Furnmart profits weaken on closure of Zambian operations
Isaac Pinielo | Wednesday April 26, 2017 14:50
The Botswana Stock Exchange-listed company said trading across its operations has been subdued during the six months to end of January 2017.
It said the decrease in gross profit margins was mainly due to the winding down of its Zambian operations.
Furnmart’s operating income of P55.8 million is 25.8% lower than the corresponding period, which was also attributed to the winding down of the Zambian operations, higher operating expenses and lower finance income earned, partially offset by a decrease in debtors’ costs.
The group said its revenue of P624 million for the period under review, is only marginally higher compared to the previous year.
Commenting on the results, Furnmart managing director, Serniel le Roux said the group’s performance must be seen against the backdrop of a difficult trading environment.
He noted that lower economic growth, higher prices driven by currency weakness, high levels of consumer indebtedness and unemployment, rising food inflation and drought in the region, have all contributed to this unsatisfactory performance.
“Furthermore, our main regional competitors have rationalised their positions in South Africa and are expanding into Botswana and Namibia,” le Roux said.
However, he said the quality of the debtors’ books in the group has improved and as a result, total debtors’ cost has reduced during this reporting period.
He said the total impairment provision relative to the debtors’ book, has been maintained, adding that the group was able to satisfactorily manage the additional credit risk, resulting from job losses relating to the closure of mines in the country.
“The collection of the outstanding debtors’ books in Zambia is progressing according to plan,” le Roux added.
According to the managing director, the group’s exchange gain of P6.4 million is substantially better than last year’s exchange loss of P45.2 million.
He said this gain was a result of the weakening of the pula against the group’s other functional currencies. In addition, the group’s profit after tax of P23.7 million is P28.1 million higher than the previous year.
The group opened two new Furnmart stores during the period under review and is continuing with a programme of revamping old but profitable stores.
Management expressed confidence that the closure of the Zambian operations will have a positive impact on future profitability.
The group said it will continue to focus on its respective business models in each of the three countries in where it operates.
“More specifically, non-performing business units will be subjected to a turnaround strategy or as a last resort, closed,” le Roux said.
Management believes that the continued focus on the non-performing business models will yield positive returns in future, adding that it will continue its efforts in curtailing expense growth throughout the group.