LONDON (Alliance News) - Obtala Resources Ltd Thursday said it expects to improve margins in its African Home Stores business, after the recent acquisition of Lifes' Comfort Solutions' shops in Lesotho provided a blue-print for expanding its business into neighbouring countries.
In a statement, the agri-processing, farming, timber and retail company said the Lifes' Comfort Solutions shops had generated revenue of about USD2.1 million between October 23 and December 31, 2014, and a gross profit margin of 21%.
It said it expects the margin to increase as it improves its buying, brings in new suppliers, and optimises both stock and investory management.
LCS has also signed binding terms for lease agreements on two further outlets in Lesotho and a further unit in Bloemfontein, South Africa, a move it expects to boost revenue and profitability. The new units will be operational in the second quarter of 2015 and are expected to add about 15% to 20% to overall sales revenue on a monthly basis. It is also looking to win business from governments, miners, and other private sector businesses once it establishes a new workwear wholesale unit.
Additionally, LCS has agreed terms with a supplier to open the first iStore for Apple consumer technology products in Lesotho. Its shops will have special areas for the Apple products, with the shop fitting funded by suppliers starting in February. It expects this move to boost footfall and its IT and telecoms revenue.
The company is also re-negotiating agreements with MultiChoice, the regional satellite TV provider, to increase the revenue received for services provided by LCS to MultiChoice.
"Our intention is to use the business model in Lesotho as the blueprint for rolling out the business into neighbouring states in 2015," Obtala Resources Managing Director Simon Rollason said in a statement.
"Revenues and margins are very encouraging and the improvements in buying and cost management will generate higher margins going forward. The implementation of improved management policy and procedures, particularly focusing on stock and inventory control and re-ordering systems will provide for better cost efficiencies," he added.
Still, Obtala Resources shares were down 3.3% at 10.27 pence Thursday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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