- 27% haven’t paid in five years
- Four top defaulters paid 24 directors N2.9bn in 2016
- Investors call for probe of firms’ executives
Ninety-six, out of the 176 quoted companies on the Nigerian Stock Exchange failed to pay dividends to their shareholders in 2016, investigations by The Point have revealed.
According to data obtained from the Exchange, more than half of these firms, across different sectors of the economy, last paid dividends five or more years ago, while others owe their investors between one and three years returns on investment.
Further analysis shows that majority of the firms, identified as the worst hit, are moribund and are likely to be delisted from the emerging bourse anytime soon. Companies in this category owe between five to 10 years dividend.
For instance, despite the fact that South East-based Champion Breweries increased its profit before tax from N210.1 million in 2015 to N637.3 million at the end of 2016, it has not paid dividends to shareholders for over 10 years.
While Premier Breweries Plc and Studio Press Plc last paid dividends seven years ago, others like Livestock Feeds Plc, Costain West Africa Plc, John Holt Plc, Diamond Bank Plc, Oando Plc, Skye Bank Plc, Wema Bank Plc, Neimeth Phamaceuticals Plc, Fortis Microfinance Bank, Academy Press, LASACO Insurance Plc and Nigerian Enamelware Plc, have not rewarded their investors on the average of three years.
Further findings by our correspondent, however, revealed that, while some of the companies mentioned above had not rewarded their shareholders, emoluments and allowances of their directors had been increased over the years.
For instance, Wema Bank, which has not paid dividend since 2014, increased its directors’ emoluments and allowances, from N234.6 million in 2015 to N434.2 million in 2016.
Diamond Bank Plc, Oando Plc, and Skye Bank Plc also increased theirs from N299.7 million to N301.2 million; N1.78 billion to N1.93 billion; and N124.2 million to N222.3 million, respectively.
In total, the four companies increased their directors’ emoluments and allowances from about N2.44bn in 2015 to N2.89bn in 2016.
The firms have six directors each. (Skye Bank’s directors were sacked by the CBN).
Shares of the quoted companies have also witnessed a sharp decline in the last two years on the floor of the Nigerian Stock Exchange.
For instance, Livestock Feeds lost over 50 per cent of its value on the NSE, when it fell from N1.79 on January 5, 2016 to N0.85 by October 5, 2017.
While Oando Plc dropped from N30.40 to N5.94, the share value of Diamond Bank, Wema Bank, Neimeth, Premier Plc, Champion Plc, and LASACO Plc, have also decreased from N2.27 to N1.09; N1.00 to N0.50 (the minimum value of all shares); N1.00 to N0.58; N1.00 to N0.50; N3.30 to N2.00; and N0.50 to N0.50 (no trades done within the period); respectively.
Wema Bank, which has not paid dividend since 2014, increased its directors’ emoluments and allowances, from N234.6 million in 2015 to N434.2 million in 2016.Diamond Bank Plc, Oando Plc, and Skye Bank Plc also increased theirs from N299.7 million to N301.2 million; N1.78 billion to N1.93 billion; and N124.2 million to N222.3 million, respectively
SHAREHOLDERS DEMAND PROBE OF COYS
Reacting to the The Point’s findings, some aggrieved shareholders of the companies have called for the probe of the managements, describing them as groups of gluttons, over allegations of mis-conduct.
According to the investors, who spoke in separate interviews, no tenable explanation can be given for the increase in directors’ emoluments at a time the firms are not bouyant enough to pay dividend.
As far as the National President, Constance Shareholders Association of Nigeria, Mr. Shehu Mikail, is concerned, most of the companies’ managements are only after their welfare and not the interest of the people that voted them in (shareholders) “as they hold stage-managed Annual General Meetings to continue in their illicit practice.”
He said, “We know that the economy has been inflicted with recession since last year, but we should not be the only ones making sacrifices. Increasing their pay with the profit made and neglecting investors, show lack of corporate governance on the part of the management. Most of them use their positions to enrich themselves at the expense of investors across the country. This is unfair and they should be investigated by the Securities and Exchange Commission.
“The regulators should put an end to the era of top executives feeding fat on proceeds of the company in order to avoid the 2008/09 near-crash of the Nigerian capital market. They should understand that the more they benefit from such increments, the longer it takes for dividends to be paid. We should all bear the consequences of the state of the economy now, so we can enjoy later.”
The President, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, urged the managements of the companies to be strategic and proactive in order to restore the desired profitability to the companies.
He advised most of the brewery companies that had not paid dividend in the last two years to merge in order to be stronger.
For instance, he said the major stakeholder in Champion Breweries, Heineken, should fast-track the merging process of the company with the Nigerian Breweries, another company it owns a large stake in, in order to optimise the potential of the Akwa Ibom State-based company and bring returns to the minority retail shareholders.
He added that the approved merger of International Breweries Plc with Intafact Beverages Limited and Pabod Breweries Limited should be speeded up.
Okezie said, “The proposed merger is expected to generate both revenue and cost synergies, enhanced operational efficiencies, better resource management and more streamlined operations. While Heineken derives indirect benefits through its management and inter-member contracts within the group, minority shareholders have not been able to benefit from the turnaround because the company lacks the scale to compete profitably.
Considering our present financial position, from deficit to surplus, our company has the right mindset and structures to achieve payment of dividend to our esteemed shareholders in no distant future. We remain resolute in continuously achieving cost optimisation and innovation for increased profit
“With the envisaged increased competition in the industry, Champion Breweries and IB lack the network and scale to stand alone.”
He added that the company would perform better with the combination of its business with world-renowned brands.
Aside from Skye Bank, whose management has been taken over by the Central Bank of Nigeria, another shareholder, Alhaji Mukhtar Mukhtar, advised other companies operating within the same sector to restrategise and move forward.
According to him, the merger of local brands with stronger and bigger brands is the best thing likely to happen, as it will be in line with global best practice, when it comes to unlocking synergies.
He said the majority core investors in the companies across sectors should make the process of business combination smooth and avoid the mentality of clinging to an unviable business.
“I urge the directors of the companies to consider all options and go the extra mile to create better values for shareholders. It is better to conclude all merging processes now that the companies are still managing to produce than when all chips are down,” he told The Point.
DON’T EXPECT DIVIDEND SOON – ANALYSTS
However, financial analysts have warned investors that the companies may not be out of the woods anytime soon.
Managing Partner, Profit Plus Investment, Dr. Peter Olawunmi, explained that the rising interest rate and the depreciation of the naira had affected the performances of the financial institutions and manufacturing firms in the last few years and might persist, except the Federal Government sustained its intervention measures.
He said, “In an environment whereby you have rising interest rate, banks and firms (mentioned above) are net borrowers from the market and they have substantially high interest expenses, that alone can shrink profits.
“Other banks are net placers of funds in the market and in an environment whereby you have high interest rate, a net placer of funds will benefit from the rising interest and that is the case with the Tier1 banks.”
He explained that most of the affected banks borrowed funds from the Tier 1 banks and the running cost made it difficult for them to survive.
“If you were doing business last year, the cost of running businesses between December 2015 and December 2016 had gone up by more than 45 per cent. Therefore, if a company borrowed money to fund its transaction from a bank, it meant that it would need additional funds of over 45 per cent to enable it to maintain the same level of production,” he added.
Head, Research, FSDH Bank, Dr. Ayo Adewunmi, said, “The growth in the loans can be attributed to the effect of the devaluation of the naira. This is because if a company has a dollar-denominated loan that was converted to naira in the year 2015 at about N198 per dollar, now the same loan will be converted to naira at over N360.
“Therefore, a bank with a loan of $1 billion in 2015 would carry about N198 billion in its naira balance sheet as the value of the loan. But the same loan will now be worth over N360 billion in its balance sheet without any actual increase in loan.”
For the companies to make ends meet, he advised them to be more transparent to the shareholders and avoid luxury, while the government sustained its intervention measures.
WRITE US TO INVESTIGATE, NASS TELLS SHAREHOLDERS
Reacting to the claims of the aggrieved investors, the Chairman, House of Representatives Committee on Capital Market and Institutions, Hon. Tajudeen Yusuf, told The Point that the lawmakers had yet to be informed officially.
According to him, as soon as the committee gets a petition against the management of any company, it will investigate and ensure justice for any deprived
“We are ready to probe or ask questions on all allegations leveled by all parties, but we need to be informed formally. We have handled similar cases, when investors make fraud allegations but refused to appear before the committee,” he said.
FUTURE REMAINS BRIGHT
Reacting to concerns of shareholders, Chairman, Champion Breweries Plc, Dr. Elijah Akpan, said the company foresaw stronger competition with the sealed mergers between brewing giants in the world, which would lead to more innovations and inflow of new brands in the
He, however, noted that the outlook for the Nigerian breweries sector remained bright because of the country’s large and varied opportunities.
“We shall explore the available possibilities the Nigerian business environment is offering to increase our market share within our business region. Considering our present financial position, from deficit to surplus, our company has the right mindset and structures to achieve payment of dividend to our esteemed shareholders in no distant future. We remain resolute in continuously achieving cost optimisation and innovation for increased profit,” Akpan