The national council of the Nigerian Stock Exchange (NSE), in pursuit of investors’-confidence building had last week approved the suspension of some quoted companies while others have been placed on watch list. KAYODE OGUNWALE and BUKOLA IDOWU examine the implication of non-submission of annual reports and accounts by these to the NSE.
LAST week the council of the Nigerian Stock Exchange (NSE) placed technical and full suspension on some quoted companies for defaulting in post-listing requirements, especially in financial reporting of their operations and payment of annual listing fees.
15 companies were placed on full suspension (meaning there will be no transaction on their shares) for failure to render 2008 audited accounts as at 6th September 2010. These include Wiggins Teape Nigeria Plc; Jos International Breweries Plc; Hallmark Paper Products Plc; Okitipupa Oil Palm Plc; Nigerian Wire & Cable Plc; Union Dicon Salt Plc; Ekocorp Plc; Nigercem Plc; Golden Guinea Breweries Plc; Daily Times of Nigeria Plc; Albarka Air Plc; Foremost Dairies Plc; Arbico Plc; First Capital Invest Trust Plc and Stokvis Plc.
The council also directed that if by Monday, 11th October, they fail to render their arrears of audited and interim accounts, the exchange shall commence formal de-listment process on them, for failure to submit their 2009 financial statements.  Also 28 companies was placed on technical suspension ( meaning their shares would be traded but there would be no price movement on their shares) starting from Monday, October 4, 2010.
These include Lennards Nigeria Plc,  PS Mandrides Company Plc, Aluminum Manufacturing Company of Nigeria Plc, Chams Plc, Ikeja Hotels Plc, Nigerian-German Chemical Plc, Pharma Deko Plc, Studio Press Nigeria Plc, Tourist Company of Nigeria Plc, Union Diagnostic & Clinical Services Plc, Nigeria Energy Sector Fund Plc, Vono Products Plc, M-Tech Plc, G. Cappa Plc, Nigerian Wire Industries Plc, Interlinked Technologies Plc, Big Treat Plc, MTI Plc, African Petroleum Plc, Conoil Plc, Nigerian Ropes Plc, SCOA Plc, Dangote Flour Mills Plc, Evans Medical Plc, Daar Communications Plc, Crusader Plc, IPWA Plc and Nigerian Sewing machine Manufacturing Company Plc.
On the emerging market platform, Flexible Mineral Plc, Krabo Plc, New Pak Plc, Tropical Petroleum Plc and West African Aluminum Plc have been directed to regularize their status in the areas of audited accounts, evidence of recapitalisation and payment of outstanding listing fees. Failure to conclude the regularisation by 11th October 2010, the exchange would commence de-listing process against them.
Furthermore, Afrik Pharmaceuticals Plc, Anino Plc, Rak Unity Plc, Rokana Plc, Smart Products Plc, Udeofson Garment Plc and Union Ventures & Petroleum Plc have been placed on watch list to enable them complete their recapitalisation activities, submit outstanding financial accounts (audited and interim), hold their annual general meetings, clear all regulatory issues with the Securities & Exchange Commission (Sec) and have a satisfactory site visit report from the exchange.

Benefit of annual report to shareholders
The annual report to shareholders is the principal document used by most public companies to disclose corporate information to their shareholders. It usually reveals the financial state of the company, including an opening letter from the chief executive officer, financial data, results of continuing operations, market segment information, new product plans, subsidiary activities, and research and development activities on future programmes.
An annual report is a comprehensive report on a company’s activities throughout the preceding year. It’s intended to give shareholders and other interested persons information about the company’s activities and financial performance. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company’s registry. Companies listed on a stock exchange are also required to report at more frequent intervals.
The details provided in the report are of use to investors to understand the company’s financial position and future direction.
Annual reports provide the rich text which accompanies annual financial statements. Therein lies an explanation for changes found in the numbers and importantly a section on prospects for the coming year. Analysts and researchers alike can get information on company strategy, key directors and their ownership of stock and stock options, divisional performance, key economic factors affecting the business and a whole lot more.
They are particularly valuable resource for strategy and marketing researchers. It can also be a useful way of checking the validity of forecasts made by directors. The operational review and outlook for coming year sections often promise improvements which may or may not materialize.

Stakeholder Reactions
Meanwhile stakeholders have continued to react to the action taken by the council of the exchange. Many believed that the sanction on the companies is long over due. According to Mr Sunny Nwosu, the national coordinator of Independent Shareholders Association of Nigeria (ISAN), “It is not a new thing and it does not come to us as a surprise. We have constantly written to the exchange raised the issue at annual general meetings that there is need to know the status of these companies.”
He however noted that the NSE was protecting more of its own interest rather than that of the investors, as the NSE placed the sanction due to fees owed it.
One stockbroker who pleaded anonymity said, “This should have been done long ago. It is better for us to have few companies who are ready to play by the rules than to have all the companies in the world who are not ready to satisfy post listing requirements.”
Noting that many of them won’t meet the deadline, he urged that the stocks placed on full suspension have no value and ought to be delisted.
Another broker noted that “placing the companies on full or technical suspension for non-compliance with the rules of listing on the NSE is a welcome development, as it would lead to more appropriate pricing of securities. More quoted entities would be compelled to give information to the market on a timely basis. Investors confidence in the regulatory capacity of the NSE and therefore in the market would be enhanced.
Some stakeholders also believe that the sanction would make the companies sit up and post their results as at when due thereby providing investors, analyst and stockbrokers the platform to predict the real value of the companies. it is also expected to help in determining the real prices of the stocks.

Conclusion
It is believed that this will serve as a lesson for other companies. Investors require adequate, appropriate and timely information to make rational investment decisions. The sanction may however further affect the declining liquidity in the market. According to a broker there would be no trading on the shares of those placed on full suspension and for those on technical suspension, investors interest in them would reduce.
This step by the interim administration of the exchange may actually be one that heads in the right direction towards the cleansing of the market and the restoration of investors’ confidence.