NOV 21, 2017: UCHUMI SUPERMARKET: GOOD TRY BUT.....

Kenya's Uchumi Supermarket PLC apparently tried its very best to turnaround in the financial year to June 2017 but this was not good enough.

According to the year's audited figures released last week, the black hole called loss margin grew bigger, not smaller despite all the cost cutting and turnaround strategies deployed.

Uchumi ended the year losing Kes 64.3 on each Kes 100 income, up considerably from year 2016's Kes 41.6 and of course, accumulated loss rose to Kes 5.2bn from Kes 3.02bn.

Uchumi's net sales has dropped by 59.7% to Kes 2.587bn from Kes 6.437bn but only cost of sale went down faster than this. It dropped by 60.8% to Kes2.137bn 

The result was that gross profit declined not by 59.7% but by 54% to Kes449.2m.

All that was then needed was for total cost to drop at least at the same rate but unfortunately, it could not. All the cost cutting and management deployed only resulted in 42.1% decrease to Kes 2.12bn.

Nice try because eventually the loss reported, at Kes 1.663bn only reduced by 41.6% from 2016's Kes 2.671bn. The end result was the increased loss margin reported for the year.

But it was a good try. It is even a pleasant surprise that with net income down by more than 50%, drop in actual loss could result at all given how hard it always to cut costs that do not fluctuate with unit sales.

Now, according to Board Chair, Dr Catherine Ngahu Uchumi is pinning hopes on fruitful talks with a strategic investor for much needed cash; imminent government shareholder Kes 700m loan and continued cost management, and implementation of more turnaround initiatives.

It wouldn't be a walk over though. Indeed, what is worth watching out is answer to the hanging question whether after loss of subsidiaries in Uganda and Tanzania, it was time to open new income streams within Kenya or just get better and better at harvesting Kenyan supermarket opportunities.

UCHUMI SUPERMARKET: Full year KesM
                                    2017.           2016
Net sales.                 2587.2.        6427.1
Cost of sale.            2138.1.         5450.2
Gross profit.               449.2.           976.9
Total overhead cost 2112.9.       3648.4
Profit before tax.     (1663.7).   (2671.5)
Profit margin %            64.3.           41.6
Working capital.     (6164.9).    (4768.2)
Accumulated loss   5209.5.       3022.2

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