Uchumi restructuring cuts full year loss to Sh2.8bn
Uchumi Supermarkets’ restructuring efforts have begun paying off as the retailer cut its full year 2016 full year loss.
In the period ended June 2016, Uchumi’s after tax loss shrunk to Sh2.8 billion from Sh3.4 billion shillings a year earlier.
The retailer twice delayed the release of its results as it restructured its books following the closure of its non performing subsidiaries in Uganda and Tanzania.
During the period under review, revenues dropped by more than half from Sh12.9 billion in 2015 to Sh6.4 billion.
However improvement in operations and reduction in operating costs helped Uchumi narrow its loss.
Uchumi reduced its operating expenses by Sh1.5 billion during the period to Sh3.3 billion.
The country’s oldest retailer has been implementing a restructuring plan that focuses on cutting costs and re-evaluating the business plan.
“We have had to make tough decisions in order to ensure the continued survival and growth of the brand. We may not be out of the woods yet, but we can certainly expect to start to see positive results now as we work to revamp the brand,” Uchumi Managing Director Dr Julius Kipng’etich said in a statement.
Besides closing non profitable branches, Uchumi has also turned to asset sales to inject capital into the business.
Uchumi is seeking Sh1.8 billion from the government as part of plans to raise funds to stabilize operations.
In the supplementary budget, the National Treasury allocated the retailer Sh600 million but it was not immediately clear whether the funds had been transferred.
Dr Kipng’etich said besides the government bailout, the retailer is also actively seeking a strategic investor to pump in funds.
“Uchumi Supermarkets continues its search for a strategic investor and negotiations are ongoing with potential investors. Uchumi is looking into the disposal of its non-core assets in order to boost its liquidity as well working towards a way of clearing the old supplier debt,” he said.
The company has put in place plans to venture into franchising by partnering with neighborhood retailers to boost sales.
The model dubbed Uchumi Express will see 300 stores opened over the next three years in strategic locations.
Auditor KPMG Kenya issued a qualified opinion of the results, saying there was no audit evidence on property and equipment’s opening balances.
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