Cadbury Plc released its 2012 Full year audited financial statements with revenues slightly dipping 1.76% year on year to N33.5billion. Operational profit was N4billion (12% operational profit margin) compared to the N4.6billion posted a year earlier. Profit after tax at the end of the period was N3.45billion compared to N3.67billion a year earlier.
You can either view this flat result as half empty or half full after all profit margin was 10% compared to 11% a year earlier. In addition, the challenges the company is facing has been discussed in an earlier post on my Blurb page . Currently, revenue stability will be accepted in the absence of growth in these harsh competitive environment leaving me to worry about something more pertinent. Why is Cadbury proposing to pay just 50kobo per share as dividend when it has over N15.7billion in cash (it was N10.5billion in 2011)? A 50kobo per share dividend amount to a total dividend payout of just over N1.5billion or just 10% of total cash available. A whopping N5.2billion in extra cash was generated this year after spending N1.8billion in investments. Working capital is N9.2billion and tax liabilities of N662 million is just 4% of cash held.
Shareholders of Cadbury have enjoyed quite a bullish run in the value of their shares. The stock has returned is N34.8 compare to just over N12 a year before. That is a massive 188% return. But the price is obviously riding on a bubble and can last too long. A trailing P.E ratio of 24.7x and a current one of about 31.6x is nothing I’d be crazy about. Growth prospects for Cadbury can’t justify such price highs making the company appear sweeter than it taste. But still shareholders are in a candy store
Cadbury will make the argument that return on equity averaged 18.7% this year so why should shareholders be bothered. But return on average equity is down 24% from the year before and adjusted for inflation is back to 6.7%. The proposed dividend per share of 50kobo provides a yield today of about 1.4% (the market pays an average 5%). Ex div (after dividend payment) may rise by another 50% and still not up to average.
But why all the complaint anyway after all Cadbury is 75% owned by Kraftsfood and 25% is owned by Nigerians who are in the minority who are very well compensated with capital appreciation? Oh well tell that to a kid in a candy store!!