Monday, July 22, 2024

Profits rise at FurnMart, but shares in the furniture group are down

The Botswana Stock Exchange listed furniture supplier group, Furnmart Limited seems to find it hard to pick up its stock price trading despite impressive results posted recently.

The group’s trading in the stock market has been drastically going down. In 2016, for instance in the second quarter the stock was trading at P1.04 and has been dropping down since, to now P0.54.

The group posted revenue growth of 5.8 percent to P660million for the six months ended January 2018, higher than the prior year. The Profit-After-Tax reached P62, 5million from the lowest of P23, 7million in the previous reporting period. The group has had to shut down some of its non performing operations in Zambia which has since paid off and the recovery of the remaining debtor’s book is said to be ongoing.

Motswedi Analyst, Garry Juma shared with Sunday Standard this week that, “if our market was more liquid we could have seen the share price picking up after such a strong performance. Our view is that the company has already turned a corner and its restructuring seems to be paying off.”

Furnmart group is facing tough competition from other South Africa’s furniture retailers as well as the mushrooming of Chinese owned enterprises operating where Furnmart was traditionally dominating.  In addition, some customers are now directly importing from China.

Even so, according to Juma, competition is very intense in this sector and this is made tough by the decline in disposable incomes.  He is of the view that, managing their debtors will be key in the sustainable growth of this business.  He added that, Chinese shops are not close competitors to Furnmart as the target market is not the same although there are still some Chinese shops that are offering top quality products but they are not the same.  “One area where Furnmart stands out from the Chinese is offering durable products with a guarantee for peace of mind which most Chinese shops do not offer.”

Meanwhile, the company which is chaired by John Tobias Mynhardt, has stated in its results that trading in this first half was strong. Management is of the view that trading in the second half of the year will be comparatively less buoyant. Management is however, confident that the group will produce earnings growth for the full year as a result of the growth in the debtors’ book, a focus on debtor book quality and cost control.

“Management will continue to seek out opportunities for new store growth where appropriate. The furniture retail market in Botswana and Namibia remains overtraded and imminent sweeping regulatory changes, in these markets, may present future headwinds,” reads the statement by chairman Mynhardt.

The operations, with few exceptions, have all performed very well during the period under review. The remaining non-performing stores are expected to attract further focus from management in an attempt to turn them around.

The group opened three new Furnmart stores during the period under review and are now trading out of 124 stores in three countries. Management will be opening another six stores during the current financial year.

In the 2016/2017 annual report the group recorded P1.17billion revenue which was lower than the previous reporting period.


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