Group Chairman’s Statement
The statement is prepared on the basis of inflation adjusted numbers.
Business Overview
Material disruptions stemming from COVID-19 had a significant impact on the group’s performance, most significantly in April and May due to enforced lockdowns.Since then sales have been steadily recovering. Units sold to end of June trading declined from 1.6 million to 963K compared to same period last year, a trend reflected in the 48% decline in revenue. Trading in foreign currency since April has allowed retail chains to improve stock assortments, which in turn has improved the number of feet in our stores. The business recorded decent foreign currency sales spurred by increased diaspora remittances.
The factory received foreign currency allocation through the FX auction system for re-tooling. The introduction of the FX auction and the subsequent price correction resulted in increased operating costs.
The credit environment has been tough, saddled by hyperinflation making value preservation very difficult and COVID-19 uncertainties leading to high delinquencies during lockdown as customers could not pay in stores.
Profit after tax for the period was ZW$36 million increasing from ZW$17.8million in the same period last year. In historical terms profit after tax increased 268% to ZW$ 75.4million (2019: ZW$20.2million). The business continues to track pricing of its products against stable currencies.
Edgars Chain
The chain recorded turnover of ZW$194.3m (2019: ZW$456.5m) out of 26 stores (2019:26). Units sold for the year were 0.4m (2019:0.6m). The chain’s profit to sales ratio declined to 16% (2019: 37%).
Jet Chain
Total sales were ZW$166.7m (2019: ZW$279.9m) out of 27 stores (2019:25). Units sold for the half year were 0.5m (2019:0.9m). The chain’s profit to sales ratio declined to 22% (2019:30%).
Credit Management
The retail book declined to ZW$64m at the end of the period from a peak of ZW$98m in March 2020 trading period. This was due to deliberate steps to curtail credit and general customer caution to credit during uncertain times.
We have since released credit in a measured approach, targeting existing customers with good payment record.
The microfinance loan book, like the retail book, declined due to challenges mentioned above. Revenue decreased to ZW$8.2m (2019: ZW$21.5m) making a profit after tax of ZW$0.8m (2019: ZW$12.5m). Loans to customers were at ZW$7.1m (2019: ZW$16.9m). Both retail debtors and the loan book have since recovered better than expectation.
Manufacturing
The factory made a profit of ZW$7.7m (2019: ZW$23m).
The sale of face-masks contributed significantly to this performance.
Financing and Cashflow
Gearing decreased to 0.16 in the current year (2019:0.20). The Group had US$168 000 foreign liabilities as at the end of June 2020 which has since been settled.
Outlook
The Rights Issue has been concluded, raising ZW$70m for the group. The Edgars Employee Share Trust also managed to follow its rights through the Pension Fund reflecting employees’ commitment to the business. The proceeds have been used in retooling the factory, in progress stores revamps and enhancement of digital capabilities including the development of online shopping platforms.
A continued multicurrency environment will be key for the business. Foreign currency sales growth will depend on diaspora remittance growth.
Dividend
Regrettably, your Group will not declare an interim dividend for the 26 weeks to 5 July 2020.
Appreciation
I would like to commend fellow board members, shareholders, management and staff for their continued resilience and commitment despite the challenging environment. I look forward to continued effort from all in the last quarter of the year.
T N SIBANDA
CHAIRMAN
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