Depressed consumer spend hits Pelhams

HARARE - Listed furniture retailer Pelhams Limited (Pelhams)’s losses widened to $3,3 million from $1,7 million in the year to March 2014 as sales declined by 69 percent to $2,62 million.

The group chairperson Tawanda Nyambirai said the decline in sales was due to a combination of factors which included stocking challenges and declining demand.

“The gross margin relating to the sale of goods stood at 20 percent, a marked decrease from the prior years’ margin of 26 percent as demand for big ticket items with higher margins declined,” he said in a statement accompanying Pelhams’ financials for the period under review.

Nyambirai noted that the company was facing challenges in raising funding for restocking to generate sales.

“The liquidity challenges that the market faced in the financial year made it increasingly difficult for the company to access the required funding,” he said.

Finance income on trade receivables declined from a prior year level of $3,08 million to $1,11 million as the old debtor’s book matured and was repaid.

The group, which recently closed branches, is expecting to take advantage of its manufacturing units that produce high quality and competitively priced products.

“The company will also continue negotiating trade arrangements with suppliers that may want to distribute products that fall under the company’s product profile and strategic fit,” said Nyambirai, adding that Pelhams was “also currently concluding negotiations of renewal of its loan facilities with its bankers.

During the period under review, the group restructured its costly loan arrangement.

“The restructuring of expensive debt and loan arrangements together with the reduction in the company’s loan secured by a mortgage bond contributed towards a reduction in finance costs of $1,02 million from the prior period,” he said.

“The company has also aggressively implemented credit policies which will ensure that the company’s debtors’ book performs better than it did in prior years.”

Pelhams successfully discounted part of its debtors’ book in order to raise working capital.

Nyambirai said the benefits will be realised in the new financial year. “The board and management will continue to seek ways to secure more working capital facilities in order to improve stock levels and revenue,” he added.

 

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