Category Archives: Express Kenya

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 its 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 quarter-hour to kick in.

Mid week business

IPO
The Scangroup IPO has been officially announced, but with a rather short window for investors to prepare (opens July 17 closes July 28).

While advertising is a fickle industry, the company seems to be a good bet since it controls over half of the media buying market and had revenue and profits of 2.3 billion and 200 million respectively last year.

It should not be as euphoric as Kengen, the hangover of which is still being felt by the investment community – and one lesson learnt is that an allocation criterion has been set to secure the interest of institutional investors who were all locked out of Kengen. They and corporations will get 45%, individuals 50% and 5% of the floated shares will go to staff.

Bonus share
Express (K) announced a share bonus at a rate of 1: 10 to shareholders of record as at 13th July.

Uchumi update
A suppliers group being coordinated by the Kenya Association of Manufacturers (KAM) has been informed that identification of an impeccable management team has been the main delay in the reopening of the company stores. (franchise Uchumi stores remained open). Suppliers have been asked to secure their interests by registering with the “Uchumi action” group and pay 10,000 towards lawyer and other movement expenses.

Miss the bus?
There are virtually no buses of the struggling KBS/Bustrack company on the road this month (anyone seen one?).

Broadband
Telkom Kenya launches Kenstream broadband wireless today.

– Also, the Minister of Finance has granted a special tax waiver for the about-to-be-retrenched employees at Telkom – one condition of which is that they can’t resume work/or consult for the company for a period of 3 years.

Education
The Tropical Institute of Community Health in Kisumu will convert into a new private university to be known as the Great Lakes University.

Housing
A new housing project known as Neema Estate, comprising 450 1 to 3 bedroom bungalows in Lukenya (located on the Nairobi – Kangundo road).

– Meanwhile a recent tribunal decision has given Jamii Bora Trust the go-ahead to continue with a slum resettlement project. Jamii Bora had sought to construct 2,000 low-cost homes at about 150,000 shillings each to settle 2,000 families (i.e. about 10,000 people) from the Nairobi slums of Kibera Mathare and Soweto in a new town to be called Kaputiei on 293 acres in Isinya, Kajiado. The town will be located 60km south of Nairobi, bordered to North by Nairobi National Park and to the South by the Magadi-Mombasa railway.

The Trust sued the National Environment Management Authority (NEMA) who had blocked the project saying it would adversely affect the environment and community. NEMA received objections to the Jamii project from Masai communities & area residents (who welcomed the town development but not slum dwellers), the Kenya Wildlife Services (KWS) & other wildlife bodies who argues that the land was part of the wildfire migratory corridor into the park. The land was currently sustained by lease agreement where the KWS paid Masai communities $4 per acre or about $400 – 800 per household per year as accommodation for wildlife.

The Tribunal found that the residents who opposed were not representative of the entire community and that the project had the support of church groups, AMFI, and had also received approval from other government sectors. The tribunal also deemed the area as no longer viable for wildlife owing to nearby human development.

One troubling verdict of the decision noted by the tribunal is that the influx of residents is likely to alter voting patterns and create hostilities, something the tribunal feels would be alleviated by voter education. Also, it will be tough for workers who settle here to commute to their jobs in Nairobi.

Tourism
– A new Tourist lodge in Buffalo Springs reserve in Samburu with 52 bedrooms and 12 luxury tents.

– Baobab Beach Resort in Ukunda will add 84 rooms to its 188 existing ones.

– Oltome Mara Campat Koyaki ranch, a semi-permanent tented camp will be set up in the Mara for Christian tourists visiting Kenya on religious missions.