Farewell Mars Group Kenya

While the world awaits the release of more cable from Wikileaks, some unfortunate news comes from Kenya where the equivalent of Wikileaks – the anti-corruption watchdog Mars Group Kenya - inexplicably took down their website in mid December.

The reasons for this are unclear, but (via @twitter) it appears it came about when someone tried to create an application to access their vast database - and this provoked the founders to take down the site and post a message that their database and contents therein are copywrited and invited anyone who wanted to use it to e-mail them for permission.

Mars Group Kenya (created by Mwalimu Mati, former Director of Transparency International Kenya) has been a great resource of information for taxpayers, students and analysts looking at corruption. Their site had official and unofficial, unreleased and secret reports of the Kenya government, Kenya parliament and auditors) mainly on corruption in Kenya. Also their budget reports on government spending have come to be appreciated and even caused the Kenya Finance Minister to re-check his numbers going into the 2009 budget.

Youthful Tantrum

The saga at the Youth Fund continues at the board hit back at the Minister of Youth Affairs for ‘re-appointing’ the ‘previous CEO’ to his previous post. And the nightly news have duly shown two CEO’s show up at the Fund office, each claiming authority to run the Fund – one backed by the Board of Directors, one sacked by the Board (and reappointed by the Minister)
For month now the CEO has had the upper hand in the media making rounds that he had single handedly stopped the Fund from engaging in financing deal with Canadian group Enablis – one which would the Fund would have been better served by channeling these funds through local commercial banks

Now the board has hit back with a hard hitting statement giving reasons why they had fired the CEO including that he was in-subordinate, misused resources (over-claimed imprest, attend training for fun), took trips to his distant home in northern Kenya under the guise of making official trips in his government allocated car), inflated procurement contracts, among other things.

The government inspector appears to agree with the board in most of the allegations against the CEO; but their recommendation is also curious: they don’t say the CEO should be sacked, instead - “…the audit team noted the board had lost faith and trust in the CEO and that they cannot continue to work together as a team. The only prudent action by the minister is to separate the two.”

This bring to mind a similar stand-off a few years ago at Consolidated Bank of Kenya where the Board said the would not renew the contract of the CEO and asked the Minister to appoint a new CEO. However the cards were flipped on the Board and they were all sacked, while the CEO was re-appointed to a new contract

This time around the stakes are different. The board appears stronger and the Minister not as powerful; in fact she is under siege from her own assistant ministers and the Board who used comments against her this week in the media including ‘lying, crying, comical’. So how will this one end? How should it end?

Olympia Capital 2009 AGM

excerpts from the last ½ of the meeting

Q&A leading into the 2009 AGM, Olympia shareholders had many questions revolving around the companies investment strategy, governance issues, disastrous foray into South Africa and prospects of escaping an Uchumi like future as the AGM was postponed, and happened a week later than scheduled.

Governance: - the AGM was delayed, the Board said, because the annual accounts were late coming out; one shareholder urged them to do better, not aim for the minimum corporate of 21 days only to avoid being late and incurring regulator penalties. CEO (Michael Matu) said they had noted this and had improved to the extent that the ½ year accounts were released in September, just over month after completion of period.
(lacking) corporate governance (missed this part where the auditor read out a statement that the company had no corporate governance in place. The auditor apparently made a similar remark last AGM, but that was omitted from the minutes of the meeting presented today - the directors mentioned they have engaged consultants and were embarking on corporate governance measures. One shareholder noted that the board had promised the same last year and no piece meal measures have been implemented to which the directors said they were doing this now and would brief shareholder in about two months
director loans increasing each year amount to 18.3 million – who, for what, what terms? CEO said he’s the only director and he has borrowed to buy house and car. Loan interest is paid and assets are charged to the company
insider board: One shareholder complained that 5 of the 7 directors had links to the parent company, so board was not truly independent
investor briefing -one shareholder presented the directors with a list of 35 detailed questions. The chairman suggested they have an investor briefing in about two months where all these and other shareholder questions can be exhaustively answered it will not be an EGM. CEO also promised to reply to all these questions via e-mail to the shareholder and copy his replies to the Capital Markets Authority whose representatives were in attendance
- at that time, the directors all also explain what measures they have taken in the area of corporate governance

Strategy Going Forward - For SADC (southern Africa) Olympia is still keen on the building materials market which is still strong. Even plan to go back into South Africa but without a link to Builders Warehouse – who handled 75% of their sales. They hope to revive and relocate the Natwood business to Botswana (Gaborone) from South Africa from where it will be easier and cheaper to supply their core markets in the Gauteng region (transport distances will halve from 600km to 300km)
- now going into Zambia on a smaller scale, and will look at Zimbabwe since economy is more attractive after dollarization
- part of problem was they did not make the management changes that they hoped to make; hire right people

Investments - Dunlop is profitable this half year, though had not yet installed new plant they bought to replace their exiting 1970’s plant. However with what they know from the Botswana tiles operation, they know how they can multiply their products & sales in Kenya with Dunlop once new plant is installed. From Botswana they supply South Africa, Zimbabwe, Angola Nigeria and Mozambique. Answering a separate shareholder question, mentioned that factory land had been given to Dunlop to support their balance sheet, but transfer had not been effected since they were awaiting confirmation that there would be no stamp duty to be paid on deal
- Mather & Platt, they bought out centum’s shareholding, but are yet to beef up the management there
- A shareholder (who was transaction adviser on the rights issue of 2007) said he was surprised to see how share transfers were disclosed in 2009 accounts. CEO said that at the time of rights issue, shares were allocated pending investments later made. E.g. Olympia had no cash to take up Heri rights issue, but Avon advanced Olympia cash against balance sheet . In answering a similar question CEO said of their strategy – when they see opportunities, but have no cash they arrange for third party to buy shares and agree to re-sell them to Olympia at later date
- No due diligence in describing Natwood investment, CEO had mentioned that they paid ½ the funds but later their due diligence showed that there were come issues within the company and a shareholder questioned if any initial due diligence was done at all. CEO explained that if company went after blue chip companies, they would pay premium prices, but they chose to go after viable but distressed companies and in this case they had consulted advisers and lawyers before natwood deal.

Shareholder votes - One director was re-elected, but COO Mwangi Wamae opted out of re-election to the board.
- ESOP though directors said employee share options plan (ESOP) will be a key tool to attract top managers for the various companies, shareholders voiced concern that this was the wrong time to bring up an ESOP, with the board governance not in place. Directors argue that the ESOP approval was separate from the implementation noting that - they have had an ESOP in Botswana for 3 years with no shares issued, and that the CMA (Kenya) would not be discuss and approve an ESOP unless shareholders had approved it. Since this was a formality it was approved.
- A dividend of 10 cents was approved. Chairman joked that this was the same as Safaricom was paying

Summary: Olympia CEO and Board pulled it off (again) - reassuring shareholders that the company was sound, strategy & governance would improve, they had a plan to take it forward and that the worst (of the SA foray) was behind them now.

Reading the Olympia Capital Tea Leaves

Holding company - Olympia Capital’s annual report is one of the most jumbled I have seen in a while - it has contradictory statements, dates overlap, and profit/loss amounts that may have led to some regulatory trouble in Botswana where the company was also listed.


recap
Performance: their accounts were qualified accounts by the audit firm DCDM who noted that the company did not comply with IFRS – where they should have consolidated a subsidiary (Plush - to be liquidated) in their accounts; the auditors however added that this omission did not have a material effect on the performance numbers since Olympia wrote off all related amounts

Disastrous SA investments
capping a disastrous foray into South Africa – whose dismal results the directors blame on the recession in that country
- owned 74% of Plush products limited which ceased business and will be liquidated as their bankers (Nedbank) moved in – the SA equivalent of a receivership?. Olympia wrote off Kshs. 103 million from Plush – 86 million investment and 17 million in loans
- With another company, Natural wooden products, they expected to buy (and who they lent money), but this will not materialize; they don’t expect to recover monies and have provided for it in full
- another one Natwood owes 63 million
- The report notes that Olympia provided a total of Kshs. 115 million for SA investments that have not contributed to profits since investment while the elsewhere is a note that discontinued SA operations will cost Kshs. 200 million

Investment/subsidiaries
- own 12.5% Heri investments (valued at 71.6) million and mentioned they got a good dividend, thought its unclear how much was received
- A subsidiary, Dunlop, bought a tile making plant at a cost of 54 million – but it has not been installed – and the company may have to get a third party to install or operate it – or may even have sell the plant!
- Owned 7 million worth of Safaricom shares at year end

Other
- Some directors & top shareholders have reduced their shareholding
- There are so many internal deals /within-the group based on valuations or estimated of directors
- There are no director profiles in report
- Corporate governance: Olympia created two board committees audit & nomination, and investments committee – but these did not meet during the year (this company needs a competent independent investments committee after its SA foray!)

Upcoming AGM
should be interesting to attend
- The AGM will be held on 25th September
- Auditors signed accounts on July 31, but the reports have been sent to (2,685) shareholders just two weeks before meeting
- Shareholders will be asked to approve a dividend at a critical time for the company (Olympia will pay out Kshs 4 million)
- Bad timing for the directors to ask shareholders to approve creation of an employee share option plan (ESOP), fund it, appoint trustees, issue shares etc.
- Increase share capital from 40 million to 50 million by creating 10 million new shares of 5/= each – this adds up to an additional 50, not 10 million!
- DCDM will continue as auditors.

Athi River Mining Board evicts Bamburi Cement as Director

Excerpts from the 2009 Athi River Mining annual general meeting (AGM)

Athi River Mining, Kenya’s 3rd largest cement company held its annual general meeting (AGM) on June 11 2009 at the Grand Laico Regency Hotel. It was mainly presided over by the Chairman Mr. Palle Rune and Managing Director Pradeep Paunrana.

After the finance director gave a review of 2008 performance – sales of 4.6 billion ($58 million) and a profit of 503 million ($6.3 million) (but had an error column labeled 2009 numbers and skipped over the net current assts position instead focusing on global credit rating A1 rating of the company)), the MD took over and outlined his plans for the company going forward along with a talk on the state of the cement business in East Africa.

ARM Outlook
- ARM had no cement growth in 2008 because they are at full capacity, and same with fertilizer. fertilizer sales rose sharply to almost 1 billion shillings, but that was because the price of fertilizer shot up in Keya. It is mainly sold o tea farmers, cheaper than fertilizer imported by KTDA and gives better yield. Silicate sold mainly export markets Mozambique, Malawi, SA
- 26% of ARM sales were from exports, but were hampered by strong shilling
- Project to haves sales of 6 billion in 2010 rising to 13.4 billion by 2012
- Currently produce 1,000 tons per day for the Kenya market that has 5,000 tones per day production capacity. With new plant in Tanzania, ARM will go to 2,000 tons per day from January 2010 - the new plant in Tanzania will be largest plant in east Africa
- improved production efficiency: now have the best margins in cement production in Kenya, ahead of Bamburi and a distant EAPC.
- improved energy efficiency in cement production - East Africa. Saved 16% (about25m) in 2008 and expect to save about 50 million in 2009 – they have achieved international benchmarks
- building their own clinker plant in Tanzania, locally produced clinker cheaper than imported clinker by about 1/3

Cement in EA
- Cement a growth business, and there’s great demand in this part of Africa for building work, and in the future for roads
- Cement grows at 2x GDP in east Africa , and has been at about 15% p.a. for last few years
- Comparing cement companies across region shows a variation in pre-tax profit margins ranging from 36% at PPC (SAfrica) and Tanga (Tanzania), while in Kenya Bamburi was 18%, ARM 17% and EAPC -13%
- Egypt became a new importer of cement in 2008

Shareholder Q&A
- borrowing costs are high and growing, why? high borrowing for expansion- they chose that route instead of the equity one. which will probably strenthen Bamburi's position
- acquired minority shares in Tanzania subsidiary, but did not get Kenya shareholder approval, why not? Chairman said they’d never get anything done if they had to bring such things to a vote
- Why not sell cement in south Sudan and Rwanda? Wont go for those markets, they are focused now on the highly profitable Tanzania market, and less profitable S. Sudan market is better served by rivals (tororo and hima)
- when will shareholders visit new Kaloleni plant as promised by the board? perhaps AGM next year will be held there, but its open year round for any shareholder to visit
- why is ARM cement and fertilizer not seen in retail shops around the country ? MD explained that virtually all their product was sold to repeat customers – e.g. contractors who took the cement at factory to building sites, and same with tea farmers

Hot Button moment: director elections
Three directors were up for re-election – Bamburi Cement, Michael Gondwe and the deputy chairman H. Paunrana, none of whom were present or reprsented.

Bamburi Cement, a rival and Kenya’s largest cement producer own almost 14% of company, and are second largest shareholder in company. Bamburi had not sent a representative, and their reserved seat at the board dais was empty
- The Chairman recommend that shareholders <vote against the re-election of Bamburi. He said it was clear that Bamburi does not want ARM to grow or produce more cement. They have been trying to sabotage ARM in international circles. I noticed in the minutes of last years meeting, for the vote to split the company management, Bamburi had requested a poll vote be taken. Chairman summed it up by saying that the board was not comfortable disusing ARM company business in the presence of a Bamburi representative
- One Shareholder queried if company had obtained legal advice to which chairman answered yes the board had even got two opinions
- Another shareholder feared that if Bamburi were voted out and then dumped their shares, it would affect other investor; the deputy MD replied that snares would be snapped up quickly and said Bamburi rights as a shareholder and director were separate unrelated matters
- Another shareholder asked about an ongoing land dispute between ARM and Bamburi for limestone deposits; CEO summed it up as follows: ARM scouted and located a deposit of limestone. Signed a least for 540 acres with Kitui town council. Bamburi tried to get this overturned, and the former Local Govt. Minister Musikari Kombo had tried to broker a sharing arrangement. Bamburi got high court injunction and ARM and Kitui council have now gone to court of appeal, a process that may take years. Courts and government tried to broker a settlement, but two companies are too far apart
- After the arguments shareholders present unanimously voted against the re-election of Bamburi as a director of the company.
- The two other directors, though absent, were re-elected unanimously. Mr. Gondwe of PTA, the company’s bankers had given his apologies as he was involved with other bank business on that day, while Mzee (old man) Paunrana, though over 70 was described by other directors as being a key guide in day to day management of company (not just a honorary deputy chair)

Goodies: T-shirt, tote-bad, keychain, lunchbox from the Laico

Ugandan Envy

this is NOT about Migingo Island

Google Earth image courtesy of afromusing

A year ago wrote this on the information availed to Ugandan investors by their companies; this year the envy is even more, it makes me sad; that by being the leading country in the region, we may not notice we are being passed in some aspects of investor awareness & rights.

Use of E-Mail: The Stanbic Uganda invitation/AGM notice again arrived by e-mail; now many Kenyan companies have passed by-laws allowing them to send out e-mail notices and annual reports to shareholders, but none has done so far. Maybe, with the eventual passage of the much maligned/controversial communications bill the legal framework is now there to back enable this – but we’ll see; While not every shareholder will have an e-mail account, if 1/4 of 1/3 of some company’s shareholders (Kengen, Co-Op, Safaricom) do, then these companies could potentially saves millions of shillings in postage costs.

Investor Disclosures:
(i) For Stanbic UG, rules of voting are clearly stated – shareholders are to endorse new directors and that 1/3 of directors will retire at each meeting.
(ii) for directors who are up for election, their mini-CV’s are printed out for all to peruse i.e. their ages, year of appointment, educational qualifications, directorships in other companies, and committee seats they. In Kenya, Company Chairmen just mumble through, if at all, fully expecting elections to be a foregone conclusion. Refreshingly here, the directors up for election at Stanbic Uganda (Hannington Karuhanga, Kitili Mbathi, and Samuel Sejjakka) are all younger than 50 years. In Kenya, opportunities for younger leaders & directors are the exception rather than the rule. But at Stanbic Uganda - the Chairman and Deputy Chairman have their tenure is capped at two terms of 5 years only.
(iii) Remuneration of directors is declared. Again in Kenya money amounts paid to directors are rarely mentioned, but in Uganda they are spelt out for shareholders to approve – here the Company (non executive) Chairman gets an annual retainer of US$7,500 while a director gets US$5,500

Language used; several companies (most recently) KCB have amended their company article to allow for electronic communication with clients; but they merely replace one of gibberish with another one, without bothering to explain what the jargon means. Here; Stanbic explain allows video-conferencing or tele-conferencing to be used at board meetings

Proxy detail proxy forms contain a lot more details including the items to be voted for with shareholder able to vote for or abstain on votes. They also call for shareholders to provide contact details (name, e-mail – what an easy way for a company registrar to build up a working database to manage is subsequent years)

Shareholders or their proxies (who can be more than one)are entitles to attend, speak, and vote, and the endorsement /presence of a proxy does not disqualify a shareholder from attending; this enables a shareholder to bring his wife/wives or children for them to learn about the process!

==

Investor guides: There are many things to learn from other countries in the region on investor rights and information despite Kenya being the leader. We are innovative, Uganda is about to unveil a CDSC system that Kenyan investors have had for three years, but which rogue stockbroker have besmirched. It would not be surprising if the Ugandan version may be sorted out ahead of time, closing loopholes that will be used to protect shareholders, and by educating them on how the system works.

All the regional exchanges – Kenya, Tanzania, Uganda, and soon Rwanda (where KCB, Kenya’s largest bank in Kenya will be the first company to have its shares to be (cross) listed & trading) all have the same information; but my NSE seems stale, like all the regulations were put up years ago and forgotten. Usualy we just check for the latest share trades, bond trades and quarterly financial announcements.

e.g. Faced with a budget deficit, Kenya has lowered the minimum amounts to invest in bonds to Kshs. 50,000 ($625). The Central Bank of Kenya which issues these bonds has put up some investor information basics, but nothing from the NSE who trade in these bonds. In Uganda, there is an advisory page for investor guides for bonds and shares, for any new investor to read, download for free.

Also in Kenya , tribe is the unacknowledged elephant in the room; one we pretend to not be influenced by, but which governs many aspects of our lives. Kenyans are required to communicate official in English (almost all government documents), and to a lesser extent in Kiswahili. But there are rural folk who may not understand the national or official language, but may wish to learn about shares and bond Uganda has investor awareness booklets in vernacular languages – including a Luo investor guide (PDF)(for the Northern Region) available from the Uganda Securities Exchange. And that, properly disseminated, may be worth much more than a small island.

TrackIt Overkill

KTN have been carrying a sensational three part series on car robberies, with a focus on Track-It. This is a company that installs tracking devices in cars to trace their location if reported as stolen and enable the car to be be recovered by either the company or police



For heavily stolen cars, tracking devices are recommended for owners. Some banks and insurance companies may even insist that they are installed as part of financial contracts. Fleet owners also appreciate using the devices which can assist in fleet management and monitoring

It’s a well researches story, they even obtained a list of alleged track-it customers including three members of parliament, who volunteered for their cars to be ripped apart and checked for the devices, which were apparently not found (KTN reported they found devices in just 50% of the cars they checked)

The saga has played out in an even more sordid as the managing director of that company was recorded on camera offering to bribe the journalists with about $12,000 after admitting it was true that his company had not installed tracking devices in some cars, despite charging their owners 45,000 ~ $560. The devices are small electronic units that are hidden, so that even car thieves won’t know

KTN have led with the story three nights in a row, Nairobi, but is it overkill? urely there are more pressing matters that can be covered in the news. The car theft story has led ahead of political and other events of the day.

Car theft is not a new thing; car jacking have been covered, bus passengers are robbed or terrorized, chopped up cars are fund in agricultural fields and industrial sheds every other week. To spin this story out of three prime time nights is over kill.

Also over looked in the story, and a fact alluded to by the embattled Trackit owner is business competition in the story in the business competition. The owners of the standard/KTN may also be linked to a rival company, industry leader - Cartrack. It would be unsual to KTN to acknopwlede a corporate link, but if thers’s one it should be stated. Maybe it would have been better if another media house e.g. NTV had broken this story, but I doubt if they would have made it a three day special.

e.g. Intel recently posted a query on @twitter on which of the two companies to subscribe to. But after this story is completed and based on the behavior of the Track it boss, that company is finished.

Analyzing Kenya Pipeline

Pre-IPO Peek at KPC

Kenya Pipeline Company (KPC) is expected to be the next big privatization project to help plug the current Government of Kenya budget deficit. The IPO transaction adviser selection process is already underway for KPC and other state corporations

How much can one glean from audited accounts of the giant company? I got hold of a 2007 annual reports of the company – a rare big glossy booklet that mentions every project e.g. SAP, ISO, fibre optics, refurbishments in Western Kenya, Mombasa, Athi River, with lots of graph



KPC still mostly compares itself to other state corporations in terms of goals such as to raise capacity from 440,000 to 880,000 lire per hour by August 2008 - a massive project that later turned controversial and may have cost the last MD (Okungu) his job in January 2009.

Financials
- 2007 revenue of 8.8 billion shillings (~$117 million) (2007 was 8.45 billion and 2003 was 6.5 billion). 2007 Revenue comes from export services (4.3b) , local services (3.7b), and 748 million from kipevu storage fees
- Pre-tax profit of Kshs. 4.3 billion in 2007 (~$53 million)
- Earnings per share was 163 shillings [153 in 2006, 2003 was 29 shillings) – company’s shareholding is made up of 18 million ordinary shares of 20/= par each.
- Dividend paid out of 8.25 per share each year 2007 and 2006
- Cash of 4.5 billion (1.1 billion in 2003) of which 2.5 billion is in treasury securities (which they only started investments in 2005)
- Paid 2.2 billion in direct and indirect taxes and was recognized by Kenya Revenue Authority as a distinguished tax payer
- Total assets of 20.2 billion shillings (18.7 billion in 2006) –however fuel stocks of 13 billion shillings (384,509 cubic metres) that is owned by marketers is not include in their accounts. [2006 was 36 billion comprising 856,958 cubic metres]
2008 decline: summarized KPC financial accounts show revenue declined by 7% to Kshs. 8.2 billion and pre tax profit 54% down to Kshs. 2.6 billion in 2008

Auditors: Accounts audited by controller and auditor general, who hired Deloitte & Touche; who said the accounts were ok except to note that that 1.2 billion receivables (current assets) includes 348 million owed from an unnamed oil company that is the subject for a court case and for which no provisions have been made

Scandals: has been a cash cow for politicians for years with a high turnover of managing directors, manager and directors. Different parts of the report mention Kshs. 967 million pending in lawsuits, 404 million leasehold land unable to develop since it is gazetted forest land, 347 million from Oil Company, 314 million of obsolete spares, and Kshs. 221 million for a finance deal with Triple A that cost the previous MD (Ochuodho) his job. The company also provided Kshs. 382 million of services to National Oil Corp of Kenya (related company as they are both owned by the Government– do they pay all oil marketing fees?

Banking
Bank with NBK, CBA, Stanchart, Co-op. In 2007, they paid off all bank loans (EIB, Stanchart, and CBA) amounting to Kshs. 500 million in 2007, but are still stuck with the 221 million Triple A loan.
- KPC recently signed a syndicated loan of Kshs 8.2 billion with CFC-Stanbic, Barclays, CBA, Citibank, and KCB.

Exports:
- Exports 58% to Uganda, 155 Rwanda, DRC 14% Tanzania 6% Sudan 4% Burundi 3%
- strong shillings bad for export sales
-pricing structure – more expensive at Eldoret and Kisumu means that the company loses revenue if other countries e.g. Rwanda, Uganda remove their oil at Nakuru or Nairobi depots
- 50% of their revenue comes from fuel exports, and With oil being found in Uganda, Sudan, and possibly Congo, is the pipeline capable and adequate to transfer oil from central Africa to the coast at Mombasa?

Others & Non core activities
- will Construct an LPG plant with private sector investors (including Kenya pipeline refineries limited, and now-collapsed Triton) in Mombasa at a cost $50 million and one in Athi River at a cost of $13.5 million by Bharat of India
- Other income includes Kshs. 8 million in helicopter income, and also disposed of 120 million worth of helicopters in the year 2007
- 50 million donated to ministry of youth affairs
- 6 acres worth of land worth 30 million in Nairobi was donated for a street children rehabilitation center
- Spent 114 million in advertising (by a monopoly) and 35 million shillings in legal expenses
- Has shares in petroleum institute of east African and consolidated bank
- Successfully changed their pension from a defined benefit to a defined contribution scheme

Outlook:
- Slight financial dip in 2008 will probably be attributed to the post election disruptions
- Capital spending could be significant as they are extending the pipeline to Uganda (Eldoret to Kampala). Also the company already spends quite a bit in pipeline rehabilitation costs, and won't a complete new pipeline (though more expensive) be a better solution?
- Needs a stronger management team led by a strong MD – like Kengen’s Eddy Njoroge (someone with a legacy to protect who will shun the wheeler dealers) and a stronger board (not just the Energy ministers' cronies)
- Could be a good IPO buy i.e. a cash cow pre-tax profit margins of almost 50%

Other Opportunities
- Bank of Africa: branch managers, assistant branch managers, operations assistants’ recruitment@boakenya.com by 5/2
- Consolidated bank credit manager, administration manager, apply to the Head of HR 51133-00200 by 31/1
- Housing Finance senior relationship manager (mortgage finance), portfolio manager, legal officer, human.recources@housing.co.ke
Dyer & Blair sales agents, and for several hundred other weekly jobs visit Kenyan jobs blog

KCB and Triton

KCB has been rather silent on the Triton matter even as the company’s share price took a mini hit and its profitability outlook was downgraded in some circles.

The last release from their website was in reference to the launch of a Sustainability Report of the group. It’s not online yet, though it will be, an interesting report with lots of rarely disclosed facts on the bank, mostly their corporate social responsibility (CSR) activities, and will be repeated every two years.

in the report
KCB Brand - has a 75% corporate reputation, is the most popular financial brand, and the 4th most popular in Kenya (after Safaricom, Kenya airways and Coca-Cola) according to the Steadman Group.

Silence on Triton can be explained by KCB’s customer privacy guidelines - the bank assures customers of privacy though stringent procedures and guidelines and undertake responsibility for any breach of confidentiality that may arise

Impact of Triton policy on responsible lending requires that the KCB audit committee meets twice a month, credit committee also twice a month to discuss risk profile of bank, and the risk management committee meet quarterly or when required

Corruption & Triton: KCB has zero tolerance to corruption, has 110 ethics champions trained to combat corruption. Also in 2007 KCB exited from transparency international (TI) bribery index, it prohibit political contributions (direct or indirect) from bank funds, and is founder member of Ethical Business Group Kenya?. Report states that 2 staff were dismissed and 9 terminated.

Labour matters
- employees got an average of 39 hours of training a year
- Base salary is equal regardless of gender: for subordinates (male is Kshs. 36,057, female is Kshs. 33,984) clerical (m 58,434 f 63,600), section heads (m 85,770, f 87,684) managers (m 192,090, f 161,138)
- staff include managers (630 males to 287 females), most of whom are aged 30 – 50 years (492 m, 212 f)

Environmental
– all loan projects are required to obtain environmental (NEMA) certification
– KCB will strive to reduce water consumption (estimated at 191,000 cubic meters p.a) reduce energy consumption (5.782 million kwh, consume 312,000 litres of diesel which emitted 248,000 and 838 tons of carbon dioxide respectively)
– KCB will strive to recycle paper, scan documents – encourage customers to uptake e-services (use less paper), participate in tree planting and reforestation,

Empowerment of Kenyans
- loan base rate of 12%
- KCB has 71,000 e-customers (receive information by electronic means - which menas less paper consumed)
- Create wealth nationwide - branches can procure 33% of product in local areas, and KCB has 9 full branches in sparely populate areas
- provide agricultural loans (mavuno for tea farmers and brookside for dairy operators)
- in education sector, partner with AIESEC and the palmhouse foundation

Triton ends well? for KCB: The Triton matter may be a forgone conclusion if the Daily Nation article about an out of court settlement between Government of Kenya and its financiers (KCB, Fortis, Ecobank, Equatorial banks) is true - and that the government (i.e. taxpayers) may pay the financiers off to not go to court over their funds lost with Trition and teh Kenya Pipleince Corporation (KPC). The silence will mean that unsavory happenings at KPC will (maybe) not be exposed further, clearing the way (hopefully) for an IPO of the troubled company.

Missing the Centum party

(EDIT: Centum's official Press release about the AGM)

When I last looked at Centum, company was in the news due to CEO exit and a postponed AGM and postponed dividend.

Now it appears the AGM took place yesterday: I did not attend as I (i) had sold my shares (ii) did not see invitation document before today (iii) forgot all about Centum AGM

From today's reading, Centum sent out an annual report with updated sections but still the financial accounts for nine months to March 2008: it now includes mentions of departures of Isaac Awuondo (September 08), and CEO Peter Mwangi (October 2008) which coincided with the postponed AGM, and also welcomes on board new directors - Kibuga Karithi (September 08) , Imtiaz khan (November 2008 - Cassias capital partners) and new CEO James Mworia (appointed October 2008, joined board December 2008) who came on board a week after Mwangi left - for greener pastures where he’s now the CEO of the Nairobi Stock Exchange (NSE)

No agenda: The invitation letter dated on 1st December 2008 mentiones a shareholder presentation woudl take place on Thursday at 10, followed by the AGM at 11 - but no meeting agenda was contained.

The report also states that the (Centum) board believes that annual general meting provides an appropriate forum for investors to communicate with the board and encourages participation

Dividend day A company statement from October had mentioned that dividend would be paid at the January 14 AGM

So what happened?

Anonymous Comments posted yesterday include

Anonymous said... You gave the Centum AGM a skip???!! Here I was looking forward to a post on that.
Part of the drama was that the company's attorney denied a proxy audience on the grounds that co. law does not expressly provide for proxies to be heard at an AGM. I wonder how corporate s/holders are supposed to voice their concerns at AGMs in that case?
Interestingly, a special agenda to have two directors (the Chairman and Chris Kirubi) removed was in the cards; no need to wait for the result of that coz its sure to flop since their stake in the co is significant.

Anonymous (New CEO) MainaT - I think he's off to a good start. He managed the anti- C.K s/holder sentiment as best as these things can be managed i.e. by requesting the co. attorney to give an (erroneous) interpretation of co law to diffuse the anti C.K sentiments that were beginning to spiral out of ctrl.

Anonymous said... Centum don't have an in-house co. attorney. They must have hired whoever was turning proxies at the door. Their co. sec. is not attorney. Curiously, did they send the annual reports without the proxy forms? Extremely strange. Very strange. CMA should take a peek at this. Some one should write a stinker, otherwise, minority views will continue to be suppressed.

any more comments? and was the dividend paid or just declared?

Toxic Centum Last time Centum was in the news their CEO had departed, and Discount stockbrokers had collapsed. This time the news cycle is topped by the Triton fuel scam and the departures of the Chairman of the Capital markets Authority Chege Waruingi and Kenya Airports Authority CEO George Muhoho - (more from "airport expert" - Coldtusker )

Electric Slide

Kengen: the Kenya electricity generating company will have its third AGM later this week – and while shareholders may be happy with a Kshs. 0.90 dividend they will also be asked to approve (i) 30% investment in a geothermal development company to be created by the Government of Kenya (ii) invest in a coal plant (iii) participate in other ventures – (perhaps buy into another IPP independent power producer?)

The proposals to shareholders are vague and without any spending amounts attached, they should not be presented to a vote. When the Access Kenya board got shareholder authority to make other investments, they capped them at Kshs. 200 million each - this one has none, and the third proposal doesn’t even limit Kengen from investing within the energy sector so it could probably buy a sugar company or tea company (for cogeneration?) with that mandate.

Anyway Kengen has undertaken a lot of geothermal work with three olkaria plants and is it really necessary for the Government with strained recourses to create another parastatal at this time? Shareholders who were also spooked by plans of a secondary listing of shares and plans to hive off a geothermal company from their assets two years ago will also not be happy to see that the plans are. still active.

KPLC: The much heralded VAT reduction in electricity bills has not amounted to much. It was effected in the November power bills, but the reduction in VAT from 16% to 12% appears to only cover the fixed charge of a Kshs. 240 per meter – so the savings amount to just Kshs. 9.6 per consumer.

Looking Back: Annual reports

I found the annual accounts for Total East Africa (now Total Kenya) for the year 1990 and tried to compare the changes over the years. This is important as companies with over a hundred thousand shareholders (Eveready, Safaricom) will be considering cutting their costs soon until they are able to use e-mail for distribution.

comparing the 1990 and 2006 annual reports from Total

size: 1990: 20 pages, black & white, no pictures, heavy envelope paper
2006: 48 pages, glossy paper, all colour, lots of pictures

Financials: 1990 profit & loss (appears on page. 8), balance sheet (p.9), cash flow (p.10) followed by notes 11 – 15 (13 notes) – showing turnover of 3.1 billion shillings and pre tax profit of 237 million.

2006 P&L (appears on p.25), balance sheet (p.26), cash flow (p.27), followed by note page 29 – 44 (32 notes) - showing turnover or 38.0 billion shillings, and pre tax profit of 677 million.

shareholding: 13.7m ordinary shares 6/= dividend [total dividend of 84 million]
173m ordinary shares 2.50 dividend [total dividend of 435 million]

Chairman's statement
1990 ½ page
2006 4 pages

Auditors statement: 1990 - Murdoch, McCrae & smith; they issued a 1 page statement with two paragraphs, saying they examined books, and they are true in their opinion.
2006 Deloitte & Touché: 1 page statement with 6 paragraphs; explaining directors’ responsibility, auditors’ role, audit process, and finally their opinion that the accounts are true.

Other Formatting: what’s missing from 1990, that’s found in 2006? shareholder profile (p.22) mission & ,vision (p.2), directors bios & photos (2 pages), picture of key managers (1 page), management report (5 pages), company profile (4 pages), corporate social responsibility and adverting messages.

verdict: companies like Eveready can cut back on the ‘filler’ and give an annual report with just the basics to cut the postage cost in ½. Last year they issued a small size report that was short on ‘filler’ but financial, regulatory and governance changes have also contributed to the increasing size of corporate reports and resultant shareholder costs.

Sleeping giants may never wake (or reform)

labour on Labour Day
Sometimes I wonder if we are ever going to reform & develop, or if by being profitable and making money we see no need for some reforms - corporate, land, ICT, political or other.

Rwanda is on the fast path to being an ICT powerhouse. They may get there, but we have the beach, undersea cable etc. - all we have to do is wait to benefit from them. Uganda and Sudan have oil – but so what? It will have to pass through here.

Stanbic Uganda [Pre tax profit of 69 billion ($41 million) [up 37%] and a dividend of Ug. 6.64 shillings per share (up 10%)] is able to e-mail to shareholders their annual reports, AGM notices, and proxies; meanwhile many Kenyan companies talk about it, have amended their by-laws to enable it, but I'm yet to see it done (any examples? - but maybe having 1 million expensive shareholders will entice them to take the next step forward).

In Uganda, empty plots display their legal numbers and have some sequential order by street; here in Kenya L.R. no’s (the official designation of parcels of land) only appear in court documents/mentioned in scandals and are only understood by estate agents.

In Uganda the Central Bank publishes all bank charges in the newspapers for customers to compare; here they give them to some private agency (FSD Kenya) to interpret for customers.

While the Kenyan audit bodies (FIRE, ICPAK) fault our companies for not disclosing the director compensation which they ask their shareholders to dutifully approve at each AGM, Stanbic Uganda shareholder can see that their chairman earns $10,400 and what each board member earns ($1,700 to $4,250) for them to approve.

Lastly, I don’t know any Ugandan stockbrokers but I’m sure it’s easier to ascertain their performance (and avoid rogue brokers) than it is here.

NSSF: apples & oranges

Kenya’s National Social Security Fund finally released their year end results in the newspapers today after many years of pressure by governance experts and regulators. The scheme hopes to convert into a pension fund and states that it plans to hold an AGM soon

While the statements show improved performance over the last four years (NSSF-K was abused in the 1990’s and forced into bad property investments and lost billions in collapsed banks), how does it compare with NSSF Uganda who released their results last week?

approximate conversion to US$

Buildings/property/land
NSSFK $434 million (35%)
NSSFU $76 million (13%)

Government Securities
NSSFK $115 million (9%)
NSSFU $289 million (51%)

Equities
Uganda list their holdings. – as Uganda Clays , Baroda, Nsimbe, DFCU, Stanbic, Serena, HFCU, Victoria properties. Kenyan one does not list but would include Unilever Tea, Nation media group, HFCK (11%) KCB (8%) British American Tobacco (20%) East African Breweries (8%), EAP cement (27%), and National Bank (48%)
NSSFK $618 million
NSSFU $54 million

Current assets
NSSFK $50 million
NSSFU $350 million

Current Liabilities
NSSFK $20 million
NSSFU $11 million

Members Funds
NSSFK $1,240 million
NSSFU $548 million

Totals assets
NSSFK $1,240 million
NSSFU $564 million

Income:
NSSFK $61 million
NSSFU $38 million
however the Kenyan one include changes in market value of shares in last year, adding another $80m to bring total income to $141m

Costs
NSSFK $41 million
NSSFU $7 million

Net Gain/Profit
NSSFK $147 million
NSSFU $31 million

Earlier:
- Under its current format, the ultimate payout will be low from NSSF(K) and the benefits at retirement will not be enough to sustain a majority of retirees
- Comparison between Stanbic Kenya and Stanbic Uganda.

Reporting director performance

NIC Bank which has been recognized for corporate governance awards for financial reporting has now added a new level of director performance by publishing a scorecard of directors attendance of board and committee meetings during the year.

Director attendance is an important measure of their performance, and contribution to the company. They should also be measured by how many other boards they sit and their other executive commitments to determine if they add value to the company.