For investors in Cadbury Nigeria Plc, 2006 ended as a bad year. Reason: They lost over 50 per cent of their investment in the shares of the company following the overstated accounts of the company. Prices of the equity fell sharply soon after its cooked up accounts were discovered through internal investigations.
Given the rating of Cadbury in the food/beverages sub-sector, its past performance and calibre of management, many investors bought the shares at N65.52 per share on December 30, 2005. But when trading closed at the stock market for 2006 on Friday, December 29, those investors had recorded a negative return of 50.46 per cent as Cadbury shares ended at N32.46 per share.
This implies that the investors have recorded a loss of N36.06 on each share, which translates to a dip of N36.43bn in the market capitalisation of company. Cadbury had opened 2006 with a market capitalisation of N72.20bn, which dipped to N35.77bn on Friday.
The confectionary company rode on the wave of positive responses to 130 kobo dividend paid for the year ended December 31, 2005 to a yearÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¾Ãƒâ€šÃ‚Â¢s (2006) high of N70 per share.
The intermittent bearish trend in the market had depressed the stock to about N55 before it was discovered in mid-December that the company had been overstating it accounts over the years.
The equity took a plunge as investors expressed their disappointment over the discovery by dumping their shares. This negative response continued for the last two weeks of the year, pulling the price from N51.45 to close at N32.46.
Market operators said the free fall of the equity might continue in the New Year.
According to an analysis by Meristem Securities Limited, the downgrading of the financials by the Cadbury management resulted in a drop in the companyÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¾Ãƒâ€šÃ‚Â¢s asset per share from N10.86 as at December 2005 to about N0.99 as at September 30, 2006, representing about 91 per cent fall. The stockbroking firm added that CadburyÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¾Ãƒâ€šÃ‚Â¢s earnings per share had entered the negative zone from a positive figure of N2.70 as at the end of December 2005.
MSL said, ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã¢â‚¬Â¦ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œGiven the Nigerian investing public with pricing mentality based on benefits (bonus and dividend) , dividend payment for the next two years would be denied and bonus may not be issued for up to five years after utilising the available capital reserves to absorb losses. In the same vein, the resulting capital reserve from planned revaluation exercise is also not available for capitalisation issue.
ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã¢â‚¬Â¦ÃƒÂ¢Ã¢â€šÂ¬Ã…â€œCadburyÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¾Ãƒâ€šÃ‚Â¢s share price would drop significantly to stabilise at a range of N10-N15 and would, thereafter, depend on the actions of new management team and recovery performance of the company in 2007 financial year.ÃƒÆ’Ã†â€™Ãƒâ€šÃ‚Â¢ÃƒÆ’Ã‚Â¢ÃƒÂ¢Ã¢â€šÂ¬Ã…Â¡Ãƒâ€šÃ‚Â¬ÃƒÆ’Ã¢â‚¬Å¡Ãƒâ€šÃ‚Â Explaining the outcome of investigations into the financial manipulations, the Chairman of Cadbury Nigeria Plc, Dr. Uduimo Itsueli, said that bottomlines of the company were overstated by over N1.5 billion.- Punch