Cash-strapped Uchumi Supermarkets plans to close down some branches and lay off staff in an effort to cut costs and stay afloat. The company’s management the expansion strategy had been undertaken without proper funding most of the stores to be closed will be in Tanzania and Uganda, the Nation reports.
To raise more cash to pay off debt, the retail chain will sell a 20-acre piece of land it owns in Kasarani, Nairobi, for about Ksh2.2 billion, chief finance officer Sam Oduor said at an investor breifing today.
By mid last month, the retail chain owed suppliers Ksh2.3 billion, but it approached Kenya Commercial Bank for a Ksh500 million loan to clear some of the dues. The chain store also announced it had finalized a Ksh500m financing arrangement with Kenya Commercial Bank to pay outstanding supplier debts.
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Mr Oduor said Uchumi’s problems started when the 2013 rights issue that was meant to raise Ksh1.5 billion was delayed by nearly two years. The rights issue, which was later undertaken in 2014, raised just over Ksh800 million, Ksh700 million short of the original target.
This affected its expansion plans and payment to a number of suppliers. The store has had challenges getting stock due to delays in paying suppliers. “The two-year rights issue delay was very expensive as it led to a substantial decline in the share price,” Mr Oduor said.“When the rights issue eventually took place, the money was not enough”.
Last month, the retailer fired its long-serving chief executive officer, Mr Jonathan Ciano, on allegations of mismanagement and using land valuations to declare the profits. A report done by Exotix, a London-based investment bank, indicated that the retailer should in fact have declared losses in 2013.
The retailer has now hired KPMG to undertake a forensic audit on the firm’s finances.
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