By Macharia Kamau
Uchumi Supermarkets improved profitability trend now signals the retail chain’s turnaround plan is yielding fruit.
The supermarket posted a pre-tax profit of Sh169.9 million for 12 months ending June 30, up from Sh106 million recorded in a corresponding period in the previous financial year.
The Receiver Manager Jonathan Ciano attributed the performance to cost cutting measures as well as the smooth implementation of the turnaround plan – the Uchumi Recovery Plan.
"We have continued to remain focused on operating costs with the ratio to net revenue improving in successive years. As a result of prudent cost management, profit after tax has also increased during the three years," he said on Friday when he released the results.
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The chain was placed under receivership three years ago. In the first year of receivership it posted a pre-tax loss of Sh256 million.
Mr Ciano said Uchumi had throughout the receivership period managed to offset a huge proportion of money owed to suppliers and creditors.
"The business has continued to meet obligations to the pre-receivership creditors, current suppliers and the secured debenture holders," he said.
In the period under review, sales were up to Sh8.23 billion, compared to Sh6.79 billion in the previous financial year.
End to receivership
"In spite of the challenging environment, business performance has continued to improve in the third year running with the on-going implementation of the recovery plan," he said.
Ciano said the process to raise funds from shareholders would begin on Monday.
The money will be used to restructure Uchumi’s balance sheet through increased equity, augment its competitive positioning and lessen debt.
"The process of raising additional equity through a ten per cent convertible shareholders’ debenture is expected to be concluded by November 15," he said.
He added that the success of this exercise would lead to lifting of receivership and a subsequent re-listing of the company’s shares in the Nairobi Stock Exchange.
Ciano said a recent valuation by KPMG placed the value of the chain’s shares at Sh12 after the conversion of all the proposed debentures into shares.
However, the firm’s shares remain suspended from trading at the Nairobi Stock Exchange.
Investors who have participated in previous debenture schemes will be able to buy a share (equivalent to one debenture unit) at Sh10.