Uchumi Supermarkets’ total liabilities have surpassed its assets by nearly Sh200 million, putting the firm in a negative equity position.
Uchumi becomes the second Nairobi Securities Exchange (NSE) traded company to have a negative shareholder equity balance after national carrier Kenya Airways.
This means Uchumi and Kenya Airways’ shareholders would not get a cent if the companies were to be liquidated today.
Uchumi’s heavy debt load of Sh6.3 billion against a total asset base of Sh6.1 billion has crystallised into a negative equity of Sh181.8 million, or Sh0.49 per share as per half-year financial statements to December.
Uchumi and Kenya Airways are now relying on the goodwill of creditors to keep operating, as they scramble to craft a turn-around plan.
“Funding remains the key uncertainty at the moment, with supplier credit and debt sustaining operations,” commented Standard Investment Bank on Uchumi’s precarious position.
The national carrier has a negative equity of Sh33.8 billion, or Sh23 per share.
Shareholders of the two firms have witnessed some of the biggest wealth erosion at the NSE in terms of share price routs and new capital injections in the form of rights issues that have proven insufficient to solve the companies’ problems.
The share prices of Uchumi and KQ have dropped to the current lows of Sh6.3 and Sh4.5 respectively, with the companies’ dividend drought expected to continue in the short term.
Uchumi made a pre-tax loss of Sh1 billion in the half year ended December, widening the negative earnings of Sh262.3 million a year earlier.
The company did not disclose its net loss position. Its net sales declined 37.5 per cent to Sh4.2 billion, with cost of goods sold also falling by a similar margin to Sh3.3 billion.
The retailer’s expenses, however, increased 11.7 per cent to Sh2 billion. The losses, coupled with increased borrowings, have seen the company’s net worth deteriorate steadily to end up in the negative position.
