KENYA – Uchumi Supermarkets’ board has let go of chief executive Jonathan Ciano even as it opened a forensic audit into the cash flow problems that have in recent weeks left the retail chain with empty shelves.
The board said it had sent Mr Ciano and the chief finance officer, Chadwick Omondi Okumu, packing for “gross misconduct and gross negligence” that has left the listed retailer owing suppliers Sh1 billion.
“The board has taken decisive action to address the challenges we are facing and has a clear roadmap to return Uchumi Supermarkets to sustainable and profitable operations,” Uchumi chairperson Khadija Mire said at a briefing on Monday.
Owino Ayodo, the general manager, operations, has been appointed the acting chief executive of the listed retail chain as the hunt for a new head and CFO begins. The human resource manager, Michael Kibe, has been suspended.
Uchumi has been struggling to pay suppliers since late last year and the board said it plans to sell non-core assets worth Sh2 billion – such as land- to pay suppliers, the lifeline in a retail chain.
The board ruled out a possible government bailout or the sale of the company to a competitor, insisting that the company could still be salvaged.
One of its priorities is to return key branches at Sarit Centre, Hyper, Langata Hyper, Ngong Road Hyper, Capital Centre and Koinange Street back to normalcy.
Uchumi has failed to return to its glory since it got relisted on the Nairobi Securities Exchange (NSE) in June 2011 after a five-year suspension, following gross mismanagement that saw it close shop in June 2006.
Ironically, it was Mr Ciano who resuscitated Uchumi, with the help of a government bailout and suppliers, who agreed to convert their debt into shares.
The road back to profitability has, however, proved a tortuous one for the retail chain, marked by serial borrowing and a lack of a clear strategy that has seen Uchumi trail Naivas, Tuskys and Nakumatt, its main rivals.
To find its position in the market the board said it was set to hire a management consultant to write a new blueprint for the 38-year- old firm.
“It is very important that we validate the ongoing regional expansion in view of the performance of our business while taking steps to position ourselves to compete effectively in the changing retail environment,” said Ms Mire.
Competition is also set to become tighter with the entry of Walmart, French-based Carrefour and Botswana retail chain Choppies.
Signs that Mr Ciano was set to exit began to show in inability to handle suppliers yet the retailer had borrowed loans and funds from shareholders in the 2014 rights issue that raised Sh896 million.
Sam Kimani, a board member representing Jamii Bora Bank, the single largest shareholder with a 15.8 per cent stake in the retailer, said that failure to pay suppliers despite the rights issue cash had catalysed the board’s decision to change Uchumi’s top brass.
“We are trying to figure out why suppliers are not delivering yet we had raised money through a rights issue to pay them,” said Mr Kimani.
The retailer additionally took a Sh405 million loan from the Co-operative Bank to pay suppliers and a Sh600 million loan from KCB to fund expansion.
Mr Ciano, however, told the Business Daily that the die was cast once Jamii Bora Bank became the largest shareholders and got a seat on the board.
“I have been informed of the same (sack) and I am comfortable with the decision that has been reached. As you may be aware new shareholders came on board and they have the right to make realignments that are in line with their market and growth expectations.”
Mr Ciano said he will not pursue any legal action for termination of his contract and will be paid three months’ salary in lieu of notice, adding that he has no hard feelings about the decision.
“I leave Uchumi a happy man having played a key role in turning around Uchumi. It has not been an easy journey and I hope the next CEO will take Uchumi supermarket to the next level.”
The listed supermarket chain made a half-year loss of Sh262.3 million for the year ended December 31 2014 compared to a net profit of Sh106.9 million a year before.
Sales dropped to Sh6.8 billion from Sh7.2 billion over the same period.