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Markets

GSK’s ₦8.2 billion Special dividend explained

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GlaxoSmithKline Consumer Nigeria Plc recently released its results for the 12 months ended December 2017. The company’s profit after tax fell sharply from ₦2.3 billion in 2016 to ₦486 million in 2017, largely due to elevated costs of sales.

GSK, however, opted to pay a special dividend of ₦7.10 per share and an ordinary dividend of ₦0.40 per share. The total cash value of the special dividend is a whopping N8.4 billion and will be paid from the portion of its retained earnings that was earned from the sale of its drinks business to Suntory in 2016.

GSK Sold its drinks division (Ribena and Lucozade) to Japanese firm Suntory Ltd.

The regular dividend will be paid from its pioneer earnings balance of ₦915.5 million.

What is a special dividend?

A Special dividend is one that is issued by a company out of profits it made from Extra-ordinary income. Extra-Ordinary income refers to an income that a business makes upon unusual circumstances.

Dividends are usually paid from the profits a company has made at the end of its financial year. The company may opt to pay all or part of its profits. These profits accumulated over several years are known as retained earnings.

GSK’s Special Dividends

GSK made ₦20.9 billion in 2016 from the sale of its drink business to Suntory Beverage and Food Nigeria Limited. The amount being cash was kept in the bank by the company until it has now decided to distribute it to its shareholders.

A common mistake might be to believe the ₦3.9 billion profit after tax from the proceeds of the sale of the drinks business, is what they should actually distribute as dividends. However, that is not the case as the company can indeed, share the entire cash proceeds considering that the cost of the property and plant and equipment of the drinks business had been paid for years ago.

It paid a special dividend of ₦0.60 per share in 2016 amounting to ₦717 million.

 

The 2017 special dividend from the proceeds amounts to ₦8.49 billion, while ordinary dividend equates to ₦478 million. A total of ₦8.96 billion will thus be paid to shareholders for as dividends for the 2017 financial year.

Pioneer earnings

A company qualifies for pioneer status when it either embarks on a new project or expands an existing one. This qualifies the company for a tax holiday for a maximum period of 5 years. Dividends declared during this period, are not subject to tax.

Who gets what and how much

Setfirst Ltd and SmithKline Beecham Ltd own 46% of GSK Nigeria. Based on this they will receive ₦3.9 billion only.

Jaiz bank

53.6% of the shares of the company are owned by Nigerian Shareholders.

 

GSK shares closed at ₦28.05 in today’s trading session, up 10%.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training.He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE).He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy.You can contact him via [email protected]

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Cryptocurrency

Troubling signs on crypto market, SEC tags many crypto assets as Securities

These further suggest the head of the financial watchdog could tighten its grip on the crypto market.

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Dark clouds hover above the cryptoverse as the leader of the world’s most powerful investments regulatory agency affirmed most crypto assets as securities.

Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC) in his most recent appearance on CNBC’s Squawk Box, opined that “many” crypto-assets were securities, meaning many of these assets required regulatory oversights and exchanges trading such crypto assets require at least a form of SEC regulation.

In his words:

“The extent that something is a security, the SEC has a lot of authority. And a lot of crypto tokens—I won’t call them cryptocurrencies for this moment—are indeed securities.”

What you must know

An asset is considered a financial security asset if it is a tradable financial asset and thus has monetary value.

What Gensler said suggests that the financial assets watchdog could tighten its grip on the crypto market. Recall that SEC is already battling with Ripple and calling XRP a security asset.

However, Gary Gensler described the flagship crypto asset as a store of value but with a very volatile characteristic and not a security.

It’s important to understand why the regulator doesn’t classify Bitcoin as a security. It is based on the fact that its existence began through mining as an incentive in validating a distributed platform. There are no pre-mined coins, no initial token offering, and no kind of business entity governing it.

A few months ago, Nigeria’s Securities and Exchange Commission released guidelines referring to cryptoassets as securities, except proven otherwise.

  • The position of the Commission is that virtual crypto assets are securities, unless proven otherwise.
  • Thus, the burden of proving that the crypto assets proposed to be offered are not securities and therefore not under the jurisdiction of the SEC, is placed on the issuer or sponsor of the said assets.
  • Issuers or sponsors are expected to satisfy the burden of proving that the virtual assets do not constitute securities by making an initial assessment filing.
  • However, where the finding of the Commission is that the virtual assets are indeed securities (not structured to be exclusively offered through crowdfunding portals or other exempt methods), then the issuer or sponsor must register the digital assets.

That being said, recent price actions reveal the bullish trend in the crypto market is still very much in play despite regulatory fears surrounding the crypto market as its market value now stands at $2.42 trillion, posting a 2.47% increase over the last day.

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Markets

Bullish dominance in the NGX Banking Index

The NGX Banking Index made a bullish recovery at the end of yesterday’s trading session with an increase of +1.11%, pushing the index points to 354.25.

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gtbank, stock market, Bulls dominate Nigerian bourse ASI up 0.74%, Investors gain N77 billion., Crude oil bulls lose steam, as COVID-19 cases hit record high

The NGX Banking Index made a bullish recovery at the end of yesterday’s trading session with an increase of +1.11%, pushing the index points to 354.25. There were 5 profits opposing 5 losses, but the magnitude of the gainers pushed the Banking Index into the green.

Union Bank led the gainers with a profit of +0.45, pushing its price upwards from N4.95 to N5.40.

Zenith Bank came second amongst the gainers with a profit of +1.14%, posting N22.20 from the previous day’s close of N21.95.

Guaranty Trust Bank also closed in profits with an increase of +0.86%, leaving its price at N29.40 from its previous price of N29.00. Sterling Bank was also part of the gainers with a profit of +0.63% putting its price at N1.60 from its previous close of N1.58.

Access Bank made profits of 0.62%, pushing its prices to N8.15 from N8.10.

Wema Bank was the biggest loser at the end of yesterday’s trading session as it made losses of -4.92%, leaving its price at N0.58 from N0.61.

Jaiz Bank also made losses of -3.23%, pushing its closing price to N0.63 from N0.62 obtained the previous day.

Ecobank joined the losers, posting a loss of -1.89% which put its price at N5.20 from its previous price of N5.30.

Fidelity Bank followed with a loss of -0.90%, putting its price at N2.24 from N2.22. UBA also posted a loss of -0.69%, pushing its price from N7.25 to N7.20.

Outlook

  • Market sentiment tends bullish as the magnitude of gainers outweighed the losers despite the 5 gainers and 5 losers held at the end of the trading session.
  • Nairametrics advises cautious buying amid growing uncertainties.

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