Thursday, June 01, 2006

Uchumi Supermarkets Limited in Receivership

An employee foreshadows the fate of Uchumi?
Letter to the editor of Kenya Times 24 July 2004

Uchumi Supermarkets has had turbulent years but here is some recent information (recent to older news):

Albert Ruturi was appointed chairman snubbing naushad merali of Sameer Group. Akif Butt (SG's FD) resigns his seat on USL's board & SG dumps its stake in USL pushing the prices to a low of 12/- (post Rights Issue).

Talk on the street (aka rumours) was that the government through KWAL refused to sell its stake to Sameer Group thus thwarting SG's plans to be the anchor shareholder.

Sameer Group had purchased a 10% stake in USL (early 2006) hoping to eventually buy out 25% & take control of the chain. ICDCIC (the listed entity controlled by chris kirubi) sold its stake to Sameer Group through the NSE board. The price rises to a post-Rights high of 22/-

USL had a successful Rights Issue in 2005 where they raised almost KShs 1.2 Billion.

USL appoint new MD, John Mastersen-Smith, formerly of Spar (SA).

Thairu is fired & replaced by an acting MD, Kipn'getich Bett.

Vendors stop supplying USL as it faces a cash crunch. Loss of retail traffic as shelves remain empty.

USL burns through the accumulated cash that Suresh Shah had carefully built up on an ill-conceived expansion plan that used short-term funds to fund long-term expansion. Various suspect leases for new premises were entered into that were done with "related" parties. Haco Indutries (kirubi-controlled) becomes a major USL supplier.

East African article about a "lost Uchumi"

Titus Mugo is fired in Nov 2000 & replaced by Kennedy Thairu (a kirubi appointee) as MD in 2001. Article justifying Shah's & Mugo's ouster from Market (Un)Intelligence.

chris kirubi takes effective control of USL through shareholdings held by himself, ICDCIC (kirubi-controlled) & other kirubi-controlled firms.

kirubi - supplier, vendor & buyer - did he eat his cake & have it too?

Titus Mugo (long serving deputy MD under Suresh Shah) becomes MD upon SS's "retirement".

Interview/Article in East African Dec 4 2000

Suresh Shah retires/resigns as MD of Uchumi in 1999 after an extremely successful run from its loss-making days as a government owned institution (through shares owned by ICDC, ICDCIC & KWAL) to its IPO & subsequent success. It has a 14 year run of making profits under Shah. Rumours have it that he was forced to resign to enable "politically correct" individuals control the cash-rich (over KShs 500 Million) & cash-generating behemoth. These "pc" individuals entities would also then become suppliers to Uchumi.

Suresh Shah's interview with Nation on his pending "retirement".

USL issues a bonus of 1:2 i.e. 1 share for every 2 held. Price hits a high of 60/-.

Kenya enters into an inflationary period & Uchumi's cash hoard increases Uchumi's interest income substantially. Uchumi undertakes a careful expansion concentrating on Nairobi. The logic as explained by the MD was expansion undertaken with a view to "logistical distribution" i.e. Can enough goods be supplied to new stores from a central point at a reasonable cost. This was pre-barcodes & ERPs thus control of shrinkage was paramount in the retail business.

USL goes public through an IPO at 16.50 which was oversubscribed. Suresh Shah remains MD & price goes up to 20/-.

Suresh Shah becomes General Manager then Managing Director of Uchumi (1980 to 1999).

Uchumi Supermarkets is established in 1975.


pesa tu said...

did you know that if you looked at Uchumi's Accounts in the mid and late-90s you will find that most of the spike in their earnings is from their CASH hoard, not TRADING.

VItuVingiSana said...

Uchumi had lots of cash in th 1990s & the management made a SMART decision to invest in T-Bills at 70-80% coz better margins than trading. They expanded at a steady pace.

The management (esp Suresh Shah) decided to take advantage of the high rates occassioned by the post-Goldenberg mop-up instituted by Cheserem.

kirubi's team opted to frund LONG-TERM growth using short-term cash. It's risky esp in a Kenyan situation. Their undoing was the "favourable" treatment given some suppliers (rumoured to be kirubi'f firms & associates).

The 1990s management team did a great job in increasing both trading & interest earnings. In fact that is the perios when banks were making lots of cash from the interest spreads offered by T-bills.

VituVingiSana said...