Sefalana keeps faith in cautious strategy
Pauline Dikuelo | Friday August 2, 2019 12:19
The group plans to focus on low risk markets is an apparent strategy to avoid troubles facing Choppies, its prime rival.
Choppies, which is currently suspended from trading on the Botswana Stock Exchange and faces liquidity pressures, is known for its aggressive growth model. Through the strategy, it set up 212 stores across seven countries within a decade.
Documents recently filed in a High court case involving the company’s suspended CEO suggest Choppies is facing troubles in Kenya and South Africa’s North West province.
The documents also show that executives received bonuses for each new store opened.
This week, Sefalana chief financial officer, Mohammed Osman said the retail group was taking a slow and steady cautious approach to its expansion.
“We don’t want to cannibalise our existing stores. We are always on the lookout for good sides and those tend to be the areas where we don’t have a presence,” he said.
“We have different models for that but certainly next year we should see the opening of three or four stores and then we build our way up to the 40 mark in the next five years.”
Osman further said they would explore and evaluate other neighbouring regions as part of their regional expansion drive.
“This will however continue to be a cautious and measured approach, which has been our model to date,” he said.
Sefalana currently has 102 stores spread across Botswana, Namibia, Lesotho and South Africa but is charting a different growth trajectory.
“With economic challenges experienced in the local market over recent times, our diversification into neighbouring countries has been central to our strategy and over the last five years has helped us improve the group’s overall performance,” added Osman.
He explained that expansion into the regional markets naturally exposes the group to foreign exchange gains and losses.
At the half year, the group reported a P45 million re-translation loss, mainly relating to the Namibian, South African and Lesotho businesses that are all rand denominated.
At the year-end, this re-translation loss amounted to P46 million since the currency movements have not been significant over the latter six-month period. For the year ended April 30, 2019, the group recorded profit after tax of just over P0.25 billion representing a 12% percent increase compared to P231 million recorded in the comparative year to April 30, 2018.