Kshs 000's | FY 2009 | FY 2010 | FY 2011 |
Revenue | 36,459,000 | 39,107,000 | 42,486,000 |
Gross profit | 18,091,000 | 19,319,000 | 23,365,000 |
Gross Margin | 50% | 49% | 55% |
Profit before tax | 4,782,000 | 5,633,000 | 6,255,000 |
Net Margin | 13% | 14% | 15% |
Profit after tax | 3,225,000 | 3,716,000 | 4,220,000 |
Earnings per share | 2.14 | 1.86 | 2.43 |
Dividends per share | 0.36 | 0.36 | 0.45 |
Change from prior year | FY 2010 | FY 2011 | |
Revenue | 7.26% | 8.64% | |
Gross profit | 6.79% | 20.94% | |
Profit before tax | 17.80% | 11.04% | |
Profit after tax | 15.22% | 13.56% | |
Earnings per share | -13.08% | 30.65% | |
Dividends per share | 0.00% | 25.00% |
Kenya Power revenues grew by 8.64% to Kshs 42.48B in 2011 from Kshs 39.11B in 2010.
The company’s profit after tax rose by 13.56% to Kshs. 4.22B.
Kenya Power’s performance has improved significantly in the last two financial years. The growth in 2011 was higher, with a 6-point jump in the gross profit margin, from 49% in 2010 to 55% in 2011.
There was, however, a drop in the company’s pre-tax profits and net profit margin, which fell from 15.22% in 2010 to 13.56% in 2011. This suggests that the company was face with higher running costs, a lot of which can be attributed to the high diesel costs in the past year.
Dividends rose to 45 cents a share from the previous year’s Kshs. 0.36 per share. These figures represent adjustments made following Kenya Power’s share issue in December 2010, after the end of the previous financial year. At the current share price of Kshs 17.15 (as at October 19, 2011), the dividend translates to a yield 2.62%. The P/E ratio is fairly low at just 7.06.
Outlook:
Kenya Power has been heavily reliant on diesel-powered electricity generation, which reached an all-time high of 32.5% of nearly 1200 Megawatts of power required in June 2011. The irregular rainfall patterns led to a decline in hydro-electric power generation. As such, the company was compelled to take up the more costly diesel and thermal energy options. The cost has subsequently been transferred to the consumers, in particular the industrial and commercial users who account for over 70% of power consumption in the country today. This is reflected by an increase in both the foreign exchange adjustment costs and the fuel cost surcharge. This coupled with persistent power outages throughout the country has led to increasing dissatisfaction among consumers. In spite of these challenges, Kenya Power managed to record a profit for the year.
Earlier this year, Kenya Power’s CEO Eng. Joseph Njoroge unveiled the company’s 5-year strategic plan. The company plans to increase regional interconnectivity by linking the Kenya power grid to Uganda, Ethiopia and South Africa in order to prevent future lags in supply. It also plans to place more emphasis in thermal, geothermal and wind energy projects. Furthermore, Kenya Power aims to develop its infrastructure with the funds raised from the rights issue. This money will go towards projects such as rural electrification, improvement of infrastructure to boost power supply, and adoption of feed-in-tariffs to promote green energy investments. The introduction of fibre optic cables along the transmission network is part of Kenya Power’s strategy to enter the telecommunications industry and diversify its services. The company has also embarked on a project to provide power to homes in the slum areas. The project targets 67000 households and is expected to receive up to Kshs. 1.5B in reimbursement from The World Bank.
Kenya Power is expected to continue on this profit making if its expansion strategy yields revenue and it is able to control its operational costs.
