Kenya Airways sells Embakasi land to Kemsa for Sh400m
What you need to know:
- The sale of assets, which includes the sale and leasing of aircraft as well as proceeds from disposing of the Embakasi land, is expected to earn the carrier Sh14.6 billion.
- The carrier’s move to sell idle property is part of its quest to inject much-needed cash into the business which has now posted losses for four consecutive years, with the latest one being a record net loss of Sh26.2 billion for the year ended March.
Kenya Airways has completed the sale of five acres of land in Embakasi to the Kenya Medical Supplies Agency (Kemsa) in a transaction that will earn the carrier over Sh400 million.
The national airline, known as KQ by its international code, made the deal as part of multiple asset sales aimed at strengthening its financial position. KQ early last year invited bids for two parcels of land opposite its training school —one measuring 24.71 acres and another of 5.56 acres.
The company’s management, which was expecting to raise about Sh2.25 billion from the transactions, has now decided to sell only five acres to Kemsa and shelve the other transaction. The land sold to Kemsa has been rented by the government’s medical logistics provider for decades.
“We completed the sale of the five acres to Kemsa. We have signed the contract and expect them to send us the money in the next couple of days,” Mbuvi Ngunze, KQ’s managing director, said during the recent release of full year results.
“The land sale is positive for our cash flow. What we will book as profit will be a maximum of Sh200 million. After internal review, the only plot we put up for sale is the fiveacres,” said Mr Ngunze.
The two plots in Embakasi are in an area where the market price per acre is between Sh80 million and Sh100 million. Lloyd Masika, the valuation and estate agent, was handling the transaction.
Cash injection
The carrier’s move to sell idle property is part of its quest to inject much-needed cash into the business which has now posted losses for four consecutive years, with the latest one being a record net loss of Sh26.2 billion for the year ended March.
The sale of assets, which includes the sale and leasing of aircraft as well as proceeds from disposing of the Embakasi land, is expected to earn the carrier Sh14.6 billion.
KQ anticipates that this income, in addition to Sh20 billion expected from execution of a restructuring plan in collaboration with American consultancy Mckinsey, will lift the business from the financial pit it finds itself in.
KQ’s latest annual report indicates that its investment in freehold land and buildings as at March 2015 was valued at Sh5.05 billion, down from Sh7.3 billion posted a year earlier.
The difference of Sh2.2 billion is the expected proceeds from the Embakasi land which has been recorded in the airline’s books as “reclassified to assets held for sale”.
The airline is betting on asset sales, expenditure cuts and restructuring of operations to move out of the loss-making position. KQ’s new record loss was driven by a Sh9.7 billion foreign exchange loss and an acceleration of other costs including interest expenses.Its revenue increased to Sh116.1 billion from Sh110.1 billion in the same period, trailing the increase in costs.
The loss also saw the national carrier set a new record in wiping out shareholders’ equity, with the company’s net worth now at a negative Sh35.6 billion from the previous negative Sh5.9 billion.
