Loss-making fashion retailer Deacons (East Africa) PLC board has resolved to be placed under administration due to financial difficulties.
“The board of directors of the company have resolved that as a result of the financial difficulties being faced by the company, it is in the best interest of the company and its creditors for the directors to place the company into administration subject to compliance with the provisions of the Insolvency Act,” said Deacons CEO Muchiri Wahome said in a statement.
“The primary objective of placing the company under administration is to enable it achieve a better outcome for the creditors than would likely to be the case if the company were to be liquidated,” Deacons CEO Muchiri Wahome said in a statement.
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The board in its Friday resolutions proposed the appointing of Peter Kahi and Atul Shah of PKF Consulting as joint administrators of the company.
The Insolvency Act No.8 of 2015 gives companies going through financial distress an opportunity to explore the possibility of rescuing the firms.
Deacon’s stock has dropped 97 per cent from the listing price of KSh15 per share in 2016 to Fridays KSh0.45.
It posted a loss of KES 841.4Mn FY2017, a 204.5% increase from KES 276.3Mn in FY2016 mainly attributed to a tough operating environment and disruptions in its supply chain.
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Sterling Capital Analysts “Expect this move to have a negative effect on investor confidence in Kenya’s capital markets as Deacons becomes the second listed company after Athi River Mining (ARM) to be placed under
administration in a span of 3 months.”
In 2016, Deacons listed 123,558,228 shares on the Nairobi Securities Exchange at KES 15 per share by way of introduction on the AIM segment of the exchange.
Then the retailer’s shares had been trading over the counter for six years and ended on 25th July 2016 after the company sold some of its shares to a select number of investors in 2010 through a private offer. Deacons at that time, sold 12,800,000 shares at KES 62.5 each during the private offer aiming to raise KES 800 million. The offer was 87.5% subscribed raising KES 700 million.