On 28th September 2018, PUMA Energy Zambia Plc reported, through SENS Announcement on LuSE, its half year performance for 2018. The Oil Marketing Company (OMC) that is positioned at the tail end of the oil marketing value chain saw revenue increase by 20.2% at half year 2018 compared to the same time in the previous year. Following a 10.5% increase in volume sales, the Company recorded for the half year ended 30 June 2018 a profit before tax of K61.48 million compared to K49.26 million recorded in the previous financial year. This is a marked 24.5% increase for the period under review.
A profit before finance costs, taxation and exchange gains of K86.46 million was achieved for the half year ended 30 June 2018 compared to K72.36 million for the previous year. A 20.7% bottom line increase means the oil business could never be better. However, some observations can be made from their comparative income statement for the two periods. Of note, there was a 29.5% increase in finance costs. Furthermore, from an exchange loss position at mid-year 2017, 2018 sees the company with a substantial exchange gain of K1.576 million.
With the gains in income comes the tax burden which increased by 32%. However, this had minimal impact on the bottom line which increased by 20.7%. With certain profit projected at end of year, FiZ estimates that forward EPS will be around 0.158. We anticipate that should the current 20% increase in the local currency against the dollar hold, EPS at end of year may come in north of 0.158.
On the working capital end, macro-economic pressure can be seen from the 29.5% increase in finance costs. Furthermore, current asset cover for current liabilities has dropped by 18%. Although the company is strongly liquid, it is clear that the external business environment is taking its toll. The higher finance costs are attributed to the 76% increase in the company’s appetite for short term debt (in their industry, overdraft facilities are ubiquitous).
The SENS Announcement offers shareholders comfort in the statement on the company’s value preposition. Business-to-Business (BTB) and Aviation sections saw a 4% growth. With the former, the company is seeing a lot of influence from the positive performance in agriculture, mining, construction and manufacturing sub-sectors. Furthermore, the company invested over K6.743 million in capital projects mainly in its Retail Network. As a result, the management team has made a “Marris Type” decision and foregone dividends in the interim as they pursue an aggressive expansion program for their retail network.