Mynhardts taste first fruits after Furnmart delisting
Mbongeni Mguni | Friday February 21, 2020 15:09
After 21 years on the local exchange, Furnmart delisted and went back into the hands of founders, the Mynhardt family, who controlled approximately 92% of the group after the BSE exit.
According to the group’s Annual Report released this week, Furnmart posted pretax profits of P161.3 million for the year ended July 31, 2019, compared with P140.3 million the previous corresponding period.
At its annual general meeting on March 17, investors will decide on the 3.52 thebe final dividend proposed by directors, which follows the 4.49 interim dividend paid previously.
The Annual Report shows that Furnmart generally enjoyed a robust performance for the year, with revenues up six percent to P1.3 billion and earnings per share up to 21.75 thebe from 16.89 thebe.
The group was also able to pay down its borrowings to P164.7 million in the year to July 2019, from P180.3 million the previous corresponding period.
A source of concern, however, will be the rising bad debts, where impairments and write offs of loans amounted to P103.2m in the year to July 2019, from P91.2 million the previous year. The group’s loans and advances to customers, however, declined during the period under review to P511.8 million from P587.5 million.
The group’s higher impairments are also possibly due to the adoption of the IFRS 9 reporting standards, a new reporting standard where companies are required to state broader ‘expected credit losses’, which widen the impairment provision.
Risk tests also showed that the group’s wholly owned South African operations, Xtreme Discounters, were vulnerable to collapse. Furnmart has 47 stores in South Africa, compared to 52 in Botswana and 40 in Namibia.
“During the year the company identified its investment in Xtreme Discounters, as most vulnerable and has carried out an impairment assessment,” a statement accompanying the annual report reads.
“However, despite making losses and not having highly liquid assets, the entity is in a positive net asset position. “Projected cash flows also depict profitability in the foreseeable future.”
Furnmart Limited is exposed to Xtreme to the tune of about P162 million in equity and P114.5 in loans. “Management applied significant judgement in their impairment testing of loans to subsidiary at year end amounting to P114.47 million,” auditors noted.
Furnmart left the BSE citing the introduction of new listing rules, which required companies to increase shares held by the public from 20% to 30%. At the time of delisting, Furnmart had 23% in public hands.
Group deputy chairperson, Tobias Mynhardt previously told BusinessWeek that in addition to the tighter listing rules, Furnmart had not realised the capital growth in its counter it had expected, due to low liquidity on the BSE.
“Over the course of the last six years, our stock has been illiquid in the market with trade of our shares being less than three percent of those in issue. This, to some extent, has inhibited our market capitalisation,” he said.