Mining company in a hole over extra dividend

BHP Billiton, the largest diversified mining company in the world, has had to call an extraordinary general meeting after it emerged that it had paid an extra dividend, in contravention of the Companies Act.

At the EGM, shareholders will be asked to vote in favour of cancelling a dividend paid in September 2004 worth $0.095 per ordinary share.

If the proposal is not passed, the BHP Billiton directors who agreed to pay the dividend could face claims against them, along with those company shareholders who received the dividend.

‘It is clearly not the company’s intention to make any such claim against either the shareholders or directors,’ BHP Billiton’s chairman Don Argus said in a letter to shareholders. He added that, according to legal advice, the passing of the proposals at the EGM would clear up the matter.

BHP Billiton, which has operations in Mozambique, Canada and Australia, infringed on a technicality of the Companies Act because its final dividend took the total dividend payment for the financial year above the distributable profits reported in its last set of annual accounts.

In its annual accounts for the year ended 30 June 2003 – the financial statements that BHP Billiton had to use to determine if its dividends would exceed distributable profits – the company reported retained earnings of $603m (£327.5m).

After declaring dividends in December 2003, May 2004 and then in September, the company had paid out a total of $641m in dividends – $38m in excess of the 2003 retained earnings. Had the company been able to refer to its audited accounts for the year ended 30 June 2004, it would not have exceeded the threshold.

At the EGM, BHP Billiton aims to rectify the problem by sanctioning the appropriation of profits to the September 2004 dividend, and waiving the rights of the company against shareholders who received the dividend and the directors who approved it.

BHP Billiton non-executive director Carlos Cordeiro has recommended that shareholders support the proposals, arguing that it is in the best interests of the company to do so.

The EGM will be held on 13 June 2005 and a majority of at least 75% will be needed to pass the proposals.

COMPANY REPORTS

Morrisons still struggling after Safeway buyout, as BA bides time on IFRS following boost to profits.

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Standard Chartered has said the impact of IFRS on its 2004 accounts is ‘modest’, with pre-tax profits under the new standards falling 4% from $2.2bn (£1.2bn) to $2.1bn. ‘The transition to IFRS has had a limited impact on the restated 2004 results,’ said Peter Sands, the group’s finance director. ‘IFRS does not change net cashflows, the underlying economics of our business or the way we take commercial decisions.’

Less than two months after the resignation of FD Martin Ackroyd, Morrisons has warned that operating margins for 2005 are expected to be down. In a trading statement the retailer said it was still ‘heavily impacted’ by the dual distribution, IT and administration costs required for the Safeway conversion process. Morrisons will update the market on its search for a replacement to Ackroyd at the company’s AGM next Thursday.

British Airways has reported an increase in operating profits, but will only reveal the impact of IFRS in the summer. ‘An IFRS convergence team was set up in 2003 and reports to the audit committee quarterly,’ a BA statement said. ‘Progress continues in accordance with the project plan.’

Pre-tax profits at banking group Northern Rock edged up from £431.2m under UK GAAP to £435.3m under IFRS. The bank, which saw its share price dip after releasing its first IFRS guidance, said it expected asset growth to be above the midpoint of its strategic range when reporting its first interims under IFRS in July.

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SMG group finance director George Watt saw his total pay for 2004 fall from £211,000 in 2003 to £200,000. Watt earned a salary of £170,000, and a £17,000 bonus, while his benefits totalled £13,000. The owner of Virgin Radio and Pearl & Dean saw its group turnover fall from £209.2m in 2003 to £201.2m in 2004. Statutory pre-tax profit, meanwhile, was £25.3m, compared with a pre-tax loss of £0.3m in 2003.

Stuart John Bridges, the group finance director of insurance company Hiscox, earned £530,000 in 2004, £45,000 less than his total pay for 2003. Bridges received a £216,000 salary, £14,000 in benefits and a £300,000 bonus. Hiscox’s pre-tax profit fell from £83.4m in 2003 to £77m in 2004.