STAFF WRITER
Choppies – Botswana’s mega retailer – will pay its first dividend to shareholders since 2017 on the back of a business turnaround that has defied doomsayers.
Brandishing the results for the six months ended December 31, 2023 the company executives are over the moon that the seven years wait for them to deliver a return to shareholders is now over. The company has declared an interim dividend of 1.60 Thebe – with total payout of P29 million – following a whopping 41 per cent jump in Profit After Tax; from P71 million in the corresponding period in 2022 to P90 million.
Ramachandran Ottapathu, Group CEO, has hailed the achievement as two-fold. “First, we are back to being a dividend paying retailer. Secondly, it is very clear that Kamoso businesses will strengthen profitability along with strong regional performance,” he said.
Group Chief Financial Officer Minnesh Rajcoomar conceded further that the company is in a strong position to deliver sustainable dividends.
“Our performance is very good. We are technically solvent. Our cash generation is very strong, having gone up by 14 per cent. We are growing fantastically well. We are confident that we will sustain this performance indefinitely,” charged Rajcoomar.
The group has registered growth across all its segments including the newly acquired Kamoso group and despite the challenges faced by its Zimbabwean operations. Footfall went up by 15.7 per cent in overall operations with that figure going down to 7.7 percent if Kamoso is excluded.
He dismissed suggestions that they may be reacting to shareholders pressure by declaring dividend – insisting that they have sufficient resources to continue growing the business even as they pay dividends. “We still have money to open new stores. In the six months under review, we opened 12 stores – that means opening two stores per month,” he maintained.
PERFORMANCE
“Each week, approximately 2.3 million customers visit 282 stores under seven formats in four countries. With an annual revenue of more than P8 billion, Choppies employs 11 000 people and is the largest grocery retailer in Southern Africa, outside of South Africa,” said the company directors.
The Group’s retail sales increased by 21.3% to P4 258 million (2022: P3 511 million), driven by 10 new Choppies stores and the acquisition of 100 liquor and hardware stores from Kamoso as well as other Kamoso divisions.
Expenses increased by 19.9%.
A special case for the company is the challenge they face with operations in Zimbabwe. For example, if they exclude Zimbabwe operations from the results, the group would have made a Profit After Tax of 117.4 percent but this has now been dragged down to 41 per cent. But Rajcoomar’s consolation is that even as they transverse so many challenges in that market the Zimbabwe operations still posted a P6m profit.
“We have implemented several measures to reduce losses and enhance cash flows. During the reporting period, two stores were closed and one store was relocated. We also indefinitely deferred a portion of the remuneration of the senior management team. We are also planning to close or relocate at least four stores to limit losses post the reporting period,” he said.
On the other hand, the CFO is very happy with the performance of their Zambian business.
“ Zambia is a good story. Business is performing very well. They have doubled their profitability in Pula terms from P13m last year to P26m,” he declared.
FOOTFALL
The retailer continues to draw more people to its stores, according to the CFO, because of its value proposition. With their footprint across the country at 101 stores they are close to most customers, they sell the goods wanted by customers and offer them at a reasonable price.
“The excellent performance resulted from good in-store execution and improved customer engagement, as well as due to the inventory optimisation system. Despite the continued competition from retailers and wholesalers, the segment managed to improve gross profit margins by 60 basis points. Our 20th Big Birthday Bonanza was an incredible success, which helped drive customers into the stores and improve engagement. Although the segment is still very young, it has achieved dominance in the market in only 20 years, “he said in his results analysis.
KAMOSO”S IMPACT
The acquisition of Kamoso businesses finalised in July 2023 is already proving the impact they are set to make to the whole group’s earnings going forward. One key segment coming through Kamoso group is Liquorama, which added 73 stores to the group and hence is expected to lead the charge in increasing Choppies earnings.
“For the period, sales increased by 7.1% and Kamoso moved from a loss after tax of BWP4 million last year to a profit after tax of BWP11.8 million this year. These numbers exclude the loss of BWP10 million relating to the discontinued business of Keriotic. Overall, we are pleased with the performance of Kamoso in the short time since acquisition and we are seeing vital signs of a turnaround. We are confident that the acquisition will be value accretive for the Group going forward,” he said.
OUTLOOK
Going forward, Choppies will continue organic growth in its markets – Botswana, Namibia, Zambia and Zimbabwe while adjusting the business model to current evolving dynamics.
“We will continue to expand the number of our stores, increase our in-country manufacturing and accelerate our digital transformation. We are very eager on fintech and further details will be shared in the next reporting period,” Rajcoomar said.