Sefalana Group Managing Director Chandra Chauhan said the company’s stock market performance positions it as the largest by value in the Retail and Wholesale sector on the Botswana Stock Exchange (BSE).
The market capitalisation of the Group on 28 April 2024 amounted to P2.9 billion.
Choppies Group, which used to dominate the fast-moving consumer goods sector, is currently valued at P948.7 million, a fraction of Sefalana’s market cap.
At P11.80 per share, Sefalana’s share price has seen a 21 percent increase during the year, despite the illiquid nature of its stock, where the company’s large institutional shareholders choose to retain their holdings in Sefalana despite an overweight position.
Chauhan attributed the regular and sustained income stream for their shareholders for many years to a consistent dividend policy of paying out approximately 50 percent of earnings in the form of dividends.
For the year under review, the Group generated a profit before tax (PBT) of P443 million, up 10 percent on the prior year or up some 15 percent on a 52-week like-for-like period.
“Third-party valuations have suggested a fair share price value in excess of P14.37 illustrating additional capital growth potential,” he says.
During the year, Sefalana continued to invest significantly in inventory to ensure supply constraints were minimised. This has enabled the group to reduce stock-outs and provide their customer base with a consistent product offering.
“There have been numerous price increases from suppliers in South Africa over the last 18 months, and where possible we have accelerated procurement in these commodities to mitigate the impact of these increases,” he says, adding that with this continued level of growth, Sefalana Group has created employment for an additional 611 persons during the year taking its total number of staff to 7,234.
“We continue to focus our employment on citizens in all our areas of operation and report under 1 percent non-citizen employment,” he adds.
Financial highlights
For the 52-week period to 28 April 2024, the Group’s: Revenue was P9.7 billion – up 7 percent on the prior year.
Earnings before interest, tax, and amortisation (EBITA) was P460 million, up 12 percent on the prior year or some 16 percent on a like-for-like 52-week period; Profit before tax was P443 million – up 10 percent on the prior year or up some 15 percent on a like for like 52-week period.
Despite achieving a turnover of nearly P10 billion, Sefalana Group has highlighted the significant pressure on margins that continued throughout the year due to an increased level of competition across the region and pressure on the consumer’s budget.
“We were hoping to reach the P10 billion mark in this financial year, although, from our current strategic perspective, we were only supposed to achieve that in 2025,” says Chauhan.
Sefalana, a diversified blue-chip conglomerate says margin management has become ever more important with price increases from suppliers becoming increasingly regular.
Notably, the group says challenges relating to supply chains and procurement have made inventory management critical.
“There have been numerous price increases from suppliers in South Africa over the last 18 months, and where possible we have accelerated procurement in these commodities to mitigate the impact of these increases,” Sefalana said.
Overall, manufacturing volumes have dropped, and the cost of raw materials has increased.
Sefalana says much of these raw materials are sourced by its suppliers from territories across the world, where political uncertainty and the challenging economic environment, along with logistics and transport difficulties have made doing business more costly and complex.
Sefalana also had to contend inflationary pressures, with consumers having had to manage their spending and adapt their buying patterns.
“The shift away from luxury goods towards necessities continues,” Sefalana said.
“Each business sector, and each geographical region, continues to bring with it unique circumstances and challenges.”
Due to the nature of the sectors in which Sefalana operates, the group says navigating these obstacles is never easy and requires decisive, and informed, decision-making.
During the period under review, the group’s performance was anchored by Botswana business units, which represent around two-thirds of the entire group business.
The local business generated P306 million of Profit Before Tax (PBT) for the period, compared to P259 million in the prior year.
At the end of the year, the Botswana Fast Moving Consumer Goods (FMCG) business consisted of four hyperstores, 25 cash and carry stores, 34 supermarket retail stores, 56 liquor stores, five convenience stores, and one catering outlet, giving the group a total of 125 stores in Botswana excluding our three fuel stations.
This compares to 123 stores at the April 2023 year-end.
Sefalana hopes to open 19 new stores during the current financial year, 10 in Botswana and nine in Namibia.
In Namibia, Sefalana already runs 23 stores operating under the Metro brand.
Chauhan has, however, indicated that Sefalana continues to take a cautious approach, and open new stores only where there is a strong business case to do so.
Sefalana attributes its overall performance to consistent sustainable growth diversification into neighbouring countries over the last 10 years.
Besides Namibia, the group has also made inroads in Lesotho and has operations in Zambia too.
After entering the Australian market a few years back, Chuahan says the investment in this market continues to generate a positive EBITDA and cash generation.
There, Sefalana operates 11 stores across Brisbane under the Seasons IGA brand.
He stated that the Australian economy is currently experiencing strain with interest rates more than doubling since debuting in that market.
As a result, consumer spending has reportedly declined.
