Olympia Capital held it’s 2016 AGM in in Nairobi on Monday. It was a brief meeting at the 680 Hotel during which the board promised they had turned the company round and expected to pay a dividend next year and be on time with their financial reports. They will announce their half year results, in two weeks, and the CEO said their (unaudited) business in Botswana was their best investment, while South Africa was a disaster where they had lost a lot of money.
We don’t want cents
He said, 17 years after they made the deal, 50% of the company business is now from outside Kenya, and even though the Botswana Pula had major exchange rate swings they expect Kalahari Floor Tiles to pay an interim dividend which will be passed on to Olympia shareholders as a full year dividend.
Shareholders questioned the company’s debts, investment decisions & classification, the absence of the chairman’s report from the accounts and a decision to de-list a subsidiary in South Africa to protect it from creditors. On the, promised dividend, shareholders said that they want shilling dividend payments, not cents.
The shareholders of ARM Cement (Athi River Mining) will meet on August 25 in Nairobi to approve the investment into the company by CDC Group (formerly Commonwealth Development Corporation), the UK government-owned development finance institution. CDC will become anchor shareholder who may contribute to stabling the company share price to the benefit of existing shareholders.
- If shareholders allow the investment of Kshs 14.14 billion, and other approvals are received, CDC (through CDC Africa Cement) will own 37% of the company.
- The IM document (distributed to ARM shareholders) notes that CDC, which previously the used to invest through third parties, resumed directly investing in African businesses in 2012 after change of strategy – and now has stakes including 76% of Feronia (DRC), 70% of Globeleq Power, 31% of Garden City, 24% of GEMS Africa, 20% Africa Foods (Rwanda), 15% of DFCU (Uganda), 15% Miro Forestry (Sierra Leone), and 3.7% of Bridge Academies.
- Shareholders will approve an increase of ARM’s share capital from 675 million to 960 million through creation of 285 million shares. As part of the deal, 353 million new shares will go to CDC and 90 million shares will go to the ARM employee share ownership scheme (ESOP).
- The current largest shareholders are Amanat Investments and the ARM MD (Pradeep Paunrana) with 27% and 18% respectively and their stakes will reduce to 14% and 9% in this deal, while the ARM ESOP stake could go up from 4% to 13%.
- The ESOP is more like an executive compensation plan as most of the shares allocated since March 2007 are to the managing director, the deputy managing directors and other senior managers. Of the 90 million new shares, 55 million are reserved for the managing director, 10 million for a family member, 5 million for the deputy managing director and 20 million for other senior managers of ARM. The amount of share be allocated are conditional on ARM meeting certain targets calculated of minimum EBITDA ($44M in 2017, $77M in 2019) and target EBITDA ($55M in 2017, $95M in 2019) [Note: The company lost lost ~$33 million before tax in 2015 down from a profit of $20 million in 2014]
- The deal will also include a payment of $20M to reduce the debt owed to the Africa Finance Corporation, another $90M in debt payments, and $30M of capital expenditure.
- Kestrel considers the Kshs 40 price to be adequate, but a chart in the IM shows that the share price has dipped from Kshs 80 in May 2015 to hang around Kshs 40 (or below) for all of 2016. On top of that, the new deal will dilute existing shareholders by another 43%.
- The shareholders will also change the company name (from ARM Cement Ltd) to Athi River PLC and will vote to allow (i) board meeting to be held on phone, (ii) payment of dividends by mobile money (iii) annual reports to be published in newspapers or company websites.
- The deal also includes reconstitution of the board to have 2 directors from the promoters (MD’s group) and 2 from CDC with other independent directors. CDC will get to sit on board committees for audit & risk, strategy & investments, HR and a new one called environment, social & governance to be formed as part of the CDC code for responsible investing.
- Deal advisors are Tradeways, Coulson Harney, Kestrel, and Deloitte.
$1 = Kshs 101
Co-operative Bank of Kenya (Coop) had its 8th AGM (since listing) on Friday 27th May, at Bomas, in Nairobi. At the end of 2015, Kenya’s 3rd largest bank had 342 billion in assets, and profits of Ksh 15 billion. It had Kshs 208 billion in loans and Kshs 265 billion in deposits. The CEO also mentioned that Q1 profit in 2016 was almost Kshs 5 billion and they hoped to attain Kshs 20 billion by the end of 2016.
- Soaring Eagle: The CEO gave an update of the ongoing transformation project that seeks to improve Co-op’s efficiency and services to the 5.9 million customers of the Bank. Now, only 25% transactions are done at branches, as customers have the choice to use other channels like mobile phones, ATM,s internet, or bank agents. Internally, staff are tasked to cross sell bank products & open accounts, and they receive promotions, bonuses, and increments based on KPI’s and appraisals. They consulted with McKinsey for some of this.
- Regional Expansion / Subsidiaries & Associates: They own 60% of Kingdom Securities (stockbrokers), and in South Sudan they own 51% of Coop Bank there, with the government of South Sudan owning the other 49%. The bank went from a loss of Kshs 687 million to a pre tax profit of Kshs 850 million, and the CEO said that Sudanese see the bank as their own, as they have a stake a board and management are local. They plan to use the same joint venture approach to take Coop Bank to Ethiopia, another large closed banking market. They also own 100% of Co-op Consultancy and Co-op Trust Investment Services, 35% of Cooperative insurance (parent of the listed CIC insurance) and 31% of CIC South Sudan.
- Shareholders: The bank has almost 96,000 shareholders who will each receive Kshs 0.8 per share in dividend – and this will total Kshs 3.9 billion in 2015 (up from 2.4 billion). The bank Chairman said that they had to maintain a balance with the dividends paid out so that they they did not have to call on shareholders to put money back in to the bank as it grows. Coop shares were issued after a 2008 IPO at Kshs 9.5, and now trade at 18.3. They have also issued bonus shares (twice?).
Elections: During the shareholder election, the CEO explained two unique points. One was that Coop Holdings which owns 65% of the bank, had already had its AGM and nominate 7 directors (that they are entitled to) and merely forwards the names to the Bank for endorsement at the AGM. Second was that the CMA now requires that companies make shareholders aware that they have audit committees, and to have shareholders vote for the members of the audit committee at the AGM.
- One Shareholder asks about the cost of banking saying that If he deposits Kshs 100 at an agent, Kshs 20 is cut, and there’s another Kshs 50 for each of his ATM withdrawals. The CEO they share these fees with the agents who have to pay for costs like electricity or to run their kiosks. Another one asked that Coop asked the bank to open more agent locations (now at 8,765) to serve other parts of the country.
- Insider Lending at Coop? The CEO assured that all loans taken by directors (total about Kshs 300 million) and employees (about 6.5 billion) are being serviced properly, and that they are known to, and approved by the board. Insider lending had brought down other banks in Kenya, but, he said, this was not an issue at Coop.
- Legal cases? All banks have legal cases, and they highlighted the main ones in the annual report.
KenolKobil had its annual shareholders meeting on May 12, at the Hilton Hotel in Nairobi. The board chairman spoke of the company’s performance in the three years since they had lost Kshs 6.2 billion. They had thereafter embarked on a turnaround that involved reducing costs, divesting from non-performing territories, focusing on profitable business rather than growing their market share, paying down debt, and corporate governance moves (separating the role of Chairman & CEO role) .
- Tanzania: The company would up their short foray in Tanzania where they were losing $2 million a year. They had a depot that was part of their venture was an expensive lease, and while fuel prices in Tanzania are set by the government, many companies sell below that price as they don’t pay taxes. The directors said that Kenol was a responsible company that could not and decided to close shop.
- DRC: They invested here, but did not ship product there as they were not happy. with the business climate and decided to sell out.
- Burundi is doing well despite the political turmoil there.
Dividends: One shareholder said the dividend was too low, but the chairman said they have a consistent policy of paying 25% of net profit as dividend, while the Group MD (GMD) said they still had to pay down a lot of debt. One long-term shareholder told the meeting, that it was better for the company to be conservative with dividends, rather than aggressive, like other companies, and come back in a few years to ask shareholders to invest more money in a right issues
Property: They have decided not to put up an office building in Haile Selassie street in downtown Nairobi for now as the office property market is saturated.
Goodies: Lunch box (which Hilton guards would not allow to be eaten on site), and tote bag. Some shareholders pleaded for the company to provide them with caps and umbrellas to promote the brand.
Odd Point: One shareholder asked why the AGM had not started with prayers. The Chairman said it would not be productive, as they would have to have prayers for Christian, Muslim, Jewish, and traditional African religions to be fair to all shareholders present.
The Kenya Airways shareholders 2015 annual general meeting (AGM) was held at the KQ Pride Centre, Embakasi on Friday October 9. This was on the back of the year in which they lost (a corporate record) Kshs 25.7 billion ($257 million).
Board Changes (in the calendar year): In: Mbuvi Ngunze (CEO), Carol Armstrong, Wanjiku Mugane Out: Titus Naikuni (CEO), Ayisi Makatiani, Dinesh Kapila and the Chairman Evanson Mwaniki who had announced he was stepping down ahead of the AGM by not seeking re-election. He said he was not running away from problem but it was time to give someone younger the chance.
At the end of the meeting, there was re-election of directors to the board, and while 5 had applied, 3 of them had since dropped out leaving Jason Kapkirwok (a former KQ strategy director) and Dennis Awori (current board member) as the only two names for the two vacancies on the board.
The meeting was quite routine, ahead of the Q&A. After the auditor read his statement, which included an emphasis of matter (relating to the loss), the chairman invited KQ CEO Mbuvi Ngunze to give a brief on the state of the airline which he (Mbuvi) said was operationally sound, but had financial challenges.
- He asked Kenyans to rally behind airline, as the staff are committed. Dubai and Ethiopia had aligned their hubs with airline and cities, but Kenya had not.
- KQ has sold older Boeing 767 and 737, aircraft, but deals to sell the 777-200 fell through twice, and they have since hired an agency to complete this.
- Seabury have been appointed to improve pricing and airline processes.
- They have appointed financial advisor to secure $200 million and negotiated credit with local banks and patient supplies, as well as short-term loans from government of Kenya, and KLM has also provided some finance.
- Asked about the loss, finance director, Alex Mwangi said, in short, they invested in the fleet, but revenue did not grow to match the increased fleet expenses (6 new 787’s now, and 3 new Boeing 777-300 this year). He also said the aircraft buy decisions were made back in 2005 – even before Chairman Mwaniki (longest-serving director) joined the board.
- One shareholder said the Kenya government should not give the board Kshs 60 billion, but instead jail the managers who were being investigated by the senate and get new auditors. Mbuvi said they are cooperating with senate who say they have a constitutional right to ask questions.
- PS Kamau Thugge said that with the visits by President Obama, the Pope, the WTO summit and the lifting of advisories, the outlook was good for KQ. He reiterated that the government was not broke as written in the media, and that they had already lent Kshs 4.2 billion to the airline, and facilitated the Afriexim funding.
- What’s the use of KLM? Mbuvi said KLM is a commercial and shareholder partner on North-South routes and this has allowed KQ to focus on Africa where 60% of their revenue now comes. They also have 20 other partnerships.
- Did Ebola really impact the results? Mbuvi said the Liberia and Sierra Leone routes generated closes to $4 million per month and the airline lost about $31 million in two weeks .
- One shareholder was concerned that management is too optimistic. Last year they talked nicely after the airline lost money, only to come back this year and find that the position was even worse. He said they had also been sweet-talked by boards at Uchumi and National (bank) as the companies went down and wondered if KQ would be around next year.
- One complained about, in the digital era, shareholders don’t get to see annual reports, till they arrive at the AGM .
- One shareholder who’s a frequent flyer and trader on the China route commended the switch to new Boeing 787’s, from the old 767’s which would break down often in China resulting in extended expensive hotel stays for passengers and crew. He also said that Kenyans were lucky to have an airline, and that other African travelers depended on KQ.
- Some shareholders complaints were contradictory; one asked for the meeting to be held in Mombasa, and another asked for bus fare to be refunded. One complained about high ticket prices, then later complained about having to buy water on JamboJet (KQ’s no frills carrier). She also complained about kids been separated from parents in-flight (an international airline rule?) and also asked the airline not to use prominent people like Chris Kirubi and Charles Njonjo (who crew would salute) in their adverts, but instead have ordinary passengers talk about their airline experiences.