Kenya Revenue Authority has launched investigations into financial records of Express Kenya, a move that could see the Nairobi Securities Exchange-listed firm face a significant tax demand.
The taxman’s review comes after the transport firm posted an after-tax loss of Sh23.2 million in the six months ended June.
“The company has an ongoing in-depth examination by the Kenya Revenue Authority,” Express Kenya said in its latest annual report dated October 26.
“As a result, the directors are unable to quantify liabilities (if any) arising from the examination.”
Tax audits are carried out by KRA to verify the veracity of income statements and may result in the taxman issuing demand notices if it finds gaps in declarations made by a company or individual.
Express Kenya earned a negative tax credit of Sh917,083 in the year ended December 2014, widening its net loss to Sh77.3 million in the period.
It booked a positive tax credit of Sh1.9 million the year before, turning the pre-tax loss of Sh1.6 million into a net profit of Sh229,399 in the period.
The logistics firm has recorded reduced profitability since East African Breweries – previously it’s single largest customer — in 2011 terminated its lucrative distribution contract for all its products and awarded the deal to DHL.
READ: Express Kenya in red as loss of EABL contract bites
Express Kenya had accumulated tax losses of S09.5 million as of December last year, generating tax assets of Sh92.8 million which it can use to reduce taxable income in the future when it makes profits.
In its heydays, Express Kenya was one of the biggest players in the logistics business, providing clearing, forwarding and warehousing services to blue chips firms.
The company is now turning to real estate to shore up its earnings and has already created a housing unit to drive the property venture.
It plans to build a shopping mall and 224 apartments on a plot it owns on Nairobi’s Likoni Road.
The firm’s stock has declined 35 per cent over the past one year to trade at Sh4.20, reflecting the dividend drought and dwindling earnings.
The company, however, says its venture into real estate will change its fortunes.
“We can report that the new property business segment is going to be important and will reposition the company back to its heyday market capitalisation and reclaim its place amongst the NSE-20 Share Index,” the firm’s chairman Chris Obura said in a statement.
SOURCE: BUSINESS DAILY