How Ciano cooked books as Uchumi made losses

A week after firing its CEO, it is emerging that books were cooked to give a rosy image of Uchumi Supermarkets financial health.

The management actually used the revaluation of its properties to conceal losses it made in the past two years, according to a report in the Business Daily.

Without the gains from the property revaluations, which were included in the profit and loss accounts, Uchumi would have been in the loss-making territory from 2013, according to London-based Exotix and Kenya’s Equity Investment Bank.

Though a normal accounting practice, the International Accounting Standards (IAS) require that revaluation for companies that are not in the property business and which are not tax deductible, flow through the income statement after the net income.

Exotix says that Uchumi’s decision to include the revaluations as part of its income had the effect of obscuring the true status of its financial position — moving it from loss-making to profitability.

ALSO SEE: BOARD FIRES UCHUMI CEO OVER FRAUD

“After stripping out the revaluations, we calculate that Uchumi would have reported a Ksh123 million loss in 2013 against the Ksh357 million profit it reported and a Ksh336 million loss in 2014 compared to the Ksh384 million profit it declared,” Exotic analysts say, adding that they expect the retail chain to make a Sh413 million loss because of an even weaker top-line performance and increasing overhead costs.

Uchumi reported Ksh14.6 billion sales for 2014 and Ksh14.27 billion in 2013, a marginal 0.6% increase while loyalty points stood at Ksh92.8 million in 2014 down from Ksh98.04 million a year earlier — indicating a decline in purchases from the regular customers. Total revenues were Ksh14.46 billion in 2014 from Ksh14.37 billion a year earlier, a 10.6% increase.

NEXT READ: UCHUMI SHARES HIT HARD BY CEO FIRING