• Botswana contributes 66% of revenue
Choppies Enterprise Limited will open more stores in the three markets that it operates in being Botswana, Zimbabwe and South Africa but the rate of expansion in Botswana is expected to slow down.
The group confirmed this in a statement accompanying the financial results for the six months period that ended 31 December 2014. As part of the long-term strategy, Choppies has disclosed that plans are at an advanced stage to open stores in a number of new markets this year.
Choppies CEO, Ramachandran Ottapathu, said on Thursday during the presentation of the financial results that they will open their first store in Tanzania before June this year while in Zambia the first store will open before the end of 2015 fiscal year. According to Ottapathu, they are also accessing entry into the Namibian and Kenyan markets.
Though he said the Namibian market is similar to the Botswana market including equal population of around 2 million people, other markets being currently assessed possess potential including the East African market. In Tanzania, he said there is huge potential for formal retail as it currently stands at 13 percent of the total retail market.
Penetration into other markets will position Choppies well to achieve its target of over 200 stores across six countries by December 2016, Ottapathu revealed. At the moment Choppies, which employs around 11 000 staff in three different countries, currently operates 121 stores – 72 in Botswana, 31 in South Africa and 18 in Zimbabwe. In overall 16 new stores were opened across the three markets during the period under review.
The group CEO said that the rate of expansion in Botswana will slow down and they will focus on the Greenfield – the untapped market.
After mulling over the possibility of secondary listing on the Johannesburg Stock Exchange (JSE) in South Africa, a market in which Choppies opened its first store in 2008, Ottapathu said this week that the possibility will be evaluated during the year 2015.
He, however, said approval from the existing Botswana Stock Exchange (BSE) shareholders will be required for any new shares issued in contemplation of the secondary listing. Through the secondary listing, Choppies seeks to raise extra capital to support expansion into existing and new markets. The move will also enhance the liquidity and tradability of shares on both stock exchanges through spread and diversity of investors.
Ottapathu further noted that the listing will further increase analyst research coverage to support a fair market value for the shares and also enhance Choppies’ public profile in the South African market.
Through the secondary listing and entering new markets, Choppies will be building on the existing growth which is reflected in the financial results for the reporting period. During the period, Choppies recorded a revenue increase of 20 percent to arrive at P3 billion. However, profit growth for the period was impacted by higher interests’ costs as a result of increased capital expenditure for the expansion into various regions.
Botswana market, which is said to be the core market of the group, contributed 66 percent to the revenue, South Africa 21 percent while the remaining 1 percent came from the Zimbabwean market.
The local revenue rose by 6.7 percent, reflecting a P2 billion increase while the South African market improved during the period with revenue of P622 million. Ottapathu said they expect the business in South Africa to become profitable in the near future, once they reach critical mass. Trading conditions post 2014 platinum strike are said to remain a challenge and it is forecast to continue for a foreseeable period.
In Zimbabwe where subsidiaries began operating in 2013, revenue generated during the period is P395 million. Margins are said to have been negatively impacted by high marketing and promotional expenditure. The strengthening of the US Dollar had deflationary impact and is expected to continue for the rest of the financial year.
Choppies, the third most valuable company on the BSE with market capitalisation of P4.6 billion, has declared no dividend for the period, a final dividend will be declared after the finalisation of the financial statements for the year ended 30 June 2015.