Pelhams Chief Executive Middleton Chikowore told an AGM held yesterday that the group would post a loss for the first half as the season has been characterised by tightening liquidity and consequent subdued consumer spending.
“But we expect a profitable second half supported by credit sales on the back of new and cheaper facilities, focus on higher margin products and reduced operating costs.”
All the resolutions tabled at the AGM were passed with the requisite majorities.
In a trading update, Chikowore said the group would post a loss in the first half as the season has been characterised by tightening liquidity and subdued consumer spending.
Nonetheless, the group is expected to return to profitability in the second half of the financial year.
Costs realignment has been the primary focus for the group in the first half as the company structure had to match sustainable revenue streams. High cost centers such as occupancy costs were down 53%, salaries and wages were reduced by 25% and bank loans were down 57%.
The reduction in rental costs was achieved on the back of closure of Banet and Harris in Borrowdale, Banet and Harris in Arundel and Bradlows Speke Avenue. The group also closed the warehouse in Bulawayo.
Mr. Chikowore said current facilities with the bank will have been repaid by the end of November. This will reduce the cost of borrowing significantly for the company from rates of 4% per month to rates of 1.5% per month.
The group also entered into a supply agreement with TN Harlequin for the supply of furniture products to Pelhams.
Imara Edwards analyst Tonderai Maneswa said: “The turnaround of Pelhams will take longer given the legacy issues the company is struggling with as well as very unforgiving operating environment where credit sales remains a difficult proposition.” Mr Maneswa believe that there is value elsewhere and advise investors to sell Pelhams. – See more at: http://www.businessdaily.co.zw/index-id-Business-zk-32605.html#sthash.ZdHCsKY3.dpuf