PELHAMS Limited has revealed that sales for the twelve months to March declined 50 % to US$8,4 million compared to the previous year as the company sought to strike a balance between its credit sales and the unwinding of expensive debt structures.
In a statement accompanying its results which were released on Monday, the company said credit sales contributed 69 percent of turnover against a prior year comparative to 82 percent.
The gross margin for the locally listed company decreased marginally from 27 percent in the prior to 26 percent as the company focused more on local better quality products instead of imports.
A number of deliberate strategies were also implemented during the course of the year to improve cash inflows in the face of the unwinding of the existing expensive debt structure.
Although the gross debtors book declined by 44 percent from US$10,3 million at the beginning of the year to US$5,8 million, finance income only eased by 32 percent from US$4,5 million to US$3,1 million.
The company incurred a loss of US$1,7 million during the period under review from a profit of US$1,5 million with its current liabilities exceeding current assets by US$1,1 million.
The losses incurred during the year are mainly as a result of challenges that the company faced in raising funds for its debtors book.
Pelhams chairman, Tawanda Nyambirai Nyambirai said the company had adopted measures such as realignment of overheads, relocation and closure of non-performing branches, research and manufacturing of exclusive lines to increase margins.
The group is also close to concluding new initiatives for working capital and funding of the debtors book to ensure that it returns to profitability.
Nyambirai said the new board had inherited a company whose business was modelled around credit sales, yet all the finance charges earned from the credit were mortgaged to lenders in their entirety leaving very little finance charges income for the company.
“The new board has had to deal with these and many other legacy issues while at the same time keeping the company going. Instead of focusing on cheap imported products, the company is now increasingly focusing on locally produced and appropriately priced goods of high quality,” said Nyambirai.Advertisement
He said more “reasonably priced” financing arrangements had been put in place.
“Better supply terms were being negotiated with suppliers. Some non-performing branches are being shut down. A consultant has been engaged for the group to work on the introduction of a performance culture that will see the conversation on branch staff from being store-keepers to sales persons who will go out to look for customers,” he said.
Nyambirai said overheads alignment would be key in returning the company to profitability. He said measures are being put in place to increase space utilization through exploitation of synergies amongst brands.
“The company will also stock exclusive lines manufactured within the group specifically for Pelhams to enhance margins and improved stock levels across the company’s branch network,” he said.
“The company is also seeking to strike a balance between credit sales and cash sales. Structures for the financing of the further debtor’s book that apportion the finance charges fairly between the financier and the company are now being put in place.”