Uchumi results release delayed over change of auditors

Listed retailer Uchumi Supermarkets will delay the release of its financials for the year ended June 2016 citing change of external auditors.

Uchumi chief executive officer Julius Kipng’etich said in an interview that the complex process of handing over to its newly contracted auditors had prompted the struggling chain to seek an extension from the regulator Capital Markets Authority (CMA). The deadline for submission of results to Kenyan financial authorities is October 31st.

“The extension was approved. Delay in on-boarding the new auditors (is behind the delay in release of the annual earnings) but everything is now all underway,” said Mr Kipngetich in an interview.

Mr Kipngetich on Wednesday did not state when the retailer will publish its results.

“We’re discussing with the board on when to release the results. There are a lot of things that need to be sorted out.”

KPMG took over from Ernst & Young this year amid accusations by the current management that Uchumi’s former top managers manipulated last year’s financial statements.

KPMG had been hired to carry out a forensic audit with preliminary findings indicating the former management had manipulated books and concealed losses.

READ: KPMG set to replace Ernst & Young as Uchumi auditors

CMA confirmed it had given the retailer room to clear up its issues and release the results as required by the law.

“Yes, we granted an extension as the company highlighted several challenges it has faced thus necessitating delay in publication of the results for the financial year ended June 30, 2016,” said CMA.

“They are required to publish a notice highlighting that they would delay publication and also indicate the date that they will publish. The same is to be approved by the authority.  We are following up on this to ensure compliance,” said CMA.

Companies listed on the NSE face the sanction of suspension and delisting in addition to fines for delays in submitting their reports.

On Wednesday the share of the retailer was valued at Sh3.45, a 1.43 per cent fall compared to the previous day’s trading at the Nairobi bourse.

Mr Kipng’etich, who was brought in to turn around the retailer in August last year, is banking on a multi-pronged turnaround strategy to optimise and put the business on a growth trajectory through staff and store rationalisation, disposal of non-core property as well as engagement with suppliers and customers.

The restructuring saw Uchumi cut its branch network by half and reduce the number of casual workers under the recovery strategy. Even then, a growing debt and empty shelves have become a thorn in the flesh for the retailer.

The resignation of several senior executives has also cast a dark cloud on the government’s attempt to revive the chain. In July this year the retailer received a huge boost after the Cabinet approved Sh1.8 billion bailout.

For the second time in a decade, Uchumi had asked the government, a part owner and founder, for Sh1.2 billion to settle part of the suppliers’ Sh3.6 billion debt in their turn-around strategy.

Uchumi apparently came out of the cross-hairs of its suppliers after a section of them agreed to drop a winding up petition, seen as a key hurdle in its recovery plan.