Choppies profits halve on expansion costs
Pauline Dikuelo | Thursday September 22, 2016 15:38
The local retail giant recorded a 48% decline in PAT to P104.9 million for the financial results for the year ended in June this year compared to P197.2 million recorded in the prior year.
Choppies CEO, Ramachandran Ottapathu attributed the loss to the group’s operating margins, which were negatively impacted by the costs of establishing new geographical locations, opening new stores and distribution centres.
“However, while profits suffered, cash flow remained robust and a strong growth in the group revenue coupled with a 25% increase in footfall that was facilitated by new store openings further demonstrates the strong consumer appeal of Choppies,” Ottapathu said.
In addition, he said the group’s strategy of creating a strong African supermarket business has moved forward at an accelerated pace during the past year with the establishment of businesses in Zambia and Kenya.
For this financial year, the group added 54 supermarkets across Africa to the already existing 129 expanding the footprint to have about 183 supermarkets by end of the financial year. The group opened about six supermarkets in Botswana, 25 in South Africa, 10 in Zimbabwe, five in Zambia and eight in Kenya.
Touching on the operations, Ottapathu said despite the challenging economic conditions, Botswana operations traded well and maintained market share.
“The continued devaluation of the Rand put downward pressure on prices and thus revenues. Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) increased by seven percent with net profit after tax increasing by one percent due to an increase in the depreciation charge related to the Botswana operations,” he said.
Ottapathu said their South African business other than Jwayelani have incurred significant losses occasioned by the depressed trading in areas dominated by mining. He noted that despite the challenging trading conditions, focused management action has resulted in an improvement in sales and margins and early indications are that these actions will advance South Africa to improved results.
Zimbabwe also incurred losses due to depressed economic conditions, which resulted in shortage of cash in circulation, causing customers per transaction to drop markedly.
“However, footfall increased strongly in Zimbabwe demonstrating the desire of customers to shop at Choppies. Our newly opened stores in Zambia and Kenya will also remain loss making in the first quarter of next year as we continue to build our store base and invest in operational infrastructures, ” he said.
Ottapathu added that the group’s expansion plans are progressing well as they expect to commence operations in Tanzania and Mozambique in the coming months adding that the group plans to roll out more than 20 stores in all regions by the first quarter of 2017.