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Understanding the Quickmart IPO · The Mwango Capital Podcast

• 0:00
  SPEAKER_02: Thank you so much for joining us for this edition of The Mwango Spaces on the 15th of October.
• 0:05
  SPEAKER_02: We'll be returning to our focus on capital markets tonight.
• 0:08
  SPEAKER_02: It's been a really, really interesting year as far as the capital markets are concerned.
• 0:13
  SPEAKER_02: We've seen the corporate bond market that come back to life starting in Q4 of 2025.
• 0:17
  SPEAKER_02: We've had the listing, of course, okay, a pipeline in March.
• 0:21
  SPEAKER_02: Multiple companies have seen their share prices at record highs as
• 0:25
  SPEAKER_02: the NSE20 is now getting back to levels that it hasn't really seen in decades.
• 0:30
  SPEAKER_02: Now, we also have the intent to list by Quigmart,
• 0:33
  SPEAKER_02: the second-largest retailer in the country by stores.
• 0:36
  SPEAKER_02: So, here are the basic terms of the offer.
• 0:37
  SPEAKER_02: We'll get into the details of this with our speakers.
• 0:40
  SPEAKER_02: In the course of the hour,
• 0:41
  SPEAKER_02: 50% of the issued share capital,
• 0:43
  SPEAKER_02: that's roughly 2 billion ordinary shares,
• 0:45
  SPEAKER_02: those are coming to market, priced at $7.50.
• 0:49
  SPEAKER_02: Each, assuming full uptake,
• 0:50
  SPEAKER_02: that should raise around $15 billion in gross proceeds,
• 0:53
  SPEAKER_02: that's around $115-odd million.
• 0:54
  SPEAKER_02: Now, I IFC,
• 0:56
  SPEAKER_02: the private sector financing arm of the World Bank,
• 0:58
  SPEAKER_02: has committed to buying shares worth around $15 million.
• 1:02
  SPEAKER_02: That's 13% or thereabouts on the 2 billion shares on offer.
• 1:06
  SPEAKER_02: So in the course of this conversation,
• 1:07
  SPEAKER_02: we'll go over the business, the rationale for the listing, and of
• 1:13
  SPEAKER_02: We have a really solid panel with us tonight for this conversation,
• 1:16
  SPEAKER_02: the actual shareholders and operators of this retail firm.
• 1:20
  SPEAKER_02: Then it is, of course, Martha Osir, who is a partner at Adenia Partners.
• 1:24
  SPEAKER_02: We've got Simon Macharia,
• 1:25
  SPEAKER_02: who is the Chief Finance Officer at QuickMart,
• 1:27
  SPEAKER_02: and Jacques Dern, who is the Managing Director at QuickMart Kenya.
• 1:31
  SPEAKER_02: I want to start with Martha as a partner at Edenia,
• 1:35
  SPEAKER_02: key shareholder in Quikmart,
• 1:37
  SPEAKER_02: and you've had a wonderful seat to the story of how Quikmart
• 1:40
  SPEAKER_02: at Illinois today has come to be.
• 1:42
  SPEAKER_02: So walk us through that, Annie.
• 1:44
  SPEAKER_02: Who are the investors behind Sokoni Retail Kenya?
• 1:47
  SPEAKER_02: How did Edenia,
• 1:48
  SPEAKER_02: Quikmart,
• 1:48
  SPEAKER_02: and the Jomani founders and the group come together to hold their interests?
• 1:53
  SPEAKER_01: Thank you, Rama, for that question.
• 1:55
  SPEAKER_01: I'm Martha Osia.
• 1:56
  SPEAKER_01: I'm a partner with Adenia, which is a private equity firm focused on Africa.
• 2:02
  SPEAKER_01: Adenia was established almost 25 years ago, initially in the Indian Ocean Island.
• 2:08
  SPEAKER_01: So we're truly Pan-African and we only focus on Africa and on investing
• 2:12
  SPEAKER_01: in controlling equity stakes.
• 2:35
  SPEAKER_01: In terms of how did we come together with the Tumaini and QuickMout founders,
• 2:42
  SPEAKER_01: it's a much longer story,
• 2:43
  SPEAKER_01: but to keep it short, I will say Adenia initially invested in Tumaini in delay.
• 2:52
  SPEAKER_01: So it was our first investment in Kenya and we took stake of about 55% with
• 2:59
  SPEAKER_01: the founders of Tumani retaining the balance and subsequently around nine months.
• 3:07
  SPEAKER_01: We also invested or Adenia also invested in Quikmart, where we took 51% equity stake.
• 3:17
  SPEAKER_01: And at that point in time, it may...
• 3:20
  SPEAKER_01: It made a lot of sense to bring the two businesses together,
• 3:25
  SPEAKER_01: which we did at the beginning of 2020.
• 3:28
  SPEAKER_01: That's when we did the merger.
• 3:31
  SPEAKER_01: And by doing the merger,
• 3:33
  SPEAKER_01: we effectively add the Two families swapped their shareholding,
• 3:39
  SPEAKER_01: their residual shareholding into Soconi Retail.
• 3:42
  SPEAKER_01: So that is now how Soconi Retail became, call it the sole shareholder of Freakland.
• 3:51
  SPEAKER_01: Quikmart being the surviving entity.
• 3:54
  SPEAKER_01: So in Kenya, there's maybe several ways you can do a merger, but usually one entity survives.
• 4:02
  SPEAKER_01: So in this case,
• 4:03
  SPEAKER_01: we rebranded all the I went to my stores to Quick Mart and started to do
• 4:11
  SPEAKER_01: the expansion under the Quick Mart brand.
• 4:14
  SPEAKER_01: In terms of what is the percentage of shares that are being offered?
• 4:20
  SPEAKER_01: It's going to be a pro-rata offer,
• 4:24
  SPEAKER_01: meaning all shareholders will be selling,
• 4:28
  SPEAKER_01: call it roughly, 50% of their existing state.
• 4:32
  SPEAKER_01: So post-listing, Sokoni,
• 4:35
  SPEAKER_01: because Sokoni is the sole shareholder today,
• 4:38
  SPEAKER_01: post-listing Sokoni will still be the largest shareholder with 50%.
• 4:44
  SPEAKER_01: Maybe the last thing I'll mention is the CEO of QuickWatch,
• 4:48
  SPEAKER_01: Peter apologies he could not join today,
• 4:51
  SPEAKER_01: is also a shareholder because he's imported and played a key role in the merger.
• 4:56
  SPEAKER_01: So he also has a stake in Scoccoli Retail.
• 5:00
  SPEAKER_01: And in terms of what will be our role or if all the shareholders' role post-listing,
• 5:06
  SPEAKER_01: I would say nothing really changes because 50% stake as
• 5:12
  SPEAKER_01: a single shareholder is still quite significant.
• 5:15
  SPEAKER_01: So I expect that all of us,
• 5:18
  SPEAKER_01: and at least I know this,
• 5:20
  SPEAKER_01: speaking at Zadenia and also on behalf of the other founders and shareholders,
• 5:24
  SPEAKER_01: is that all of us intend to remain fully invested.
• 5:29
  SPEAKER_01: And I don't see any significant changes from shareholders and not from directors.
• 5:37
  SPEAKER_02: Indeed, and we'll get back to that topic a little later on in the hour,
• 5:40
  SPEAKER_02: but I want to bring Jack into the conversation as well,
• 5:43
  SPEAKER_02: just to try and understand the one question that I've seen,
• 5:46
  SPEAKER_02: and I'm sure you probably also have seen this feedback in conversations
• 5:48
  SPEAKER_02: with investors, why lists now, right?
• 5:52
  SPEAKER_02: Certainly,
• 5:52
  SPEAKER_02: we've seen,
• 5:53
  SPEAKER_02: at least with companies that have PE firms that have invested in them,
• 5:56
  SPEAKER_02: is we often see sales either to other PE firms or we see sales to companies in
• 6:01
  SPEAKER_02: that wider space.
• 6:02
  SPEAKER_02: So like, for example, in this case, to another retailer.
• 6:04
  SPEAKER_02: So what was the motivation to list?
• 6:06
  SPEAKER_02: To say, you know what,
• 6:07
  SPEAKER_02: instead of doing a trade sale,
• 6:08
  SPEAKER_02: let's take this 2 billion shares and list them,
• 6:10
  SPEAKER_02: put them publicly on the Nairobi Securities Exchange.
• 6:13
  SPEAKER_02: Martha, you can take that first.
• 6:15
  SPEAKER_01: Sure.
• 6:16
  SPEAKER_01: Yeah, I think grammar, as you know, it's always about timing.
• 6:19
  SPEAKER_01: Of course,
• 6:21
  SPEAKER_01: as we always explore all options,
• 6:23
  SPEAKER_01: but as a board, we felt strongly that now would be a good time to list.
• 6:29
  SPEAKER_01: QuickMart has grown.
• 6:30
  SPEAKER_01: The brand is well recognized.
• 6:33
  SPEAKER_01: We feel most Kenyans understand what the business does and therefore it makes sense
• 6:40
  SPEAKER_01: to have Kenyans actually be shareholders in a company where they shop.
• 6:45
  SPEAKER_01: On a weekly, if not bi-monthly basis.
• 6:48
  SPEAKER_01: Second, I would say given the scale,
• 6:51
  SPEAKER_01: the top management team that we have and the maturity of the management team,
• 6:56
  SPEAKER_01: we definitely feel that QuickWart can be a publicly licensed.
• 7:02
  SPEAKER_01: If you look in the rest of Africa,
• 7:04
  SPEAKER_01: markets like South Africa, Egypt,
• 7:07
  SPEAKER_01: Morocco,
• 7:08
  SPEAKER_01: a lot of those retailers who,
• 7:11
  SPEAKER_01: let's say, we would have approached or spoken to about as well.
• 7:15
  SPEAKER_01: A lot of those retailers,
• 7:18
  SPEAKER_01: if you look at their shareholding,
• 7:19
  SPEAKER_01: they're really owned by local long-term investors.
• 7:24
  SPEAKER_01: And I think this allows them to have a really strong capital base.
• 7:30
  SPEAKER_01: Our expectation that once QuickMart is listed,
• 7:33
  SPEAKER_01: it will be able to pack into the capital markets and really have a strong,
• 7:40
  SPEAKER_01: broadened shareholder base that can allow the company to grow in Kenya and also
• 7:45
  SPEAKER_01: beyond Kenya.
• 7:46
  SPEAKER_01: And the last point is being a listed company will also strengthen the governance.
• 7:53
  SPEAKER_01: One of the key things we did when we invested was really to Transition,
• 7:58
  SPEAKER_01: the governance and institutional and going public can only strengthen that.
• 8:04
  SPEAKER_01: And I think that's where I would say in terms of why.
• 8:07
  SPEAKER_01: And now it is a good time, given the strong performance of the MST.
• 8:13
  SPEAKER_02: Jack, your comments on that?
• 8:14
  SPEAKER_00: Yes, I think Mwango has already answered to a large extent.
• 8:18
  SPEAKER_00: I would just add that probably also while the timing now,
• 8:22
  SPEAKER_00: I think there's a very good alignment as much as there is for Abenia as also we have
• 8:27
  SPEAKER_00: that alignment for quick mast in the sense that as As you may know,
• 8:30
  SPEAKER_00: for most private equity funds, there is a timing to the existence of the fund.
• 8:35
  SPEAKER_00: After now about eight years that Adenia has invested,
• 8:39
  SPEAKER_00: I think a liquidity event on the side of Adenia is welcome at this time.
• 8:44
  SPEAKER_00: I mean, since Adelnia came on board back in 2018,
• 8:46
  SPEAKER_00: 2019, the business has grown from 25 stores to 75.
• 8:59
  SPEAKER_00: 22 stores today has been an excellent growth journey in a profitable manner.
• 9:05
  SPEAKER_00: And we feel that if we want to open up now,
• 9:08
  SPEAKER_00: the capital to the public markets is a good time
• 9:11
  SPEAKER_00: because there's still significant growth opportunity.
• 9:14
  SPEAKER_00: You may know today we're only operating in 16 counties of Kenya with our 72 store,
• 9:19
  SPEAKER_00: which leads an ample space.
• 9:21
  SPEAKER_00: And we would like also to bring on board now public shareholders
• 9:25
  SPEAKER_00: to bring them along this growth journey,
• 9:27
  SPEAKER_00: which is still very,
• 9:28
  SPEAKER_00: very exciting at this time and broaden the base of our shareholders.
• 9:32
  SPEAKER_02: But post IPO, how does the composition of the boards then change?
• 9:36
  SPEAKER_02: Because I know it's based on the information put out in the information memorandum.
• 9:40
  SPEAKER_02: If Sir Corny is holding more than 30% of the company,
• 9:42
  SPEAKER_02: it has a right to appoint four directors, right?
• 9:44
  SPEAKER_02: That's half the board.
• 9:45
  SPEAKER_02: Will there be changes post listing so it might see four new persons joining the board?
• 9:50
  SPEAKER_01: Yes, that's correct.
• 9:52
  SPEAKER_01: In preparation for the listing,
• 9:54
  SPEAKER_01: we have already onboarded two non-executive independent directors.
• 10:00
  SPEAKER_01: They bring very strong experience in business, in audits.
• 10:06
  SPEAKER_01: With management and also human capital management.
• 10:10
  SPEAKER_01: So their details are provided in the information memorandum.
• 10:14
  SPEAKER_01: And then in terms of Soconi Retail,
• 10:17
  SPEAKER_01: the largest shareholder, yes, we do have the right to appoint board directors.
• 10:24
  SPEAKER_01: The four directors who will be appointed by Sokorni have worked with
• 10:31
  SPEAKER_01: the management team of QuickMart,
• 10:33
  SPEAKER_01: I would say, for the better part of the last six, seven years.
• 10:36
  SPEAKER_01: So we have four non-existent.
• 10:38
  SPEAKER_01: We have two executive directors appointed by Sokuni,
• 10:41
  SPEAKER_01: two new fully independent non-executive directors,
• 10:46
  SPEAKER_01: and then we have two executive directors who are the group CEO,
• 10:51
  SPEAKER_01: Peter Kanyiri, and Jack, who is on this call, who is the managing director of Kenya.
• 10:56
  SPEAKER_01: So that's the board composition,
• 10:58
  SPEAKER_01: post-IPL, and this is in line with the Nairobi stock exchange requirements.
• 11:04
  SPEAKER_02: Simon, I want to bring you into this conversation,
• 11:06
  SPEAKER_02: Simon Macheri,
• 11:07
  SPEAKER_02: of course,
• 11:07
  SPEAKER_02: as I mentioned at the start of the conversation,
• 11:09
  SPEAKER_02: he's the CFO at QuickMart,
• 11:11
  SPEAKER_02: just to get a better understanding of the meat and bolts of a business, as it were.
• 11:14
  SPEAKER_02: The company describes itself as having a relatively strong operating cash conversion.
• 11:20
  SPEAKER_02: Can you give us a bit more detail on that?
• 11:21
  SPEAKER_02: What's the cash conversion cycle time for the retailer and how...
• 11:25
  SPEAKER_02: Dependent, how sensitive is that to the terms you've negotiated with your suppliers?
• 11:30
  SPEAKER_03: Quikmat applies best practices in terms of working capital management.
• 11:34
  SPEAKER_03: And if you look at retailers that are well learned,
• 11:38
  SPEAKER_03: And we have the models of the likes of Walmart is aimed
• 11:41
  SPEAKER_03: to negotiate sustainable payment terms with suppliers.
• 11:45
  SPEAKER_03: And we've done that over the years.
• 11:47
  SPEAKER_03: We've negotiated terms of an average of between 55 and 60 days.
• 11:52
  SPEAKER_03: And we have turned that into agreement,
• 11:55
  SPEAKER_03: what we call the joint business plans,
• 11:57
  SPEAKER_03: that we agree with our suppliers,
• 11:59
  SPEAKER_03: the terms on average,
• 12:01
  SPEAKER_03: but there are some suppliers that we even pay twice in a month,
• 12:04
  SPEAKER_03: depending on the categories that they pay in.
• 12:07
  SPEAKER_03: But on average, we have an average payout payment terms of between 55 and 60 days.
• 12:13
  SPEAKER_03: But most importantly,
• 12:14
  SPEAKER_03: in terms of inventory management,
• 12:16
  SPEAKER_03: this is where we had a lot of upsides when we introduced
• 12:19
  SPEAKER_03: a category management system,
• 12:21
  SPEAKER_03: a state of the art category management team system
• 12:24
  SPEAKER_03: to optimize our inventory conversion.
• 12:27
  SPEAKER_03: That today we have an average inventory conversion of between 28 and 30 days.
• 12:31
  SPEAKER_03: And that gives you negative working capital of 30 days.
• 12:35
  SPEAKER_03: And that is important.
• 12:36
  SPEAKER_03: And it's what you'll get in well-learned, internationally, best practice, retail industry.
• 12:42
  SPEAKER_03: So we have negative working capital of 30 days.
• 12:44
  SPEAKER_03: We keep our terms.
• 12:45
  SPEAKER_03: PICMAT is the best payer in the industry.
• 12:48
  SPEAKER_03: We are one of the best pay masters.
• 12:51
  SPEAKER_03: And at the same time,
• 12:52
  SPEAKER_03: in terms of the Discipline that we have in terms of new store opening
• 12:56
  SPEAKER_03: and also profitability.
• 12:58
  SPEAKER_03: And we have negative working capital,
• 13:00
  SPEAKER_03: yes, but also the profitability also helps in terms of cash generation.
• 13:05
  SPEAKER_02: With these agreements here with suppliers, what duration are we looking at?
• 13:09
  SPEAKER_02: Is it a one-year agreement that's negotiated every year?
• 13:11
  SPEAKER_02: Is it on average much longer?
• 13:13
  SPEAKER_02: Give us some call on that.
• 13:15
  SPEAKER_03: Yes, we do annual agreements and these agreements,
• 13:18
  SPEAKER_03: the way they are negotiated to speak about the way we look at the relationship
• 13:24
  SPEAKER_03: with our suppliers from stakeholder point of view that we need everybody
• 13:28
  SPEAKER_03: to feel they are getting value from the trade.
• 13:30
  SPEAKER_03: As we discuss with suppliers issues to do with the performance targets that we have
• 13:35
  SPEAKER_03: for both of us.
• 13:37
  SPEAKER_03: And also in terms of payment terms,
• 13:39
  SPEAKER_03: the way suppliers will bring in new innovation, we call it listing.
• 13:44
  SPEAKER_03: And we don't wait for the year to wait for us to have those conversations.
• 13:48
  SPEAKER_03: We have continuous conversation on a quarterly basis.
• 13:50
  SPEAKER_03: We meet to review our performances against our targets.
• 13:55
  SPEAKER_03: And we adjust accordingly to see where we need to perform better.
• 13:59
  SPEAKER_03: And also to look also at our working capital in terms of the regular sharing of data.
• 14:04
  SPEAKER_03: So we come up with moderates in which we share data and help suppliers to see
• 14:09
  SPEAKER_03: if I have brought these items to Quikmat, how are they performing?
• 14:13
  SPEAKER_03: Across the stores and then we adjust accordingly to ensure that we stock the items
• 14:18
  SPEAKER_03: where our customers need them.
• 14:20
  SPEAKER_03: But it's a mutual conversation and it's very good because every now and
• 14:23
  SPEAKER_03: then we are little stakeholders that we meet with our suppliers
• 14:26
  SPEAKER_03: and we have honest conversations and to see how we can grow the trade together.
• 14:31
  SPEAKER_02: Jax, there's an interesting question coming through that I want you to tackle if you can.
• 14:35
  SPEAKER_02: How comfortable would suppliers be,
• 14:37
  SPEAKER_02: do you think,
• 14:38
  SPEAKER_02: in delivering to branches when QuickMath expands to 125 branches total?
• 14:44
  SPEAKER_02: The question he's asking is,
• 14:45
  SPEAKER_02: isn't that a strategic risk on supply relations and the resilience
• 14:50
  SPEAKER_02: of your supply chain?
• 14:52
  SPEAKER_00: Yes, I do not see this as a risk.
• 14:54
  SPEAKER_00: At the moment,
• 14:54
  SPEAKER_00: we indeed operate on a supply chain,
• 14:57
  SPEAKER_00: a logistics model,
• 14:58
  SPEAKER_00: which is predominantly direct-to-store delivery,
• 15:01
  SPEAKER_00: meaning that it is the suppliers that take the merchandise to our stores,
• 15:06
  SPEAKER_00: and we see that as It's a very strong pillar of our profitability on
• 15:10
  SPEAKER_00: the Kenyan market today.
• 15:11
  SPEAKER_00: The reason why I would not be worried is that you have to put this in
• 15:15
  SPEAKER_00: the perspective that today in Kenya,
• 15:17
  SPEAKER_00: the modern retail segment of the market,
• 15:20
  SPEAKER_00: meaning the organized Supermarkets still represent about 25-30% of
• 15:27
  SPEAKER_00: the total grocery retail space,
• 15:29
  SPEAKER_00: meaning that the market in Kenya today is still dominated by the informal retail,
• 15:35
  SPEAKER_00: so the kiosks, the small stores.
• 15:37
  SPEAKER_00: Which means that suppliers must have anyway a supply chain organization to deliver
• 15:43
  SPEAKER_00: to most areas of Nairobi and around the country.
• 15:46
  SPEAKER_00: So I would not be worried that our model is sustainable considering a development
• 15:52
  SPEAKER_00: to 125-130 stores as we envisage in our business plan.
• 15:58
  SPEAKER_02: Can we talk about shrinkage for a moment?
• 16:00
  SPEAKER_02: Because one of the questions from the same person,
• 16:03
  SPEAKER_02: one of the questions they're asking is,
• 16:04
  SPEAKER_02: how exactly is QuickMats managing to deliver a shrinkage rate of 0.4%
• 16:09
  SPEAKER_02: when you've got retailers,
• 16:10
  SPEAKER_02: much larger ones, of course, like Walmart is the example of being cited here.
• 16:14
  SPEAKER_02: They're struggling at above 1.5%.
• 16:15
  SPEAKER_02: So how are you keeping a handle on shrinkage rates in managing inventory?
• 16:20
  SPEAKER_00: Yes, we have invested in very strong controls.
• 16:23
  SPEAKER_00: We have loss control teams in all our stores.
• 16:26
  SPEAKER_00: We have also very frequent stock takes,
• 16:29
  SPEAKER_00: cycle counts,
• 16:30
  SPEAKER_00: or full stock takes in stores that give us very good grips on the structure.
• 16:35
  SPEAKER_00: Yes, as Jack has said, this is an area that we also focus keenly in terms of
• 16:58
  SPEAKER_03: Putting internal control systems to have regular checks,
• 17:02
  SPEAKER_03: we have created physical and also system-based controls to ensure
• 17:08
  SPEAKER_03: that we do not lose items when we buy them.
• 17:12
  SPEAKER_03: And in the collaborative approach,
• 17:14
  SPEAKER_03: we have also worked together with our suppliers that we monitor to ensure that
• 17:19
  SPEAKER_03: the items that we do receive, we don't lose them, but we also have very good staff.
• 17:24
  SPEAKER_03: So we must thank our staff who are very vigilant in ensuring
• 17:28
  SPEAKER_03: That we don't lose items and that has helped in terms
• 17:31
  SPEAKER_03: of managing very low shrinkage levels and part of success stories in terms
• 17:36
  SPEAKER_03: of profitability.
• 17:38
  SPEAKER_02: Slooping back to what you said a little earlier, Simon,
• 17:40
  SPEAKER_02: because this is another question that's come in on the fact
• 17:43
  SPEAKER_02: that QuickMut is operating with negative working capital.
• 17:46
  SPEAKER_02: The question here is essentially saying that raises concerns
• 17:49
  SPEAKER_02: that suppliers are effectively funding the business as a teacher,
• 17:51
  SPEAKER_02: rolling short-term credit through those extended payment terms
• 17:54
  SPEAKER_02: if they're being settled in 55, 60 days, as the case may be.
• 17:59
  SPEAKER_02: How do you respond to concerns that suppliers are being squeezed?
• 18:02
  SPEAKER_02: And the second part of the question is...
• 18:05
  SPEAKER_02: Is this a sustainable model?
• 18:07
  SPEAKER_02: Can you continue to scale this up and remain with the same arrangement as you get
• 18:10
  SPEAKER_02: to 125 stores and beyond?
• 18:13
  SPEAKER_03: Yeah, the way to look at it is to see international best practices is
• 18:17
  SPEAKER_03: that modern grocery retailers learn on negative working capital.
• 18:21
  SPEAKER_03: We do not deliver payments to our suppliers.
• 18:25
  SPEAKER_03: As I said,
• 18:25
  SPEAKER_03: based on the categories within which suppliers operate,
• 18:30
  SPEAKER_03: there are some categories where we even pay twice a month.
• 18:33
  SPEAKER_03: We are one of the best paymasters in the market.
• 18:36
  SPEAKER_02: Just going to a bit more detail on that.
• 18:38
  SPEAKER_02: So when you say there's a sort of hierarchy, right?
• 18:39
  SPEAKER_02: There are those suppliers who might get paid in two days,
• 18:42
  SPEAKER_02: and then there are others who might be paid twice a month.
• 18:44
  SPEAKER_02: So can you give us a sense of which ones, what kind of companies are looking at?
• 18:48
  SPEAKER_02: Is it like, say,
• 18:49
  SPEAKER_02: for example,
• 18:49
  SPEAKER_02: you're from a small farmer or a small farmer corp,
• 18:52
  SPEAKER_02: and we're supplying spinach on a regular basis.
• 18:55
  SPEAKER_02: Do we fall into that category where we get paid twice a month?
• 18:58
  SPEAKER_03: Yes, for fresh suppliers,
• 19:00
  SPEAKER_03: suppliers will bring fresh items because again,
• 19:03
  SPEAKER_03: these are an area which is quite intensive in terms of cash flow requirement.
• 19:08
  SPEAKER_03: We pay them two times in a month.
• 19:10
  SPEAKER_03: If you're bringing your fruit and vegetables, et cetera.
• 19:15
  SPEAKER_03: The other categories again,
• 19:16
  SPEAKER_03: where you get terms of say 30 days and on average, and again, it's a negotiation.
• 19:23
  SPEAKER_03: And suppliers are very happy.
• 19:24
  SPEAKER_03: And I can tell you,
• 19:25
  SPEAKER_03: when you look at it,
• 19:26
  SPEAKER_03: When I joined,
• 19:27
  SPEAKER_03: there is a supplier who used to pay a number of suppliers because we have more
• 19:30
  SPEAKER_03: than 700 suppliers and a number of them are SMEs.
• 19:33
  SPEAKER_03: There are some suppliers we used to pay like 500,000 and today we pay them over 5 million.
• 19:39
  SPEAKER_03: Then the other thing we've done is we have also offered an opportunity.
• 19:43
  SPEAKER_03: Where our supplier might need financing,
• 19:46
  SPEAKER_03: we have got opportunities to refer them to our bankers and they get the financing
• 19:52
  SPEAKER_03: that they might need.
• 19:53
  SPEAKER_03: It has been a very successful collaboration and we have come from far,
• 19:57
  SPEAKER_03: even as an industry,
• 19:58
  SPEAKER_03: to come up with clear terms because our suppliers require satility in terms of
• 20:03
  SPEAKER_03: when they expect payments and we keep those terms.
• 20:06
  SPEAKER_02: Martha, I want to come back to you because there's a couple
• 20:08
  SPEAKER_02: of interesting questions here around the nature of the sale and the intent,
• 20:12
  SPEAKER_02: rather, by shareholders to remain for the long run.
• 20:15
  SPEAKER_02: And here's the question as it's been phrased,
• 20:16
  SPEAKER_02: because effectively what's happening here is the shares are sold,
• 20:21
  SPEAKER_02: the proceeds are not going into the business where they're going to shareholders.
• 20:25
  SPEAKER_02: So what assurances can you give prospective investors that this is not just
• 20:28
  SPEAKER_02: an opportunity for existing investors to cash out at a premium?
• 20:33
  SPEAKER_02: And then leaving public shareholders who come on board exposed to execution
• 20:38
  SPEAKER_02: and valuation risks.
• 20:40
  SPEAKER_01: Thank you for that question.
• 20:42
  SPEAKER_01: The assurance is that QuickMart is,
• 20:45
  SPEAKER_01: and I'll speak for Ardenia,
• 20:48
  SPEAKER_01: QuickMart is one of the best performing assets that we have in our portfolio.
• 20:53
  SPEAKER_01: So for us,
• 20:55
  SPEAKER_01: together with the founder directors to still retain a 50% pay,
• 21:00
  SPEAKER_01: I think shows that this is something we do not want to let go of.
• 21:05
  SPEAKER_01: We are not the first.
• 21:06
  SPEAKER_01: I think Jack mentioned this is private equity.
• 21:11
  SPEAKER_01: There have been many examples,
• 21:14
  SPEAKER_01: maybe not as many in Kenya, but I think you all remember Equity Bank.
• 21:20
  SPEAKER_01: At some point,
• 21:20
  SPEAKER_01: I think maybe it was 2007,
• 21:23
  SPEAKER_01: maybe 2008,
• 21:25
  SPEAKER_01: also had a private equity investor at a point in time
• 21:28
  SPEAKER_01: when Equity Bank was certainly not occupying the top position.
• 21:33
  SPEAKER_02: That's those of the years, right?
• 21:37
  SPEAKER_01: Yes, Sidious was the fund and they subsequently had their liquidity events,
• 21:44
  SPEAKER_01: I think starting around 2015 thereabouts.
• 21:47
  SPEAKER_01: So I would say QuickMart has gone through a similar cycle.
• 21:52
  SPEAKER_01: When we invested in 2018 and 2019,
• 21:56
  SPEAKER_01: the people who recognized those brands were the people in the neighborhoods.
• 22:01
  SPEAKER_01: So QuickMath was not a nationally or neither was to my nationally recognized.
• 22:07
  SPEAKER_01: Today, we can say we are nationally recognized and we are a three-year leader.
• 22:12
  SPEAKER_01: So having gone through that journey in terms of,
• 22:15
  SPEAKER_01: you know,
• 22:16
  SPEAKER_01: this was our investment piece was to build a leader and to invest in
• 22:21
  SPEAKER_01: the retail sector.
• 22:23
  SPEAKER_01: So the next thing is going to the public markets, you know, so I want to see.
• 22:27
  SPEAKER_01: We want to do what Equity Bank did and we are already halfway there.
• 22:33
  SPEAKER_01: So I feel the assurance that to investors is we are here to stay.
• 22:39
  SPEAKER_01: This is still a lot of money on the table.
• 22:42
  SPEAKER_01: And we are also going to be on the board of directors,
• 22:48
  SPEAKER_01: working with the same managing team that we've worked with Holly for
• 22:51
  SPEAKER_01: the last almost seven years.
• 22:54
  SPEAKER_01: So we want to ensure that this transition is stable,
• 22:59
  SPEAKER_01: but we also have a duty to our investors to return some capital at this point
• 23:05
  SPEAKER_01: in time.
• 23:06
  SPEAKER_01: So we This is really the same thing that equity went through if we look at other markets.
• 23:12
  SPEAKER_01: More recently, Nunu, which is a retailer in the UAE, listed a very similar arrangement there.
• 23:20
  SPEAKER_01: The shareholder sold a significant stake and is still involved,
• 23:24
  SPEAKER_01: same with Komei in Egypt, and similar also to Boxer in South Africa as well.
• 23:29
  SPEAKER_01: This is really a natural cycle and it's a cycle that allows companies to really transform.
• 23:37
  SPEAKER_01: QuickMark has transformed from a regional retailer to now a national retailer.
• 23:43
  SPEAKER_01: This is one path.
• 23:44
  SPEAKER_01: There are other paths to get here, but this is one path that companies can transform.
• 23:49
  SPEAKER_02: Indeed.
• 23:50
  SPEAKER_02: And I guess in terms of context,
• 23:52
  SPEAKER_02: because we haven't seen much in the way of P exits on the stock markets over
• 23:58
  SPEAKER_02: the last, I'd say, 10, 15 years.
• 24:01
  SPEAKER_02: So in that sense,
• 24:02
  SPEAKER_02: for a lot of investors in the market now,
• 24:04
  SPEAKER_02: this sort of feels new,
• 24:05
  SPEAKER_02: which I think is one of the reasons why the onus it will feel like is on you to sort
• 24:09
  SPEAKER_02: of do a lot more invested education to say, look, this is why we're doing this.
• 24:14
  SPEAKER_01: Totally agree.
• 24:15
  SPEAKER_01: But I think it's important to note that this has happened before,
• 24:19
  SPEAKER_01: especially even in this market.
• 24:21
  SPEAKER_01: And those companies, that feels very strong.
• 24:24
  SPEAKER_01: And that's our expectation,
• 24:26
  SPEAKER_01: that becoming publicly listed improves your governance and
• 24:30
  SPEAKER_01: that improves your overall long-term sustainability.
• 24:33
  SPEAKER_01: And that has always been a core philosophy for Adenia.
• 24:37
  SPEAKER_01: Even for companies that we...
• 24:40
  SPEAKER_01: Sell in the private markets.
• 24:43
  SPEAKER_01: We still see that those companies continue to be lenders.
• 24:47
  SPEAKER_01: And for this one that is in the public markets,
• 24:50
  SPEAKER_01: we will not take that risk of not ensuring that it's a smooth condition.
• 24:56
  SPEAKER_02: Indeed.
• 24:56
  SPEAKER_02: Jacques,
• 24:56
  SPEAKER_02: I want to come back to you in terms of geographical locations,
• 25:00
  SPEAKER_02: because the target is essentially expand to that 125 store and beyond.
• 25:05
  SPEAKER_02: And based on the data in the information memorandum and prospectus,
• 25:09
  SPEAKER_02: by and large, you classify your stores into three groups, right?
• 25:12
  SPEAKER_02: There's the hypermarkets,
• 25:13
  SPEAKER_02: the large form of destination stores, supermarkets, and then the express stores.
• 25:17
  SPEAKER_02: So where do you plan to open these 10 to 15 stores every and why?
• 25:23
  SPEAKER_02: Walk us through how you're thinking about this expansion here.
• 25:26
  SPEAKER_00: First of all, we believe there is ample wide space on the market to develop.
• 25:30
  SPEAKER_00: As I've mentioned,
• 25:31
  SPEAKER_00: probably we operate today 72 stores in only 16 counties of Kenya,
• 25:36
  SPEAKER_00: which means that only the number of counties we have ample space to develop,
• 25:41
  SPEAKER_00: we should divert.
• 25:41
  SPEAKER_00: Ideally, by 2030, be present in at least 30 or 35 counties of Kenya.
• 25:48
  SPEAKER_00: There's really ample space also in terms of pipeline of stores
• 25:52
  SPEAKER_00: to find really good locations, premium locations for us.
• 25:56
  SPEAKER_00: So I would say that in terms of strategy,
• 25:59
  SPEAKER_00: it's not really about pushing one format more than the other, in the sense
• 26:11
  SPEAKER_00: Since that we are operating very profitably across the three store formats
• 26:16
  SPEAKER_00: that we have, it is more a matter of choosing the right format for the locations.
• 26:22
  SPEAKER_00: So we always look at locations that have the best potential.
• 26:29
  SPEAKER_00: So we have always been very disciplined in our approach to growth,
• 26:33
  SPEAKER_00: meaning that before opening any store,
• 26:36
  SPEAKER_00: we would thorough review of the location, of the traffic around it, both walking.
• 26:41
  SPEAKER_00: Driving traffic has solid expectations,
• 26:44
  SPEAKER_00: reliable expectations in terms of sales,
• 26:47
  SPEAKER_00: and then adjust the format we will use to that location.
• 26:50
  SPEAKER_00: So if it's mostly a driving destination,
• 26:53
  SPEAKER_00: we would rather go for a destination format like a hypermarket.
• 26:57
  SPEAKER_00: Supermarket,
• 26:58
  SPEAKER_00: more for a residential type of neighborhood and unexpressed for
• 27:02
  SPEAKER_00: a highly densely populated area where we would have mostly walk-in traffic.
• 27:07
  SPEAKER_00: As a result of that, then we choose the format.
• 27:10
  SPEAKER_00: We do a very thorough So business model for each store,
• 27:14
  SPEAKER_00: ensuring that we will be profitable from day one before we proceed to the opening.
• 27:19
  SPEAKER_00: Now, looking at the current market today,
• 27:22
  SPEAKER_00: to answer your question, it's more in the segment of the supermarkets.
• 27:26
  SPEAKER_00: We currently find the most interesting opportunities where there are
• 27:31
  SPEAKER_00: the most opportunities today on the market.
• 27:33
  SPEAKER_00: And when you look at our plan,
• 27:35
  SPEAKER_00: which is to open indeed 10 to 15 stores per year,
• 27:38
  SPEAKER_00: I think we're very confident about that plan as we speak.
• 27:42
  SPEAKER_00: We are considering a pipeline of identified good locations of around 30 potential locations.
• 27:49
  SPEAKER_00: So really now it's on us to choose out of that the 10 to 15 best ones
• 27:54
  SPEAKER_00: that we will select for opening next year.
• 27:57
  SPEAKER_02: Retailers tend to have relatively thin operating margins in general,
• 28:01
  SPEAKER_02: and looking at the spread of goods that are on offer in Quick Mart,
• 28:05
  SPEAKER_02: 60% of the SK user either groceries or food items by and large.
• 28:10
  SPEAKER_02: So help me to reconcile that.
• 28:12
  SPEAKER_02: Because on one hand, there's a thin margins.
• 28:14
  SPEAKER_02: There's the concentration risk, some may say, in these really price sensitive items.
• 28:19
  SPEAKER_02: There's the plan to open 10 to 15 stores every year,
• 28:22
  SPEAKER_02: which at face value may seem a bit capital intensive.
• 28:24
  SPEAKER_02: There's also a drive into e-commerce, which I'll speak about in a bit.
• 28:28
  SPEAKER_02: Given all of those demands, isn't that 80% dividend payout targets a bit aggressive?
• 28:34
  SPEAKER_02: How much flexibility do you have baked into that?
• 28:37
  SPEAKER_02: Jacques can then sign when you can wait.
• 28:40
  SPEAKER_00: I think you have to consider first that the business is generating very strong cash flows.
• 28:45
  SPEAKER_00: Even if the margins are thin,
• 28:47
  SPEAKER_00: which is a fact of the retail industry,
• 28:50
  SPEAKER_00: we are able,
• 28:51
  SPEAKER_00: with the operating model that we have,
• 28:53
  SPEAKER_00: to generate a very strong level of profitability.
• 28:55
  SPEAKER_00: Stability at EBITDA level,
• 28:57
  SPEAKER_00: which is a bit more than 10% of sales and also very strong cash flows
• 29:02
  SPEAKER_00: with conversion cycle of around 65% of EBITDA.
• 29:06
  SPEAKER_00: So at the same time, we are also operating an asset portfolio.
• 29:11
  SPEAKER_00: So when you look at the development plan of 10 to 50 stops per year,
• 29:15
  SPEAKER_00: let's not forget that QuickMast does not invest in any real estate,
• 29:19
  SPEAKER_00: in any construction, building or plot of land.
• 29:22
  SPEAKER_00: No, we don't invest in that.
• 29:24
  SPEAKER_00: That's one of the key lessons from our Nakuma
• 29:26
  SPEAKER_02: Tenduchimi went wrong, isn't it?
• 29:28
  SPEAKER_00: Probably, and also in terms of capital efficiency.
• 29:31
  SPEAKER_00: So the only investment that we do in our stores is the equipment basically
• 29:36
  SPEAKER_00: that we need to fit out a building,
• 29:38
  SPEAKER_00: meaning the shelves,
• 29:39
  SPEAKER_00: the gondolas, the fridges, all the technical equipment that we need.
• 29:46
  SPEAKER_00: So when you look at our strong cash flows,
• 29:48
  SPEAKER_00: profit generation,
• 29:50
  SPEAKER_00: and you relate to that the CapEx,
• 29:52
  SPEAKER_00: there's absolutely no doubt,
• 29:54
  SPEAKER_00: looking at our numbers, that we can completely self-fund the CapEx.
• 30:00
  SPEAKER_00: I think
• 30:05
  SPEAKER_00: we will
• 30:12
  SPEAKER_00: comply with no difficulty at all.
• 30:15
  SPEAKER_00: Actually,
• 30:15
  SPEAKER_00: the contrary,
• 30:16
  SPEAKER_00: based on the business plan that we have,
• 30:18
  SPEAKER_00: even after paying those dividends at that level of 80%,
• 30:22
  SPEAKER_00: we will still be generating quite substantial excess cash.
• 30:26
  SPEAKER_00: That's the nature of our model.
• 30:28
  SPEAKER_00: Simon, do you want to
• 30:28
  SPEAKER_03: weigh in?
• 30:29
  SPEAKER_03: Yes, and I just wanted to add about the profitability.
• 30:32
  SPEAKER_03: Yes, it's been, but growing.
• 30:34
  SPEAKER_03: If you look at the last five years,
• 30:36
  SPEAKER_03: the compounded growth in our turnover was 18.4%,
• 30:40
  SPEAKER_03: whereas our costs have grown by only 15.3%.
• 30:43
  SPEAKER_03: So we are very cost efficient.
• 30:46
  SPEAKER_03: We ensure that the growth in our turnover is not lost in terms of costs.
• 30:52
  SPEAKER_03: We are very efficient when it comes to cost management.
• 30:55
  SPEAKER_03: And that has helped us that wherever in the past we had access debt,
• 30:59
  SPEAKER_03: particularly in the year 2021 to 2022, when we were opening new store.
• 31:04
  SPEAKER_03: Today, we don't have any debt in our balance sheet,
• 31:06
  SPEAKER_03: whereas we have also managed to pay very attractive return,
• 31:10
  SPEAKER_03: cash returns to shareholders.
• 31:12
  SPEAKER_03: If we continue with that discipline,
• 31:14
  SPEAKER_03: which we intend to do,
• 31:15
  SPEAKER_03: applying the international best practices when it comes to management
• 31:19
  SPEAKER_03: of our working capital in terms of being very light in terms of capex
• 31:23
  SPEAKER_03: that we do not overinvest in land and green rings,
• 31:26
  SPEAKER_03: we are able to generate a good level of profitability,
• 31:29
  SPEAKER_03: both for existing stores and new stores.
• 31:32
  SPEAKER_03: And at the same time, generate very strong cash flows.
• 31:35
  SPEAKER_03: Our balance sheet is very rich in terms of cash flows even today.
• 31:40
  SPEAKER_03: And with that, we are able to fund our development, keep very strong cash flows.
• 31:44
  SPEAKER_03: Today we have more than a billion in cash.
• 31:47
  SPEAKER_03: In our bank accounts that we could have used to open stores,
• 31:51
  SPEAKER_03: but with the discipline we have,
• 31:52
  SPEAKER_03: we can only open the stores we have reflected on in our plan.
• 31:56
  SPEAKER_03: When we continue with that discipline,
• 31:58
  SPEAKER_03: we are able to further the development,
• 32:00
  SPEAKER_03: pay attractive dividends to shareholders,
• 32:02
  SPEAKER_03: and at the same time,
• 32:03
  SPEAKER_03: keep quite efficient,
• 32:05
  SPEAKER_03: actually sufficient cash flows to a balance sheet,
• 32:08
  SPEAKER_03: just to ensure that we have a cushion.
• 32:10
  SPEAKER_03: Again, we have access to funding.
• 32:12
  SPEAKER_03: Today, we have a funding line of close to $2 billion.
• 32:15
  SPEAKER_03: It's only that we are not using it, but it's available.
• 32:18
  SPEAKER_03: That's the one post from somebody bank, right?
• 32:21
  SPEAKER_03: Correct, correct.
• 32:21
  SPEAKER_03: But we are not using it,
• 32:23
  SPEAKER_03: but we still have access to that should we need,
• 32:25
  SPEAKER_03: just to ensure that we have resilient balance sheet that is,
• 32:29
  SPEAKER_03: even if there is some sensitivities we need to do,
• 32:33
  SPEAKER_03: we are well placed in case of any external shock that might come in the business.
• 32:38
  SPEAKER_02: I want to put a question that's coming to both of you,
• 32:41
  SPEAKER_02: and it's related to,
• 32:42
  SPEAKER_02: I believe it's a note on the table on page 120 of the prospectus.
• 32:47
  SPEAKER_02: And this person's asking why there was 1.1 billion shillings advanced tied
• 32:52
  SPEAKER_02: to interim dividends paid out in the first half of the year,
• 32:56
  SPEAKER_02: vis-a-vis half-year profit of only 873 million shillings.
• 32:58
  SPEAKER_02: Jacques, do you want to take that?
• 33:02
  SPEAKER_00: Yes, this has got to do with the seasonality and also the fact
• 33:06
  SPEAKER_00: that we have always been consistently paying dividends to our shareholders on
• 33:11
  SPEAKER_00: a regular basis,
• 33:12
  SPEAKER_00: even often on a monthly basis, considering the very strong cash generation deficit.
• 33:17
  SPEAKER_00: There's no point to keep cash idle in our balance sheet.
• 33:22
  SPEAKER_00: It's always better from a financial angle to distribute to the shareholders.
• 33:26
  SPEAKER_00: The two amounts that you are referring to have got to do also with his humility
• 33:31
  SPEAKER_00: because So you may know that in the retail industry,
• 33:34
  SPEAKER_00: we have a very strong profit generation in the second half of the year,
• 33:39
  SPEAKER_00: considering that we do our anniversary campaign always in September, October.
• 33:45
  SPEAKER_00: Then you have, of course, a very strong Christmas campaign.
• 33:48
  SPEAKER_00: So there's an element of seasonality in this.
• 33:52
  SPEAKER_02: Quite a few questions that are coming in now about the extent to which
• 33:55
  SPEAKER_02: the original shareholders will also hold their shares after the IPO.
• 33:59
  SPEAKER_02: So there's two questions that I'm going to get to on that particular front.
• 34:01
  SPEAKER_02: I want to start with the IFC one,
• 34:03
  SPEAKER_02: because just to recap a little earlier,
• 34:05
  SPEAKER_02: IFC is the private sector financing arm of the World Bank is committed
• 34:08
  SPEAKER_02: to buy shares worth around $15 million,
• 34:11
  SPEAKER_02: that's 13% of the $2 billion or so shares that are I'll take it.
• 34:15
  SPEAKER_02: IFC does not have a lockup.
• 34:16
  SPEAKER_02: However,
• 34:16
  SPEAKER_02: I would say that one of their key mandate is to spur the growth of capital markets
• 34:20
  SPEAKER_02: in different countries where they operate.
• 34:43
  SPEAKER_01: Our expectation is that they will longer term investor.
• 34:47
  SPEAKER_01: And in addition,
• 34:49
  SPEAKER_01: they are also supporting QuickMarch on several initiatives as part
• 34:54
  SPEAKER_01: of their agreement.
• 34:55
  SPEAKER_01: They'll be working with QuickMarch on matters related to food safety and energy efficiency.
• 35:03
  SPEAKER_01: Those are not things that you can do in a fairly short time.
• 35:06
  SPEAKER_01: So I think that was core to IRC and that's why they wanted to come in early.
• 35:12
  SPEAKER_01: And of course,
• 35:13
  SPEAKER_01: I can't speak to at what point in time they would want to get liquidity,
• 35:18
  SPEAKER_01: but they're not traders, if you will.
• 35:21
  SPEAKER_01: They want to support the investment so they can provide more than just capital.
• 35:27
  SPEAKER_02: And there's another question directly related to Edenia's plans after listing.
• 35:32
  SPEAKER_02: Because as I understand, it's around 60% of the positive for holding is locked for 24 months.
• 35:36
  SPEAKER_02: But what's your plan thereafter once that 24-month window is over?
• 35:40
  SPEAKER_02: Will you still retain that position or would the fund be looking for partial
• 35:45
  SPEAKER_02: or gradual sell them?
• 35:47
  SPEAKER_01: Yes, I think what we want to do is to have the action to be well aligned with
• 35:53
  SPEAKER_01: the new investors coming on board.
• 35:56
  SPEAKER_01: So we are working internally in Adenia to make sure that we can be well aligned.
• 36:02
  SPEAKER_01: And this is one of the discussions that we had with the CMA,
• 36:07
  SPEAKER_01: whereby essentially they would allow Adenia to reorganize and have
• 36:13
  SPEAKER_01: a longer holding period that extends beyond the 24 months.
• 36:18
  SPEAKER_01: So that's what we are working on because we've always said internally at this price,
• 36:23
  SPEAKER_01: given the returns that we have gotten, we would invest again.
• 36:28
  SPEAKER_01: Also given the potential that we see in the business, we would invest again.
• 36:33
  SPEAKER_01: And that's what we are working on internally.
• 36:36
  SPEAKER_02: Jacques and Simon, I want to come back to you.
• 36:37
  SPEAKER_02: There's an interesting question around average basket size and the growth of that
• 36:42
  SPEAKER_02: over the years.
• 36:42
  SPEAKER_02: So depending on how you sort of look at the stores,
• 36:45
  SPEAKER_02: the lower bound would be something like around 500 shillings for
• 36:49
  SPEAKER_02: the express stores all the way around to.
• 36:51
  SPEAKER_02: Do you
• 37:01
  SPEAKER_02: think that growth rate can be maintained?
• 37:04
  SPEAKER_02: And the reason I'm asking that is because if you look at
• 37:06
  SPEAKER_02: the wider macroeconomic environment,
• 37:10
  SPEAKER_02: household incomes,
• 37:10
  SPEAKER_02: disposable income at household level has come under severe strain
• 37:14
  SPEAKER_02: from high inflation and Yes,
• 37:18
  SPEAKER_02: I think, first of all, we need
• 37:24
  SPEAKER_00: to look at inflation in two different ways.
• 37:27
  SPEAKER_00: Of course,
• 37:28
  SPEAKER_00: there's the Kenyan inflation,
• 37:30
  SPEAKER_00: which is at around more than 6.5% today,
• 37:33
  SPEAKER_00: which indeed takes a pinch on the consumer wallet,
• 37:37
  SPEAKER_00: but that has an element We see today that we are on that internal inflation.
• 38:04
  SPEAKER_00: On a level of rather 4%, 3.5 to 4%.
• 38:08
  SPEAKER_00: And then we,
• 38:09
  SPEAKER_00: as a retailer,
• 38:10
  SPEAKER_00: it is always our job to make sure that your basket size continues to grow
• 38:16
  SPEAKER_00: at least higher than that internal inflation.
• 38:19
  SPEAKER_00: Which has been the case for us today.
• 38:22
  SPEAKER_00: And this successful retailer needs to be coupled with growth in customers' numbers.
• 38:27
  SPEAKER_00: So at the moment, yes, we realize that the conditions can be tough for the consumers.
• 38:32
  SPEAKER_00: We do our best to do And so,
• 38:49
  SPEAKER_00: So far,
• 38:49
  SPEAKER_00: I think it has worked well when you look at our results on a year-to-date basis
• 38:54
  SPEAKER_00: for this year in terms of like-for-like sales growth within the range of plus 8%,
• 38:59
  SPEAKER_00: which is a meaningful combination of plus 4 in basket and plus 4
• 39:04
  SPEAKER_00: in customer transactions.
• 39:06
  SPEAKER_02: I want to come back to the debt question,
• 39:07
  SPEAKER_02: because this is something that Simon,
• 39:09
  SPEAKER_02: you spoke about a little earlier on in the conversation.
• 39:11
  SPEAKER_02: And looking at the information memorandum and the memo that came before that,
• 39:15
  SPEAKER_02: a relatively low debt level.
• 39:16
  SPEAKER_02: So you've cited that as a key advantage for the retailer.
• 39:19
  SPEAKER_02: And there's been a really interesting trend in the amount of debt that
• 39:22
  SPEAKER_02: the company is holding, 788 million shillings by end 2023.
• 39:27
  SPEAKER_02: That's come down dramatically to just around 7 million shillings by the middle of June.
• 39:34
  SPEAKER_02: Walk us through that journey.
• 39:36
  SPEAKER_02: What informed the decision to aggressively pay down these debt levels over the last three years?
• 39:41
  SPEAKER_02: Was it, you know,
• 39:42
  SPEAKER_02: you're looking at the cash flows coming in from the company and you're thinking,
• 39:45
  SPEAKER_02: well, we don't need to hold this debt.
• 39:47
  SPEAKER_02: So we might as well just progressively chop it by an average of 70, 75% a year.
• 39:52
  SPEAKER_03: When you look at it,
• 39:53
  SPEAKER_03: it's one of the demonstration of the discipline that we have had in terms of growth.
• 39:58
  SPEAKER_03: One, the debt was primarily apex for growth in terms of the new stores
• 40:03
  SPEAKER_03: that we had accessed four or five years ago.
• 40:06
  SPEAKER_03: And what What we had done that type was to look at matching the cash flows
• 40:11
  SPEAKER_03: that we needed for the debt to the payback period for our stores.
• 40:15
  SPEAKER_03: Today our new stores payback capital within two to three years,
• 40:19
  SPEAKER_03: we have some of them that have paid back.
• 40:22
  SPEAKER_03: We've opened in less than a year, which is quite commendable.
• 40:25
  SPEAKER_03: And that's the disciplined growth approach that we have had.
• 40:28
  SPEAKER_03: We've never closed a store or our stores are profitable.
• 40:32
  SPEAKER_03: We actually get to a positive EBDA in month one.
• 40:37
  SPEAKER_03: Very good stores that we have opened in the last, say, eight years.
• 40:42
  SPEAKER_03: And we continue to grow even our existing stores.
• 40:44
  SPEAKER_03: And with that then, by matching the cash flows, we had taken debts of a maximum of three years.
• 40:50
  SPEAKER_03: So we have continued to pay that debt progressively.
• 40:54
  SPEAKER_03: And today we don't have any debt.
• 40:56
  SPEAKER_03: We have termed out everything, but the facility is there.
• 40:59
  SPEAKER_03: We can access.
• 41:00
  SPEAKER_03: We have a number of proposals for debt.
• 41:04
  SPEAKER_03: We don't access debt unless we need it.
• 41:06
  SPEAKER_03: But now we don't need it.
• 41:07
  SPEAKER_03: And we even project that the new stores that we are going to open,
• 41:10
  SPEAKER_03: now that we have really scaled the business,
• 41:13
  SPEAKER_03: we will not need to access any bank borrowings.
• 41:15
  SPEAKER_03: And it's a disciplined growth.
• 41:18
  SPEAKER_03: And again, it shows you that Quikmat is very different from what we had seen in the past.
• 41:22
  SPEAKER_03: We are very disciplined in terms of new stores opening and that is critical
• 41:26
  SPEAKER_03: and also continuing also to grow our existing stores.
• 41:30
  SPEAKER_03: Our existing stores have grown at a compounded growth of 7.1%, which is way above inflation.
• 41:36
  SPEAKER_03: The last three years we have actually grown at 7.4% and we keep going.
• 41:41
  SPEAKER_03: And as we continue growing our existing stores and also having very little capex for new stores.
• 41:47
  SPEAKER_03: We will scale the business without necessarily increasing gearing
• 41:52
  SPEAKER_02: in our barrage.
• 41:53
  SPEAKER_02: And so related to some of the interesting commentary I'm seeing related
• 41:56
  SPEAKER_02: to this space,
• 41:57
  SPEAKER_02: there are people who are listening to it and an ongoing conversation online.
• 42:01
  SPEAKER_02: We shouldn't expect a medium-term bond program coming out into the market anytime soon.
• 42:05
  SPEAKER_02: Because on
• 42:06
  SPEAKER_03: one hand,
• 42:07
  SPEAKER_03: yes, there are relatively low rates that might be available
• 42:10
  SPEAKER_02: in the market right now.
• 42:11
  SPEAKER_02: But from what I'm hearing from you,
• 42:13
  SPEAKER_02: from Jacques, is that, look, you know, company generates a lot of internal cash.
• 42:17
  SPEAKER_02: We don't really need extra debt at the moment.
• 42:22
  SPEAKER_03: I think I would say that there are opportunities we've seen, particularly outside the country.
• 42:27
  SPEAKER_03: If, for example,
• 42:29
  SPEAKER_03: we go to our neighbors,
• 42:31
  SPEAKER_03: particularly in the medium long term,
• 42:32
  SPEAKER_03: we've already registered a quick match business name outside of Kenya,
• 42:37
  SPEAKER_03: in Uganda, Rwanda, Tanzania, Congo, and Ethiopia.
• 42:42
  SPEAKER_03: We are not in a hurry because there's a lot of work we need to do for us
• 42:45
  SPEAKER_03: to replicate this success in our neighboring markets.
• 42:48
  SPEAKER_03: There's a lot of research we need to do.
• 42:50
  SPEAKER_03: Look for the right partners, look for the right locations.
• 42:53
  SPEAKER_03: That will come as we go along.
• 42:55
  SPEAKER_03: Decide to invest in such,
• 42:57
  SPEAKER_03: we might need to access funding and going public now allows us
• 43:01
  SPEAKER_03: to have even more options compared between what we could get in the market.
• 43:06
  SPEAKER_03: At the same time, what we could get if we were to go to the capital market or through the bank.
• 43:13
  SPEAKER_03: From where I sit, we will only take debt if it makes sense.
• 43:17
  SPEAKER_03: We will not take debt for projects that do not generate cash flows.
• 43:20
  SPEAKER_03: And we have to tie the new project, the cash flows that we expect from those projects.
• 43:25
  SPEAKER_03: With the repayment cycles that we need for those facilities.
• 43:28
  SPEAKER_03: So we only engage in such ventures if they make sense that they are viable financially.
• 43:35
  SPEAKER_02: Just thinking five plus years out here, Shaq, indulge me for a moment.
• 43:39
  SPEAKER_02: What growth potential are you seeing within the region?
• 43:42
  SPEAKER_02: Because we've seen efforts in the past by Kenyan retailers to get out into
• 43:45
  SPEAKER_02: the East African market, which haven't worked out, right?
• 43:47
  SPEAKER_02: We've seen them crash and burn.
• 43:49
  SPEAKER_02: From your perspective as quitmarts,
• 43:51
  SPEAKER_02: if we're having this conversation 10 years from now,
• 43:53
  SPEAKER_02: what's the retail potential to get into these markets that Simon has mentioned,
• 43:57
  SPEAKER_02: Uganda, Rwanda, Tanzania, and even Ethiopia, that's a new one.
• 44:00
  SPEAKER_00: I think as Simon has mentioned, we're not in a hurry at all.
• 44:04
  SPEAKER_00: Main priority remains to be focused on Kenya,
• 44:08
  SPEAKER_00: where the potential to grow for us is huge,
• 44:11
  SPEAKER_00: and we have demonstrated that we can do it in a very profitable manner.
• 44:15
  SPEAKER_00: With very limited level of risk.
• 44:17
  SPEAKER_00: So we're not in a hurry.
• 44:19
  SPEAKER_00: The potential in the countries around us is big as well.
• 44:22
  SPEAKER_00: But one by one, and we see different markets.
• 44:25
  SPEAKER_00: You could see that Uganda is probably the most natural extension of our business in Kenya.
• 44:31
  SPEAKER_00: Ethiopia is probably a much longer term opportunity, but where the opportunity is really huge.
• 44:38
  SPEAKER_00: So one by one,
• 44:39
  SPEAKER_00: I think for us,
• 44:40
  SPEAKER_00: the priority for the next five years is clearly to double our size in Kenya
• 44:45
  SPEAKER_00: and continue to do what we do very well.
• 44:48
  SPEAKER_00: That's our key focus.
• 44:49
  SPEAKER_00: And that's what we have reflected in our business plan and the information memorandum.
• 44:55
  SPEAKER_02: In the short term,
• 44:56
  SPEAKER_02: e-commerce looks to me like it's a key growth area for the firm because if you look
• 45:00
  SPEAKER_02: at e-commerce sales across the platform that you have and third-party ones,
• 45:05
  SPEAKER_02: 1.1 billion in 2025, that was just 2.2% of total sales.
• 45:09
  SPEAKER_02: Growing relatively quickly though because that was more than almost doubled really
• 45:13
  SPEAKER_02: the year before.
• 45:14
  SPEAKER_02: What are the main bottlenecks you're running into in terms of scaling e-commerce
• 45:19
  SPEAKER_02: or rather the share of e-commerce sales,
• 45:21
  SPEAKER_02: re-serve the total sales across the entire chain?
• 45:24
  SPEAKER_00: You are very right.
• 45:25
  SPEAKER_00: We are growing very fast now on the online pace.
• 45:29
  SPEAKER_00: We had more than 3% of sales as we speak in the online business.
• 45:33
  SPEAKER_00: We see that growing very fast with the potential being much more than that.
• 45:38
  SPEAKER_00: It's not really that we are We are facing bottlenecks at the moment.
• 45:41
  SPEAKER_00: I think it's got to do with the fact that we started fairly recently.
• 45:44
  SPEAKER_00: We started to take our first steps in the online space with a partnership with Glovo in 2023.
• 45:51
  SPEAKER_00: So it's fairly recent.
• 45:54
  SPEAKER_00: We developed our own Kyusoko mobile app in 2024.
• 45:57
  SPEAKER_00: We launched it only in 2025,
• 45:59
  SPEAKER_00: so it's still a bit early days,
• 46:01
  SPEAKER_00: but we're going to see a very strong growth in that area.
• 46:05
  SPEAKER_00: We're anticipating that we should get fairly quickly to 10% more sales in
• 46:10
  SPEAKER_00: the online space and to match the leader of the market in Kenya who started earlier
• 46:15
  SPEAKER_00: than us.
• 46:16
  SPEAKER_02: Do you anticipate that the bulk
• 46:18
  SPEAKER_02: of those e-commerce transactions will be happening mostly on the Qsocker app rather
• 46:22
  SPEAKER_02: than on third-party platforms?
• 46:24
  SPEAKER_00: That's our wish and our strategy.
• 46:26
  SPEAKER_00: You may know that when you operate in partnership with operators like Glovo,
• 46:31
  SPEAKER_00: Uber Eats or Bolt,
• 46:33
  SPEAKER_00: the commissions that you have to pay as a retailer are significant.
• 46:36
  SPEAKER_00: So there is a clear advantage for us to push customers.
• 46:39
  SPEAKER_00: We're getting to toward the tail end.
• 46:54
  SPEAKER_02: I want to focus on margins and future growth forecasts very quickly,
• 46:58
  SPEAKER_02: if I may, because the net margin for the company has improved quite dramatically.
• 47:03
  SPEAKER_02: 0.8% or thereabouts in 2022, up to 3% last year.
• 47:07
  SPEAKER_02: Now, the forecast that we did see in the memo suggested that revenue growth is going
• 47:11
  SPEAKER_02: to be around 15.4%.
• 47:12
  SPEAKER_02: Profit growth of almost 40% as well.
• 47:15
  SPEAKER_02: Based on the data you're seeing now,
• 47:16
  SPEAKER_02: have your net margin levels sort of stabilized around that 3% level,
• 47:20
  SPEAKER_02: or do you think there's still a bit more room for growth?
• 47:23
  SPEAKER_03: Yes, we've seen our net margins improve,
• 47:25
  SPEAKER_03: particularly the improvements that we've seen in terms of our gross margins.
• 47:30
  SPEAKER_03: If you look at our gross margins, they have grown from 21.1% in 2021 to 22% last year.
• 47:37
  SPEAKER_03: That, and of course,
• 47:39
  SPEAKER_03: as you scale,
• 47:40
  SPEAKER_03: most of our costs,
• 47:41
  SPEAKER_03: the significant costs that we have,
• 47:44
  SPEAKER_03: like lends, the staff costs do not grow as fast as revenues.
• 47:48
  SPEAKER_03: And that's where you will see that whereas our revenues have grown by 18.4%,
• 47:52
  SPEAKER_03: Our costs have only grown by 15.3%.
• 47:54
  SPEAKER_03: So there's also the impact of the economies of steel.
• 47:58
  SPEAKER_03: We expect to continue getting that advantage as we go around.
• 48:03
  SPEAKER_03: Net margins last year were at 3.4%.
• 48:06
  SPEAKER_03: So we are today hovering at about 3.6%.
• 48:09
  SPEAKER_03: So there's quite some growth that comes from the efficiencies and also
• 48:15
  SPEAKER_03: the clear focus that we have in terms of cost management.
• 48:18
  SPEAKER_02: Indeed, it's going to be really interesting to see these numbers in the medium term.
• 48:22
  SPEAKER_02: We have essentially come to the tail end of the conversation.
• 48:25
  SPEAKER_02: So I want to give each of our speakers in turn,
• 48:27
  SPEAKER_02: starting with you, Martha,
• 48:29
  SPEAKER_02: what are the two main ideas you'd like prospective investors to consider
• 48:34
  SPEAKER_02: as they decide whether or not to invest in the QuickMut IPO?
• 48:37
  SPEAKER_01: I guess I would like prospective investors to consider the fact that Sokoni,
• 48:43
  SPEAKER_01: inclusive of Adenia,
• 48:45
  SPEAKER_01: and founder shareholders are going to remain in the business as 50% shareholder.
• 48:54
  SPEAKER_01: It's important to...
• 48:57
  SPEAKER_01: Share that today as a board, really still, we meet on a monthly basis.
• 49:04
  SPEAKER_01: So we are fully engaged with the management, ensuring there is strong governance and control.
• 49:12
  SPEAKER_01: And this is something we intend to continue host listing within the rules of the NSE.
• 49:20
  SPEAKER_01: So we will have now a strategy and investment committee,
• 49:25
  SPEAKER_01: one of the subcommittees of the board that would be meeting close to eight times
• 49:30
  SPEAKER_01: a year.
• 49:31
  SPEAKER_01: And I think it's Here is where I would really want investors to consider
• 49:35
  SPEAKER_01: that you have a very active board of directors who want to continue to be active and
• 49:42
  SPEAKER_01: to ensure that this transition is well managed.
• 49:46
  SPEAKER_01: And we can follow examples that have been set by other presidents,
• 49:49
  SPEAKER_01: such as Equity Bank, when they went through this very similar process.
• 49:54
  SPEAKER_01: So yeah, my parting shot, if you will, is that, yeah, Sokoni and Adenia are not going anywhere.
• 50:00
  SPEAKER_01: There's a lot at stake.
• 50:02
  SPEAKER_01: And we are going to continue to be QuickMart, realize its full potential.
• 50:08
  SPEAKER_02: Indeed.
• 50:09
  SPEAKER_02: Thank you very much.
• 50:10
  SPEAKER_02: Simon, your thoughts?
• 50:11
  SPEAKER_02: Thank you.
• 50:12
  SPEAKER_03: Out there, we've really grown the business.
• 50:15
  SPEAKER_03: QuickMart is such a good example of how you can scale a business,
• 50:20
  SPEAKER_03: right from a family-owned business to where you attract private equity funds and
• 50:25
  SPEAKER_03: where you go to the capital markets.
• 50:27
  SPEAKER_03: We've not grown this business alone as management.
• 50:30
  SPEAKER_03: We've grown it with a number of stakeholders.
• 50:34
  SPEAKER_03: We have our shareholders,
• 50:35
  SPEAKER_03: we have the staff,
• 50:37
  SPEAKER_03: we have our suppliers,
• 50:38
  SPEAKER_03: and it's time that now we got all these stakeholders getting a benefit from the work
• 50:44
  SPEAKER_03: that we have done together.
• 50:46
  SPEAKER_03: So I'm so excited.
• 50:47
  SPEAKER_03: That there's an opportunity that all of us can have us take in this company.
• 50:51
  SPEAKER_03: The management is out there.
• 50:53
  SPEAKER_03: We are exposing ourselves out there for accountability.
• 50:56
  SPEAKER_03: We want to be held into account and we dispel these challenges
• 51:01
  SPEAKER_03: that were there previously in the retail industry
• 51:04
  SPEAKER_03: because these are very attractive industry in terms of job creation.
• 51:07
  SPEAKER_03: Be it directly, that directly we've created more than 8,000 jobs for our young people.
• 51:12
  SPEAKER_03: We have more than 120,000 jobs we've created indirectly.
• 51:16
  SPEAKER_03: And also for our suppliers,
• 51:17
  SPEAKER_03: as you've seen our suppliers also benefit,
• 51:19
  SPEAKER_03: most of them being small and medium enterprises.
• 51:22
  SPEAKER_03: So it's a very good effect and we look forward to continuing to skill it
• 51:26
  SPEAKER_03: and also getting benefit for leaders Kenyans.
• 51:30
  SPEAKER_03: Jack, you get the last word.
• 51:32
  SPEAKER_00: Thank you.
• 51:32
  SPEAKER_00: I would like for our listeners to appreciate something very important is the fact
• 51:36
  SPEAKER_00: that what happened before on the Kenyan markets in the retail industry,
• 51:41
  SPEAKER_00: I'm referring here to the failures of Nakumats,
• 51:44
  SPEAKER_00: Tuskis that everybody still has in mind.
• 51:47
  SPEAKER_00: And we sincerely hope that all of you will embark with us on this journey of growth.
• 51:51
  SPEAKER_00: So I would say, Pamoja Nawe.
• 51:52
  SPEAKER_00: Pamoja Nawe.
• 52:17
  SPEAKER_00: And
• 52:17
  SPEAKER_02: of course,
• 52:18
  SPEAKER_02: thank you to Marthos here for Madenya Capsule Partners and Sao Masharia,
• 52:22
  SPEAKER_02: the Chief Finance Officer at Quitmart.
• 52:24
  SPEAKER_02: Of course, I had left there near from Jacques Delon, the Managing Director of Quitmart, Kenya.
• 52:27
  SPEAKER_02: And of course,
• 52:28
  SPEAKER_02: massive thank you to all of you for spending the last hour here with
• 52:31
  SPEAKER_02: on Madenya Capsule.
• 52:32
  SPEAKER_02: Mwango Spaces,
• 52:33
  SPEAKER_02: you've been extraordinarily engaged with lots and lots of questions
• 52:37
  SPEAKER_02: for our operators here,
• 52:39
  SPEAKER_02: the shareholders of the company, and we certainly do not take your engagement.
• 52:44
  SPEAKER_02: For granted,
• 52:44
  SPEAKER_02: these are the sort of engagements we'd like to see if you're going to build
• 52:47
  SPEAKER_02: a much more vibrant,
• 52:48
  SPEAKER_02: more open capital market in the country and to bring a lot more investors rise into
• 52:53
  SPEAKER_02: the table.
• 52:53
  SPEAKER_02: Thank you very much for your time this evening.
• 52:55
  SPEAKER_02: You can expect a lot more interesting content from Mwango Capital as usual over
• 52:59
  SPEAKER_02: the course of the week.
• 53:00
  SPEAKER_02: But for now, thank you very much.