How the most hated stock in 2019 looks

Kenya Airways (KQ) fell out of favour with investors in 2019, resulting in it wrapping up the year as the worst-performing stock. KQ stock dropped 77% in 2019 to close the year at Ksh2.05. It underperformed the broader market as well. The Nairobi All Share Index, which tracks the performance of all stocks on the Nairobi Securities Exchange, gained 18.5% in 2019.

Company profile

Kenya Airways operates in the aviation industry. It provides international, regional and domestic flights, serving both passenger and cargo markets. It flies to about 60 destinations around the world, including direct flight to New York, which it added in 2018. Kenya Airways owns Jambojet, a low-cost airline serving regional and domestic markets.

Kenya Airways financial performance

Kenya Airways’ latest financial report is for the first half of 2019 – the six-months period through June 2019. For that period, the airline reported revenue of Ksh58.6 billion, which increased from Ksh52.2 billion in the first half of 2018. It reported a loss of Ksh8.6 billion for the first half of 2019, which ballooned from a loss of Ksh4.0 billion in the first half of 2018.

In 2018, Kenya Airways changed its financial reporting period from a financial year ending March 31 to a calendar year ending December 31. For the 2018 calendar year, the airline reported revenue of Ksh114.2 billion and a loss of Ksh7.6 billion.

Since the airline changed its reporting period in the middle of the 2017 financial year, 2018 and 2017 results are not directly comparable. That is because the airline’s 2017 results represent only nine months of operation. For context, though, Kenya Airways reported revenue of Ksh80.8 billion and a loss of Ksh6.4 billion for 2017 financial year. The airline last reported an annual profit in 2012. It posted a profit of Ksh1.7 billion for that year.

Kenya Airways exited the first half of 2019 with Ksh4.2 billion in cash reserve, down from Ksh6.4 billion at the beginning of the period.

Recent developments

Kenya Airways nationalisation

The government is in the process of nationalising Kenya Airways after Parliament gave it the greenlight in July. It may take two years to complete the nationalisation of the airline. The government is largest shareholder in Kenya Airways with 48.9% stake. Air France-KLM owns 7.8% of Kenya Airways. The remaining stake is held by other investors.

Nationalisation means the government will take full control of the airline by purchasing the stakes held by other shareholders. The government decided to nationalise Kenya Airways as a last resort to rescue the loss-making and indebted national airline.

Kenya Airways CEO resigns

Kenya Airways CEO Sebastian Mikosz resigned in May and was schedule to leave the airline this month. Allan Kilavuka will take over as acting CEO. Kilavuka has been running Kenya Airways’ subsidiary Jambojet and will now oversee both businesses until Kenya Airways recruits a substantive chief executive.

2019 stock list of shame

Joining Kenya Airways on the list of worst-performing stocks in 2019 were Uchumi Supermarket (UCHM) and Mumias Sugar Company (MSC), whose shares fell more than 60% and 50%, respectively.