Marshalls East Africa shareholders at a past annual general meeting in Nairobi. PHOTO | FILE
What you need to know:
Marshalls East Africa continues its drift after the recent exit of India’s Tata from its stable.
Marshall’s turnover fell sharply in 2007 with the loss of its Peugeot franchise, slipping below the Sh1 billion mark from where it has not recovered.
In the financial year that ended March 2014, Marshalls managed to cut its loss to Sh2.5 million from last year's loss of Sh110 million, riding on the Sh31.7 million it earned from sale of property and equipment.
At its peak nearly a decade ago, Marshalls East Africa held an exclusive dealership contract for iconic French car Peugeot, among other lucrative franchises in the Kenyan market that earned the company an annual turnover of Sh1.65 billion for the year ended March 2003.
But ownership wrangles have since taken a toll on the performance of the NSE-listed company, shrinking its turnover more than seven-and-a-half times to Sh221 million and pushing it deep into loss-making territory, according to the latest annual results released last week.
Indian carmaker Tata, whose trucks are popular with contractors, also severed ties with Marshalls – a company associated with controversial businessmen Kamlesh Pattni and Ketan Somaia – leaving Korean brand KIA alone in the dealer’s showrooms.
Marshalls did not respond to questions on its latest performance as CEO Govinder Guru was said to have been locked in day-long meetings both Thursday and Friday last week.
Investment analysts, who track Nairobi Securities Exchange (NSE)-listed companies, however, painted a gloomy picture of the company’s outlook, saying the reclusive nature of its management has left little room for new ideas to flow in.
“It has been largely viewed as more of a private firm than a public company even though it is listed, due to its ownership structure and limited trading on its counter at the stock market,” said Standard Investment Bank director Job Kihumba.
Marshall’s turnover fell sharply in 2007 with the loss of its Peugeot franchise, slipping below the Sh1 billion mark from where it has not recovered.
Signs that the company’s fortunes had taken a nose dive became even clearer in 2009 as its turnover halved to Sh592.8 million.
Its bottom-line suffered even more with the fall of net profit from Sh44 million in 2007 to a loss of Sh117.5 million in 2009.
The company only returned a net profit in 2008 when its net earnings stood at Sh181 million on the back of a Sh401 million waiver on a loan that the company’s former principal Ketan Somaia had borrowed from KCB. Mr Somaia lost the battle for control of the company in 2010.
In the financial year that ended March 2014, Marshalls managed to cut its loss to Sh2.5 million from last year’s loss of Sh110 million, riding on the Sh31.7 million it earned from sale of property and equipment.
The 2014 property sale came two years after Marshalls sold non-core assets worth Sh621 million and used the proceeds to repay a bank loan.
Peugeot vehicles are now sold by Urysia, a new dealer that acquired the franchise from Marshalls. Urysia has been riding on Peugeot’s rich heritage to grow sales in Kenya.
Marshalls’ boardroom has seen turbulence in past six years, hampering its ability to develop long-term strategies in an increasingly competitive market.
The upheavals were seen to be arising from an ownership dispute between Mr Pattni and Mr Somaia that was resolved in 2010.
Mr Pattni stoked fresh controversy in 2012 with the sale of his 50.7 per cent stake in Marshalls to a consortium of nine investors — including the then existing shareholders.
A row over the transfer of the shares, alleged to have been done without the official ownership documents, sucked in the Capital Markets Authority.
The row began with the announcement through a public notice that Mr Pattni had sold the 4.5 million shares – at the time worth Sh50 million – that Oriental Commercial Bank had charged as security for a loan Mr Somaia took from the bank in the 1990s in the name of Marshalls Investment Ltd and left without settling.
Mr Pattni had inherited the debt when he took over Marshalls Investment from Mr Somaia, thus attracting the market regulator’s attention with the alleged sale.
Marshalls has in the past experienced a high turnover of chief executive officers, a big challenge in an environment where continuity and stability is seen as a positive by shareholders and clients.
The list of executives who have led Marshalls in recent years includes Sanjiv Shah, who’s the current MD at RMA Group, Sudeep Basu the chief operating officer at Tanzania’s Quality Motors Limited, Rahul Sood and Solomon Adede.
Former Cabinet minister Joseph Kamotho served on Marshalls’ board for a year before exiting in November last year alongside two other directors.
Before its journey of decline began in early 2000s, Marshalls had for decades effectively competed with the likes of Toyota Kenya and General Motors East Africa in the pick-up and saloon car segments of the automobile market.
Its gradual decline has in turn left GM and Toyota as the dominant players in the pick-up category of new car market. The saloon car market is, however, spread more broadly across several brands.
Marshalls’ poor performance has not escaped the attention of investors who have factored it in their dealing with the company’s shares at the Nairobi bourse, more than halving the price from a range of Sh30 and Sh50 between 2006 and 2008 to the current price of Sh10.80.
The company’s counter has also been more recently characterised by low trading volumes.
Regulatory filings at the end of July show that local institutional shareholders own 81.7 per cent of the company.
Global Limited is the biggest shareholder with two million shares representing a 13.9 per cent stake, Woodside Limited has 1.46 million shares or 10.15 per cent of the company while Abner Holdings has 1.33 million shares equivalent to 9.23 per cent.
Mukesh Vaya, who holds 300,000 shares representing a 2.08 per cent stake, is the company’s top individual shareholder.
Savitaben Shah and Ali Mohamed Adam have 1.09 per cent and 1.03 per cent of the company respectively.
Marshalls has 14.39 million issued shares, one of the lowest in the NSE, and going by the current trading price of Sh10.80 the company is valued at a paltry Sh155.4 million.
Market analysts have, however, pointed to a dearth of information that has made it nearly impossible to properly assess the firm’s health.
“We have not seen regular investor and analyst briefings on this company, making it hard to know the exact nature of the problems it is facing and how they are being resolved,” said ABC Capital corporate finance manager Johnson Nderi.
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