Express bets on rights issue to shore up capital

By James Anyanzwa

The troubled logistics firm, Express Kenya, has announced plans to raise Sh1.1 billion additional capital through a rights issue to bolster its leaking balance sheet.

The capital raising plans, which are still subject to the shareholders and regulatory approvals will increase the company’s paid up capital from Sh177 million to Sh1.2 billion.

In a notice to the shareholders on Friday, the company’s board of directors noted that additional shares would be offered at a nominal value of Sh5 each. This represents a 40.8 per cent premium on the company’s current closing price of Sh3.55 per share as traded on the Nairobi Securities Exchange (NSE).

The existing shareholders will be allotted six new shares for every one held. “The rights issue is not subject to a minimum subscription level and that any rights not taken up shall be offered on terms and conditions, as are determined by the directors and notified to the shareholders through the press,” the company said.

“We think management could have identified a taker for the offer, which could see the controlling shareholder Etcoville Holdings increase its shareholding or a new shareholder introduced into the company,” said an analyst at Standard Investment Bank (SIB).

Express Kenya directors will also be seeking the shareholders approval to increase the company’s authorized share capital from Sh216 million to Sh1.25 billion through the creation of an additional 206.8 million ordinary shares of Sh5 each.

During the Annual General Meeting scheduled for September 21, the shareholders will also be expected to discuss the future of the firm in relation to the current business position, which has been characterised by financial hemorrhage and a growing number of disgruntled employees.

After issuing a profit warning in July, the firm reported a 49 per cent fall in turnover for the six months ended June 30, with revenues plummeting to Sh128.6 million from Sh252.9 million in a similar period last year.

However, the company made a profit of Sh 89.4million from a loss of Sh 55million in a similar period last year. But the profit was as a result of disposal of idle assets, otherwise the loss would have widened by 39 per cent to Sh 76.2 million.

During the full-year ended December 31 Express Kenya Ltd posted a net loss of Sh229.08 million

The loss jumped more than seven times from Sh28.09 million recorded in the previous year, with revenues dropping 47 per cent to Sh450.32 million, down from Sh856.51 million.