Furnmart bemoans harsh operating environment

Isaac Pinielo | Wednesday May 6, 2015 10:35

During the six months to January 31, 2015, the group’s debtors’ books reflected the deteriorating credit climate in the region that resulted in subdued profitability.

This was attributed to higher impairment provisions and lower income yields earned from the debtors’ books. Revenue for the half-year period amounted to P655 million, an increase of nine percent from P600 million last year.

Commenting on the results, management reiterated that the trading environment, particularly in Botswana and South Africa, remains difficult. Furnmart managing director, Tobias Mynhardt indicated that profits were also negatively impacted by the start-up costs of new stores, higher depreciation charges and interest expenses.

This resulted in profit after tax of P40.3 million that is materially lower compared to the previous year of P58.4 million.

“The increased depreciation includes the write-off of software expenses subsequent to the completion of the roll-out of the new IT system in Botswana, Namibia and Zambia,” said Mynhardt. He noted that the higher interest charge is the result of increased long term funding, which has been raised for future growth.

The group opened four new Furnmart stores during the period under review. One Home Corp store and one Furnmart store are planned for opening in South Africa this month.

Mynhardt also revealed that the rollout of the new IT platform is nearing completion, adding that all the stores with the exception of South Africa have been converted to the new system. The South African stores will be converted by May 2015.

He added that the group would benefit from this investment through enhanced efficiencies in areas of in-store operations, reporting, credit follow-up and credit granting.

He further explained that the difficult trading conditions in the credit retail market are expected to continue for the remainder of the year.  However, he said management would continue to focus on improving collections, improving credit-granting processes and containing costs through emphasis on productivity and improved efficiencies.

Mynhardt added: “Despite the adverse trading conditions, the group will continue its expansion plans in line with its strategy of diversification of country risk.

“Ongoing rationalisation in the industry increases the potential to obtain prime sites in appropriate towns and villages.”

Meanwhile, the group declared a gross interim dividend of 2.21 thebe per share on April 27, 2015 and is payable to shareholders registered on May 15, 2015, for payment on May 26, 2015.