Court-appointed administrator says massive stock write-off does not add up
Nakumatt’s former management has said the discrepancy was the result of massive “theft, pilferage, stock shrinkage and losses arising from stock obsolescence, a response Mr Kahi says is “unsatisfactory.”
Nakumatt owes tens of billions of shillings to suppliers, banks and landlords of premises it used to operate.
Nakumatt chief executive officer Atul Shah is facing investigations over theft of suppliers' stock worth Sh18 billion at the troubled retail chain.
Peter Kahi, the court-appointed administrator of troubled supermarket chain, Wednesday told MPs he is seeking funds to hire a forensic expert to investigate how Mr Shah wrote off stocks worth billions of shillings before the company took a nosedive.
Mr Kahi told the Senate that around May 2017, Nakumatt wrote off stocks worth Sh18 billion on grounds that there were stocks in the system that were actually not on the retail chain’s shelves.
“It means that the books were massaged a long time ago. It means there was cooking of books. I am looking for money to hire a forensic investigator to tell us where the money is.
"We are told some money may have been siphoned out of the country. This is a lot of money that disappeared from the company’s books,” Mr Kahi told the Senate Tourism Trade and Industrialisation committee which is investigating the slow death of what was Kenya’s biggest retail chain.
Nakumatt owes tens of billions of shillings to suppliers, banks and landlords of premises it used to operate.
Forensic audit
The administrator told MPs the forensic audit will cost about Sh15 million.
The committee, chaired by Kirinyaga Senator Charles Kibiru, met Mr Kahi to listen to Nakumatt’s views in the ongoing investigations into the closure of supermarkets and the crisis facing the retail sector.
Uchumi Supermarkets, Kenya’s oldest retail chain, is also in financial distress.
Mr Kahi said the significant discrepancy in Nakumatt’s books of accounts was booked by the retailer as an adjustment in its accounts for the year to December 2017.
Nakumatt’s former management has said the discrepancy was the result of massive “theft, pilferage, stock shrinkage and losses arising from stock obsolescence, a response Mr Kahi says is “unsatisfactory.”
The Sh18 billion hole emerged in a comprehensive report Mr Kahi presented to the retailer’s creditors in March, outlining restructuring proposals he believes would keep the business afloat.
Mr Kahi told Senators that in the year to February 2016, Nakumatt made sales of Sh52.2 billion which dipped to Sh16 billion in the year to February 2017, meaning that the missing stock amounted to one third of the year’s revenues.
He said Nakumatt’s debt current stands at Sh40 billion, an amount he said can be fully settled in seven to eight years if a restructuring plan he has presented to creditors is adopted.
“When I moved in, I had never done an assignment in all my life that involved revival of a company with such a huge debt of Sh35.8 billion as at December 31, 2017,” he said.
Mr Kahi said banks such as DTB, #ticker:DTK KCB, #ticker:KCB Standard Chartered #tickerLSCBK and Bank of Africa were owed Sh6.9 billion when he took over.
He said the amount owed to secured lenders has now climbed to Sh8.5 billion after reconciliations.
He said Nakumatt had loans amounting to Sh4.8 billion in commercial papers and a further Sh1.1 billion in private placement loans.
“As at December 2017, Nakumatt owed the Kenya Revenue Authority (KRA) Sh1.8 billion but the figure has now increased to Sh2.3 billion. We have met KRA to explain our situation and they agreed to give us amnesty to the end of April. From May this year we are servicing PAYE,” he said.
Mr Kahi said staff salary arrears from July 2017 to January when he entered Nakumatt stood at Sh1.3 billion.
He said creditors who include suppliers and landlords were owed 18.5 billion, the biggest chunk of Nakumatt debt.
He said other creditors including provisions amounted to Sh1.1 billion to bring the total Nakumatt debt as at December 2017 to around Sh36 billion.
Mr Kahi said after conducting reconciliations, the total debt as at January 22 2018 stood at Sh40 billion.
Time extension
He said he is seeking an extension of time from the initial 60 days granted by the court to one year which is allowable in law to restructure Nakumatt.
“With seven branches currently, I can’t see how I will manage to pay Sh40 billion. If given time with this new structure, we can sort out challenges facing the firm and bring up Nakumatt.
"If the government gives me Sh2 billion, I can revive Nakumatt within a very short time,” he said.
He said Nakumatt as at January had 29 branches but has since been closed to seven cutting down the number of employees from 6,700 to 770 currently.
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