Express Kenya cuts back on rights issue

By James Anyanzwa

Shareholders of the troubled logistics firm Express Kenya have reduced the amount of the rights issue on what market observers attributed to uncertainty surrounding the firm’s future.

The firm’s board, which had originally proposed to raise Sh1.1 billion through the floatation of additional shares to the existing shareholders, will now attempt to raise Sh323 million, representing a 70 per cent reduction.

Express Kenya is hoping to diversify into real estate from its core logistics business to bolster its revenue base that has come under pressure after the company lost its key transportation client East African Breweries  two years ago.

Disposal of assets

The Company’s foray into public transport has not been profitable. It has  disposed off non-core assets to reduce its liabilities. Part of the re-engineering process has also included hiring out its trucks and workshop as well as laying off staff.

During the annual general meeting  held last week, shareholders also approved the Company’s authorised share capital to be increased from Sh216 million to Sh1.25 billion.  According to a circular to the Capital Markets Authority  (CMA) and the Nairobi Securities Exchange (NSE) dated September 21, Certified Public Secretaries, Equatorial Secretaries and Registrars, pointed out that the proposed rights issue could be completed within the next three months, subject to regulatory approvals. Etcoville Holdings, the largest shareholder with a 60.43 per cent holding has committed to take up its share of the offer, with an additional uptake up to the maximum permitted by the CMA (effective shareholding of 80 per cent).

Intense debate

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 firm said.

The future of the firm has been a subject of intense debate owing to  financial difficulties and disgruntled employees. After issuing a profit warning in July 2012 Express Kenya 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 firm made a profit of Sh89.4 million from a loss of Sh55 million in a similar period last year as a result of disposal of idle assets. The loss would have otherwise  widened 39 per cent to Sh76.2 million.