Crusader Nigeria Plc

[zainabusman]

Originally Posted by billions

Great performance!

D next big thing in d insurance sector...

I dont think the performance is great. There is an exceptional item of N1 billion. By nature an exceptional item is not recurring. So that should be adjusted out when making future forecast. Furthermore tax is only 8.5%. This means there is probably a large deferred tax that must be paid in the future.

By the way i own Crusader but i am not excited.

[hispy99]

Originally Posted by zainabusman

I dont think the performance is great. There is an exceptional item of N1 billion. By nature an exception item is not recurring. So that should be adjusted for to make future forecast.

correct...take out the N1B and PBT is N582.

[billions]

Originally Posted by zainabusman

I dont think the performance is great. There is an exceptional item of N1 billion. By nature an exceptional item is not recurring. So that should be adjusted out when making future forecast. Furthermore tax is only 8.5%. This means there is probably a large deferred tax that must be paid in the future.

By the way i own Crusader but i am not excited.

Yea,i noticed the exceptional item of 1b naira... it may be d result of the other activities insurance companies are involved in,like microfinance,real estates,etc

[zainabusman]

Originally Posted by billions

Yea,i noticed the exceptional iteam of 1b naira... it may be d result of the other activities insurance companies are involved in,like microfinance,etc

I doubt much due to the accounting definition of exceptional item. The figure also looks too round for comfort.

Anyway lets wait until we see the full accounts b4 we jump to conclusions.

[hispy99]

Originally Posted by billions

Yea,i noticed the exceptional item of 1b naira... it may be d result of the other activities insurance companies are involved in,like microfinance,real estates,etc

Very doubtful; such activities if they are going to be recurring should not be classified as exceptional.

[ManIsland]

Originally Posted by hispy99

Very doubtful; such activities if they are going to be recurring should not be classified as exceptional.

Extraodinary Items - Gains or losses included in a company's financial statements, which are infrequent and unusual in nature. These are usually explained further in the "notes to the financial statements."

Excpetional Items - Gains or losses which in a a company's earnings during a given reporting period which are a normal to company's business activities but are unusually large.

If the financials states "exceptional Item" I'd be inclined to believe business operations is beginning to ramp up and we are about to see a positive departure from past operating trends. Crusader might turn out to be a best of breed within the insurance industry.

[hispy99]

Originally Posted by ManIsland

Extraodinary Items - Gains or losses included in a company's financial statements, which are infrequent and unusual in nature. These are usually explained further in the "notes to the financial statements."

Excpetional Items - Gains or losses which in a a company's earnings during a given reporting period which are a normal to company's business activities but are unusually large.

If the financials states "exceptional Item" I'd be inclined to believe business operations is beginning to ramp up and we are about to see a positive departure from past operating trends. Crusader might turn out to be a best of breed within the insurance industry.

Thanks for this....actually went to dig up my old ICAN notes for this . Anyone that has Statement of Accounting Standards can please help out. This is what I have from my old notes:

Extraordinary Item: These are items of revenue and expenditure that are not related to the ordinary activities of an enterprise. They are abnormal in nature and infrequent in occurence e.g profit/loss on sale of fixed assets; closure of branch expense; profit/loss on sale of subsidiaries.


Exceptional Item: These are items of revenue and expenditure that are normal to ordinary activities of an enterprise. They are abnormal in nature and infrequent in occurence. e.g abnormally high bad debts.


The key word in both extraordinary and exceptional is "infrequent". If the N1B is expected to reoccur, it would not be classified as "exceptional". Yes, the N1B is related to Crusader's business, but the key to an investor is "is this N1B going to reoccur?". If the answer is NO, then you need to discount it in your valuation.

[knightofdelta]

Originally Posted by billions

CRUSADER INSURANCE PLC
AUDITED RESULT FOR THE YR ENDED 31-12-2007
2007 2006
TURNOVER N2.169b N1.206b
EXCEPTIONAL ITEMS N1.0b
PROFIT BEFORE TAXATION N1.582b N300.447m
TAXATION (N135.362m) (N33.330m)
PROFIT AFTER TAXATION N1.446b N267.117m
PROPOSED DIVIDEND 15K CLOSURE DATE JUNE 30 TO
JULY 04, 2008 PAYMENT DATE TO BE ADVISED LATER

I believe that the management of Crusader have done well in generating such a huge amount of exceptional items this year. I believe that they were able to do that on their normal course of business and those brains that cooked up the business ideas have already pushed themselves to the point that they have no choice but to deliver much more than that again this accounting year.

Based on this result
EPS - 43K, Earning yield - 5.8%
Dividend - 15K, Dividend yield - 2%
ROE increased by 338% over one year period
PE - 17.44
Fair value - N9.46

I am not interested in selling this stock anymore. I am going to withdraw my offer.

[hispy99]

Originally Posted by knightofdelta

I believe that the management of Crusader have done well in generating such a huge amount of exceptional items this year. I believe that they were able to do that on their normal course of business and those brains that cooked up the business ideas have already pushed themselves to the point that they have no choice but to deliver much more than that again this accounting year.

Based on this result
EPS - 43K, Earning yield - 5.8%
Dividend - 15K, Dividend yield - 2%
ROE increased by 338% over one year period
PE - 17.44
Fair value - N9.46

I am not interested in selling this stock anymore. I am going to withdraw my offer.

KoD,

I would advice you discount the exceptional item in making your decision

[knightofdelta]

Originally Posted by hispy99

KoD,

I would advice you discount the exceptional item in making your decision

Hmm
I guess it is better to play the game defensively.
I concur.

[zainabusman]

Originally Posted by hispy99

Thanks for this....actually went to dig up my old ICAN notes for this . Anyone that has Statement of Accounting Standards can please help out. This is what I have from my old notes:

Extraordinary Item: These are items of revenue and expenditure that are not related to the ordinary activities of an enterprise. They are abnormal in nature and infrequent in occurence e.g profit/loss on sale of fixed assets; closure of branch expense; profit/loss on sale of subsidiaries.


Exceptional Item: These are items of revenue and expenditure that are normal to ordinary activities of an enterprise. They are abnormal in nature and infrequent in occurence. e.g abnormally high bad debts.


The key word in both extraordinary and exceptional is "infrequent". If the N1B is expected to reoccur, it would not be classified as "exceptional". Yes, the N1B is related to Crusader's business, but the key to an investor is "is this N1B going to reoccur?". If the answer is NO, then you need to discount it in your valuation.

I dusted my old ACCA texts and this is what i found.

According to the latest International Accounting Standards showing Extraordinary items in the face of the P & L is prohibited. Only exceptional items can be shown. Exceptional items are defined as material items which need to be disclosed by virtue of size or occurence.

Although this is an IAS standard, the Nigerian Standards tend to tow their line. Furthermore, according to this standard only 3 exceptional items must be shown on the face of the P & L. Any other one can be disclosed in the notes. These are:

1)profits or losses on the sale or termination of an operation;

2)costs of a fundamental reorganisation or restructuring having a material effect on the nature and focus of the reporting entity's operations;

3) profits or losses on the disposal of fixed assets (which must be computed as the difference between the sales proceeds and the carrying value of the fixed asset in the financial statements immediately before the disposal).

Most analysts remove exceptional items from future forecast. That is the safest and conservative approach.

All the same, i maintain we need to see the accounts to know how to treat this item properly. Right now we are just guessing.

[hispy99]

Originally Posted by zainabusman

I dusted my old ACCA texts and this is what i found.

According to the latest International Accounting Standards showing Extraordinary items in the face of the P & L is prohibited. Only exceptional items can be shown. Exceptional items are defined as material items which need to be disclosed by virtue of size or occurence.

Although this is an IAS standard, the Nigerian Standards tend to tow their line. Furthermore, according to this standard only 3 exceptional items must be shown on the face of the P & L. Any other one can be disclosed in the notes. These are:

1)profits or losses on the sale or termination of an operation;

2)costs of a fundamental reorganisation or restructuring having a material effect on the nature and focus of the reporting entity's operations;

3) profits or losses on the disposal of fixed assets (which must be computed as the difference between the sales proceeds and the carrying value of the fixed asset in the financial statements immediately before the disposal).

Most analysts remove exceptional items from future forecast. That is the safest and conservative approach.

All the same, i maintain we need to see the accounts to know how to treat this item properly. Right now we are just guessing.

I believe that extra-ordinary items are allowed on P&L statements in Nigeria (except this has changed).

True, we are guessing, but as long as extraordinary or exceptional items are "infrequent" in occurence, then we can safely assume that this N1B will likely not reoccur.

Seeing the accounts will obviously shed more light on this issue.

[zainabusman]

Originally Posted by hispy99

I believe that extra-ordinary items are allowed on P&L statements in Nigeria (except this has changed).

True, we are guessing, but as long as extraordinary or exceptional items are "infrequent" in occurence, then we can safely assume that this N1B will likely not reoccur.

Seeing the accounts will obviously shed more light on this issue.

Extraordinary items were also allowed under IFRS (now IAS) and UK standards in the past. But it was chaged. It is possible Nigerian standards have also been modified. I have the ICAN handbook (i am chartered by ICAN as well) which has the standards but it is dated. I need to get the latest.

[threecrown]

Originally Posted by hispy99

I believe that extra-ordinary items are allowed on P&L statements in Nigeria (except this has changed).

True, we are guessing, but as long as extraordinary or exceptional items are "infrequent" in occurence, then we can safely assume that this N1B will likely not reoccur.

Seeing the accounts will obviously shed more light on this issue.

yes, seeing the accounts is the solution to this case and this N1b exceptional item needs to be understood in detail interms of further investment in this company. I have been waiting for there account report and the PO.