State keen to take up rights in Uchumi's growth, expansion bid

The Government is keen to take up its rights in Uchumi supermarkets. This is as the retail chain moves to raise additional capital from the existing shareholders to bolster its ambitious growth and expansion drive in the region.

National Treasury Cabinet Secretary Henry Rotich yesterday confirmed that the State will boost its presence in the retail supermarket, having engineered its revival from the brink of insolvency and receivership.

“We are looking forward to the rights issue. We are already committed to it. We can’t run away from the company as it is doing well. We will continue to be partners,” Rotich told a media briefing in Nairobi yesterday.

Rotich was speaking after receiving a cheque of Sh33.32 million from the Uchumi board. The amount represents the final installment of an Sh407 million loan it had acquired from the Government, before it was allowed to re-list on the Nairobi Securities Exchange (NSE).

During the event, Postal Corporation of Kenya (PCK) and the Kenya Re-insurance Corporation also presented dividend cheques amounting to Sh17.3 million and Sh252 million respectively to the National Treasury.

The Government, which holds a 13.4 per cent stake in the retail chain, is expected to inject an additional Sh264 million by taking up its rights in the cash call. Chief Executive Jonathan Ciano said the company will be looking to raise at least Sh1 billion in the rights issue scheduled for next month.

The amount would be used to partly finance the company’s seven-year growth and an expansion programme estimated to cost Sh2 billion - including opening new branches and refurbishing local branches.

Asset financing

Ciano explained that Sh1 billion has already been raised through asset financing (Sh400 million) and borrowings (Sh600 million) from commercial banks.

Uchumi, whose full-year profitability plunged by seven per cent for the 12 months to June 30,2014, is set to put 100 million newly created shares on offer, with priority to the existing shareholders. This is as the retail chain seeks to consolidate its position in the competitive retail space.

The retain chain’s profit before tax fell to Sh452.74 million from Sh485.9 million in the previous year. In 2005, Uchumi Supermarkets sold 120 million shares in its first ever rights issue at Sh10, which managed to attract Sh1.3 billion, an over-subscription of six per cent.

The planned right issue has been preceded by a successful cross-listing of the company’s stock in Rwanda Stock Exchange and Uganda Securities Exchange after the Nairobi bourse. The firm was put under receivership in June 2006 over a debt of Sh2.2 billion and its shares suspended from trading at the NSE. It was however reinstated on May 31, 2011.