Fashion retailer Nairobi Business Ventures #ticker:NBV, which operates under the K-Shoe brand, has lost more branches to landlords who have seized its inventory over non-payment of rent arrears.
The events have reduced the Nairobi Securities Exchange-listed firm’s sales and left its accounting records in disarray.
The state of NBV’s finances has been disclosed by the company’s external auditors Jessie & Associates in their report for the year ended March.
According to the auditors, the company lost Sh21.5 million worth of goods after landlords confiscated two branches in the review period.
NBV had also lost inventory valued at Sh55 million the year before when it lost three branches to landlords.
“There were no other suitable audit procedures that we could adopt to verify the accuracy of values of stocks and fixed assets confiscated by the landlords in the absence of third party documentary evidence,” the auditors said.
“In addition the closing stocks are the directors’ best estimates of the stocks at the point of loss of control as at the year end. Due to lack of information, we were unable to determine whether the financial performance and cash flows for the year are materially misstated.”
NBV’s sales dropped to Sh13.2 million in the review period compared to Sh18.1 million a year earlier but its net loss narrowed to Sh34.7 million from Sh76.5 million. The company’s negative equity meanwhile worsened to Sh36.2 million from Sh31.5 million, partly due to loss of the shoe stocks.
NBV has suffered from inadequate working capital and has been relying on shareholders loans which have not been provided in due time. “The continuation of the company’s activities is dependent on the support of the creditors, continued availability of its banking facilities and the advances from the shareholders of the company,” the auditors said.
The auditors noted that NBV risks going out of business since “as at March 31, 2019 the company had a shareholders’ deficit of Sh36.2 million (2018: Sh31.5 million) as a result of loss in the current year and previous financial year.”
The fashion retailer’s share price has collapsed to trade below Sh1, having debuted on the NSE in June 2016 at Sh5 per share.