Unga Group employees payroll rises sharply to Sh1.1bn after bakery buyout
Unga Group silos in Eldoret. The miller has recently hired scores of sales people to promote its products in various stores. PHOTO | FILE
What you need to know:
Unga Group spent Sh1.1 billion to remunerate employees in the year ended June, up from Sh752.7 million the year before.
The payroll costs went up after the consolidation of Ennsvalley, a bakery which had 300 employees prior to its acquisition by the miller.
Human and animal feeds manufacturer Unga Group saw its staff costs rise by Sh390.3 million or 51.8 per cent in the year ended June on the back of increased hiring.
The Nairobi Securities Exchange-listed firm has disclosed in its latest annual report that it spent Sh1.1 billion to remunerate employees in the review period, up from Sh752.7 million the year before.
The payroll costs also went up after the consolidation of Ennsvalley, a bakery which had 300 employees prior to its acquisition by the listed miller on July 1, 2015.
The sharp jump in payroll expenses was one of the factors that narrowed the company’s operating profit margin to three per cent from four per cent.
Unga had earlier said it recruited more employees but the financial implication of the hiring was not disclosed at the time it first published its full year results.
“Operating profit was impacted by higher distribution and administrative expenses, attributable to the group’s strategic investments in ICT system upgrades, human resources and brand equity building,” the firm said in a statement.
Among the new staff hired are three senior managers –Allen Ssebugwawo (general Manager Unga Millers Uganda), Kanana Ndegwa (head of marketing and new products at Unga Holdings) and Thomas Ochola (general manager Ennsvalley Bakery).
“During the second-half of the year we completed hiring to fill the open positions in the senior management team … The leadership team has identified leadership competency development and succession planning as an area of focus for the foreseeable future,” Unga said in the annual report.
About 98 per cent of the staff costs are reflected as “salaries and wages”, meaning that there is a variable component which could rise or fall depending on the number of temporary staff hired.
Unga has recently hired scores of sales people to promote its products in various stores. The company did not disclose its total staff count.
The increased hiring signals the company’s preparation for increased growth in the human and animal feeds market. It recently launched new products including Fugo Kienyeji, a supplemental diet for indigenous chicken.
It also introduced basmati and pishori rice under the Amana brand, broadening its human nutrition products that include wheat and maize flour.
Unga’s subsidiary Ennsvalley is also expanding its footprint, with the latest being the signing of an agreement with Chandarana Supermarkets to operate the retailer’s current and planned in-store bakeries.
The bakery has similar deals with restaurants, hotels and other supermarkets including Nakumatt.
Ennsvalley’s range of breakfast products includes bread, cakes, doughnuts, cupcakes and cookies.
Unga disclosed that it reduced the amount it invested to acquire part of the bakery from NAS Holdings to Sh465.2 million from the initial Sh541.6 million, citing subsequent changes in the VAT Act that are adverse to the subsidiary’s business.
Prior to its acquisition, Ennsvalley in 2014 reported a net profit of Sh25.3 million on revenues of Sh737.8 million representing a margin of 3.4 per cent.
Unga said the bakery’s revenues grew in the year ended June but did not disclose its profitability which was impacted by restructuring and investment in equipment.
The listed miller reported an 18.1 per cent net profit drop to Sh508.8 million in the review period due to the absence of a Sh192 million gain from sale of a 51 per cent stake in packaging firm Bullpak Limited the year before.
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Note: The results are not exact but very close to the actual.
