Cadbury sweats over Nigerian meltdown

Cadbury Schweppes said last month that its issues with its Nigerian
subsidiary had cost it £25m, its share of the cost according to its stake in the
business, just over 50%.

Cadbury said all of the figures cited in the review ‘remain subject to year
end audit processes,’ suggesting the saga may not be entirely over.
The figures were in line with early estimates of the problem, which put a £10m
estimate on the accounting issues.

PricewaterhouseCoopers had been called in to look into issues in Nigeria,
which have seen the departure of the subsidiary’s finance director and managing
director, Ayo Akadiri and Bunmi Oni respectively.

The company is also set to look again at the book value of the subsidiary, it
has said.

Investigators found that the West-African division had been riddled with
inconsistencies for a ‘number of years’.

Cadbury described the Nigerian wrangle as a ‘significant and deliberate
overstatement of the company’s financial position’.

Andrew Saunders, analyst at Numis Securities, said: ‘While this is not a
hugely big number, it does beg the question of how tight and efficiently
monitored the business units are.’

Analysts said the issue was one of a worrying list of problems for the

‘Cadbury is in the doghouse as far as the analyst community is concerned.
2007 is going to be a pretty unexciting year at the company in terms of growth,’
one said. The company is also at the centre of a landmark tax case on the UK’s
controlled foreign companies rules. It declined to update the market on the
progress of the case at the time of its trading statement.

Company reports

Eurovestech ordered to amend its accounts

A probe into Eurovestech’s books has called for the venture capital group to
consolidate two of the investments in its accounts. FRRP rejected Eurovestech’s
claim that the subsidiary undertakings that appeared on its balance sheets had
not been consolidated because it would not give a true and fair view of the
company’s interest in these investments.

An FRRP statement said: ‘While the panel accepted that the directors had
acted in good faith, it did not accept the use of the true and fair override in
this case as the company was unable to demonstrate special circumstances
warranting a departure from the requirements of the accounting standard. The two
subsidiary undertakings in question accounted for more than 50% of the company’s
portfolio, and had directors appointed by the company. ’

Enron CEO to have 24-year sentence slashed

Convicted Enron CEO Jeffrey Skilling could have his sentence reduced after a
Houston appeals court announced that it had identified flaws in his conviction
during a review. The disclosure came after federaljudges refused Skilling’s plea
to remain under house arrest at his mansion until his appeal was decided.

‘Our review has disclosed serious frailties in Skilling’s conviction of
conspiracy, securities fraud and insider trading’ the federal appeals court
said. In light of the announcement Skilling’s defence attorney Daniel Petrocelli
championed a ‘substantial reduction’ of his client’s sentence if these counts
were thrown out on appeal.

ECJ Denkavit ruling could save funds millions

Investment funds and companies with pan-European investments could see
hundreds of millions of pounds shorn off their tax bills after the European
Court of Justice ruled that withholding tax contravened EU law.

The challenge to withholding tax was brought by Dutch company Denkavit, which
had received dividends from two French subsidiaries. The withholding tax charged
on these dividends was deducted at source from earnings received by a
non-resident taxpayer, to ensure the income does not leave the country untaxed.

The ECJ found that this tax resulted in a higher tax burden being imposed
when dividends are paid to foreign investors than the tax that would have been
levied in the domestic situation.

Related reading