ZIMBABWE Stock Exchange-listed household and appliance retailer Pelhams Limited is forecasting a loss in the first half to September due to subdued consumer spending on the back of an underperforming economy, a company official has said.
Report by Tarisai Mandizha
Speaking at the company’s annual general meeting in Harare recently, Pelhams chief executive officer Middleton Chikowore said although the primary focus for the company this year has been the realignment of structures with sustainable revenue streams, indications are that the company could incur a loss.
The company posted a $1,7 million loss for the year ended March 31, 2013 compared to a profit of $1,5 million during the same period last year.
“We expect to post a loss for the first half. However, management forecast the business to have a profitable second half supported by credit sales on the back of new and cheaper credit facilities, focus on higher margin products and reduced operating costs,” Chikowore said.
Chikowore said the liquidity challenges on the market delayed closure of credit facility negotiations and affected sales due to the resultant subdued consumer spending.
Pelhams has already implemented cost-reduction measures which saw occupancy costs being reduced by 53% in the year to March 2013 through closure of the company’s three branches in Harare and a warehouse in Bulawayo.
Chikowore said the current facilities with banks will have been repaid by the end of November 2013 and this will enable the company to conclude new facilities to fund the debtor’s book and replace the expensive credit from suppliers that had built up as a result of legacy issues.
Chikowore said the company was working towards cost reduction measures and has reduced occupancy cost by 53% to $48,841 as of March 2013 from $104 819 while salaries and wages were reduced by 25% to $111 763 from $148 235.
“The 53% reduction in rentals arose from the closure of Banet and Harris Borrowdale, Banet and Harris Arundel, Bradlows Speke, and a 50% reduction in another branch’s rentals,” Chikowore said.
“These branches’ overhead costs were no longer supported by the turnover generated in the respective branches. We have, however, opened two more trading floors at Pelhams Harare to incorporate these brands.”
In the period under review, balance payables that related to bank loans were reduced by 57% and balances payable inherited expensive debt structures decreased by 19%.
He added that prior to the year the majority of credit supply balances had been converted into loan amounts attracting interest rates of 4%, but the management engaged all suppliers and managed to reduce interest rates from 4% per month to 1,5 % per month.