Administrators of troubled Deacons East Africa say they have released 93 staff to cut costs and plans to let go of directors to boost confidence in the revival process.
The joint administrators, Peter Kahi and Atul Shah, say they want a lean team that can match the current realities of the business where branches have reduced and revenues shrunk almost four times to Sh646 million year as opposed to prior years’ average of Sh2.3 billion.
“Times are challenging and uncertainties are there. No doubt about that,” said Mr Shah of PKF Consulting.
“Staff cost reduction will be achieved across open branches and head office. We have cut staff size to around 60, down from 153 staff.”
The administrators will also be seeking to change the directors of the company, together with CEO Wahome Muchiri, who had been co-opted to help in identifying the debt covenants.
“We have retained directors with a view of getting history of creditors and other crucial information but we may have to replace them. We need fresh management to deal with issues,” said Mr Shah.
They also want to relocate the head office from Norfolk Towers to the warehouse to further cut costs and improve cash flow position of a business whose loss stood at ShSh628 million as at November 25, 2018.
Branches have been cut to eight from 12 and the administrators are also proposing to sell Uganda and Rwanda subsidiaries to help manage debt.
The joint administrators say they are keen to avoid liquidation path since the fashion retailer’s assets will fetch only Sh63 million, exposing creditors and shareholders to a Sh1.9 billion loss.