CHAIRMAN'S STATEMENT
Despite the challenging environment of foreign currency shortages and the threat this has on margins and merchandise assortments, the Group's sales of merchandise has grown from $24.1m in the half year to June 2017 to $31.1m in the same period in 2018, an increase of 29%. Group margins were at 43% (2017:42%).
The Group's profit before tax increased by 200% from $0.9m in 2017 to $2.6m in 2018 driven predominantly by the growth in sales.
Retail Operations
Edgars Chain: Total sales were $19.5m (2017: $15.8m) and sales per square metre were $1 958 (2017: $1 502) out of 26 stores (2017:26).The Jason Moyo branch (Bulawayo) is currently being revamped and the Masvingo branch is planned for a revamp in the second half of the year. Units sold for the six months were 0.8m (2017: 0.77m), an increase of 4%. Chain profitability decreased to 23% from 26% in 2017.
Jet Chain: Total sales were $12m (2017: $8.7m) and sales per square metre were $2 966 (2017: $2 103) out of 25 stores (2017: 25).The Marondera branch was revamped during the period under review and the Masvingo branch is planned for a revamp in the second half of the year. Units sold for the year were 1.05m (2017: 0.94m), an increase of 12%, and the chain's profitability increased to 17% (2017:16%).
Credit Management
Edgars Chain debtors were $16.8m (2017: $16.3m), after an allowance for credit losses of $0.83m (2017: $0,9m). Net write-offs for the period averaged 2.1% (2017: 8.7%) of lagged credit sales, and 0.4% of lagged debtors (2017: 1%). Edgars Chain active accounts at June 2018 were 102 874 (2017:110 325).
Jet Chain debtors were at $4.9m (2017: $4.5m), after an allowance for credit losses of $0.48m (2017: $0.5m). Net write-offs for the period equated to 1.6% (2017: 6.6%) of lagged credit sales, and 0.7% of lagged debtors (2017: 1.1%). Jet Chain active accounts at June 2018 were 49 548 (2017:45 584).
The reduction in finance income is due to the fact that the arrears amounts of our customers are down on the prior year.
Manufacturing
The factory made a loss of $0.3m after once off terminal benefits of $0.2m (2017: $0,3m). We believe the reduced cost structure will align with the export initiatives being pursued.
Microfinance
This new division grew from a loan book of $0.6m at December 2017 to $2.6m at June 2018. Total revenue of $0.5m has been earned for the six months. The division made a profit before tax of $62k after $88k allowance for credit losses.
Financing and cash flow
Borrowings have increased to $7.6m (December 2017:$4.6m) as a result of revamps, shorter supplier credit terms for merchandise inputs and microfinance growth. Consequently, gearing has increased to 0.24 (December 2017 (restated):0.15). We expect our borrowings to increase further in the second half in order to finance microfinance business growth.
Trade payables include foreign liabilities. We continue to engage our bankers in sourcing foreign currency to clear these from our balance sheet.
Outlook
We are well poised to take advantage of any upswing in economic activity and should achieve original forecasts by year end.
Dividend
The Board has decided not to declare a dividend this half year end.
Appreciation
I am grateful to board colleagues, management and staff for their dedication. I am also grateful to our customers for their loyalty and our landlords, bankers and suppliers for their continued support.
TN Sibanda
Chairman
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