Category Archives: Scangroup

Scangroup AGM

Excerpts from the 2008 Scangroup AGM, Q & A session held today at KICC.

top issues were dividend cheques and bonus shares

Misplaced shareholder cheques: The question was posed by Mr. Shah, who’s probably the second most famous public shareholder after Mr. A W Chami and who had waited for nine months for a dividend cheque error to be corrected, and was faced with bank charges of several hundred shillings for his efforts.

In response, the company said they were working to sort out shareholder cheque and unclaimed dividends issues: 

  • Said the figure was now down to 3.2 million shillings. (which if unclaimed after a few years, will go to CMA)
  • Passed some blame on to stockbrokers who have not reconciled some accounts since the IPO
  • On cheques, they have an arrangement with their bankers (CFC), so customers could cash their cheques for free can (at the CFC upper hill branch)
  • Said electronic (EFT) payments had not been successful because a lot of information provided by shareholders was wrong.

Bonus shares: Several shareholders argued for bonus shares. Chairman replied times that – it was not the right time, they will cross that bridge when they get there, when they need to they will adjust their capital, will look at fund-raising at that time (shares were not the only avenue available)

CSR: Company is weak; Chairman replied they are doing more this year including some work with IDP’s.

A marketing company that does not market! Can the company do some advertising so it becomes well known?; CEO replied that they pitch to corporates and there’s not a marketing person in East Africa who is not aware of the company or its affiliates.

ESOP: It was good to have discussions at this AGM on the company’s employee share ownership plans (ESOP) – as CEO Bharat Thakrar explained that the board had approved for 6 million shares a per year to be availed through the ESOP to key revenue drivers and to ensure that senior managers were very well incentivized. All managers get targets, which entitles them to some options at the end of the year. The Chairman added that the shares were not free, were paid for by managers to the company and were priced on the date of acceptance i.e. market price. The report 2007 report noted that was ESOP set up under a trust deed in February 2008 but that no options have been granted so far, though shareholders have approved 15 million shares.

African ambition: Different shareholders challenged the board their ambition to be the biggest media buyer in Africa by 2010 when they (i) didn’t have the capital (ii) had dormant offices in Malawi, Mozambique, Zambia and Nigeria. The first shareholder was actually asking the company to give bonus shares/increase float (from the current 160 million shares to at least 250 million) while the CEO answered to the second – that all the offices were active, (except Nigeria) and were used for billing companies in those countries.

Cross-listing: One shareholder asked them to cross-list as their market was also Uganda and Tanzania. Chairman said it would make sense at the right time, but it was also very expensive to do.

Super sleuth: One eagle-eyed shareholder pointed out, and the company confirmed the error; that the top ten shareholders (printed in the annual report) had 66, not 50% of the company shares.

Goodies: Lunch offered, at KICC grounds, but no details.

New media stocks at the NSE

Until Safaricom gets listed later this year, take a glance at Access Kenya and Scangroup – two recently listed, new media companies at the NSE. They both say they are market leaders (none of their competitors are listed), both set out to increase market share organically and by acquisitions, and their shares cost about 30 shillings ($0.48) each, three times their IPO prices.

This month, Access Kenya are gearing up for their first AGM since their 2007 listing, while Scangroup will be having their second; and while Scangroup (SG) will have a vanilla AGM (no special business), Access Kenya (AK) have a lot more going on as they will seek approval from their shareholders to;

– double their authorized share capital from 250 million to 500 million shillings (500m shares) [giving them the capacity to acquire companies, split shares, or raise capital in future]
– allow the board of directors to acquire companies up to 200 million shillings (~$3 million) without having to call for an expensive extraordinary general meeting of shareholders
– allocate more shares for the company’s ESOP (employee share ownership plan)

How else do the two companies stack up?

vision:
SG vision – to be the leading marketing services company in Africa by 2010
AK vision – be the premier provider of high -quality internet and other technology services to corporate and high-end residential customers

shareholders : SG 44,193 ; AK 29,434 shareholders

2007 performance
SG: turnover of 4.7 billion, profit of 353 million, cash generated 165 million, assets of 900 million. EPS 1.48 and a dividend of 0.90.
AK: turnover of 882 million, profit of 171m (dividend of 0.30), cash generated of 133m, assets of 748 million (had 600m in cash, much of it unutilized from the IPO). They also have separate consolidated accounts that include the financials of Openview business systems which was acquired after the IPO.

Employee Retention key for new media companies:
SG: ESOP approval of 15m of the company’s 160m ordinary shares. Staff costs were 561m including 7m to directors and key managers.
AK: ESOP that had 7.25m shares of 203m ordinary shares has been exhausted and another 2.75 to be added this year. Staff costs of 131m including 53m to key managers and directors,

Other
SG: Has a lot of subsidiaries, from acquiring customers and competitors which is part of their strategy. 64% of their revenue was from Kenya with the rest from Uganda and Tanzania. Their CEO was on CNBC Africa TV last month saying their focus the year would be expansions to Zambia, Ghana, Mozambique, and Angola – probably by securing contracts with mobile phone companies in those countries.

AK: was charged a management fee of 52 million shillings by subsidiary companies (shades of Sameer group companies?).
Also, Access Kenya’s annual report is heavy on the marketing side with a special offer for shareholders to apply for Access Home – the fastest guaranteed residential broadband(Nairobi and Mombasa) for Kshs. 6,000 + VAT per month – a 20% discount for shareholders. One time costs include 8,500 installation and equipment of 25,000 (and VAT, though I thought all computers equipment was VAT free). An added extra for shareholders is that the package which (including 1st month) costs a total of Kshs. 45,820 (~$725) can be financed with an Equity Bank 1-year loan (but monthly repayments of 4,391 work the loan out to cost about 25%) – the offer runs till the end of May, and installation to be done in June & July.

NSE Briefs

Scangroup: It was a pleasant surprise to pick up the newspaper this morning and see results from Scangroup (company earnings usually break at theNSE site) for the year ended in December 2007.

Turnover was up from 3 billion to 4.7 shillings billion, and profit after tax was up from 279m to 353 million shillings (27%) as were EPS (1.48) and dividend per share of Kshs. 0.90 – which is not bad for a share that was oversubscribed 3X just 16 months ago.

KCB: Good and not so good news form the notice of their upcoming AGM (May 9). The company will be cross-listing it shares in Uganda and Tanzania but also proposes to carve out an employee share ownership scheme (ESOP) from the creation of new shares in a proposed rights issue (reserving 150 million of the 400 million new shares). ESOP shares are controversial unless they are bought from the pool of existing, issued, shares.

Kenya Re IPO

Better late than never, along comes the Kenya Re IPO shuffled to the top of the privatization deck . The ace card is still Safaricom, while Kenya Pipeline should be a joker in waiting.

It’s nice to venture back into the IPO game (after passing on the last two – Access Kenya, Eveready) and I should have my Kshs 19,000 ($288) ready to go after getting the prospectus(Minimum is 2,000 shares for individuals at 9.50 per share).

The IPO delay has not been explained, but the former managing director and financial controller of Kenya Re did not help matters by getting indicted for corruption related offenses just as the process was underway nor did a late attempt to absorb the run- down Kenya National Assurance (KNAC 2001) into Kenya Re.

Despite the 2,000 share minimum for individuals you can expect it to be over-subscribed going by the numbers who applied for Eveready and the amounts individuals applied for with Kengen. While recent IPO’s (Access Kenya, Eveready) have not performed as well as earlier ones (Kengen, Scangroup, that could all change now .

Foreign and institutional investors got burnt in Kengen (the first IPO in years) after they applied for millions of dollars worth of shares only to end up with $1,000 each. Subsequent IPO’s have defined specific allocation criteria – for individuals, employees, corporate investors, others and now even insurance companies. Corporates/institutions have also been given another incentive in that they unfairly won’t have to pay until they know how many Kenya Re shares have been allocated to them.

The market is still down , as I and am sure many others have traded less this year. Most activity had revolved around new share issues and recently split shares and the reduced trading has meant less income for the brokers.
Some say it is because of the falling prices or shares are still too expensive/overvalued, others says it is because of stockbroker misdeeds.

Dividend by EFT
In another move to curtail rising shareholder costs Scangroup has twice tried to entice investors to get their IPO refunds and now dividends by signing up direct bank transfers (EFT’s) to get money straight into their accounts. EFT’s offer faster payments, by pass risky cheques (can get lost in post office and investors have take about two weeks to get funds), but while EFT’s are free are most bank’s it’s also a sly way of passing on the cost of dealing with shareholders to shareholders themselves.

The most expensive round of beer you’ll ever buy

Archer has regaled us with some great bar tales of late. So here’s a nairumor to caution/silence all those big talkers and big spenders who take one tusker and suddenly become as generous as a politician tuning a stewardess by buying rounds of drinks and sharing their million shilling investment plans and income secrets.

It is said that someone with ulterior motives will cozy up to you to listen, and maybe get a free drink for listening. Usually such a person would be a sly thief eyeing one of the three fat nokia’s you’ve laid out on the table. Now there’s another fox that’ll befriend you and ask for your business card. That person could be tax agent who’ll Google (check up on) your records at the Kenya revenue Authority the next day to see how your big bar talk measures against the small income tax returns you filed at the KRA.

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.