LIFESTYLE Holdings (Lifestyle)’s 2012 decision to place all its shares into a Mauritian special purpose vehicle, TN Harlequin International (TNHI), is paying dividends as the export market is beginning to warm up to the group’s local manufacturing unit, TN Harlequin, a company official said.
Earlier this year, Lifestyle shareholders approved a resolution that okayed TNHI to acquire the group’s shares to manage political risk and attract capital into the group.
Lifestyle CEO Tawanda Nyambirai said the group had been struggling to secure regional contracts due to the perceived political risk in Zimbabwe, but things were picking up following the Mauritian registration.
He said TN Harlequin had so far secured a US$340 000-a-month supply contract with one of South Africa’s largest retailers, OK South Africa.
“We now have a contract from OK South Africa to supply them with a huge order of lounge suites per month simply by saying we represent a Mauritian company, TNHI and we would like to supply you with our products,” Nyambirai said in an interview after listed subsidiary Pelhams’ annual general meeting. Pelhams is Lifestyle’s furniture retail subsidiary.
Nyambirai said despite perceptions that South Africa was friendly to Zimbabwe, his company spent two years trying to penetrate that country in a meaningful way. The South Africans cited Zimbabwe’s high political risk, he said.
Nyambirai said it was the strategic move to register Lifestyle in Mauritius that had eventually opened doors in South Africa, adding the company was now in the process of concluding other contract negotiations with top retailers in the neighbouring country.
“We are now talking to House and Home in South Africa and we are going to export our product and that was our intent,” he said.
Nyambirai said TN Harlequin products were expected to be competitive in the South African market because of their durability and quality at a time the neighbouring country is flooded with Chinese imports which have stifled its local furniture industry.
Nyambirai also said Pelhams was contracting third parties to distribute its furniture to grow sales and increase revenue going forward.
He said under the arrangement, accredited agents would get supplies from the manufacturer at wholesale prices and distribute.
“I think it’s a common trend now. If you look at cement companies for instance, you find containers anywhere near some construction activities which are owned by entrepreneurs and they distribute their products,” Nyambirai said.
“Manufacturers have seen they don’t need to be building shops but they can use the informal sector to distribute their product, because our economy is largely informal anyway.”
In a trading update, Pelhams CEO Middleton Chikowore forecasted a first half loss to September 2013 due to subdued local consumer spending.
“ However, management forecasts 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.
Pelhams reported a US$1,7 million loss for the year ended March 31, 2013 compared to a profit after tax of US$1,5 million during the same period last year.
Chikowore said the company had reduced occupancy costs by 53% to US$48,841 as of March 2013 from US$104 819 after closing some branches around the country.
He said salaries and wages were reduced by 25% to US$111 763 from US$148 235.