Courtesy of the Nationmedia.com Story by MUNA WAHOME Publication Date: 06/02/2006
The Uchumi supermarket chain closed down yesterday after finally admitting it was insolvent – throwing more than 1,000 employees out of work and leaving debts of hundreds of millions of shillings.
The stricken firm's chief executive, Mr John Masterten-Smith, announced the Uchumi board had decided to cut the company's losses.
The board had concluded it was unethical to continue trading when they could not pay their debts.
He said it would seek "financial solutions" from its lenders – and that his own resignation had been accepted by the company's chairman, Mr Albert Ruturi. He became chairman little more than one month ago, having replaced Ms Eddah Gachukia, who herself replaced businessman Chris Kirubi only two years back.
Trading in Uchumi shares on the Nairobi Stock Exchange was suspended yesterday by the Capital Markets Authority), but not before around 1.6 million shares had been sold on Wednesday at Sh14.50. Investors could have lost some Sh23 million.
Affected by the closure are the company's supermarkets in Nairobi – at the Sarit Centre in Westlands, Lang'ata, Mombasa Road Hyper and Ngong Road Hyper.
Others are at City Square, Adams Arcade, Jogoo Road, Nairobi West, Parklands, Westlands, Koinange Street, Kimathi Street, and Buru Buru. Also closed are branches in Eldoret, Karatina, Nakuru East, and Meru.
The company had franchised five of its branches to private firms: one in Kisumu and five in Nairobi, at the Railway Station, Market, Taveta Road, Temple Road and Kahawa Wendani.
Earlier, in a bid to streamline its operations, Uchumi had closed other branches, including those in Mombasa, Nakuru and Kisii.
The decision to close Uchumi was announced by the CEO, Mr John Masterten-Smith, at 11.30am, at the company's Nanyuki Road headquarters in Nairobi's Industrial Area.
After admitting Uchumi was insolvent and was closing down, he said: "The business has been encumbered by various hurdles day to day with trade and non-trade creditors."
He was accompanied only by company secretary Waweru Mathenge. Other board members were not present.
Independent sources said the firm's outlets had operated normally until 8.30pm on Wednesday. Then workers were told that they should not go to work yesterday, because they had been given a Madaraka Day rest.
Uchumi has been ailing since 2001, when its board, then led by Mr Chris Kirubi, engaged in an extravagant expansion programme that eventually pushed the company into a cash flow crisis and finally into the red.
Puzzled customers pass the closed gates of Uchumi Hyper on Ngong Road yesterday. The Once flourishing houselhold chain of supermarkets announced yesterday the closure of its stores country wide. Photo by George MulalaMany investors, however, failed to read the signs and sunk almost Sh1.3 billion into a rights issue that had been expected to herald the company's turnaround. They were not even deterred by a Sh1.2 billion loss incurred by the firm in the year ending June 30, 2005.
And there are those who have only partially burnt their fingers in the Uchumi closure. The Industrial and Commercial Development Corporation (ICDC), Kenya Wine Agencies and ICDC Investment gave up some of their rights to new investors during the rights issue. ICDCI baled out completely.
Businessman Naushad Merali’s Sameer Group early this year snapped up 10 per cent of the stake before they quickly pulled out. It was reported that the Uchumi board had refused to grant him the number of board seats he wanted.
Mr Kirubi made his exit last year. Yesterday when told of the closure, he exclaimed: "Oh no!"
Apart from the investors, the company's 1,200 workers in 17 branches were facing the future without jobs.
When making the announcement yesterday, the CEO said they were yet to be informed. "It will be a huge shock," he conceded.
Mr Masterten-Smith, a South African who was hired in November 2004, said at the time: "I am aware of the task ahead of us. I am not saying it is easy."
He now says competition made recovery impossible, in spite of the management's best efforts.
CMA had been informed of the decision, and the company was awaiting a reply. The KCB Group and PTA Bank who are owed hundreds of millions of shillings have also been told.
Yesterday Mr Masterten-Smith seemed at a loss over what financial solutions the board was contemplating for its lenders.
"I cannot enlighten you as decisions have not been taken," he said. "Anything is possible."
Uchumi's recovery strategy appears to have collapsed partly because of its failure to sell its fixed assets. The firm gained only Sh300 million out of the Sh955 million targeted from the sale.
Yesterday, Mr Masterten-Smith said most of the offers were "not suitable".
Asked whether Uchumi's much hyped turnaround was a hoax, he replied: "I do not think we have ever misled anyone in the Kenyan market. We thought the recovery was possible."
The board had concluded it was unethical to continue trading with a negative balance sheet. On the franchise, he said a further decision would have to be taken on their operations. It emerged yesterday that the Kampala branch in Uganda would remain open, because it was a separate company.
Uchumi called television stations to the Press conference in the morning, but for unknown reasons, avoided the print media. Only the Daily Nation and two independent TV stations were present. other realated links
Courtsey of the Nationmedia.com