Nine months after, NSE may delist Transcorp, Dicon, 45 others

Nine months after, NSE may delist Transcorp, Dicon, 45 others
By Kingsley Ighomwenghian, Finance Editor

• Oscar Onyema, CEO, NSE • Dokpesi

When the Nigerian Stock Exchange (NSE) announced the placing of some companies on technical suspension last week, nine months after putting them on notice through a September 2010 statement, there were names of companies that had been recurrent since September 2008, when the bourse proposed 28 stocks for delisting, accusing them of failing to comply with its post-listing requirements. Chief among the requirement has always been timely rendition of financials, whether quarterly or full year.

One of such names that have remained on the list and always managed to escape delisting with the hope that the owners would re-inject fresh capital, thereby enabling it to rebound, is Lt Gen Theophilus Danjuma’s Union Dicon Salt Plc.

Some observers had wondered why the once thriving UDS, listed on NSE in September 1993, escaped delisting at the time when some others, including the exchange’s entire textiles and machinery sub-sectors were delisted, just as several insurance companies over the years.

But as if to sign-post its readiness to restart operations at its Kirikiri, Lagos, jetty, or anywhere else for that matter, the company’s board had in March this year, submitted audited results for five years for December 31, 2004 to 2008, indicating that its factories last produced any grain of salt in 2006.

The company, which last paid a dividend (50 kobo per share), 10 years ago in 2001, when it was one of the most thriving stocks on NSE, was also one of those listed among the 48 to be weeded by the NSE management on October 4 and 11, 2010. Reason: It has so far failed to present its audited report up to 2008 to guide investors to adequately price its shares, apart from honouring such obligations as paying its listing fees as part of its post-listing requirements.

That the company rushed its five-year audited financials to the NSE, according to observers, is a sign that the owners are still interested in remaining a quoted company, besides giving credence to ongoing moves to resuscitate the company.

***Daily Independent*** reported recently the ongoing talks between indigenous conglomerate, Bua International Limited, and the owners of Union Dicon Salt, Defence Industrial Corporation (DICON), which was believed to be nearing conclusion. Bua was reportedly eyeing a 51 per cent stake, part of which may come from DICON’s plan to divest 20 per cent of its stake. This would then leave 31 per cent to be scooped from other key shareholders, especially AIMS Limited with 40 per cent interest. Information available on the company’s website showed that individual shareholders have 34 per cent stake, and Union Dicon Salt Staff Trust Fund, 6.0 per cent.

The company’s woes, is believed to have started when its former foreign technical partners (Brazilians) allegedly mismanaged it, selling the interests of the shareholders of DICON salt in Salina Branco Limited, a major supplier of raw salt, and failed to account for the proceeds. Union Dicon invested in Salino Branco in late 1996, upon invitation from the technical partners to take a 40 per cent stake for $3.6 million, of the production facility.

“As you may be aware, our erstwhile technical partners mismanaged the company and its funds. They sold off your interest in Salina Branco Limited and are yet to account for the sale,” Danjuma told shareholders at an extraordinary general meeting in Kaduna to enable the company raise fresh capital some years ago.

NSE latest list

Three months after reports that the deal between UDS and BUA was nearing conclusion, sign-posted by the release of its five-year financials and no progress report on the talks, the NSE’s management last week listed Union Dicon among 48 companies in default of audited account rendition. The company was, therefore, placed on technical suspension, “meaning that there will be trading, but no movement on their share prices) which takes effect from today, Friday, July 1, 2011.”

High profile companies on the list include Transnational Corporation of Nigeria (TransCorp), whose board is chaired by Ndi Okereke-Onyiuke, former director-general of the NSE; Femi Otedola’s Forte Oil (African Petroleum); and Dangote Flour Mills, one of the four listed firms owned by billionaire, Aliko Dangote. There are also: Nigerian Bottling Company (listed in November 1973), which is already making moves to exit the exchange through a planned delisting of its shares, by offering to buy off the minority 33.57 per cent; DAAR Communications, owners of first independent broadcast outfits, RayPower and African Independent Television, which only recently held its first annual general meeting since listing its shares in 2008; as well as Tola Mobolurin’s Crusader (Nigeria) in the other financial institutions sub-sector.

A breakdown of the list also showed nine insurance companies, including Great Nigeria Insurance, majority owned by Wema Bank and Oodu’a Group; Lasaco Assurance, related to the Lagos State government; and Emeka Offor’s Guinea Insurance. Also on the list are companies like FTN Cocoa Processors in the agriculture/agro-allied sub-sector, which was listed in the past three years, just like Omatek Ventures; and Etranzact; as well as old timers like conglomerate, Scoa Nigeria (listed in 1977); construction firms, Cappa & D’alberto and G Cappa G. Cappa, both of whose market share of the construction business has been watered down severely over the years by behemoth Julius Berger and repackaged Costain. G.Cappa has not declared cash dividend since year 2000 when it paid 20 kobo in December of 2001. Others are: UTC; hotel owners, Ikeja Hotels and Tourist Company of Nigeria, both of which has Goody Ibru as chairman, besides three common directors, a common company secretary and external auditor.

When Nigeria Energy Sector Fund (NESF) appeared on the list of companies earmarked to be delisted in September 17, 2010, many wondered how the high-profile closed-end mutual fund promoted in 1998 and listed in June 1998, found its way in. The fund, managed by Sterling Capital Markets Limited, a subsidiary of Sterling Bank, is engaged in pooling funds for investment in the Nigeria’s lucrative upstream and downstream sectors.

Another surprise appearance was Ibadan, Oyo State-based Nigerian Wire & Cable, which was late last year believed to have concluded a restructuring programme, began in 2007, following which its financial year-end was change from September 30 to December 31.

Another stock on the list were Jos International Breweries, listed in 1992, which last submitted its audited result in 2008, and may have been saved from delisting by a memorandum of understanding (MoU) signed by both its management and an unnamed foreign investor. Others are IPWA (listed in 1978); Lennards, Ekocorp (hospitals owner1994) and Morison Industries, a pharmaceutical firm; three firms in the industry/domestic products sector, including troubled Vono Products, also with significant holding by Oodu’a Group.

In taking the step, the NSE said the affected companies have not submitted their audited financials to December 31, 2010, which violated “the Post-listing Rules of The Exchange as contained in Key Issue No. 5 (Annual Accounts Procedures), which states that “audited annual accounts of companies ought to be submitted within three months of year end”.

The NSE technical suspension, according to the NSE, will subsist for the next one month, “after which the exchange reserves the right to take further action.”

First sign of trouble

Okereke-Onyiuke had some years ago, explained that delayed results are first signs of trouble in a company. Such trouble, she noted, could either be mild or full-blown such as board/management squabbles.

As if to lend credence to this, Femi Ekundayo, a founding director, Resort Savings and Loans, one of those marked for delisting, reported sold off about 800.7 million units of his shares, because he “is not too comfortable with the way the company is being run.”

There is also the recent case of Longman Nigeria, whose core investor, Pearson Plc (through Pearson Education Limited -19.6 per cent, and Longman Group Overseas Holdings - 31.4 per cent, among others) announced plans to divest its entire 51 per cent stake in the coming 18 months beginning from June 2011, in what is seen as the outcome of a boardroom crisis. The move, the company told the NSE, would lead to a modification of Longman’s product portfolio, and a name change, being the “fallout of exhaustive discussions and strategic reviews by its board.”

Longman, however, assured the investing public and “stakeholders that the planned divestment would not result in any capital flight or dilution of the current shareholding structure”.

NSE patience explained

But the former NSE DG had in defence of the exchange’s decision to retain the moribund companies on the bourse, in the past, explained that the move was with the hope that their owners and managers would resolve their problems for the benefit of stakeholders, including finding new core investors.

“As an emerging market, we had quietly intervened by assisting some of the companies, which accepted our calls, shared their problems with us and today are doing fine,” she once noted.

According to her, Champion Breweries Plc, Impresit Bakalori and RT Briscoe were among companies that took advantage of the earlier interventions of the NSE and are today back in business and meeting their obligations to investors.

RT Briscoe, which was not reckoned with until assets management company, ARM, bought into the popular automobile and sundries distribution firm, and turned it around. Other examples, she said, included National Salt Company, which was some years ago acquired by Dangote Industries Limited, merging it with its own Dangote Salt, as a result of which the company’s share price moved from being a penny stock; Champion Breweries; Impresit Bakalori; Costain (West Africa) and Nigerian Ropes; Okitipupa Oil Palm; and Thomas Wyatt.

Omatek protests inclusion

Reacting to the NSE statement, Omatek Ventures, one of those suspended, had in a letter dated July 1, 2011, protested its inclusion on the list. The letter signed by its Managing Director, Mrs. Florence Seriki, said the company fulfilled its post-listing obligation long before now. A copy of the letter accompanying the result for 18-month ended December 31, 2010, made available to our correspondent and dated March 22, 2011, noted that “this is the first to be presented based on our new financial year end, and as earlier advised to the exchange.”

The letter was duly acknowledged as “received” and stamped on March 24, by the NSE

The letter addressed to the General Manager/Head, Listings Directorate, a copy of which was made available to our correspondent on Monday, implored the NSE “to take necessary steps to remove Omatek’s name from the list of defaulters to avoid unnecessary embarrassment to the company and its shareholders”.