Is It The End of Uchumi As Julius Kipngetich Resigns?

By Juma Fred / December 6, 2017



Julius Kipng’etich Appointed New Jubilee Holdings CEO

The rain that started beating the once vibrant Uchumi Supermarket is not over yet after the resignation of its Chief Executive Officer, Dr. Julius Kipngetich.

Dr. Kipngetich has been at the helm of the struggling retailer for a period of two years and he leaves at a time when the retailer is still facing a blink future.

In a notice to its shareholders, Uchumi Supermarket board of directors said that they have accepted without reluctance the resignation of Dr. Kipngetich as the company Chief Executive Officer, effective 30th November 2017.

The hunt for the new CEO has now begun with the board saying that the person will be announced in the due course. Kipngetich is said to have left to pursue personal interests.

What is the future of Uchumi Supermarket? Will the turbulence end or will it bring the brand to an end?

In November 2017, Uchumi Supermarket showed some optimism in recovery after it narrowed its full-year loss to 1.68 billion shillings from 2.83 billion shillings as a result of what was termed as improved cost management.

While giving the results, the auditors of the firm gave a qualified opinion due to assets write off and loss of control of the business in Uganda. The outlets of the ailing retailer in Uganda and Tanzania, as well as some in Kenya, have been closed. This, according to the management, has been on the basis alongside assets write off for the auditor general to give a qualified opinion.

Despite the fact that the retailer boasts of having reduced the loss by 39 percent on account of improved cost management implementation, the net sales have continued receiving blows from the environment reducing by more than half to 2.6 billion shillings from 6.4 billion shillings as compared to last year.

Just like its peer, Nakumatt, Uchumi Supermarket has not been paying its suppliers promptly leading to a huge buildup of debts. Most suppliers have stopped supplying to the retailer citing the inability of the retailer to meet their financial obligations. Most shelves remain empty and unconfirmed new sources have been indicating that the retailer has been disposing of most of its assets in a desperate move to remain afloat.

According to the majority of shareholders, since its comeback in 2011, Uchumi Supermarket has only managed to pay dividends once out of the financial results of 2014 and since then, shareholders have been going home sulking, empty-handed.

Some History

Uchumi Supermarket limited was a public limited company incorporated in 1975 under the Companies Act.

In the early 2000s, it started to experience financial and operational difficulties which resulted in a marked diminution of the Company’s resources consequently it was unable to meet its financial obligations.

On 31st May 2006, the Board of Directors resolved that the company ceases operations and on 2nd June 2006, the Debenture Holders placed the Company under receivership.

Following a framework agreement between the Government of Kenya, suppliers and debenture holders, the company was revived and commenced operations from 15th July, 2006 under Specialized Receiver Manager and interim management.

By the end of 2008 financial year, Uchumi returned a profit of Kshs 106 million against a loss of 257 million shillings the previous year marking a turnaround of 356 million shillings but that only lasted shortly before the retailer slumped back to the loss-making chamber.

The retailer has also been struggling with the stock market. The image below shows how it has been performing as at the close of business on Tuesday:

What do experts say about the cause of Uchumi’s troubles?

According to European Federation of Accountants F.E.E. (2004), causes of business decline may stem from the external environment and from factors internal to the business.

Internal causes of business decline may be foreseen in advance while external causes are not so predictable. Negative performance occurs when external environmental elements change rapidly and the business is unable to react to these changes. Several authors have identified several internal causes of business decline.

According to Thompson and Shah (2006) when a manager cannot face up company issues promptly, then the business will be overwhelmed and eventually decline. This can be attributed to the management lack of skills, experience, and competencies to make specialized decisions.

Failure of the management to ensure that problems are identified promptly and the correct solutions applied may lead the company to the crisis.

Poor accounting and decisions based upon inaccurate financial information can actually cause problems which may threaten the solvency of the business.

Misleading accounting information blinds the management to the problems a company is facing or recognize them too late. Decision made from this information would be inappropriate causing a decline in business performance (Corporate Renewal Solutions Limited, 2007).

Substandard cash flow management is the imbalance between the payment terms taken by debtors to those given to creditors due to inadequate management of inventory and work in progress.

The most common outcome of a defective cash flow management is a 1 0 decline in liquid assets thus the business is unable to pay its obligations such as loans and suppliers of goods and services. Eventually, the firm lacks the working capital to run to day activities (European Federation of Accountants F.E.E. 2004). Bibeault (2006) points out that weak financial function may appear throughout the company as a general phenomenon, resulting in inadequate financial and accounting control.

An extreme reliance on loan finance can test the company’s cash flow position leading to excessive obligations for the firm to repay capital and associated interest. Unsuitable financing options results in au> inconsistency between the liquidity of assets and the sources of financing; that is financing short-term asset with long-term loans instead of short-term debt.

Here are some of the challenges facing the retailer:

 



About Juma Fred

Juma Fredrick is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it. You can reach him on: (020) 528 0222 or Email: [email protected]

View other posts by Juma Fred


More Articles From This Author







Other Related Articles








SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2018
  • January 2018 (291)
  • February 2018 (220)
  • March 2018 (279)
  • April 2018 (226)
  • May 2018 (240)
  • June 2018 (85)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (196)
  • September 2017 (186)
  • October 2017 (236)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (167)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (250)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (154)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (171)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950