Kenya Airways rights issue miss target by Sh6b

By James Anyanzwa and Reuters

The national flag carrier, Kenya Airways (KQ), missed its revenue target by Sh6.2 billion in the just concluded rights issue.

The airline raised Sh14.48 billion from existing and new shareholders, representing a 70 per cent total subscription performance rate.

The airline seeking to raise Sh20.68 billion by floating an additional 1.5 billion new ordinary shares to the existing shareholders at a discounted price of Sh14 per share.

The proceeds of the issue will finance part of the airline’s 10-year ambitious growth and expansion strategy whose total cost is estimated at $3.6 billion (Sh306 billion).

The funds will be used to purchase new planes ahead of a planned routes and flights expansion.

KQ’s ambitious programme, which is scheduled for completion in 2021, will include fleet expansion and growth of destinations.

Under this strategy KQ will increase its passenger fleet from 34 aircrafts last year to 107 in 2021 and grow its freighter fleet by 12 aircraft in a similar period.

The airline will also increase its destinations from 55 to 115 destinations with increased focus China, India, and African markets.

On Friday, the airline’s shares, one of Africa’s leading airlines, fell as much as 3.0 per cent to Sh14 on news of the under-subscription.

“The fact that the rights issue was undersubscribed is not a good sign for investors. It means that they may have to cut their plans or borrow more in the future,” said Mwenda Rarama, an analyst at Kingdom Securities.

“If they going to borrow more through another rights issue, we’re looking at further dilution.”

Through the offer, the Kenyan Government increased its stake from 23 per cent to 29.8 per cent to become the single largest shareholder in the airline.

KLM’s stake remained little changed 26.73 per cent from 26 per cent. Based on post-rights issued shares, non-participating shareholders have been diluted 69. 2 per cent.KQs’ half-year profit rose by 37 per cent despite turbulence in the airline industry occasioned by high fuel prices, Eurozone crisis and shocks in Japan.

KQ profit before tax  grew to Sh2.82 billion in the six-month period ended September 30 from Sh2.05 billion recorded in a similar period last year.

The  performance was attributed to increased passenger numbers across all regions, improved cargo tonnage volume, better yields and the weakening shilling which had a positive effect on foreign currency denominated revenues.