Zimbabwe healthcare products provider, MedTech Holdings says with no definitive position on payment of legacy debt this may result in serious challenges and its ability to continue in the future.
The group owes legacy debts amounting to ZAR27.8 million to foreign creditors. However, some of the debts have been validated by the Reserve Bank of Zimbabwe while appeals have been put in for others.
“At this stage, the Group is unsure when payments will be made for the debts validated and when a response will be received for appeals lodged. Delays in the payment of legacy debt has resulted in cuts in supply and stock outs which is one of the contributing factors to the decreased sales volumes,” group chairperson Rose Mazula said a statement accompanying the results.
“For prudence, these foreign creditors have been restated to the interbank rate of 16.77 at end of the reporting period. The extent of liabilities owing to the foreign creditors leaves the Group in a precarious position.” She added: “Uncertainty related to payment of legacy debt affects our foreign credit lines, and with no definitive position, this may result in serious challenges and our ability to continue in the future.”
Inflation adjusted revenue for the group declined 31% to ZWL$70.48 million in the year ended 31 December 2019 from ZWL$101.46 million in 2018. This was attributed to a stance by management to restrict sales due to the continual devaluation of the debtor’s book with the aim of preserving shareholder value and falling consumer spending as income levels have not kept up with rising general price levels and this has caused aggregate demand to remain subdued.
Also, stockouts due to challenges in sourcing replacement stock of raw materials and goods largely to stop supply from foreign creditors owing to overdue balances. The company operations are in FMCG, medical and manufacturing. FMCG revenue went down by 38% compared to comparative prior period.
As the trading environment and macro-economic conditions remain volatile, Mazula said the business will continue to do its best to maintain market share and sales and keep up strict cost control.