Corporate News
By VICTOR JUMA, vjuma@ke.nationmedia.com
In Summary
The Kenya Airways’
board and top management is set to face shareholders later this month
with a plan on how the carrier intends to resolve its negative capital
position, becoming the first public company to do so as required by the
Companies Act 2015.
The new law states that if the net assets of a public
company are half or less of its called-up capital, the directors shall
convene a general meeting to “consider how to deal with the situation.”
Such a meeting does not allow any other issue to be
considered but KQ, as the airline is known by its international code,
has lumped the matter with its other AGM agenda items for the September
29 meeting.
“Notification of loss of capital and remedial steps
being taken by the company as required under section 416 of the
Companies Act, No. 17 of 2015,” reads part of the airline’s AGM notice.
“To note steps taken by directors with regard to
the turnaround strategy set out in paragraph six of the directors’
report contained in the financial statements for the year ended March
31, 2016 in order to address the net assets position of the company.”
The law requires such a meeting to be held not
later than 56 days from the date directors of a public company become
aware of the depleted asset position, with failure to do so amounting to
an offence carrying a fine of Sh500,000 for each of the board members.
Goodwill of creditors
The airline set a new record in wiping out
shareholders’ equity in the review period, with the company’s net worth
receding to a negative Sh35.6 billion from the previous year’s negative
Sh5.9 billion.
The negative capital position has seen the Nairobi
Securities Exchange-listed firm rely on the goodwill of creditors to
continue operating, with its auditors emphasising uncertainty as to its
ability to carry on as a going concern.
The mounting liabilities came as the airline made a
record net loss of Sh26.2 billion in the review period, widening the
Sh25.7 billion net loss the year before. Its revenue increased to
Sh116.1 billion from Sh110.1 billion in the same period, trailing the
increase in costs. The company suffered a Sh9.7 billion foreign exchange
loss and an acceleration of other costs including interest expenses.
KQ says it is focusing on revenue growth, cutting
costs and restructuring its capital base including through asset sales,
debt renegotiation and possible capital-raising from shareholders.
The company has moved to reduce its fleet by
selling aircraft and sub-leasing others. It has also let go of scores of
employees including pilots besides terminating some routes.
The airline’s major owners, the Treasury and
Koninklijke Luchtvaart Maatschappij (KLM) are expected to play a major
role in shepherding the company back to profitability.
The fortunes of small shareholders, most of who
bought KQ’s shares in the open market, is likely to depend on the
actions of major owners.vjuma@ke.nationmedia.com
No comments :
Post a Comment