Cadbury Schweppes revealed yesterday (16 November) that the board of Cadbury Nigeria, a separately listed 50.02% subsidiary, has appointed independent accountants to investigate an overstatement in its financial position relating to the current and previous years.
This February, Cadbury Schweppes acquired a majority shareholding in Cadbury Nigeria, increasing its stake from 46.4% to 50.02%, In October, a Cadbury Schweppes executive was appointed financial director to oversee the transition from associate to subsidiary and replace the previous financial director, who was retiring. The new financial director has since uncovered the overstatement of the company’s finances.
In 2005, Cadbury Nigeria reported as an associate in Cadbury Schweppes’ accounts and contributed a net profit of GBP6m. In the first half of 2006, Cadbury Nigeria contributed a net profit of GBP1m. Cadbury Nigeria retained associate status until 28 February, and has been considered a subsidiary for the remaining four months. The value of Cadbury Nigeria on Cadbury Schweppes’ balance sheet as at 30 June 2006 was GBP70m.
At this stage, Cadbury said it is too early to be certain of the extent of the overstatement. “We do not believe it is significant to the group’s overall financial performance going forward,” the company concluded.
A further update will be provided at Cadbury Schweppes’ next scheduled trading update on 12 December.
