Botswana retailer Choppies reports top-line growth spearheaded by 89% revenue jump in other markets

BOTSWANA – Botswana based retailer, Choppies Enterprises Limited, has registered a 18.9% rise in interim revenue, in the six months ended December 2021 to BWP 3.223 billion (US$280m) from BWP 2.711 (US$235.6m) attained in the corresponding period in 2020.

The rise in top-line earnings is attributed to the opening of six new stores coupled with strong volume and price growth in the Rest of Africa.

The retailer, which has stores in Zambia, Botswana, Zimbabwe and Namibia, attained a 89% jump in revenue for the rest of Africa to BWP 992 million (US$86.2m) from BWP 525 million (US$45.6m) in 2020.

This was driven by the addition of five new stores, inflationary increases in Zimbabwe and Zambia and volume growth in all countries.

The segment has shown a significant improvement in EBIT moving into profitability of BWP 50 million (US$4.35m) from last year’s EBIT loss of BWP 7 million (US$608,000).

Meanwhile in its home market, Choppies experienced modest revenue growth to BWP 2.231 billion (US$193.9m) from BWP 2.186 billion (US$190m) mainly as a result of negative volume growth due to the impact of the COVID-19 pandemic on the economy and consumer spending.

The 2.1% revenue rise in Botswana showcased strong resilience in an increasingly challenging economic environment characterised by a confluence of elevated inflation, high unemployment, and lower economic growth.

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Operating expenditure was managed well, increasing by 6.5% despite two new stores and increasing by 1.8% after excluding once-off bad debt recoveries from last year’s costs.

Due to extremely challenging trading conditions, operating profit (EBIT) in Botswana reduced by 9.7% but the EBIT margin remains healthy at 5.9%.

Overall, the group’s like for like sales growth was 13.9% and gross profit grew by 14.7% to BWP 686 million (US$59.6m) from BWP 598 million (US$51.98m) despite the challenging economic environment.

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Total operating costs increased by 9.7%, mainly driven by a 15.0% increase in administrative expenses which was offset a BWP 29 million (US$2.52m) foreign exchange gain on lease liabilities from the Zambian operation following the strengthening of the Kwacha.

As a result, operating profit (EBIT) increased by 31.2% from BWP 138 million (US$12m) to BWP 181 million (US$15.7m). EBIT margins improved from 5.1% to 5.6%.

The Group continues to manage its cash resources and liquidity prudently with a reduction of BWP 83 million (US$7.22m) in net debt over the past six months.

Free cash flow of BWP 72 million (US$6.26m) was generated during the past six months compared to BWP 74 million for the 12 months to June 2021.

However, Choppies still has more debt than assets with 2.3-billion pula in debt and 1.9-billion pula in assets.

The company has been mired in scandal and was suspended from the Botswana exchange and the JSE in October 2018 after missing a deadline to release financial results. 

In 2019, it announced an investigation by an EY forensic team, which uncovered accounting irregularities.

After the publication of 2018 and 2019 results, the discount retail chain was reinstated on the JSE in November 2020 after returning to the Botswana exchange a few months earlier.

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