Furnmart continues regional expansion drive

Pauline Dikuelo | Tuesday January 5, 2016 12:39

According to the group’s managing director, John Mynhardt, they believe that opportunities still exist for growth within the region, but they will be selective with site location and capital commitment when considering store location.

“The growth of the foreign operations relative to Botswana has continued and management is very confident in the group’s diversification strategy,” he added.

According to the company’s 2015 annual report, the group is also anticipating that trading conditions in the region are likely to remain subdued for the foreseeable future.

Mynhardt said the group would continue to focus on improving gross profit margins, productivity and efficiencies and containing costs unlike the past year when they came under pressure due to strong competition in the region and changes in product mix.

“The deterioration of the group’s debtor books as reported in prior periods has largely been arrested,” he said. “Increased focus on efficiencies and productivity coupled with stricter credit granting is starting to pay dividends.”

However, Mynhardt said management was monitoring the market closely to ensure that any developments were dealt with swiftly to ensure that the momentum was sustained.

“Management is closely focusing on monitoring our Home Corp and Zambian business models to ensure that these investments yield the required return,” he said.

The group recorded six percent revenue increase from P1.11 billion recorded in the prior year to P1.22 billion, which has been attributed to new stores and a Home Corp store that they opened in the past year.

Profit before tax of P88.2 million for the year was 18.6 lower than the prior year mainly as a result of lower gross profit margins and higher operating expenses.

“The increase in operating expenses is attributable to the start-up costs of new stores and higher IT costs arising from the roll out of the new in-store system,” he added. “Higher depreciation charges and interest charges also impacted negatively on profitability.”

Mynhardt said the increasing size of the group’s foreign operations relative to Botswana is evident from the foreign exchange losses that they have been reporting. He noted that these foreign exchange losses arose from their foreign receivables due to the relative strength of the Pula. Subsequent to year-end, the Zambian Kwacha has weakened substantially against the Pula. “The weaker kwacha impacts on the group’s profitability due to the foreign exchange losses in our inter company receivables and substantial increases in leasing costs which are US Dollar based,” he said.

Furnmart retails domestic furniture and electrical appliances through its network of stores in Botswana, South Africa, Namibia and Zambia.