Choppies revenue up to P5.4 billion amid new strategy
Choppies Enterprises Chief Executive Officer (CEO) Ramachandran Ottapathu has said the retail giant is regaining its feet after tumultuous spell which saw the company being suspended on the stock exchange as well poor performance of its operations in some countries.
Choppies returned to trading on the Botswana Stock Exchange (BSE), where it is primarily listed, on the 27th of July 2020 subsequent to release of its 2018 and 2019 financial results which have been backlogging for the past two successive financial years.
BSE suspended Choppies in 2018 after the company failed to publish its financial results pending “changes in auditors as well as the legal and forensic investigations” hence a subsequent boardroom fracas played before the media.
For the same reason, Choppies shares were also suspended in its secondary market, the Johannesburg Stock Exchange (JSE). Choppies remains suspended on JSE.
Speaking to WeekendPost on Thursday, the Choppies supremo said they have learnt numerous lessons over the past few years relating to operations expansion, expressing confidence that the strong financial performance that the company posted recently is a testament to creation of a new path.
“The company had few loss making units that have been disposed of. The remaining places where we operate [Botswana, Zimbabwe, Zambia and Namibia] are solid performers from all the four regions in spite of high inflation in Zimbabwe, we still continue to make money. Zambia is growing well and Namibia is also in strong footing,” Ottapathu said.
Choppies recently decided to cease its operations in South Africa, Mozambique, Kenya and Tanzania owing to poor performance. Despite this divesture Ottapathu is confident other regions will be key in the growth of Choppies in the next few years.
“We will get some growth in Zambia, Namibia and Zimbabwe depending on what the country is going through. We are not going to be in a hurry to expand in Zimbabwe but other countries we will do expansion in a phased manner,’’ he said.
Asked on what went wrong in other regions Ottapathu said: “It was too new in those countries. Nobody had the patience to wait, we had to go with a new tide that people have to make money immediately.”
Ottapathu could not rule out the possibility of returning to the markets where they exited, indicating that only time will tell.
“It is too early for me to make a comment on that. We will be expanding in a cautious manner and we will do an expansion programme in a very thoughtful process,” he said.
In the latest financial results, Choppies indicated that it is in the process of restructuring its debt. The Debt Restructuring Plan will allow the Company to repay the lenders in smaller tranches than the previous structure which will release some cash to the Company and improve the cash flow going forward, the statement stated.
The Choppies board is of the view that the buffer that has been provided by lenders coupled with improved profitability levels will go a long way in keeping the Company as a going concern for the short, medium to long term.
“That is one of the lessons we learn in the whole thing, debt is a killer. We want to reduce the debt. We will repay the debt even if dividends are delayed by a year, we will rather pay the debt,” Ottapathu said.
Despite events of the past few years, Ottapathu is self-assured that shareholders are confident about the future of the company.
At the height of Choppies saga, Ottapathu was suspended as the CEO of the company pending investigations resulting from allegation of wrong doing that have been raised by one of the previous auditing team members.
“Majority of them are confident, that is why they put us back in the driving seat. We brought in new board members and they are working well with us,” said Ottapathu.
As he previously indicated, Ottapathu said his suspension followed his proposal to the then board led by former President Festus Mogae to have the company board “refreshed” to bring in people with relevant experience in the retail business.
After garnering support from majority shareholders, the board was refreshed, with Mogae and other board members comprising of Dorcas Kgosietsile, Heinrich Stander, Ronald Tamale and Wilfred Mpai resigning their seats in September 2019.
During the year under review there has been changes in the Board of Directors of Choppies and the current board, which is led by Uttum Corea and comprises of among others; Farouk Essop Ismail, Ramachandran Ottapathu, Carol Jean Harward, and Tom Pritchard.
CHOPPIES FINANCIAL PERFORMANCE
Choppies negative equity increased from P80.1 million at June 2019 to P467.1 million as at June 2020. The main contributor for the increased negative equity is the P469.6 million loss from discontinued operations.
Group revenue, for the year ended June 2020 comprising of sale of goods, from the continuing operations, increased by 1.1 percent to P5 421 million (2019: P5 359 million).
This increase was inflation driven in Botswana and Zimbabwe against a backdrop of negative sale volumes in Botswana and Zimbabwe due to the impact of the Covid-19 pandemic.
The impact of the COVID-19 pandemic on the Group’s continuing operations revenue is estimated at P190 million.
The Board has considered it prudent to not declare a dividend for the period under review.
Botswana
The Botswana business continued to show strong resilience in an increasingly competitive and disruptive market due to Covid-19. This year was a period of consolidation, rationalising and balance sheet management with only 3 new stores opened totalling 91 stores.
Revenue grew by 2.7 percent to P4 260.1 million (2019: P4 147.2 million) despite sale volumes reducing by 4.7 percent. The gross profit margin improved to an impressive 24.4 percent (2019: 24.1 percent) with increased consumer demand in an economic environment of low interest rates and a weak Rand. In addition, improved buying and further addition of house brands contributed to profitability.
Financial services and value-added segments contributed well to the bottom line with significant effort and resources placed behind these to improve the service delivery and profitability.
EBITDA (i.e. before accounting for IFRS 16) grew by P58.2 million or 22.5 percent to P316.6 million (2019: P258.3 million).
Zambia
Choppies is becoming a significant player in the Zambian market and is currently number 2 in its market segment with a total of 21 stores (2019: 21). Revenue grew by 3.5 percent to P604.1 million (2019: P583.5 million) and the gross profit margin to 17.6 percent (2019: 17.2 percent). In the rapid declining currency situation, input costs are not sufficiently recovered by sales proceeds in Kwacha. This situation is made worse by some overheads like rent which are normally fixed in US dollars, a situation currently been re-negotiated.
EBITDA losses (i.e. before accounting for IFRS 16) reduced significantly by P33.6 million to a P4.4 million loss (2019: P38.0 million loss).
Zimbabwe
Zimbabwe is one of the most challenging markets to operate in, with hyperinflation in three digits, concerns surrounding the economy, changes in the money market and public disturbances. Revenue declined by 18.6 percent to P414.1 million (2019: P508.5 million) resulting from an 87.5percent weakening of the local currency against the Pula during the previous 12 months.
Gross profit margins improved slightly to 19.0 percent (2019: 18.8percent) with EBITDA on a comparable basis (i.e. before accounting for IFRS 16) at P15.7 million (2019: P15.1 million). The abrupt changes and volatility in the currency makes operating in Zimbabwe extremely difficult. This resulted in all the gains obtained at country level getting eliminated when converted at group level due to the weak currency when compared to the Botswana Pula.
Despite all these issues, the business remains self-sustaining without any cash flow constraints. However, repatriation of profits to Botswana will continue to be difficult until the economy undergoes a structural change.
Namibia
The Namibian operation is still relatively small, with five stores (2019:5), and is yet to reach a critical mass needed to generate sustainable profitability levels. Revenue increased by 18.7 percent to P142.1 million (2019: P119.7 million) with gross profit margins improving to 18.3 percent (2019: 16.6 percent).
The trends in sales growth and substantial improvement in gross profit levels are indicative of the future potential of the region. Based on the trends and similarities this market has to Botswana, the Namibian operation is expected to be a substantial contributor to the profitability of the Group in the longer term.
EBITDA losses (i.e. before accounting for IFRS 16) increased to P11.3 million (2019: loss P9.2 million) due to the rental payment of three non-operational stores.
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Nigerians, Zimbabweans apply for Chema Chema Fund
Fronting activities, where locals are used as a front for foreign-owned businesses, have been a long-standing issue in Botswana. These activities not only undermine the government’s efforts to promote local businesses but also deprive Batswana of opportunities for economic empowerment, officials say. The Ministry of Trade and Industry has warned of heavy penalties for those involved in fronting activities especially in relation to the latest popular government initiative dubbed Chema Chema.
According to the Ministry, the Industrial Development Act of 2019 clearly outlines the consequences of engaging in fronting activities. The fines of up to P50,000 for first-time offenders and P20,000 plus a two-year jail term for repeat offenders send a strong message that the government is serious about cracking down on this illegal practice. These penalties are meant to deter individuals from participating in fronting activities and to protect the integrity of local industries.
“It is disheartening to hear reports of collaboration between foreigners and locals to exploit government initiatives such as the Chema Chema Fund. This fund, administered by CEDA and LEA, is meant to support informal traders and low-income earners in Botswana. However, when fronting activities come into play, the intended beneficiaries are sidelined, and the funds are misused for personal gain.” It has been discovered that foreign nationals predominantly of Zimbabwean and Nigerian origin use unsuspecting Batswana to attempt to access the Chema Chema Fund. It is understood that they approach these Batswana under the guise of drafting business plans for them or simply coming up with ‘bankable business ideas that qualify for Chema Chema.’
Observers say the Chema Chema Fund has the potential to uplift the lives of many Batswana who are struggling to make ends meet. They argue that it is crucial that these funds are used for their intended purpose and not siphoned off through illegal activities such as fronting. The Ministry says the warning it issued serves as a reminder to all stakeholders involved in the administration of these funds to ensure transparency and accountability in their disbursement.
One local commentator said it is important to highlight the impact of fronting activities on the local economy and the livelihoods of Batswana. He said by using locals as a front for foreign-owned businesses, opportunities for local entrepreneurs are stifled, and the economic empowerment of Batswana is hindered. The Ministry’s warning of heavy penalties is a call to action for all stakeholders to work together to eliminate fronting activities and promote a level playing field for local businesses.
Meanwhile, the Ministry of Trade and Industry’s warning of heavy penalties for fronting activities is a necessary step to protect the integrity of local industries and promote economic empowerment for Batswana. “It is imperative that all stakeholders comply with regulations and work towards a transparent and accountable business environment. By upholding the law and cracking down on illegal activities, we can ensure a fair and prosperous future for all Batswana.”
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Merck Foundation and African First Ladies mark World Health Day 2024
Merck Foundation, the philanthropic arm of Merck KGaA Germany marks “World Health Day” 2024 together with Africa’s First Ladies who are also Ambassadors of MerckFoundation “More Than a Mother” Campaign through their Scholarship and Capacity Building Program. Senator, Dr. Rasha Kelej, CEO of Merck Foundation emphasized, “At Merck Foundation, we mark World Health Day every single day of the year over the past 12 years, by building healthcare capacity and transforming patient care across Africa, Asia and beyond.
I am proud to share that Merck Foundation has provided over 1740 scholarships to aspiring young doctors from 52 countries, in 44 critical and underserved medical specialties such as Oncology, Diabetes, Preventative Cardiovascular Medicine, Endocrinology, Sexual and Reproductive Medicine, Acute Medicine, Respiratory Medicine, Embryology & Fertility specialty, Gastroenterology, Dermatology, Psychiatry, Emergency and Resuscitation Medicine, Critical Care, Pediatric Emergency Medicine, Neonatal Medicine, Advanced Surgical Practice, Pain Management, General Surgery, Clinical Microbiology and infectious diseases, Internal Medicine, Trauma & Orthopedics, Neurosurgery, Neurology, Cardiology, Stroke Medicine, Care of the Older Person, Family Medicine, Pediatrics and Child Health, Obesity & Weight Management, Women’s Health, Biotechnology in ART and many more”.
As per the available data, Africa has only 34.6% of the required doctors, nurses, and midwives. It is projected that by 2030, Africa would need additional 6.1 million doctors, nurses, and midwives*. “For Example, before the start of the Merck Foundation programs in 2012; there was not a single Oncologist, Fertility or Reproductive care specialists, Diabetologist, Respiratory or ICU specialist in many countries such as The Gambia, Liberia, Sierra Leone, Central African Republic, Guinea, Burundi, Niger, Chad, Ethiopia, Namibia among others. We are certainly creating historic legacy in Africa, and also beyond. Together with our partners like Africa’s First Ladies, Ministries of Health, Gender, Education and Communication, we are impacting the lives of people in the most disadvantaged communities in Africa and beyond.”, added Senator Dr. Kelej. Merck Foundation works closely with their Ambassadors, the African First Ladies and local partners such as; Ministries of Health, Education, Information & Communication, Gender, Academia, Research Institutions, Media and Art in building healthcare capacity and addressing health, social & economic challenges in developing countries and under-served communities. “I strongly believe that training healthcare providers and building professional healthcare capacity is the right strategy to improve access to equitable and quality at health care in Africa.
Therefore, I am happy to announce the Call for Applications for 2024 Scholarships for young doctors with special focus on female doctors for our online one-year diploma and two year master degree in 44 critical and underserved medical specialties, which includes both Online Diploma programs and On-Site Fellowship and clinical training programs. The applications are invited through the Office of our Ambassadors and long-term partners, The First Ladies of Africa and Ministry of Health of each country.” shared Dr . Kelej. “Our aim is to improve the overall health and wellbeing of people by building healthcare capacity across Africa, Asia and other developing countries. We are strongly committed to transforming patientcare landscape through our scholarships program”, concluded Senator Kelej.
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Interpol fugitive escapes from Botswana
John Isaak Ndovi, a Tanzanian national embroiled in controversy and pursued under a red notice by the International Criminal Police Organization (Interpol), has mysteriously vanished, bypassing a scheduled bail hearing at the Extension 2 Magistrate Court in Gaborone. Previously apprehended by Botswana law enforcement at the Tlokweng border post several months earlier, his escape has ignited serious concerns.
Accused of pilfering assets worth in excess of P1 million, an amount translating to roughly 30,000 Omani Riyals, Ndovi has become a figure of paramount interest, especially to the authorities in the Sultanate of Oman, nestled in the far reaches of Asia.
The unsettling news of his disappearance surfaced following his failure to present himself at the Extension 2 Magistrate Court the preceding week. Speculation abounds that Ndovi may have sought refuge in South Africa in a bid to elude capture, prompting a widespread mobilization of law enforcement agencies to ascertain his current location.
In an official communiqué, Detective Senior Assistant Police Commissioner Selebatso Mokgosi of Interpol Gaborone disclosed Ndovi’s apprehension last September at the Tlokweng border, a capture made possible through the vigilant issuance of the Interpol red notice.
At 36, Ndovi is implicated in a case of alleged home invasion in Oman. Despite the non-existence of an extradition treaty between Botswana and Oman, Nomsa Moatswi, the Director of the Directorate of Public Prosecution (DPP), emphasized that the lack of formal extradition agreements does not hinder her office’s ability to entertain extradition requests. She highlighted the adoption of international cooperation norms, advocating for collaboration through the lenses of international comity and reciprocity.
Moatswi disclosed the intensified effort by law enforcement to locate Ndovi following his no-show in court, and pointed to Botswana’s track record of extraditing two international fugitives from France and Zimbabwe in the previous year as evidence of the country’s relentless pursuit of legal integrity.
When probed about the potential implications of Ndovi’s case on Botswana’s forthcoming evaluation by the Financial Action Task Force (FATF), Moatswi reserved her speculations. She acknowledged the criticality of steering clear of blacklisting, suggesting that this singular case is unlikely to feature prominently in the FATF’s assessment criteria.