We have extracted below the Chairman’s Statement from the 2018 annual report of Sameer Africa Limited (FIRE.ke), listed on the Nairobi Securities Exchange:
The board has long committed the Group to a process of risk management that is aligned to the principles of best practice and corporate governance.
Distinguished shareholders, members of the board, ladies and gentlemen, it is with great pleasure that I welcome you to the 50th Annual General Meeting of your company. Your Company has had a difficult year in 2018. The best-selling tyres remained unavailable throughout the year and to the day of this report. Efforts have been made to switch production to different factories and this has now been realized with the first batch arriving in August 2019. At the same time, the regional business in Tanzania, Uganda and Burundi has been adversely affected by counterfeit products that easily out price our quality brands in these markets. This has necessitated a significant write down of the investments we hold in those markets. Finally, we faced uncertainties from our key suppliers with substantial price increases throughout 2018 leading to a depressed gross margin of 5% across the tyre business.
As a result of the above adverse trading conditions, Group revenues declined by Kshs 559 Million or 21% and the gross margins declined from Kshs 781 Million to Kshs 342 Million a decrease of 56%. Our subsidiaries at the Company level recorded an impairment of Kshs 403 Million. Overheads increased from Kshs 781 Million to Kshs 786 Million, an increase of 1% mainly due to an increase in the general levels.
The group made a loss of Kshs 529 Million for the year ended 31 December 2018 against a profit of Kshs 13 Million recorded in 2017.
STEPS TAKEN TO IMPROVE PERFORMANCE
The Board has taken swift and far reaching changes in an attempt to address the business losses and bring the group back to profitability. I enumerate a few of the changes below:
Sourcing of Tyres
The group has diversified the sourcing of tyres and has partnered with factories in China, India, Czech Republic, Italy and South Africa.
This diversification has enabled the group to mitigate the risk of stock outs that has impacted the group negatively.
Pricing of Tyres
The operating environment remains hostile with counterfeit tyres being increasingly sold in our markets. We have successfully negotiated with our suppliers for much more favourable terms which will enable the gross margins to improve going forward.
The group has focused on the retail business and is in the process of revamping the products offered. This line of business is expected to improve the returns by expanding the product range beyond tyres into accessories and related product .
The group has segmented the business to be more in line with customer expectations. To that end, each business unit is headed by an expert in that line offering unparalled customer experience.
In 2019, the board and management developed a new strategic plan to cover the three year period 2019 – 2021. The five key pillars of the new plan are as follows:-
- Working Capital Management
The new 2019 – 2021 strategic plan was approved by the board in May 2019.
The board has long committed the Group to a process of risk management that is aligned to the principles of best practice and corporate governance. Our business strategy depends upon us taking calculated risks in a way that does not jeopardize the direct interests of the different stakeholders. Sound assessment of risk enables us to anticipate and respond to changes in our business environment, as well as make informed decisions under conditions of uncertainty. The risk management process has been embedded in our business systems and processes, so that our responses to risk remains current and dynamic. All key risks associated with major change and significant actions by the company also fall within the process of risk assessment and management.
GOVERNANCE AND REMUNERATION
During the year 2018, Mr Allan Walmsley who had been with the group for 6 years retired in August 2018 and was replaced with Mr Simon Gachomo as Managing Director 1 October 2018. I would like to thank Mr Walmsley for his enormous contribution over the years and wish him every success in his future endeavors In 2018, the various board committees continued to play a vital role in supporting the board in discharging its duties and I am continually grateful for their hard work and commitment.
In 2019, the board will also continue to enhance governance and compliance practices and will focus relentlessly on risk management.
Finally, I would like to thank all shareholders, business partners, advisors and customers for their unwavering support and goodwill. My appreciation also to the members of the board, management and staff for their efforts and contribution to the sustainable growth of Sameer Africa.
God bless Sameer Africa and each of you!!!
Eng. Erastus Kabutu Mwongera.