Turnover grew 17.6% to P76.559m and net income rose 14.3% to P12.733m. The dividend fell 6.6% to 9.5t per share. However, it should be noted that in the previous year, the interim dividend was paid to shareholders as at the end of the prior year, utilising some of the listing proceeds as opposed to operating income. The actual dividend on a year to year basis payable to shareholders as a listed company has increased from P2.2m to P3.6m.
There were an additional 8 stores opened during the year bringing the total to 48 with 6 new cell-phone outlets in recognition of the huge explosion in consumer spending on cellular telephony. There are plans to expand on the "cell-phone" shop concept with the roll out of five more shops. Growth is also planned for Zambia and Namibia in an effort seek future growth outside of Botswana.
Trading conditions in the retail sector are generally currently under pressure due to the regressive nature of other drains on consumer spending, such as cellphones. We do, however, anticipate that Furnmart's store expansion programme will add to improved profitability, and thus forecast growth in earnings of 19.1% during F2001, resulting in EPS of 33.1t. We forecast an operating margin of 23.4% and a return on equity of 26.9% in F2001. The share price has halved over the last 6 months on very thin volume. This fall is largely due to small first time investors being disappointed with the share price performance since listing.
On a forward PER of 3.0x and P/BV of 0.7x, Furnmart is cheap and compares favourably to its peers in RSA. We recommend a buy for investors with a long term view.
