Sale of non-core assets lowers Marshalls losses and bank loans

 

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By MUGAMBI MUTEGI

In Summary

• The Nairobi bourse-listed car deal Wednesday announced a full-year loss of Sh110 million compared to Sh165.5 million a year earlier.

Marshalls East Africa has reduced its losses for the year ended March 2013 as lower financing costs offset falling sales.

The Nairobi bourse-listed car deal Wednesday announced a full-year loss of Sh110 million compared to Sh165.5 million a year earlier.

Sales dipped by 1.7 per cent to Sh230.4 million from Sh234.3 million last year and Sh1.3 billion in 2007—highlighting the troubles facing the firm and extending its loss-making streak to six years.

But the impact of the falling sales was softened by the drop in financing costs to Sh3.4 million from Sh40 million on reduced bank loans.

Marshalls last year sold non-core assets including land in Mombasa worth Sh621 million to settle bank loans, which left it nearly debt-free after the waiver of a Sh401 million loan borrowed from KCB by businessman Ketan Somaia.

READ: Marshalls sells non-core assets for Sh621m to repay loan

Mr Somaia who lost the battle for control of the auto firm to tycoon Kamlesh Pattni in 2010 in a spat that lasted four years, was said to have borrowed the loan without board approval.

“The directors do not recommend the declaration of any dividend for the year,” the company said in a statement Wednesday. This is a blow to its owners who have failed to enjoy the stock market boon given that the car dealer’s shares has dropped 7.7 per cent over the past year to Sh12 in a period that has seen most counters appreciate by double-digits.

Its shares have become the least sought after at the Nairobi Securities Exchange, going for weeks without trading.

Marshalls is betting on signing new dealerships to grow its sales. It is eyeing dealerships of luxury saloon car Audi and commercial truck Ashok Leyland to return to profitability.

The firm now relies heavily on India’s Tata and KIA, a South Korean vehicle manufacturer that supplies it with saloon cars, pick-ups and sports utility vehicles after it lost the lucrative Peugeot franchise in 2007 to Urysia after holding it for 47 years.