Deacons East Africa to unload assets to contend with substantial liabilities

25 January 2019 Consultancy.africa

Having come under administration late last year, apparel chain Deacons East Africa has announced that it will be unloading assets in order to raise the finances required for it to stay afloat, to which end it will appoint a transaction advisor at the end of May this year.

Deacons has been in financial trouble for over two years now, having reported sustained dips in revenue. The clothing retail firm reported losses of Sh 180 million for the first half of 2017 and Sh 230 million over the first six months of 2018. Where the firm’s revenues stood at Sh 2.3 billion two years ago, the firm drew revenues of just under Sh 650 million last year.

The biggest blow to Decons’ operations came through the closure of South African retail giant Mr. Price, which brought the firm’s revenues down by just under 21%. Last November, the firm entered administration, and appointed two consultants from PKF Kenya to support with the debt restructuring process.

Deacons East Africa to unload assets to contend with substantial liabilities

The two administrators – Atul Shah and Peter Kahi – have now made their preliminary assessments of the Deacons’ finances, and concluded that the firm must offload some of its assets across various African markets such as Uganda and Rwanda in order to restore some degree of financial stability.  

The advisors estimate that Deacons needs to raise approximately Sh 60 million in order to increase its sales and renew the flow of revenue and work towards paying off its liabilities, which currently stand in excess of Sh 1 billion. Sh 387 of these are owed to Nairobi-based lenders NIC Group.

The decision to sell assets has been approved unanimously according to Kahi, which can be attributed to the fact that the initial collapse has resulted, among other factors, from a failed attempt to expand the firm’s operations. As a result, the firm will be appointing a transaction advisor in May to help with the process of selling assets.

According to PKF, the consistent losses reported by Deacons mean that the firm “may be unattractive to potential investors or buyers.” Nevertheless, the firm will draw ecnouragement from the fact that East Africa is rapidly becoming an attractive region for international investors, a scenario that might present some opportunities.

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