Audit Report Exposes Financial Irregularities in Nakumat Holdings Ahead of Creditors Meeting

Audit Report Exposes Financial Irregularities in Nakummat Holdings Ahead of Creditors Meeting

An independent audit report of Nakumatt Holdings’ annual and financial statements  by Parker Randall Eastern Africa, has noted irregularities in the numbers as of February 2018.

The retailer currently under administration is reported to have incurred a loss of Kshs 6,571,333,000 (2017 – Kshs  20,471,180,000) during the year.

As of that date, the company’s current liabilities exceed its current assets by Kshs 17,923,136,000 (2017 – Current liabilities exceeded current assets by Kshs 20,618,563,000).

The Company has a total asset base of Kshs 10,445,647,000 (2017 – Kshs 15,985,884,000) against total liabilities of Kshs 38,103,070,000 (2017 – Kshs 37,081,695,000).

“Therefore, there is inadequate cover in the company’s asset base to be able to meet its obligations. A significant portion of the liabilities relates to borrowings of Kshs 13,203,652,000 which are non-current in nature,” says the audit report.

However, the auditor said the Nakummat management was unable to provide proper costing schedules to enable the audit to ascertain inventory values contained in the financial statements.

“We were unable to satisfy ourselves by alternative means concerning the inventory quantities held on February 28, 2017, and 2018 which are stated in the statement of financial position at KSh5 billion and KSh1 billion, respectively,” the audit says.

In addition to the findings, the auditors found out that the troubled retailer had lend its directors more than KSh1 billion in interest-free soft loans by the time it was placed under administration on January 22, 2018.

“Significant in this net balance is KSh948 million due from the directors. These receivables are not supportable based on the available evidence. The amounts due from a director are interest free. They relate to short-term advances through a current account.”

Then, the largest supermarket chain Nakumatt had 62 branches in East Africa including 47 in Kenya, and generated up to $600m in annual revenues.

“The  financial  statements,  the  Company has  suffered  recurring  losses  from  operations  and  has  a  net  capital  deficiency  that  raise substantial  doubt  about  its  ability  to  continue  as  a  going  concern.”

Nakumatt creditors are set to meet on January 7 to dissolve the company.