Uchumi half-year pre-tax loss widens by 288pc

Uchumi shareholders will have to wait longer for any recovery after the supermarket chain posted a pre-tax loss of Sh1 billion.

The loss for the six months to December 31, 2015 marks a 288 per cent dip from the Sh262.4 million loss posted in a similar period in 2014.

In a statement, the group attributed the loss to a drop in sales brought about by low stock levels and closure of some of its branches.

Uchumi CEO Julius Kipng’etich. [PHOTO: WILBERFORCE OKWIRI/standard]

 

In October last year, the retail chain headed by Julius Kipng’etich shut stores in Uganda and Tanzania as well as Maua and Syokimau branches in Kenya, terming them as loss-making and non-viable.

This, coupled with a dip in supplier confidence, saw its stock shrink by 38 per cent to Sh3.4 billion in the first-half of the year.

The Nairobi Securities Exchange (NSE)-listed retailer managed to collect Sh4.3 billion from customers in the six months period under review.

Employee Layoffs

This is a 37.6 per cent decline compared to the Sh6.8 billion net sales it managed in a similar period in 2014.

Layoffs have also come back to haunt the company as its operating expenses ballooned to Sh2 billion since it had to foot redundancy costs.

“Operating expenses grew by 12 per cent following rationalisation of 1,200 staff and costs related to implementation of a Collective Bargaining Agreement,” said the retailer’s chairperson Catherine Ngahu.

The loss-making supermarket also saw its assets drop by Sh1.8 billion as it continues to dispose of non-core assets. However, current liabilities hit Sh6 billion, reflecting a 57 per cent rise.

On Wednesday, the company’s share set a new all-time low when it reached Sh6 per share before wrapping up the week at Sh6.60. Over the last one year, the share price has dropped by about 40 per cent.

Restoring Confidence

But even in the wake of this dismal performance, the board and management said they are still keen on restoring the retailer’s lost glory.

Some of the key recovery strategies include disposal of non-core assets and getting a strategic investor to inject fresh working capital.

In January, Uchumi hired Pamoja Capital, a Nairobi-based business advisory firm, to help in the search for an investor to inject Sh5 billion in its turnaround strategy.

In December last year, the retailer announced plans to dispose of its land at Ngong Hyper, Lang’ata, as well as a 20-acre plot in Kasarani, Nairobi.