Deacons East Africa ’s (under administration) CEO Muchiri Wahome says delay in opening Two Rivers Mall is to blame for the company’s financial woes.
The fashion retail company planned to operate four stores at Two Rivers Mall. It invested Ksh400 Million in stock as it awaited the mall’s opening. However, the Kiambu-based mall delayed its open date more than six months. This left the retailer with excess stock and no additional revenue from its investment.
As a result, Deacons’ cash flow troubles began. It failed to meet its financial obligations to suppliers which led to the loss of its key franchisee, Mr Price. The exit of Mr Price yielded further losses for the retailer.
The company’s problems were aggravated when it resorted to costly debt financing agreements and used operating cash from other branches. This new arrangement saw Deacons breach its supplier agreements with existing suppliers as most payments were made to Mr Price. As a result, the traders stopped supplying goods to the retail company.
These financial troubles explain Centum’s “loss of interest” in acquiring 5.53 per cent of Deacons East Africa in July 2017. The private equity firm had made arrangements to buy 6.8 million Deacons shares’ from Aureos East Africa Managers but quickly abandoned the plan.
Between 2016 and 2017, Deacons’ revenues dropped by Ksh303 million. In the same financial period, its losses widened from Ksh276 million to Ksh841 million.
In November 2018, the retail company was put under the administration of PKF consultants; Peter Kahi and Atul Shah. The decision was necessitated by its mounting financial problems.
According to its administrators; the collapse of anchor tenants at its prime locations, and increased competition worsened the retail company’s financial position.
On 22 January, Deacons’ creditors unanimously agreed to sell some of the company’s assets with the hope of recovering part of their investment. They also decided to find strategic investors to help revive the retailer.