Delayed for over a year, Choppies FY2018 annual report makes for grim reading

During mid-December, Choppies finally published its financial results for the 12 months to June 2018 (FY2018). The Botswanan retailer’s losses deepened during the year, from an upwardly revised BWP169.8 million (USD16.9 million) in FY2017 to BWP444.5 million (USD44.2 million) during FY2018.
Auditor PwC refused to sign off on its accounts, stating that “We have not been able to obtain sufficient evidence to provide a basis for an audit opinion.” Among the chief issues it highlighted were the existence of “more than one hundred potential related parties, which had not been identified and reported on as such in prior financial periods”; “the inconsistency of explanations received with respect to the nature of inventory included in bulk sales transactions” in South Africa and Zimbabwe; and the nature of the business relationships between Choppies and two other Botswanan retailers (supermarket chain Payless and the Fours chain-and-carry chain). 
PwC also identified potential  shortcomings in the historical  processes used to “ensure the completeness and accuracy of the inventory records underpinning Choppies’ annual financial statements.”
The Sagaci Research View: The struggle for control of Choppies has been well documented, as have plans to almost halve its total store count in an effort to ensure its survival. While it has been obvious for some time that Choppies is not a well-run enterprise, PwC has plumbed the depths of its dysfunction.
As a result, CEO Ram Ottapathu is now a much-diminished figure. Without new investment, Choppies could enter a Nakumatt-like death spiral, but this investment is unlikely to be forthcoming as long as the current leadership remains in place.
For a more detailed analysis of Choppies’ financial performance, store network, and retail strategy, check out the new edition of our Choppies Retailer Research Report, which will be published in the near future.