In 2017, the company had Kshs 6 million (6M) in the bank, paid 5 M in salaries and another 3M in professional fees. Their accounts were audited by Abdulhamid & company. This accumulated losses at the end of 2017 were Kshs 44 million, compared to Kshs 33 M the previous year.
Kenya Airways (KQ) announced their full-year results in Nairobi this morning covering the nine-month period April to December 2017, as in a change for past years, they have shifted their year-end to December to be in line with their airline partners. It was tough to compare 2017 to 2016 which was a full year but it was a significant year in which the airline completed a capital optimization to wipe out a deficit in their balance sheet which was achieved by Kenyan banks converting debt into equity, and becoming the second-largest shareholder (38.1%) after the Kenya Government who also funded their airline with cash and guarantees as their shareholding went up to 49%.
CEO Sebastian Mikosz said that fuel prices (which went up from about $52 to $62 in the year combined with elections (which included a 20% drop in East African domestic travel) had the biggest impact on the bottom line. He said that they flew 3.4 million passengers with a 76.2 average cabin factor and 8.1million revenue kilometers and increased frequencies to Cape Town, and added a new route to Victoria Falls. He
Acting CFO Hellen Mwariri read the results which included an operating profit Kshs 1.3 billion and a loss after tax of Kshs 6.1 billion. This was from revenue of Kshs 81 billion (compared to Kshs 106 billion in the full year before) and with assets at year-end of Kshs 140 billion (146 billion the year before) and they had also wiped out the negative equity position that went from minus Kshs 44 billion to minus 4 billion.
Mikosz spoke of the need to get more revenue from Kenya Airways corporate brands – Jambojet, Technical (servicing their own aircraft and they gained two external customers in the year), Cargo, Pride (training), and Holidays. He also spoke of network optimization at the airline – adding New York flights, new routes to Mauritius and Cape Town, and using more Q400 turboprops on short regional routes. Kenya Airways will also be enlarging their joint-venture with KLM to now include Air France and will KQ introduce an “economy comfort” product in all aircraft in the next 12-15 months, something that is popular with European partners customers. They have also recalled a Boeing 787, that they had sub-leased Oman Air, which they will now use on the New York route from October.
Mikosz said he was not a big fan of “open skies” that African nations were pushing for as Africa was not like Europe that regulated and policed open skies and was able to monitor the competitive space and the support availed to all airlines and the levels of state protection.
July 23 EDIT : After the two rounds of tenders closed, Stanbic announced that they received acceptances which resulted in their Kenya shareholding increasing to 68%. The statement adds that they have applied to continue buying shares of the bank through the market to reach their 75% target i.e from other shareholders of the company through the Nairobi Securities Exchange.
June 21 EDIT: Results of the first closing were announced and Stanbic received offers of 26.32 million shares out of the 23 million target and they will buy 23.56 million shares valued at Kshs 2.24 billion shillings – which will increase their shareholding to 65.96%. The second phase already commenced on 12 June, and those who participated in the first phase will begin to receive payments from 25 June. Participants who take part will forego the Kshs 4 per share dividend.
May 16 EDIT: Stanbic published a new notice in which the offer changed to a tender on a “willing-buyer, willing seller” basis with no element of compulsory acquisition. It will be in two phases which run from May 21, with the first closing to June 11 and the second on July 2. This will allow those who take it up the offer to be paid earlier – and that will be after the first closing date. Preference is given to the shareholders with less than 10,000 shares, and Stanbic shares now trade at 89-92 shillings.
March 16 Original: Stanbic Africa Holdings (Stanbic) – SAHL has tendered an offer to other shareholders of its Kenyan subsidiary who may be willing to sell their shares to the SAHL group at a premium as it seeks to increase its stake in Kenya’s 8th largest bank.
SAHL, which owns 237 million shares representing 60% of Stanbic Kenya, is seeking to buy another 59 million shares, which will take its stake to 75% (296 million shares) as part of a commitment to grow its business in Africa. Stanbic Kenya is listed on the Nairobi Securities Exchange and SAHL has declared that the shares will remain listed after the deal and have applied for an exemption from being required to make a formal takeover.
The bank shares were trading at Kshs 83 before the announcement, and SAHL is offering to buy no more than 59 million additional shares at Kshs 95 (~$0.94) a share. SAHL states that it will give preference to shareholders on the register date for up to a maximum of 10,000 shares in the offer, which runs to April 27.
In 2016, Stanbic Kenya had 4,424 shareholders, 3,837 of whom owned less than 10,000 shares, and 1,838 of these had less than 500 shares. While SAHL states that it is not acting in concert with any other parties, it is entirely possible that the three largest shareholders behind SAHL in the Kenyan bank – two foreign firms and one local company who may own a combined 59 million shares may be targets of the offer. One of the shareholders has also recently divested from owning large stakes in other NSE-listed companies including Athi River Mining and Kenol-Kobil.
SAHL established its banking presence in Kenya in 2007 by initially merging with the CFC Bank Group. Shareholders who take up the new offer to sell their shares will also forego a dividend of Kshs 4.00 per share declared this month when Stanbic reported bank profits of Kshs 5.6 billion along with assets of Kshs 239 billion, loans of 130 billion and deposits of Kshs 153 billion.
This week, the East Africa Venture Capital Association (EAVCA) with Intellecap Advisory Services released the Fintrek – which explores fintech opportunities in East Africa, new frontiers in fintech (defined as firms using technology to deliver financial products/services or capabilities to customers or others firms) and fintech investments in East Africa.
Asia Pacific and Africa have been harbingers of mobile payments and that is transitioning into fintech now. The Fintrek report notes three underlying factors driving fintech uptake as:
- (i) the use of alternative data to generate credit takings of the unbanked (and deliver services to them cheaply e.g no need for bank branches),
- (ii) peer to peer networks (decentralized collaboration, payments across borders, unregulated) and
- (iii) the emergence of nontraditional players (telcos, wallets like Google Pay & Apple Pay, e-retailers like Amazon)
Regionally, Kenya is seen as a leader in the region owing to its levels of deposit penetration, deep financial sector penetration, and smartphone ownership (at 44% compared to less than 10% for Tanzania Uganda Rwanda and Ethiopia). Kenya is where most fintechs are setting up, and Kenya-based fintechs have raised $204 million between 2000 and 2017 which is 98% of the funding to the region.
Funding: In terms of funding, fintechs are still in early stages as seen in the small deal sizes: seed funding provided 47 deals (averaging $447,000) and 60% of all funding was to impact areas renewable energy/off grid lighting and health care (microinsurance). Five companies M-KOPA, Off-Grid Electric, SunFunder, Angaza, Azuri) have raised $345 million (through debt and equity) accounting for 55% of the funding between 2010 and 2017. Another finding was that while 53% of all funding between 2010 and 2017 was from venture capital funds, their average deal size ($6 million – e.g. from Apis, Madison Dearborn) is lower than those of corporates ($15 million – e.g. from Stanbic, Commercial Bank of Africa) and foundations ($10 million – e.g. from Calvert, Emerson, Omidyar Network) deals.
Fintechs needs a balance of debt and equity investments to grow, but they are struggling to get debt financing (mainly bank loans). Fintechs in East Africa had debt-equity ratios of 1:1 compared to 3:1 globally, indicating they have capacity to absorb more debt but are not doing it. The EAVCA report cites one of the funding challenges as investors want proof of traction while fintechs need working capital to demonstrate proof of concept, lack of funder knowledge about local markets, East Africa fintechs don’t look like what foreign investors expect, currency fluctuations make it had to raise debt and there is a lack of fundraising skill among local fintechs who can’t afford the teams that will enable them to raise money.
The Fintrek report identified 11 fintech opportunities models and 47 sub-models and identified 4 sub-models that have flourished in East Africa:
– Payments and Savings: digital wallets (M-Pesa, Alipay, Tigo pesa – which pays 7-9% interest and now attract high-end users), payment intermediaries (Cellulant, Direct Pay, Jambopay) and digital currencies (Bitpesa, Coinbase, Belfrics – a crypto-currency platform).
– Lending: direct lending (Branch, Tala – with 1.8M customers in Kenya, Kreditech, Umati capital), P2P lending (Lendable, Pezesha – has 6,000 borrowers & 200 lenders), and lending aggregators (lakompare). Also, there is telco-based nano lending (M-Shwari, KCB-M-Pesa, Equitel – which issued $57 billion worth of loans – and telco-bank lenders in Kenya account for over 76% of total loan accounts, but only 4% of the loan values)
– Financial Management: Insuretech (Bimaspace, BimaAfya, Microensure), Investech (Abacus, Xeno) and personal finance management – (Chamasoft, Caytree).
– FS Enablers: (Jumo – credit underwriting for 5 million customers and 20 million loans), Arifu, FirstAccess, NetGuardian – fraud identifier), FarmDrive, Sasa solutions, Lendddo).
Some recent fintech deals in East Africa include Farmdrive (from the Safaricom Spark Fund), Pezesha (DFS lab), Pula (DFS lab, CGAP), M-Kopa ($80M – Stanbic, CDC, FMO, Norfund), Tala ($30M – IVP), Jumo ($24M – Finnfund), Mobisol ($12M – FinnFund), Angaza ($10.5M – Emerson), Flutterwave ($10M – Greycroft), Netguardian ($8.5M – Freemont), Trine ($8M – Gullspang), Lendable ($6M – Kawisafi, Omidyar, Fenway), Direct Pay ($5M – Apis), Azuri ($5M – Standard Chartered), Bitpesa ($4.25M – Greycroft), Branch ($2M – from high-networth Kenyans and funds – arranged by Nabo Capital)
Production of the Fintrek report was supported by Financial Sector Deepening (FSD) Africa and Netherlands Development Finance Company (FMO).
See more of the EAVCA Fintrek report and other fintech opportunities at the 5th Sankalp Africa Summit on March 1-2, 2018 in Nairobi and see their private equity snapshot report.
Comparing performance to six months ago a year ago, this portfolio is down 4% mainly due to shares sales, while the while the NSE 20 share index is down 7% from August 2017.
CIC Insurance ↓
Diamond Trust ↑
Kenya Airways ↑*
Stanbic (Uganda) ↑
Out: Bralirwa, at a 55% gain since buying in the Bralirwa IPO in 2011.edit TPSEA (Serena)
Best performer: Kenya Airways* (shares were diluted four times, price is up 235% from six months ago), Serena (up 36%), Diamond Trust 8%
Worst performer(s): Unga down 12%, CIC down 10% from six months ago)
Unexpected Events: (1) The offer by Seaboard to buy and de-list Unga (2) Kenya Airways restructuring impact on retail shareholders(3) Kenya bank shares resilience in their share prices even with concerns about their earnings growth in the era of interest rate caps.
Looking Forward to: (1) Banks expect interest rate caps to be re-assessed in 2018 (results in February 2018 (2) More infrastructure bonds from the government like M-Akiba (3) CIC developing a mixed-use project (Residential, commercial, educational, and recreational units) on 200 acres near Tatu City, Kiambu.