MRS Oil Nigeria Plc Financial Statements - - 31 … OIL NIGERIA PLC...MRS Oil Nigeria Plc 2012...

MRS Oil Nigeria Plc

Financial Statements - - 31 December 2012Together with Directors’and Auditor's Reports

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MRS Oil Nigeria PlcIndex to the financial statementsfor the year ended 31 December 2012

Contents Page

Corporate Information 2

Director's report 3

Statement of director's responsibilities 14

Independent auditor’s report 15

Statement of financial position 16

Statement of comprehensive income 17

Statement of changes in equity 18

Statement of cash flows 19

Notes to the financial statements 20

Additional information 71

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Corporate InformationRC 6442

Board of Directors:Alhaji Sayyu I. Dantata ChairmanMr. Paul Bissohong Managing Director (Ag.)Mr. Patrice Alberti Non Executive DirectorMr. Andrew O. Gbodume Executive Director (Finance & Administration)Dr. Samaila M. Kewa Non Executive DirectorMr. Lawal Mangal Alternate Director

Registered Office 8, Macarthy StreetOnikan Lagos State

Company Secretary Mrs. O.M. Jafojo8, Macarthy StreetOnikan Lagos State

Registrar City Securities (Registrars) Limited358, Herbert Macaulay StreetYabaLagos

Independent Auditors KPMG Professional ServicesKPMG TowerBishop Aboyade Cole StreetVictoria IslandLagos

Principal Bankers First Bank of Nigeria PlcFirst City Monument Bank PlcCitibank Nigeria LimitedStandard Chartered Bank Nigeria LimitedZenith Bank PlcAccess Bank PlcKeystone Bank Plc

LEADERSHIP TEAM

Paul Bissohong Oghenekaro OlogeManaging Director (Ag.) Information Technology Manager

Andrew O. Gbodume Hajia Safia MohammedExecutive Director (Finance & Admin) Human Resources Manager

Oluwakemi M. Jafojo Andrew Onum Company Secretary Chief Legal Counsel

Martin Orogun Mohammed KokiFinance Manager Operations Manager

OgungbangbeThomas O.** Charles OnumAviation Manager Lubes Sales and C & I Manager

Alfred Otobo*** Omoloja OladipoSales & Marketing Manager Marketing Support Manager

Kola Akinyemi Gloria AtongHSE Manager Procurement Manager

** Resigned 2012*** Resigned 2013

MRS Oil Nigeria Plc 2012 Annual Report and Accounts

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Directors’ Report For the year ended 31 December 2012 The Directors present their Annual Report on the state of affairs of the Company, together with the Audited Financial Statements for the year ended 31 December 2012. Incorporation and Legal Status of the Company The Company was incorporated as a privately owned Company in 1969, and was converted to a Public Limited Liability Company quoted on the Nigerian Stock Exchange in 1978, as a result of the 1977 Nigerian Enterprises Promotions Decree. The Company is domiciled in Nigeria and its shares are listed on the Nigerian Stock Exchange (NSE). The marketing of products in Nigeria commenced in 1913 under the Texaco brand, when they were distributed exclusively by CFAO a French multinational retail company. In 1964 Texaco Africa Limited started direct marketing of Texaco products selling through service stations and kiosks acquired from the said multinational retail company, on lease terms. It also entered into the aviation business. On 12 August 1969 Texaco Nigeria Limited was incorporated as a wholly-owned subsidiary of Texaco Africa Limited, thus inheriting the business formerly carried out in Nigeria by Texaco Africa Limited. With the promulgation of the Nigeria Indigenization decree in 1978, 40% of Texaco Nigeria Limited was sold to Nigerian individuals and organizations by Texas Petroleum Company. In 1990, the Companies and Allied Matters Decree came into force and this necessitated the removal of ‘Limited’ from the company’s corporate name to the prescribed ‘Public Limited Liability Company’(PLC) with its shares quoted on the Nigerian Stock Exchange. Following the creation of ChevronTexaco in 2001 from the merger between Chevron Corporation and former Texaco Inc., Texaco Nigeria Plc became an integral part of the new corporation. As ChevronTexaco considered the acquisition of former Union Oil Company of California (UNOCAL), the board of ChevronTexaco decided to eliminate ‘Texaco’ from the corporate name and retain only Chevron as the new name of the enlarged corporation. Effective 1 September 2006, the company’s name changed from Texaco Nigeria Plc to Chevron Oil Nigeria Plc following a directive from Chevron Corporation’s headquarters to all affiliate companies. This was designed to present a clear, strong and unified presence of Chevron Corporation throughout the world. On 20 March 2009 there was an acquisition of Chevron Africa Holdings Limited, (a Bermudian Company) by Corlay Global SA of Moffson Building, East 54th Street, Panama, Republic of Panama. By virtue of this foreign transaction, MRS Africa Holdings Limited gained control of all assets of Chevron Nigeria Holdings Limited, Bermuda.


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The new management of the Company announced a change of name of the Company from Chevron Oil Nigeria Plc to MRS Oil Nigeria Plc (“MRS”) effective 2 December 2009 following the ratification of the name change of the Company at the 40th Annual General Meeting of the Company on 29 September 2009. Currently about 253,988,672 shares are held by about 23,551 Nigerian shareholders and 1 foreign shareholder (MRS Africa Holdings Limited, Bermuda) in MRS Oil Nigeria Plc, a company with the main business of marketing and/or manufacture of petroleum related products in Nigeria. With about 138 active Company owned operating outlets and more than 255 third party owned operating outlets, MRS Oil Nigeria Plc is a major player in Nigeria’s petroleum products marketing industry. MRS is also a leading producer of quality lubricating oils and greases.

Principal Activities: The Company remains principally engaged in the business of marketing and distribution of refined petroleum products, blending of lubricants and manufacturing of greases. The summary of results of the company as included in the financial statements are as follows:

YEAR ENDED 31 DECEMBER, 2012

2012 N'000

2011 N'000

Revenue 79,727,349 71,490,715

Profit Before Tax 378,755 1,413,242

Taxation (173,634) (797,618)

Profit for the Year 205,121 615,624

Proposed Dividend for the Year 59,281 177,792

Earnings Per share (Naira) 0.81 2.42

Declared Dividend per 50k share(Kobo) 70 125

Net Assets per 50k share 7,502 7,476

Dividend: The Board proposes to pay 23.34 kobo per share, as final dividend (2011: 70 kobo per share). The proposed dividend which amounts to approximately N59.28 million will, if approved at the Annual General Meeting of the Company, be paid on 15 August 2013 to shareholders on the register of the Company at the close of business on 19 July 2013 and is subject to appropriate withholding tax (2011: N 177.79 million).


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Going Concern: Nothing has come to the attention of the Directors to inform them, that the Company will not remain a going concern in the next twelve months. The Directors: The Directors in office during the year are listed below and except where stated, served on the board in 2012:

NAME NATIONALITY DESIGNATION Appointment/Resignations (A/R)

Alhaji. S. I. Dantata Chairman March 20, 2009 (A) Mr. Shardhashis* Indian Managing Director August 15, 2011

(A)/December 5, 2012(R) Mr. P. Bissohong* Cameroonian Managing Director December 5, 2012 (A) Mr. P. Alberti French Director March 20, 2009 (A) Mr. A.O. Gbodume Executive Director (F & A) May 12, 2011 (A) Chief S. C. Ezendu Non-Executive Director

(Deceased) June 8, 1999 (A)

Dr. S. Kewa Non-Executive Director March 7, 2007 (A)

Mr. Lawal Mangal Alternate Director May 10, 2012 (A) *See Board changes below

Board Changes: Mr. Shardhashis B. Prasad resigned from the Board on 5 December 2012. Following his resignation, Mr. Paul Bissohong was appointed Managing Director (Ag.) of the Company on 5 December 2012. On 17 March 2013, we lost a valued and trusted member of the board Chief Sylvanus Chukwuemeka Ezendu. He will be remembered for his dedication, hard work and commitment to board issues and the Company’s performance. Chief Ezendu will be greatly missed. Election/Re-election of Directors: In accordance with Articles 90/91 and 95 of the Company’s Article of Association, Alhaji S.I Dantata and Mr. A.O. Gbodume retire by rotation and being eligible, offer themselves for re-election. In accordance with Articles 95 of the Company’s Articles of Association, Mr. Paul Bissohong, being the only director appointed since the last Annual General Meeting retires and being eligible offers himself for re-election.


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Directors’ Interest in the Issued Share Capital of the Company: The direct and indirect interests of Directors in the issued share capital of the Company as recorded in the register of directors’ shareholdings and/or as notified by the Directors for the purposes of Sections 275 of the Companies and Allied Matters Act of 2004 and the listing requirements of the Nigerian Stock Exchange are as follows:

Directors’ Interest in Contract: In accordance with Section 277 of the Companies and Allied Matters Act 2004, none of the Directors have notified the Company of any direct or indirect interest in any contract or proposed contract with the Company. Major Shareholders: According to the Register of Members as at 31 December 2012, the following shareholders of the Company hold more than 5% of the issued ordinary share capital of the Company. Name Units Percentage %

MRS Africa Holdings Limited 152,393,190 60%

Directors

Total No. of Shares as at 31/03/2013

Total No. of Shares as at 31/12/2012

S. Dantata (Indirect holdings) 152,393,190 152,393,190 P. Bissohong - - P. Alberti Representative of Pact Advisory, Management & Service SAS

- -

A.O. Gbodume - - D.M. Barau - - S. C. Ezendu (Indirect holdings) (Deceased)

47,368 47,368

S. M. Kewa 1,989 1,989


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Analysis of Shareholding: According to the Register of Members at 31 December 2012, the spread of shareholding in the Company is presented below:

Number of holding Local shareholders:

Number of shareholders

Number of shares held

Percentage of shareholding

1 - 500 8,678 1,992,495 0.8% 501 - 1,000 3,723 2,794,806 1.1% 1,001 - 5,000 8,720 20,188,271 7.9% 5,001 - 50,000 2,275 26,397,382 10.4% 50,001 - 100,000 85 6,109,353 2.4% 100,001 - 500,000 60 11,074,964 4.4% 500,001 - 1,000,000 5 3,660,738 1.4% 1,000,001 - 50,000,000 5 29,377,473 11.6% Total 23,551 101,595,482 40% Foreign shareholders Over 50,000,001

-

253,988,672

1

152,393,190

60%

TOTAL 23,552 253,988,672 100% Acquisition of Its Own Shares: The Company did not acquire its shares during the year. Corporate Governance: The Board considers the maintenance of high standards of corporate governance, central to achieving the Company’s objective of maximizing shareholder value. The Board has a schedule of matters reserved specifically for its decision. The Directors have access to learning appropriate professional skills and knowledge development. The Company’s Board currently comprises of a Non Executive Chairman, Executive Directors and Non Executive Directors. The Executive Directors have extensive knowledge of the oil and gas industry, while the Non Executive Directors bring in their broad knowledge of business, financial, commercial and technical experience to the board. Annually, the Board routinely reviews the board structure to ensure that there is a satisfactory balance of Executive and Non Executive Directors in the Company. However, this balance may be reviewed on an ongoing basis, bearing in mind the size of the Company and its ownership structure. In the year under review, there were 7 Directors on the Board of the Company; each Director bringing their wealth of experience to bear on deliberations at Board Meetings. The Board meets at least four times a year for regular scheduled meetings to review the Company’s operations and trading performance, to set and monitor strategy as well as consider new business options. The Board also meets for unscheduled meetings, if there are specific matters that require its attention. The attendance of Directors at board meetings in the year under review is noted below:


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MRS Oil Nigeria Plc - 2012 Board Meetings DIRECTORS DESIGNATION Feb 28,

‘12 March 23,

‘12 May 3,

’12 July 10,

‘12 Nov 8,

‘12 Alhaji Sayyu I. Dantata Chairman X X X Mr. S.B Prasad* Managing

Director X X X X X

Mr. Paul Bissohong** Managing Director

Mr. Patrice Alberti Director X X X X X Mr. Andrew O. Gbodume Executive

Director X X X X X

Chief Sylvanus C. Ezendu Director X X X X X Dr. Samaila M. Kewa Director X X X X Mr. Lawal Mangal*** Alternate

Director X X

* Mr. Shardhashis B. Prasad resigned as the Managing Director of the Company on December 5, 2012. ** Mr. Paul Bissohong was appointed to the Board on 5 December, 2012. *** Mr. Lawal Mangal was appointed to the Board on 14 August, 2012. Board Performance Appraisal: The Board did not undertake any formal evaluation of its performance, individual or collective in the year under review. A process exists for the follow up on all matters of concern or potential improvement which may arise when an evaluation process is carried out. Sub Committees of the Board: The Board has established Committees, each with written terms of reference approved by the Board. Currently, there are 4 sub-committees of the Board and the Chairman is not on any of the Committees. The sub-committees are established to assist the Board to effectively and efficiently perform guidance and oversight functions, amongst others. The terms of reference for all the committees are available for inspection at the registered office of Company. The current composition of the Board Sub-committees and attendance at meetings in the year under review are as follows:-


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1. The Audit Committee

Audit Committee Members

Designation Feb, 22 ‘ 12

March 22, ‘12

May 2, ‘12

Aug 7, ‘12

Nov 6, ‘12

Engr. Tunji Ijaiya Chairman X X X X X

Mr. Isiaka Saliu Member X X X X X Chief Vincent Barrah Member X X X X X Chief Sylvanus C. Ezendu

Member X X X X X

Mr. Andrew Gbodume Member X X X X X Dr. Samaila M. Kewa Member X X X Mr. Lawal Mangal Member (Appointed to the Committee on April 18, 2013)

The Audit Committee is chaired by a shareholder representative. On the invitation of the Chairman of the Audit Committee, representatives of Management and the External Auditors are invited to attend meetings. The Audit Committee is responsible for the review of the quarterly and annual financial reports of the Company before submission to the Board. The Audit Committee makes recommendations on the appointment of the External Auditors and reviews the nature and scope of their work as well as recommendations on the company’s accounting procedures and internal controls. In the year under review, the Audit Committee met 5 times. 2. Board Nominations and Corporate Governance Committee The Board Nominations and Corporate Governance Committee is responsible for proposing candidates for appointment to the board, bearing in mind the balance and structure of the Board. The board also considers corporate governance issues, ensures strict compliance and makes recommendation to the Board (on issues regarding but not limited to) the membership of the Audit, Strategic & Finance Planning and the Human Resources Committee in consultation with the Chairman of each Committee. In the year under review, the Board Nominations and Corporate Governance Committee did not meet.


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3. The Strategic and finance Planning Committee

Strategic Planning and Finance Committee: Members

Designation Dec, 5, ‘12

Chief Sylvanus C. Ezendu Chairman X

Mr. Paul Bissohong (appointed to committee on Dec 5,2012)

Member X

Dr. Samaila M. Kewa (appointed to Committee on Nov 5, 2012)

Member X

Mr. S.B. Prasad (resigned from the board on Dec 5, 2012)

Mr. Andrew O. Gbodume Member X The Committee is responsible for assisting the Board of Directors in performing its guidance and oversight functions effectively and efficiently, and is specifically charged with defining the Company’s strategic objectives, determining its financial and operational priorities, making recommendations regarding the Company’s dividend policy and evaluating the long-term productivity of the Company’s operations.

In the year under review, the Strategic Planning and Finance Committee Members met once. 4. Human Resources Committee

Human Resources Committee Members

Designation Dec, 6 ‘12

Dr. Samaila M. Kewa Chairman X Chief Sylvanus C. Ezendu Member X Mr. Paul Bissohong Member X Mr. Andrew O. Gbodume Member X

The Human Resources Committee is responsible for reviewing the contract terms, remuneration and other benefits of the Executive Directors and Senior Management of the Company. The Committee also reviews the reports of external consultants for services rendered, which assist the Committee in their duties. The Chairman and other Directors may be invited to attend meetings of the Committee, but do not take part in any decision making directly affecting their own remuneration. The Committee undertakes an external and independent review of remuneration levels on a periodic basis, to ensure that employment policies are strictly adhered to.

In the year under review, the Human Resources Committee met once. Meetings: The register of attendance at meetings is available for inspection during normal business hours at the registered office of the Company and at each Annual General Meeting of the Company.


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Employment Policy: The Company is committed to selecting and employing the best qualified individuals for positions, consistent with the Company’s long term best interest. The determining factors in recruiting, hiring, selecting and placing employees are the overall requirements of the job. The objective of the policy is to provide a level of remuneration that is sufficient to attract, retain and motivate high quality employees to run the Company successfully and to ensure that there is an alignment between the Company’s business plan and shareholder objectives. A significant proportion of the employee remuneration is linked to the achievement of short and long – term performance objectives. The Company maintains a fair policy in considering job applications of physically challenged persons having regard to their abilities and aptitude. The policy prohibits any form of discrimination on the basis of disability, race, religion, colour, national or ethnic origin, age, sex, political preference, membership or non-membership of any lawful organization or any other basis in the recruitment, training and career development of employees. The Company did not employ any physically challenged person during the year. The Company provides a working environment that promotes diversity within its workforce and enables employees to participate and contribute to the growth of the Company. Employees Health, Safety and Environment: The Company is committed to achieving and maintaining the highest standards of safety for its employees, suppliers, customers and the public in line with best global HSE standards. In the year under review, consistent Health Safety and Environment (HSE) standards continued to guide the Company’s operations and activities. In July, 2012 the Company engaged the services of medical health providers to provide better health and welfare care services to the generality of the staff and their families. The head office and Apapa complex in-house outpatient clinic were functional and accessible to employees throughout the year, during business hours. The theme of the 2012 annual safety week was “SAFETY STARTS WITH ME”, with action learning sessions provided for the employees, haulers, drivers, contractors on the best safe work and health practices. On regulatory compliance, statutory inspections visits were conducted and emergency preparedness drills were carried out at our operational facilities by the Department of Petroleum Resources (DPR), NOSDRA (Federal agency), LASEPA(State agency) and the Nigerian Ports Authority-Health Safety and Environment Committee (NPA-HSE) and FAAN, Airlines Operators. The Company received a satisfactory report of compliance, by the industry (petroleum downstream sector and the different Aviation regulatory agencies).


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Employees Involvement, Training and Development: In the year under review, various employees took part in various training and development programmes; Staff Induction Training, Finance for Non – finance managers, Station Manager training programme, SAP Reporting, External training for team building, Time Management and Credit Management, to mention a few. Contributions and Charitable Donations: During the year, the Company made the following donations in fulfillment of its corporate social responsibility:

NAME AMOUNT 1. The Zamarr Institute (School for Autism), Abuja 200,000 2. Poorest of the Poor, Abuja 100,000 3. Ereko Methodist Primary School, Berkley, Lagos 200,000 4. Lagos State School Management Board (L.S.P.E.B) G.R.A, Oba Akinbiyi way,

Ikeja, Lagos. 300,000

5. Wasimi Community Primary School, Wasimi, Maryland, Lagos 200,000 6. Pacelli School for The Blind, Surulere, Lagos 100,000 7. G.R.A. Primary School, G.R.A Ikeja, Opposite Police Force HQ. Lagos 200,000 8. Opebi Primary School, Opebi, Ikeja, Lagos. 300,000 9. Olusosun Wright Estate Primary School, off Kudirat Abiola way, Oregun, Lagos 200,000 10. 9 Brigade Primary School, Brigade Miliktary Cantonment, Ikeja, Lagos 200,000 11. Bola Memorial Primary School, Mobolaji Bank Anthony way, Maryland, Lagos 200,000 TOTAL 2,200,000

Donations made in 2011 amounted to N2,200,000. In accordance with Section 38(2) of the companies and Allied Matters Act, the Company did not make any donations or gift to any political party, political association or for any political purpose in the course of the year under review.

Information Technology Upgrades: The Company is committed to the provision of regular upgrade of its information technology infrastructure for its head office and field locations to assist with online monitoring of its field transactions. IT achievements in the year under review include: 1. Upgrade of 27 Remote Locations VSAT connectivity from 64-128k to 512-256k to

accommodate (BPCS now SAP and Emails) from the Head-office. 2. VPN connection created for usage of Network facilities outside the head-office/Apapa. 3. Backup VSAT connect created for the Head-office – Two ISPs namely Main One Cable

and Vodacom Business Nigeria. 4. SAP - New Business Application – Implementation, launch and go live. 5. Email platform upgraded to Office 365. 6. Head-Office Access monitoring system upgraded – for the access control system and

biometric data capturing, time and attendance system. 7. Replacement of Laptops & Desktop that had reached end-of-life.

MRS Oil Nigeria Pic 2012 Annual Report and Accounts

8. Remote access provided to employees. 9. Loyalty Card System for MRS Stations.

Appointments and Promotions: The Company is committed to attracting, recruiting and retaining skilled and experience personnel into the organization for future growth and continuity of the Company's operations. The Company will continue to identify and reward positive contributions by our employees who excel in their various functional areas.

In 20U, the Company employed several new employees to strengthen its operations.

Staff Strengt h: As at 31 December 2012, the Company's staff strength was 109. This number includes expatriates and employees on secondment from MRS Holdings. One (1) employee was promoted in the year under review.

Property; Plant and Equipment: Information relating to changes in the Company's property, plant and equipment Is given in Note 12 to the financial statements. In the Directors opinion, the market value of the Company's properties is not less than the value shown in the financial statements during the year.

IFHS Transition

In line with the IFRS transition roadmap released by the Financia l Reporting Council of Nigeria (FRC), MRS all Nigeria Pic is classified as a Listed and Significant Public Interest Entity and has prepared these financial statements for the first time in accordance with International Financial Reporting Standards (IFRS) . An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 30.

Auditors: Messers KPMG Professional Services was appointed External Auditors to the Company have indicated their willingness to continue in office as Auditors in accordance with Section 357(2) of the Companies and Allied Matters Act of Nigeria . A resolution for their re-appointment as Auditors will be proposed at the Annual General Meeting of the Company to be held on 14 August 2013.

By the Order 0 ~Board \

Company Secret ry I 5 n'10 ?--G 1.3

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STATEMENT Of DIRECTORS' RESPONSIBILITIES IN RElATION TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

The directors accept responsibility for the preparation of the annual financial statements set out on pages 16 and 70 that give a true and fair view in accordance with the International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, 2011 .

The directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error.

The directors have made an assessment of the Company's ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead .

E BOARD OF DIRECTORS BY:

b \'&1ssQ \to ~ ~. Name

Date

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KPMG Professional Services Telephone 234 (1) 271 8955

KPMG Tower

Bishop Aboyade Cole Street Victoria Island PMB 40014, Falonlo Lagos

INDEPENDENT AUDITOR'S REPORT

To the Members of MRS Oil Nigeria Pic

Report on the Financial Statements

We have aud ited the accompanying financial statements of MRS Oil Nigeria Pic ("the Company), w hich comprise the statement of financial position as at 31 December 2012 and the statement of com prehensive income, statement of changes in equity, and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory infonnation, as set out on pages 17 to 70.

Directors' Responsibility for the Financial Statements T he directors are responsible for the preparation of fi nancial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of N igeria and the Financial Reporting Council of N igeria Act, 20 11, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

AIIditor 's R espoftsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with International Standards on Audi ting. Those standards require that we comply with ethical requirements and plan and perfolm the audit to obtain reasonable assurance about whether the financial statements are free from mat.erial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thl: fmancial statements. The procedures selected depend on the auditor's judgment, including the assesu nent of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's

,PMG Pro~e~Slanat $('!rvl(.tJ~. a PnW'le~lllp ~sla.b L'ihe<'j under 1>J'il6r.a I1M', Ii a rnflmbei Qr (PMG h'lllrMltioll8l Cooperative ('KPMG Intem;)tJol'la! ~ I . FI SWI:i J!1"1 tV- A.I ,rghri:io rese:rvf'd .

234 m27 1 8599

Fax 234 (1) 271 0540

Internet www.kprng com/ng

preparation and fair presen tation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also include~ evaluating the appropriatenc:.: of accounting polIcies used an o the reasonableness of accounting estImates made by the directors, as well as evaluating the overall presentation of the fmancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basi s for our audit opinion.

Opinion In our opinion, these financial statements gi ve a tru and fair view of the financial position of MRS Oil Nigeria Pic (" the Company) as at 31 December 2012 and of the Company ' s financial p rformance and cash flows for the year then ended in accordance with Intemational Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of N igeria and the Financial Reporting Council of Nigeria Act, 2011.

Report on Other Legal and Regulatory Requirements Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act o(Nigeria

In our opinion, proper books of account have been kept by the Company, so far as appears from our

examination of those books and the statemen t of financial position and the statement of comprehensive income are in agreement with the books of account.

15 May 2013 Lagos, N igeria FR CI2 0 /2IfC;! NIOOOOOO(l()442

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MRS Oil Nigeria PIc Statement of financial position

Non-current assets Property, planl and equipment InLangible assets Other receivables Prepayments Total non-current asset!i

Current assets Inventories Trade and other receivables Prepayments Cash and cash equivalents Total current assets

Total assets

Equity Share capital Retained earnings

Total equity

Notes

12 13 14

15 14

16

17 18

31 DeC2.0~2 Rooo

2. ,013,568 140,560

7,507 236.673

22,398,308

4,331,733 8,294,190 18,406,207 32,207,135

158,738 78,150 10,300,702 8,421,512 33,197,380 49.000,987

55,595,688 72,700,238

126,994 126,994 18,927,016 18,861 ,691

19,054,OtO 18,988,685

31 Dec 2011 Wooo

23.172,968 162,641 247,557 116,085

23,699,251

1 Jan 2011

N'ooo

24 115.946

280,858 209,143

24,605,947

8,565,752 10,161,148

98,071 2,899.395

21.724.366

4 6,330 ,313

.126,994 18,512,872

18,639,866

Total equity and liabilities 55,595,688 72 ,700,.238 4 6,330,313

Approved by the Board of Directors on /5 fYl~ 2013 and signed on its behalfby:

r ) Alhaji Sayyu 1. Dantata (Chairman)

----------+-~~~+-.------------

Mr. Paul Bissohong (Managing Director (Ag.))

Mr. Andrew Guodume (Executive Director, Finance & Administration)

The Dotes on pages 21 to 70 are an integral part of these financial statements.

7,281,809

630,699 528,543

17,384,934 517,347

1,347,115

20,408,638

27,690,447

Total non-current liabilities

Current liabilities Security deposits 20 Dividend payable 21 Trade and other payables 22 Bank overdraft and short term borrowings 23 Tax payable 11

Total current liabilities

Total liabilities

6,457,01..1)

1,510,904 473.942

14,180,677 1 ,460,102

459,038

30,084,663

36.541,678

6.951,370

822,920 533,081

23,243,053 21,003,958

1,1 7,.171

46,760,183

53,711,553

Liabilities Non-current liabilities Employee benefit obligaLions 19 218,415 551,480 580,919 Deferred tax liabililY 11 6,238,600 6,399,890 6,700,89

16

17

MRS Oil Nigeria PlcStatement of comprehensive income for the year ended 31 December

Notes 2012 2,011 N’000 N’000

Revenue 5 79,727,349 71,490,715 Cost of Sales 7

Gross Profit 5,711,862 6,822,742

Other income 6 923,383 933,073 Selling and distribution expenses 7Administrative expenses 7

Results from operating activities 1,587,900 1,772,767

Finance income 149,051 157,537 Finance cost

Net finance costs 8

Profit before income tax 9 378,755 1,413,242

Income tax expense 11

Profit for the year 205,121 615,624

Other comprehensive income:Actuarial gains on post-employment benefit obligation 19 5,321 57,289 Tax effect on other comprehensive income

Other comprehensive income, net of tax 3,725 40,102

Total comprehensive income for the year 208,846 655,726

Earnings per share (EPS) Basic earnings per share (Naira) 10 0.81 2.42

The notes on pages 21 to 70 are an integral part of these financial statements.

(74,015,487)

(709,665) (4,337,680)

(64,667,973)

(996,307) (4,986,741)

(1,596) (17,187)

(1,358,196) (517,062)

(359,525)(1,209,145)

(173,634) (797,618)

18

MRS Oil Nigeria PlcStatement of changes in equity

Share capital

Retained earnings

Total equity

NotesN’000 N’000 N’000

Balance at 1 January 2011 126,994 18,512,872 18,639,866

Comprehensive income for the yearProfit for the year - 615,624 615,624 Actuarial gains on post-employment benefit obligation, net of tax - 40,102 40,102

Total comprehensive income for the year - 655,726 655,726

Transactions with owners recorded directly in equityDividends 21 - Unclaimed dividend written back 21 - 10,579 10,579

Total transactions with owners of the Company -

Balance at 31 December 2011 126,994 18,861,691 18,988,685

N’000 N’000 N’000

Balance at 1 January 2012 17, 18 126,994 18,861,691 18,988,685

Comprehensive income for the yearProfit for the year - 205,121 205,121 Actuarial gains on post-employment benefit obligation, net of tax - 3,725 3,725

Total comprehensive income for the year - 208,846 208,846

Transactions with owners recorded directly in equityDividends 21 - Unclaimed dividend written back 21 - 34,271 34,271

Total transactions with owners of the Company -

Balance at 31 December 2012 126,994 18,927,016 19,054,010


For the year ended 31 December 2011

For the year ended 31 December 2012

(177,792)

(143,521)

(306,907)

(317,486) (317,486)

(306,907)

(177,792)

(143,521)

19

MRS Oil Nigeria PlcStatement of cash flows for the year ended 31 December

Notes 2012 2011 N’000 N’000

Cash flows from operating activities:Profit for the year 205,121 615,624

Adjustments for :Depreciation 12 1,476,481 1,330,289 Amortisation of intangible assets 13 31,301 3,189 Finance income 8Finance cost 8 1,358,196 517,062 Loss on sale of property, plant and equipment 15,875 2,043 Provision for long-term service award 10,167 8,938 Curtailment gains on long-term service award 19(b) - Provision for gratuity 97,152 86,720 Curtailment gains of gratuity provision 19(a) - Tax expense 11(a) 173,634 797,618

3,050,576 3,203,946

Changes in: - trade and other receivables 13,841,961 - inventories 3,962,457 271,562 - security deposits 687,984 192,221 - trade and other payables 5,887,482 Cash generated from operating activities 11,661,940 5,241,895

Income taxes paid 11(d)Witholding tax credit notes utilised 11(d)Long-term service award paid 19(b)Gratuity paid 19(a)Value added tax paid

Net cash from operating activities 10,277,414 3,660,015

Cash flows from investing activities:Proceeds from sale of property, plant and equipment 6,668 8,298 Purchase of property, plant and equipment 12(a)Purchase of intangible assets 13Interest received 146,892 137,894

Net cash used in investing activities

Cash flows from financing activities:Net repayment on short term borrowings 2,388,934 Dividends paid 21(b)Interest paid

Net cash (used in)/ generated from financing activities 1,793,873

Net change in cash and cash equivalents 1,468,267 5,036,598

Cash and cash equivalents as at 1 January 7,418,646 2,382,048

Cash and cash equivalents as at 31 December 16 8,886,913 7,418,646


(9,881,038)

(149,051)

(28,112)

(140,188)

(157,537)

(4,313,316)

(976,442) (58,211) (909) (271,175) (77,789)

(1,295,850) (9,900)

(4,215)(120,882)(151,033)

(8,613,863)

(397,652) (165,830)

(339,624) (9,220)

(195,284) (417,290)

(7,954,779) (202,660) (456,424)

(302,369) (292,692)

20

MRS Oil Nigeria PlcNotes to the financial statements for the year ended 31 December 2012

Page

Notes1 Reporting entity 21

2 Basis of preparation 21

3 Significant accounting policies 22

4 Determination of fair values 33

5 Revenue 34

6 Other Income 34

7 Expenses by nature 34

8 Finance income and costs 35

9 Profit before taxation 35

10 Earnings per share (EPS) 37

11 Taxation 37

12 Property, plant and equipment 40

13 Intangible assets 41

14 Trade and other receivables 42

15 Inventories 42

16 Cash and cash equivalents 43

17 Share capital 43

18 Retained earnings 43

19 Employee benefit obligations 44

20 Security deposits 47

21 Dividends 47

22 Trade and other payables 47

23 Bank overdraft and other short term borrowings 48

24 Financial instruments 48

25 Related party transactions 55

26 Segment reporting 56

27 Contingencies 57

28 Operating leases 58

29 Subsequent events 58

30 Explanation of the transition to IFRSs 59

21

MRS Oil Nigeria PlcNotes to the financial statementsFor the year ended 31 December 2012

1. Reporting entity

2 Basis of preparation

(a) Statement of compliance

(b) Basis of measurement

(c) Functional and presentation currency

The Company was incorporated as Texaco Nigeria Limited (a privately owned Company) on 12August 1969 and was converted to a Public Limited Liability company quoted on the Nigerian StockExchange in 1978, as a result of the 1977 Nigerian Enterprises Promotions Decree. The Company isdomiciled in Nigeria and its shares are listed at the Nigerian Stock Exchange (NSE). The Company’sname was changed to Texaco Nigeria Plc. in 1990 and again on 1 September 2006 to Chevron OilNigeria Plc.On the 20th of March, 2009 there was an acquisition of Chevron Africa Holdings Limited, (aBermudian Company) by Corlay Global SA of Moffson Building, East 54th Street, Panama, Republicof Panama. By virtue of this foreign transaction, M.R.S. Africa Holdings Limited gained control of allassets of Chevron Nigeria Holdings Limited, Bermuda.

The new management of the Company announced a change of name of the Company from ChevronOil Nigeria Plc to MRS Oil Nigeria Plc (“MRS”) effective 2nd of December, 2009 following theratification of the name change of the Company at the 40th Annual General Meeting of the Companyon September 29, 2009.

8, Macarthy StreetOnikanLagos Nigeria

The Company is domiciled in Nigeria and has its registered office address at:

The Company is principally engaged in the business of marketing and distribution of refined petroleum products, blending of lubricants and manufacturing of greases.

The financial statements have been prepared in accordance with International Financial ReportingStandards (IFRS). These are the Company’s first set of financial statements prepared in accordancewith IFRS and IFRS 1 First-time Adoption of International Financial Reporting Standards has beenapplied.

An explanation of how the transition to IFRS has affected the reported financial position, financialperformance and cash flows of the Company is provided in Note 30.

The financial statements were authorised for issue by the Board of Directors on __________

The financial statements have been prepared on the historical cost basis except for defined benefitobligations.

The methods used to measure fair values are discussed further in Note 4.

These financial statements are presented in Nigerian naira, which is the Company’s functionalcurrency. All financial information presented in naira have been rounded to the nearest thousandunless stated otherwise.

22


(d) Use of estimates and judgements

3 Significant accounting policies

(a) Foreign currency transactions

(b) Financial instruments

i. Non-derivative financial assetsThe Company initially recognizes loans and receivables on the date that they are originated. All otherfinancial assets (including assets designated at fair value through profit or loss) are recognizedinitially on the trade date at which the Company becomes a party to the contractual provisions of theinstrument.

The accounting policies set out below have been applied consistently to all periods presented in thesefinancial statements and in preparing the opening IFRS statement of financial position at 1 January2011 for the purposes of the transition to IFRS, unless otherwise indicated.

Transactions denominated in foreign currencies are translated and recorded in Nigerian Naira at theactual exchange rates as of the date of the transaction. Monetary assets and liabilities denominated inforeign currencies at the reporting date are retranslated at the rates of exchange prevailing at thatdate. The foreign currency gain or loss on monetary items is the difference between amortised cost inthe functional currency at the beginning of the period, adjusted for effective interest and paymentsduring the period, and the amortised cost in foreign currency translated at the exchange rate at theend of the reporting period. Non-monetary assets and liabilities denominated in foreign currenciesthat are measured at fair value are retranslated to the functional currency at the exchange rate at thedate that the fair value was determined.

Foreign currency differences arising on retranslation are recognized in profit or loss, except forqualifying cash flow hedges, which are recognized in other comprehensive income. Non-monetaryitems that are measured in terms of historical cost in a foreign currency are translated using theexchange rate at the date of the transaction.

The preparation of the financial statements in conformity with IFRS requires management to makejudgements, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets, liabilities, income and expenses. Actual results may differ from theseestimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognized in the period in which the estimates are revised and in any future periodsaffected.

In particular, information about assumptions and estimation uncertainties and critical judgements inapplying accounting policies that have the most significant effect on the amounts recognised in thefinancial statements are described in the following notes:

Note 19 – Employee benefit obligationsNote 24 – Financial instrumentsNote 27 – Contingencies

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in Note 12 and relates to key assumptions used in discounted cash flow projections to assess the impairment of Property, plant and equipment.

23


Cash and cash equivalents

Financial assets at fair value through profit or loss

Loans and receivables

ii Non-derivative financial liabilities

The Company derecognizes a financial asset when the contractual rights to the cash flows from theasset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in atransaction in which substantially all the risks and rewards of ownership of the financial asset aretransferred. Any interest in transferred financial assets that is created or retained by the Company isrecognized as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financialposition when, and only when, the Company has a legal right to offset the amounts and intends eitherto settle on a net basis or to realize the asset and settle the liability simultaneously.

The Company has the following non-derivative financial assets: financial assets at fair value through profit or loss, loans and receivables.

Cash and cash equivalents comprise cash on hand; cash balances with banks and call deposits withoriginal maturities of three months or less. Bank overdrafts that are repayable on demand and forman integral part of the Company’s cash management are included as a component of cash and cashequivalents for the purpose of statement of cash flows.

A financial asset is classified at fair value through profit or loss if it is classified as held for trading oris designated as such upon initial recognition. Financial assets are designated at fair value throughprofit or loss if the Company manages such investments and makes purchase and sale decisions basedon their fair value in accordance with the Company’s documented risk management or investmentstrategy. Upon initial recognition attributable transaction costs are recognized in profit or loss asincurred. Financial assets at fair value through profit or loss are measured at fair value, and changestherein are recognized in profit or loss.

Loans and receivables are financial assets with fixed or determinable payments that are not quoted inan active market. Such assets are recognized initially at fair value plus any directly attributabletransaction costs. Subsequent to initial recognition loans and receivables are measured at amortisedcost using the effective interest method, less any impairment losses. Loans and receivables comprisetrade and other receivables.

All financial liabilities (including liabilities designated at fair value through profit or loss) arerecognized initially on the trade date at which the Company becomes a party to the contractualprovisions of the instrument.The Company derecognizes a financial liability when its contractual obligations are discharged orcancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financialposition when, and only when, the Company has a legal right to offset the amounts and intends eitherto settle on a net basis or to realize the asset and settle the liability simultaneously.The Company has the following non-derivative financial liabilities: loans and borrowings, trade andother payables.

24


iii Share capital

(c) Property, plant and equipment

i Recognition and measurement

ii Subsequent costs

iii Depreciation

Such financial liabilities are recognized initially at fair value plus any directly attributable transactioncosts. Subsequent to initial recognition these financial liabilities are measured at amortised cost usingthe effective interest method.

The Company has only one class of shares, ordinary shares. Ordinary shares are classified as equity.Incremental costs directly attributable to the issue of ordinary shares are recognized as a deductionfrom equity, net of any tax effects.

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amountsubstituted for cost, less its residual value.

The cost of replacing a part of an item of property, plant and equipment is recognized in the carryingamount of the item if it is probable that the future economic benefits embodied within the part willflow to the Company and its cost can be measured reliably. The carrying amount of the replaced partis derecognized. The costs of the day-to-day servicing of property, plant and equipment are recognizedin profit or loss as incurred.

Items of property, plant and equipment are measured at cost or deemed cost less accumulateddepreciation and accumulated impairment losses. The Company elected to apply the optionalexemption to recognize cost of certain items of property, plant and equipment by reference to theprevious (Nigerian) GAAP revaluation and others using the fair value option as deemed cost at 1January 2011, the date of transition to IFRS.

Cost includes expenditure that is directly attributable to the acquisition of the asset. Property, plantand equipment under construction are disclosed as capital work-in-progress. The cost of self-constructed asset includes the cost of materials and direct labour, any other costs directly attributableto bringing the assets to a working condition for their intended use including, where applicable, thecosts of dismantling and removing the items and restoring the site on which they are located andborrowing costs on qualifying assets.

Purchased software that is integral to the functionality of the related equipment is capitalized as partof the equipment.

When parts of an item of property, plant and equipment have different useful lives, they areaccounted 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 bycomparing the proceeds from disposal with the carrying amount of property, plant and equipment,and are recognized net within other income in profit or loss.

25


The estimated useful lives for the current and comparative periods are as follows:

- Land and Buildings- Leasehold Land Lease period- Buildings 10 to 25 years

- Plant and Machinery 10 to 20 years- Furniture and Fittings 5 years - Automotive equipment 4 years- Computer and office equipment 3 years

(d) Intangible assets

Subsequent expenditure

Amortisation of intangible assets

(e) Leases

Leased assets

The Company’s intangible assets with finite useful lives comprise acquired software.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodiedin the specific intangible asset to which it relates. All other expenditure is recognized in profit or lossas incurred.

Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less itsresidual value. Amortisation is recognized in profit or loss on a straight-line basis over the estimateduseful lives of intangible assets from the date that they are available for use, since this most closelyreflects the expected pattern of consumption of the future economic benefits embodied in the asset.The estimated useful life for the current period for the acquired computer software is 3 years.

Leases in terms of which the Company assumes substantially all the risks and rewards of ownershipare classified as finance leases. Upon initial recognition the leased asset is measured at an amountequal to the lower of its fair value and the present value of the minimum lease payments. Subsequentto initial recognition, the asset is accounted for in accordance with the accounting policy applicable tothat asset.

Intangible assets that are acquired by the Company and have finite useful lives are measured at costless accumulated amortisation and accumulated impairment losses.

Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to therelevant asset category immediately the asset is available for use and depreciated accordingly.

Depreciation methods, useful lives and residual values are reviewed at each financial year end andadjusted if appropriate.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives ofeach part of an item of property, plant and equipment which reflects the expected pattern ofconsumption of the future economic benefits embodied in the asset. Leased assets are depreciatedover the shorter of the lease term and their useful lives unless it is reasonably certain that theCompany will obtain ownership by the end of the lease term in which case the assets are depreciatedover the useful life.

26


Lease payments

Determining whether an arrangement contains a lease

·

·

(f) Inventories

The basis of costing inventories are as follows:

Cost Basis

Weighted Average Cost of costs incurred (for deregulated products) and reduced value of subsidies due for deregulated products.

First in , First Out

Purchase cost incurred to date

Net realizable value is the estimated selling price in the ordinary course of business, less the estimatedcosts of completion and selling expenses. Inventory values are adjusted for obsolete, slow-moving ordefective items.

At inception or on reassessment of the arrangement, the Company separates payments and otherconsideration required by such an arrangement into those for the lease and those for other elementson the basis of their relative fair values. If the Company concludes for a finance lease that it isimpracticable to separate the payments reliably, then an asset and a liability are recognised at anamount equal to the fair value of the underlying asset. Subsequently the liability is reduced aspayments are made and an imputed finance cost on the liability is recognised using the Company’sincremental borrowing rate.

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includesexpenditure incurred in acquiring the inventories, production or conversion costs and other costsincurred in bringing them to their existing location and condition. In the case of manufactured/blended inventories and work in progress, cost includes an appropriate share of production overheadsbased on normal operating capacity.

Other leases are operating leases and the leased assets are not recognized in the Company’s statement of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over theterm of the lease. Lease incentives received are recognised as an integral part of the total leaseexpense, over the term of the lease.Minimum lease payments made under finance leases are apportioned between the finance expenseand the reduction of the outstanding liability. The finance expense is allocated to each period duringthe lease term so as to produce a constant periodic rate of interest on the remaining balance of theliability.

At inception of an arrangement, the Company determines whether such an arrangement is or containsa lease. This will be the case if the following two criteria are met:

the fulfilment of the arrangement is dependent on the use of a specific asset or assets; and

the arrangement contains a right to use the asset(s).

Inventory-in-transit

Product Type

White Petroleum Products ( AGO, ATK, PMS , DPK)

Packaging Materials , Lubricants and Greases

27


(g) Impairmenti Non-derivative financial assets (including receivables)

ii Non-financial assetsThe carrying amounts of the Company’s non-financial assets, other than inventories are reviewed ateach reporting date to determine whether there is any indication of impairment. If any suchindication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted totheir present value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. For the purpose of impairment testing, assets thatcannot be tested individually are grouped together into the smallest group of assets that generatescash inflows from continuing use that are largely independent of the cash inflows of other assets orgroups of assets (the “cash-generating unit, or CGU”).

The Company’s corporate assets do not generate separate cash inflows. If there is an indication that acorporate asset may be impaired, then the recoverable amount is determined for the CGU to whichthe corporate asset belongs.

A financial asset not carried at fair value through profit or loss, including an equity accountedinvestee, is assessed at each reporting date to determine whether there is objective evidence that it isimpaired. A financial asset is impaired if objective evidence indicates that a loss event has occurredafter the initial recognition of the asset, and that the loss event had a negative effect on the estimatedfuture cash flows of that asset that can be reliably estimated.

Objective evidence that financial assets (including equity securities) are impaired can include defaultor delinquency by a debtor, restructuring of an amount due to the Company on terms that theCompany would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, orthe disappearance of an active market for a security. In addition, for an investment in an equitysecurity, a significant or prolonged decline in its fair value below its cost is objective evidence ofimpairment.

The Company considers evidence of impairment for receivables at both a specific asset and collectivelevel. All individually significant receivables are assessed for specific impairment. All individuallysignificant receivables found not to be specifically impaired are then collectively assessed for anyimpairment that has been incurred but not yet identified. Receivables that are not individuallysignificant are collectively assessed for impairment by grouping together receivables with similar riskcharacteristics.

In assessing collective impairment the Company uses historical trends of the probability of default,timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as towhether current economic and credit conditions are such that the actual losses are likely to be greateror less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as thedifference between its carrying amount and the present value of the estimated future cash flowsdiscounted at the asset’s original effective interest rate. Losses are recognized in profit or loss andreflected in an allowance account against receivables. Interest on the impaired asset where applicablecontinues to be recognized through the unwinding of the discount. When a subsequent event causesthe amount of impairment loss to decrease, the decrease in impairment loss is reversed through profitor loss.

28


(h) Employee benefits

i Defined contribution plan

ii Defined benefit plan

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimatedrecoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognizedin respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to theunits, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a prorata basis.

Impairment losses recognized in prior periods are assessed at each reporting date for any indicationsthat the loss has decreased or no longer exists. An impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount. An impairment loss is reversedonly to the extent that the asset’s carrying amount does not exceed the carrying amount that wouldhave been determined, net of depreciation or amortisation, if no impairment loss had beenrecognized.

A defined contribution plan is a post-employment benefit plan (pension fund) under which theCompany pays fixed contributions into a separate entity. The Company has no legal or constructiveobligations to pay further contributions if the fund does not hold sufficient assets to pay all employeesthe benefits relating to employee service in the current and prior periods.

In line with the provisions of the Pension Reform Act 2004, the Company has instituted a definedcontribution pension scheme for its permanent staff. Staff contributions to the scheme are fundedthrough payroll deductions while the Company’s contribution is recognised in profit or loss asemployee benefit expense in the periods during which services are rendered by employees. Employeescontribute 3 % each of their Basic salary, Transport and Housing Allowances to the Fund on amonthly basis. The Company’s contribution is 12 % of each employee’s Basic salary, Transport andHousing Allowances.

The Company currently operates one gratuity scheme which is a defined benefit scheme for certain employees.

The Company’s net obligation in respect of defined benefit scheme is calculated by estimating theamount of future benefit that employees have earned in return for their service in the current andprior periods and that benefit is discounted to determine its present value. In determining the liabilityfor employee benefits under the defined benefit scheme, consideration is given to future increases insalary rates and the Company's experience with staff turnover.

The recognised liability is determined by an independent actuarial valuation every year using theprojected unit credit method. HR Nigeria Limited was engaged as the independent actuary in thecurrent and prior years. Actuarial gains and losses arising from differences between the actual andexpected outcome in the valuation of the obligation are recognised fully in Other ComprehensiveIncome. The effect of any curtailment is recognised in full in the profit or loss immediately thecurtailment occurs. The discount rate is the yield on Federal Government of Nigeria issued bonds thathave maturity dates approximating the terms of the Company’s obligation. Although the scheme isnot funded, the Company ensures that adequate arrangements are in place to meet its obligationsunder the scheme.

29


iii Other long-term employee benefits

iv Termination benefits

v Short-term employee benefits

(i)

A provision for onerous contracts is recognized when the expected benefits to be derived by theCompany from a contract are lower than the unavoidable cost of meeting its obligations under thecontract. The provision is measured at the present value of the lower of the expected cost ofterminating the contract and the expected net cost of continuing with the contract. Before a provisionis established, the Group recognizes any impairment loss on the assets associated with that contract.

Provisions and contingent liabilities

Provisions

A provision for restructuring is recognised when the Company has approved a detailed and formalrestructuring plan, and the restructuring either has commenced or has been announced publicly.Future operating losses are not provided for.

A provision is recognized if, as a result of a past event, the Company has a present legal orconstructive obligation that can be estimated reliably, and it is probable that an outflow of economicbenefits will be required to settle the obligation. Provisions are determined by discounting theexpected future cash flows at a pre-tax rate that reflects current market assessments of the time valueof money and the risks specific to the liability. The unwinding of the discount is recognized as financecost.

A liability is recognized for the amount expected to be paid under short-term cash bonuses if theCompany has a present legal or constructive obligation to pay this amount as a result of past serviceprovided by the employee, and the obligation can be estimated reliably.

The Company’s other long-term employee benefits represents Long Service Awards scheme institutedfor all permanent employees. The Company’s obligations in respect of these schemes are the amountof future benefits that employees have earned in return for their service in the current and priorperiods. The benefit is discounted to determine its present value. The discount rate is the yield at thereporting date on Federal Government of Nigeria issued bonds that have maturity datesapproximating the term of the Company’s obligation. The calculation is performed using the Projected Unit Credit method. Any actuarial gains and losses are recognised in profit or loss in the period whichthey arise.

Termination benefits are recognized as an expense when the Company is committed demonstrably,without realistic possibility of withdrawal, to a formal detailed plan to either terminate employmentbefore the normal retirement date, or to provide termination benefits as a result of an offer made toencourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized asan expense if the Company has made an offer of voluntary redundancy, it is probable that the offerwill be accepted, and the number of acceptances can be estimated reliably. If benefits are payablemore than 12 months after the reporting period, then they are discounted to their present value.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed asthe related service is provided.

30


(j)

(k)

(l)

Revenue

If the likelihood of an outflow of resources is remote, the possible obligation is neither a provision nora contingent liability and no disclosure is made.

Contingent liabilities are only disclosed and not recognised as liabilities in the statement of financialposition.

A contingent liability is a possible obligation that arises from past events and whose existence will beconfirmed only by the occurrence or non-occurrence of one or more uncertain future events notwholly within the control of the company, or a present obligation that arises from past events but isnot recognised because it is not probable that an outflow of resources embodying economic benefitswill be required to settle the obligation; or the amount of the obligation cannot be measured withsufficient reliability.

Contingent liabilities

Finance income and finance costs

Rental income is recognized in profit or loss on a straight-line basis over the term of the lease. Leaseincentives granted are recognized as an integral part of the total rental income, over the term of thelease. Rental income is recognized as other income.

Rental income

If it is probable that discounts will be granted and the amount can be measured reliably, then thediscount is recognised as a reduction of revenue as the sales are recognised.

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of theconsideration received or receivable, net of value added tax, sales returns, trade discounts and volumerebates. Revenue for regulated products equates the amounts that accrue to the Company directly netof amounts the Company collects from regulators on behalf of third parties i.e. dealer commissionsand transport costs. Revenue is recognized when persuasive evidence exists that the significant risksand rewards of ownership have been transferred to the buyer, recovery of the consideration isprobable and there is no continuing management involvement with the goods and the amount ofrevenue can be measured reliably.

Finance costs comprise interest expense on borrowings, bank charges, unwinding of the discount onprovisions and impairment losses recognized on financial assets except finance costs that are directlyattributable to the acquisition, construction or production of a qualifying asset which are capitalisedas part of the related assets, are recognized in profit or loss using the effective interest method.

Finance income comprises interest income on funds invested and changes in the fair value of financialassets at fair value through profit or loss.. Finance income is recognized as it accrues in profit or loss,using the effective interest method.

Foreign currency gains and losses are reported on a net basis.

31


(m) Income and deferred tax

(n) Earnings per share (EPS)

(o) Segment reporting

An operating segment is a component of the Company that engages in business activities from whichit may earn revenues and incur expenses. All operating segments’ operating results are reviewedregularly by the Board of Directors to make decisions about resources to be allocated to the segmentand assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Board of Directors include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assetsand liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferredtax is not recognized for the initial recognition of assets or liabilities in a transaction that is not abusiness combination and that affects neither accounting nor taxable profit or loss.

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. BasicEPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Companyby the weighted average number of ordinary shares outstanding during the period, adjusted for ownshares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinaryshareholders and the weighted average number of ordinary shares outstanding, adjusted for ownshares held, for the effects of all dilutive potential ordinary shares.

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognizedin profit or loss except to the extent that it relates to a business combination, or items recognizeddirectly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, usingtax rates statutorily enacted at the reporting date, and any adjustment to tax payable in respect ofprevious years.

Deferred tax is recognised in profit or loss account except to the extent that it relates to a transactionthat is recognised directly in equity. A deferred tax asset is recognised only to the extent that it isprobable that future taxable profits will be available against which the amount will be utilised.Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefitwill be realised.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differenceswhen they reverse, based on the laws that have been enacted or substantively enacted by the reportingdate. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset currenttax liabilities and assets, and they relate to income taxes levied by the same tax authority on the sametaxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets ona net basis or their tax assets and liabilities will be realized simultaneously.

32


(p) Loans and borrowings

(q) Statement of cash flows

(r) Government Grants

(s) Jointly Controlled Assets

(t) New standards and interpretations not yet adopted

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred. Loansand borrowings are subsequently stated at amortised cost; any difference between the proceeds (netof transaction costs) and the redemption value is recognised in profit or loss over the period of theborrowings using the effective interest method.

Loans and borrowings, for which the Company has an unconditional right to defer settlement of theliability for at least 12 months after the statement of financial position date, are classified as non-current liabilities.

The statement of cash flows is prepared using the indirect method. Changes in statement of financialposition items that have not resulted in cash flows such as translation differences, fair value changes,equity-settled share-based payments and other non-cash items, have been eliminated for the purposeof preparing the statement. Dividends paid to ordinary shareholders are included in financingactivities. Finance costs paid is also included in financing activities while finance income is includedin investing activities.

Petroleum Products Pricing Regulatory Agency (PPPRA) subsidies which compensate the Companyfor losses made on importation of certain refined petroleum products are recognised when there isreasonable assurance that they will be recovered and the Company has complied with the conditionsattached to receiving the subsidy. The subsidies are recognised as a reduction to the landing cost ofthe subsidised petroleum product.

Jointly controlled assets refers to the Company’s interests in joint aviation facilities held with otherparties. These financial Statements include the Company’s share of these jointly controlled assets anda proportionate share of the relevant revenue and related operating costs.

A number of new standards, amendments to standards and interpretations are effective for annualperiods beginning after 1 January 2013, and have not been applied in preparing these financialstatements. Those which may be relevant to the Company are IFRS 11 Joint Arrangement , IFRS 13Fair Value Measurement and IFRS 9 Financial Instruments , which is expected to impact theclassification and measurement of financial assets. These standards will become mandatory for theCompany’s 2013 financial statements except for IFRS 9 which is mandatory for the 2015 financialstatements. The extent of the impact has not been determined and the Company does not plan toadopt these standards early.

33


4 Determination of fair values

(i) Trade and other receivables

(ii) Non-derivative financial instruments

The fair value of trade and other receivables is estimated as the present value of future cash flows,discounted at the market rate of interest at the reporting date. This fair value is determined fordisclosure purposes. For short term trade receivables, no disclosure of fair value is presented whenthe carrying amount is a reasonable approximation of fair value.

A number of the Company’s accounting policies and disclosures require the determination of fairvalue, for both financial and non-financial assets and liabilities. Fair values have been determined formeasurement and/or disclosure purposes based on the following methods. When applicable, furtherinformation about the assumptions made in determining fair values is disclosed in the notes specificto that asset or liability.

Fair value, which is determined for disclosure purposes, is calculated based on the present value offuture principal and interest cash flows, discounted at the market rate of interest at the reportingdate.

34


5 Revenue2012 2011

N’000 N’000Premium Motor Spirit (PMS) 58,922,799 49,150,651Aviation Turbine Kerosene (ATK) 10,120,921 9,933,242Automotive Gas Oil (AGO) 6,281,355 7,278,709Lubricants and greases 2,459,812 2,593,049Dual Purpose Kerosene (DPK) 1,713,289 2,535,064Low Pour Fuel Oil (LPFO) 229,173 -

79,727,349 71,490,715

6 Other income2012 2011

N’000 N’000Rental and lease income (Note 6 (a)) 136,591 100,635 Loss on disposal of property, plant & equipmentSundry income 377,258 81,487Income on storage services 425,409 752,994

Total 923,383 933,073

(a)

7 Expenses by nature

2012 2011 N’000 N’000

Depreciation 1,476,481 1,330,289 Amortisation of intangible assets 31,301 3,189 Change in inventories of lubes, greases and white products 73,231,224 64,082,703 Rental of service stations, buildings and equipment 220,767 225,581 Advertising expense 10,361 12,749 Consultancy expense 158,602 109,567 Maintenance expense 260,770 244,972 Throughput expense 874,853 791,940 Freight expense 463,826 537,780 Impairment of deferred intercompany charges 18,207 - Management fees ( Note 25 (a)) 531,628 704,150 Director's renumeration 17,034 16,076 Employee benefit expense (Note 9 (b)) 812,667 1,525,011 Auditor's renumeration 24,914 17,114 Write-off (write-on) of trade and other receivables 40,665Local and international travel 122,616 134,435 Office expenses and supplies 257,531 357,395 Communication and postage 171,951 96,945 Meeting expenses 45,567 12,191 Other expenses 291,867 455,438

79,062,832 70,651,021

(15,875) (2,043)

(6,504)

Rental and lease income relates to income earned on assets that are on lease (finance and operating leases) to thirdparties. Assets on lease include filling stations and related equipment (generators and dispenser pumps).

Total cost of sales, selling and distribution expenses and administrative expenses

35


8 Finance income and finance costs

2012 2011N’000 N’000

Finance incomeInterest income on short-term bank deposits 147,721 135,211Interest on employee receivables - 17,898

1,330 4,428Total finance income 149,051 157,537

Finance cost– Interest expense 249,756 269,728– Bank charges 252,079 68,375– Net foreign exchange loss 856,361 178,959Total finance costs 1,358,196 517,062

Net finance costs 1,209,145 359,525

9 Profit before income tax(a) Profit before income tax is stated after charging:

2012 2011N’000 N’000

Depreciation (Note 12) 1,476,481 1,330,289 Amortisation of intangible assets (Note 13) 31,301 3,189 Management fees (Note 25 (b)) 531,628 704,150 Director's renumeration (Note 9 ( b) (iv)) 17,034 16,076 Employee benefit expense (Note 9 (b) (i)) 812,667 1,525,011 Auditor's renumeration 24,914 17,114 Loss on disposal of property, plant and equipment 15,875 2,043 Foreign currency exchange loss 856,361 178,959

(b) Directors and employees

i Employee costs during the year comprise:2012 2011

N’000 N’000Salaries and wages 581,257 1,225,372Other employee benefits 54,351 648Termination benefits - 86,309Employer's pension contribution 64,442 117,024Post employment benefit charge (Note 19) 102,473 86,720Other long term employee benefit charge (Note 19) 10,144 8,938

812,667 1,525,011

ii

2012 2011Administration 23 49Technical and production 19 37Operation and distribution 35 43Sales and marketing 32 74

109 203

Interest income on loans (dealer and staff loans)

Number

The average number of full-time persons employed during the year (other than executive directors) was as follows:

36


iii

2012 2011

1,000,001 2,000,000 - 62,000,001 3,000,000 1 83,000,001 4,000,000 19 734,000,001 5,000,000 50 465,000,001 6,000,000 10 326,000,001 7,000,000 10 197,000,001 8,000,000 12 98,000,001 9,000,000 2 29,000,001 10,000,000 1 3

Above 10,000,000 4 5

109 203

iv

2012 2011N’000 N’000

Fees 1,500 2,500 Other emoluments 15,534 13,576 17,034 16,076

The directors' remuneration shown above includes:

Chairman - -

Highest paid director 4,747 5,880

2012 2011

Nil 4 31,000,001 2,000,000 - 12,000,001 3,000,000 - - 3,000,001 4,000,000 - 14,000,001 5,000,000 2 - 5,000,001 6,000,000 - 2

Other directors received emoluments in the following ranges:

Higher-paid employees of the Company, other than directors, whose duties were wholly or mainly discharged in Nigeria, received remuneration in excess of N1,000,000 (excluding pension contributions) in the following ranges:

Number

Directors's remuneration (including pension contributions) for directors of the Company charged to the profit and loss account are as follows:

Number

37


10 Earnings per share (EPS)

(a) Basic

2012 2011

205,121,000 615,624,000

Weighted average number of ordinary shares in issue 253,988,672 253,988,672

Basic earnings per share (expressed in Naira per share) 0.81 2.42

(b) Dividend declared per share

11 Taxation(a) Income tax expense

2012 2011N’000 N’000

Current tax expense:Income tax 353,460 998,026 Tertiary education tax 31,107 76,328 Capital gains tax - 733 Prior year (over)/underprovision (48,047) 191,854

336,520 1,266,941 Deferred tax expense:Origination and reversal of temporary differences

Tax expense from continuing operations 173,634 797,618

(b) Tax recognized in other comprehensive income:

(469,323) (469,323)(162,886)

(162,886)

Basic earnings per share of N0.81 (2011: N0.11) is based on profit attributable to ordinary shareholders ofN205,121,000 (2011: N27,110,000), and on the 253,988,672 ordinary shares of 50 kobo each, being the weightedaverage number of ordinary shares in issue during the year (2011: 253,988,672).

Profit for the year attributable to shareholders (expressed in Naira)

Tax of N1.6 million was recognised in other comprehensive income on actuarial gains recorded in theyear (2011: N17.2 million).

The tax change for the year has been computed after adjusting for certain items of expenditure and income, whichare not deductible or chargeable for tax purposes, and comprises:

Prior year over-provision of N48.05 million is as a result of tax benefit on prior year adjustmentsrecorded (see Note 30). The over-provision of N119.19 million is as a result of adjustments to taxpayable for the 2010 financial year.

Dividend declared per share of 70 kobo (2011: 125 kobo) is based on total declared dividend of N177.79 million(2011: N317.49 million) on 253,988,672 ordinary shares of 50 kobo each, being the ordinary shares in issue duringthe year (2011: 253,988,672).

38


(c ) Reconciliation of effective tax ratesThe tax on the company's profit before tax differs from the theoretical amount as follows:

% %Profit before income tax 378,755 1,413,242Income tax using the statutory tax rate 30% 113,627 30% 423,973

Effect of:

Impact of capital gains tax 0% - 0% 733Impact of tertiary education tax 8% 31,107 5% 76,328

Effect of tax incentives -49% (185,114) 0%Non deductible expenses 43% 162,633 15% 214,211Change in recognized deductible temporary 0% - -5%Adjustment for prior periods 0% - 14% 191,854Other diffrences 14% 51,382 -2%

Total income tax expense in income statement 46% 173,634 56% 797,618

(d)

2012 2011N’000 N’000

Balance at beginning of the year 1,157,171 1,347,115 Payments during the yearProvision for the year (Note 11 (a) ) 336,520 1,266,941 Withholding tax credit notes utilisedTax impact of prior year errors -

459,038 1,157,171

(1,295,850)

(9,900)(151,135)

(58,211)

(976,442)

2011

Movement in current tax liability

2012

(3,575)

(77,717)

(28,188)

39


(e) Recognised deferred tax assets and liabilitiesDeferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net2012 2011 1-Jan-11 2012 2011 1-Jan-11 2012 2011 1-Jan-11

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000Property, plant and equipment - - - Employee benefits 65,525 148,257 59,157 - - - 65,525 148,257 59,157 Impairment loss - 67,104 77,707 - - - - 67,104 77,707 Inventories 29,622 - - - - - 29,622 - - Others 37,429 94,490 194,310 (7,065) - (49,500) 30,364 94,490 144,810

132,576 309,851 331,174

(f) Movement in temporary differences during the year Recognized Recognized

in other Recognized in otherBalance Recognized in Comprehensive Balance Recognized in Recognized Comprehensive Balance1-Jan-11 profit or loss income 31-Dec-11 profit or loss directly in equity income 31-Dec-12

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000Property, plant and equipment 272,824 - - 345,630 - - Employee benefits 59,157 106,287 - 148,257 - 65,525 Impairment loss 77,707 - - 67,104 - - - Inventories - - - - 29,622 - - 29,622 Others 144,810 - 94,490 - - 30,364

162,886 - (1,596) (6,238,600)

100,814 (64,125) (151,135)

(6,700,890) 469,323 (17,187) (151,135) (6,399,889)

-

directly in equity

(6,982,564) (6,709,741) (6,364,111) (17,187) (81,136) (1,596)

(10,603) (67,104)

(6,371,176) (6,709,741) (7,032,064) (6,238,600) (6,399,889) (6,700,890)

(6,982,564) (6,364,111) (6,709,741) (6,982,564) (6,364,111) (6,709,741)

40

MRS OIL NIGERIA PLCNotes to the annual financial statementsFor the year ended 31 December 2012

12 Property, Plant and Equipment

(a) The movement on these accounts was as follows:Land &

BuildingsPlant &

MachineryAutomotive Equipment

Computer & Office

Equipment

Furniture & Fittings

Capital Work in Progress

Total

N’000 N’000 N’000 N’000 N’000 N’000 N’000Cost/deemed costBalance at 1 January 2012 14,381,518 9,748,547 1,399,996 672,212 188,771 54,810 26,445,854Additions - - - 60,950 - 278,674 339,624Transfers 6,686 128,021 42,429 28,118 2,531 - Disposals - - - - -

Balance at 31 December 2012 14,388,204 9,876,568 1,333,110 761,280 191,302 125,699 26,676,163 Depreciation and impairment losses

Balance at 1 January 2012 922,487 922,915 895,880 429,291 102,313 - 3,272,886 Charge for the year 289,897 927,389 145,242 96,169 17,784 - 1,476,481 Disposal - - - - -

Balance at 31 December 2012 1,212,384 1,850,304 954,350 525,460 120,097 - 4,662,595

Land & Buildings

Plant & Machinery

Automotive Equipment

Computer & Office

Equipment

Furniture & Fittings

Capital Work in Progress

Total

N’000 N’000 N’000 N’000 N’000 N’000 N’000Cost/deemed costBalance at 1 January 2011 14,192,725 9,706,892 1,423,886 587,457 178,924 - 26,089,884Additions 184,884 32,581 - 73,952 1,689 104,546 397,652Transfers 4,048 9,074 17,318 11,138 8,158 - Disposal - - -

Balance at 31 December 2011 14,381,518 9,748,547 1,399,996 672,212 188,771 54,810 26,445,854 Depreciation and impairment losses

Balance at 1 January 2011 633,950 - 852,858 396,596 90,534 - 1,973,938 Charge for the year 288,542 922,915 74,121 32,932 11,779 - 1,330,289 Disposal - - -

Balance at 31 December 2011 922,487 922,915 895,880 429,291 102,313 - 3,272,886

Carrying amountsAt 1 January 2011 13,558,775 9,706,892 571,028 190,861 88,390 - 24,115,946

At 31 December 2011 13,459,031 8,825,632 504,116 242,921 86,458 54,810 23,172,968

At 31 December 2012 13,175,820 8,026,264 378,760 235,820 71,205 125,699 22,013,568

(5)

(139)

(109,315)

(86,772)

(41,208)

(31,099)

(335)

(237)

(49,736)

(207,785) (109,315)

(86,772)

(41,682)

(31,341)

41


( b ) Impairment assessment

( c ) Finance lease

(d) Capital commitmentsCapital expenditure commitments at the year end authorised by the Board of Directors comprise:

(e) All depreciation expense is included as part of administrative expenses.

31 Dec 2012 31 Dec 2011N’000 N’000

Capital commitments 1,541,856 312,000

13 Intangible assets 2012 2011N’000 N’000

CostBalance at 1 January 165,830 - Additions 9,220 165,830

Balance at 31 December 175,050 165,830

AmortisationBalance at 1 January (3,189) - Charge for the year (31,301) (3,189)

Balance at 31 December (34,490) (3,189)

Carrying amount 140,560 162,641

The carrying amount of the Company's net assets exceeded its market capitalization as at the year end. As a result ofthis, management carried out an impairment testing as at 31 December 2012 . Based on results of the test, therecoverable amount of the Company's cash generating units (CGU) are higher than the carrying amount i.e value in useof the CGUs exceeds the carrying amount and as such no impairment loss has been recorded.

The Company holds various parcels of land under finance lease arrangements. The maximum tenor of the lease is 99years in line with the Land Use Act. The lease amounts were fully paid at the inception of the lease arrangements andthese are depreciated over the lease period.

At 31 December 2012, the carrying amount of leased land was N8.26 billion (2011: N8.35 billion).

Amortisation of N31 million is included in 'administrative expenses' in the statement of comprehensive income (2011: N3 million).

42


14 Trade and other receivables 31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000

Trade receivables 3,440,509 2,722,131 1,919,704 Petroleum Equalisation Fund (PEF) 3,193,286 2,559,922 6,107,739 Petroleum Support Fund (PSF) 8,627,610 7,119,146 1,189,294

27,337 425,896 538,327 Interest receivable 2,159 1,745 - Interest paid in advance - 45,411 - Withholding tax receivable 71,990 100,115 82,131 Due from joint venture partners 62,763 38,742 7,340 Directors' debit balance - 100 1,300

214,697 231,206 309,7782,557,888 19,049,777 244,342

Other debtors 215,475 160,501 42,051

18,413,714 32,454,692 10,442,006

(7,507) (247,557) (280,858) Current portion 18,406,207 32,207,135 10,161,148

(a)

(b)

15 Inventories31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Premium Motor Spirit (PMS) 872,340 1,623,300 1,777,550 Lubricants and greases 1,722,285 2,952,721 1,008,504 Aviation Turbine Kerosene (ATK) 1,307,816 1,201,337 418,055 Automotive Gas Oil (AGO) 300,635 248,710 255,364 Dual Purpose Kerosene (DPK) 126,371 15,972 13,670 Packaging materials and other sundry stocks 2,286 10,293 10,909 Work in progress - 25,482 19,060 Inventories in transit - 2,216,375 5,062,640

4,331,733 8,294,190 8,565,752

Receivables from registrar represents funds paid to the registrar towards dividend payments to shareholders not yetpaid to the shareholders as at the year end.

Employee loans are various interest free loans granted to staff members and are usually secured by the employee'sretirement benefit obligations. The loans are usually repayable within 1 to 7 years. The fair value of the employee loansis based on cashflows discounted based on market borrowing rate . As at 31 December 2012, all employee loans are duewithin 2 years.

The Company's exposure to credit risk and impairment losses related to trade and other receivables are disclosed in Note 24 (a).

For receivables that are classified as 'current', due to their short-term maturities, the fair value approximates their carrying values.

Loans to employees (Note 14 (a))

Receivables from registrar (Note 14 (b))Receivables from related parties (Note 25)

Less: non-current portion : loans to employees (Note 14 (a))

Inventory amount of N447.87 (2011: N961.78 million) was held in a facility owned by MRS Oil and Gas Limited, arelated party (Note 25).

43


16 Cash and cash equivalents31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Cash and cash equivalents 1,155,398 6,513,027 1,649,395 Short term deposits with banks (Note16(a)) 9,145,304 1,908,485 1,250,000

10,300,702 8,421,512 2,899,395

8,886,913 7,418,646 2,382,048

(a)

17 Share Capital 31 Dec 2012 31 Dec 2011 1 Jan 2011

Authorised: N’000 N’000 N’000271,657,230 Ordinary shares of 50k each 135,829 135,829 135,829

Issued and fully paid:253,988,672 Ordinary shares of 50k each 126,994 126,994 126,994

Issued and fully alloted:253,988,672 Ordinary shares of 50k each 126,994 126,994 126,994

18 Retained earnings 2012 2011

N’000 N’000At 1 January 18,861,691 18,512,872 Profit for the year 205,121 615,624 Defined benefit plan actuarial gain, net of tax 3,725 40,102 Dividends declared (Note 21)Unclaimed dividend written back (Note 21) 34,271 10,579

At 31 December 18,927,016 18,861,691

Bank overdrafts used for cash management purposes

The value of changes in products, packaging materials and work-in-progress included in cost of sales amounted toN74.01 billion (2011: N64.66 billion). In 2012, the write downs of inventory to net realizeable values amounted toN98.7 million (2011: N5.94 million). The write downs have been recorded in "cost of sales" in the statement ofcomprehensive income.

Cash and cash equivalents in the statement of cashflows

(1,413,789) (517,347) (1,002,866)

(177,792) (317,486)

Short term deposits with banks represent placements with commercial banks for period between 0 - 90 days. Includedin short term deposits are unclaimed dividends amounting to N255.98 million (2011: N240.71 million) held in separatebank accounts in accordance with guidelines issued by Securities and Exchange Commission. Also included in shortterm deposits with banks is an amount of N 8.9 billion (2011: N1.6 billion) being the balance on the sinking fundaccount. These amounts are restricted from use by the Company.

Included in retained earnings is N14.40 billion which represents revaluation surplus. This amount is not available fordistribution.

44


19 Employee benefit obligations31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Year end obligations for:Post-employment benefit (Note 19 (a)) 201,250 515,461 549,623 Other long term employee benefits (Note 19 (b)) 17,165 36,019 31,296 Total employee benefit liabilities 218,415 551,480 580,919

2012 2011N’000 N’000

Expense recognized in profit or loss:Post-employment benefit 102,473 86,720 Other long term employee benefits 10,144 8,938 Total amount recognised in profit or loss 112,617 95,658

All the expenses have been included as part of administrative expenses.

Actuarial gains and losses recognised in other comprehensive income:

2012 2011

N’000 N’000Amount accumulated in retained earnings at 1 January (10,155) (67,444) Recognized during the year 5,321 57,289

Amount accumulated in retained earnings at 31 December (4,834) (10,155)

(a)

2012 2011N’000 N’000

At 1 January 515,461 549,623 Current service cost 56,738 88,879 Interest cost 45,735 55,130 Actuarial losses/(gains) - change in assumption 26,460 Actuarial gains - experience adjustmentBenefits paid by the employerCurtailment gains -

At 31 December 201,250 515,461

(31,781) (54,928) (2,361)

Post employment benefit obligation comprise of gratuity provision and is based upon independent actuarial valuationperformed by HR Nigeria Limited using the projected unit credit basis. The Company does not maintain any assets forthe gratuity plan but ensures that it has sufficient funds for the obligations as they crystallize.

The movement in the defined benefit obligation during the year is as follows:

(271,175) (140,188)

(120,882)

45


(b)

2012 2011N’000 N’000

Balance at 1 January 36,019 31,296 Provision for the yearCurrent service cost 6,987 6,373 Interest cost 3,157 2,771 Actuarial losses/(gains) - change in assumption 1,122 Actuarial (gains)/losses - experience adjustment 4,379 Benefits paid by the employerCurtailment gains -

Balance at 31 December 17,165 36,019

The next valuation is due as at 31 December 2013.

(c)

(d) Actuarial Assumptions

2012 2011

Long-term average discount rate (p.a.) 13% 14%Future average pay increase (p.a.) 13% 13%Average rate of inflation (p.a.) 10% 10%Average Duration in years (Gratuity) 21.7 17Average Duration in years (Long Service Awards) 12.9 11

The movement on the provision for other long term employee benefits was as follows:

As a result of a curtailment in the gratuity arrangement for a number of employees, the Company's obligationdecreased by N140,188,000 (2011: Nil). A corresponding curtailment gain is included in the Company's statement ofcomprehensive income for the year ended 31 December 2012.

The provision was based on independent actuarial valuation performed by HR Nigeria Limited using the projected unitcredit basis as at 31 December 2012. Other long term employee benefits comprise of long service awards and it isfunded on a pay as you go basis by the Company.

(4,585)

(4,215) (1,099) (909)

The next valuation is due as at 31 December 2013.

(28,112)

As a result of a curtailment in the long service award arrangement for a number of employees, the Company'sobligation decreased by N28,112,000 (2011: Nil). A corresponding curtailment gain is included in the Company'sstatement of comprehensive income for the year ended 31 December 2012.

The balance and movement in the Company's pension payable account which represents amounts due to the pension fund administrators which are yet to be remitted as at year end are shown in Note 22 (a).

Principal actuarial assumptions at the reporting date (expressed as weighted averages):

These assumptions depict management’s estimate of the likely future experience of the Company.

Due to unavailability of published reliable demographic data in Nigeria, the demographic assumptions regardingfuture mortality are based on the rates published jointly by the Institute and Faculty of Actuaries in the UK. The datawere rated down by one year to more accurately reflect mortality in Nigeria as follows:

46


Mortality in Service

Withdrawal from Service

(e) Sensitivity Analysis

Gratuity Long Service Award

Net periodic benefit cost (Gratuity)

Net periodic benefit cost

(LSA)

N’000 N’000 N’000 N’000Discount rate -1% 232,855 18,434 94,298 9,561

+1% 174,789 16,043 70,822 8,667Salary increase rate -1% 173,799 16,366 66,536 8,488

+1% 233,579 18,048 90,949 9,488Inflation rate -1% 201,249 17,165 76,908 7,038

+1% 201,249 17,165 76,908 7,488Mortality rate -1 year 201,694 17,185 81,222 9,092

+1 year 201,242 16,318 80,475 8,731

≤ 30

31 - 39

40 - 44

45 - 60

2012 2011

0.5%

0.5%

0.5%

0.0%0.0%

0.5%

0.5%

0.5%

Rates

11121319

45 26

Below is the sensitivity analysis of the principal actuarial assumptions adopted in determining the employee benefitliabilities:

33

Assumptions regarding future mortality rates are based on published statistics and mortakity tables by institute of Faculty of Actuaries in the UK.

Age Band

Sample age

25303540 14

977

Number of deaths in year out of 10,000 lives

2012

It is assumed that all the employees covered by the defined end of service benefit scheme would retire at age 60 (2011: age 60).

2011

Number of deaths in year out of 10,000 lives

47


20 Security deposits

21 Dividends(a) Declared dividends

The following dividends were declared and paid by the Company during the year.2012 2011

70 kobo per qualifying ordinary share (2011: 125 kobo) 177,792 317,486

2012 2011

23.34 kobo per qualifying ordinary share (2011: 70k) 59,281 177,792

(b) Dividend payable2012 2011

N’000 N’000At 1 January 533,081 528,543 Declared dividend 177,792 317,486 PaymentsUnclaimed dividend transferred to retained earnings

At 31 December 473,942 533,081

(i)

(ii)

22 Trade and other payables31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Trade payables 8,435,992 5,199,261 9,732,297 Accrued expenses 2,662,679 3,440,258 1,932,411 Amounts due to joint venture partners - 62,096 51,894 Advances received from customers 1,429,200 472,414 1,028,399 Bridging allowance 464,806 336,214 2,551,796 Amounts due to related parties 1,146,307 13,542,005 2,047,873 Pension payable (Note 22 (a)) 4,333 3,298 2,904 Other liabilities 37,360 187,507 37,360

14,180,677 23,243,053 17,384,934

After the respective dates, the following dividends were proposed by the Directors. The dividends have not been provided for and there are no income tax consequences.

These are collateral deposits paid by dealers who maintain credit facilities with the Company. These amounts arenetted off on a periodic basis to cater for operational losses. These deposits do not bear interest.

Unclaimed dividend transferred to retained earnings represents dividend which have remained unclaimed for overtwelve (12) years and are therefore no longer recoverable or actionable by the shareholders in accordance with Section385 of the Companies and Allied Matters Act, Cap. C20, Laws of the Federal Republic of Nigeria, 2004.

The Company's exposure to currency and liquidity risks related to security deposits is disclosed in Note 24 (b).

As at 31 December 2012, an amount of N214.7 million (2011: N231.2 million) of the total dividend payable is held withthe Company’s registrar, City Securities (Registrars) Limited. The remaining dividend payable of N259.2 million (2011:N301.9 million) represents unclaimed dividends, which have been returned to the Company by the Registrar.

(202,660) (302,369) (10,579) (34,271)

48


(a)

31 Dec 2012 31 Dec 2011N’000 N’000

At 1 January 3,298 2,904 Contributions during the year 85,202 155,080 Payments during the year

At 31 December 4,333 3,298

23 Bank overdrafts and other short term borrowings31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Bank overdrafts 1,413,789 1,002,866 517,347 Bank borrowings (Import Finance Facility) 12,046,313 20,001,092 -

Total Borrowings 13,460,102 21,003,958 517,347

24 Financial InstrumentsFinancial risk management overviewThe Company has exposure to the following risks from its use of financial instruments:

· Credit risk· Liquidity risk· Market risk

Risk management framework

Import Finance Facilities represents short term borrowings obtained to fund letters of credits for product importation.Included in the prior year balance of N20 billion is an amount of N17.61 billion obtained on behalf of a related party ,MRS Oil and Gas Limited. No amount was obtained on behalf of MRS Oil and Gas Limited as at the year end. See Note25.

(154,686) (84,167)

Total lines of credit available to the Company amounted to N11.5 billion (2011: N25.50 billion). Interest rates on thesefacilities ranged between 15 % to 20 % per annum (2011: 14 % to 19.75 % per annum ). The net interest expenseincurred in the year amounted to N294.76 million (2011: N269.73 million). These facilities are either secured withproducts financed, domiciliation of PPPRA payments or the Company’s sinking fund account with a balance of N8.9billion as at year end (2011: N1.6 billion). The sinking fund account is included in the short term deposits in Note 16.

The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant.

The balance on the pension payable account represents the amount due to the Pension Fund Administrator which isyet to be remitted at year end. The movement on this account during the year was as follows:

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives,policies and processes for measuring and managing risk, and the Company’s management of capital. Furtherquantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s riskmanagement framework. The Board has established the strategic and finance planning committee, which isresponsible for developing and monitoring the Company’s risk management policies. The committee reports regularlyto the Board of Directors on its activities.

49


(a) Credit risk

Note 31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000

Trade and other receivables 14 18,413,714 32,454,692 10,442,006 Cash and cash equivalents 16 10,300,702 8,421,512 2,899,395

28,714,416 40,876,204 13,341,401

Trade and other receivables

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to setappropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies andsystems are reviewed regularly by the strategic and finance planning committee to reflect changes in market conditionsand the Company’s activities. The Company, through its training and management standards and procedures, aims todevelop a disciplined and constructive control environment in which all employees understand their roles andobligations

The Company’s Audit Committee oversees how management monitors compliance with the Company’s riskmanagement policies and procedures, and reviews the adequacy of the risk management framework in relation to therisks faced by the Company. Internal Audit undertakes both regular and ad hoc reviews of compliance with establishedcontrols and procedures, the results of which are reported to Senior Management of the Company and the auditcommittee.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails tomeet its contractual obligations, and arises principally from the Company’s receivables from customers and otherrelated parties.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to creditrisk at the reporting date was:

Management has credit policies in place and the exposure to credit risk is monitored on an ongoing basis by anestablished credit committee headed by the Managing Director. Under the credit policies all customers requiring creditover a certain amount are reviewed and new customers analysed individually for creditworthiness before theCompany’s standard payment and delivery terms and conditions are offered. The Company’s credit assessment processincludes specified cash deposits by new customers. Credit limits are established for qualifying customers and theselimits are reviewed regularly by the Credit Committee. Customers that fail to meet the Company’s benchmarkcreditworthiness may transact with the Company only on a prepayment basis.

The Credit Committee reviews each customer’s credit limit in line with the customers’ performance, feedback fromsales team and perceived risk factor assigned to the customer.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whetherthey are an individual or legal entity, whether they are a key distributor or retail distributor, geographic location, andexistence of previous financial difficulties. Trade and other receivables relate mainly to the Company’s wholesalecustomers. Customers with no trading activities for a period of up to one year are placed on a dormant customer list,and future sales are made on a prepayment basis only with approval of management.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect oftrade and other receivables. The main components of this allowance are a specific loss component that relates toindividually significant exposures, customers with outstanding amounts but have not placed orders/traded for aprolonged period of time (usually one year) and a collective loss component established for groups of similar assets inrespect of losses that have been incurred but not yet identified. The collective loss allowance is determined based onhistorical data of payment statistics.

50


31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000

2,646,282 2,163,668 1,617,283993,096 811,981 455,799

(198,869) (253,518) (153,378) 3,440,509 2,722,131 1,919,704

7,507 247,557 280,858 2,557,888 19,049,777 244,342 11,820,896 9,679,068 7,297,033

586,914 756,159 700,069 18,413,714 32,454,692 10,442,006

The aging of trade receivables at the end of the reporting period was as follows:

2012 2011 1 Jan 2011N’000 N’000 N’000

1 - 30 days 1,546,236 1,620,733 1,232,959

31 - 60 days 940,403 524,427 398,954

61 - 180 days 400,057 476,225 362,284

More than 180 days 553,813 100,746 76,642 3,440,509 2,722,131 2,070,839

2012 2011N’000 N’000

Balance at 1 January 253,518 153,378 187,351 100,140

Reversal of impairment losses - Balance at 31 December 198,869 253,518

- Others- Impairment

- Due from regulators (Government entities)

- Other receivables (non-current)- Due from related parties

- Major customersTrade receivables

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

Impairment loss recognised

The maximum exposure to credit risk for trade and other receivables at the reporting date by type of counterparty was:

(242,000)

The impairment loss as at 31 December 2012 relates to several customers that are not expected to be able to pay theiroutstanding balances, mainly due to economic circumstances. The Company believes that the unimpaired amounts arestill collectible, based on historic payment behaviour and extensive analyses of the underlying customers’ credit ratingswhen available. The impairment loss is included in administrative expenses on the statement of comprehensiveincome.

- Others

51


Cash and cash equivalents

(b) Liquidity risk

Notes Carrying amountContractual cash flows 6 months or less

N’000 N’000 N’000Non-derivative financial liabilities

Overdraft and other Short-term borrowings 23 517,347 517,347 517,347Dividend payable 21 (b) 528,543 528,543 528,543Trade and other payables 22 17,384,934 17,384,934 17,384,934Security deposits 20 630,699 630,699 630,699

19,061,523 19,061,523 19,061,523

Overdraft and other Short-term borrowings 23 21,003,958 21,003,958 21,003,958Dividend payable 21 (b) 533,081 533,081 533,081Trade and other payables 22 23,243,053 23,243,053 23,243,053Security deposits 20 822,920 822,920 822,920

45,603,012 45,603,012 45,603,012

Overdraft and other Short-term borrowings 23 13,460,102 13,460,102 13,460,102Dividend payable 21 (b) 473,942 473,942 473,942Trade and other payables 22 14,180,677 14,180,677 14,180,677Security deposits 20 1,510,904 1,510,904 1,510,904

29,625,625 29,625,625 29,625,625

1 January 2011

31 December 2011

31 December 2012

The Company held cash and cash equivalents of N10.3 billion as at 31 December 2012 (2011: N8.4 billion), which represents its maximum credit exposure on these assets. The cash and cash equivalents (with the exception of N3.4 million held as cash by the company) are held by banks and financial institutions in Nigeria.

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with itsfinancial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managingliquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’sreputation.

The Company has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturingdebt obligations. As part of the liquidity management process, the Company has various credit arrangements withsome banks which can be utilised to meet its liquidity requirements. At the year end, the Company had N1.41 billionutilized credit arrangements under overdraft agreements with it's bankers.

Typically the credit terms with customers are more favourable compared to payment terms to its vendors in order tohelp provide sufficient cash on demand to meet expected operational expenses, including the servicing of financialobligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such asnatural disasters.

The following are the contractual maturities of financial liabilities, including estimated interest payments andexcluding the impact of netting agreements.

52


(c) Market risk

Currency risk

Exposure to currency risk

In thousands 31 Dec 2012 31 Dec 2011 1 Jan 2011USD USD USD

23,011 108,284 2,060 2,920 3,808 14,081

Net statement of financial position exposure

Sensitivity analysis

Increase/(decrease) in profit or loss31 December 2012 N’000USD (5 percent strengthening) 470,010 31 December 2011USD (5 percent strengthening) 569,904

The Company is exposed to currency risk on sales and purchases and borrowings that are denominated in a currencyother than the functional currency of the Company, primarily the Naira. The currency in which these transactionsprimarily are denominated is US Dollars (USD). The currency risk is the risk that the fair value or future cash flows of afinancial instrument will fluctuate due to the changes in foreign exchange rates.

In managing currency risk, the Company aims to reduce the impact of short-term fluctuations on earnings. TheCompany’s has no export sales. Thus the exposure to currency risk in that regard is non existent. The Company’ssignificant exposure to currency risk relates to its importation of various raw materials. Although the Company hasvarious measures to mitigate exposure to foreign exchange rate movement, over the longer term, however, permanentchanges in exchange rates would have an impact on profit. The Company monitors the movement in the currency rateson an ongoing basis.

The Company’s transactional exposure to US Dollar (USD) was based on notional amounts as follows:

Financial assetTrade and other receivablesCash and cash equivalentFinancial liabilityShort- term borrowingsTrade and other payables

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity priceswill affect the Company’s income or the value of its holdings of financial instruments. The objective of market riskmanagement is to manage and control market risk exposures within acceptable parameters, while optimizing thereturn.

The Company manages market risks by keeping costs low through various cost optimization programs. Moreover,market developments are monitored and discussed regularly, and mitigating actions are taken where necessary.

(77,583) (112,040) (10,089) (12,068) (6,016)

(73,023) (8,889) (60,541) (72,971)

A strengthening of the Naira, as indicated below against the Dollar at 31 December would have increased (decreased)profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that theCompany considered to be reasonably possible at the end of the reporting period and has no impact on equity. Theanalysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on thesame basis for 2011, albeit that the reasonably possible foreign exchange rate variances were different, as indicatedbelow

53


2012 2011 2012 2011N N N N

155.44 151.82 155.27 156.2

Interest rate risk profile

2012 2011N’000 N’000

Fixed rate instrumentsFinancial liabilities 13,460,102 21,003,958

(d) Capital risk management

31 Dec 2012 31 Dec 2011 1 Jan 2011N’000 N’000 N’000

Total borrowings (Note 23) 13,460,102 21,003,958 517,347 Less: Cash and cash equivalents (Note 16)Net debt 3,159,400 12,582,446 Total equity 19,054,010 18,988,685 18,639,866 Total capital Employed 22,213,410 31,571,131 16,257,818

Debt to adjusted capital ratio 17% 66% -13%

There were no changes in the Company's approach to capital management during the year.

The Company is not subject to externally imposed capital requirements.

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss.Therefore a change in interest rates at the end of the reporting period would not affect profit or loss

At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence andto sustain future development of the business. Management monitors the return on capital, which the Companydefines as result from operating activities divided by total shareholders’ equity. Management also monitors the level ofdividends to all shareholders.

The Company’s debt to adjusted capital ratio at the end of the reporting period was as follows:

US Dollar

(2,899,395) (8,421,512)

Carrying amount

(10,300,702) (2,382,048)

A weakening of the Naira against the dollar at 31 December would have had the equal but opposite effect on the abovedollar to the amounts shown above, on the basis that all other variables remain constant.

Average rate Reporting date spot rate

The following significant exchange rates were applied during the year

In managing interest rate risk, the Company aims to reduce the impact of short-term fluctuations in earnings.Dividend pay-out practices seek a balance between giving good returns to shareholders on one hand and maintaining asolid debt/equity ratio on the other hand

54


(e) Fair valuesFair values versus carrying amounts

Financial assets

Financial liabilities Total

Loans and Amortisedreceivables Cost

31 December 2012 N’000 N’000 N’000Financial assetsTrade and other receivables 18,413,714 - 18,413,714 Cash and cash equivalents 10,300,702 - 10,300,702

28,714,416 - 28,714,416

Financial liabilitiesShort term borrowings - 13,460,102 13,460,102 Trade and other payables - 14,180,677 14,180,677 Security deposits - 1,510,904 1,510,904

- 29,151,683 29,151,683

The Company's financial instruments are categorised as follows:

Financial assets


Loans and Amortisedreceivables cost

31 December 2011 N’000 N’000 N’000Financial assetsTrade and other receivables 32,454,692 - 32,454,692 Cash and cash equivalents 8,421,512 - 8,421,512

40,876,204 - 40,876,204

Financial liabilitiesShort term borrowings - 21,003,958 21,003,958 Trade and other payables - 23,243,053 23,243,053 Security deposits - 822,920 822,920

- 45,069,931 45,069,931

The Company's financial instruments are categorised as follows:

Financial assets


Loans and Amortisedreceivables cost

1 January 2011 N’000 N’000 N’000Financial assetsTrade and other receivables 10,442,006 - 10,442,006 Cash and cash equivalents 2,899,395 - 2,899,395

13,341,401 - 13,341,401 Financial liabilitiesShort term borrowings - 517,347 517,347 Trade and other payables - 17,384,934 17,384,934 Security deposits - 630,699 630,699

- 18,532,980 18,532,980

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statement offinancial position, are as follows:

55


31 Dec 2012 31 Dec 2011 1 Jan 2011

Other receivables 18% 18% 18%

25 Related party transactions

Parent and ultimate controlling entity

(a) Sales of Goods and Services 2012 2011

N’000 N’000Sales of goods: - MRS Oil and Gas Limited 4,990,266 2,440,000 - Other related entities 245,880 - Sales of services - MRS Oil and Gas Limited 376,531 -

Total 5,612,677 2,440,000

(b) Purchases of goods and services 2012 2011

N’000 N’000Purchase of products - Petrowest Limited 6,471,922 28,928,946 - MRS Oil and Gas Limited 13,171,703 1,640,160 Purchase of Services - Management Fees 531,628 704,150 - Storage Fees 832,296 741,690

Total 21,007,549 32,014,946

As at the year ended 31 December 2012, MRS Africa Holdings Limited (incorporated in Nigeria) owned 60 % of theissued share capital of MRS Oil Nigeria Plc. The ultimate holding company of the Company is MRS Africa HoldingsLimited incorporated in Nigeria.

The interest rates used to determine the discount estimated cash flows, where applicable are based on external sources and were as follows:

The Company has transactions with its parent and other related parties who are related to the Company by virtue of being members of the MRS Group. The total amounts due to related parties by the nature of the transactions are shown below:

Trade and other receivables, security deposits, bank overdrafts and other short term borrowings are the Company’sshort term financial instruments. Accordingly, management believes that their fair values are not expected to bematerially different from their carrying values.

56


Net balances due (to)/ from related entities within the group are as follows: 31 Dec 2012 31 Dec 2011 1 Jan 2011

N’000 N’000 N’000Petrowest Limited - MRS Oil and Gas Limited 1,387,054 16,729,746 - MRS Africa Holdings Limited 49,454 68,359 210,375Other related entities

Total 1,411,581 5,507,772

(c) Key management personnel compensationThe Company pays short term benefits to its directors as follows:

2012 2011N’000 N’000

Short term employee benefits 17,034 16,076

26 Segment reporting

(i)

(ii)

(iii)

All outstanding balances do not bear interest and exclude value of products stored by MRS Oil and Gas Limited for theCompany amounting to N447.87 million (2011: N961.78 million). During the year, the import finance facilities drawnby the Company on behalf of M.O.G in prior year was settled in full. At the year end, the Company wrote off an amountof N18.20 million relating to joint costs incurred on the completed SAP project which could not be allocated amongstthe related entities and N55.86 million relating to uncollectable amounts due from Petrowest limited.

Segment assets and liabilities are not disclosed as these are not regularly reported to the Board of Directors.

Segment information is provided on the basis of product segments as the company manages its business through threeproduct lines - Retail/Commercial & Industrial, Aviation, and Lubricants. The business segments presented reflect themanagement structure of the Company and the way in which the Company’s management reviews businessperformance. The accounting policies of the reportable segments are the same as described in notes 2 and 3.

The Company has identified three operating segments:

In accordance with the provisions of IFRS 8 – Operating Segments, the operating segments used to present segmentinformation were identified on the basis of internal reports used by the Company's Board of Directors to allocateresources to the segments and assess their performance. The Board of Directors is MRS Oil Nigeria Plc’s “chiefoperating decision maker” within the meaning of IFRS 8.

Lubricants - this segment manufactures and sells lubricants and greases.

Aviation - this segment involves the sale of Aviation Turbine Kerosene (ATK).

Retail/ Commercial & Industrial - this segment is responsible for the sale and distribution of petroleum products(white products) to retail customers and industrial customers.

(1,926,596)

(87,310) (57,532) (24,927)

(11,232,801)

(1,803,531)

57


(a) Segment revenue and cost of sales

Amount % of Total Amount % of Total Amount % of TotalN’000 N’000 N’000

Retail/C&I 67,146,616 84 62,419,474 84 4,727,142 83Aviation 10,120,921 13 9,304,720 13 816,201 14Lubes 2,459,812 3 2,291,293 3 168,519 3Total 79,727,349 100 74,015,487 100 5,711,862 100

Amount % of Total Amount % of Total Amount % of TotalN’000 N’000 N’000

Retail/C&I 58,964,424 82 53,754,793 83 5,209,631 76Aviation 9,933,242 14 8,956,075 14 977,167 14Lubes 2,593,049 4 1,957,105 3 635,944 9Total 71,490,715 100 64,667,973 100 6,822,742 100

(b) Segment profit before tax 31 Dec 2012 31 Dec 2011N’000 N’000

Retail/C&I 317,410 924,193Aviation 50,876 332,299Lube 10,469 156,750

378,755 1,413,242

27 Contingencies

(a) Pending litigation and claims

(b) Financial commitments

(c) Guaranteesi

ii

There are certain lawsuits and claims pending against the Company in various courts of law which are being handledby external legal counsels. The contingent liabilities in respect of pending litigation and claims amounted toN12,471,106,206 as at 31st December 2012 (2011: N8,367,068,842). In the opinion of the Directors and based onindependent legal advice, the Company’s liabilities are not likely to be material, thus no provision has been made inthese financial statements.

The Directors are of the opinion that all known liabilities and commitments, which are relevant in assessing the stateof affairs of the Company, have been taken into consideration in the preparation of these financial statements.

Gross profitCost of salesRevenue

Revenue Cost of sales Gross profit

2012

2011

During the year, the Company cancelled its agreement with a commercial bank to guarantee car and housing loans toemployees. The guarantee was up to a limit of N45 million. No loss was incurred on the cancellation.

Guarantees obtained in the prior year in favour of major oil marketers for N409.35 million were extinguished duringthe year at no loss to the Company. No other guarantees exist at year end.

58


28 Operating leasesLeases as lessee

29 Subsequent eventsThere are no significant subsequent events, which could have had a material effect on the state of affairs of the Company as at 31 December 2012 that have not been adequately provided for or disclosed in the financial statements.

The Company leases a number of buses for staff transportation under cancellable operating leases. During the yearended 31 December 2012, an amount of N68 million was recognized as an expense in profit or loss in respect of theoperating lease (2011: N 30 million). Lease rentals are paid on a monthly basis.

In addition, the Company leases a number of filling stations, warehouses and offices under non-cancellable operatingleases. During the year ended 31 December 2012, an amount of N 102 million was recognized as an expense in profit orloss in respect of operating leases (2011: N 189 million). Lease rentals are paid upfront and included in prepayment,which are amortized to the profit or loss over the life of the lease.

59


30 Explanation of the transition to IFRSs

As stated in note 2(a), these are the Company's first financial statements prepared in accordancewith IFRS.

The accounting policies set out in note 3 have been applied in preparing the financial statements forthe year ended 31 December 2012, the comparative information presented in these financialstatements for the year ended 31 December 2011 and in the preparation of an opening IFRSstatement of financial position at 1 January 2011 (the Company’s date of transition).

In preparing its opening IFRS statement of financial position, the Company has adjusted amountsreported previously in financial statements prepared in accordance with previous Nigerian GAAP.An explanation of how the transition from previous Nigerian GAAP to IFRS has affected theCompany’s financial position, financial performance and cash flows is set out in the following tablesand the notes that accompany the tables.

60


30 Explanation of the transition to IFRSs (Cont'd)Reconciliation of Nigerian GAAP Statements to IFRSs

(i) Effect of

Notes Nigerian GAAP Correction transition to(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000

AssetsNon-current assetsProperty, plant and equipment (a), (b) 18,209,184 - 5,906,762 24,115,946Intangible assets - - - - Other receivables (i ), (d) - 280,858 280,858Prepayments (i ) 370,108 - 209,143Total non-current assets 18,579,292 - 6,026,655 24,605,947Current assetsInventories (b) 8,637,715 - 8,565,752Trade and other receivables (c ), (d), (i), (j),(s) 10,719,360 (472,296) 10,161,148Prepayments (i ) - - 98,071 98,071Due from related parties (j ) 244,342 - - Cash and cash equivalents 2,899,395 - - 2,899,395Total current assets 22,500,812 (472,296) 21,724,366 Total assets

41,080,104 (472,296) 5,722,505 46,330,313

EquityShare capital 126,994 - - 126,994Revaluation reserve (a) 14,008,720 - - Retained earnings (s), (q) 4,393,032 (389,091) 14,508,931 18,512,872Total equity 18,528,746 (389,091) 500,211 18,639,866 LiabilitiesNon-current liabilitiesDeferred tax liability (s) 1,699,058 (183,102) 5,184,934 6,700,890Security deposits (k) 630,699 - - Employee Benefit obligation 580,919 - - 580,919Total non-current liabilities 2,910,676 (183,102) 4,554,235 7,281,809Current liabilitiesSecurity deposits (k) - - 630,699 630,699Dividend payable 528,543 - - 528,543Trade and other payables (e), (j) 15,199,804 99,897 2,085,233 17,384,934Due to related parties (j ) 2,047,873 - - Bank overdraft and short term borrowings 517,347 - - 517,347Tax payable 1,347,115 - - 1,347,115Total current liabilities 19,640,682 99,897 668,059 20,408,638Total Liabilities 22,551,358 (83,205) 5,222,294 27,690,447Total equity and liabilities 41,080,104 (472,296) 5,722,505 46,330,313

(244,342)

(304,150)

(14,008,720)

(630,699)

(2,047,873)

Statement of financial position as at 1 January 2011

(160,965)

(71,963) (85,916)

61



(ii) Effect of

Notes Nigerian GAAP Correction transition to(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000

AssetsNon-current assetsProperty, plant and equipment (a) 17,676,983 - 5,495,985 23,172,968Intangible Asset 162,641 - - 162,641Other receivables (i ), (d) 243,612 - 3,945 247,557Prepayments (i ) - - 116,085 116,085Total non-current assets 18,083,236 - 5,616,015 23,699,251Current assetsInventories (b) 8,366,153 - 8,294,190Trade and other receivables (c ), (d), (i), (j) 13,564,382 - 18,642,753 32,207,135Prepayments (i ) - - 78,150 78,150Due from related parties (j ) 19,049,777 - - Cash and cash equivalents 8,421,512 - - 8,421,512Total current assets 49,401,824 - 49,000,987

Total assets 67,485,060 - 5,215,178 72,700,238EquityShare capital 126,994 - - 126,994Revaluation reserve (a) 13,045,781 - - Retained earnings (l) 4,801,138 (118,180) 14,178,733 18,861,691Total equity 17,973,913 (118,180) 1,132,952 18,988,685 LiabilitiesNon-current liabilitiesDeferred tax liability (a) 2,386,991 (31,967) 4,044,866 6,399,890Security deposits (k) 822,920 - - Employee Benefit obligation 551,480 - - 551,480 Total non-current liabilities 3,761,391 (31,967) 3,221,946 6,951,370 Current liabilitiesSecurity deposits (k) - - 822,920 822,920Dividend payable 533,081 - - 533,081Trade and other payables (e), (j), (s) 9,513,541 150,147 13,579,365 23,243,053Due to related parties (j ) 13,542,005 - - Bank overdraft and short term borrowings 21,003,958 - - 21,003,958Tax payable 1,157,171 - 1,157,171Total current liabilities 45,749,756 150,147 860,280 46,760,183Total Liabilities 49,511,147 118,180 4,082,226 53,711,553 Total equity and liabilities 67,485,060 - 5,215,178 72,700,238

(822,920)

(13,542,005)

(13,045,781)

(19,049,777)

(71,963)

(400,837)

Statement of financial position as at 31 December 2011

62



(iii) Statement of comprehensive income for the year ended 31 December 2011

Effect ofNotes Nigerian GAAP Correction transition to

(SAS) of errors IFRS IFRSN’000 N’000 N’000 N’000

Revenue (g) 70,952,936 - 537,779 71,490,715

Cost of Sales (f) (63,914,979) - Gross Profit 7,037,957 - 6,822,742Other Income (f), (l) 147,411 - 785,662 933,073 Selling and Distribution expenses (g ), (l), (s) (375,610) (50,250)General and Administrative expenses (a), (b), (c ), (d) (4,651,560) Results from operating activities 2,158,198 (50,250) 1,772,767 Finance income (d) 139,639 - 17,898 157,537 Finance cost (h) (269,728) - Net finance (costs)/income (130,089) - Profit before tax 2,028,109 (50,250) 1,413,242 Income tax expense (s) (991,935) 48,047 146,270 Profit for the year after tax 1,036,174 (2,203) 615,624

Other comprehensive incomeActuarial (losses)/gains on post-employment benefit obligation (0) - - 40,102 40,102

Total comprehensive income for the year 1,036,174 (2,203) 655,726

Earnings per share (EPS) Basic earnings per share (Naira) 4.08 2.42

(797,618)

(378,245)

(752,994) (215,215)

(570,447) (335,181)

(335,181)

(247,334) (229,436)

(564,617)

(418,347)

(64,667,973)

(996,307) (4,986,741)

(517,062) (359,525)

63


Index to the notes to the reconciliations Note

Deemed cost exemption a

Property Plant and Equipments (PPE) and Inventory b

General provisions on trade receivables and impairment of receivables c

Employee Receivables d

Accumulating leave liability e

Other income f

Freight costs on non-regulated products g

Finance Costs h

Prepayments i

Due to/from related parties j

Security deposits k

Pump repairs recovery l

Intangible assets m

Deferred tax liability on revaluation surplus n

Actuarial Gain o

Deferred tax liability/asset on other IFRS adjustments p

Retained earnings q

Deferred Tax r

Correction of errors s

64


30 Notes to the reconciliation of equity and profit

(a) Deemed cost on certain items of PPE

Statement of financial position31-Dec-11 1-Jan-11

N’000 N’000Fair Value Adjustments 5,906,762 5,906,762 Depreciation - Net Impact on Carrying amount of PPE 5,495,985 5,906,762 Defferred tax implicationNet Adjustment to retained earnings 3,847,189 4,134,733

Statement of comprehensive income:31-Dec-11

N’000Income tax expense


N’000 N’000Revaluation reserve for PPE 13,045,781 14,008,720

Net Adjustment to retained earnings 13,045,781

Statement of comprehensive income:31-Dec-11

N’000Increase in depreciation expense 410,777 Adjustment before income tax 410,777

(b) Property, Plant and Equipment (PPE) and Inventory

(123,233)

(14,008,720)

(410,777)

(1,772,029) (1,648,796)

The exemption in IFRS 1 allows entities to use a value that is not depreciated cost in accordance with IAS 16, as

deemed cost of items of property, plant and equipment on transition to IFRS. The Company has chosen the fair value

option as the deemed cost of some of its items of property, plant and equipment (''plant & machinery'') . An

independent valuer was used to determine the fair value. The fair values resulted in higher amounts than the NGAAP

carrying values for the plant and machinery items. In other instances ( "land and buildings), the Company elected to

apply the optional exemption to use previous revaluation as the deemed cost under IFRS. As a result, the revaluation

reserve amounting to N14,008,720,000 as at 1 january 2011 and N13,045,781,000 as at 31 December 2011 were

reclassified to retained earnings. In addition, the fair value adjustments on 1 January 2011 relating to Plant and

Machinery increased the property, plant and equipment by N5,906,762,000 with the corresponding impact increasing

retained earnings by the same amount and a corresponding increase in deferred tax liability of N1,772,029. The

increase in the asset value by the fair value adjustments together with changes in the residual values of the assets

increased the attributable depreciation for the assets by N410,777,000 and reduced retained earning by the same

amount. The effect of these on the carrying value of the Property, Plant and equipment is summarised below:

The impact of the reclassification of the revaluation reserve for the PPE to retained earnings is summarized below:

Under the previous Nigerian GAAP, spare parts amounting to N71,963,000 intended for use with specialized trucks

for the transportation of ATK were classified as inventories. On transition to IFRS, the value of the spares were

reclasified from inventories to PPE and as the items would have been fully depreciated as at the date of transiton,

corresponding amounts were recorded as accumulated depreciation and a reduction to retained earnings.

65


The impact is summarised as follows31-Dec-11 1-Jan-11

N’000 N’000Increase in PPE cost 71,963 71,963 Increase in Accumulated DepreciationNet Impact on carrying value of PPE - - Reduction in Inventory

(c) General provisions on trade receivables and impairment of receivables

Statement of financial position:

31-Dec-11 1-Jan-11N’000 N’000

Reversal of general provisionsRecognition of impairment loss 253,518 153,378 Net impact on carrying amount of receivables (227,365) 125,383 Defferred tax implication (37,614)Net adjustment to retained earnings (227,365) 87,769

Statement of comprehensive income31-Dec-11

N’000Recognized impairment loss 101,982 Adjustment before income tax 101,982

(d ) Employee Receivables

71,963

(27,995) (26,153)

MRS advances loans to its employees at a zero percent (0%) interest rate. Under N-GAAP the loans are recognised atface value. Under IFRS, these loans should be recognized at fair value and the benefits the employees earn as a resultof receiving interest free loans accounted for as employee costs.

The fair value of the loans were estimated as the present value of all future cash receipts discounted using theprevailing market rate of interest (18%) for similar instruments (same currency, term and other factors). Thedifference between the fair value of the loans (based on market rates) and actual value of the loan advanced is anemployee benefit to be recognised in the period that the employee receives the benefit which is the tenure of the loanor shorter if the employee terminates his employment before the tenure of the loan. Prepaid employee benefits areamortised as salary costs using a straight line method over the tenure of the loan or a shorter period where applicable.Amortisation of prepaid employee benefits are recognized in the profit or loss.

The prepaid employee benefit was amortised from the inception of the loan to the transition date and this resulted in adecrease in retained earnings of N31,514,000. For the year ended 31 December 2011, the amortised amount wasN47,048,000 . The notional interest income on the loan from inception to transition date resulted in an increase inretained earnings of N44,603,000. As at 31 December 2011, the notional interest income recognised wasN62,501,000.

Under NGAAP, loans and receivable balances were subjected to provision for doubtful debts based on expected lossesby reference to ageing of such receivable balances. IFRS requires loans and receivables to be assessed for impairmentat reporting date and if there is an impairment, the recoverable value of the receivable is calculated using a presentvalue approach.

As at 1 January 2011 and 31 December 2011, the Company had recorded general provisions of N 27,995,000 andN26,153,000 respectively in the NGAAP financial statements. However, based on collective impairment assessmentcarried out under IFRS, impairment losses of N153,377,707 and N253,518,000 were estimated as at 1 January 2011and 31 December 2011 respectively.

The impact of reversal of general provisions and recognition of impairment loss based on collective impairmentassessment is summarized below:

As at 1 January 2011, the measurement exercise carried out on 'employee receivables' resulted in an excess of the valueof the loan advanced over the fair value of the loan - a prepaid employee benefit of N106,804,000 . This led to areclasification from 'trade and other receivables' - current to 'Other receivables' - non-current. As at 31 December2011, the reclassified amount was N104,577,000. This reclassification had no impact on retained earnings.

Net Adjustment to retained earnings

(71,963)

(71,963) (71,963)

(71,963)

(71,963)

66


The impact from the change is summarized as follows:


N’000Increase in employee BenefitsIncrease in finance income 17,898 Adjustment before income tax 2,364


N’000 N’000Increase in "Other receivables" - Non current 120,030 119,893 Decrease in trade and other receivables currentNet adjustment to retained earnings 15,453 13,089

(e) Accumulated leave liability

The impact from the change is summarized as follows:


N’000 N’000Increase in trade and other payables - current (37,360) (37,360)Defferred tax implication 11,208 Decrease in retained earnings (37,360) (26,152)

(f) Other income

The impact of this reclassification is summarized as follows:


N’000Increase in other incomeIncrease in cost of sales 752,994 Adjustment before income tax -

(g) Freight costs on non-regulated products

The Company realises income from storage services provided to a third party. Under NGAAP, this income was used toreduce the Company's cost of sales. In accordance with IFRS, a reclassification was made to reclassify N 698,3 000 from 'cost of sales' of to 'other income', with no net effect on profit.

(752,994)

The Company had previously classified freight costs on transportation of non-regulated products as a reduction torevenue in the financial statements.

(106,804) (104,577)

(15,534)

The Company has a scheme in place that allows employees to carry forward unused leave days, for more than thecurrent financial reporting period. No liability was recognized under NGAAP. IFRS requires that compensated short-term absences should be accrued for and recognised in the financialstatements. This measurement criteria resulted in an accrued leave liability of N37,360,000 with a consequentdecrease in retained earnings of the same amount. The same amount was recognised in the financial statements as at31 December 2011.

In accordance with IFRS and the Company's accounting policy, the transportation costs of N537,779,000 has beenreclassified from revenue to selling and distribution expense with no net effect on profit.

67




N’000Increase in revenueIncrease in selling and distribution expenses 537,779 Adjustment before income tax -

(h) Finance Costs



N’000Increase in finance cost 247,334 Decrease in administrative expensesAdjustment before income tax -

(i) Prepayments

The impact of this reclassification is summarized as follows:31-Dec-11 1-Jan-11

N’000 N’000Prepayments - non-current 116,085 98,071 Prepayments - current 78,150 (Decrease)/Increase in other receivables - non current 160,965 Decrease in trade and other receivables - currentNet adjustment to retained earnings - -

(j) Due to/from related parties


Statement of financial position: 31-Dec-11 1-Jan-11

N’000 N’000Increase in trade and other payables - currentDecrease in due to related parties 13,542,005 2,047,873 Increase in trade and other receivables - current 19,049,777 244,342 Decrease in due from related parties Net adjustment to retained earnings - -

(k) Security deposits

Under NGAAP, amounts due to/from related parties were disclosed separately in the statement of financial position.On transition to IFRS, amounts due to/from related parties have been included as part of trade and other payablesand trade and other receivables respectively. This reclassification had no effect on net assets or retained earnings. .

(13,542,005) (2,047,873)

(244,342) (19,049,777)

(537,779)

(247,334)

(160,965)

The Company had previously classified net foreign exchange loss and bank charges as general administrativeexpenses. In accordance with options available under IFRS and the Company's accounting policy, foreign exchangedifferences and bank charges amounting to N247,334,000 were reclassified from general administrative expenses tofinance costs with no net effect on profit.

(98,071) (78,150) (116,085)

Under NGAAP, prepayments were included as part of trade and other receivables in the statement of financialposition. On transition to IFRS, prepayments were reclassified from trade and other receivables.

Under NGAAP, security deposits paid by the Company's customers were classified as non-current liabilities. Inaccordance with IFRS , the security deposits have been reclassified to current liabilities with no effect on totalliabilities or retained earnings.

68



Statement of financial position: 31-Dec-11 1-Jan-11

N’000 N’000Increase in current liabilitiesDecrease in non- current liabilities 822,920 630,699 Net adjustment to retained earnings - -

(l) Pump repairs recovery



N’000Increase in other incomeIncrease in selling and distribution expenses 32,668 Adjustment before income tax -

(m) Intangible assets


Statement of financial position31-Dec-11

N’000Increase on trade and other receivables 5,259 AmmortizationImpact on trade and other rececivables 3,068 Net adjustment to retained earnings

(n) Deferred tax liability on revaluation surplus


N’000 N’000Deferred tax liabilityNet Adjustment to retained earnings

2,504,321 3,461,727


N’000Income tax expense 5,532

(3,068)

Under NGAAP, Leasehold land was not depreciated and deferred tax was not recognized on the revaluation surplusarising on land that was revalued under the NGAAP. IFRS requires that leasehold land is depreciated and deferred taxliability is recognized on revaluation surplus. The effect of recognising deferred tax liability on land is summarizedbelow:

(2,504,321) (3,461,727)

Under NGAAP, the Company recorded recoveries earned from dealers on repair of pumps as a reduction to 'sellingand distribution expenses" . In accordance with IFRS and the Company's accounting policy, these have beenreclassified from selling and distribution expenses to other income with no net effect on profit.

Under NGAAP, an impairment was recorded for the unamortised portion of a software (intangible assets) in 2011.Under IFRS, the impairment was reversed as there were no indicators of impairment as at 31 December 2011. Inaddition, as the amount relates to prepaid license fees for the software, it has been reclassified to prepayments andamortised accordingly.

(822,920) (630,699)

(32,668)

(2,191)

69


(o) Actuarial gain

Other comprehensive income 31-Dec-11N’000

Actuarial gains on post-employment benefit obligation 57,289 Tax effectNet Adjustment to other comprehensiveincome 40,102

(p) Deferred tax asset on other IFRS adjustments

Statement of financial position31-Dec-11

N’000Deferred tax liability 77,392

Net Adjustment to retained earnings


N’000Income tax expense

(q) Retained earningsThe above changes decreased (increased) retained earnings (each net of related tax) as follows:

Note 31-Dec-11 1-Jan-11N’000 N’000

Deemed cost on PPE aRevaluation reserve for PPE aDeferred tax liability on revaluation surplus n 2,504,321 3,461,727 Property Plant and Equipments (PPE) and Inventory b 71,963 71,963

c 227,365 87,769 Employee Receivables dAccumulated leave liability e 37,360 26,152 Intangible assets m - Tax effect on actuarial Gain o - Correction of errors sDeferred tax liability/asset on other IFRS adjustments p

On transition to IFRS, assessment of deferred tax impact on other IFRS adjustments was a deferred tax asset ofN77,392. The effect of recognizing this deferrred tax asset is summarized as follows:

(28,569)

(77,391) (48,047)

(17,187)

The Company currently operates a defined benefit scheme for certain employees and the recognised liability isdetermined by an independent actuarial valuation every year using the projected unit credit method. Under NGAAP,actuarial gain arising from difference between the actual and expected outcome in the valuation of the obligation wasrecognised in the profit and loss account for the year. Under IFRS, the Company has selected the policy that allowsactuarial gains to be recognised in Other Comprehensive Income. The effect of recognising actuarial gain in OtherComprehensive Income net of deferred tax is as follows:

(4,134,733) (14,008,720)

(3,847,189) (13,045,781)

(77,392)

General provisions on trade receivables and impairment ofreceivables

(15,453)

(3,068) 17,187

(14,178,733)

(13,089)

(14,508,931)

70


(r) Deferred TaxThe changes in deferred tax liability at 30% tax rate is attributable to:

31-Dec-11 1-Jan-11N’000 N’000

Deemed cost on PPE aDeferred tax liability on revaluation surplus nGeneral provisions on trade receivables and impairment of rec c - 37,614 Accumulated leave liability e - 11,208 Tax effect on actuarial Gain o - Correction of errors s 48,047 Deferred tax asset on other IFRS adjustments p 77,392

(s) Correction of errorsCorrection of errors relating to prior years comprise:

31-Dec-11 1 Jan 2011N’000 N’000

(i) Related party cost omitted - 472,296 (ii) Pipeline usuage costs ommitted 50,250 99,897

Total 50,250 572,193

Income tax expense 2,203 389,091

Deferred Tax Liability 48,047 Net adjustment to retained earnings

(i)

(ii)

Material adjustments to statement of cashflows

During 2012, the Company discovered that expenses amounting to N150.15 million relating to the usage of pipelineshad not been recognized in profit or loss as the related expenses were incurred. The amount should be recognized asan expense of N50.25 million in 2011 ( included in 2011 profit or loss) and N99.9 million in 2009/2010 ( recognized asan adjustment to opening retained earnings as at 1 January 2011).

(1,648,796)

(48,047)

(5,184,934)

(183,102)

(4,044,865)

(48,047)

(1,772,029) (3,461,727) (2,504,321)

(17,187)

There were no material differences between the statement of cash flows presented under IFRS and the statement ofcash flows presented under the previous NGAAP.

During 2011, the Company discovered that costs incurred on its behalf by a related party, MRS Oil and Gas Limitedamounting toN472.3 million, with respect to purchase of products that were sold in 2010 had not been recognized inprofit or loss as a liability to MOG as the respective sales were made. The costs should have been recognised in full inthe 2010 financial statements.

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Additional Information

Value Added StatementFor the year ended 31 December

2012 2011N’000 N’000

Revenue 79,727,349 71,490,715Bought in materials and services

- Imported- Local

2,988,691 3,916,077

Other income 923,383 933,073

Finance income 149,051 157,537

Value added by operating activities 4,061,125 5,006,687

Distribution of Value Added % %

To Government as:Taxes and duties 173,634 4 797,618 16

To Employees:Salaries, wages, fringe and end of service benefits 812,667 20 1,525,011 30

To Providers of Finance:- Finance cost 1,358,196 33 517,062 10

Retained in the BusinessTo maintain and replace: - Property, plant and equipment 1,476,481 36 1,330,289 27 - Intangible assets 31,301 1 3,189 - Proposed dividend 59,281 2 177,792 4To augment retained earnings 149,565 4 655,726 13

Value added 4,061,125 100 5,006,687 100

(19,249,054) (46,993,841) (57,489,604) (20,580,797)

72

Financial Summary

Statement of comprehensive income

2012 2,011 N’000 N’000

Revenue 79,727,349 71,490,715Results from operating activities 1,587,900 1,772,767Profit before taxation 378,755 1,413,242Profit for the year 205,121 615,624Comprehensive income for the year 208,846 655,726

RatiosEarnings per share (Kobo) 81 242Declared dividend per share (Kobo) 70 125Net assets per share (kobo) 7,502 7,476

Statement of financial position31 Dec 2012 31 Dec 2011 1 Jan 2011

Employment of Funds N’000 N’000 N’000 Property, plant and equipment 22,013,568 23,172,968 24,115,946Intangible assets 140,560 162,641 - Other receivables 7,507 247,557 280,858Prepayment 236,673 116,085 209,143Net current assets 3,112,717 2,240,804 1,315,728Employee benefit obligationDeferred tax liability

Net assets 19,054,010 18,988,685 18,639,866

Funds EmployedShare capital 126,994 126,994 126,994Retained earnings 18,927,016 18,861,691 18,512,872

19,054,010 18,988,685 18,639,866

(218,415) (551,480) (580,919) (6,238,600) (6,399,890) (6,700,890)

MRS Oil Nigeria Plc Financial Statements - - 31 … OIL NIGERIA PLC...MRS Oil Nigeria Plc 2012...

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Transcript of MRS Oil Nigeria Plc Financial Statements - - 31 … OIL NIGERIA PLC...MRS Oil Nigeria Plc 2012...