Sacked Uchumi Supermarkets CEO Jonathan Ciano on Monday insisted he had quit before the board of the struggling retail giant announced his dismissal.
“Last week on Friday, I tendered my letter of contract termination to the board,” Mr Ciano said in a telephone interview with the Nation. “They told me that they had also wanted to terminate the contract. So I would term this as an agreement on both parties.”
Mr Ciano spoke after the Uchumi board announced his exit on Monday to be replaced in an acting capacity by the firm’s general manager operations, Mr Owino Ayodo.
Also forced out was the chief finance officer, Mr Chadwick Omondi Okumu. The human resources manager, Mr Michael Kibe, was suspended.
Announcing Mr Ciano’s exit at a press conference on Monday, Uchumi chairperson Khadija Mire said it was far from a mutual parting and attributed the sacking to gross misconduct and negligence.
She also said that the board had instituted investigations into the affairs of the troubled retailer that has sunk into a deep financial hole and which has been struggling to pay suppliers.
Just last week, Mr Ciano said that Uchumi was in talks with KCB for a loan of Sh500 million to pay suppliers.
Ms Mire on Monday confirmed that the bank had agreed to continue supporting the business.
The order for an investigation, however, could indicate suspicion that the supermarket’s financial troubles could be the result of more than just a difficult business environment.
It is instructive that Uchumi, a pioneer in the supermarket business in Kenya, has been struggling while rivals like Nakumatt, Tuskys and Naivas continue to grow by leaps and bounds.
“The board has commenced a forensic audit into the operations of the company to establish the extent of the problem,” Ms Mire said.
According to her, the company dipped into a Sh1 billion debt just a few months after raising Sh896 million additional capital from shareholders.
Mr Ciano’s contract was to end in June next year but his premature exit marks a turning point after he was credited with turning around the retail chain and bringing it back from insolvency in 2006.
In the financial year ending June 2013, Uchumi declared a dividend of Sh0.30 per share, marking a complete turnaround after going under in June 2006 due to insolvency. In that period, the retailer moved from a debt position of about Sh2.2 billion to a debt of Sh600 million towards the end of 2014. However, this has changed following revelations that it owed Sh1 billion.
Ms Mire acknowledged that the retailer has been experiencing cash-flow problems resulting in suppliers not being paid on time. Some of the suppliers, such as Kenya Power, have announced that they have stopped doing business with the troubled retailer. A meeting with suppliers is scheduled for Friday.
“We want to assure our suppliers that we have plans to pay them as soon as possible and urge them to continue to give us their support in the meantime,” Ms Mire said. “The board has identified non-core assets worth over Sh2 billion that would be disposed of to meet the company’s obligations.”
She also hinted at the possibility of a joint venture in an effort to keep the business afloat.
“We may consider looking for strategic partners but before we do, we will first present the matter to shareholders,” Ms Mire said.
The board will also hire a consultant to advice on a turnaround and expansion strategies.
“It is very important that we validate the ongoing regional expansion in view of the performance of the business while taking steps to position ourselves to compete effectively in the changing retail environment,” Mr Mire said.
Last November, the company made a cash call seeking to raise Sh895 million in fresh capital from shareholders. This saw the government, which holds an estimated 13.4 per cent stake, make a commitment to take up its entitlement in the rights issue to a tune of Sh264 million.
According to Ms Mire, the company has also set aside Sh200 million to refurbish some of its key outlets in Nairobi, which include the Sarit Centre, Lang’ata Road, Ngong Road, Capital Centre and Koinange Street branches.
The company’s businesses in Uganda and Tanzania have been in decline, with its subsidiaries in the two countries sinking deeper into losses in the year ending June last year. The company closed one of its 10 branches in Uganda following the losses and moved its 110 employees to other branches in the same country.
Even with a turnaround, Uchumi is likely to face more hurdles, including the entry of other international retailers into the same market. Last month, South Africa’s Massmart entered the Kenyan market through its flagship Game brand at the Garden City shopping mall on Thika Road in Nairobi.
French retailer Carrefour has also booked space at the upcoming Two Rivers mall in Runda while a Botswana retailer, Choppies, is also eying entry into Kenya after it announced it would acquire 10 Ukwala Supermarkets outlets at a cost of about Sh1 billion.
On Monday, the supermarket’s share price dipped to Sh9.75 down from Sh10.40 on Friday. The previous week, the share had traded at Sh10.55.