The Independent Board of Imara has recommended that Imara Shareholders reject the offer by FWA Financial Limited to acquire the entire issued ordinary share capital of the company that it does not already own.
The recommendation comes a month after FWA offered shareholders a cash offer consideration of P2.10 per offer share, which is 19% lower than the current share price. FWA is a financial holding company registered in Mauritius, and the company is the single largest shareholder in Imara with a 28.97% stake. In its offer, FWA has proposed to buy the remaining 71% of Imara shares which are currently not held by them. Furthermore, the offer was not a combined offer as it was made directly to shareholders, which means shareholders do not need approval to sell to FWA hence making a hostile takeover possible.
When making the offer, FWA reasoned that the offer price of P2.10 per share is attractive to shareholders, providing a liquidity event as well as representing a fair value proposition. The Mauritius based company is hoping to leverage their offer on the absence of liquidity for Imara shares on the Venture Capital Board of the BSE and meet shareholders desire for a return of the cash proceeds associated with the sale in 2015 of Imara SP Reid Proprietary Limited either through share buyback or declaration of special dividends.
FWA as the main shareholder has taken the role of the activist investor as the company appears to question certain decisions taken by Imara, furthermore the offer to buy the whole of Imara seems to stem from the concerns regarding the future operations of Imara.
FWA appears to be disappointed that the share buyback programme approved by shareholders last year October to buy back 15 million shares has not been implemented, denying shareholders capital gains accrued and also the chance to offload the hard to sell stock. Moreover, FWA said when making the offer that the potential for Imara to keep its shareholders happy through a special dividend is unlikely as the company simply doesn’t have sufficient cash reserves to finance an attractive special dividend.
FWA argues that Imara’s distributable reserves amounting to P39.2 million equates to a maximum potential dividend of P0.66 per share, approximately 31.4% of the FWA offer price. FWA’s offer to take over the whole of Imara is motivated appears to be driven by the desire to save the company from collapse as they highlighted that Imara finds itself in a tough spot.
FWA says Imara has experienced difficult trading conditions in the sub-Saharan African markets in which it is active. African economies have suffered a sharp decline in the past 18 months, driven by weak commodity prices which led to declines in currencies versus the US Dollar, difficult economic conditions, currency controls, reduced liquidity, lower share prices and reduced equity trading volumes.
Indicative of the challenges experienced by Imara is the 50% drop in the value of the flagship Imara African Opportunities Fund in US Dollar terms in the period from 30 April 2015 to 30 September 2016 as a result of the decline in African equity values and redemptions.
In the five years to 30 April 2016, Imara generated profits Attributable to Owners of the Parent in two out of the five years. Cumulative Losses Attributable to Owners of the Parent totalled BWP24.6 million in the five years to 30 April 2016. In the year to 30 April 2016 IHL reported a pre-tax loss of BWP13.38 million from continuing operations before the profit on disposal of Imara SP Reid Proprietary Limited, exchange rate gains and goodwill impairments.
FWA has also noted that Imara has high central costs for a company of its size, adding that the high central costs reflect the fixed costs associated with its listing on the Venture Capital Board of the BSE as well as fixed costs associated with the complexity of its business model.
DETERMINING THE OFFER PRICE
“In determining the Offer price, FWA has taken into account IHL’s track record, the value of IHL’s balance sheet at 30 April 2016 and IHL’s growth prospects. FWA therefore considers that the all-cash nature of the Offer allows Shareholders to realise their entire investment at a fair value given the uncertainties facing African economies and IHL at this time,” the acquiring company said.
FWA has also revealed that should it manage to buy the required shares, it intends to make an application for a delisting of Shares on the Venture Capital Board of the BSE. The reasons for de-listing include the lack of liquidity in the Botswana market for small-cap shares and thus the ability to set proper market prices becomes compromised; the limited liquidity to raise capital as a small-cap stock; management having to spend a significant amount of time to focus on investor relations and compliance with the BSE Listing Requirements and ongoing fixed costs associated with BSE Listing Requirements compliance and regulatory oversight.
While it appeared that FWA had made a convincing case for the takeover, the independent board has not only rejected the offer price but also quashed some of FWA’s claims regarding the operations of Imara. The board of directors of Imara were obligated to form the Independent Board for the purpose of considering the terms and conditions of the Offer. The Independent Board, in accordance with its obligations in the Takeover Regulations, appointed KPMG as an Independent Expert to provide it with a fair and reasonable opinion regarding the fairness and reasonable of the Offer Consideration. Following receipt of that fair and reasonable opinion, the Independent Board is required to communicate the contents thereof to Shareholders, together with the Independent Board’s opinion on whether or not the Shareholders should accept the Offer.
IMARA INDEPENDENT BOARD FIGHTS BACK
“The Independent Board, taking into account the opinion of the Independent Expert that the terms and conditions of the Offer are not fair and not reasonable, has considered the Offer and is of the opinion that the Offer undervalues the Company and, on that basis, recommends that Imara Shareholders reject the Offer.”
The Independent Board considers the Offer to be an opportunistic move to take advantage of the current short-term adverse trading environment for the IHL Group and to acquire control of it cheaply. The independent board stopped short of accusing FWA of being disingenuous by using inside information to drive their agenda.
The board has revealed that while FWA is critical of the recent and current performance of the company, the management team of Imara currently comprises of four executive directors, three of whom are also directors of FWA. In an interesting twist, the independent says Imara’s board of directors has been pressing the management team, most of the members of which are now directors of the FWA, for its promised strategy proposals, which have not been forthcoming and have delayed the implementation of various key decisions by the board of directors.
“The Independent Board considers that a conflict of interests is created when members of the management of the Company, who have not articulated a strategy to deal with the numerous issues facing the Company, form part of the Offeror, which has made the Offer at an Offer Price which the Independent Expert has confirmed undervalues the Company.”
Given the prevailing financial environments in countries where Imara operates, the short to medium term prospects of the company are uncertain and the Independent Board is unable to confirm that the business of the Company, in its current format, will be profitable on a sustainable basis, until there is an improvement in the current adverse cyclical factors affecting it.
With just four weeks to go, the Gambling Authority of Botswana has revealed that it is expecting a record attendance at the much anticipated International Association of Gambling Regulators (IAGR) Conference, which will be held in Botswana from 16 – 19 October 2023.
According to a communique from the IAGR, the Gambling Authority will most probably break the record in the number of accredited countries that will attend the conference in Botswana.
“We are on track to match and potentially exceed the incredible delegate turnout we saw in Melbourne last year,” read a statement from IAGR’s.
In its global reach alert, IAGR revealed a glimpse of jurisdictions that will be represented at the conference, among them Australia, Canada, Denmark, Japan, Jersey, Mauritius, United Kingdom, United States and Netherlands. African countries that have so far confirmed attendance include Zimbabwe, South Africa, Nigeria, Tanzania, Kenya and Burundi.
Commenting on the expected bumper attendance, IAGR said the amazing diversity elevates the conference to a whole new level, which will enrich discussions with a tapestry of regulatory perspectives and insights.
Botswana won the bid to host this year’s conference last year in Melbourne, Australia. The IAGR consists of representatives from gaming and gambling regulatory organizations from around the world; with a common mission to advance the effectiveness and efficiency of gaming regulation.
According to Gambling Authority Chief Executive Officer (CEO) Peter Kesitilwe, the Authority is a member of the IAGR by dictates of the Gambling Act; which compels it to align with international organizations whose objectives are to regulate gambling, and build collaboration among regulators.
“The IAGR conference is held annually and hosted by different member jurisdictions. It provides opportunities for gambling and gaming regulators from around the world to engage, learn and network with industry peers through events, workshops, research, information sharing, and the development of best practices,” explained Kesitilwe.
Funding requirements for the conference are shared between IAGR, the host country and conference participants. The government of Botswana has reaffirmed its commitment to supporting the Gambling Authority to host IAGR; as it is in line with its objectives of promoting the country as a Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism destination.
According to Kesitilwe, the conference is coordinated by a Technical Committee of IAGR; together with a Local Organizing Committee (LOC) that comprises of representatives from the Ministries of Trade, Tourism, Foreign Affairs, Botswana Police Service and other stakeholders.
“We promise to deliver this hugely important event and showcase the best that Botswana has to offer. In addition to the exchange of ideas and culture capital, the Organizing Committee will also ensure maximum benefits for the tourism, hotel and hospitality industry, entertainment, transport, telecommunications, vendors, hawkers of cultural artifacts,” said Kesitilwe.
As part of preparations to host IAGR2023, the Gambling Authority recently went on a benchmarking mission to Great Britain.
“What we learnt there can assist the Gambling Authority as we enter a new era of growth and expansion. The meeting also provided a timely opportunity to catch up on preparations for IAGR2023. We are ready to host the conference and we look forward to meeting other regulators from across the world to share best practice, discuss common challenges and tackle illegal gambling,” concluded Kesitilwe.
In recent years, diversity and inclusion have emerged as crucial aspects of the corporate sector. Recognising the importance of inclusivity, the Botswana Development Corporation (BDC) has taken significant steps to signal its commitment to the inclusion of all regardless of age, gender, background. By implementing a comprehensive Diversity and Inclusion policy, BDC aims to create an environment that fosters equality, attracts top talent, and promotes creativity and innovation.
BDC has demonstrated its commitment to inclusion by crafting and implementing a bespoke Diversity and Inclusion policy. This policy recognises and values the differences within its workforce, striving to create a culture of equality. By fostering an environment where all employees feel respected and supported, BDC aims to attract and retain top talent, which in turn contributes to the organisation’s overall success.
The Corporation has implemented policies and strategies that promote diversity and inclusivity in the workplace. The Diversity and Inclusion policy emphasises the value and respect for employees from diverse backgrounds, creating an inclusive environment where everyone can thrive. By having this policy in place, BDC ensures that all employees are treated fairly and have equal opportunities for growth and development within the organisation.
In the realm of inclusivity, leading firms and companies have emerged as trailblazers, championing diversity and equity by implementing progressive policies and initiatives. These organisations have made significant strides in demonstrating their commitment to inclusivity through actions that support individuals with disabilities and foster work-life balance for all employees.
Microsoft actively recruits individuals with disabilities and fosters an inclusive workplace through accommodations and a dedicated resource group. Netflix offers generous paternity leave, Unilever supports surrogate parenthood and gender-neutral caregiver benefits, while IBM provides comprehensive adoption support. Companies like Google, Apple, and Facebook establish employee resource groups to amplify underrepresented voices. Adobe prioritises inclusive workplace design, and Accenture and Deloitte focus on diverse leadership representation. These companies set a powerful example, demonstrating the value of diversity and fostering a more inclusive corporate landscape.
Rising to the challenge, BDC has also taken several measures to respond to the different needs of its work force. These measures include fostering open and respectful communication, encouraging the formation of employee resource groups or affinity networks, and promoting diverse perspectives and contributions. The Corporation has also shown its commitment to inclusivity by recruiting persons with disabilities, providing paternity leave benefits, and recognising and supporting surrogate parenthood, primary caregiver benefits regardless of gender, as well as the adoption of children. These efforts demonstrate BDC’s progressive approach to embracing diversity and supporting employees in all aspects of their lives.
By so doing, The Corporation exemplifies the essence of progressiveness, embracing inclusivity as a core value. By championing diverse talent, providing supportive benefits, and fostering inclusive cultures, BDC is part of a movement that is shaping a future where every individual is valued and empowered.
Inclusion and diversity are not only moral imperatives but also strategic investments for success. BDC’s commitment to fostering diversity and inclusion, sets an example for other organisations in Botswana and beyond. By implementing policies and strategies that create an inclusive environment, celebrating diversity, and supporting employees from all walks of life, BDC paves the way for a more equitable and inclusive corporate sector in Botswana. Embracing diversity is not only the right thing to do; it also drives innovation, boosts employee morale, and contributes to the overall success of organisations.
Choppies Enterprises Limited, a supermarket chain led by Botswana businessman Ramachandran Ottapathu, reported an increase in profit after tax which is up 3.4%, hence improving from P145 million realized in 2022, to P150 million in 2023.
The results demonstrate sustained increases in consumer demand, improved operational flexibility, efficiency, cost-effectiveness and despite stiff competition, the Group managed reduce its debt levels by paying off P263 million debt from the previous fiscal year.
The chain supermarket realized growth in Group retail sales which went up 6.5% to BWP6 433 million compared to P6 042 recorded in 2022. The growth is attributed to a broad presence across Botswana and a growing footprint in three other African countries, being South Africa, Zambia and Zimbabwe, according to a recently financial results statement.
In Pula terms, gross profit grew by 4.0% to BWP 1 359 million (2022: BWP 1 307 million) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined.
During the period under review, the group’s Group net cash generated from operating activities rose by 4.5% to P484 million, this is a significant improvement when compared to P463 million recorded in 2022. This segment was boosted by strong showing from Botswana and Namibia, which performed exceptionally despite the challenging trading conditions. Furthermore, it was driven by sixteen new stores coupled with price growth of 6.8%.
As a result of the robust financial performance, the group’s total assets increased from P1 886 million to P2 177 million, while retained losses decreased from P811 million to P664 million.
Meanwhile, the Group faced a demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which continue to constrain consumer spending and the consumer’s ability to digest higher prices. Sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases.
According to the audited results, the gross profit margin accordingly reduced to 21.1% from last year’s 21.6% due to higher supply chain costs, including fuel and managing prices in response to higher cost inflation and competitor discounting.
Furthermore, while expenses increased 5.1% excluding the depreciation restatement, expenses grew 9.8% partly due to new stores and inflation. Foreign exchange losses on lease liabilities of P31 million (against a gain of P28 million last year) were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of P18 million (2022: BWP15 million).
Operating profit (EBIT) reduced by 1.8% from BWP 279 million to BWP 274 million whilst 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.
According to the Choppies Enterprises financial statement commentary, the Group continues to manage its cash resources and liquidity prudently with a reduction of P132 million in debt with P87 million paid out of internally generated funds and the balance of P45 million paid out of the proceeds of the rights issue.
In addition, capital expenditure increased to P185 million when compared to 2022 fiscal year which had recorded P122 million. This was a result of the Group strategy to invest in new stores and maintaining the distribution fleet.
Choppies Enterprises raised BWP50 million from leases to fund the fleet, an improvement because in 2022 only P36 million was raised.
Despite the growth in sales, inflation and new stores, Choppies Enterprises inventory reduced by P20 million helped by more stable global supply and the benefits of implementing an inventory optimisation system.
Finally, commentary from the Choppies Enterprises Group observes that as the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected. “With a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known for. While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,” reads a commentary on the Group’s Financial statement.
Choppies Enterprises Limited (“the Company”) is a Botswana-based investment holding company operating in the retail sector in Southern Africa. Dual-listed on the Botswana Stock Exchange (“BSE”) and Johannesburg Stock Exchange (“JSE”), its are food and general merchandise retailing as well as financial service transactions supported by centralised distribution channels through distribution and logistical support centres. Each week, approximately 2.0 million customers visit 177 stores under five formats in four countries. With annual revenue of more than BWP6 billion, Choppies employs 10 000 people and is the largest grocery retailer in Southern Africa, outside of South Africa.
EVENTS AFTER REPORTING DATE
On 19 July 2023, Choppies acquired 76% (seventy-six percent) 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.
This acquisition will take Choppies to become a P8 billion business in revenue with 11 000 employees and 274 retail stores.
SNEAK VIEW: COUNTRY PERFORMANCES
According to the financial results, Botswana experienced sales growth to BWP4 459 million an improvement from P4 209 million recorded in 2022. This was supported by volume growth from new stores and double-digit price inflation. Sales from Botswana increased by 5.9% and like-for-like sales growth was 2.2%, as the business continued to show strong resilience in an increasingly challenging economic environment. The Botswana economy continues to experience elevated inflation, high unemployment, and low economic growth.
EBITDA grew 5.8% and adjusted EBITDA was flat on last year. The performance for the second half was much stronger than in the first half as our strategies, leadership and inventory optimisation system have started to come to fruition.
As for the Rest of Africa being Namibia, Zambia and Zimbabwe sales increased by 7.7% to P 1 974 million, yet another improvement from 2022, which had realized P1 833 million sales. The increase was driven by the addition of nine new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia. “However, this was offset by a very weak Zimbabwean Dollar resulting in Zimbabwe’s Pula sales declining by 48.3%.”
Meanwhile Namibia has successfully turned around with sales growth of 60.0% and like-for-like sales growth of 14.4%. Five new stores were opened during the year. EBITDA grew 140% with EBIT loss reducing from BWP9 million to BWP2 million. Adjusted EBIT, excluding the depreciation reassessment, reduced from BWP9 million to BWP6 million.
Connectedly, Zambia continues to grow with sales up 44.7% and like-for-like sales growth of 33.3%. Three new stores were opened during the year. While EBITDA declined by 26.4% due to the foreign exchange loss on the lease liability, adjusted EBITDA grew 27.1%. Adjusted EBIT declined marginally at 2.6%. Choppies Enterprises Directors are confident that Zambia will generate taxable profits in the foreseeable future.
Lastly in Zimbabwe, the Zimbabwean Dollar (ZWL) has significantly weakened especially in the last two months of the financial year. As a result of the above mentioned factors, Pula sales declined by 48.3%. EBIT and EBITDA declined by 151.6% and 125.5% respectively as cost inflation reduced margins. Adjusted EBIT and adjusted EBITDA declined 133.3% and 108.1% respectively.