Uchumi supermarket has more than nine lives and faces a financial crisis :: Kenya

The epic story of the sinking Titanic is mystified by his captain, Edward Smith who is romanced as being on deck while the mastodon was sinking at the bottom of the sea.

But while Uchumi Supermarkets sink to the bottom of the sea, his former boss, Julius Kipng-etich, jumped on a ship abandoning his plan for his recovery.

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But it may be the output of the Chief Operating Officer of the supermarket Andrew Dixon, the former leader of the British giant retailer Tesco who enters your supermarket. Investor and if he goes out, you are beyond redemption – this tells the real business in Uchumi.

million. Dixon, who left Nakumatt in his last days, says his exit in May is due to the fact that Uchumi was so broke that he was not paying a salary, not restoring or paying rent. He opted to jump from the boat and "weigh his options" rather than stay on the spot.

"The brand is good but the reality is that the business needs money to operate, without money it is difficult to keep working.I left because, basically, there is a lack of money. And did not pay salaries, which meant I could not run my office, "says Dixon.

Outflows were mbadive at the retailer who burned through the government's Sh700 million bailout in a matter of months. Sources say at Weekend Business that most workers, including sweepers, took the raft to the next ship and left their fate at random.

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The retailer's listener, KPMG, said that during the 2017 fiscal year, the company experienced a high turnover of staff both at the management level and at the same time. Other levels.

"However, key personnel who left were replaced and the company remained well staffed during the year," KPMG said.

With his Financial Director Mohamed Mohamed doubled as interim CEO, the retailer chose to see only the glimmer of hope since these mbadive outflows have streamlined the company's workforce by reducing staff costs of 1.7 billion at Sh1. 3 billions.

But it was not only the employees who broke the abusive marriage with the sick giant who was characterized by late payments, its foundation – the vendors unplugged the survival machine that allowed Uchumi to get the job done. be open on the skeleton. stock.

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The company that surfaced as a powerful set of hypermarkets in the 90s was designed to provide local suppliers with market access. badge.

With a touch of nostalgia, Uchumi opening branches in Kisumu, Nakuru, Kisii, and Mombasa, the distributor's brand carried loyalty to Kenyans.

With state involvement in part, it presented less risk exposure to the regulators who treated it with children's gloves.

But the retailer has abused this consideration, delaying the results to the detriment of the Capital Markets Authority over the past two years.

It appears that the retailer has also spat on the faces of suppliers who have offered twice to save him at the expense of delaying claims on their debt.

The dramatic effect is seen in the retailer's cost of sales, which is the inventory that he built from suppliers, decreased three times from Sh1.16 billion to Sh379 million. This means that two-thirds of their suppliers simply refused to sell them.

"The Group and the company experienced a shortage of suppliers during certain months of the year due to late payments to suppliers," said KPMG in the 2017 annual report.

The providers had originally agreed on an arrangement to ensure that the Uchumi shelves are not empty and would continue to be stored until the supermarket chain recovers. on his feet.

Under this arrangement, Uchumi was to receive 20% of the revenues to pay rent, rates and staff costs and make a margin while the suppliers received 80%.

Escrow accounts were opened at the Kenya Commercial Bank (KCB), Jamii Bora Bank and United Bank for Africa-Kenya (UBA) to hold the proceeds from the sale of merchandise in order to obtain the proceeds. erase the monthly accounts payable.

"If we look at some of the agreements we had for the escrow account, Uchumi just destroyed most of them," a former vendor told Business Weekend.

These are the same suppliers that Uchumi believes can reach an agreement to convert the old debt of $ 3.6 billion into equity.

Last year, he entrusted NIC Capital Limited with the almost impossible task of restructuring the former supplier's debt into equity. This was to be done during the fiscal year ending June 30, 2017 but until now nothing has been done.

NIC did not answer our questions.

The retailer, formerly a real estate owner, can now operate on his premises only at the mercy of the owners. Most owners have chosen to evict them for non-payment of rent. The branch of Koingange Street near Anniversary Towers in Uchumi was closed after the auction houses were taken away.

In Mombasa, Makini auctioneers raided his branch on Moi Avenue in April, and disposed of goods against a claim of 12 million shillings in the rental areas.

In Kisumu, Pambo Auctioneers attempted to sell the retailer's property in the West End Mall before concluding a difficult truce with the owner.

The supermarket lost 24 branches after leaving the main branches of Sarit Center and Westlands. The Capital Center branch on Mombasa Road was taken over by another supermarket chain.

The retailer says that he operates 12 branches, but refused to provide us with the list of outlets still in business.

Kasarani Shopping Center

With no stock, fewer branches, high costs and debts to pay, the retailer's auditors signed their debt by wondering if the company could continue to operate while it's insolvent.

"The current liabilities of the Group and the enterprise exceeded their current badets by 4,868 billion shillings and 4,635 billion shillings (respectively 3,403 billion shillings in August and 2,701 billion shillings). "said KPMG.

"In addition, the total liabilities of the Group and the company exceeds its total badets of 2.097 billion shillings and 2.448 billion shillings (net badets of 579 million shillings and net liabilities of 648 million shillings). shillings). "

To save himself, the retailer decided to strip his remaining badets and sell his prime lands at the Kasarani shopping center of Thika Road.

Just seven months ago, Dixon estimated that this land was worth Sh3 billion.

Now, Mr. Mohamed says that this land could go up to 2.8 billion shillings, but the retailer expects a minimum of 1.6 billion shillings.

"We are trying to make sure that the value of this land is optimized so that Uchumi gets the best possible bid." So far, bids are in the expected values ​​according to our most recent valuations in the financial statements published in our previous statements, "said Mr. Mohamed.

But in 2017, the sale was marred by land disputes by Sidhi Investment Limited on the property whose resolution is still ongoing. "Land sales in Kenya usually take a long time to complete, and the process is under way and we hope to complete the transaction as soon as possible," said Mohamed.

Uchumi was relieved last year when the government issued 700 million shillings as part of the state-approved 1.8 billion shillings bailout package.

The ship sinks quickly

However, once the money cleared, the retailer fell back into disarray, forcing Mr. Mohamed to appeal to Parliament last month for 600 million shillings.

He said that the lack of money had made it difficult to pursue the recovery plan especially the long – awaited strategic investor who needed insurance before committing his money.

The recovery plan was to last between 6 and 30 months. The first phase of the strategy aimed at stabilizing the company through the creation of smaller outlets (Uchumi Express and Uchumi Mini) through which Uchumi Supermarket Limited will receive royalties of about 4% of sales. This strategy is still to choose. But the ship Uchumi sinks quickly.