Shareholders confront Conoil over shortcomings in corporate governance

By NKIRUKA NNOROM

Shareholders of Conoil Plc have raised concern over the shortcomings in the company’s corporate governance practices, especially the continuous absence of the chairman, Mr. Mike Adenuga, from the Annual General Meetings, AGMs.

Nigerian-Stock-Exchange-(NSSpecifically, they said that Adenuga has in the last 10 years absented himself from the AGMs, noting that his absence is detrimental to the interest and progress of the company, being the majority shareholder.
This is contained in a letter addressed to the chairman of Conoil Plc by members of Renaissance Shareholders Association, RSA, signed by their president, Amb. Olufemi Timothy.

They also criticized the company for frequent change in managing directors, MDs, saying that the company has produced more MDs than any of its peers in the petroleum marketing sector as it has in the last decade engaged not less than 10 managing directors, having an average of one MD per annum.

Querying why the company could not sign on one MD for at least a period of five years, they said that a stable management is necessary for consistent policy implementation and a steady growth.

“If we may be correct, you have not been to the company’s AGM for over a decade now, (10 years). This to us, who are concerned about your stake and that of other 26 percent holders of the equity of the company, is a disservice to the company and its business.

“A leader must always be seen leading its team at all times. No report of events at the AGM to you could be as accurate as when you are present to see the feelings; hear the comments, compliments and the body language of people by yourself. We wish that you will have a change of mind, attitude on this. Come to the next AGM wherever you know will be secure enough for you and your team, if security is your concern,” they said.

The shareholders frowned at lack of confidence shown in the affairs of the company by the directors as manifested through their lack of having shareholding in the company. According to them, only three out of the 10 directors hold interest in the company.

They also called on the company to appoint more non-executive directors, especially independent and minority shareholders into the Board, saying that having a Board of Directors consisting of five executive and five non-executive directors is against the recommendations of the Code of Corporate Governancethat states that non-executives directors must be more than the executives who form the management team upon which the Board has an oversight function.

“Please, we recommend that you appoint more non-executive directors, especially, independent directors and minority shareholders’ representative.

Since a few years ago that the two directors representing minority shareholders (holding 26 percent) left the Board, you have not replaced them accordingly,” they noted.

On the account for the year ended December 31, 2013, they said that it would have been impossible for the company to achieve such a robust result without the extra-ordinary income earned from the debts owed the company by the federal government on delayed payment of subsidy on imported fuel.

Consequently, they argued that the N2.77 billion dividends declared for the year would not have been possible without the extra-ordinary income and would not be sustained in the subsequent years if the management could not produce profit before tax and gross operating profit of N4.5 billion and N20billion in 2014 respectively.

They said, “The accounts for 2013 year-end appear to the best in the last five years. But can it be sustained? If the results in the statement of profit or loss on page 24 is anything to rely on, the statement of profit or loss states that our gross profit was N17 billion while other operating income of N2.5 billion was recorded, as a result of interest paid to our company from the debts owe the company by the federal government on delayed payment of subsidy on imported fuel.

“What happens in a year without this kind of extra-ordinary income, payment? We should work harder and improve on our revenue and not rely on other, extra-ordinary income (occasional).

“Our actual PBT was N2.57 billion, while PAT would have been – N1.07 billion for the year 2013 end. We could not have been able to declare N2.77 billion cash dividend in the year, if not for the extra income.

“We believe that; to sustain this dividend payment in the 2014 year-end results, the management must produce PBT of N4.5 billion and above without extra-ordinary income, while the gross operating profit must move up to about N20 billion.”
 

-Culled from: http://www.vanguardngr.com