Accounting reports by London-based Exotix and Kenya’s Equity Investment Bank have come out to reveal that Uchumi Supermarkets made a loss of Sh. 459 million in the 2013 and 2014 financial years. However, uchumi Supermarkets, through its sacked CEO Jonathan Ciano used the revaluation of its properties to conceal these losses. “After stripping out the revaluations, we calculate that Uchumi would have reported a Sh123 million loss in 2013 against the Sh357 million profit it reported and a Sh336 million loss in 2014 compared to the Sh384 million profit it declared,” Exotic analysts say, adding that they expect the retail chain to make a Sh413 million loss because of an even weaker top-line performance and increasing overhead costs.

The Exotix says that Uchumi’s decision to include the revaluations as part of its income had the effect of obscuring the true status of its financial position — moving it from loss-making to profitability.

Though a normal accounting practice, the International Accounting Standards (IAS) require that revaluation for companies that are not in the property business and which are not tax deductible, flow through the income statement after the net income.

Uchumi reported Sh14.6 billion sales for 2014 and Sh14.27 billion in 2013, a marginal 0.6 per cent increase while loyalty points stood at Sh92.8 million in 2014 down from Sh98.04 million a year earlier — indicating a decline in purchases from the regular customers.

Total revenues were Sh14.46 billion in 2014 from Sh14.37 billion a year earlier, a 10.6 per cent increase.

The information memorandum on the November 2014 rights issue that raised Sh896 million indicated that Uchumi had four registered properties, including the parcels of land where its Ngong Hyper and Langata Hyper branches are located and two parcels of land along Thika Superhighway.

The parcels of land, totalling 20 acres, are held under Uchumi’s property management subsidiary Kasarani Mall Limited and were valued at Sh2.2 billion at the end of June 2014.

The retailer has since reported a half-year loss of Sh262.3 million for the six months to December 2014 compared to a net profit of Sh106.9 million recorded for a corresponding period a year earlier.

Uchumi directors denied any accounting irregularity, insisting that everything was above board. “Uchumi Board did not overstate its profits, based on revaluation of its property holdings. International Financial Standards require a company to state the true value of its property when reporting its finances. We therefore complied with the requirement,” Uchumi chairperson Khadija Mire said.

The accounting revelation comes a week after the Uchumi board sacked Mr Ciano and Chadwick Omondi Okumu, the chief finance officer, and suspended human resource manager Michael Kibe.