In a statement attached to the company’s financial results, chairman Oliver Chidawu said the securitisation of the debtors’ book, which currently sits at US$10 million, primarily funded operations and improved the level of trading despite the absence of sustainable funding . The debtors book grew by 197%. This saw income increasing from US$273 000 to US$2,3 million, immensely contributing to group profitability.
The company improved its credit terms, which were increased to a maximum of 24 months, up from 18 months, a move which lifted credit sales. This strategy underpinned the sales growth of 95% against the prior year comparative of 115%.
“This was a deliberate strategy, mindful of the low disposable income in the market and lending by financial institutions at micro level to spread risk,” Chidawu said.
Group revenue grew by 95% to US$16,7 million, up from US$8,6 million in 2011. Profit before tax of US$2,1 million compared to US$144 454 the previous year. Cost of sales increased to US$12,3 million from US$6 million the prior year. Finance costs grew to US$2, 1 million, up from US$670 045 in 2011.
The company said it would augment its securitisation structures which continue to sustain operations, adding it would require a long term funding structure, something that has been missing since 2009. Pelhams CEO Oswald Masoha said the company needed to be capitalised so that it did not rely on the securitisation of the debtors book to unlock funding.
“If we were using our own shareholders’ funds, the entire US$2,2 million incurred in finance costs would have gone straight to the bottom line. Further to this, if we have adequate capital, it improves our strategic sourcing and we can improve our margins by importing more of the lines that give us better margins,” he said.
Tradewinds, the company’s manufacturing unit, maintained its contribution to group revenue of 5%. However, the continued increase in local production costs had a negative impact on margins, which reduced to 27% against a prior year comparative of 30%.
Pelhams’ sales mix for the year was largely skewed towards locally-manufactured products, which earn lower margins compared to imports. The company said it would continue to pursue its strategy of importing to improve supply and margins due to high costs of production locally .