed. The sources of FX risk include Imports of all petroleum products for sale e.g.
PMS, AGO, Base Oil and ATK, FX denominated opera�ng expenses, Receivables denominated in currency other than the base currency.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 101
ardova plc
Notes to the financial statements
6.
Financial risk management (cont’d)
Currency Risk
The currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to the changes in foreign exchange rates.
The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than its func�onal currency. The Company is exposed primarily to US Dollars (USD), Euro (E), and Pound Sterling (GBP).
The Company monitors the movement in currency rates on an ongoing basis to mi�gate the risk that the movements in the exchange rates may adversely affect the Company's income or value of their financial instruments.
The Company is allowed to hedge currency exposure within the tolerable limit by bank and must be approved by Risk Management Commi�ee. The Company does not hedge for specula�ve reasons.
Interest on borrowings is denominated in the currency of the borrower. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying opera�ons of the Company, primarily Naira. This provides an economic hedge without deriva�ves being entered into and therefore hedge accoun�ng is not applied in these circumstances.
Sensi�vity analysis
A change in the exchange rate either posi�vely or nega�vely by 200 basis points would have increased/ (decreased) equity and profit or loss by the amount stated below. This analysis is based on foreign currency exchange rate variances that the company considered to be reasonably possib le at the end of the repor�ng year, the analysis assumes that all other variables, in par�cular interest rates remain.
A weakening of the Naira against the currencies at 31 December 2019 would have increased/ (decreased) equity and profit or loss by the amount shown below:
Year end
Increase / decrease in foreign exchange rate
N'000
31-Dec-19
+-2%
4,300
31-Dec-18
+-2%
5,372
Interest Rate Risk
The Company is exposed to interest rate risk because the Company borrows funds at fixed interest rates and also u�lizes overdra� facili�es from Banks. This risk is managed by the Company by maintaining an appropriate mix between short and long term borrowings. The risk is also managed by the Company by constantly nego�a�ng with the banks to ensure that interest rates are consistent with the monetary policy rates as defined by the
Central Bank of Nigeria.
At the repor�ng date, the average interest rate
profile of the Company's interest -bearing financial interest was:
Overdra�
15.0%
Note 23 highlights the borrowings for the repor�ng year.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 102
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
6. Financial risk management (cont’d) Sensi�vity Analysis
A change in the interest rate either posi�vely or nega�vely by 200 basis points would have increased/ (decreased) equity and profit or loss by the amount stated below. This analysis is based on interest bearing debt obliga�ons at the relevant repor�ng dates while holding all other variables constant.
Increase / decrease in interest rate
Year end N'000
31-Dec-19 +-2%
553,205
31-Dec-18 +-2%
352,211
Other market Risk
Forte Oil Plc monitors the mix of debt and equity securi�es in its investment por�olio based on market indices. Material investments within the por�olio are managed on an individual basis and all buy and sell decisions are recommended by Risk Management Commi�ee and approved by the Execu�ve Commi�ee.
Management is assisted by external advisors in this regard. In accordance with this strategy, certain investments are designated at fair value through profit or loss because their perfor mance is ac�vely monitored and they are managed on a fair value basis. The company does not enter into commodity contracts other than to meet the expected usage and sale requirements; such contracts are not se�led net.
Capital Management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence at all �mes and to sustain future development and growth of the business. The Board of Directors monitors capital on the basis of the gearing ra�o, which the company defines as total liabili�es (non-current liabili�es and current liabili�es) over total assets (non-current assets and current assets).
The Company manages its capital structure to achieve capital efficiency, maximise flexibility and give the appropriate level of access to debt markets at a�rac�ve cost levels. Also, The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital posi�on.
The debt to capital ra�o at the end of the repor�ng year was as follows:
Dec-19
Dec-18
N’000
N’000
Total liabili�es
30,855,629
47,449,309
Total assets
47,018,954
61,198,279
Gearing ra�o as at:
66%
78%
The Company manages its capital to ensure that it will be able to con�nue as a going concern while maximizing its returns to all stakeholders
There were no changes in the company's approach to capital management during the year.
Notes to the Financial Statement 103
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
31-Dec-19 31-Dec-18
N’000 N’000
7. Revenue & Cost of Sales
7.1 Revenue Fuels 159,245,196 120,844,440
Lubricants and greases 17,249,004 13,720,830
Solar system 39,097 141,036
Liquefied Petroleum Gas (LPG) and Cylinder Sales
17,469 -
176,550,766 134,706,306
7.2. Cost of Sales
Fuels
152,387,320
112,346,536
Lubricants and greases
12,822,179
10,909,732
Solar system
41,102
119,972
Liquefied Petroleum Gas (LPG) and Cylinder Sales
18,448
-
165,269,049
123,376,240
`
31-Dec-19
31-Dec-18
N’000
N’000
8.
Other income
Investment property rental income
275,182
233,113
Throughput income (Note 8.1)
537,360
466,362
Foreign exchange gain (Note 8.2)
-
113,688
Sundry income (Note 8.3)
328,727
198,530
Provisions no longer required
23,054
77,402
Dividend received
-
270,000
Freight income (Note 8.4)
404,090
494,177
Gain on disposal of property, plant and equipment
9,997
6,537
Foreign exchange loss
12,435
-
Gain on disposal of subsidiary (Note 8.5)
2,674,891
-
Net Income from crude li�ing contract (Note 8.6)
51,419
-
4,317,155
1,859,809
8.1
This represents throughput income earned on storage of products for the Pipeline and Petroleum Marke�ng Company (PPMC) and other petroleum marketers in Apapa ta nk farm during the year.
8.2
This represents transac�onal gains of foreign exchange earned from sale of dollar inflows.
8.3
This represents income from sales of
scrap and empty packaging materials.
8.4
This represents income earned on 141 trucks owned by Ardova Plc managed by various logis�c companies
Notes to the Financial Statement 104
ardova plc
Notes to the financial statements
8.5 During the period ended 30 June 2019, Ardova Plc disposed its subsidiaries, Amperion Power Distribu�on Company Limited (Amperion), Forte Upstream Services Limited (FUS) and AP Oil and Gas Ghana, the disposal of Amperion and FUS resulted in a gain of N1.55 billion and N1.23 billion respec�vely, totalling N2.78 billion. The disposal of AP Oil and Gas Ghana resulted in a loss of N108 million resul�ng in a net gain of N2.67 billion as presented below:
FUS APOG
Amperion Total
N’000 N’000
N’000 N’000
Considera�on
1,242,849 28,838
11,700,000 12,971,687
Total value of Investment in Subsidiary
(10,000) (1,094,961)
(10,149,926) (11,254,887)
Provision for Diminu�on
in value of
investment
-
958,091
-
958,091
Gain/(Loss) on disposal
1,232,849
(108,032)
1,550,074
2,674,891
8.6
This represents net income from crude oil li�ing
contract executed with the Nigerian Na�onal Petroleum Corpora�on (NNPC) to li� out of the total crude alloca�on.
9a.
Expenses by nature
31-Dec-19
31-Dec-18
N’000
N’000
9a.1
Selling, distribu�on expenses
Fuels -
freight
2,005,260
2,007,396
Lubes -
freight
270,464
232,038
Commissions
5,242
6,254
2,280,966
2,245,688
9a.2
Administra�ve Expenses
Personnel expenses (Note 9a.2.1)
2,402,697
1,890,182
Deprecia�on and amor�sa�on
2,151,459
1,422,098
Bank charge
169,056
164,764
Transport and travel costs
439,560
308,519
Repairs and maintenance
613,628
876,060
Safety security and quality control
240,419
190,091
Insurance
210,149
205,436
Internet and communica�on
108,532
165,254
U�li�es
116,664
96,524
Professional and legal fees
341,721
362,676
Audit fees
34,125
34,125
Board and AGM expenses
96,755
87,592
Licenses, rates and fees
141,994
152,251
Public rela�ons, promo�ons and adver�sement
176,922
70,734
Rent and leases
227,676
1,064,006
Bad and uncollec�ble debt
9,357
13,384
Impairment charge
69,436
443,944
Shrinkage and product losses
265,220
276,433
Loss on disposal of property, plant and equipment
40,064
422
Prin�ng and sta�onery expenses
15,479
17,120
Director fees
950
3,850
Other expenses
521,597
149,636
8,393,460
7,995,101
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 105
ardova plc
Notes to the financial statements 31-Dec-19 31-Dec-18 N’000 N’000
9a.2.1 Personnel expenses Salaries, wages and allowances 1,195,287 1,097,228
Contribu�ons to pension fund scheme 77,349 75,930
Gratuity and redundancy cost 611,257 97,851
Performance Bonus - 130,000
Training, recruitment and canteen expenses 109,611 101,001
Medical expenses 43,602 47,638
Contract Manpower 344,473
307,295
Other personnel expenses 21,118
33,239
2,402,697 1,890,182
31-Dec-19 31-Dec-18
9b.
Expenses by func�on
N’000
N’000
Cost of sales (Note 7.2)
165,269,049
123,376,240
Selling, distribu�on expenses (Note 9a.1)
2,280,966
2,245,688
Administra�ve expenses (Note 9a.2)
8,393,460
7,995,101
175,943,475
133,617,029
10. Finance income and finance cost
Finance income
Interest income on bank deposits (Note 10.1)
185,604
194,551
Other interest income (Note 10.2)
4,369,491
986,487
Total Finance income
4,555,095
1,181,038
31-Dec-19
31-Dec-18
N’000
N’000
Finance costs
Interest on medium term bond
(1,258,646)
(1,591,484)
Interest expense on
bank loans and overdra�s (Note 10.1)
(1,981,728)
(1,510,096)
Discoun�ng of promissory notes
(1,585,020)
-
Total Finance cost
(4,825,394)
(3,101,580)
Net finance costs
(270,299)
(1,920,542)
10.1.
Interest income represents income earned on bank deposits while interest expense represents charges paid on trade finance, loans and overdra� facili�es u�lised during the period.
10.2.
Other interest income.
31-Dec-19
31-Dec-18
N’000
N’000
Interest and foreign exchange differen�als on subsidy
3,947,483
-
Interest on loan and receivables
158,648
940,694
Interest income on bank credit balances and other interest income
263,360
45,793
4,369,491
986,487
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 106
ardova plc
Notes to the financial statements
11. Taxa�on
31-Dec-19 31-Dec-18
a) Income tax expense N’000 N’000
Income tax 904,224 241,252
Educa�on tax 66,819 52,543
Over provision in prior year - (932)
Nigerian Police Trust Fund 184
Capital Gain 151 -
971,378 292,863
Deferred tax (credit)/charge (232,371)
104,210
Total income tax expense
739,007
397,073
b)
Effec�ve tax rate
Profit
for the year
3,915,140
631,471
Profit before tax
4,654,147
1,028,544
Income tax reported in the statement of profit or loss
739,007
397,073
Total income tax
739,007
397,073
Profit before tax
4,654,147
1,028,544
Effec�ve tax rates
16%
39%
c)
Effec�ve tax rate reconcilia�on
The income tax charge for the year can be reconciled to the accoun�ng profit as follows:
Profit before taxes
4,654,147
1,028,544
Income tax expense at 30%
1,396,244
308,563
Effect of income exempt from taxa�on
(972,616)
(214,543)
Effect of expenses not deduc�ble for taxa�on
551,491
688,491
Effect of capital allowance
(616,202)
(525,427)
Effect of balancing charge
27,526
8,270
Loss effect
-
(265,354)
Capital gains tax
151
-
Educa�on tax
66,819
52,543
Overprovision
-
(932)
Minimum tax
904,224
241,252
The Nigerian Police Trust Fund
184
-
Deferred tax
(232,371)
104,210
Total income tax expense
739,007
397,073
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 107
ardova plc
Notes to the financial statements
11. Taxa�on (cont’d)
c) Effec�ve tax rate reconcilia�on (cont’d)
The company income tax computa�on for the year ended 31 December 2019 was based on the provisions of the Company Income Tax Act Cap C21 LFN 2004 and Finance act 2020.
Educa�on tax was computed at the rate of 2% of assessable profit in accordance with the provisions of
the Act.
31-Dec-19 31-Dec-18
N’000 N’000
c)
Movement in current tax liability balance
Liability as at 1 January
296,217
245,206
Income tax for the period
971,378
292,863
Payments during the year
(209,058)
(241,852)
Withholding tax u�lised
(81,905)
-
976,632
296,217
12.
Earnings per share
Profit a�ributable to ordinary shareholders
Profit a�ributable to ordinary shareholders
3,915,140
631,471
Profit a�ributable to ordinary shareholders
3,915,140
631,471
Weighted average number of ordinary shares
Issued ordinary shares at 1 January *
1,310,629
1,310,629
Treasury shares
(5,599)
(5,599)
Weighted average number of ordinary shares
1,305,030
1,305,030
Basic/diluted earnings per share in (N)
3.00
0.48
The Company's basic earnings per share of N3.00
kobo (December 2018 : N0.48 kobo) is based on the profit a�ributable to ordinary shareholders of N3,915,140,000 (December 2018 : N631,471,000) on the 1,305,030,180 (December 2018 : 1,305,030,180) ordinary shares of 50 kobo each, being the weighted average number of ordinary shares in issue during the current and same period of the preceding year.
Dilu�ve instruments
There were no dilu�ve instruments in the books of the Company as at the year ended 31 December
2019.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 108
ardova plc
No
tes
to t
he
fin
anci
al s
tate
me
nts
Pro
pe
rty,
pla
nt
an
d e
qu
ipm
en
t.
The
mo
vem
ent
on
th
is a
cco
un
t d
uri
ng
the
pe
rio
d w
as a
s fo
llow
s:La
nd
Bu
ildin
g
Pla
nt,
Eq
uip
me
nt
an
d t
anks
Co
mp
ute
r e
qu
ipm
ent
Furn
itu
re
& fi
�n
gsM
oto
r ve
hic
les
Co
nst
ruc�
on
w
ork
in
pro
gre
ssTo
tal
N’0
00N
’000
N’0
00N
’000
N’0
00N
’000
N’0
00N
’000
Co
st
Bal
ance
at
1 Ja
nu
ary
20
18
3,7
02,1
95
2,7
69,4
93
8,53
2,8
37
314,
72
427
,24
43,
049
,03
147
,31
818
,44
2,8
42
Ad
di�
on
s -
-20
3,4
2963
,21
5-
105,
154
-37
1,7
98D
isp
osa
ls
--
-(7
40)
-(1
23,
185)
-(1
23,
925)
Bal
ance
at
31 D
ecem
ber
201
8
3,7
02,1
95
2,7
69,4
93
8,73
6,2
66
377,
19
9
27,2
44
3,03
1,0
00
47,3
18
18,6
90,
71
5A
dd
i�o
ns
1,4
47,4
57
658,
37
9
333,
974
14,0
89
-
1,13
4,3
52
227,
785
3,81
6,0
36
Tran
sfer
(N
ote
c)
40,0
00
5,51
2
1,
806
-
-
-
(47
,318
)-
Dis
po
sals
(10
7,64
3)
(34
0)
(14
0,35
4)
(34
0)
-
(15
3,87
7)
-(4
02,
554)
Dis
po
sal o
f su
bsi
dia
ries
Ba
lan
ce a
t 31
De
cem
be
r 2
019
5,0
82,0
09
3,4
33,0
44
8,9
31,6
92
390,
948
27,2
44
4,0
11,4
75
227,
785
22,1
04,1
97
De
pre
cia
�o
n a
nd
imp
airm
ent
loss
es
Bal
ance
at
1 Ja
nu
ary
20
18
382,
28
3
1,3
94,4
93
5,18
8,5
41
279,
84
1
15,8
45
1,41
3,5
88
-8,
674
,59
1C
har
ge f
or
the
year
41,0
64
209,
79
3
651,
146
35,3
18
4,89
6
382,
196
-1,
324
,41
3D
isp
osa
ls
-
-
-
(69
9)
-
(97
,500
)
-(9
8,1
99)
Bal
ance
at
31 D
ecem
ber
201
8
423,
34
7
1,60
4,2
86
5,83
9,6
87
314,
46
0
20,7
41
1,69
8,2
84
-9,
900
,80
5C
har
ge f
or
the
year
42,9
84
167,
29
3
605,
016
34,4
48
2,95
4
393,
683
-1,
246
,37
8D
isp
osa
ls
(21
,685
)
(24
9)
(40
,592
)
(24
8)
-
(96
,891
)
-(1
59,
665)
Ba
lan
ce a
t 31
De
cem
be
r 2
019
444,
646
1,7
71,3
30
6,4
04,1
11
348,
660
23,6
95
1,9
95,0
76
-10
,987
,51
7
Ca
rryi
ng
am
ou
nts
Bal
ance
at
1 Ja
nu
ary
20
18
3,3
19,9
12
1,3
75,0
00
3,3
44,2
96
34,8
83
11,3
99
1,6
35,4
43
47,3
189,
768
,251
Bal
ance
at
31 D
ecem
ber
201
8
3,2
78,8
48
1,1
65,2
07
2,8
96,5
79
62,7
39
6,5
03
1,3
32,7
16
47,3
188,
789
,910
Ba
lan
ce a
t 31
De
cem
be
r 2
019
4,6
37,3
63
1,
661
,714
2,5
27,5
81
42
,28
8
3,
549
2,0
16,4
00
22
7,78
511
,116
,68
0
(a)
Dep
reci
a�o
n c
har
ge o
f N
1, 2
46
,37
8,0
00
(Dec
emb
er 2
018
: N1
, 32
4,4
13
,00
0)
is in
clu
ded
in a
dm
inis
tra�
ve e
xpen
ses
in t
he
stat
emen
t o
f p
rofi
t o
r lo
ss a
nd
oth
er c
om
pre
hen
sive
inco
me.
(b)
Ther
e w
as n
o im
pai
rmen
t ch
arge
on
pro
per
ty, p
lan
t an
d
equ
ipm
ent
du
rin
g th
e ye
ar.
(c
)Th
e tr
ansf
er o
f as
sets
rep
rese
nts
co
mp
le�
on
of
Itu
ro
ad s
ervi
ce s
ta�
on
in U
yo.
(d
) Th
e C
om
pan
y’s
asse
ts h
ave
no
t b
een
ple
dge
d a
s se
curi
ty in
rel
a�o
n t
o lo
ans
hel
d b
y th
e C
om
pan
y.
ARDOVA PLC(Formerly Forte Oil Plc)
Annual Reports and Financial statementsFor the year ended 31 December 2019
Notes to the Financial Statement 109
ardova plc
Notes to the financial statements
31-Dec-19
N’000
14 Right of use assets
Lease property
Cost
Balance at 1 January 2,701,972
Balance at 31 December 2018
1,939,502
Addi�on 245,542
Balance at 31 December 2019
2,185,044
Deprecia�on
Charge for the period
808,574
Balance at 31 December 2019
808,574
Carrying amount
At 31 December 2019
1,376,470
(a)
Addi�ons to right of use assets during year were N245,542,000
(b)
Deprecia�on charge of N808, 574,000
is included in administra�ve expenses in the statement of profit or loss and other comprehensive income.
(c)
The Company has leases for some of its retail outlet. With the excep�on of short-term leases and leases of low-value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset and no lease liability was recognised because the full lease payment for the leased periods was made to the lessor at the contract incep�on.
Each lease generally imposes a restric�on that, unless there is a contractual right for the Company to sublet the asset to another party, the right-of-use asset can only be used by the Company.
Some leases contain where the lessee is desirous of renewing the lease, a wri�en no�ce to that effect shall be sent to the lessor who when sa�sfied shall accede to the renewal with the liberty to call for a revised lease payment and other condi�ons to meet the exigencies of the material. The Company is prohibited from selling the underlying leased assets. It is also stated that the Company must keep those proper�es in a good state of repair and ret urn the proper�es in their original condi�on at the end of the lease.
(d)
No impairment charge on lease property during the year.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 110
ardova plc
Notes to the financial statements
14 Right of use assets (cont’d)
(e) Right-of use asset
No of right-of use assets
Leased Range of remaining
term
Average remaining lease term
Leased Property 89 5 - 25 years 15years
31-Dec-19
(f) Amount recognised in profit or loss
N’000
Short term lease 192,255
Low value lease 1,134
193,389
`
15. Investment property
Cost
Balance at 31 December 2018
2,235,584
Balance at 31 December 2019
2,235,584
Deprecia�on
Balance at 1 January
678,140
Charge for the year
25,449
Balance at 31 December 2018
703,589
Charge for the year
25,449
Balance at 31 December 2019
729,038
Carrying amount
At 31
December 2018
1,531,995
At 31
December 2019
1,506,546
(a)
Investment property comprises of a number of commercial proper�es that are leased to third par�es. The lease year ranges between 1 -
5 years. Investment proper�es are carried at cost/deemed
cost. The carrying amount of investment property is separated between lease hold land and buildings. Lease hold land is amor�sed over the lease year while building is depreciated on a straight line basis over the es�mated useful life at 4% per annum.
(b)
During the year
ended 31 December 2019 the Company recognised N275, 182,000
(2018:
N233, 113,000) as rental income in statement of profit or loss.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 111
ardova plc
Notes to the financial statements
15. Investment property (cont’d)
(c) Deprecia�on charge of N25, 499,000 (2018: N25, 499,000) is included in administra�ve expenses in the statement of profit or loss and other comprehensive income.
(d) The fair value of the investment proper�es as at 30 June 2018 was N5 , 736,560,000. The fair valua�on was carried out by Jide Taiwo & Co. (FRC2012/NIESV/000000254); Ismail & Partners (FRC/2012/NIESV/00000000245) and Dele Olaiya & Associates (FRC/2013/NIESV/00000002773).
These valua�ons indicate upward movement in the market values of these proper�es compa red to their carrying amounts, hence no indica�on of impairment for all investment proper�es.
Directors are of the view that the fair value of these proper�es as at 31st December, 2019 are not materially different from the values obtained at 30th June , 2018 and have therefore not recognised any impairment charge during the period.
(e)
No impairment charge on investment proper�es during the year.
16.
Intangible assets
31-Dec-19
N’000
Cost
Balance at 1 January
1,014,969
Acquisi�ons
19,397
Balance at 31 December 2018
1,034,366
Addi�on
-
Balance at 31 December 2019
1,034,366
Amor�sa�on
Balance at 1 January
818,319
Charge for the year
72,236
Balance at 1 January
890,555
Charge for the year
71,058
Balance at 31 December 2019
961,613
Carrying amounts
Balance at 31 December 2018
143,811
Balance at 31 December 2019
72,753
(a)
These relate to purchased so�wares.
(b)
The amor�sa�on charge on intangible assets of N71, 058,000
(December 2018:
N72, 236,000) is included in administra�ve expenses in the statement of profit or loss.
(c)
No impairment charge on intangible assets during the year.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 112
ardova plc
No
tes
to t
he
fin
anci
al s
tate
me
nts
17.
D
efe
rre
d t
ax
a)
Re
cogn
ised
de
ferr
ed
ta
x as
sets
an
d li
abili
�e
s
Def
err
ed t
ax a
sset
s an
d li
abili
�es
are
a�
rib
uta
ble
to
th
e fo
llow
ing:
A
sset
s
Li
ab
ili�
es
N
et
20
19
2018
20
19
2018
2019
2018
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N
’000
P
rop
erty
, pla
nt
and
eq
uip
men
t
-
-
1,
463
,95
6
1,
490
,74
1
(1
,463
,95
6)
(1
,490
,741
)
Trad
e re
ceiv
able
s
538,
66
6
38
1,7
71
-
-
538,
666
381,
771
O
ther
rec
eiva
ble
s
167,
19
0
16
7,1
90
-
-
167,
190
167,
190
O
ther
liab
ili�
es
77,3
01
28
,61
0
-
-
77,3
01
28,6
10
783,
157
577,
571
1,4
63,9
56
1,
490
,741
(68
0,7
99)
(913
,170
)
Ba
lan
ce 1
Ja
nu
ary-
20
19
Re
cogn
ized
in
pro
fit
or
loss
Effe
ct o
f fo
rex
flu
ctu
a�o
ns
Re
cogn
ized
in
oth
er
com
pre
hen
sive
in
com
e
Ba
lan
ce 3
1
De
cem
ber
-20
19
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
b)
Mo
vem
en
t in
te
mp
ora
ry d
iffe
ren
ces
du
rin
g th
e
pe
rio
d
P
rop
erty
, pla
nt
and
eq
uip
men
t(1
,490
,741
)26
,78
5-
-
(1,4
63,9
56
)
Trad
e re
ceiv
able
s38
1,7
71
156,
89
5-
-
538,
666
O
ther
rec
eiva
ble
s16
7,1
90-
--
167,
190
O
ther
liab
ili�
es28
,61
048
,69
1-
-
77,3
01
(9
13,1
70)
232,
371
--
(680
,799
)
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 113
ardova plc
Notes to the financial statements
31-Dec-19 31-Dec-18
18. Inventories N’000 N’000
White products 7,078,251 5,762,913
Raw materials 3,820,907 1,924,552
Packaging materials 109,363 90,383
Semi-finished goods of lubricants 102,786 118,631
Finished goods of lubricants 1,296,653 1,318,366
Inventory -Solar System 65,025 123,850
Consumables (Note 18.2) 361,388 189,451
12,834,373 9,528,146
18.1 During the year, N165, 269,049,000
(31 December 2018:
N123, 376,240,000) of inventory was sold and
recognised as cost of sales in the statement of profit or loss.
18.2 Consumables include spare parts for retail outlets, equipment maintenance and sta�onery for office use.
31-Dec-19
31-Dec-18
N’000
N’000
19.
Trade receivables
Trade receivables (Note 19.1)
4,451,848
3,293,720
Impairment allowance (Note 19.6)
(1,198,244)
(1,141,893)
3,253,604
2,151,827
19.
Other receivables
Petroleum Support Fund receivable (Note 19.2) 6,230,423
8,719,609
Notes receivable (Note 19.3)
640,082
4,628,897
Advance payment to suppliers
5,524,009
1,802,033
Interest receivable
85,525
17,016
Withholding tax recoverable
44,580
88,834
Other receivables (Note 19.4)
828,728
9,007,265
13,353,347
24,263,654
Impairment allowance (Note 19.6)
(1,154,610)
(1,151,212)
12,198,737
23,112,442
Prepayments
Prepayments
995,927
2,975,098
Prepaid staff expenses
229,703
372,504
1,225,630
3,347,602
Trade and other receivables Notes (a+b)
16,677,971
28,611,871
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 114
ardova plc
Notes to the financial statements
19.1 The Company carries out periodic review and financial assessment of customers before products are supplied on credit. Credit customers are categorised according to the determined default risk ra�ng. High risk customers are required to provide bank guarantees for credit sales. The Credit Commi�ee assesses the status of all credit customers periodically. See Note 4.2.4 (Impairment) and Note 6 (Financial Risk Management).
19.2 This balance relates to outstanding subsidy receivable from Petroleum Products Pricing Regulatory Agency (PPPRA) which represents interest on delayed payments and foreign exchange differen�al claims under the PSF scheme recoverable from PPPRA on PMS imported by Forte Oil Plc. The foreign exchange differen�al represents differences between the rate used by PPPRA in pricing Premium Motor Spirit (PMS) and the actual rates the foreign exchange in respect of these products importa�on were purchased. Promissory notes was issued to the oil marketers
as part se�lement of these outstanding in December, 2018 and July, 2019. The
balance of N7.9bn is expected to be se�led with a one year promissory note.
19.3 This is one of the promissory notes received from the Federal Government as a part of the outstanding subsidy.
19.4 Other receivables
31-Dec-19
31-Dec-18
N’000
N’000
BSG Resources Ltd
-
7,466,467
Amperion Power Distribu�on Company Ltd
-
681,341
Geregu Power Plc
-
13,245
AP Oil and Gas Ghana Ltd
-
61,493
Zenon Petroleum and Gas Limited
-
16,847
Other debtors
828,728
767,872
828,728
9,007,265
19.5
Impairment allowance
At 1 January
2,293,105
1,829,870
Effect of retrospec�ve adop�on of New standard (IFRS 9)
-
19,291
Increase during the year
69,436
443,944
Allowance no longer required
(9,687)
-
2,352,854
2,293,105
19.6
Impairment allowance
Trade Receivables
1,198,244
1,141,893
Other Receivables
1,154,610
1,151,212
2,352,854
2,293,105
20
Restricted cash*
31-Dec-19
31-Dec-18
N’000
N’000
19,707
-
This represents cash set aside and held with the bank in conformity with the bond agreement.
It is used solely for the repayment
of the bond liability and not for any opera�onal needs.
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 115
ardova plc
Notes to the financial statements 31-Dec-19 31-Dec-18
21 Cash and cash equivalents N’000 N’000 Bank balances 1,376,867 299,638 Short-term deposits (Note 20.1) 607,393 854,631
Cash and bank balances 1,984,260 1,154,269
Bank overdra�s used for cash management purposes (Note 20.2) (116,773) (9,473,546)
Cash and cash equivalents in the statement of cash flows
1,867,487 (8,319,277)
21.1 Bank balances and short term deposits with banks represent placements with banks for period between 0 -
180 days. Included in these are unclaimed dividends amoun�ng to N607, 391,099
(December
2018:
N627, 305,356) held in a separate bank account in accordance with the guidelines of the Security and
Exchange Commission (SEC). The unclaimed dividend deposit is restricted for use by the Company.
21.2 This represents the overdrawn current account balances with four Nigerian banks. These facili�es have an average interest rate of 18%.
22
Discon�nued opera�ons and disposal Companies
held for sale.
The asset and liabili�es of the Company’s
Fuel, Produc�on
Chemicals and Power Genera�on segments, AP Oil and Gas, Ghana, Forte Upstream Services Limited and Amperion Power Distribu�on Company Limited were presented as held for sale at 30 June 2018, following the approval by the Board and shareholders at the 39th Annual General Mee�ng held on 23 May 2018 and approval by the Securi�es and Exchange Commission ('SEC') to sell the en��es. Analysis of the result of en��es classified as discon�nued opera�ons are as shown
below:
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 116
ardova plc
Notes
to the financial statements
22.1.
Assets and Liabili�es of disposal Companies
held for sale
Assets and liabili�es of disposal Companies held for sale comprise the assets and liabili�es of FUS, APOG and Amperion as at 31 March 2019.
At the repor�ng date, 31 March 2019, these subsidiaries have been disposed and the assets and liabili�es derecognized.
FUS
APOG
Amperion
Total
Carrying values of
31-Mar-19
31-Mar-19
31-Mar-19
31-Mar-19
N’000
N’000
N’000
N’000
Assets
Net book value of property, plant and equipment
265,498
77,927
51,042,468
51,385,893
Intangible assets
8,584
-
754
9,338
Deferred tax asset
11,295
128,452
4,535,442
4,675,189
Inventory
535,224
2,205
727,585
1,265,014
Trade and other receivables
1,300,923
777,929
36,026,875
38,105,727
Cash and cash equivalents
111,354
(66,414)
3,790,855
3,835,795
Long term employee benefits
26,298
-
483
26,781
Total assets held for sale
2,259,176
920,099
96,124,462
99,303,737
Liabili�es
Trade and other payables
(484,877)
(1,003,429)
(25,101,888)
(26,590,194) Current income tax liabili�es
(165,684)
10
(516,517)
(682,191) Bank overdra�
-
-
-
- Loans and borrowings
(33)
-
(7,539,940)
(7,539,973) Deferred Tax liabili�es
(80,081)
-
-
(80,081)
Total liabili�es held for sale
(730,675)
(1,003,419)
(33,158,345)
(34,892,439) Net Assets/(Liabili�es) directly
associated with disposal Company
1,528,501
(83,320)
62,966,117
64,411,298
Subsidiaries classified as held for sale.
31-Dec-19
31-Dec-18
N’000
N’000
Equity: Forte Upstream Services Limited
-
10,000
AP Oil and Gas Ghana Limited -
670,011 Amperion Power Distribu�on Company Limited -
10,149,926
Irredeemable Preference Shares: Cummula�ve Conver�ble Preference Shares in AP Oil and Gas Ghana Ltd
- 424,950
- 11,254,887 Impairment allowance - (958,091)
- 10,296,796
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 117
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
22.3. Sale of AP Oil and Gas GhanaDuring the period under review, the Company signed a Sale and Purchase Agreement (SPA) to dispose 100% shares in AP Oil and Gas Ghana to Cobalt Interna�onal Services Limited. The transac�on was concluded in March 2019. As a result of the sale the Company lost control of AP Oil and Gas Ghana and have derecognized all assets and liabili�es. A gain on disposal of N112 million, has been recognized in this financial statements (under profit a�er tax for the period from discon�nued opera�ons).
22.4. Sale of Forte Upstream Services Limited
During the period under review, the Company signed a Sale and Purchase Agreement (SPA) to dispose 100% shares in Forte Upstream Services Limited to Gbonka Oil and Gas Limited. The transac�on was concluded in March 2019. As a result of the sale the Company
lost control of Forte Upstream Services Limited and have
derecognized all assets and liabili�es. A loss on disposal of N286 million, has been recognized in this financial statements (under profit a�er tax for the period from discon�nued opera�ons).
22.5.
Sale of Amperion Power Distribu�on Company Limited
During the period under review, the Company
signed a Sale and Purchase Agreement (SPA) to dispose its shares in Amperion Power Distribu�on Company Limited to Calvados Global Services Limited. The transac�on was concluded in March 2019. As a result of the sale the Company
lost control of Forte Upstream Services
Limited and have derecognized all assets and liabili�es. A loss on disposal of N1.4 billion has been recognized
in these financial statements
(under profit a�er tax for the period from discon�nued opera�ons).
FUS
APOG
Amperion
Total
Considera�on
1,242,849
28,838
11,700,000
12,971,687
Net liability/ (asset)
(1,528,499)
83,321
(62,966,117)
(64,411,295)
NCI
-
-
49,882,501
49,882,501
(Loss)/Gain on Disposal
(285,650)
112,159
(1,383,616)
(1,557,107)
31-Dec-19
31-Dec-18
22.6.
Results of discon�nued opera�ons
N’000
N’000
Revenue
12,670,947
39,820,598
Cost of sales
(7,512,944)
(25,113,445)
Gross profit
5,158,003
14,707,153
Other income
1,606
16,131
Administra�ve and distribu�on expenses
(570,683)
(6,412,238)
Opera�ng profit
4,588,926
8,311,046
Net finance cost
(191,474)
(1,775,173)
Profit before tax from discon�nued opera�ons
4,397,452
6,535,873
Income tax
(104,781)
1,447,062
Profit a�er tax from discon�nued opera�ons
4,292,671
7,982,935
Loss on sale of discon�nued opera�on
(1,557,108)
-
Profit a�er tax for the period from discon�nued opera�ons
2,735,563
7,982,935
Notes to the Financial Statement 118
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements 31-Dec-19 31-Dec-18 N’000 N’000
23. Share capital and reserves Ordinary shares
a) Authorised ordinary shares: 4,000,000,000 ordinary shares of 50k each 2,000,000 2,000,000
b)
Issued and fully paid ordinary shares of 50k each
1,310,629,267 ordinary share of 50k each
655,314
655,314
31-Dec-19 31-Dec-18
Units Units
c)
Shares outstanding
Issued ordinary shares at 1 January
1,310,629
1,310,629
Treasury shares
(5,599)
(5,599)
Number of ordinary shares
1,305,030
1,305,030
*These are in thousand units.
31-Dec-19
31-Dec-18
N’000
N’000
d)
Share premium
8,071,943
8,071,943
e)
Other reserves
Other reserves represent the carried forward, other comprehensive income and expenses plus current period other comprehensive income a�ributable to shareholders.
f)
Retained earnings
Retained earnings represent the carried forward recognised income net of expenses plus current year
income a�ributable
to shareholders.
31-Dec-19
31-Dec-18
N’000
N’000
Balance at 1 January
6,418,039
5,805,859
Adjustment
(2,711)
-
Profit for the year
3,915,140
631,471
Effect of retrospec�ve adop�on of IFRS 9
-
(19,291)
Dividend paid
(1,500,785)
-
8,829,683
6,418,039
g)
Treasury stocks
This represents 5,599,087 units (at the market value of N248 as at the date of the transfer) of the company's exis�ng shares transferred
to Forte Oil Plc to enable the Company recover the dividend and interest received on unpaid shares in 2009 by a shareholder. These shares were seized by the company on the ruling of the Security and Exchange Commission (SEC). The shareholders at the 37th
Annual General Mee�ng held on the 26th of April, 2016 approved the re-issue of these shares to exis�ng shareholders of the company on a pari passu basis at the market price of N300 per share.
Notes to the Financial Statement 119
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
24. Long term employee benefits
The Company operates a funded long term employees plan (gratuity) for qualifying employees of the Company. Under the plan, the employees are en�tled to a lump sum benefits on a�ainment of a re�rement age or on disengagement a�er contribu�ng a specific number of years in service. No other post -re�rement benefits are provided to these employees. The most recent actuarial valua�ons of the present value of the defined benefit obliga�on were carried out as at 31 December 2019 by KMC Actuarial Service. The present value of the defined benefit obliga�on, and the related current service cost and past service cost, were measured using the Projected Unit Credit Method with actuarial valua�on being carried out at the end of each repor�ng period.
The company has taken the decision to wind up the gratuity scheme as at 31 December 2019 but con�nue with the defined contribu�on plan for its staff. As a result, the total balance of the employee benefit liability as at 31 December 2019 will be distributed to the qualified beneficiaries of the program accordingly based on the company policy on gratuity computa�on.
Furthermore, there will be no more gratuity expenses and accrual in the financial statements of the subsequent years. Hence, the sensi�vity analysis of the impact of changes in economic assump�ons on the assump�ons is no longer necessary.
The movement in the present value of the other long-term
employee benefits was as follows:
31-Dec-19
31-Dec-18
N’000
N’000
Gratuity liability at 1 January
468,546
473,372
Current service costs
328,735
97,347
Transfer of employee service cost
9,072
-
Provision no longer required
(13,368)
-
Payment during the year
(530,084)
(102,173)
Gratuity liability
at 31 December
262,902
468,546
Investments (Employee Benefits)
Planned asset/investment
at 1 January
563,910
489,414
Actual return on planned assets
83,127
74,496
647,037
563,910
Current por�on
610,302
-
Non-current por�on
36,735
563,910
647,037
563,910
Expense recognised in comprehensive income
Current service costs
328,735
97,347
Return on planned assets
(83,127)
(74,496)
Charged to profit or loss
245,608
22,851
Notes to the Financial Statement 120
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
24. Long term employee benefits (cont’d)
(a) Long term employee benefit expense is recognised in administra�ve expenses in the statement of profit or loss.
(b) The actuary valua�on report was signed by Miller Kingsley (FRC/2013/NAS/00000002392) of KMC Actuarial Services a fellow of Society of Actuaries, USA.
(c) The planned asset/investment is held by four fund managers: Meristem Wealth Management Limited; FSDH Asset Management Limited, Cardinal Stone Partners, and Afrinvest Asset Management.
The assets are placed in Treasury bills, Bonds with quoted market price in the ac�ve Nigerian bond market and Fixed deposits are placements with financial ins�tu�ons and do not have quoted prices.
The plan typically exposes the Company to actuarial risks such as; assets vola�lity, interest rate risk, life expectancy, salary risk, changes in corporate yields
and infla�on risk.
Asset vola�lity
The present value of the defined benefit plan liability is calculated using a discount rate determined by reference to high quality corporate bond yields; if the return on plan assets is below this rate, it will create a plan deficit. Currently the plan has a rela�vely balanced investment in Government Securi�es and money market instruments. Due to the long-
term nature of the plan liabili�es, the board of the pension fund considers it appropriate that a
reasonable por�on of the plan assets should be invested in equity securi�es
and in real estate to leverage the return generated by the fund.
Interest Rate Risk
A decrease in the bond interest rate will increase the plan liability; however, this will be par�ally offset by an increase in the return on the plan’s debt investments.
Life Expectancy
The present value of the defined benefit plan liability is calculated by reference to the best es�mate of the mortality of plan par�cipants during their employment.
An increase in the life expectancy of the plan par�cipants will increase the plan’s liability.
Salary Risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan par�cipants. As such, an increase in the salary of the plan par�cipants will increase
the plan’s liability.
Changes in bond yields
A decrease in corporate bonds yield will increase plans liabili�es.
Infla�on Risk
The majority of the plan's assets are either unaffected by fixed interest bonds or loosely correlated with equi�es infla�on, meaning that an increase in infla�on will also increase deficit.
There are two categories of employees in Forte Oil Plc; first category are those on direct long term contract with the company, while the second category are Associates on secondment to Forte from other companies. Only the former are covered by
this long-term
benefit.
In es�ma�ng the present value of the defined benefit obliga�on, certain assump�ons on financial environment, a�ri�on rates of withdrawal from service and death of staff likely to be experienced were made. The significant actuarial assump�ons used are summarized as follows:
Notes to the Financial Statement 121
ardova plc
ARDOVA PLC(Formerly Forte Oil Plc)
Annual Reports and Financial statementsFor the year ended 31 December 2019
Notes to the financial statements
24. Long term employee benefits (cont’d)
a) Discount rate/average rate of return on assets 13% per annum b) Average rate of salary increase 12% per annum c) Inflation rate 12% per annum
d)
Mortality rate
A67/70 English Life Tables
The weighted average liability dura�on of the Plan is 12.61 years. The average weighted dura�on of the
longest Nigerian bond as at the valua�on date, 31st December 2019, is the 14.8% 26-April-2049 bond with a weighted average dura�on of 7.46 years and with a gross redemp�on yield of about 12.89% as at 31st December 2019.
Maturity profile of Defined Benefit Obliga�ons
Age Band (in years)
Number of Employees
Annual Gross Pay
(NGN)
Accrued Liability
26-30
12
58,395,989
9,843,134
31-35
29
243,632,746
56,210,757
36-40
32
225,422,906
97,921,248
41-45
19
161,654,295
65,087,245
46-50
7
132,001,885
33,840,109
Total
99
821,107,821
262,902,493
Past Service (in years)
Number of Employees
Annual
Gross Pay (NGN)
Accrued Liability
0-5
12
575,290,345
85,185,426
6-10
29
245,817,476
177,717,067
Above 10
-
-
-
Total
99
821,107,821
262,902,493
Notes to the Financial Statement 122
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
25 Loans and borrowings
This note provides informa�on about the contractual terms of the Company’s interest -bearing loans and borrowings, which are measured at amor�sed cost.
31-Dec-19 31-Dec-18 N’000 N’000 Non-current
Term loans
- 634,369
Medium term bond (25.2)
2,735,388 5,041,359
2,735,388 5,675,728
Current
Loans and borrowings
Term loans
-
861,278
Import finance facili�es (note 23.2)
-
575,816
-
1,437,094
Medium term bond (23.1)
2,476,801
2,134,164
5,212,189
9,246,986
31-Dec-19
31-Dec-18
25.1
Loan movement
N’000
N’000
At 1 January
9,246,986
10,769,357
Interest cost for the year
2,592,258
1,699,415
Repayment
(6,627,055)
(3,221,786)
At 31 December
5,212,189
9,246,986
25.2
In December 2016, The Company issued N9billion unsecured corporate bond for a 5-year
tenor and at a coupon and effec�ve interest rate of 17.5% and 19.43% respec�vely.
The net proceeds were used to refinance exis�ng commercial bank loan obliga�ons and to immediately finance the company’s retails outlet expansion strategy.
The restric�on to the bonds issued are as follows but not limited to below:-
a
give prior no�ce to the Trustees of any proposed redemp�on and, if it shall have given No�ce to the Bondholders of its inten�on to redeem any Bonds, duly proceed to redeem such Bonds accordingly.
b
not (and ensure that none of its Subsidiaries shall) without the consent of the Bondholders and Trustees:
bi
incur any Indebtedness above the sum of Five Billion
Naira (N5,000,000,000);
bii
dispose any of its assets above the sum of Five Billion Naira (N5,000,000,000);
Notes to the Financial Statement 123
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
25 Loans and borrowings
25.2 (cont’d)
c give to the Trustees and Bondholders a No�ce prior to the acquisi�on of any company/business/assets where the cost of such acquisi�on when aggregated with the cost of any other acquisi�on of any company/business/assets by the Issuer during the financial year of the proposed acquisi�on, exceeds the total sum of Five Billion Naira (N5,000,000,000).
Borrowings
are ini�ally measured at fair value, net of transac�on costs incurred. Borrowings are subsequently measured at amor�sed cost. Any differences between the proceeds (net of transac�on costs) and the redemp�on value is recognised in the statement of pro fit or loss over the year of the borrowings using the effec�ve interest method. The carrying values of borrowings approximate their fair value.
25.3
Import finance facili�es represents short term borrowings obtained to fund le�ers of credits fo r petroleum product importa�on. These facili�es are secured with the product financed, the Petroleum Subsidy Fund receivable on them if applicable and any sinking fund of the company.
31-Dec-19
31-Dec-18
N’000
N’000
26. Trade and other payables
Current trade and other payablesTrade payable
NNPC accounts payable
4,361,957
6,495,513
Trade creditors
4,171,287
2,850,689
Petroleum Equalisa�on Fund (PEF) payable (Note 25.1)
2,402,599
2,234,526
Inventory accruals (Note 25.2)
5,673,520
8,770,024
Customer deposits for products
3,037,319
2,657,270
19,646,682
23,008,022
Non-trade payables and other creditors (Note 25.3) 3,176,495
3,465,250
Total Trade and other payables
22,823,177
26,473,272
26.1
This balance relates to bridging allowance net of bridging claims due to Petroleum Equalisa�on Fund (PEF). Bridging claims, raised against the Federal Government of Nigeria, are costs incurred in transpor�ng white products (excluding deregulated products) from specific PPMC dep ots to approved areas. Bridging allowances are compulsory contribu�ons on each litre of white product li�ed, to assist the Federal Government defray costs arising from bridging claims. Bridging claims are usually set off against bridging allowances to establish the net amount due to, or from the PEF, an organ of the Federal Government of Nigeria responsible for managing the process.
Notes to the Financial Statement 124
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
26.2 Inventory accrual accounts includes liability accrued for product and associated costs. This account holds accruals for value of goods received pending receipt of supplier's invoices.
26.3 This consists of unclaimed dividends, statutory payables such as; withholding tax liabili�es, VAT, PAYE, NSITF, and other payables such as; transporters freight account, rents received in advance and security deposits.
31-Dec-19 31-Dec-18 Non-trade payables and other creditors N’000 N’000
Unclaimed dividend
605,811 621,443
Statutory payables (VAT, WHT etc.)
486,534 285,318
Other payables
1,715,438 2,182,836
Security deposits
368,712 375,653
3,176,495 3,465,250
Notes to the Financial Statement 125
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
Company 31-Dec-19 31-Dec-18 N’000 N’000
27. Financial instruments Credit risk Exposure to credit risk The carrying amount of financial assets
represents the maximum credit exposure. The maximum exposure to credit risk at the repor�ng date was:
Trade and receivables (Note 19)
16,677,971 28,611,871
Cash and cash equivalents (Note 20)
1,867,487 (8,319,277)
18,545,458 20,292,594
Forex exposure
Bank balances denominated in other currencies
554,297
292,828
Trade and other receivables denominated in other currencies
-
1,520,280
Liabili�es dominated in other currencies
-
(594,360)
554,297
1,218,748
Gross
Impairment
Gross
Impairment
31-Dec-19
31-Dec-19
31-Dec-18
31-Dec-18
N'000
N'000
N'000
N'000
Trade Receivables
The aging of loans and receivables at the
repor�ng date was:
0-2 months
2,799,840
2,819
925,869
11,065
2-3 months
152,203
5,299
65,215
1,943
3-6 months
20,142
851
36,950
2,477
6-12 months
50,682
37,700
49,606
724
More than 12 months
1,428,981
1,151,55
2,216,080
1,125,684
4,451,848
1,198,244
3,293,720
1,141,893
Notes to the Financial Statement 126
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
27. Financial instruments (cont’d)
Gross Impairment Gross Impairment 31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18 N'000 N'000 N'000 N'000 Other Receivables
The aging of loans and receivables at the
repor�ng date was: 0-2 months 5,998,584 - 2,031,888 - 2-3 months 61,458 - 659,112 -
3-6 months
256,269 -
1,092,782 -
6-12 months
39,471 10,933
462,393 -
More than 12 months
6,952,985 1,143,678
20,017,479 1,151,212
13,308,767 1,154,611
24,263,654 1,151,212
Gross
Impairment
Gross
Impairment
31-Dec-19
31-Dec-19
31-Dec-18
31-Dec-18
N'000
N'000
N'000
N'000
The Company
Analysis of financial assets impaired.
Trade receivables
4,451,849
1,198,244
3,293,718
1,141,893
PSF Receivables
516,713
516,713
516,713
516,713
Advances to contractors
540,000
540,000
549,686
549,686
Other Receivables
67,338
67,338
66,260
66,260
Receivables from Property customers
15,709
15,709
15,709
15,709
Receivables from former employees
14,850
14,850
2,844
2,844
5,606,459
2,352,854
4,444,930
2,293,105
The average credit year on sales of goods is 60 days. Specific impairment is made for trade receivables that are past due and doub�ul of recovery based on the probability of default. Receivables not specifically impaired are impaired collec�vely using the historical probability of default over the last three repor�ng years. Trade receivables are considered to be past due when they exceed the credit year granted.
Notes to the Financial Statement 127
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
No
tes
to t
he
fin
an
cia
l sta
tem
en
ts
2
7. F
inan
cia
l in
stru
me
nts
(co
nt’
d)
Loa
ns
20
19
2018
Cu
rren
cy
No
min
al
Inte
rest
ra
te
Year
of
Mat
uri
ty
Pre
sen
t va
lue
Ca
rryi
ng
amo
un
t
Pre
sen
t va
lue
Ca
rryi
ng
am
ou
nt
N'0
00
N
'000
N
'000
N'0
00
The
Co
mp
any
Term
s a
nd
deb
t re
pay
men
t sc
he
du
le
Te
rms
and
co
nd
i�o
ns
of
ou
tsta
nd
ing
loan
s w
ere
as
follo
ws:
Se
cure
d t
erm
loan
N
aira
18
.00%
Term
inat
ed
-
-
1,36
7,7
58
1,49
5,6
47
17.5
% m
ediu
m t
erm
bo
nd
Nai
ra
17
.50%
2021
4,5
73,4
17
5,21
2,1
89
6,05
4,3
18
7,17
5,5
23
Trad
e fi
nan
ce li
nes
N
aira
18
.00%
2017
-
-
575,
816
575,
816
Tota
l in
tere
st b
ear
ing
liab
ili�
es
4,5
73,4
17
5,2
12,1
89
7,9
97,8
92
9,2
46,9
86
Notes to the Financial Statement 128
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
No
tes
to t
he
fin
an
cia
l sta
tem
en
ts
2
7.
Fin
anci
al i
nst
rum
en
ts (
con
t’d
)
Liq
uid
ity
risk
The
follo
win
g ar
e th
e co
ntr
actu
al m
atu
ri�
es o
f fin
anci
al li
abili
�es
, in
clu
din
g es
�m
ated
inte
rest
pay
men
ts a
nd
exc
lud
ing
the
imp
act
of n
e�n
g ag
reem
ents
.
Ca
rryi
ng
Co
ntr
actu
al
6 m
on
ths
Mo
re t
han
am
ou
nt
cash
flo
ws
or
less
6-12
mo
nth
s
1-2
year
s
2-5
year
s
5 ye
ars
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
N’0
00
31 D
ece
mb
er
201
9
No
n-d
eriv
a�ve
fin
an
cia
l
liab
ili�
es
Secu
red
ban
k lo
ans
5,2
12,1
89
6,44
3,9
66
1,6
10,9
92
1,6
10,9
92
3,22
1,9
83
-
-Tr
ade
and
oth
er p
ayab
les
23,1
91
,88
9
23,1
91,
88
9
-
23,1
91
,88
9
-
-
-B
ank
ove
rdra
�
116,
77
3
116,
773
116,
773
-
-
-
-
28,5
20,
851
29,7
52,6
28
1,7
27,7
65
24,8
02,
881
3,2
21,9
83
-
-
31 D
ece
mb
er
201
8
No
n-d
eriv
a�ve
fin
an
cia
l
liab
ili�
es
Secu
red
ban
k lo
ans
9,2
46,9
86
11,4
83,
38
0
2,1
27,9
38
2,1
27,9
38
4,00
5,5
20
3,22
1,9
83
-
Trad
e an
d o
ther
pay
able
s
26,4
73
,27
3
26,4
73,
27
3
25,4
76,
17
7
621,
44
3
375,
653
-
-
Ban
k o
verd
ra�
9,4
73,5
46
9,47
3,5
46
9,4
73,5
46
-
-
-
45,1
93,
805
47,4
30,1
99
37,0
77,
661
2,7
49,3
814,
381
,173
3,2
21,9
83
-
It is
no
t ex
pec
ted
th
at t
he
cash
flo
ws
incl
ud
ed in
th
e m
atu
rity
an
alys
is c
ou
ld o
ccu
r si
gnifi
can
tly
earl
ier,
or
at s
ign
ifica
ntl
y d
iffer
ent
amo
un
ts.
Notes to the Financial Statement 129
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
28. Con�ngencies
a) Guarantees The Company did not have any guarantees as at 31 December 2019.
b) Pending li�ga�on and claims
The Company is engaged in lawsuits that have arisen in the normal course of business. The con�ngent liabili�es in respect of pending li�ga�on and claims amounted to N511 Million at 31 December 2019 (31 December 2018:
N116 Million). In the opinion of the directors, and based
on independent legal advice, the Company is not expected to suffer any material loss arising from these claims. Thus, no provision has been made in these consolidated financial statements.
c)
Financial commitments
The Directors are of the opinion that all known liabili�es and commitments, which are relevant in assessing the state of affairs of
the Company, have been taken into considera�on in the
prepara�on of this financial statements.
29. Transac�ons with key management personnel
Loan to directors
No loan to directors was issued during the year ended 31 December 2019.
2019
2018
Directors
Chairman
Directors
Chairman
N’000
N’000
N’000
N’000
Directors emoluments
Fee
750
200
3,000
850
Allowances
61,382
11,111
62,855
11,375
62,132
11,311
65,855
12,225
There were eight (8)
Directors on the Company’s Board up to June 20, 2019 and subsequent to that date a new set of six (6) Directors currently sit on the Company’s Board as at 31 December 2019.
Execu�ve Directors are not en�tled
to and do not get paid directors fees.
Company
2019
2018
1.
Chief Execu�ve Officer
Olumide Adeosun
Akin Akinfemiwa
2.
Execu�ve Director -
Finance and Risk Management
Moshood Olajide
Julius Omodayo-Owotuga
The Company has 153 employees as at 31 December 2019 and 161 as at December
2018.
Notes to the Financial Statement 130
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the financial statements
30. Transac�ons with key management personnel (cont’d)
Transac�ons with key management personnel
Key management of the Company are the execu�ve members of Ardova Plc. Key management personnel remunera�on includes the following expenses:
Company
31-Dec-19 31-Dec-18
N’000 N’000
Key management personnel compensa�on comprised:
Short-term employee benefits:
-
Salaries including allowances 169,272
139,933
169,272 139,933
Post-employment benefits:
-
Defined contribu�on to compulsory pension fund scheme
11,410
10,193
Defined benefit gratuity scheme
15,428
13,786
196,110
163,912
The Company
31-Dec-19
31-Dec-18
Range
Number
Number
Below N1,000,000
-
11
N1,000,001 -
N2,000,000
-
5
N2,000,001 -
N3,000,000
26
18
N3,000,001 -
N4,000,000
19
38
N4,000,001 -
N5,000,000
31
12
N5,000,001 -
N6,000,000
37
26
N6,000,001 -
N7,000,000
10
16
N7,000,001 -
N8,000,000
11
9
N8,000,001 -
N9,000,000
3
8
N9,000,001 -
N10,000,000
5
3
N10,000,001 and above
11
15
Total
153
161
*These are annual emoluments
Notes to the Financial Statement 131
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
No
tes
to t
he
fin
an
cia
l sta
tem
en
ts
ela
ted
par
ty t
ran
sac�
on
s
Th
e ag
greg
ate
valu
e o
f tr
ansa
c�o
ns
and
out
stan
din
g b
alan
ces
rela
�n
g to
th
ese
en�
�es
wer
e as
fo
llow
s:
Re
late
d P
ar�
es
N
atu
re o
f Tr
ansa
c�o
n
R
ela
�o
nsh
ip
Tra
nsa
c�o
n
valu
e d
uri
ng
the
ye
ar
Bal
an
ce
ou
tsta
nd
ing
as
at
31
Dec
em
be
r
T
ran
sac�
on
va
lue
du
rin
g th
e y
ear
31
-De
c-19
31-D
ec-1
9
31
-Dec
-18
N
’000
N’0
00
N’0
00
P
rud
ent
Ener
gy N
iger
ia L
imit
ed
Pu
rch
ases
Rel
ated
to
co
re
inve
sto
r
17,4
29,7
38
3,1
62,3
95
-
B
SG R
eso
urc
es L
td
Ad
van
ces
(7,4
66,4
67)
-
902,
534
A
mp
erio
n P
ow
er D
istr
ibu
�o
n
Co
mp
any
Lim
ited
Ad
van
ces
(681
,34
1)
-
298,
771
G
ereg
u P
ow
er P
lc.
Ad
van
ces
(13,
245
)
-
415,
748
Fo
rte
Up
stre
am S
ervi
ces
Ltd
Sale
s &
Ad
van
ces
226,
880
-
(353
,35
1)
O
il an
d G
as G
han
a Lt
d
Tran
sla�
on
diff
eren
ce
(61,
492
)
-
(3,9
02)
Ze
no
n P
etro
leu
m a
nd
Gas
Lim
ited
Ren
t
(16,
847
)
-
(67,
580
)
9,41
7,2
26
3,16
2,3
95
1,19
2,2
20
Ev
ents
a�
er
the
en
d o
f re
po
r�n
g d
ate
D
ecem
ber
2019
, th
e co
mp
any
reso
lved
to
dis
con
�n
ue
accr
uin
g fo
r gr
atu
ity.
On
th
is b
asis
, pay
men
t w
ere
mad
e ag
ain
st t
he
staff
gra
tuit
y ac
cru
ed
Dec
emb
er 2
019
in J
anu
ary
202
0. A
s a
resu
lt o
f th
e m
anag
emen
t de
cisi
on
to
dis
con
�n
ue
accr
uin
g fo
r gr
atu
ity,
the
ou
tsta
nd
ing
pro
visi
on
for
grat
uit
y an
d p
lan
ned
as
sets
wer
e re
clas
sifi
ed a
s at
th
e ye
ar
end
ed 3
1 D
ecem
ber
, 201
9.
Th
ere
wer
e n
o o
ther
eve
nts
a�er
th
e re
po
r�n
g d
ate
that
co
uld
hav
e h
ad a
ny
mat
eria
l eff
ect
on
th
e st
ate
of
affai
rs o
f th
e C
om
pan
y as
at
31 D
ecem
ber
201
on
th
e p
rofi
t fo
r th
e ye
ar e
nde
d o
n t
hat
dat
e th
at h
ave
no
t b
een
tak
en in
to a
cco
unt
s in
th
ese
fin
anci
al s
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Notes to the Financial Statement 132
ardova plc
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Statement of value added
The Company
31-Dec-19 31-Dec-18
N'000 % N'000 %
Turnover 176,550,766 134,706,306
Other income 4,317,155 1,859,809
Finance income 4,555,095 1,181,038
185,423,016 137,747,153
Bought in materials and services:
-
Local
(171,389,319)
(121,828,431)
-
Imported
-
(8,476,318)
Value added
14,033,697
100
7,323,221
100
APPLIED AS FOLLOWS:
To pay employees:
Salaries, wages and other staff costs
2,402,697
18
1,890,182
25
To pay Government:
Taxa�on
971,378
7
292,073
4
To pay providers of capital:
Interest on borrowings
4,825,394
34
3,101,580
42
Retained in the business
Deferred taxa�on
(232,371)
(2)
104,201
1
Deprecia�on and amor�sa�on
2,151,459
15
1,422,098
19
Profit transferred to reserves
3,915,140
28
631,471
9
14,033,697
100
7,442,404
100
Value added represents the addi�onal wealth which the Company has been able to create/erode by its own and its employees' efforts. This statement shows the alloca�on of that wealth among the employees, government, providers of capital and that retained for the future crea�on of more wealth.
Notes to the Financial Statement 133
ardova plc
Financial summary
2019 2018 2017 2016 2015 N’000 N’000 N’000 N’000 N’000
Funds employed
Share capital 655,314 655,314 655,314 655,314 546,095
Share premium 8,071,943 8,071,943 8,071,943 8,071,943 8,181,162
Other reserves (5,041) (7,752) (7,752) (7,752) (7,752)
Retained earnings
8,829,683 6,418,039
5,805,859 4,543,801
5,691,196
Total equity a�ributable to equity holders of the Company
17,551,899
15,137,544
14,525,364
13,263,306
14,410,701
Treasury stock
(1,388,574)
(1,388,574)
(1,388,574)
(1,388,574)
(1,388,574)
Total equity
16,163,325
13,748,970
13,136,790
11,874,732
13,022,127
Current liabili�es
26,656,285
39,814,294
38,232,417
49,892,291
49,341,673
Non-current liabili�es
4,199,344
7,635,015
10,748,422
11,691,972
3,377,160
47,018,954
61,198,279
62,117,629
73,458,995
65,740,960
Assets employed
Non-current assets
14,892,341
11,607,197
22,654,311
22,171,280
22,846,995
Current assets
32,126,613
49,591,082
39,463,318
51,287,715
42,893,965
47,018,954
61,198,279
62,117,629
73,458,995
65,740,960
2019
2018
2017
2016
2015
N’000
N’000
N’000
N’000
N’000
Revenue
176,550,766
134,706,306
86,176,010
131,613,962
108,853,855
Opera�ng profit
4,924,446
2,949,086
2,587,372
6,707,897
5,780,627
Profit before income tax
4,654,147
1,028,544
1,895,670
5,442,482
5,831,755
Profit a�er tax
3,915,140
631,471
1,262,058
3,235,829
4,794,578
Basic & diluted earnings per share in (N)
3.00
0.48
0.97
2.48
4.39
ARDOVA PLC (Formerly Forte Oil Plc)
Annual Reports and Financial statements For the year ended 31 December 2019
Notes to the Financial Statement 134
ardova plc
�
PROXY FORM
41st Annual General Meeting of the Members ro be held at The Panoramic View Hall,
Civic Centre, Victoria Island, Ozumba Mbadiwe, Lagos, on the 28th day of August 2020, 10:00a.m
I/We…………………………………………………........................
being a member/members of Ardova Plc
hereby appoint (please tick one out of
the underlisted nominated proxies):
Ÿ Mr. AbdulWasiu Sowami; or
as my/our proxy to attend and vote for
me/us and on my/our behalf at the
Annual Genera l Meet ing of the
Company to be held on August 28th,
2020 and at any adjournment thereof.
Ÿ Sir Sunny Nnamdi Nwosu, KSS;
or
Ÿ Mrs . Adeb is i O luwayemis i
Bakare; or
Ÿ Mr. Boniface Okezie
Ÿ Mr. Patrick Ajudua; or
Signature of Shareholder……………………….....
Dated this …….........day of ………………. 2020.
Name of Shareholder………..…………………..........
NUMBER OF SHARES HELD
RESOLUTIONS FOR AGAINST
To consider and approve the Audited Financial
Position with the Statement of Profit or Loss
and other Comprehensive Income for the year
ended 31st December 2019, the Report of
the Directors and the Report of the Auditors
and Statutory Audit Committee thereon
To re-elect Mr. Mohammed Aminu Umar to the
Board of Directors as a Director whose term
expires in accordance with Articles 88 and 89
of the Company’s Articles of Association.
To author ize the Directors to fix the
remuneration of the External Auditors
To elect/re-elect the members of the
Statutory Audit Committee
To fix the remuneration of the Directors
Ardova Plc (Formerly Forte Oil Plc) 135
ardova plc
I/We…………………………………………………........................
being a member/members of Ardova Plc
hereby appoint (please tick one out of
the underlisted nominated proxies):
Dated this …….........day of ………………. 2020.
Signature of Shareholder……………………….....
Ÿ Mr. AbdulWasiu Sowami; or
Ÿ Mrs. Adebisi Oluwayemisi Bakare; or
Name of Shareholder………..…………………..........
as my/our proxy to attend and vote for
me/us and on my/our behalf at the
Annual Genera l Meet ing of the
Company to be held on August 28th,
2020 and at any adjournment thereof.
Ÿ Sir Sunny Nnamdi Nwosu, KSS; or
Ÿ Mr. Patrick Ajudua; or
Ÿ Mr. Boniface Okezie
NUMBER OF SHARES HELD
RESOLUTIONS FOR AGAINST
To consider and if thought fit, pass the
following resolutions as special resolutions of
the Company:
Ÿ That Art ic le 98 of the Art ic les of
Association of the Company be is hereby
amended to read as follows:Ÿ “The Quorum necessary for the transaction of the
business of the Directors may be fixed by the
Directors and unless so fixed shall be “three. A
meeting of the Board of Directors may be held by
conference call, video call or other digital or electronic
means. A Director shall be entitled to participate in a
Board Meeting by any digital or electronic means and
where a Director so participates, he shall be counted
for the purpose of determining whether a quorum has
been constituted and for determining the outcome of
any vote taken at the Meeting.”
Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Proxy Form 136
ardova plc
I/We…………………………………………………........................
being a member/members of Ardova
Plc hereby appoint (please tick one out
of the underlisted nominated proxies):
Ÿ Mr. AbdulWasiu Sowami; or
Ÿ Mr. Boniface Okezie
Ÿ Sir Sunny Nnamdi Nwosu, KSS; or
Ÿ Mrs. Adebisi Oluwayemisi Bakare; or
Ÿ Mr. Patrick Ajudua; or
as my/our proxy to attend and vote
for me/us and on my/our behalf at the
Annual General Meeting of the
Company to be held on August 28th,
2020 and at any adjournment thereof.
Dated this …….........day of ………………. 2020.
Signature of Shareholder……………………….....
Name of Shareholder………..…………………..........
NUMBER OF SHARES HELD
RESOLUTIONS FOR AGAINST
Ÿ “A Resolution in writing signed (or approved by
letter, electronic mail, telegram or telex, or by any
other electronic means whatsoever) by all the
Directors or (unless either the Directors appointing
the Committee or the regulations imposed by the
Directors on such Committee shall otherwise direct),
by all the members of a Committee for the time being
shall be as valid and effectual as if it had been passed
at a meeting of the Directors or as the case may be,
such Committee duly called and constituted. Such
resolution may be contained in one document or
electronic transmission, or in several documents or
electronic form (email or otherwise), each signed or
approved by the Directors or Members of the
Committee concerned. For the purpose of this Article,
the signature or electronic approval as aforesaid of an
alternate Director (if any) entitled to notice of
meeting of Directors shall suffice in place of the
signature or approval the Director appointing him.”
Ÿ That the Articles of Association of the
Company be and is hereby amended by
introducing a new Article 99, which shall
read as follows:
Ÿ T h a t s u b s e q u e n t A r t i c l e s s h a l l b e
renumbered accordingly.
* Please indicate with an “X” in the appropriate box how you wish your votes to be cast on the
resolutions set above. Unless otherwise instructed, the proxy will vote or abstain from voting at his
discretion.
Ardova Plc (Formerly Forte Oil Plc) 137
ardova plc
To be valid, this proxy form should be duly stamped by the Commissioner of Stamp Duties and signed before posting it to
reach the address overleaf not later than 48 hours before the time for holding this meeting.
Please note that no action should be taken on the proxy form if the member is attending the meeting.
NOTE:
Ÿ In view of the health and safety measures in place by the Government and the Health
Annual General Meeting exercise their right to vote despite not being physically
present at the meeting.
Authorities including restricting the number of persons at a gathering, this Proxy
Ÿ Members may appoint a Proxy of their choice from the following persons: (a) Mr.
Form has been prepared to enable Shareholders entitled to attend and vote at the
arrangements at its cost, for the stamping of the duly completed and signed proxy
Ÿ In line with the Corporate Affairs Commission Guidelines, the Company has made
AbdulWasiu Sowami, (b) Sir Sunny Nnamdi Nwosu (KSS), (c) Mrs. Adebisi
Ÿ If the Shareholder is a Corporation, this form must be executed under its Common
Seal or under the hand of some officers or an Attorney duly authorized.
Oluwayemisi Bakare, (d) Mr. Patrick Ajudua, (e) Mr. Boniface Okezie.
gain entrance to the meeting.
Ÿ The Proxy must produce the Admission Card sent with the Notice of the meeting to
forms submitted to the Company’s Registrars within the stipulated time.
Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Proxy Form 138
ardova plc
Ÿ The shareholder or his proxy must produce the admission card to gain entrance to the Annual General Meeting.
Please admit *-------------------------------------------------------------------------* to the 41st Annual General Meeting
A member (shareholder) who is unable to attend an Annual General Meeting is allowed by law to vote by proxy and the
above proxy form has been prepared to vote in case you cannot personally attend the meeting. The names of five
nominated proxies, who are shareholders of the Company have been entered on the form to ensure that someone will at
the meeting act as your proxy.
Signature of person attending
Ÿ The name of the shareholder must be written in BLOCK LETTERS on the form marked (*). Please stamp and sign the
proxy form if you are not attending the meeting and post it so as to reach the address shown overleaf not later than
August 21, 2020. If executed by a corporation, the proxy form should be sealed with a common seal.
IF YOU ARE UNABLE ATTEND THE MEETING
Lagos on the 28th day of August 2020, 10:00a.m .
of the members of Ardova Plc holding at The Panoramic View Hall, Civic Centre, Victoria Island, Ozumba Mbadiwe,
NUMBER OF SHARES HELD …………..............................................................
ADMISSION CARD
IMPORTANT
Ÿ Shareholders or their proxies are requested to sign the admission card before attending the meeting.
______________________________
Annual Reports and Financial Statements - Yr End, 31 Dec, 2019Proxy Form 139
ardova plc
COMPANY’S REGISTRAR
PLOT 89 A, AJOSE ADEOGUNVICTORIA ISLAND LAGOS,
LAGOS STATE.
AFFIX YOUR STAMP HERE
VERITAS REGISTRARS
Ardova Plc (Formerly Forte Oil Plc) 140
ardova plc
E-DIVIDEND MANDATE
Veritas RegistrarsPlot 89 A, Ajose Adeosun StreetVictoria Island, Lagoswww.veritasregistrars.com
Email: [email protected]
Tel: +234 1-2784167, +234 1-2784168
Dear Sir,
I/we hereby request that all dividend(s) due to me/us from my/our holding in Ardova Plc be paid directlyto my/our Bank named below
Annual Reports and Financial Statements - Yr End, 31 Dec, 2019E-Dividend Mandate 141
ardova plc
In line with the developments in electronic communications to circumvent the usual issue of late receipt of corporate
information, we would like to introduce to our shareholders the electronic delivery of corporate information such as
annual reports and financial statements, proxy form etc.
Regards,
Ag. Company Secretary and General Counsel
Signature: ……………………………………………………………………………………………...
With this service, as an alternative to receiving paper copies of corporate information and materials, you can elect to
receive an electronic copy thereof via an email the will provide an electronic link to the corporate information and/or
receive a compact disk of the corporate information by post.
Telephone Number: ………………………………………………………………………………….
Date: ……………………………………………………………………………………………………
AUTHORITY TO ELECTRONICALLY
OLADEINDE NELSON-COLE
13 Walter Carrington Crescent
Victoria Island
information of the Company electronically.
Ardova Plc hereby authorise(s) the Company and agree to receive all future corporate
CSCS Clearing House Number: ……………………………………………………………………
Postal Address: ………………………………………………………………………………………..
If you so elect, kindly complete the authority to electronically receive information attached below and return to the
Company Secretariat at the Head Office a No. 13, Walter Carrington Crescent, Victoria Island, Lagos.
FRC/2019/NBA/00000019918.........................................................................................................................................
Lagos
I/We ……………………………………………………………………………………………………. being a member/members of
RECEIVE CORPORATE INFORMATION
Email(s): ………………………………………………………………………………………………...
CSCS Account Number: ……………………………………………………………………………
Ardova Plc (Formerly Forte Oil Plc) 142
ardova plc