Furnmart this week disclosed the draft National Credit Amendment Bill in South Africa, which proposes that all or part of the debt under certain qualifying credit agreements can be extinguished will hit them hard.
The Botswana-based furniture retailer has several furniture shops in South Africa, the continent’s most industrialised economy. However, the new bill will have devastating impacts on their bottom line, especially that some of their customers, including low income earners have credit arrangements with the group.
“This amendment bill is of great concern as most of the Group’s South African customers fall in the income bracket that this legislation is targeting,” said the company when announcing full year results to July 2018. For the period under review, the company recorded a 67 percent jump in profits to P107, 9 million. The results are up on back of growth in revenue and operating income.
The operating income was picked up by the closure of some of their non-performing units. Meanwhile, cash generated from operations has declined by P26.8m mainly due to an increase of P83.3m in the group’s debtor’s book, resulting in lower cash and cash equivalents. Nonetheless, the group has continued to expand its footprints.
“The Group opened nine new Furnmart stores during the period under review and is now trading out of 129 stores in three countries,” said the company manager Daniel le Roux. However, the company will be cautions with expansion in South Africa, which its economic forecast has also been reduced.
“The furniture retail market in Botswana and Namibia remains overtraded and imminent sweeping regulatory changes, in these markets, may present future headwind,” said the BSE listed group.