Category Archives: KBS

Express Kenya 2009 AGM

The annual general meeting of Express Kenya was held on August 7, 2009, at the Norfolk Hotel.

The transport company had a decline in sales to Kshs 803 million (~$11 million) (down from Kshs 922 million in 2008) and it’s four-year profit streak was snapped as it lost Kshs 53 million ($700,000) before tax, down from a profit of Kshs 112 million the year before.

A presentation was given by the Express Kenya CEO as well as the Transport Manager which noted that 2008 was a year marked by post-election violence (PEV) which saw revenue decline by 13% (as they could not deliver to key contract routes in Western Kenya), fuel prices rose by 27%, and the company suffered some PEV vehicle damage which insurance companies have not compensated (insurance co’s don’t cover political risk).

2009 outlook: They noted that in the half year of 2009, sales and profits are ahead of budget; the company has undertaken efficiency measures including installation of vehicle fleet management & tracking system, outsourcing of some services, investment in new vehicles to support contracts, increase in warehouse utilization etc. By year-end, they project to have a profit which will be distributed as follows: to pay down overdraft (31%), new investments (29%), dividend (25%) and cash flow (15%)

Shareholder Q&A: Most of the questions asked related not on (lack of) dividends this time. Shareholders seemed to accept that the loss was justified by the election events and were convinced of the management and board explanations and improvements made since.

Hot button issue: The company entered into the murky Nairobi city bus transport system through deals with two companies’ – Citi Hoppa and Kenya Bus Services, and shareholders asked over half dozen about the investments.

Safeguard Bus Investment:
– How many buses? Express have 40 buses now that are shared among the two companies, each on the same terms. Other towns like Kisumu and Mombasa have requested Express to also launch similar investments there
– Are they profitable? Last year was trial; this year is performing better than expected – with good profits for the company. Express gets a guaranteed minimum daily income from each of their vehicles; anything above that and the management company gets a bonus. Money is banked into Express accounts every other day and this is closely monitored. In future, they plan to have swipe cards and pre-pay systems that will better enhance revenue collection
– Express is now the largest single vehicle owner in the Citi Hoppa franchise
– Since it has succeeded when will they branch out on their own? The Government has only licensed 3 transporters in Nairobi which probably requires 200-300 buses, so they have to work with Citi Hoppa, Kenya Bus or 2M. When the time is right, they may apply for their own license, but also they recognize that they (Express) don’t have the management team to run an independent fleet now

Fleet Management & Maintenance: 
– Express buses operate routes only within Nairobi, and only on specific routes e.g. 46 that have few potholes and where they can do many trips with their relatively new fleet. This also means lower insurance rates.
– Bus maintenance by who? The vehicles are part of a complex partnership with Ashok Leyland. Express rents space to the dealer who also does all the bus maintenance at their yard. In exchange, Express get all the clearing business and bonded warehousing for the dealer.
– One shareholder warned them they were dealing with someone (Juja MP George Thuo) who ran down KBS and built Citi Hoppa with the bounty. CEO said they did their due diligence at Citi Hoppa, and the buses, under the management of (Mrs.) Judy Thuo, are doing very well, even better than the KBS.

Other Q&A

Anchor shareholder commitment? Investor Chami questioned the direction of the company, the commitment of the main shareholder, lending by a director, building purchase by the company, and asked what/if the anchor shareholder, (who’s also CEO), pulled out of the company?
– CEO (Hector Diniz) replied that the loan to the company (Kshs 205 million) is at 6% whereas a bank would have charged 18%. The anchor shareholders have built up the company since they took over 5 years ago, transforming it from being worth Kshs 200 million to over Kshs 1 billion while producing profits from day one (and would have done so in 2008 if not for PEV and fuel prices)
– In the new building, Express Kenya owns 49%, while the Diniz group will have 51% and are sharing the opportunity and profit with shareholders (the building will cost Express Kshs 488 million)
– The CEO said he is proud of results – shareholder numbers have increased from 1,500 when they took over to 4,200 now, and the current share price of the company at Kshs ~9 is not a true reflection of the company’s worth which he said is Kshs 20+. He added that once Safaricom lifts market, the true market value of Express will show.
– He told off Chami that if he sold his shares, Chami could also sell his or look for another anchor shareholder.

Big Contract lost? When a shareholder asked if Express had lost a lucrative contract to distribute beer for Kenya Breweries, directors said they have not lost the Kenya Breweries distribution contract in the 5 years they have been in charge. They briefly lost distribution in Central Kenya, but have now got it back. They also do Western Kenya (which was affected by PEV in 2008), have got 100% distribution for Alvaro (for which they will procure new small trucks), 100% for UDV (spirits) and for delivery of KBL products to AFCO (Kenya army) stores.

Director Elections: at the onset of the meeting chairman, Dr. Chris Obura, corrected the notice of the meeting which had stated that three directors (including himself) were up for re-election (the printer had repeated last years notice). So as a result only one director was up for re-election – and Mr. Moskovic was re-elected

Goodies: One shareholder made a loud appeal for SWAG (there was none), saying the previous year they had got shopping vouchers and his family would ask “what has Express Kenya given you – to show patriotism to the company?” After the AGM, tea and sandwiches were served outside the meeting hall, but that turned into a free for all grabbing match – when will companies ever learn?

KPLC is not good There was a delay of 15 minutes as the meeting started because the electricity cut out, and the Norfolk generator took another ¼ hour to kick in

Uchumi, KBS, Madaraka

Uchumi
Uchumi stores will re-open this week. No word yet on the fate of shareholders and if it will be re-listed soon on the NSE. I still don’t think they will be able compete with Nakumatt & other supermarkets, or recover their lost ground, but I hope I’m wrong.

KBS
Official confirmation that KBS buses are not running, but the company plans to resume as a new company and a new fleet by the end of the month.

Madaraka
Monday (July 10) marks the deadline for residents of Madaraka Estate to have submitted applications, along with a 10% deposit, to buy the houses they live in.

Bus company crisis

After Uchumi, the next urban icon likely to go down in the face of faster, fitter, and smarter competition may not be a surprise.

When Citi Hoppa shuttles first appeared on the Nairobi scene, they were outnumbered about 10 to 1 by big blue Bustrack buses. Now it’s the other way round with the ever-expanding fleet of green citi hoppa’s outnumbering the reduced fleet of road-worthy bustrack buses still on the road by about the same margin.

And like Naukmatt over Uchumi, Citi hoppa’s aggressive drivers seem to delight in overtaking their creaking, struggling, blue-bus competition (which also break down often) especially as they climb hills and race to pick up passengers.

Bustrack/KBS, which seem to have withstood and adapted to the introduction of Matatu’s to the city, have not been able to adjust to the Citi Hoppa onslaught.

No more Metro Shuttle

The popular metro shuttle is no more and there are no more lines of faithful passengers queuing at Kencom House for travel to Karen, Lavington, Westlands, South B, JKIA and a few other destinations. General Motors Kenya has impounded 83 Metro Shuttle, Msafiri and KBS vehicles while financiers ICDC Corporation and Imperial Bank have claimed another 30 and 4 more repectively, following the failure of KBS to pay some major bills with these creditors.

Corporate Briefs

Kenya Bus trouble: Kenya Bus Services is going through some turbulent times as creditors have tried to sell some of their buses during the busy Easter weekend. General Motors Kenya moved to Court to attach 17 Msafiri buses over a 198 million shilling debt, and last week Kenya Grange Vehicle Industries tried to ‘sell’ 10 of KBS newest vehicles (the double-decker buses?) over a 6 million shilling debt – but both moves were halted by the Courts.

Braeburn (school) buys Hillcrest (school): The Saga of the Hillcrest schools, formerly owned by Kenneth Matiba’s Alliance Investments, took a new turn when the schools were sold to the Braeburn Group to settle a Kshs. 620 million debt owed to Barclays Bank. Earlier this week MP’s and some lobby groups launched a campaign to urge the Government to save the Matiba group  companies from predatory foreign banks.

SMS Banking: National Bank has launched SIM-ple banking which will enable customers to check balances, verify salaries, make utility payments and about 30 other services. This Nation article said that there’s a vast potential for mobile banking that is not being exploited. It’s probably due to the cost as both Prime and Co-operative banks already offer mobile banking at 30 shillings per SMS request, but the service is currently free at Dubai Bank.

No to a Strong Shilling: Central Bank has announced that it will move to weaken the Kenyan Shilling if it gets too strong against the US dollar. The shilling hit a 21-month high of 72.9, and bank forex dealers expect the dollar to fall below the 70-shilling mark soon. However, a strong shilling makes Kenya’s principal exports like coffee, tea and flowers, more expensive

US: No to Africa: The US will not finance recommendations made in the Commission for Africa Report.

Interest Rates inch up: Barclays Bank base lending rate is now 13.75%. In 2003 lending rates at most banks were about10%. The new rates at major banks of 13 – 14% are still far below the 25 – 28% rates that they charged customers in the late 1990’s.