Uchumi supermarket at Garden City in Kampala, Uganda. PHOTO | FILE
In Summary
- Several creditors have execution orders while other cases are pending before different courts. The unsettled dues include money owed to suppliers, landlords and employees who will be rendered jobless.
- The board of directors of Uchumi Supermarkets Ltd, the majority shareholder in Uchumi Supermarkets (Uganda), blames low sales, stocks and fraud for the challenges that have rendered the Uganda operation commercially unviable.
- Concerns are emerging over how Uchumi will settle its obligations with more than a dozen creditors including Crown Bottlers, Century Bottling Co. Ltd, Nateete Shopping Centre, Samona Products, Dembe Trading and landlords seeking their dues.
The increasing number of lawsuits against Uchumi
Supermarkets (Uganda) Ltd has prompted the beleaguered company to
petition the High Court to wind up its operations to safeguard its
remaining assets from creditors.
If successful, the liquidation petition filed on December 7 at
the High Court in Kampala would see the company’s assets placed in the
custody of the Attorney General as the official receiver.
Several creditors have execution orders while other cases are
pending before different courts. The unsettled dues include money owed
to suppliers, landlords and employees who will be rendered jobless.
The board of directors of Uchumi Supermarkets Ltd, the majority
shareholder in Uchumi Supermarkets (Uganda), blames low sales, stocks
and fraud for the challenges that have rendered the Uganda operation
commercially unviable.
“Your petitioner has had working capital constraints that have
resulted in delayed payments to suppliers. As of July 31, 2015, your
petitioner had outstanding payables amounting to Ush8.8 billion [$2.62
million],” said company secretary, John K. Wambugu, in an affidavit to
the court.
The High Court invited all interested creditors to reply to
Uchumi’s petition within 15 days from December 10, the date that they
were notified through a court directive. The submissions will be heard
from February 22.
Negative cash position
Uchumi’s operations are projected to have a negative cash
position of Ush23.8 billion ($7.1 million) by end of December 2015, up
from Ush12.7 billion ($3.78 million) in September. Documents filed in
court show that the company had incurred a net loss of Ush10.3 billion
($3.062 million) as of June 30, 2014. Between January and June 2015,
losses registered Ush295 million ($87,713).
The company opened shop in Uganda with a nominal capital of
Ush5.296 billion ($1.6 million) in May 2001. The main branch is at
Garden City. Other branches were opened in the city suburbs of
Kabalagala and Nateete, as well as the upcountry towns of Mbale and
Gulu. A move to expand to Mbarara failed due to the losses the Uganda
operation was making.
In spite of that, Uchumi Supermarkets Ltd, the holding company,
has been providing financial support to its Uganda operations. By the
end of June 2014, the parent company had lend Uchumi Uganda close to
Ush18 billion ($5.5 million).
Uchumi’s net asset position declined from Ush107 million
($32,000) as of June 2012 to negative Ush19.4 billion ($5.780 million)
as of June 2014.
“The decline was due to losses in the financial years 2012, 2013, 2014,” said Mr Wambugu.
Obligations
The business income, which comprises mainly special stores
income, promotional income and signage, declined over the past six
months in line with decreasing revenues, as a result of decreased
customer footfall owing to stockouts and internal fraud.
“Management of your petitioner has considered all alternative
options and undertaken all efforts to dispose of the assets of the
company to realise working capital, however, these efforts have not been
fruitful. Your petitioner then took the decision to formally close the
business,” reads the petition.
Concerns are emerging over how Uchumi will settle its obligations with more than a dozen creditors including Crown Bottlers, Century Bottling Co. Ltd, Nateete Shopping Centre, Samona Products, Dembe Trading and landlords seeking their dues.
The employees have also included the rest of the shareholders in their lawsuit, plus CEO Julius Kipng’etich.
On top of that, entities that secured court orders prior to
filing the petition have attached several assets already. For instance,
Golf Course Holdings, the landlord at Garden City, has locked up the
premises and denied the company access to the assets held there in.
Ugachick Poultry Breeders Uganda Ltd has attached other assets
from Garden City while Imperial Hardware Ltd has attached a 250KVA
generator and two 500KVA generators.
“In view of the above, it is only just and equitable that an
order for liquidation of the company by this court should be made to
facilitate an orderly winding up of the business and that an interim
protective order to be issued to protect the remaining assets for the
benefit of the general body of creditors,” says the petition.
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