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Uchumi poaches Equity Group’s Julius Kipng’etich for top job

Julius Kipng'etich, Uchumi Supermarket's newly
Julius Kipng'etich, Uchumi Supermarket's newly appointed chief executive. PHOTO | FILE 

Uchumi Supermarkets has picked Julius Kipng’etich as its new chief executive, counting on the senior executive at Equity Group to lead the debt-laden retail chain back to profitability.

Mr Kipng’etich has been poached from Equity, which he led as chief operating officer since 2012, having been hired from State-owned Kenya Wildlife Service (KWS) where he was the chief executive for eight years.

Mr Kipng’etich is credited with turning around the KWS during his leadership there and sources privy to Uchumi’s thinking said that it is this success, while at the State corporation, that heavily influenced the board’s choice.

The sources told the Business Daily that he was expected to bring the discipline required to turn around Uchumi.

The appointment of the Equity Bank senior executive, they added, is also meant to strengthen the listed retailer’s new team, which has been headhunted from other successful retail chains.

Last week Uchumi hired Naivas business development and marketing manager Willy Kimani to be its chief operations officer.

Mr Kimani has also worked at Tuskys, Kenya’s second-largest retail chain, where he was business development, marketing and IT manager for four years.

The chief executive position fell vacant in mid-June after the board fired Jonathan Ciano for alleged “gross misconduct and negligence”, which had resulted in empty shelves at the retailer’s branches as suppliers held back deliveries due to delayed payments.

Owino Ayodo has been acting as the chief executive since.

The board also sacked chief finance officer Chadwick Omondi Okumu and human resource manager Michael Kibe, whose positions have yet to be filled.
KPMG were appointed as the forensic auditors to investigate the extent of the financial mess.

Financial consultancy Deloitte was hired to appoint a new chief executive. Sources said that the position attracted around 60 candidates.

Since then the board has been on an “active clean-up campaign” that has seen it hire consultants and review contracts entered by the previous management.

Hipora Business Solutions East Africa, a human resource company, was hired to investigate thefts by employees and recruitment anomalies.

Uchumi has a staff count of about 4,500 across its 39 branches in Kenya, Uganda, Tanzania and Rwanda.

Additionally, Uchumi wrote eviction notices to some 127 specialty shops that operate within its branches.

This is part of a wider plan that was announced in July where all contracts with the previous management are to be looked at afresh.

The review is meant to identify which contracts were awarded unfairly or through middlemen — one of the reasons that have been cited for Uchumi’s cash flow problems.

A stop-gap measure for the cash flow problems was borrowing Sh500 million from KCB to pay suppliers that have invoices older than 90 days.

Overall the retailer owes suppliers Sh1 billion. To pay the entire amount and improve cash flow, the board decided to sell some of the firm’s landholdings, beginning with 20 acres, held under Uchumi’s property management subsidiary Kasarani Mall Limited, and valued at Sh2.2 billion.

Analysts have been apprehensive about the new strategies, with the retailer still borrowing from banks.

“We applaud Uchumi for taking this step but are concerned about several details, including the cost of the new debt,” said a recent coverage note on Uchumi by London-based Exotix. “We need to know more before we can develop a clear view on the potential success of this new strategy.”

Uchumi reported a pre-tax loss of Sh262.3 million in the half year ended December 2014, compared to Sh106.9 million a year earlier, after sales fell to Sh6.8 billion from Sh7.2 billion during the same period.

The Exotix report estimates that the losses were actually bigger if gains made from its property portfolio were not included in the 2013 and 2014 results.

“Uchumi would have reported a Sh123 million loss in 2013 against the Sh357 million profit it reported and a Sh336 million loss in 2014 compared to the Sh384 million profit it declared,” says the report.

The share price has also been on a gradual fall since the beginning of the year.

As at Monday, Uchumi’s share price stood at Sh7.45, a 29 per cent drop from Sh10.45 price it opened the year with, while the market capitalisation has dropped to Sh2.6 billion from Sh2.8 billion over the same period.

Mr Kipng’etich will come to head a chain that faces increasing competition from both local and foreign firms who are eyeing the formal retail industry that is estimated to have generated a turnover of Sh400 billion in 2014.

Exotix says that Nakumatt, Tuskys and Naivas are major local brands that have overtaken Uchumi in revenues while more competition is expected to come from French-based Carrefour, which is set to open its doors by the end of the year, and Choppies of Botswana, the new owners of Ukwala Supermarkets’ ten stores.

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