Choppies Enterprises says it still wants to list in the Johannesburg Stock Exchange (JSE)ÔÇöa move that will give the mega retailer access to abundant finances in South Africa where it is still struggling to trade.
However, the Botswana Stock Exchange (BSE) listed consumer goods leader is bullish that its South African business will become profitable in the near future as it reaches critical mass. The private equity arm of Standard Chartered, which has a 12.8 percent stake in the group that originates from Lobatse, had hinted that the group could list as early as 2015. However, when announcing its half year results for 31 December 2014 Choppies said the listing is still work in progress.
“We are continuing to evaluate a possible secondary listing on the Johannesburg Stock Exchange in 2015 in order to access new investors and to increase liquidity in our shares,” said the company headed by Ram Ottapathu.
ChoppiesÔÇöwhich listed on the BSE in 2012 has a market capitalisation of US$452.1 million (about P4.4 billion) and a balance sheet of US$209.3 million (about P2 billion)-bosses the market with a number of outlets in Botswana. It has expanded to South Africa and Zimbabwe in a bid to rival some of its local competitors. The retailer has aimed to increase its footprint in South Africa as part of its Sub-Saharan strategy.
“Performance continued to improve during the period, and the business is expected to become profitable in the near future as we reach critical mass,” the company said of its South Africa stores.
“Trading conditions post the 2014 platinum belt strike remained challenging. This situation may continue for the foreseeable future. The Fruit and Veg Distribution Centre in Rustenburg was opened in December 2014 which should help improve efficiencies.”
Stockbrokers Botswana, a local brokerage firm, said in the past that Choppies’ expansion is ‘evidently taking a toll’ on profits as earnings growth has been relegated to the low single digits.
“Thus this growth spurt by the group has put strain on EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortisation) and net profit margins as costs have begun escalating, particularly due to the new South African operations still on the kick off to full profitability,” said Stockbrokers Botswana in its note.
The group said it expects to roll out a further store footprint in South Africa, Zimbabwe and Botswana and initiate forays into Zambia and other sub-Saharan African countries. Sites have been confirmed in Zambia and Tanzania while Choppies has also set sights on Namibia. The retailer also told shareholders of a potential for expansion to 30+ stores in Zimbabwe, where it has a presence in Bulawayo with over 15 percent market share.
Choppies acquired 10 stores in Zimbabwe last year and opened two more stores in 2013 and one in 2014 and is now ‘targeting expanding into north of Bulawayo’, according to the report. In Botswana, where it has a market share of 35 percent, it said it was pursuing opportunities in semi-urban markets.
“As part of our expansion plans, we expect to open more stores in Botswana, South Africa and Zimbabwe, although the rate of expansion in Botswana is expected to slow. In accordance with our long term strategy, we are also well advanced in our plans to open stores in a number of new markets this year,” it said.
The Choppies’ half year results showed revenues grew by 20 percent to P3 billion compared to P2.5 billion in the same period last year. Its EBITDA was up by 12percent to P 206 million. During the period, Choppies opened five new stores in Botswana, six in South Africa and five in Zimbabwe. The total number of stores as on 31 December 2014: Botswana ÔÇô 72, South Africa ÔÇô 31 while Zimbabwe was 18.