Half way through 2005

Three companies going through significant times:

East African Breweries (1/5 of the value Nairobi Stock Exchange) ended its year on June 30th. Looking at its half year numbers, it is on track to have ended the year with 22 billion in sales and a profit before tax of 9 – 10 billion shillings, with beer consumption up over 20% in 2004/5. During the year the company did a 5 for 1 stock split and also got listed on the Dar es Salaam stock exchange in June.

Kenya Airways
Was the first company Kenyan company on the Dar es Salaam, and it can be argued that Tanzanian investors are the ones who kick-started the stunning appreciation of KQ shares. The company started the year at 17 shillings a share, and six months later the shares are at 69 shillings per share, a 300% increase.

All was not rosy despite the super-profits (6.9 billion from sales of 27 billion) that they announced last week. Negotiations will begin on July 12 between the government and Vodaphone over their 1998 shareholders agreement. Despite his desire to continue as MD Michael Joseph’s contract was renewed for only six months, making it likely that Government will push to have a Kenyan MD by year end.

10 thoughts on “Half way through 2005

  1. Jay

    I will hate myself FOREVER for not buying KQ shares earlier this year. A friend of mine approached me to buy some as he was buying and I said no thanks. Somebody please put me out of my misery!! I wanna die!

  2. Anonymous

    Bankelele… a rare mistake for u my friend… EABL had a 1:5 bonus & a subsequent 5:1 split… so 1 share became 6 shares… not a 10:1 split. Kenol was first to do a split & it was a 10:1.

    I don’t agree with DSE listing being “kick-start” of the KQ run-up in price rather the profits KQ made & the expected growth in new routes in 2005 (Istanbul, Bamako, Dakar, etc) as well as increased flights e.g. to SAfrica, London, etc. In addition, KQ made the smart move of hedging oil/fuel purchases.

    KQ had very good half-year results & stunning year-end results!

    Safaricom – Yes, I support a Kenyan MD as well BUT let the good times roll with M Joseph! Why rock the boat at this stage?

    It is not about him being a Mzungu but the fear that his Kenyan replacement might be connected to the current State House mafia. If u think I am making this up… note that in 2003 JB Wanjui wanted to be KQ chairman & was roundly defeated by KLM votes against GOK. Yes, GOK voted for Wanjui while KLM (& other like minded Kenyans) voted for other choices…

  3. Anonymous

    An excerpt from East African

    This is in my defense that Michael Joseph (even though a non-Kenyan) should remain as CEO – subject to performance measures- rather than have a “preferred” Kenyan who is beholden to political/tribal interests!!! I agree that Safaricom should be “floated” on the NSE. But the best man or woman for the job should occupy the CEO & CFO roles whether they are Kenyan or not!
    Last week, Mr Joseph defended the dividend policy, saying it was informed by the need to put more resources into network expansion and upgrade. A dividend payout is also barred under the terms of the firm’s corporate bond issues, valued at Ksh6.5 billion ($84.4 million), that expire in June 2007. Although the battle for Safaricom’s ownership directly pits the government against Vodafone, the management control part appears to have torn the government down the middle, with various interests lobbying intensely to have their preferred man replace Mr Joseph.

  4. bankelele

    Spare a thought for Telkom, who would rather use dividends from Safaricom to restructure and re-invest in new technology, instead of having to sell some of their 60% shares in Safaricom.

  5. Anonymous


    Telkom (its predecessor) got a free ride on Safaricom. Basically, they were given the “free” license by the Govt. Telkom then asked Vodafone to provide $22M for 40% of Safaricom.

    KenCell (Vivendi & sameer/merali) paid $55M.

    A side note: On the day sameer/merali was supposed to pay for his 40% ($22M = 40% of $55M) the KShs unexpectedly gained substantial ground against the US$. In layman’s terms, merali bought US$ “cheaper” from CBK through market manipulation – in cahoots with CBK honchos. The discount was approx 20% less in KShs than he should have paid! merali paid the KShs EQUIVALENT of $22M to the govt thus with a “stronger” KShs he paid LESS in KShs than you, I or other wananchi would have! The next day the KShs went to its “normal” level!

    Telkom needs a complete overhaul like KQ, not dividends which will help it limp along with the current wasteful structure.

    Before KLM bought into KQ, the Govt took over KQ’s debts. These included “suspicious” debts, etc. These debts were those that KLM would have never accepted as valid!

    So KLM took over a clean balance sheet, thereafter a public IPO tppk place & the stage was set for success.

    Telkom in its current form needs to be declared bankrupt & placed under receivership. The assets should be transferred to a “TelkomTrue” – My name for the new debt-free Telkom.

    Let the new Telkom find an experienced strategic partner, hire only the employees they require, sell shares in an IPO, offer a bond to raise capital & upgrade their networks. It will be a smaller, efficient legacy free entity.

    The old Telkom should receive fair value for assets sold/trasnferred to TelkomTrue. It should immediately fire most workers, pay their pension obligations & scrutinise the “debts” owed to guys like Mugoya & Kirinyaga Construction among others! An independent audit firm should be hired for this task.

    With good managemnt TelkomTrue will survive.

    In the meantime, the only significant investment that old Telkom would have would be be the 60% in Safaricom. The next step would be to hash out an agreement with Vodafone about listing Safaricom & giving management control to Vodafone. Next Telkom would offload its shares at MARKET prices to public & Vodafone (who would be a buyer like any other on the NSE) thus receiving the BEST value.

    Funds from the shares sale would be used to repay the (genuine) creditors including the Govt. And if the sale of shares doesn’t cover the debts, well… write them off!

    Remember the Govt will also own part of TelkomTrue which it can also sell to offset debts owed by old Telkom.

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