Recession flattens Sefalana earnings

Brian Benza
Staff Writer | Friday September 3, 2010 00:00

 

The conglomerate reported an unimpressive Earnings Per Share of P0.34, while revenue declined by 8.8 percent to P 1.7 billion on the back of reduced consumer spending.

Gross profit declined by 15.3 percent to P146 million, with the margin weakening by 70 basis points to 8.5 percent. Profit after tax declined by 3.6 percent to P 72.2 million as a 16.6 percent increase in the tax charged was offset by a 260 basis point decline in the effective tax charge to 22.6 percent.

Overall, the group says subsidiaries performed well under the circumstances in the year, with only MF Holdings (vehicle and agricultural implements retailer) and KSI Holdings (soap manufacturing) posting unsatisfactory results.

'Management expects that trading conditions will continue to be difficult in 2011, and only projects a recovery in 2012,' reads a statement accompanying the results. The group's biggest subsidiary, Sefcash, reported an 8.6 percent drop in earnings in the year.

'As reported in our interim announcement to the shareholders, we have experienced a general decline in consumer spending caused mainly by the economic recession combined with the introduction of the 30 percent liquor levy, an increase in the Value Added Tax rate, and a freeze on increments in public sector salaries.

'Our cross-border trade, principally with Zimbabwe, has also seen a reduction during the reporting year. Even though Sefcash's turnover and gross margins were down by four percent and 14 percent respectively compared to the previous financial year, the company has performed exceptionally well given the circumstances.'

The group says it continues to find efficiencies through cost-cutting measures while bearing the cost of establishing its Shoppers Supermarket chain, all of which have been funded through internal resources.

'The company's expansion into retail business under the 'Shoppers Supermarket' banner is being well received by Botswana and we expect to see long-term growth and profitability from this sector in the coming years.'

There are seven supermarkets currently operating while another four are expected to open before the 2010 Christmas holiday season.

Revenue for Sefcash declined by 4.3 percent to P 1.5 billion while cost of sales declined by 3.7 percent to P 1.4 billion, largely on the back of a decline in consumer spending caused by the economic recession.

Apart from Sefcash, Sefalana holds total or part equity in Foods Botswana, MF Holdings, Kgalagadi Soap Industries, Commercial Motors and a range of other interests in industries such as timber, mechanised farming, travel and tourism and property.

Foods Botswana had an excellent year, mainly as a result of increased sales to both the wholesale and retail markets of their own branded products of Sechaba, Tsabotlhe, Tholo Beer and Sarona Samp and from supplies of Tsabana, Tsabotlhe and Sarona Samp to the Government of Botswana. 'Foods has realised full operating capacity throughout the year,' the statement says. 'With the announcement of the re-imposition of restrictions on importation of grain, it is anticipated that the average cost of sorghum grain will increase during the coming period. However, we expect reasonable and sustainable profitability from Foods going forward.'

Last month, Sefalana announced that it would de-list Sefcash in a move calculated to cut the listing costs of the parent company and its only listed subsidiary.

Sefcash is currently 79.35 percent owned by Sefalana, while the remainder of the shares are free float as required by BSE.