On 29th January 2010 shareholders of Uchumi Supermarkets [in receivership] held a meeting at the Kenyatta international conference centre KICC). It was not really an annual general meeting as the Specialist Receiver-Manager (SRM) Jonathan Ciano noted in his opening remarks. It was a meeting of shareholders, and he was a guest (angling to be CEO though). There is no board, but the reorganization task force sat at the high table as the board and the meeting chairman was the Kenya Government Solicitor-General Wanjuki Muchemi. It was part company meeting, savings & credit/investment club and religious meet that one felt a sense of revival or resurrection [of Uchumi] whose receivership period may end early in February 2010 – after almost 4 years!

Investor Relations: Uchumi has been run like a company in all aspects during the receivership. Most important has been the way the SRM has communicated with shareholders, dealt with suppliers (given them as much preference as banks), and produced and published periodic financial accounts (both un-audited and audited) – a normal Receiver-Manager only has to produce an abstract of receipts and payments to be filed with the government and the banks. At the meeting entrance, all shareholders were handed a CD with audited accounts for the years 2006 2007 2008 2009 a/c [however, so far I’m unable to read mine – which is unreadable / corrupted]

The earlier published agenda for the day was:

• Adopt auditors report for 07 08 and 09.
• Elect Albert Ruturi and Peter Kabuga as directors.
• Re-confirm, Ernst & Young as auditors.
• Lift receivership on February 1 2010 by (i) converting suppliers debt into equity (ii) restructuring the government loan into long term debt (iii) Restructuring the KCB and PTA bank debt.

‘Directors’ introduced included SG Wanjuki Muchemi, the permanent secretary in the ministry of trade, representative of Kenya wine agencies limited (KWAL), industrial & commercial development corporation (ICDC), Ernst & Young audit firm, and Kimani Rugendo (long-term Uchumi supplier and has spearheaded their negotiations during receivership) and others.

SRM Ciano outlined the recovery steps turning around the company from 2006 [lost 750 million on sales of 3.5 billion] and 2007 [sales of 4.5 billion and a loss of 256 million], to 2008 [sales of 6.8 billion an profit of 95 million], and 2009 [sales of 8.2 billion and a profit of 420 million]. At the time beginning of receivership Uchumi owed 957 million to banks, 900 to suppliers, and 125 million to ex-staff, while today it owed 130 million banks and 192 million to current suppliers while it has paid off all ex-staff. Also during the 7 months they were closed in 2006, losses of ~150m were incurred.

The Trade PS Mr. Ali also spoke, and then it was the turn of the SG. Solicitor General (SG) Muchemi said nothing was fundamentally wrong with Uchumi when it collapsed, just bad governance. President Mwai Kibaki and the government were determined that this icon of Kenyan business would not be allowed to die and he was asked to lead a task force to revive the company (along with investment secretary Esther Koimett and then-Trade PS David Nalo). He led the team re-negotiated all loans and leases and appointed SRM. He noted what US President Obama did to bail out US banks is exactly what Kibaki has done to revive Uchumi and that it was done in a unique was because traditionally in Kenya, companies that go into receivership, usually die (are liquidated, not revived).

The E&Y auditor read out their report and noted with an emphasis of matter that still the liabilities of the company exceeded the assets the 180 million. At the time they were appointed, the accounts had not been audited and they have now been able to audit accounts for the last three years for presentation to shareholders.

Shareholder Q&A

• Explain tax in profit. Yes, it’s true, that Uchumi got a non-cash tax credit Kshs. 250 million that boosted their 2009 profit to 420 million.
• Re-claim the Uchumi flag-ship store city square CRM said that matter was in court [where former directors of Uchumi have been charged in court with illegally selling the store] and being pursued by the attorney general and CID.
• Is it the right time to exit receivership? All the things are in place proven record, and the banks (KCB and PTA) have approved the lifting of the receivership if certain conditions were met.
• Negative balance sheet position Ciano said that’s 180 million down from 1.2 billion in 2006. He added that if shareholders approved the debenture conversion, government loan restructuring, and combined with Uchumi’s profits for 2010 (based on the six-month numbers), the balance sheet position is currently a positive 594 million.
• CSR activities of the company: SRM explained that they are very active in this and spearheaded famine relief donations with several local stations among others.

Other: I left early [after the adoption of audited accounts and confirmation of Ernst & Young as auditors] but it seems all resolutions were passed.

• Shareholders approved the conversion of Kshs 211 million of shareholders debentures into equity, along with another 266 million from suppliers.
• Shareholders approved restructure of government loan into long-term debt. SRM has applied to the government to restructure their 850 million debt into 350 million of equity and 450 million to a loan which will be paid off in 4 years.
• Uchumi will pay the remaining 130 million to KCB and PTA banks by end of the year.
• Not sure who were appointed as directors.
• Seems Trans-century are still interested in Uchumi: The Transcentury Ltd group, which is chaired by James Gachui and whose directors include several men close to President Mwai Kibaki, is trying again with the executives of Uchumi Supermarkets Ltd. (…via africa intelligence)

SWAG: Small calendar, account on CD, and plenty of water to drink. It was a duel of local barons between former director Chris Kirubi (Dasani from Nairobi bottlers) and Kimani Rugendo (Mt. Kenyan brand water) and there was so much ~4 per shareholder seat.