Monday, May 17, 2021

Choppies narrows losses

The comeback for Choppies is proving to be much harder, as the retailer continues to shoulder mistakes of the past, revealing this week that profit will once again take a dip.

The chain store with the largest footprint in Botswana has cautioned investors that financial results for the 6 months ended 31 December 2020 are almost complete, projecting a loss in the half year when including discontinued operations to be approximately between 117 percent to 137 percent (P 23.8 million to P 51.6 million), better than the loss P 139.1 million loss reported for the half year period in 2020. 

On the other hand, the profit before tax for continuing operations will be approximately between 1 percent and 10 percent lower (BWP 84.8 million and BWP 93.3 million) than the pre-tax profit of P94.2 million reported for the 2020 interim results. 

Choppies is retreating from markets outside Botswana following a failed expansion strategy that nearly sunk the company. The expansion weighed heavily on Choppies and caused a rift between company founders and shareholders who were troubled by the diminishing profits and dividends. Matters came to head in 2018 when the retailer got in trouble with regulators for failure to publish audited financial results on time after the company external auditor flagged some processes and transactions that could distort the true picture of the company’s financial health. 

The review of past records uncovered losses and in the ensuing drama, Choppies decided to quit and exit the loss-making markets. The delayed June 2018 financials  released in December 2019 stunned shareholders and market observers: a P445 million loss in 2018, and another shocking loss of P170 million for 2017 which was initially reported as a P74.6 million profit when KPMG did Choppies’ books.  The losses extended to 2019, with retailer booking in a P428 million loss, and followed with a loss of P370.6 million for the year ended June 2020.

However, without the loss-making stores that Choppies has since ditched, the profit before taxation from continuing operations – made up of Botswana, Namibia, Zimbabwe and Zambia – came at P105 million in June 2020, three times more than the P30 million recorded as profit from the four countries in 2019. 

“We have reassessed our previous pan-African expansion strategy and having taken the lesson learnt, we are now focused on southern Africa and our remaining countries of operation being Botswana, Zimbabwe, Zambia and Namibia. Botswana itself offers a number of opportunities for growth. Once we have perfected the working models in Botswana, we will seek to introduce them in our other countries of operation. Innovation is the key for us going forward and our short-term focus will be on benchmarking against peers and international trends”, Choppies Board said in the 2020 annual report.

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