NSE Profit warnings for 2015

2015 was definitely a nasty year for many companies listed on the NSE. The worst hit are thus far 17 companies that have issued profit warnings before the release of their full year financial performance. The companies are as follows:

NB: A profit warning is in line with NSE requirements where the company announces that its full year net profit will decline by more than 25%.

  1. Uchumi Supermarkets
  2. ARM Cement
  3. Mumias Sugar
  4. Car and General
  5. East Africa Cables Limited
  6. Standard Group
  7. Atlas Development
  8. Crown Paints
  9. Standard Chartered
  10. Sameer Africa
  11. Home Afrika
  12. TPS East Africa
  13. Pan African Insurance
  14. Britam
  15. UAP (OTC)
  16. BOC Gas
  17. Express Kenya

Through the 1 year between 31st December 2014 and 31st December 2015, the below table looks at the return for each individual stock.

pw
1 year stock price return (Source: NSE)
mcap
1 year market capitalization (Source: NSE)

Highlights

Uchumi Supermarkets:

Uchumi Supermarkets Ltd (Uchumi Supermarkets Limited) is a Kenya-based company engaged in the retail supermarkets operation. The Company operates a network of 15 branches locally. Uchumi Supermarkets Ltd subsidiaries include wholly owned Uchumi Supermarkets (Uganda) Limited and Kasarani Mall Limited.

Even during a difficult year, investors’ appetite for the Uchumi counter was not damped as the counter gained 8.96% over the sample period.

Uchm
1 year stock price movements (Source: NSE)

In June 2015, Uchumi posted a net loss of Ksh 3.4 billion. This was due to a decline in revenue, a Ksh 1.04 billion write-off and a write-off of Ksh 1.6 billion after the retailer closed units in Uganda and Tanzania, which were insolvent. The company also experienced working capital challenges as it was estimated about Ksh 1 billion owed to suppliers strained the retailer.

Investor confidence has established this stock as strong as it revamped its governance retail chain by appointing Dr. Julius Kipng’etich as CEO and Mr. Willy Kimani as COO. Deloitte was also working on a new business model for the retail chain

“The retail chain has hired Pamoja Capital as transaction adviser to identify a strategic investor expected to pump in up to Sh5 billion in exchange for a controlling stake. Shareholders of the Nairobi Securities Exchange-listed retailer meet on Wednesday next week to vote on the fundraising plan that proposes use of options such as a convertible loan, debentures or equity to bail out the loss-making supermarket.” (Business Daily)

Atlas Development Support Services

Atlas Development & Support Services Limited acquires and/or invests in businesses which focus on the logistics support industry in respect of oil and gas exploration and other development projects in sub-Saharan Africa.

ADSS 1 year share price returns plummeted 82.57% making it the worst hit stock during the bear run in 2015.

adss
1 year stock price movements (Source: NSE)

The downturn in the oil and gas industry has put pressure on the Kenyan company as it continued to struggle adjusting to market changes, settling debts to key clients and increased credit pressure. This caused the company to re- and focus all its administrative functions and activities in Ethiopia closing Kenyan operations. It has placed its Kenyan subsidiaries into liquidation by way of a Credit Voluntary Liquidation.

The company recorded a loss of $2.5 million in the financial year of 2015. The company is currently trying to win more business in sectors of the Kenyan economy that are no oil and gas related and recently won business in the civil engineering field.

2016 is set to be a year of new growth in new areas for the company.