Diversified retailer Car & General (C&G) has posted a 35.4 per cent drop in net profit for the half year to June 2024, driven by an increase in finance and operating costs and a higher tax burden.
The company posted a profit of Sh62.5 million in the period, down from Sh96.6 million in the six months to March 2023, after moving its financial year-end to December from September.
C&G's revenue grew 3.7 percent to Sh10.9 billion from Sh10.5 billion, but costs rose at a faster rate, contributing to the fall in profits.
Operating and administrative expenses, which include salaries, rent and utilities, rose 16.5 percent to Sh1.05 billion from Sh900.3 million.
Finance costs increased by 49.7 percent to Sh586.8 million from Sh392.1 million.
The company also incurred a higher tax charge of Sh44.02 million, representing 41.3 percent of profit before tax in the period under review, compared with a tax charge of Sh29.7 million, representing 23.5 percent of profit before tax in the previous half year.
Listed on the Nairobi Securities Exchange, the company has five different business lines including automotive and equipment distribution, property investment, financial services, poultry and helmet manufacturing.
The company said it would have reported higher sales were it not for weaker demand for motorcycles in the Kenyan market.
"The performance was significantly affected by an 8.7 percent drop in sales at Kenya trading operations. Sales in Uganda have grown 45 percent and sales in Tanzania have grown 13.3 percent," said C&G.
"Our trading operations in Kenya have been specifically affected by a 77 percent drop in the overall market for motorcycles since 2022 when market average monthly sales were 20,000 units. Market sales are now 4,000 units per month."
The company says its investment properties, which include the Nairobi Mega shopping mall on the Uhuru Highway, have seen high footfall, adding that it plans to sell part of its 23 acres in Shanzu.
Mobile phone financing in Kenya, Uganda, Tanzania, the Democratic Republic of Congo (DRC), Nigeria and Sierra Leone has helped its micro-lending unit Watu grow its business despite lower demand for motorcycles.
The company says its helmet manufacturing subsidiary, Boda Plus, has expanded and is exporting the safety equipment to Uganda, Tanzania, the DRC, Rwanda and Burundi.
C&G says it expects the challenges seen in the half year to continue, adding that it is responding by holding less inventory, increasing aftermarket sales and improving efficiencies across its operations.
"Specifically, we expect motorcycle demand in Kenya to remain subdued for the foreseeable future," the company said.
