Botwana retailer Choppies turns to profitability courtesy of restructuring efforts

BOTSWANA – Botswana based retailer, Choppies Enterprises Limited has gone full circle, bouncing back from a loss in the previous financial year to post a profit growth in the full year ended June 2021.

The behemoth retailer expects its Profit after Tax including discontinued operations to be between 106% to 126% representing a gain of between P22.6 million (US$2m) and P96.7 million (US$8.56m) better than the Loss after Tax of P370.6 million (US$32.79m) reported for the period FY2020.

In a trading statement posted on the local bourse, Botswana Stock Exchange (BSE), Choppies further declares that its Profit before Tax is expected to be between 1% and 21% higher between P 105.7 million (US$ and P 126.7 million (US$11.21m), reports Patriot Botswana.

The return of Choppies to profitability follows a number of drastic steps taken by the company to streamline its operations by ceding unprofitable assets in South Africa, Tanzania, Mozambique and Kenya while also improving its governance structure.

The company attained its first profit since 2016 of P37.7 million (US$3.4m) in the six months ended 31 December 2020, a rise from the loss of P139.2 million (US$12.56m) attained in 2019.

Despite the impressive bottom-line performance, the group’s interim revenue decreased by 8.7% to P2.711 billion (US$244m).

This decline was a result of negative volume growth due to the impact of the Covid-19 pandemic and currency weaknesses in some markets.

In its home base, Botswana, the business continued to show strong resilience in an increasingly competitive operating environment and poor trading conditions.

Revenue declined by 4.6% with volumes reducing by 6.4%. The gross profit margin, albeit lower at 22.3% remains relatively healthy despite the extremely challenging trading conditions.

Expenditure was well controlled with total expenditure reducing by 15.6% negating some of the decline in gross profit.

Crossing boarders into, Namibian, operation continued to show improvement in gross profit even though it still has a very small footprint.

Revenue for this segment increased by 3.2% with gross profit margins improving to 19.3%.

EBITA losses reduced by 95% due to improved gross profit margins coupled with an 8.2% reduction in expenditure.

Meanwhile in Zambia, operation also showed an improvement in gross profit but the continued weakness of the Kwacha against the Pula had a very significant impact on the trading results and expenses.

Even though the Pula revenue declined by 28.5%, revenue in Kwacha grew by 2.4% despite volumes reducing by 8.9%. Gross profit margins improved to 18.9% driven by price inflation.

EBITA losses reduced by 33% due to effective cost control. The Zambian segment consists of 25 stores.

Currency changes and volatility was also witnessed in Zimbabwe which made its operations in the market very difficult.

Revenue declined by 21.3% resulting from a weakening of the local currency against the Pula during the previous 6 months.

Gross profit margins improved to 24.1% with the EBIT reducing to P7.9 million (US$713,000).

In spite of the challenges encountered in the different regions, the group did well to reduce the possible huge revenue losses which resulted in a reduced impact on the gross profit.

Consequently, gross profit margins reduced slightly to 22.0% from 22.9% of the previous corresponding period.

According to the dual listed entity, it managed costs aggressively by reducing its total expenditure by 14.3% resulting in a 4.7% decline in EBITA as the drop in gross profit was offset by lower expenditure.