Express Kenya 2009 AGM

The annual general meeting of Express Kenya was held on August 7 2009 at the Norfolk hotel.

The transport company had a decline in sales to 803 million ($11 million) down from (922 million in 2008) and it’s four year profit streak was snapped as it lost 53 million ($700,000) before tax, down from a profit of 112 million the year before.

A presentation was given by the CEO and transport manager which noted: 2008 was a year marked by post-election violence (PEV) which saw revenue decline by 13% (as they could not deliver to key contract routes in western Kenya), fuel prices rose by 27%, and the company suffered some PEV vehicle damage which insurance companies have not compensated (insurance co’s don’t cover political risk).

2009 outlook They noted that in the half year of 2009, sales and profits are ahead of budget; the company has undertaken efficiency measures taken include installation of vehicle fleet management & tracking system, outsourcing of some services, investment in new vehicles to support contracts, increase in warehouse utilization etc. By y year end they project to have a profit which will be distributed as follows: to pay down overdraft (31%), new investments (29%), dividend (25%) and cash flow (15%)

Shareholder Q&A Most of the questions asked related not on (lack of) dividends this time. Shareholders seemed to accept that the loss was justified by the election events and were convinced of management & board explanation and improvents since.

Hot button issue The company entered into the murky Nairobi city bus transport system through deals with two companies’ - Citi Hoppa and Kenya bus Services, and shareholders asked over half dozen about the investments.

Safeguard Bus Investment
- How many buses? Express have 40 buses now that are shared among the two companies, each on the same terms. Other towns like Kisumu and Mombasa have requested Express to also launch similar investments there
- Are they profitable? Last year was trial; this year is performing better than expected – with good profits for the company. Express gets a guaranteed minimum daily income from each of their vehicles; anything above that and the management company gets a bonus. Money is banked into express accounts every other day and this is closely monitored. In future, they plan to have swipe cards and pre-pay systems that will better enhance revenue collection
- Express is now the largest single vehicle owner in the citi hoppa franchise
- Since it has succeeded when will they branch out on their own? Government has only licensed 3 transporters in Nairobi which probably requires 200-300 buses, so they have to work with Citi Hoppa, Kenya Bus or 2M. When the time is right, they may apply for their own license, but also they recognize that they (EXpress) don’t have the management team to run an independent fleet now

Fleet management & maintenance
- Express buses operate route only within Nairobi, and only on specific route e.g. 46 that have few potholes and they can do many trips with their relatively new fleet. This also means lower insurance rates.
- Bus maintenance by who? The vehicles are part of a complex partnership with Ashok Leyland. Express rents space to the dealer who also does all the bus maintenance at their yard. In exchange, Express get all the clearing business and bonded warehousing for the dealer
- One shareholder warned them they were dealing with someone (Juja MP George Thuo) who ran down KBS and built Citi Hoppa with the bounty. CEO said they did their due diligence at Citi Hoppa, and the buses, under the management of (Mrs.) Judy Thuo, are doing very well, even better than the KBS

other Q&A
Anchor shareholder commitment? Investor Chami questioned the direction of the company, commitment of the main shareholder & lending by a director, building purchase by the company, and asked what/if the anchor shareholder, who’s also CEO, pulled out of the company?
- CEO (Hector Diniz) replied that loan to company (205 million) is at 6% whereas a bank would have charged 18%. The anchor shareholders have built up the company since they took over 5 years, transforming it from being worth 200 million to over 1 billion, while producing profits from day one (and would have done so in 2008 if not for PEV and fuel prices)
- In new building, Express own 49%, while the Diniz group will have 51% and are sharing the opportunity and profit with shareholders (the building will cost Express 488 million)
- CEO is proud of results, shareholders have increased from 1,500 when they took over to 4,200 now, and the current share price of the company at ~9 shillings is not a true reflection of the company’s worth which he said is 20+ shillings. He added that once Safaricom lifts market, true market value of Express will show
- He told off Chami that if he sold his shares, Chami could also sell his or look for another anchor shareholder

Big Contract lost? when a shareholder asked if Express had lost a lucrative contract to distribute beer for Kenya Breweries, directors said they have not lost the Kenya breweries distribution contract in the 5 years they have been in charge. They briefly lost distribution in Central Kenya, but have now got it back. They also do Western Kenya (which was affected by PEV in 2008), have got 100% distribution for Alvaro (for which they will procure new small trucks), 100% UDV (spirits) and delivery of KBL products to AFCO (Kenya army) stores.

Director elections at the onset of the meeting chairman, Dr Chris Obura, corrected the notice of the meeting which had stated that three directors (including himself) were up for r-election (the printer repeated last years notice). So as a result only one director was up for re-election – and Mr. Moskovic was re-elected

Goodies one shareholder made a loud appeal for SWAG (there was none),saying the previous year they had got shopping vouchers and his family would ask what has Express given you – to show patriotism to the company?. After the AGM, tea and sandwiches were served outside the meeting hall, but that turned into a free for all grabbing match – when will companies ever learn?
KPLC is not good There was a delay of 15 minutes as the meeting started because the electricity cut out, and the Norfolk generator took another ¼ hour to kick in

Uchumi, KBS, Madaraka

Uchumi
Uchumi stores will re-open this week. No word yet on the fate of shareholders and if it will be re-listed soon on the NSE. I still don’t think they will be able compete with Nakumatt & other supermarkets, or recover their lost ground, but I hope I’m wrong.

KBS
Official confirmation that KBS buses are not running, but the company plans to resume as a new company and a new fleet by the end of the month.


Madaraka
Monday (July 10) marks the deadline for residents of Madaraka Estate to have submitted applications, along with a 10% deposit, to buy the houses they live in.

Bus company crisis

After Uchumi, the next urban icon likely to go down in the face of faster, fitter, and smarter competition may not be a surprise.

When Citi Hoppa shuttles first appeared on the Nairobi scene, they were outnumbered about 10 to 1 by big blue Bustrack buses. Now it’s the other way round with the ever-expanding fleet of green citi hoppa's outnumbering the reduced fleet of road-worthy bustrack buses still on the road by about the same margin.

And like Naukmatt over Uchumi, Citi hoppa's aggressive drivers seem to delight in overtaking their creaking, struggling, blue-bus competition (which also break down often) especially as they climb hills and race to pick up passengers.

Bustrack/KBS, which seem to have withstood and adapted to the introduction of Matatu’s to the city, have not been able to adjust to the Citi Hoppa onslaught.

No more Metro Shuttle

The popular metro shuttle is no more and there are no more lines of faithful passengers queuing at Kencom House for travel to Karen, Lavington, Westlands, South B, JKIA and a few other destinations. General Motors Kenya has impounded 83 Metro Shuttle, Msafiri and KBS vehicles while financiers ICDC Corporation and Imperial Bank have claimed another 30 and 4 more repectively, following the failure of KBS to pay some major bills with these creditors.

Corporate Briefs

Kenya Bus trouble
Kenya Bus Services is going through some turbulent times as creditors have tried to sell some of their buses during the busy Easter weekend. General Motors Kenya moved to Court to attach 17 Msafiri buses over a 198 million shilling debt, and last week Kenya Grange Vehicle Industries tried to ‘sell’ 10 of KBS newest vehicles (the double decker buses?) over a 6 million shilling debt – but both moves were halted by the Courts.

Braeburn (school) buys Hillcrest (school)
The Saga of the Hillcrest schools formerly owned by Kenneth Matiba’s Alliance Investments took a new turn when the schools were sold to the Braeburn Group to settle a Kshs. 620 million debt owed to Barclays Bank. Earlier this week MP’s and some lobby groups launched a campaign to urge the Government to save the Matiba group from predatory foreign banks

SMS Banking
National Bank has launched SIM-ple banking which will enable customers to check balances, verify salaries make utility payments and about 30 other services. This Nation article said that there’s a vast potential for mobile banking that is not being exploted. It’s probably due to the cost as both Prime and Co-operative banks already offer mobile banking at 30 shillings per SMS request, but the service is currently free at Dubai Bank .

No to a Strong Shilling
Central Bank has announced that it will move to weaken the Kenyan Shilling if it gets too strong against the US dollar. The shilling hit a 21-month high of 72.9, and bank forex dealers expect the dollar to fall below the 70-shilling mark soon. However a strong shilling makes Kenya’s principal exports like coffee, tea and flowers, more expensive

US: No to Africa
The US will not finance recommendations made in the Commission for Africa Report.

Interest Rates inch up
Barclays Bank base lending rate is now 13.75%. In 2003 lending rates at most banks were about10%. The new rates at major banks of 13 - 14% are still far below the 25 - 28% rates that they charged customers in the late 90's.

Review of public-sector transport in Nairobi

Having taken a few days off and with a car in for repairs, I am getting a new perspective on the Nairobi transport system and here are my findings (ranking by *stars *)

Car ****
Despite the high fuel and running costs (licensing, finance, insurance, maintenance), having one’s own car is still the best way of travelling around Nairobi despite. A personal car gives one the freedom to stay out late at night, and visit parts of town not served by public transport.
Pro: Go wherever, whenever you want – if you have a reliable car, and a model not desired by thieves
Con: Very frustrating driving during rush hour, with some people spending two hours PER DAY in traffic.
Verdict: Nairobi is too congested, with few roads added in 20+ years – so pick your driving times, office and house location, carefully to beat traffic jams.

Metro Shuttle ****
A novel concept that has revived the larger matatu sector that had almost been finished off by Nissans. Staff and service are still very good though some vehicle starting to age.
Pro: comfort and service still the best in public sector
Con: High-ticket prices and too few routes served
Verdict: need more routes – in fact all Bustrack (KBS) should convert to metro shuttles

Nissan matatu’s (14 seats) ***
Appears to be the second most common vehicle in Nairobi, after the Toyota Corolla and responsible for about 90% of the bad image in the matatu sector.
Pro: they will come to your doorstep when they are looking for passengers in the morning.
Con: change fares and routes according to traffic patterns, uncomfortable as they drive up on pavements, footpaths or the wrong side of the road to jump traffic queues.
Verdict: Quickest way around town, ferrying passengers who sit like innocent sheep as their driver break every known traffic law.

Big matatu’s (25 seats) ***
Pro: generally more comfortable than Nissans – bigger seats, more cargo and legroom
Con: take longer to fill than smaller Nissan, and also drive slower
Verdict: Expect to see more of them, as they are more profitable to operate than Nissan’s. General Motors Kenya has had record sales of Isuzu matatu’s since the Michuki rules were introduced.

City Hoppa **
New kid on the block, whose mandate seems to be to frustrate KBS
Pro: access to city centre (Kencom and Ambassador)
Con: Greed - they installed school-bus size seats in a 3 X 2 formation and with little leg-room (it’s impossible to stand upright between rows)
Verdict: They seem to shadow KBS buses, arriving at bus stops simultaneously – and passengers usually prefer to board City Hoppa

Taxi **
Transport model favoured late at night and by short-term visitors (tourists) who think and dollar terms and proclaim how cheap taxi’s are in Nairobi
Pro: they are so many of them - choking prime parking spots in town
Con: inconsistent pricing, some are really old vehicles
Verdict: needs some Michuki rules to regulate prices and ensure that all taxis are roadworthy

Bustrack (Kenya Bus)*
Old faithful is getting really long in the tooth - I am yet to see a new bus model in the last five years (even thought they have KAP plates)
Pro: serve the city centre; Nairobian’s are still loyal
Con: old rickety, noisy buses, you’re afraid they won’t climb some hills
Verdict: they also responded to Michuki rules by squeezing in an extra column of uncomfortable seats thereby making the ride even worse. They will launch some new double decker buses soon, but they should scrap this old fleet and re-discover

Tuk tuk (three wheel scooters) --
This concept imported from India by Klubhouse and some taxi companies
Pro: cheaper than a taxi?
Con: slow, smoky dangerous
Verdict: Overtaken by ten drivers a minute five of who almost run you over. Washindwe!

Passenger trains (Kenya Railways) --
Pro: not enough known
Con: sitting on a roof or hanging on doors can lead to injury
Verdict: passengers seem to only remember them whenever matatu’s go on strike

Other modes of transport are walking or cycling.
Walking: Is mostly and good for your heart, but not your health – because you need an MJ like mask to filter the smoke and dust, and also you’re very likely to be mugged or worse

Cycling: Would be the best option for majority of Nairobians if (i) special bicycle paths/pavements were set-up alongside major roads (ii) more bicycles with gears were made available cheaply – except in Western Kenya, the typical bicycle rider is not able to climb a hill with the typical black mamba bike that is common to Nairobi (iii) dedicate police to reduce mugging and prevent matatu’s from using bicycle paths

Kenya Bus monopoly ends

According to the Nation, some backroom wheeling, dealing, and mud-slinging at KBS was clearly going on before City Hoppa was given a license. However not many tears will be shed for KBS as they have been giving Nairobians a raw deal – they have been using the same buses for the past 15 years (with only seatbelts added).

With matatu’s, a commuter can choose NOT to board a matatu based on it’s age, look, noise, crew etc. – but now with KBS who run the same old buses. While KBS have the metro shuttle, it covers too few routes.

KBS will soon be using double decker buses around Nairobi, and it will be interesting to see Michuki allows them to run. As of today City Hoppa and KBS are sharing the Kencom bus stage, and peace prevails.