Chams opts to pay dividends despite negative retained earnings

Chams opts to pay dividends despite negative retained earnings

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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