Choppies to raise P473m in JSE listing
Isaac Pinielo | Tuesday May 12, 2015 18:04
The retailer, which operates 125 stores in Botswana, South Africa and Zimbabwe, yesterday announced that it would list on Africa’s largest stock market on May 27, 2015. The company said it would use the funds to pay down debt as well as finance the company’s expansion into the region.
At the end of last year, Choppies had total borrowings of P466 million, as shown by its interim financial results for the six months ended December 31, 2014.
The P4.7 billion company, which already trades on the Botswana Stock Exchange (BSE), plans to double its store numbers in existing markets and enter new countries such as Zambia, Tanzania and Kenya.
Choppies CEO, Ramachandran Ottapathu said they are on track to have over 200 stores by the end of 2016.
“We will be opening our first stores in Zambia and Tanzania by mid-2015. This is on top of the three countries where we already operate, including South Africa,” he said.
In total, Choppies will list about 277 million ordinary shares in the ‘Food Retailers and Wholesalers’ sector of the JSE main board. The offer will comprise about 117 million newly issued shares, raising approximately P473 million (R574 million) and a concurrent secondary offer of 160 million shares to be sold by certain existing shareholders. The company indicated that the price of the shares would be determined following the outcome of a roadshow, which commenced yesterday, to a select current and prospective investors in South Africa, Botswana and overseas.
Since listing on the BSE, Choppies has maintained a dividend payout ratio consistently above 30 percent. As the business matures, the dividend payout ratio is expected to increase towards 50 percent.
Choppies has seen superior growth over recent years with a compound annual growth rate (CAGR) of 27 percent in total revenues from P2.4 billion for the year to 30th June 2011 to P5 billion for the year to 30th June 2014. Earnings before interest, tax, depreciation and amortisation (EBITDA) have grown at a CAGR of 19 percent from P207 million in 2011 to P352 million in 2014.
According to Ottapathu, the listing would raise the profile and make the company more visible to the regional research and analyst community and that the store will also achieve the much-needed regional recognition.
“The company’s profile will be increased amongst international investors and increase demand for the group shares,” he said.
The company first listed on the BSE in January 2012 at a price of P1.15. Its share price has since grown by four fold.
“Economies of scale in the business will continue to drive our profitable growth. In South Africa, our distribution centres can serve up to 100 stores with the current capacity used at only about 35 percent. Despite our investing heavily in rapid growth, we have continued to increase our profitability,” Ottapathu said.
The company currently operates seven distribution centres in the region. In addition to the three warehouses Choppies has in Botswana totaling over 16500 square metres 10 000, 3 500 and 3 000 in size, it also has a combined 18 000 square metres of warehouse facilities in Rustenburg, South Africa; a 6 850 square metres warehouse in Bulawayo and a 3 000 square metres warehouse in Harare, Zimbabwe.
The current infrastructure can support over 100 stores in Botswana, up to 100 stores in South Africa and 50 stores in Zimbabwe. This infrastructure includes in-house transport logistics and maintenance capabilities, Ottapathu said.