Further clarity is what’s now needed9 Aug 2020 12:44
Part 1
The following write-up was done for my own benefit as I was worried about whether Savannah is being paid as the information that Savannah has released since completion of the acquisition of the Nigerian Assets has appeared obtuse. I was wondering if it was crafted so as to show a rosy picture as there was no mention of actual progress in collecting payments, apart from figures for cash collections, and some mentions of the cash balances and debt.
Now having put in the effort over the last days to establish the facts from published financials, I am still wondering if Savannah will take an opportunity with the publication of the audited results to make a presentation and be more transparent.
Over the last few months I’ve had concerns about whether Savannah is getting paid. Cash collections, which are not audited have been released as trading updates, do provide some assurance that Savannah is getting paid. After the AGM I thought that Savannah needed to be even clearer with investors that Accugas has being paid for invoices since completion, and that Accugas receivables have reduced from the historically high levels under Seven Energy ownership. It goes without saying that the only certain indication of whether Savannah’s invoices are all being paid in full is the reduction in trade receivables on the balance sheet.
Questions about getting paid were sidestepped at the AGM in June for reasons of the close period, and investors had to wait until the FY results. So is there now clarity on this issue of being paid in the annual results? Are investors any wiser about whether Accugas is being regularly paid regularly for the amounts invoiced? There has been more than one report in the Nigerian press suggesting that Savannah has reminded NDPHC, NBET and the Minister of Finance that payments are backed by the Calabar PRG. Whilst these reports were written with political bias, it only matters in the end whether Savannah is still getting paid.
Savannah reminded investors at the AGM that it expects to get paid for all outstanding invoices, but that the cash collections pre-acquisition compared to post-acquisition are like “night and day”, which suggests to me that the high receivables pre-acquisition are proving harder to clear.
What I did is to make use of all the information released by Savannah at different time points, and work through to confirm that the figures for cash collections and receivables are firstly consistent with each other, and secondly to see what picture they presented.
My conclusion is that Savannah has been coy about its successes in getting paid, but without speculating about the reasons, which may be many, the cash collections alone show that Savannah has been paid for invoices since ownership. The credit picture has improved, and the receivables have reduced with payment for much of the outstanding invoices prior to ownership.
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