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) Date: 22/09/2015 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.