Uchumi shareholders approve plans to raise firm's share capital

Kenya: Uchumi Supermarkets shareholders yesterday approved increase of the company’s nominal share capital from the current Sh3 billion to Sh4 billion.

The new adjustment accepted at the firm’s 34th Annual General Meeting held yesterday is, however, subject to approval by the regulator, Capital Markets Authority (CMA).

The raised capital is expected to cover the ongoing Sh896 million rights issue that the retailer is raising from its shareholders. The firm plans to use the cash raised for expansion.

The Government, which is a part-owner of the supermarket chain, has already committed to take up its entitlement, representing a 13.8 per cent of the issue.

An increase in the nominal value by corporates is meant to raise the money by either transferring funds, by converting debt or by requesting further shareholder contributions, a later position taken by Uchumi.

During the AGM, the firm’s shareholders also wanted the management to clarity why the retail is strong on borrowing and overdrafts even when the supermarket is making profits.

Group Chief Executive Officer Dr Jonathan Ciano informed the shareholders that the issue of suppliers not being paid was not true as widely reported.

He clarified that the suppliers have been paid their dues and the only debt they have is the Sh600 million owed to Kenya Commercial bank and ICDC.

Ciano further said the retailer will continue to grow in performance and business, as they have adopted cautious growth approach in the region.

“These initiatives are fully supported by ongoing Rights Issue and the positive effect of cross listing Uchumi’s shares in the four Nairobi, Dar es Salaam,

Uganda and Kigali, securities exchanges,” said Ciano.

“We had initially intended to raise about Sh2 billion with the Rights Issue, but the exercise was delayed for one year due to budgetary constraints. The board and management managed to raise Sh1.3 billion through bank loans and asset financing to ensure business continuity.”

The shareholders also approved a final dividend of 30 cents per ordinary share of Sh5 par value for the year ended June 2014.

This is the third consecutive year that the supermarket chain has declared and paid dividend to its shareholders, after almost a decade of drought.

The retail chain’s profit for the year rose to Sh384 million in 2014, up from a profit of Sh357 million recorded in 2013.