Nakumatt’s shareholder deficit rises to Sh27bn

The shareholder deficit at Nakumatt Holdings widened to Sh27.6 billion in the year ended February, making compensation of creditors less likely.

In the prior year, the retailer’s liabilities surpassed its assets by Sh21 billion, according to a report on the company’s financial position prepared by audit firm Parker Randall Eastern Africa.

The enlarged negative equity means Nakumatt has no means of compensating creditors unless it receives a massive new capital injection.

Creditors, including banks, suppliers and investors in commercial paper, were claiming a total of Sh35.8 billion by the time the supermarket chain was placed under administration on January 22, 2018.

The bigger shareholder deficit was driven by a collapse of sales as the company shut down stores after losing the support of banks and suppliers on whom it had defaulted.

Nakumatt’s sales fell 70.5 percent to Sh15.3 billion in the review period compared to Sh51.9 billion the year before.

Its net loss, however, narrowed 68 percent to Sh6.5 billion from Sh20.4 billion as margins improved.

“These matters indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern,” reads part of the report.

Nakumatt’s administrator, Peter Kahi of consultancy firm PKF Kenya, had drawn up a few options of salvaging the retailer but major creditors have been sceptical of the plans.

The major creditors filed a bankruptcy suit that led to the appointment of the administrator. The rescue plans have also been overtaken by events, with the retailer closing most of its branches. Suppliers stand to lose the most, with their exposure to Nakumatt estimated at Sh18.5 billion.