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Why we undertook capital reduction — Cadbury


Cadbury Nigeria plc has explained that undertaking share capital reduction was the best option available to it to address the issue of excess capital in its coffers.

Addressing the stockbroking community and the management of the Nigerian Stock Exchange, NSE, at the Facts behind Capital Reduction of the company on the NSE, Yinka Adeboye, Financial & Strategy Director, Cadbury Nig. Plc, said that the company decided to settle for capital reduction after carefully weighing other available options and their implication for its shareholders.

She listed other options to include either reinvesting the money for expansionary purposes, undertaking a share buy-back or giving it out as dividend.

Considering re-investing the capital, Adeboye said the company did not foresee any future capital requirements that would not be met from internally generated resources to the extent that it is faced with an opportunity requiring significant additional capital.

“Company’s projections indicated that it would generate sufficient capital to meet its expansionary and operational requirements. Rather than invest excess capital on behalf of shareholders at what may be sub-optimal returns, the Board of Directors decided to recommend the return of excess capital to shareholders,” she said

“Dividend was another option, but we considered the tax obligation. If we are to pay interim dividend, it will be subjected to with-holding tax and we thought that our shareholders may not like that,” she stated, adding that the Board would continue to assess uses for distributable profits, which might include reinvestment for growth and dividends to shareholders.

Speaking further, she explained that in event a company decides to adopt share buy-back approach, it may result in shareholding of individual shareholders changing depending on whether not they participated in the buy-back.

Adeboye, however, noted that the capital reduction did not impact the ownership percentages of shareholders neither did it affect the capital value of a shareholder’s investment in the company.

Also speaking at the event, the Managing Director, Emil Moskofian, assured that undertaking capital reduction instead of reinvesting the fund does not suggest lack of appetite by the company to commit more fund into the



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