Mr Jonathan Ciano, the Uchumi Supermarkets chief executive officer. PHOTO | FILE
Retail chain Uchumi Supermarkets is back in the market with yet another cash call, the third since the company was pulled from the jaws of death seven years ago.
The near-miraculous recovery was followed by an equally surprising sustained growth beginning 2011 through to 2013 but things suddenly changed more recently as Uchumi’s rivals developed muscles and expanded to acquire bigger market share.
The rights issue in which shareholders have been offered three new shares for every eight held seeks to raise Sh895 million.
The sale of the rights kicked off to a slow start the previous week but has significantly picked pace this week.
The retail chain’s chief executive Jonathan Ciano spoke to the Business Daily about Uchumi’s challenges and how he plans to tackle them.
You have been credited with turning around Uchumi from the death scare it suffered in 2006 but now things seem to be getting out of your hands. Do you think it is time to quit?
I am glad for the transformation that we have realised in this company as a team. We have lifted Uchumi up in many ways despite the many challenges in the market.
More recently, there has been some pushing from some shareholders who want to acquire the majority stake in Uchumi and are also pushing us to join the retailers associations, which is not good for our market.
There has been total sabotage. I can only quit if the board convenes a meeting and decides the same. But I am happy to have moulded Uchumi to where it is today.
Reliable reports indicate Uchumi turned down three offers from two South African supermarkets and one from Europe who wanted to pay for the much-publicised rights issue in full. What went wrong?
There were similar offers but we saw it not worth pursuing given it would have denied current Uchumi shareholders their right to participate in the rights issue. Uchumi is not a Kenyan thing but rather an East African company.
Additionally, what the foreign investors were offering was not good for us. But this was a pointer to the potential that Uchumi has in the market.
You are said to be leaving Uchumi for a rival retailer...
Those are unfounded rumours from the same detractors who coined the scheme to portray Uchumi as doing badly with the aim of depreciating our share price in the market for purposes of advancing their bid to acquire more stakes. Gladly it never went through and our share price returned to normalcy.
What is Uchumi’s plan if the rights issue does not succeed or meet the set target?
Our success threshold as communicated to the Capital Markets Authority (CMA) is 50 per cent. As we stand, we have already hit close to 50 per cent mark after major shareholders agreed to take up their rights.
I am an optimist and I strongly believe the target is achievable. We also have a good working relationship with banks if need be — which is not an option for now.
What’s the breakdown of how the funds raised in debt and rights issue will be deployed?
The purpose of the rights issue is to boost our working capital and to help refurbish our old stores that are mainly located in Nairobi. Most of our branches upcountry are relatively new and therefore do not need a lot of refurbishment. We expect to refurbish eight branches that will cost us less than Sh200 million.
There has been a row between Uchumi and the suppliers over debts...
The group supply debt as at October 31, 2014 is just under Sh2 billion with Kenya accounting for about Sh1.3 billion. It is important to note that about 63 per cent of this is debt classified as “current”. That is those that are between 0-60 days while only 37 per cent are beyond 60 days.
The old outstanding amounts are mainly as a result of pending credit notes. In addition, we have managed to religiously pay our suppliers a minimum of Sh300 million per week. It is also important to note that our trading terms differ according to the nature of supplies.
Creditor days can be as low as 14 days (to as long as 60 days). On average, our creditor days stand at 45 days but we are working on this with the aim of improving.
What is the retailer’s strategy in terms of market expansions?
We will be opening two branches in Kigali and another one in Musanze Rwanda early next year. The three outlets will have a combined workforce of 400 employees. We are pursuing expansion, having made good strides from 15 branches in 2006 to 37 currently.
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Note: The results are not exact but very close to the actual.
