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Pelhams in $500 000 loss

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FURNITURE and household retailer Pelhams Limited has posted a $508 842 loss for the half-year to September 30 compared to a profit of $586 427 during the same period last year, weighed down by operating expenses.

FURNITURE and household  retailer Pelhams Limited has posted a $508 842 loss for the half-year to September 30 compared to a profit of $586 427 during the same period last year, weighed down by operating expenses.

By our Business Reporter Earnings per share dropped to -0,05 cents from 0,06 cents.

Despite plunging into a loss-making position, the board undertook to break even through improved credit terms during the last half of the group’s financial year.

The group’s revenue was 39% down to $4,2 million due to a decline in the contribution of credit to total sales. Credit, which is traditionally a key source of revenue for the company, contributed 65% of total sales compared to a prior year comparative of 73% on the back of liquidity constraints on the domestic market.

“In order to improve cashflow, the company has had to encourage cash sales and shorter credit terms to reduce the credit funding gap to a level that the business could sustain,” said group chairman Tawanda Nyambirai in a statement accompanying the financials.

“This limited the ability of the company to restock effectively and stimulate demand.

The business is driven by an effective credit model and the inability to support this had the effect of reducing sales significantly.”

The company’s manufacturing unit, Tradewinds, contributed 6% of total sales during the period under review. Operating expenses rose to

$1,9 million during the period under review from $1,2 million.

“The gross margin decrease to 23% from a prior year comparative of 27% was mainly a result of continued reliance on local products with higher production costs,” Nyambirai said.

“This was further reduced by a deliberate strategy to incentivise cash sales to improve cash inflows.

“The company debtors that were not securitised contributed $1,9 million through finance income against a prior year comparative of $1,5 million.” The debtors book, Nyambirai said, reduced to $6,5 million from an opening balance of $8,4 million as a result of subdued credit sales.