Sefalana enters South African market
Isaac Pinielo | Tuesday January 31, 2017 13:47
At the announcement of the financials for the half-year ended October 31, 2016, the group stated that it will use a large part of the P351 million raised recently through a rights offer to support its expansion plans into South Africa.
Recently, the group used part of the proceeds from the rights issue to enter the Lesotho market through the takeover of that country’s largest cash and carry outlet, TFS Wholesalers.
Sefalana Group managing director, Chandra Chauhan noted that the rights issue programme completed last December was significantly oversubscribed, noting that the proceeds were partly utilised for the Lesotho transaction.
“With the entry into the Lesotho market, we purchased a warehouse of just over 2,500 square metres (sqm) in Maseru and are in the process of acquiring an additional warehouse of 5,500sqm from which we are operating. We are in search of further sites for additional stores as we look to grow our presence in the country over the next few years,” he said.
He said the acquisition gives the group a very strong presence in that market from its first day of trading in the region, and is expected to increase its turnover by P150 million in the first six months of trading and contribute approximately P7- million to profit by the year end. The group said it is considering other potential sites in Maseru for additional store openings.
In Namibia, Sefalana said it is also in search of suitable sites and anticipate purchasing or developing a new head office and cash and carry outlet in Windhoek towards the end of 2017.
Sefalana currently has 14 stores in Namibia. The MD stated that potential sites across the country are being considered for future openings as the group works towards achieving its medium term target of 20 stores across that country.
Sefalana also has operations in Zambia where it indicated that its property was fully let throughout the half-year period and that it continues to generate a very good rental stream.
Meanwhile, the diversified retail group has posted a nine percent growth in revenue during the half-year period with turnover breaching the P2 billion mark.
According to the group’s financials, the group recorded a turnover of P2.005 billion for the six months ended October 31, 2016 up from P1.8 billion in the prior period.
The group’s overall profit before tax (PBT) for the six months period was marginally up to P81.1 million from P80.4 million in the comparative period the previous year.
Sefalana Cash and Carry Limited Botswana operations contributed 60% and 48% of the group’s revenue and profit before tax for the reporting period, respectively.
The local operations’ turnover amounted to just over P1.2 billion, which was in line with that of the prior period.
Chauhan said margins have been under pressure since the year-end, resulting in a significant reduction in gross profit compared to the comparative period. “This is a result of the tough trading conditions and the increased level of competition. Overall profitability for this segment fell 16%,” he stated.
In Namibia, the MD said the business has grown sufficiently to offset the decline experienced locally.
Metro Namibia contributed 32% and 22% of revenue and profit before tax for the period, respectively.
Turnover amounted to P640 million, a growth of almost 24% on the prior period. PBT amounted to P17.9 million, up 34% from the prior period.
“During the year, we have seen a significant increase in activity in our stores following an enhancement of our brand and through focusing on providing customers with what they want,” Chauhan said.