Sunday, September 20, 2020

Choppies drops the ball again

Choppies Enterprises Limited, the leading native grocer, with listings on the Botswana Stock Exchange and Johannesburg Stock Exchange, says the publication of the financial results for the year ended 30 June 2018 will be delayed. The company also warned its shareholders to expect lower profits.

In a shareholder circular released on Friday, the retailer explained that the finalisation of the full year results is taking longer than had been anticipated. “A number of matters requiring the attention of the Board and management, which may impact materially on the results, are still be considered and the possible reporting impacts of these matters have not been yet been finally and fully determined,” read part of the statement.

The company went on to advise shareholders that the group will therefore not publish results within the stipulated timeline set by the BSE which requires listed companies to publish their results within three months of the reporting period. Choppies’ reporting period for full year results is June, meaning the deadline is end of September.

This is the second time this year Choppies fails to publish results on time. Early this year, the company failed to publish its interim results for the half year ended December 2017, which were a month behind schedule. The BSE had even issued a warning to Choppies and other companies that played loose with the listings requirements rules.

The delay of the full year results which are blamed on matters requiring the attention of the board and management could be the result of the ongoing battle between Choppies group with its Zimbabwe based shareholders. In Zimbabwe, the business is registered under the name Nanavac Investments Private Limited, trading as Choppies Supermarket Zimbabwe. According to Choppies Enterprises, they own 93 percent of economic interest in Nanavac Investments Proprietary Limited.

For most part, an impression was created that the Zimbabwean shareholders held an interest of 51 percent while Choppies Enterprises held the remainder, as this was done to satisfy Zimbabwe’s indigenisation law which stipulates at the time restricted foreigner’s shareholding to 49 percent. Now, the company has since had fallout with its Zimbabwe shareholders who were close allies of the deposed former president Robert Mugabe. While the Mphoko family, claim to be the major shareholders of Choppies Zimbabwe, the Botswana based Choppies has denied that.

Instead, Choppies Enterprises has accused Siqokela Mphoko who is a non-executive and shareholder in Nanavac Investments of inappropriate behaviour that includes wantonly taking money from the stores. Choppies has since reported Mphoko which resulted in his arrest and was arraigned for 170counts of fraud and theft. In return, Mphoko has deposed an affidavit, accusing Choppies Enterprises of playing dirty by denying the Mphoko’s claim that they are the main shareholders.

The listed company’s shares have tanked following the revelations and uncertainty regarding its shareholding structure in Zimbabwe. Before the power tussle, Choppies was one of the few counters on the BSE which had positive gains, trading at P2.48. The share price has since fallen by 32 percent to trade at P1.69.

On Friday, Choppies warned on its trading statement that based on the financial results compiled to date, the board has reasonably certainty that the group’s profit after tax for the year ended June 2018 will be at least 20 percent or P14.9 million lower than 2017’s profit after tax of P75.6 million. This will disappoint shareholders who thought the retailer was finally turning the corner.

The shareholders had every reason to be hopeful following the interim financials for the period ended 31 December 2017, where the grocery retailer’s revenue surged 22 percent to P5.8 billion in the last six months, up from P4.7 billion in the same period last year. Net profit also jumped 22 percent to P68 million, up from P56 million.

The unfolding events will now dampen investors’ enthusiasm after setting their hopes high. Investors for quite some time we weary of Choppies’ costly expansion that was not delivering the expected results: the grocery retailer’s profit has been on a downward trajectory due to the expansion. Investors showed their displeasure as stock price slid both in the BSE and JSE last year.

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Sunday Standard September 20 – 26

Digital copy of Sunday Standard issue of September 20 - 26, 2020.