Red flags as Choppies delay results

More detailed verification

FUND MANAGERS have raised red flags over Choppies Supermarkets’ move to withdraw a cautionary issued in February and delay its financials to the end of next month over concerns around valuation of its inventories, a situation that analysts say has a bearing on sales and profitability for the grocer.

Choppies, founded in Botswana and with retail operations in Zimbabwe and South Africa, has been expanding its footprint in the region.

However, it has now been hit by fresh uncertainty after it withdrew its trading update and cautionary issued on February 26, which said earnings per share for the half year to the end of 2017 would be at least 25 percent higher.

An extraordinary general meeting of the company in Gaborone, Botswana, two days later confirmed PricewaterhouseCoopers (PwC) as the new auditors for the company, taking over from KPMG.

The new auditors are now expected to guide management at Choppies in re-evaluating inventories at the regional supermarket chain.

“The board of directors of Choppies Enterprises Limited advises that they have instructed management to perform more detailed procedures on verification and valuation of inventory in conjunction with the new external auditorPwC, appointed on January 31, 2018,” Choppies said on Friday.

As a consequence of this, shareholders in the company have now been advised that the trading statement issued in February has been revoked as it “cannot be relied upon”. The board of the company has also advised that “the publication of results for the half year ended December 31, 2017, will be delayed” and are now expected to be published on or before April 30, 2018.

Analysts have raised concern over this and have suggested that this amounts to lax corporate governance practices at the company. Others said this could mean that profitability for the period has been compromised and could have been overstated in the earlier trading statement issued in February.

“I have not seen this before. They (Choppies) have retracted their recent trading as it cannot be relied upon as directors have ordered management review inventories as clearly there is a problem. Share down 15 percent,” Wayne McCurrie, a fund manager with Ashburton Investments, wrote on Twitter on Friday.

Choppies’ share price dropped 14.75 percent on the JSE Friday to close at R2.60.