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Mixed reactions trail Vitafoam Nigeria declaration of dividend in spite of loss position

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Some capital market operators on Wednesday expressed mixed reactions to Vitafoam Nigeria Plc. declaration of dividends in spite posting loss for the financial year ended Sept. 30, 2017.

They told newsmen in Lagos that the company needed to map out strategies that would return it to profitability to avoid payment dividend out of retained earnings for two consecutive years.

Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., said that paying dividend from retained earnings for two years was not healthy for the company.

Omordion said that the development would affect the company’s expansion or capacity building plan.

He said that the development was also a pointer that management of the company was struggling.

Omordion said that the company’s unimpressive numbers would affect its share price on the Nigerian Stock Exchange (NSE) in spite of declaration of 15k dividend against 12k paid in 2016 financial year.

Mr Bayo Adeleke, the immediate past Secretary, Independent Shareholders Association of Nigeria, said that it was an acceptable practice to pay dividend out of retained earnings.

Adeleke, however, said that the board and management needed to work harder to produce profit from operations going forward.

NAN reports that Vitafoam directors submitted its audited financial reports for the year ended Sept. 30, 2017, offering to pay a dividend of 15k per share, in spite of the loss after tax resulting from the twin effects of the increased finance costs and tax expense for the period under review.

The directors are proposing a total dividend of N156.36 million at the Annual General Meeting (AGM) to hold on March 8.

A breakdown of the result showed that turnover during the period under review rose to N17.69 billion, up by N4.13 billion or 30.4 per cent compared to N10. 57 billion posted in the preceding period of 2016.

Its cost of sales rose by N3.69 billion or 41.51 per cent to N12.61 billion from N8.91 billion, while gross profit stood at N5.09 billion, up from N4.66 billion in 2016.

Other gains stood at N283.57 million from N284.86 million in the previous period; while administrative expenses dropped slightly from N3.43 billion to N3.31 billion.

Also, the company’s distribution costs rose to N726.18 million from N632.05 million, while operating profit increased to N1.33 billion from N888 million.

Its finance income dropped to N61. 15 million from N68.26 million; finance costs jumped to N1.38 billion, up by N481.76 million or 53.82 per cent from N895.06 million in 2016.

The company’s profit before tax dropped to N18.13 million from N61.19 million in the corresponding year.

Similarly, loss after tax surged to N127.69 million from N32.03 million achieved in 2016, representing a loss per share of 15k as against 4k in 2016.


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