Choppies revenue up 17%
The trailblazing retail giant, Choppies, has posted impressive half year results for the year ended December 2015.
The unaudited group financial results for six months shows that Choppies has not lost steam despite the challenging operating environment made more difficult by slow economic growth.
The Choppies group still relies heavily in its investments in Botswana as its other operations in South Africa, Zimbabwe and Zambia failed to make a thundering positive impact in the latest results.
The group posted a revenue of P3 530 669 000, a 17 percent increase from the corresponding period in 2014. The Earnings Before Interest Tax Depreciation and Amortization (EBITDA) was up 5 percent, while profit before tax stood at P133 474 000, a slight increase of 3 percent. In the end Choppies raked in profit after tax of P104, 103, 000, up by 0.8 percent compared to the six months ended in 2014.
The Botswana based stores remain the main anchor of the group as they contributed 64 percent of the revenue. The revenue was up by 13 percent from the half year period ended in 2014. This modest growth in revenues was despite the sharp devaluation of the rand putting pressure on pula based sales prices.
“However, profitability continued to improve from the scale benefits of our mature infrastructure. We expect this process to continue going forward,” reads part of the statement. In the current period under review, Choppies opened 5 new stores bringing the total number of stores in Botswana to 78.
The Zimbabwe market showed glimpses of opportunity as the revenue shot up to 49 percent but brought in P952, 000 profit before tax, a sharp decline of 87 percent in the previous corresponding period.
“Profitability was negatively impacted by an aggressive pricing and promotions strategy in new stores, and start-up costs for the 8 new stores opened during the period.
Macroeconomic pressures in Zimbabwe continue to affect the spending power of consumers. In addition, deflationary trends have continued due to the strength of the US Dollar” read part of the statement explaining the large drop in profitability.
Choppies entered the Zambian market in November, a month before the end of the six months statement preparation. The late entry brought in a loss before tax of P1 627, 000, amid challenging trading conditions in Zambia which is underpinned by the struggling Kwacha due to the depressed copper prices, the mainstay of the Zambia economy. The resilient Choppies is planning a further expansion of 10 stores in 2016.
In South Africa, the challenging trading conditions saw Choppies fall behind their profitability forecasts as the company posted a loss of about P40 million before taxation.
Despite this, Choppies seems to have an appetite for the elusive South African market as it continues with its expansion; opening 4 new stores to bring the total number of stores in South Africa to 40. In another bold move, the Botswana based company recently acquired 21 Jwayaleni stores in South Africa. This acquisition does not form part of the current financial results as it was concluded after.
The Choppies group boasts of a war chest that comprises of cash and cash equivalents of P221 668 000, after the company spent more than P200 million in investment activities for the period under the review.
The Choppies expansion in Africa follows the Brownfield model, which involves buying existing businesses; this has been confirmed by Ram Ottapathu, co-founder of Choppies in previous interviews. The latest acquisitions involve 10 existing stores in Kenya and the 21 Jwayelani stores in South Africa.
The 21 stores might be Choppies biggest gamble yet as it promises big returns but with the usual risks lurking in the background. The Jwayelani brand generated revenues of over R1 billion with a gross profit margin of 20.35 percent and profit before taxation up by 2.84 percent while the gross profit went up by 8.93 percent.
However, Choppies could lose big time as it still struggles in the South African market which operates on the backdrop of labour strikes, weakening rand, low investor confidence and power shortages. But the Choppies group is confident that the acquisition creates a platform for profitable growth in the South African operations.
A closer look at the recent acquisitions reveals that Choppies is moving away from mining towns whose spending power is largely tied to commodity prices, and with the commodity prices currently down, Choppies is hoping for a safe haven in the KwaZulu-Natal and Eastern Cape through Jwayelani brand.
The investors will be full of anticipation when Choppies finally releases audited results for the end of year in June. Among other things, they will looking at how the recent acquisitions in Kenya and South Africa are faring, and overall it will the group’s expansion plans that will be on trial. No interim dividend has been declared, a final dividend will be declared and distributed after the finalisation of the financial statements for the year ended 30 June 2016.
Business
LLR transforms from Company to Group reporting
Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.
The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.
At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.
The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.
“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.
The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.
In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.
“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.
Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.
Business
Botswana’s Electricity Generation Dips 26.4%
The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.
Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.
Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.
Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.
Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.
The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.
The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.
In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.
Business
MMG acquires Khoemacau in a transaction valued at P23Bn
MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.
On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.
Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.
In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).
On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.
MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.
On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.
The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.
On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.
The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.
Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.
Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.