Furniture Mart, the titanic regional furniture shop listed on the Botswana Stock Exchange (BSE) has bemoaned the hostile trading scene in the markets it operate in, though its latest results have shown a rise in revenue.
The company said on its half year results for the six months to 31 January 2015 that the trading environment, particularly in Botswana and South Africa, remains difficult.
“The performance of the Group’s respective debtors’ books reflects the deteriorating credit climate in the region. As a result, profitability is lower, mainly due to higher impairment provisions and lower income yields earned from the debtors’ books,” said the company headed by Tobias Mynhardt.
Furnmart has in the past targeted Africa expansion on the back of the local market reaching saturation and lack of improvement in salaries of civil servants for three years. However, the company which has operations in Botswana, South Africa, Namibia and Zambia saw its topline rise by nine percent from P600 million on the prior year to P655 million. It bemoaned that profits are also negatively impacted by the start-up costs of new stores, higher depreciation charges and interest expenses, resulting in profit after tax that is materially lower compared to the previous year.
“The increased depreciation includes the write-off of software expenses subsequent to completion of the roll-out of the new IT system in Botswana, Namibia and Zambia,” it said.
“The higher interest charge is the result of increased long term funding, which has been raised for future growth.”
Nevertheless, the group opened four new Furnmart stores during the period under review. Going forward, it said one Home Corp store and one Furnmart store are planned for opening in South Africa in May 2015.
It is also nearing completion of the roll-out of the new IT platform. All stores with the exception of South Africa have been converted to the new system. The South African stores will be converted by May 2015. The Group will benefit from this investment through enhanced efficiencies in areas of in-store operations, reporting, credit follow-up and credit granting.
The group has forecast that difficult trading conditions in the credit retail market are expected to continue for the remainder of the year. However, it said its management will continue to focus on improving collections, improving credit granting processes and containing costs through emphasis on productivity and improved efficiencies.
“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.”