Furnmart pretax profits double but...
Lewanika Timothy | Tuesday November 12, 2024 13:57
Credit ratios represent the ability of consumers to repay their debts to companies and a decline in credit ratios represents a decline in the ability of customers to repay hire purchase instalments to retailers such as Furnmart.
The group’s recently released half-year results to July 2024 showed an increase in the value of trade receivables which represents the amount of money owed to the company from the sale of its stock on credit. The higher trade receivables came with higher expected credit losses, the financials show.
“The increase in the expected credit loss allowance is mainly attributable to the growth in trade receivables. Management believes that the expected credit loss allowance is at an adequate level,” directors noted.
The value of trade receivables on the group’s books grew from P584 million in the year to July 2023, to P636 million in the recently concluded financial year.
“Achieving healthy growth in the group’s trade receivable book remains a priority but it is becoming increasingly difficult, as credit ratios continue to decline,” directors noted. “Higher gross profit, achieved through an increase in sales, were partially offset by an increase in the expected credit loss allowance.”
The declining credit ratios and higher expected credit ratios are associated with the fact that consumers are facing pressures emanating from unfavourable economic conditions. Income pressures felt by households could spiral into defaults in payment obligations to credit extenders such as Furnmart.
“The economy in Botswana is facing some headwinds that are expected to persist in the new financial year and will impact the group’s trading. Difficult trading conditions in South Africa are also expected to continue in the foreseeable future,” directors noted.
The group bemoaned the harsh trading environment, noting that sales growth measured against the high comparable base of the prior year has been sluggish.
This year’s higher pretax profits are due to provide momentum for expansion, as the retailer expects to open four more new stores in the remainder of the calendar year, in addition to the four already opened financial year.