Category Archives: AGM

Unga 2013 AGM

The 2013 annual general meeting (AGM) of Unga Group took place at KICC, Nairobi on November 28.
Finance and Shareholders Q& A 
 
Milling & Distribution Issues: While wheat is now being milled at 100%, it tends to fluctuate in other months as they compete with other buyers for grain especially during the festive season. Maize is being milled at 60-65% of capacity as more and more, maize is moving to the informal sector, and small Chinese mills.
When asked about product shortages of Exe flour for mandazi and chapati, the MD said when there are shortages of product, they may decide to mill general purpose wheat flour which is 90% of their brand sales. He added that shortages at Uchumi may have been due to that company being outside their credit terms which are enforced strictly.   
 
Tax Status: What is the effect of the tax reclassification of the company’s products from exempt to zero status? Unga products are now exempt (no longer zero-rated) which means they can no longer reclaim the tax back from the government – so they have to pass it on to consumers (higher prices)
 
Uganda: The company bought the 40% balance of the business in Uganda they did not own, as the minority shareholders was not willing to put in any more money while the business was struggling.  Since the takeover, they’ve been trying to add value to products, but this is more difficult since July 1  when the Uganda government imposed a 10% duty on wheat imports (all wheat is imported), also have also imposed 18% VAT. The result is that wheat flour is informally imported to Uganda, and big millers are downsizing staff and cutting back on grain procurement. 
 
Breakdown of Other Income: Other operating income was Kshs 281 million, of which 189M was revaluation of pension assets (thanks to a good the stock market). Directors said the sale of gunny bugs (collected over time) accounted for most of the balance, they will provide a detailed breakdown from next year.
 
Finance Costs: Why increased borrowings and why the low returns on investments? A new wheat mill was commissioned on November 2 and is producing quality wheat meaning fewer stock-outs. Also, the fixed deposits which were earning 6% in 2012, are now getting 12% this year.  
Volatility: Can the company benefit from Price volatility? There are recoveries sometimes on unrealized forex losses, but since the publication of the report, the shilling has strengthened, nullifying that, until recently.
Swag: As usual, shareholders asked about an increase of dividends, but also for the company to give bales of flour as a Christmas gift to shareholders. The chairlady said that this had been done in past years when the company did not have ample cash for dividends, and the board’s current preference was to work to increase the cash dividend paid out. 
 
Customer engagement: Some shareholders lamented the company’s low marketing and absence on the web with no information available for investors. The MD lamented that several counties were charging national brands for painting on walls and vehicles in the counties and that many companies are now white-washing their vehicles of any logos. He also said their website is at an advanced stage. A previous one was ready, but scuttled by management almost at the last minute. They also have a call centre at Kencall from July 1 that death with customer questions and also coordinated their orders and distribution. 
Hot Button Issue: Shareholders were concerned that the minority shareholders are being driven out by NSE buyouts at other companies (e.g.Access Kenya, Vipingo, CMC) and wanted the main shareholder (Victus with 51%) to assure other shareholders that there were no plans to buy out minority shareholders at Unga. The chairlady said there’s no evidence from the share register, that the main shareholder is buying shares, but this did not seem to offer absolute comfort as questioner noted that takeover notices appear out of the blue in the newspapers, without any prior notice.
 
Extras Business:  The proposal to shareholders for the company to purchase Ennsvalley Bakery had been deferred a few days before. The chairlady said that an opportunity to acquire an established bakery had come up and that in view of limited investment cash available, and the high cost of borrowing, a share swap was proposed – however not approvals had been received in time of the complex transaction. She said it would be discussed at an EGM to be called in the near future but before next year’s AGM.
 
The other extra business item – the sale of the company’s stake in Bullpak Ltd (a company that provides high-quality packaging material) was approved – with the board intention to redeploy the cash in the company’s core businesses of food and animal feed.

Access Kenya EGM

This morning saw what was likely the very last shareholders meeting of Access Kenya, as a public company. The Company Secretary reported receiving 11,207 proxies representing 85% of the shareholders at the extraordinary general meeting (EGM) that was to vote on the de-listing of all the issued 218 million ordinary shares of the company form the Nairobi Securities Exchange following a buyout offer that the board of directors had already endorsed and which 75% of the shareholders had voted in favour of.

A few of the retail shareholders present asked lots of questions about the deal, and it seemed they were unhappy that just over five years after they bought shares in the company at an IPO, after which the share had risen to 38 shillings, before dropping to Kshs. 4, and getting low inconsistent dividends, in between, they were now being evicted from the company.  

Some questions/topics raised:
– Why sell out for Kshs 3 billion (~$35 million) that could easily have been raised locally? The Directors 
– Was there a capital markets (CMA) rule on the minimum number of years that a company had to remain listed after an IPO? The directors said there was none, and the regulators had approved all decisions taken by the directors in the deal 
– Some shareholders said they had bought shares at about Kshs. 18, and were taking a big loss. Directors replied that Kestrel Capital, as an independent advisor, said Kshs. 14 was a good price to take and that Kshs 14 was a big improvement  from the Kshs 4 low in the past year, and Kshs. 9 when the deal was announced and shares frozen. 
– Were the needs of minority shareholders considered in the negotiations, and why didn’t the majority shareholders simply reduce their stakes, instead of selling the company outright?
– Why was the offer to retail shareholders structured as an ‘unconditional’, mandatory one? The directors said that no one was being forced out of the company and that any shareholders who wanted to remain could do so, and they will still receive annual audited accounts from Access Kenya..they noted that there were still some shareholders of Unilever Kenya which delisted  in 2009
– What is the fate of employees who own shares in the ESO..and will they be arm-twisted to vote the shareholders’ acceptances past the 90% threshold? The directors said Dimension Data was a $6 billion company who’s parent was a $100 billion one with ambitious plans for Access Kenya and Eastern Africa.

The final results of the shareholders voted will be tabulated by Deloitte and released in two days – and payments should be made to shareholders in September 2013. 

Unga 2012 AGM

The annual general meeting of Unga Limited, which is listed at the Nairobi Shares Exchange (NSE) had some discussion on land sales, the use of genetically modified foods (GM foods), the possible impact of Kenya’s upcoming elections on the company’s operations, and, of course – SWAG. Read more at Coldtusker‘s blog.

Kenya Airways 2011 AGM

Having not been to an AGM in 2011, I decided to take an hourto peek at the Kenya Airways (KQ) one as a shareholder and for sentimental reasons, including the love of aviation, because a KQ AGM was the inspiration for this blog.

There’s not been much change over the years: KQ, which has over 70,000 shareholders, has been generous with SWAG to shareholders over the years and this has ensured that they always have some good attendance (they also provide free transport from town to the Bomas venue of the AGM) – however this also means that their meetings are long and drawn out, with lot’s of time wasting (Chami) and inane questions (@ChrisKaranja 90% of all questions are related to umbrellas and food)

Some notable points

Investments: Regarding their Precision Air investment, (It’s now in the middle of an IPO) a shareholder noted KQ which owns 49% of Precision, posted a loss of Kshs. 188 million for the year to March 2011 on their investment – and looking at the Precision March 2011 ones, their pre-tax Kshs. 250 million profit was halved by forex loan revaluation adjustment of Kshs. 125 million (so the current shareholders in Precision swallowed the loss before the IPO). On their dormant investments, the KQ Chairman said one of them would be revived soon (Probably Flamingo Air, or one of two cargo companies)

Dividend: The March 31 annual dividend will be paid on 16 November.

Board: Amb. Denis Afande was retiring as a director, but there were no fireworks as in previous years – as this time, the board has settled on his replacement. Amb Denis Awori, a former Kenya rugby official and ambassador to Japan, and currently Chairman of Toyota Kenya was introduced by the KQ Chairman. He spoke briefly on his passion for the airline; he studied aeronautical engineering, was a trainee at East African Airlines (EAA was the precursor to KQ) and as ambassador to Japan participated in promoting the airline as it featured heavily in tourism promotions that were run.

Rights Issue: The Chairman spoke about their need to acquire more aircraft and pay for them including 10 Embraer 190 aircraft. The airline settled with Boeing in April on the delayed 787 aircraft (some of which were to replace Boeing 767) and the first one that was expected in October 2010, will now arrive in fourth quarter of 2013 when they anticipate loads will have increased significantly.

KQ are getting permission from shareholders (and closing the books) so they could go to the Capital Markets authorities in Kenya (& Uganda & Tanzania) but they were yet to determine the size or price. One shareholder (Mr. Karanja) cautioned that it was potentially dilutive (4X), came at a bad time (share price is low – a market price of 26 compared to NAV of 50 per share) and that a convertible bond or cheap overseas loans were better options. (FC) Karanja agreed with this, adding that they had not yet set the date, price, and structure, except that the funding plan would be a mix of debt and equity and that the new shares would create capacity for when the board decided the time was right. The KQ Chairman noted that both the principal shareholders – the Government of Kenya and KLM supported the increase in capital and the rights issue.

Missing the 2011 AGM Season

May and June are the seasons for corporate annual general meetings (AGM), but I’m yet to attend any except from one for a savings & credit society (SACCO).

SACCO’s: are getting more recognition in acknowledgement of their significant deposit holdings and loan portfolios and now have a new regulatory agency to oversee the sector.

In a variation from corporate AGM’s, at a SACCO one members have to first approve the chairperson’s report, supervisory report, accounts and budget before discussions can be held. Also at SACCO AGM’s, the rules allow members on the floor to contribute to a much higher degree, but this also means time has to be spent clarifying (from the by-laws) on exactly what proposals from the floor can be entertained e.g. how much they can vary the amount that will be paid to the management committee (honoraria).

This year, there was much debate over the last starting time of the AGM and if those members who were late in arriving at the meeting were entitled to payment of an attendance lunch allowance of $25.

Other country perspectives:

Rwanda: In Kigali, Bralirwa held their first AGM – after the company had converted to a public company and had an IPO last year. No writing has come from that meeting, but it is likely to have been quite similar to a Kenyan AGM, seeing as how much Kenyans have contributed to the structure and regulation of the capital markets system in Rwanda.

Also
– Shareholders were expected to approve an increase in capital a few months after the IPO.
– The standard auditor’s statement page has an extra clause noting that we (KPMG) have no relationship, interest or debt with the Bralirwa, and …… we comply with ethical requirements (of the) International Federation of Accountants’ Code of Ethics for Professional Accountants, which includes comprehensive independence and other requirements..

India: The Economist wrote about the Reliance AGM – at Reliance company run by India’s richest man. It is remarkably similar to a couple of Kenyan ones – (and was) a ceremony for retail shareholders, with hero-worship of an international icon and family that transformed the company to an international conglomerate. It was interesting to note that shareholders apply to speak ahead of time and get approval.

USA: Noted investor and blogger Eric Jackson wrote on the Yahoo AGM . He noted (on AGM’s) that big shareholders stay home and it is mainly those who live nearby, that attend for the free food & coffee. Also that the Q&A is tame with short answers to questions, no big news expected, and the only exciting thing was going to be the board election.

He has been very critical of the board and the current CEO and wrote elsewhere in Forbes on his preferred nominees to be the next Yahoo CEO .

Others twitter comments;
– What a downer! $YHOO “@TechCrunch: Angry Yahoo Shareholder Confronts Bartz And Asks For Her Head (Audio Clip) tcrn.ch/l9hHYJ”
– Terry Semel was let go by the Yahoo board ONE week after it backed him at 2007 shareholder mtg. They now back Bartz.
– $YHOO consensus estimate is it will do $4.55b in 2011. By my estimates, Alibaba Group (incl Alibaba.com, Taobao & Alipay) will beat that
– Here is my first 21CBH article on Jack Ma: http://is.gd/PsTaz4 $YHOO