Commentary on Results

The Board of Directors is pleased to announce the unaudited results for the half year ended 31 March 2019. Turnover for the first six months to 31 March 2019 was KSh 5.9 billion.

Like for like sales were 16 {688e0b9e123b8cebb4c28d471e5eddb9590af983a8cfaed14838f48e92e478f5} above the same period in the previous year. However, profit after tax was 9{688e0b9e123b8cebb4c28d471e5eddb9590af983a8cfaed14838f48e92e478f5} lower than the previous year at Kshs 51m as compared to Kshs 56m.

The performance was significantly impacted by other costs relating to port storage and demurrage charges which reduced gross margin by Kshs 105m. The processes are now more efficient but the compulsory transition in October 2018 of logistic operations to SGR and Nairobi ICD was extremely expensive. Excluding these charges, profit after tax would have increased 100{688e0b9e123b8cebb4c28d471e5eddb9590af983a8cfaed14838f48e92e478f5} year on year.

From a balance sheet perspective, we have consumed more cash due to higher inventory levels and a reduction in trade creditors resulting from a longer lead time due to the logistic challenges mentioned above. Efficient trading cycles will be restored in the next 3 months.

In Kenya, volumes in our consumer business (two wheelers and three wheelers) made good progress. In Tanzania, despite challenging economic conditions, we maintained strong market share in our three wheeler business. We have made good progress in growing our two wheeler business and continue to invest in this. All other businesses have performed reasonably. We strive, everyday, to improve the daily well-being of our 300,000 customers and their families.

On Investment Property, we have embarked on the refurbishment of Nairobi Mega (formerly Nakumatt Mega) on Uhuru Highway.  We have secured an anchor tenant for this 170,000 square foot development. This will be complete by the end of 2019 and will contribute significantly to rental revenues. We hope to commence another property development by the end of the year assuming we can secure an anchor tenant. We expect these developments will improve our Investment Property yields and values.

The next six months look positive across all business sectors.  Our focus will be on similar growth and operational efficiency particularly in terms of efficient trading cycles.  This will increase cash generation. Volume, margin protection and cost control will be critical to achieving our short term target of 8{688e0b9e123b8cebb4c28d471e5eddb9590af983a8cfaed14838f48e92e478f5} operating profitability. Equally critical will be the completion of our Nairobi Mega property redevelopment.

Interim Dividend

The Directors do not recommend an interim dividend.

P. Kothari

Secretary

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