Dividends will shore up shareholder confidence in Choppies
• Rising stock price on the JSE and rallying share price on the BSE signal return to normalcy at Choppies
Choppies shareholders will take courage from the fact that the group is now current with its financial statements following the lifting of trading suspension by the BSE and subsequently the JSE, Portfolio Manager at Kgori Capital, Kwabena Antwi, has told The Business Weeekly & Review.
Although the share price has shown little movement on the BSE, it has experienced a meteoric on the JSE where it went from R0.64 to R2.30 in a matter of days. Antwi says getting Choppies is back to an overall profitable position where the multinational retailer is capable of paying dividends that will go a long way in shoring up shareholder confidence. “Shareholder confidence is usually linked with shareholders returns,” he notes.
Ramachandran Ottapathu and Ismail Farouk acquired 18 597 724 shares on the open market at an average price of approximately 63 thebe per share on the BSE in a few transactions at the end of October. The founding directors of Choppies were apparently backing the group’s turnaround strategy to the tune of just over P11,000,000.
Said Ottapathu, better known as Ram: “As a management team, we faced numerous challenges during the past number of years. The retail environment continues to experience headwinds, exacerbated by the coronavirus pandemic.
“As a significant shareholder and director, I am confident that the worst is behind Choppies and that we are close to the bottom of the cycle. Our investment strongly aligns us with shareholders as we now focus on further improving corporate governance and growing profitability.”
The two men are currently involved in litigation against the company’s former auditor and audit partner for delaying the publication of the company’s audited results following breaches of independence and unlawful changes to the scope of the audit. This resulted in suspension of trading in the company’s shares on both the BSE where it holds a primary listing and on the JSE. The JSE lifted the suspension of trade in the company’s shares following a similar decision by the BSE in July this year.
At the presentation of the audited financial results for the year ended 30 June 2020, the company said it had discontinued or disposed of its loss making operations in South Africa, Kenya, Tanzania and Mozambique. This resulted in a one-off loss of approximately P371 million from discontinued operations and an increase in negative equity to P467 million for the financial year ended 30 June 2020.
“The board of Choppies considered the 2021 budgets, detailed cash flow forecasts that were stress tested, as prepared by management, banking facilities and covenants, undertakings of financial support by the founder shareholders, the economic outlook of the countries in which it operates, as well as the possible future impact of the Covid-19 pandemic,” Ram said.
Based on the evidence provided by management, the board concluded that the group has already taken the necessary steps to remedy the past situation by discontinuing loss making operations. “As founder shareholders we remain committed to the turnaround strategy of Chopppies and are confident of growing profitability in the short to medium term,” Ram said.
Says Antwi at Kgori: “The next phase will focus on implementing governance structures throughout the group. Some progress has been made, but there is still more to be rolled out.”