The Sh500 million loan will go towards paying suppliers as well as meeting other working capital needs.
Retail chain Uchumi Supermarkets said on Tuesday day it had struck a Sh500 million loan deal with KCB as it awaits the outcome of a forensic audit that will determine the company’s future.
The money is expected to come through this week and will go towards paying suppliers as well as meeting other working capital needs, the management said.
The Uchumi board said it had in the meantime appointed consultancy KPMG to carry out a forensic audit, which is expected to uncover the roots and depth of the financial troubles facing the retail chain.
“The forensic auditor will take between six and eight weeks and is expected to reveal things that may have happened a few years ago,” said Uchumi acting chief finance officer Sam Oduor at an investor briefing.
Mr Oduor said preliminary reports indicated that some top managers had been supplying Uchumi and the forensic audit is expected to offer a deeper account.
The Uchumi board was acting on whistle-blower reports that some managers had formed companies that were then contracted as the retail chain’s suppliers and had contracted agents, whose purpose was to act as middlemen between the retail chain and suppliers, he said.
The board has now banned managers and directors from supplying Uchumi and opted to buy all supplies directly from manufacturers.
Mr Oduor said the forensic audit report is also expected to determine which branches of the retail chain will be shut down or revamped, but until then, there will be a freeze on branch expansion.
Uchumi has 37 branches across Kenya, Tanzania, Uganda and Rwanda.
Financial consultancy Deloitte is on the other hand expected to finish recruiting a new chief executive officer, chief operations officer and the head of treasury by October this year.
The positions were left vacant after the board sacked Jonathan Ciano and chief finance officer Chadwick Omondi Okumu for gross misconduct and gross mismanagement in early June. Human resource manager Michael Kibe is also on suspension.
The management changes were catalysed after suppliers complained that they were not being paid on time despite the chain raising Sh896 million through a rights issue early this year.
Uchumi has also begun the process of selling land holdings that include 20 acres in Kasarani area of Nairobi, along the Thika Superhighway.
Mr Oduor said that the latest valuation of the Kasarani land is Sh2.2 billion. The retail chain also has parcels of land where the Langata Hyper and Ngong Road Hyper branches stand.
The Uchumi board plans to release the retail chain’s full-year results by the end of this month, he said. The retailer reported a half-year loss of Sh262.3 million for the six months to December 2014 compared to a net profit of Sh106.9 million for a corresponding period a year earlier.
Uchumi’s total revenues rose to Sh14.46 billion in 2014 from Sh14.37 billion a year earlier, a 10.6 per cent increase while net profits stood at Sh384 million from Sh357 million over the same time, a 7.56 per cent increase.
A jointly-written report by London-based Exotix and Equity Investment Bank, however, poked holes into the figures citing Uchumi’s use of property revaluation to cover up losses from operations.
The report said that were it not for gains made from revaluation of properties, Uchumi should have made a combined loss of Sh459 million between 2013 and 2014. Analysts remained apprehensive as to whether the latest strategies would return Uchumi back to its glory days.
“Going forward, management intends to develop a detailed corporate strategy. Though we think the restructure is a positive move, we believe Uchumi will take a while to fully turn around,” said analysts at Standard Investment Bank.
Genghis Capital said the retail chain will need to reinvent itself if it is to attract younger shoppers.
“With competition stiffening in the retail space as marts differentiate their service delivery through incorporating tech-savvy shopping; a case in study of Jumia, an online shopping mall, the company needs an innovation strategy that will see the oldest mart in Kenya turn around from the loss-making territory,” said a report by Genghis after the investor briefing.
Nakumatt, Tuskys and Naivas are local chains that have overtaken Uchumi, additionally more competition is expected from international brands Game of South Africa, Choppies (Botswana) and Carrefour (France).
Attendees of Tuesday’s briefing also questioned why it took so long for the board to act, despite red flags being raised such as supplier complaints and empty shelves.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
