New capital gives Choppies Enterprises revenue and profit growth
Choppies Enterprises recently reported substantial growth in full-year profits for the financial year ending June 2023, as the group’s retail sales increased by 6.5% to BWP6433 million (N$8878 million) compared to BWP6042 million (N$8343 million) in June 2022.
The Botswanan supermarket chain’s high profits were driven by sixteen new stores and a 6.8% price increase. Furthermore, sales volumes increased by 1.6%, while comparable sales volumes decreased by 4.6%, excluding the new stores.
According to a media release by Meropa Communications on behalf of the group, the business fundamentals have shifted to a healthy state, with revenue surging past BWP6 billion, “a significant milestone for the home-grown chain store since its turbulent phase of internal headwinds two years ago.”
“Pessimism has been wiped out thanks to the recent rights issue of BWP300 million (N$415 million) and trading profits, and there is a cheerful outlook now underpinning the once beleaguered company. In Pula terms, gross profit grew by 4.0% to BWP1359 million (compared to BWP1307 million in 2022) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates, while rates in Zambia and Zimbabwe declined.”
According to their statement, the storm is over, and with new-found optimism, there is an expectation that the group will declare dividends next year.
Choppies Chief Executive Ramachandran Ottapathu stated: “The pain we endured has finally resulted in a gain. These are impressive results. The company has undergone a major revitalization and consolidation programme, and it has paid off. We are on the way to assuming our position as a leading African multinational retail chain. We have made major strides in creating a solid foundation for the group to build on, and we believe this has set the course for a rebirth of the company that offers value for money to its customers and shareholders in a challenging economic environment.”
Ottapathu, the foremost Choppies shareholder, and his executive team pulled the company from the edge of a precipice after the retail giant was “dragged down” by negative equity.
Choppies employs 10,000 people and is the largest grocery retailer in Southern Africa outside of South Africa, with an annual revenue of more than BWP6 billion.
In a statement accompanying the full financial results, the company’s directors said operating profit (EBIT) reduced by 1.8% from BWP279 million to BWP274 million while adjusted EBIT, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances, Zimbabwean legacy debt receipts and the reassessment of depreciation, reduced by 7.5% as costs grew faster than gross profit.
Meanwhile, its primary listing is on the Botswana Stock Exchange, and its secondary listing is on the Johannesburg Stock Exchange. They pointed out that nearly 2.0 million customers visit 177 stores in five different formats across four countries each week. The company closed operations in South Africa, Kenya, Tanzania, and Mozambique and it continues to operate in Botswana, Namibia, Zambia, and Zimbabwe.
Net finance costs were higher than last year due to higher interest rates and interest on new stores’ lease liabilities, it noted.
“The effective tax rate is lower than the standard rate mainly due to the legacy debt receipts from Zimbabwe that are exempt from income tax and the raising of deferred tax on carried forward tax losses. We raised a deferred tax asset of BWP23 million for Zambia as we are now confident that this country will generate taxable profits in the foreseeable future.”
The Group also maintained that it continues to manage its cash resources and liquidity “prudently with a reduction of BWP132 million in debt with BWP87 million paid out of internally generated funds and the balance of BWP45 million paid out of the proceeds of the rights issue.”
Additionally, capital expenditure increased to BWP185 million (compared to BWP122 million in 2022) as the Group invested in new stores and maintained the distribution fleet.
“We raised BWP50 million from leases to fund the fleet (compared to BWP36 million in 2022). Despite the growth in sales, inflation, and new stores, our inventory was reduced by BWP20 million, helped by a more stable global supply and the benefits of implementing our inventory optimization system. As the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected,” said the directors.
Finally, on 19 July this year, Choppies acquired 76% of the Kamoso Group for BWP2.00 (two Pula) and took cession of shareholders’ loans to the value of BWP22 million. The Botswana Development Corporation (BDC) will retain its 24% stake.
Choppies Chief Executive and foremost shareholder, Ramachandran Ottapathu celebrates a solid set of results for the year ended June 2023 at Choppies headquarters in Gaborone.
