Uchumi puts dividend on hold as profit grows
Uchumi Supermarket Ltd
Posted Fri, 16 Sep 2011
Uchumi shareholders will have to wait longer to earn a dividend despite the retail chains full-year pre-tax profit rising 19 per cent. The company intends to spend the earnings on expansion across the region. The firm posted a pre-tax profit of KES514mn in the year to June compared to KES433mn in a similar period last year on sales of KES10.8bn up from KES9.6bn. The retail chain which closed shop briefly in mid-2006 after failing to pay creditors has returned a profit for four years in a row compared to a loss of KES1.2bn in 2005, signalling that its turnaround strategy is working. It rejoined the Nairobi Stock Exchange on May 31 after it emerged from receivership last year, raising hopes that its ripe to share profits with shareholders who have not received a dividend since 2002 and failed to make capital gains as their shares remained suspended at the bourse since mid-2006. Uchumi reckons that dividends are not a priority, arguing it is keen to reinvest the earnings to consolidate market share in the increasingly competitive retail segment. We cannot talk about dividends at this time since we have just returned from receivership, said Mr Jonathan Ciano, the CEO of Uchumi Supermarkets. We are focusing on consolidation of our market and increasing our profitability as we position the business strategically in new locations within East Africa added Mr Ciano. Uchumi is expansion plan targets reclaiming its market position now occupied by main rivals Tuskys and Nakumatt and second-tier players Naivas and Ukwala. The retailer plans to open more stores in Kenya, expand to Uganda and Tanzania to help it double its market value within two and three years. The firm is betting on its reserves, which have grown to KES952mn from KES638 last year and accumulated loss of KES1bn in 2009, and its improved debt position to compete. It cleared debts owed to KCB and PTA Bank amounting to about KES1.4bn and converted a government debt into equity that saw the State emerge as the largest shareholder with a 13.1 per cent stake. The freeze on dividends is a double blow to Uchumi shareholders who have seen their shares drop to KES8.35 at the close of trading Friday from KES13.25 when it relisted on May 31. Its net profit dropped to KES390m in the year to June compared to KES865mn last year due to KES431mn tax credit its received in 2010 compared to payments of KES124mn this year.