Total Kenya owner
takes home Shl.3bn
dividend in four years
BY GEOFFREY IRUNGU
Total OutreMer, which owns Total Kenya,
will have taken home Shl.3 billion divi
dend in four years when shareholders
pass the proposal to pay 77 cents ashare
in the annual general meeting coming
early next month.
The company holds both ordinary
and preference shares, both of which
^re eligible for dividend. However, the
preference shares have no voting rights.
The Frenchowned Ann holds 92.3 per
cent of the Kenyan marketer with 72.19
per cent of its shares being redeemable
preference shares.
This means thatthe parent entity earns
most of its dividends through the prefer
ence sh ares but the cash flow of the local
subsidiary is reviewed annually to assess
the capacity to redeem the shares. "There
is an annual review of the cash flow situ
ation and the retained earnings to assess
the capacity of the company to redeem
the redeemable preference shares," said
Maurice K'Anjejo, Total Kenya corporate
affairs manager in response to queries by
the Business Daily.
Further the Total OutreMer holding
company, Total SA., which is also incor
porated in France, has lent money to
the Kenyan entity with the outstanding
amount at the end of 2015 being about
Sh5 billion. The Kenyan company did
not reveal the exact rate at which it bor
rowed the cash.
Mr K'Anjejo said the redeemable
shares are of benefit to the company in
terms of the equity capital it brings in an d
also keeps costs of financing down.
"The redeemable preference shares
is beneficial to the company both in
terms of a strong shareholders equity
and especially in terms of costs," said
Mr K'Anjejo.
Eric Musau, a senior research analyst
at Standard Investment Bank, said the
preference shares have benefited minority
shareholders because they came at a time
oil prices were high and the local firm had
little cash so the alternative would have
been to borrow expensively.
"The fact that the preference shares
rank the same with ordinary shares
means that the preference shares don't
have to come first when it comes to paying
dividends as happens in many other cas
es where preference shares are involved.
But of course there is the uncertainty as
to when they will be redeemed since the
local company needs a lot of cash to re
deem them," said Mr Musau.
As of 2015, the earnings per share
(EPS) stood at Sh2.57, showing that
the redeemable shares earned a total of
Shl.17 billion
Total Kenya may however find it dif
ficult to redeem the shares because of the
costs involved.. On the Nairobi Securities
Exchange (NSE), where each ordinary
share is trading at Shl8.20 yesterday, the
preference shares would be worth nearly
Sh8.3 billion. Some of the redeemable
shares have had an issue price higher
than that of the market (Shl7.45) in the
past one year. "Authorised redeemable
preference shares 123,478,388 shares of
Sh31.58 each," the annual report says.
The rest of preference shares, amount
ing to 330,999,364 shares, were originally
priced at Shl5.71 each.
The other factor in the exit is that the
Total OutreMer as the majority share
holder in Total Kenya is in a pole posi
tion to determine the terms of redemp
tion given its overwhelming majority.
This implies that the local shareholders
being in the minority, are unlikely to in
fluence whether or not the shares can
be redeemed. "The right to redemption
of the redeemable preference shares is
at the discretion of the company (Total
Kenya) hence they have been classified
as equity," says the firm in its latest an
nual report.
For the year to last December, the
company board of directors has asked
shareholders to approve the dividend of
77 cents, up from 70 cents paid the previ
ous year. The approval is expected to be a
formality, paving the way for the payment
of Sh447.2 million as dividend to Total
OutreMer, up from Sh406.6 million paid
last year. The other shareholders will take
a total of only Shl5.18 million.
Towards the goal of financial freedom