The operating environment remains tough with foreign currency shortages, cash shortages and depressed consumer demand.
The business is performing within forecast.
New stores
No new stores have been opened YTD.
We are currently revamping Stanley House, First Street Harare. This will be completed in August.
Following that we will be converting the Edgars Rusape Branch to a Jet store. We will also revamp the Edgars Gweru store as soon as funds permit as it is in dire need of a revamp.
Turnover (consolidated)
Unit sales: +1.6% increase over 2016
Retail Sales $ as at end May trading: 2% above last year; we would have done better if we did not have late store inputs. We expect June to be a strong trading month as we are now in a better stock position than we have been for some time.
Margins: Gross margin is lower than last year at 44% (2016- 46%) which is attributable to deliberate “right pricing” in the Edgars Chain and sales mix variances.
Factory
The factory loss reduced from $350k in F2016 to $208k in the current year. Edgars will continue to support the factory and local industry. With effect from this month, Carousel is trading as a division of Edgars Stores Limited, simplifying structures from a tax point of view.
At the OPERATING level
We made a loss of $1.4million compared to a $3million loss last year. This is largely due to the positive impact of the cost cutting measures embarked on by the business in 2016.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
April YTD EBITDA is minus $890k, a 66% improvement from prior year and 36% better than budget.
Finance income
Finance income (LPC and debtors interest) from a smaller debtors book is $3.1million versus $3.8million for same period last year.
Finance costs
Finance costs YTD are 22% below last year due to reduced borrowings and good cash flow from operations.
Profit after tax
PAT at $ 1million (2016: (35k)) is +200% higher than budget.
Debtors
- LPC decreased over last year due to customers paying themselves out of debt and improvement in timing of civil service salaries. Current debtors stood at 68.4% (Jet) and 66% (Edgars) at the end of April.
- Number of accounts at end April 255 080, with 63% being active (April 2015- 68.9%).
- Overlay Product Income is trending downwards due to customers opting out and policies lapsing due to the 2015/16 job losses and cash challenges.
- Edgars Chain closed April at 16 weeks stock cover and Jet stocks at 10.5 weeks cover. I believe the Edgars cover will prove to be overstated.
Borrowings
- Total borrowings are $5.3m, of which $2m is payable within 3 months and the balance is payable by April 2018.
- Finance costs amount to 2.7% of turnover to date
Overall
We continue to closely monitor the trading environment and review our targets accordingly. Our March promise remains largely unchanged; Gross Margins decreased to 44% (March promise - 44.9%) reflecting the impact of the improved 2017 performance.
Linda Masterson
GROUP MANAGING DIRECTOR