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CHOPPIES ENTERPRISES LIMITED - Results for the 12 months to June 2015

Release Date: 22/09/2015 16:00
Code(s): CHP     PDF:  
Wrap Text
Results for the 12 months to June 2015

Choppies Enterprises Limited
(Registration number 2004/1681)
JSE share code: CHP
BSE share code: CHOPPIES
ISIN: BW0000001072
("Choppies" or the "Company")

CHOPPIES ENTERPRISES: RESULTS FOR THE 12 MONTHS TO JUNE 2015

Key information

    -   Turnover increased 19% from BWP 5.0 billion to BWP 5.9 billion
    -   Gross profit increased 20% from BWP 1.0 billion to BWP 1.2 billion
    -   Listed on JSE raising BWP 448 million / R 574 million
    -   Acquired Kenyan retailer Ukwala
    -   Increased footprint to 129 stores across the three markets
    -   Kenyan acquisition concluded subject to Competition Authority Kenya approval
    -   Zambian stores ready for commencement of operation
    -   Retail space grew by 25.40% to 188 849 Sq m
    -   Operating margins negatively impacted by increase in administrative expenses

Mr Ram Ottapathu, CEO, said:

“Choppies took major steps forward over the past financial year. The secondary listing on the JSE in May has given us further impetus
to become a leading retailer across Sub-Saharan Africa. The African opportunity is supported by the rapid demand for quality branded
convenience across the continent. We continued with our store rollout with 24 stores opened. Our performance over the past year
was very satisfying and we are confident of continuing on the growth trajectory.”

OPERATING REVIEW

Store expansions

Choppies increased its footprint with store rollouts in existing markets. In Botswana, Choppies further strengthened its position as
biggest retailer to 73 stores from 69 stores in FY/14. Our move towards a break-even position in South Africa was accomplished with
an additional 11 stores from 26. There was a single store closure in South Africa due to relocation of said store. The Zimbabwean
expansion from Harare to the north of the country proceeded well with the addition of 7 new stores to take the in-country footprint
to 20.

Acquisitions

Choppies acquired a 75% stake in ten Ukwala Supermarkets in Kenya in May 2015. The transaction is in line with our strategy of
expanding into new markets in Sub-Saharan Africa and gives Choppies an immediate footprint of established stores and a platform to
grow in Kenya. Three of the supermarkets are located in Nairobi, two in Nakuru and five in the port city of Kisumu, the third largest
city in Kenya. The finalisation of the acquisition is subject to approval by the Competition Authority in Kenya, which is expected to be
granted by October 2015.
COMMENTS ON RESULTS

Income statement

Choppies revenue increased to BWP 5,945 million on group level, an increase of 19% from BWP 5 012 million and gross profit
increased 20% to BWP 1,291 million. The 26% hike in administrative expenses to BWP 817 million is associated with the once-off costs
of new stores openings. Profit after tax increased 11% to BWP 197 million. Earnings per share increased by 20% to 17.11 thebe and
headlines earnings per share increased by 22% to 16.92 thebe.

Balance sheet

Plant and equipment increased to BWP 746 million from BWP 597 million due to the rollout of 24 new stores across the three
markets. Cash and cash equivalents increased to BWP 344 million from BWP 103 million. The BWP 448 million proceeds from the JSE
listing was used to repay BWP 118 million in long term debt and prop up the cash position for further expansion. Long term
borrowings increased to BWP 353 million from BWP 276 million to fund capital expenditure.

Cash flow statement

Net cash flow for the financial year was BWP 223 million.

COUNTRY OVERVIEW

Botswana

Botswana posted revenue of BWP 3,806 million with EBITDA increasing to BWP 330 million and PAT of BWP 200 million. The in-
country staff compliment grew to 6,073 employees.

Botswana’s economic growth for 2015 was impacted by lower earnings from diamonds sales, the countries’ main export commodity.
Official estimates place the 2015 growth at 2.6%, but the 2016 projection is set at 4.9%. Choppies did well to maintain market share
and improve profitability.

South Africa

For South Africa revenue increased to BWP 1,275 million with gross profit improving to BWP 284 million EBTDA of BWP 23 million,
although a weaker Rand exchange rate eroded some of the gains made through the year.

After recovering from the impact of lengthy strikes in the productive industries in 2014, the South African economy faced a new
round of challenges over the past 12 months. A steep drop in commodity prices combined with electricity shortages have placed
significant pressure on the mining sector, which is the main activity in the South African regions with a Choppies presence. Operations
have achieved EBITDA breakeven, but are not yet profitable on a net income basis. Gross profit have improved significantly due to
efficiencies in centralized distribution.

Zimbabwe

In Zimbabwe sales improved in the year to deliver BWP 863 million in revenue and an EBITDA of BWP 30 million.

The dollarized Zimbabwe economy remains fragile. Average basket sizes dropped considerably but footfall growth was very strong
indicating a growing popularity of the Choppies brand.

PROSPECTS

The roll out plans are progressing as anticipated bearing a few months delay in Zambia and Tanzania. Choppies plans to roll out a total
of 35 new stores (i.e. excluding acquisitions) in the coming financial year in line with our target to have 200 stores by the end of the
2016 calendar year.

While we expect some pressure on sales, there is sufficient measures in place to protect our profit margins. Our expanding own brand
range and cost containment thanks to improved logistical efficiencies will support margins across the region in the event of a
weakening in the consumer environment. In addition, our expansion in Kenya will help to spread our risk further and of course drive
group-level sales volume growth.

CHOPPIES ENTERPRISES LIMITED
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE, 2015

ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


                                                                      Year ended 30    Year ended 30
                                                                         June, 2015       June, 2014
                                                                             P ' 000          P ' 000
Revenue                                                                    5 945 234        5 012 418
Cost of sales                                                            (4 653 413)      (3 933 347)
Gross profit                                                               1 291 821       1 079 071
Other income                                                                  8 611           8 729
Operating income                                                           1 300 432       1 087 800


Expenditure                                                              (1 032 864)        (846 389)
Administrative expenses                                                    (817 993)        (650 279)
Selling and distribution expenses                                           (48 322)         (44 976)
Other operating expenses                                                   (166 549)        (151 134)


Operating profit before interest                                            267 568          241 411
                                                                              4.50%            4.82%
Interest cost                                                               (28 522)         (15 566)
Interest income                                                              4 180             3 589
Profit before taxation                                                      243 226          229 434
Taxation                                                                    (45 988)         (52 274)
Profit for the year                                                         197 238          177 160
Attributable to:
    Owners of the company                                                   202 826          167 882
    Non-controlling interests                                                (5 588)           9 278
Other comprehensive income
Foreign currency translation differences from foreign operations            (16 068)          3 487
Attributable to:
    Owners of the company                                                   (16 542)           5 616
    Non-controlling interests                                                  474            (2 129)

Profit and total comprehensive income for the year Attributable to:         181 170          180 647

    Owners of the company                                                   186 284          173 498
    Non-controlling interest                                                 (5 114)           7 149

Earnings per share - Thebe                                                   17.11             14.30
Headline earnings per share - Thebe                                          16.92             13.88
Dividend per share - Thebe ( declared and paid )                              4.51              4.25

ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                           Year ended      Year ended
                                                        30 June, 2015   30 June, 2014
                                                             P ' 000          P ' 000
Assets

Non current assets                                         1 269 312       1 094 808
    Plant and equipment                                      746 049         597 040
    Deferred taxation                                         19 572          15 217
    Investments in new projects                               30 165          28 509
    Goodwill                                                 473 526         454 042


Current assets                                             1 149 383         654 663
    Inventories                                              535 653         407 871
    Investments                                                    3               3
    Advances and deposits                                     66 023          53 872
    Trade and other receivables                              186 148          84 082
    Amounts due from related entities.                        17 735           5 336
    Cash and cash equivalents                                343 821         103 499

Total assets                                               2 418 695       1 749 471

Equity and Liabilities

Equity                                                     1 451 538         869 323
    Share capital                                            875 476         421 474
    Preference shares                                             86              85
    Retained earnings                                        588 286         438 418
    Non controlling interests                                  2 035           7 149
    Foreign currency translation reserve                     (14 345)          2 197

Non - current liabilities                                    312 429         244 447
    Long term borrowings                                     273 591         210 164
    Deferred lease liabilities                                38 838          34 283

Current liabilites                                           654 728         635 701
    Current portion of deferred lease liabilities              4 805           4 139
    Bank overdraft                                            62 566          45 660
    Trade and other payables                                 453 129         404 160
    Amounts due to related entities                           38 301         101 404
    Taxation payable                                          16 742          14 152
    Current portion of long term borrowings                   79 185          66 186

Total equity and liabilities                               2 418 695       1 749 471

ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                                                  Non Controlling     Foreign currency
Particulars                                            Stated Capital   Preference Shares     Retained Earnings         Interests   translation reserve      Total
                                                             P ' 000             P ' 000               P ' 000           P ' 000               P ' 000     P ' 000
Balance at 30 June 2013                                      421 474                      85           320 461                -                 (3 419)    738 601
Total comprehensive income for the year                           -                   -                167 882             7 149                 5 616     180 647
    Profit                                                        -                   -                167 882              9 278                  -       177 160
    Other comprehensive income                                    -                   -                    -               (2 129)               5 616       3 487
Transactions with Owners                                          -                   -                 (49 925)              -                    -       (49 925)
    Dividend declared                                             -                   -                 (49 925)              -                    -       (49 925)
    Issue of preference shares                                    -                   -                     -                 -                    -            -
Balance at 30 June 2014                                      421 474                      85            438 418             7 149                2 197     869 323
Total comprehensive income for the year                           -                   -                202 826             (5 114)             (16 542)    181 170
    Profit                                                        -                   -                202 826             (5 588)                  -      197 238
    Other comprehensive income                                    -                   -                    -                  474              (16 542)    (16 068)
Transactions with Owners                                     454 002                      1             (52 958)              -                    -       401 045
    Issue of ordinary shares                                 454 002                  -                     -                 -                    -       454 002
    Dividend declared                                             -                   -                 (52 958)              -                    -       (52 958)
    Issue of preference shares                                    -                       1                 -                 -                    -             1
Balance as at 30 June 2015                                   875 476                      86            588 286             2 035              (14 345)

ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS

Particulars                                                      Year ended      Year ended
                                                                 30-Jun-15    30 June, 2014
                                                                   P ' 000         P ' 000
Net cashflows generated from operating activities                     (243)        196 615
Net cashflows used in investment activities                       (278 247)       (528 056)
Net cashflows (used in)/ generated from financing activities       501 906         174 150
Net movement in cash and cash equivalents                          223 416        (157 291)
Cash and cash equivalents at begining of the year                   57 839         215 130
Cash and cash equivalents at end of the year                       281 255          57 839
 
ABRIDGED SEGMENTAL RESULTS
2015                                                              Botswana      South Africa   Zimbabwe
                                                                    P ' 000        P ' 000      P ' 000
 Statement of profit or loss and other comprehensive Income
 Revenue :
         Trading income                                           3 806 193     1 275 589      863 452
         Other income                                                 5 220         2 322        1 069
 Total segmental revenue                                          3 811 413     1 277 911      864 521
 Reportable segment gross profit                                   851 713        284 248      155 860
 Reportable segment profit/(loss) before taxation                  253 761         (23 712)     13 177
 Reportable segment Depreciation                                    59 631         45 343       11 506
 Reportable segment EBIDTA                                         330 645         23 052       30 349
 Reportable segment profit/(loss) after taxation                   200 979         (12 008)      8 267
 Statement of financial position
 Reportable segment assets                                        1 510 387       509 705      398 603
 Reportable segment liabilities                                    556 802        144 754      265 601


 2014                                                             Botswana     South Africa   Zimbabwe
                                                                   P ' 000        P ' 000      P ' 000
 Statement of profit or loss and other comprehensive Income
 Revenue :
         Trading income                                           3 586 393      1 001 693     424 332
         Other income                                                 7 324          1 226         179
 Total segmental revenue                                          3 593 717      1 002 919     424 511
 Reportable segment gross profit                                    789 151        203 054      86 866
 Reportable segment profit/(loss) before taxation                   233 623        (28 525)     24 336
 Reportable segment Depreciation                                     76 667         30 298       3 276
 Reportable segment EBIDTA                                          318 576          3 018      30 058
 Reportable segment profit/after taxation                           178 022        (19 056)     18 194
 Statement of financial position
 Reportable segment assets                                        1 124 217        347 588     277 666
 Reportable segment liabilities                                     524 979        112 809     242 360

The abridged consolidated financial results and financial position of Choppies Enterprises Limited are extracted from the audited group annual financial statements 
prepared in accordance with International Financial Reporting Standards ("IFRS"), under the historical cost convention except for financial instruments which are disclosed at fair value.

Botswana
22 September 2015

Enquiries:

Choppies
Ram Ottapathu                +267 318 6657          ram@choppies.co.bw
Vidya Sanooj                 +267 318 6657          vidya@choppies.co.bw

Instinctif Partners          +27 11 447 3030
Nicholas Williams            +27 11 050 7515
Pietman Roos                 +27 72 360 5575

Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank)

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