Uchumi signals dividend payment as sales hit Sh16bn

Uchumi Supermarkets’ shareholders could receive a dividend as early as next year after the retail chain beat analysts’ forecasts by announcing that its sales would increase by a third to Sh16 billion in the year ending this June.

Jonathan Ciano, the CEO of Uchumi Supermarkets, says the retail chain will see its sales grow to Sh20 billion in the year to June 2013, which is higher than the Sh17.8 billion that Kestrel Capital had forecast for next year and Sh14.6 billion for this year.

In a research note prepared for its clients with input from the retail chain’s management, stockbrokerage firm Kestrel Capital says that Uchumi is likely to pay a dividend in 2013.

It forecasts that the retail chain could pay a dividend of Sh0.50 in 2013 and Sh1 in 2014.

“The company does not intend to make any borrowings to fund its capex plans, but instead plans to use internally generated cash flows. With this in mind, we do not expect any dividend to be announced in FY12 but rather, dividend payments will probably be made from FY13,” said Kestrel Capital.
This development will be a boon to Uchumi shareholders who last received a dividend 10 years ago and have seen their share rise 118 per cent to Sh16.20 over the past six months, making it the top performer at the NSE over the period.

Plan

“The board is expected to deliberate on dividend matters very soon and at the moment I cannot comment on it since I’ll be violating the rules of CMA and NSE,” said Mr Ciano, in an interview with the Business Daily.

He had also told Reuters that Uchumi’s sales would increase by Sh4 billion next year as new shops it opened in the past year break even.

The firm posted a pre-tax profit of Sh204 million in the six months to December compared to Sh162 million in a similar period last year on sales of Sh7.5 billion up from Sh5.8 billion.

Uchumi’s expansion plan targets reclaiming its market position now occupied by main rivals Tuskys and Nakumatt and second-tier players Naivas and Ukwala.

The retailer plans to open more stores in Kenya, expand to Uganda and Tanzania, to help it double its market value within two and three years.
It has 24 stores, 19 in Kenya, four in Uganda and one branch in Tanzania. It plans to open five branches this year.

Four of the new branches will be in Rongai, Mombasa, Kisumu and Kisii and additional branch in Uganda.

The firm is betting on its reserves, which had grown to Sh1.15 billion in December from Sh371m in 2010 and its improved debt position to compete.

It cleared debts owed to KCB and PTA Bank amounting to about Sh1.4 billion and converted a government debt into equity , which saw the State emerge as the largest shareholder with a 13.1 per cent stake.

The government loan was part of Sh875 million advanced to the retail chain in May 2006 after its near collapse under the weight of debts, which saw it suspended from trading at the Nairobi Securities Exchange (NSE) till mid last year.