Thursday, May 08, 2008

Access Kenya AGM

Access Kenya (AK) held its first AGM since listing on the Nairobi stock exchange (NSE). Here in alphabetical order is a brief recap.

Most of the questions were answered by Chairman Michael Somen and Executive director David Somen

Accounts: there were two balance sheets and P&L’s in the accounts which caused some confusion, but it was explained that one set was audited while the other was included to guide shareholders on the position of the company taking into account recent consolidations (Openview was acquired).

Blogger moment; as I was finishing my lunch, executive director David Somen was greeting shareholders and charring so I asked him about the company’s prospects: He said it's a good for investors and that AK was the second best performing share on the NSE after Equity Bank. On acquisitions he added that Kenya was not easy as most of the ISP’s of significance were not local entities, so they may look regionally for growth.

Collapsed brokers: two shareholders raised the matter of shares being sold without owners consent at different times - but each time, the chairman deferred them since they did not relate to AK shares

Computing industry one shareholder complained that the AK report was scanty on the industry (computing, ISP, technology etc.) and that the company should in future incorporate a management report on their performance in the industry. The chairman said that would be done.

Directors’ fees: while one shareholder considered it quite large, directors replied that they had actually reduced the fees 20 million from 50 million shillings before to be in line with other listed companies.

Dividend one shareholder complained that it was not enough and the company had undertaken too many corporate social responsibility (CSR) activities, diluting the dividend. The question got a lot of applause and the Chairman said they would take that into consideration in future (heavy CSR was also an issue at Standard Chartered AGM a few years ago). Another shareholder noted a dividend current liability amount, which the directors indicated was a payment owed to the directors of the company they acquired after the year end (Openview?)

Extraordinary votes
Increase share capital: from 250 million to 500 million this would give the company room to maneuver in terms of acquisitions, bonus, share splits. In answer to another shareholder, D. Somen clarified the CMA/NSE approval was not required to increase the share sin a company, but only at the time of listing
Acquire companies: up to 200 million shillings. Directors clarified that the companies falling under this clause were rather small, none larger than 5% of AK’s worth, and it would not be prudent to call an EGM (costing 1 million to 3 million shillings and several weeks time) each time this happened. Following other questions about due diligence, target companies and costs, the directors assured shareholders that all decisions would be made with a view to maximizing shareholder value and they would inform shareholders fully about acquisitions. The increased share capital would enable them to take on new shareholders whose companies they acquired. They have talked to several, but not ready to sign any deals yet
ESOP; vote to allocate new shares (about 1.35%) to the employee share ownership plans (ESOP). directors explained that it would enable them to maintain their unparalleled staff retention in the industry and that all 250 employees were shareholders which improved their commitment to the company. D. Somen explained a bit about the scheme which options were exercised over several years and ensured employees stayed on to reap the maximum from AK. This week the Nation Media Group announce plans to create an ESOP – that would be about the 3rd largest shareholder in the company, its time more oversight was given to the professional investment management of ESOP’s

Goodies: tote bag with cap, notepad and access Kenya pen. Lunch box from the Stanley hotel (beef sandwich, apple, orange, piece of chicken, Keringet bottle, soda)

Post election violence directors reiterated that they did not expected the early 2008 events to have an impact on the company’s outlook for the year which the anticipated to be 50% - 60% growth

Venue: was the Nairobi Arboretum and I heard many shareholders complain about its (i) inaccessibility – not public transport/or shuttle organized by company (ii) no directions - once they found the ‘park’, it was vast forest with no indication as to which corner the event was being held

Verdict: apart from the location, was a nice first outing for a newly listed company. It pays to have a strong chairman, able company secretary (Fiona Fox who is leaving the company after the AGM) and directors who can readily and confidently answer questions put to them by shareholders – 70% of which are mundane and/or repeated at every other AGM.

12 comments:

Maishinski said...

Two sets of accounts, scanty growth plans.. Hmmm..

I still say its an over-valued lemon.

bankelele said...
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bankelele said...

Maishinski: It wasn't like that - the dual accounts were clearly identified (same thing happened at CFC/stanbic and Equity/Helios meeting reports)
- and the other dude wanted to know more about the IT sector. It's their first AGM report, so next time i'm sure it will be tech-heavy

MainaT said...

Banks-thanks for the update. Did they say anything about the uptake of the home-internet service?

AK is a growth stock all the way. Buy before half year if you can.

Btw, one big favor, if you are attending the Equity AGM , please ask about post-lock in plans of the principals...
Tx again

bankelele said...

MainaT: I missed the first few minutes (wading through the arborerum forest), but I doubt if it came up.
on Equity, CEO has said he won't sell after lock-in ends in August. But it could be a moot point since shareholders have earned bonus shares, that were probably not affected by lok-up. ama?

Anonymous said...

Thanks Banks for Access Kenya update!
I understand they do client profiling nowadays. I also didn't get the logic of some of the acquisitions given some of the ISPs don't have core competencies.
I also feel the tech community's growing rather fast & as such the company ought to focus on its strengths and product development rather than looking outwards.
And as Maishinski said, I think the stock is over-valued. Remember the tech-stocks blow up of the late 90s and early 00s ?
I also understand Telkom Kenya's into some interesting developments in the coming months....any insights on that ?

Pimpala said...

I've read several of your pithy and savvy AGM recaps. One thing that cracks me up and lightens the general mood of the recaps is the 'Goodie Bag' section. Tell me, do shareholders really take much 'stock' in these bitings? I mean, if shareholders got only a banana each would there be serious 'ruminations' and 'grumblings' (pardon both puns)?

Maishinski said...
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Maishinski said...

On a positive note, Access Kenya management chose a relatively inexpensive venue for the event. Plus they disttributed the Annual results electronically. Kudos for that!

However: Lets talk about "goodies".
Goodie bags are not freebies. Investors should be given the option of either a "goodie bag" during AGMs or a cheque with higher dividends.

Lets look at the numbers:
- "Tote bag with cap": @180
- "Notepad and access Kenya pen": @20
- Lunch box from the STANLEY hotel (5 star - but lets assume heavily discounted) @800

..each goodie bag probably costs 1,000 bob, thats 29M down the drain (perhaps accounted as administrative expenses).

Now, most AK shareholders have less than 1000 shares. Therefore, with a dividend of .30, most will get a cheque of 300 bob or less.

at least 7 thousand shareholders will get a dividend cheque worth 150/- or less (i.e. a worthless cheque - since it will cost them more to cash it.)

If the goodies money had been paid as dividends, ALL small shareholders would have least 1,000/-

I bet you, on a typical day, none of the small shareholders would blow off a hard earned 1,000 bob at the Stanley.

Still, no one complained at the AGM. No one asked about the impact of the "free goodies" on his/her dividends...

Hence in this istance, I don't blame the company for taking advantage of the "peculiar habits" of its shareholders.

:-)

bankelele said...

Pimpala: I think they’d be grumbling. It’s a day to meet their managers, ask questions and eat a decent lunch and perhaps take away some memento.

Maishinski: This issue is raised at almost every AGM as some shareholders say f*%# the lunch, give us more dividends. They also ask for fare sometimes.
But at the end of the day, a good meal is something that is appreciated by those who make it. And companies rarely have more than 5,000 shareholders at their AGM’ (even large ones). AK said this meeting would cost about 3m, and I think it was worth it. This is also the norm at cooperaves and unlisted companies, so a publicly listed company should be able to do this - it's only once a year that they meet the masses anyway!
- on cheques, more companies need to enter into arrangements with banks to cash cheques cheaply (Stanbic UG sent out a memo to Kenyan banks to cash their cheques at 100/= only which was ignored by many banks)

Maishinski said...
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Maishinski said...

Banks, goodies at AGMs can open up opportunities for embezzlement.

Am not sayingthis will happen for Access Kenya but - How do you account for the exact cost? According to today's article on BD 27,000 shareholders attended.

Suppose actual numbers were 5,000, then someone has an opportunity to pocket a cool 20Million shillings!

...Anyway, if shareholders are happy with the arrangement then what can I say? Its THEIR company!

Cheers.

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