Revitalised supermarket giant Choppies restructures to lift suspension
Supermarket giant Choppies Enterprises Limited (CEL) is overhauling its corporate governance in preparation for the lifting of the suspension of trading in its shares on the Botswana and Johannesburg bourses by mid-year.
The multinational grocery and general merchandise retailer headquartered in Gaborone, Botswana, has undertaken aggressive restructuring. It has recapitalised itself; appointed a Deputy CEO with over 25 years of grocery retail experience in Southern Africa, has appointed a new Chief Financial Officer (CFO); and appointed new auditors - international auditing firm, Mazars.
“We have made major strides in creating a solid foundation for the group to build on and believe this has set the course for a rebirth of the company which offers value for money to its customers in a challenging economic environment,” says Mr Uttum Corea, interim Chairman of Choppies Enterprises Ltd.
Choppies heightened corporate governance actions include:
Ø the recapitalisation of the business by Pula 150 million comprising a loan of P100m from founding shareholders, Messrs Ottapathu and Ismail, and P50m from trading operations.
Ø amendments to the employment contract of Mr Ottapathu in accordance with the King IV Code on Corporate Governance. This includes a 43% reduction in the current guaranteed portion of the CEO’s remuneration to facilitate the introduction of short-term incentives;
Ø the appointment of a Deputy Chief Executive Officer with over 25 years of grocery retail experience in Southern Africa, who is expected to join during April 2020; andØ the appointment of a Chief Financial Officer from mid-April 2020. The CFO, a South African Chartered Accountant brings extensive JSE-listed company experience (including Nampak Group and Edcon). This is subject to the issuing of a work permit by the Botswana authorities.
Choppies has also announced that two of its major shareholders are threatening to sue former auditors, PwC Botswana and/or audit partner, Rudi Binedell for damages saying a lack of independence and “an unjustifiable delay” in the auditor’s report for the June 2018 financial year, “resulted in the suspension of and a prolonged period of suspension of the shares of the Company trading on the BSEL and JSE”.
It will also take action to recover P121 048 424.78 (about R184 million) owing by Payless Supermarkets under a Loan Agreement concluded with subsidiary Choppies Distribution Centre (CDC), after the High Court of Botswana, on 13 March 2020, granted a provisional order for the winding up of Payless and the appointment of a provisional liquidator setting a return date for consideration of a final order of winding up on 27 April 2020.
Saleem Malik, owner of 90% of the issued shares in Payless Supermarkets, executed a deed of suretyship as guarantor and co-principal debtor for the amount owed. CDC issued a demand on Mr Malik for payment due by Payless. Mr Malik failed to effect payment, and CDC instituted action in the High Court of Botswana, seeking a judgement for the full capital and interest, and an order, attaching the shares held by Mr Malik in Payless Supermarkets. Summons was served on him on 3 March 2020.
CDC has ceded any monies it stands to recover from Payless to the lenders. CDC and the CEL have undertaken not to provide any financial assistance to Payless Supermarkets, in liquidation, without the consent of Lenders and prior to seeking the consent of the Lenders.
The company expects to release its financial statements for the year-ended 30 June 2019 by 30 June 2020. CEL which has a primary listing on the Botswana Stock Exchange (BSEL)and a secondary listing on the JSE, said it had postponed AGMs for the past two years because auditor’s reports and financial statements were not available.
CEL will also apply to the Botswana High Court for permission to hold an Extraordinary General Meeting.
The EGM will ask shareholders to approve the annual report, and the group financial statements for the financial year ended 30 June 2019; and to conduct other matters that would have been dealt with at an AGM of the Company in 2018 and 2019. Shareholders will also be asked to confirm the appointment of international audit firm Mazars as auditors to the Group. Mazars are reviewing the financials from 1 July 2018 to date. This follows the resignation by PwC Botswana in respect of all financial periods after 30 June 2018;