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Markets

Chams opts to pay dividends despite negative retained earnings  

Chams Plc will be paying a dividend of N0.03 per share for the 2018 financial year despite negative retained earnings.

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Chams Plc

Chams Plc released its results for the 2018 financial year, last week. There was a significant increase in the top line as well as a return to profitability.

Revenue increased from N1.9 billion in 2017 to N3 billion in 2018. The company also made a profit after tax of N380 million, as against a N1.2 billion loss recorded in the corresponding period of 2017.  

A section from the company’s financial statements disclosed that the firm has decided to pay a dividend of N0.03 per share: 

The Board of Directors, pursuant to the powers vested in it by the provisions of section 379 of the Companies and Allied Matters Act (CAMA) of Nigeria, proposed a final dividend of 3k per share as at December 31, 2018. This will be presented for ratification by the Shareholders at the next Annual General Meeting

This amounts to a payout ratio of 42.8%, as the company had earnings per share of N0.07.  

The proposed dividend is the first in over five years.  

Red flag 

While the company’s return to profitability is a positive development, the decision to pay dividends is a somewhat odd one. Chams currently has negative retained earnings of N1.9 billion.  

 

 

By law, companies are not allowed to pay dividends from negative retained earnings. 

About the Charms Plc 

Chams Plc (the company) was incorporated as a limited liability company on 10 September 1985 and became a public company on 4 September 2008.

The company was listed on the floor of the Nigerian Stock Exchange on 8 September 2008.

The principal activities of Chams Plc and its subsidiaries (the group) include identity management, payment collections, and transactional systems. 

The stock closed at N0.20 in today’s trading session on the Nigerian Stock Exchange, down 4.76%. Year to date, the stock is flat. 

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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]

8 Comments

8 Comments

  1. Teingo Inko-Tariah

    April 3, 2019 at 4:38 pm

    At last! Chams Plc appears to show some signs of life. Please could you provide any detail on the relevant section of the law that prohibits a company from paying dividens if the company has negative retained earnings? Thank you.

  2. Waheed Bello

    April 3, 2019 at 5:08 pm

    Cham Plc is a group of company. Dividend is paid from the retained earnings of the company which as at this date was approximately N386 million. If this can accommodate the declared dividend, Chams is well in line to declare and pay dividend.

    • Onome Ohwovoriole

      April 4, 2019 at 10:00 am

      Good morning. I concur with your points, but the results do not specify if the dividends are being paid from the company or group. Rule of thumb states profits are usually paid from the group.

  3. Segun Oke

    April 3, 2019 at 7:59 pm

    Very good performance and turn around for the Company.
    I advise the writer to look again at the displayed account. It is obvious that the Retained Earning is positive for the Company but negative for the group.
    Since, it is the Company that pays dividend and not the group, there are free to pay Dividend.
    The whole world need to commend the Company for being compassionate with the Dividend pay out.
    I am a shareholder and I am happy

  4. John ebenkoa

    April 3, 2019 at 9:35 pm

    Thank you for your analysis of Chams group financials and your interest in the company’s performance.

    Chams group consists of: Chams Plc, ChamsAccess Ltd., ChamsSwitch Ltd., Cardcentre Ltd., ChamsConsortium Ltd., and ChamsMobile Ltd.

    Though, Chams group has a negative retained earnings of N1.9bn while the company, Chams Plc has positive retained earnings of N385 million as reported in the financial statement.

    It would interest you to know that Chams Plc (the Company) proposed dividend of 3k per share out of 7k EPS from positive retained earnings of N385 million.

    In addition, Chams Plc is the listed company on the Nigeria Stock Exchange and not the Chams Group. Therefore, the proposed dividends is from positive retained earnings of Chams Plc.

    • Onome Ohwovoriole

      April 4, 2019 at 10:03 am

      Good Morning. I agree totally with your analysis, but the result does not specify. The group and the company both made profit.

      • Teingo Inko-Tariah

        April 5, 2019 at 9:27 am

        Onome, I believe you saw my first comment on the piece. I await your response. Kindly educate a reader.

    • Teingo Inko-Tariah

      April 5, 2019 at 9:26 am

      Thanks for the enlightening comment.

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Market Views

Nigerian stocks plunge, as WEMA, CHAMPION, MANSARD slump

The market breadth closed negative as LASACO led 17 Gainers as against 23 Losers topped by CHAMPION at the end of today’s session.

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Nigerian banking stocks remain most liquid stocks, as investors gain N25.1 billion, DANGOTE CEMENT, OKOMUOIL and GUINNESS drag Nigerian Stock market down,  SEPLAT, GUINNESS, Breaks Nigerian Bourse Support Levels, Investors Lose N49 Billion  

Nigerian stocks wrapped up the week on a bearish note after the benchmark index registered its third negative close in the last five sessions.

  • Sentiments notably picked up where they left off yesterday, as selloffs persisted in bellwether ticker – ZENITHBANK (-1.55%) as well as in Telco giant – MTN Nigeria (-3.28%).
  • The 74 basis points pullback recorded today kept the All Share Index return firmly rooted in the red and also lowering the Year date returns to -1.88%.
  • Save for the Oil and Gas (+0.25%) index lifted by sustained interest in OANDO (+2.99%), all other sectors closed in the negative territory.
  • The Insurance (-2.32%), Banking (-0.48%), Consumer Goods (-0.40%), and Industrial Goods (-0.19) indices declined following price dips in MANSARD (-5.36%), ZENITHBANK (-1.55%), INTBREW (-3.65%), and WAPCO (-2.94%) respectively.
  • The market breadth closed negative as LASACO led 17 Gainers as against 23 Losers topped by CHAMPION at the end of today’s session

Top gainers

  1. LASACO down 9.82% to close at N1.23
  2. MBENEFIT down 8.11% to close at N0.37
  3. COURTVILLE down 5.00% to close at N0.21
  4. OANDO down 2.99% to close at N3.45
  5. NAHCO down 2.70% to close at N2.28

Top losers

  1. WEMABANK down 10.00% to close at N0.63
  2. CHAMPION down 10.00% to close at N2.52
  3. SUNUASSUR down 9.59% to close at N0.66
  4. AFRIPRUD down 5.74% to close at N5.75
  5. MANSARD down 5.36% to close at N1.06

Outlook

Nigerian stocks ended the last trading session of the week on a bearish note amid profit-taking across the market spectrum.

  • Downtrend was driven by price depreciation medium capitalized stocks amongst which are; WEMA, CHAMPION, MANSARD.
  • That being said, Nairametrics envisages cautious buying on the account that certain market indicators reveal investors are taking some of their gains across the market spectrum.

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Cryptocurrency

VP Osinbajo disagrees with CBN, calls for crypto regulation

Vice President Yemi Osinbajo had recently called for Crypto regulation knowing fully well the role Crypto play in the global financial ecosystem.

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Solar, FG to slash import duties on tractors, buses, others in 2020 Finance Bill, Nigeria will not issue Eurobonds, says Vice President Yemi Osinbajo, FG guarantees mortgage loan to low income buyers at low interest rate, FG inaugurates gold refinery project in a landmark event

The Vice President of Nigeria, Prof. Yemi Osinbajo has recently called for Crypto regulation knowing fully well the role Crypto plays in the global financial ecosystem as he opined that such disruption often makes room for progress.

Osinbajo also advised the SEC, and Central Bank of Nigeria in creating a regulatory road map, while fully appreciating the stance of the CBN, Nigerian SEC, and law enforcement agencies on the possible abuses of crypto assets.

The vice president further stressed the importance Cryptocurrencies would play in the coming years as they will most likely challenge traditional banking, including reserve banking, in ways the world hasn’t yet imagine, stressing the need for Nigeria in being prepared for such a seismic shift.

He also called for scaling up of government-private sector interventions because, “the task of national development requires that we fire on all cylinders, after all at one stage China was building 1.9m housing units per year.”

READ: Why Crypto black market is thriving in Nigeria

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