KPLC unbundled

A new company will be spun off from the Kenya Power and Lighting Company once PricewaterhouseCoopers complete a review and formulate a balance sheet for the new transmission company.

RVR shutdown: Kenya Ports Authority has ended a contract with Rift Valley Railways for non-performance. What ails the company that has invested so much in new trains? Well the actual railway is still run by Kenya railways who have not seen any significant investment in years (but who have just advertised for a new MD)

Other Madaraka Jobs
most from the papers

Aureos Kenya a private equity fund is seeking investment professionals. Apply by 20/6 the managing partner at 43233-00100 Nairobi.

British Airways: Trade sales manager East Africa, Corporate sales manager East Africa. Apply to hcapjobs@wananchi.com by 8/6

Investment Research Consultants at Kaimana Consulting to evaluate investment opportunities in the emerging markets of Eastern Africa. Apply to jobs@kaimanaconsulting.com.

Uchumi Anniversary

One year ago today, Uchumi closed down. The management resigned, and the government later stepped in with a rescue package, receiver manager, and arrangements with the companies’ banks.

AGM season; Yesterday Uchumi held a meeting for shareholders. Watching KTN, it appears the media were kept out (as had been at past shareholder meetings). I was not able to attend (as a shareholder) and I am requesting any reader who attended to comment with a synopsis or key issues mentioned at the Uchumi meeting or any other AGM at KICC yesterday. Anonymous comments are given less weight, so do sign your comment with a name/profile please. (Media reports here and here)

This is AGM season and there are too many events to cover. I have tried to avoid going back to the same companies, but when you have two or three on a given day, in addition to other duties – yesterday company AGM’s included Nation Media Group, Standard chartered and Uchumi, one can’t be everywhere.

Uchumi Receivership: Media reports indicate that Uchumi (under receivership) may have improved performance by 50% over their best recent year. The audited results have not been released do they public, nor do they when a company is under receivership.

A receiver / manager (RM) (or bank hangman) is appointed by debenture holders (usually bank or financial institution) when they see a company is going to crash. His/her job is to salvage what they can for the banks to recover their money (usually by sale of assets), not other shareholders or suppliers. By that measure, the Uchumi team (led My Mr. Ciano) has gone an extra mile in engaging & informing suppliers and shareholders in the recovery plan. Shareholders because Uchumi needs their goods on the shelves and shareholders to raise money.

RM’s usually are unable to revive companies. This is because, by the time they are appointed, the company is beyond salvation. The owners/management will have run it down, hidden information from banks on the poor performance of the company, withheld payments to banks, staff and unfortunately to the tax man and city council, among other fatal decisions.

Some RM’s have gotten very rich in this country, selling the assets of the company to themselves – at throwaway prices, employing their relatives, and enjoying the power to manager giant companies that they would not have risen to manage even if they had worked for 50 years. For others it has become a permanent way of life, as the company (under their management) remains profitable and they see it as a long-term job – see the Nairobi Grand Regency Hotel – that has been run by different RM’s for over 10 years now). RM’s also have to contend with lengthy court battles with the previous owners who also meddle in the company’s affairs through proxies.

But occasionally, and if appointed early enough, an RM can actually save a company. He/she can make some harsh decisions to trim fat e.g. shut down an unprofitable unit that was consuming too much money, terminate bad contracts, and fire excess/expensive employees. They are able to make decisions that a sentimental management were unable to. It has happened before (rarely) and sometimes the now grateful previous owners will acknowledge the work of the RM to turn around the company and will now come back and pay the bank and takeover their now lean & profitable company.

Kenya Re 2006

Kenya Re published their 2006 results in preparation for IPO planned for June. Assets were up from Kshs. 11.6 billion in 2005 to 12.8 billion ($183 million) in 2006 and net insurance premium revenue rose from 2.1 to 2.8 billion over the same period. The year also saw management expenses increase from Kshs. 290 to 453 million resulting in a reduction of pre-tax profit from Kshs. 947 million in 2005 to 762 million ($10.9 million) in 2006.

Kenya Re accounts are straight forward, but insurance reporting is tricky. Once a year, usually between March & May), insurance companies publish their year end results. But there is no rhyme, some report only total assets, some don’t report profit/loss, or net asset positions while others have more/less detail – making it difficult to compare and see which companies are performing better. I wish their reporting could be harmonized.

KQ hits turbulence

Down: Profits dipped slightly owing to increased competition, and the weakening US dollar. Kudos’ to the NSE for the timely release of company accounts (now if they could only offer .txt alternatives alongside the huge PDF files). Sooner or later a company is going to reach a limit – and either report flat (or declining) revenue or profits, but shareholders don’t take too kindly to the inevitable.

Pilot stabilizes: In the wake of the KQ 507 crash, the airline MD has released a statement on safety issues to quell murmurs that the airline operations were stretched in pursuit of profit. Another statement of reassurance from a former manager.

Up: The airline has been voted Africa’s Leading Airline by readers of Travel News magazine. KQ also won for best regional, local airline, Msafiri magazine and frequent flier programme (with KLM).

ARM to retire bonds

Athi River Mining will convert 125 million shillings worth of corporate bonds into shares in the company as existing shareholders will be asked to approve the creation of 25 million new shares for this purpose.

The bonds were launched in October 2005. Of the 800m raised 600 was for completion of clinker plant in Kaloleni (near Mombasa) and 200 million was for repayment of bank debt.

Other corporate bonds include Faulu Kenya, PTA Bank and Mabati – with few new issues expected and little trading in them. Previous corporate bond giants – Safaricom and Celtel (who also retired their bonds early), opted to get bank financing the last time they needed expansion funds.