Wednesday, September 23, 2020

Sefalana remains solid

Sefalana Group reported another stellar set of financial results, defying the economic downturn caused by COVID-19 and in some instances benefitting from the pandemic. 

On Thursday, the Botswana Stock Exchange listed retailer released its financial statements for the year that ended April 2020, with revenue up by ten percent to P5.8 billion, while profit before tax (PBT) came at P258.8 million, slightly above last year’s P256.7 million, which the retailer said it was their best showing.  

The group, whose business interests spans fast moving consumer goods (FMCG), commercial motors, manufacturing, properties and government contracts, was anchored by strong performance in Botswana, aided also by impressive performance across other markets it operates in. 

“Notwithstanding the difficult times, we have managed to close the year with a sterling performance. Last year we reported our best ever results and this year we have done it again, and are pleased to generate almost exactly the same profit despite the adverse impact of Covid-19,” the company said in a commentary accompanying the results. 

The retailer said it had placed greater focus on its FMCG business across countries it operates in, making considerable progress in the first half of the year before the disruptions brought by coronavirus containment measures, supressing consumer movements and causing uncertainty, resulting in cautious customers, who at first went on a panic buying spree in early April when lockdown was announced, and then reduced buying after lockdown ended in the third week of May. 

Net margin was also reduced after customers prioritised essentials over luxury high margin goods. In a stroke of luck, Sefalana says it was able to benefit largely from the government’s food packages which were given to those affected by the lockdown. The government spent nearly P400 million on the food subsidy programme. 

“From a top line growth perspective, we benefitted from the government Covid-19 relief program where many donors selected Sefalana as their preferred supplier due to the competitive prices on offer,” the company said.

“We deliberately reduced margins on these orders to maximise the food being made available to those in need. As a consequence, our turnover increased but at very slim margins. Our advance planning enabled us to stock up on key lines and this enabled us to be in a position of having adequate stock of these lines when our competitors had run out.”

In Botswana, Sefalana operates 55 stores: 4 hyper stores and 25 Cash and Carry stores, both mainly targeting resellers and bulk buyers. It also has 26 retail stores under its Shoppers brand. The Botswana businesses, made up of retail, manufacturing and property, contributed more than of the group’s revenue and profit, which came at P135.6 million. 

The 21 stores in Namibia were also a bright spot, bringing in P53.2 million in profit before tax. The group says it plans to open an additional ten stores, pleased with their return on investments in the country since they started operating there in 2015. The South African investment also did well, delivering P37.5 million. In 2017, Sefalana bought into a consortium in South Africa, spending R250 million, and in return, the retailer gets a fixed annual return of R50 million for five years, and after that, the investment can be converted into a 30 percent equity in the consortium which owns 15 stores. 

The Zambian and Lesotho operations were also profitable, bringing in P11.6 million and P1.2 million respectively. 

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.