INTRODUCTION
I am pleased to present the Edgars Stores Limited Group financial results for the 52 weeks ended 5 January 2020. The commentary on the financials is based on the inflation adjusted numbers. The historical numbers are shown as supplementary information as they have not been prepared in compliance with International Accounting Standard 29 - Financial Reporting in Hyperinflationary Economies. No opinion has been expressed by the auditors on the historical financial information.
FINANCIAL OVERVIEW
The Group's turnover decreased by 5%, from ZWL$ 629m in the previous year to ZWL$ 595m in the current year, despite a 23% decrease in units sold. Revenue performance for the last quarter, usually our peak turnover period, performed below expectation mainly due to subdued consumer spending in general and challenges with mobile payment platforms.
Profit after tax for the period was ZWL$17.9m, an 81% decrease from ZWL$91.8m in the same period last year. The business continues to prioritise cost containment.
The Group closed the year in an overstock position but this was fresh stock and placed the Group at an advantage for first quarter trading.
RETAIL OPERATIONS
Edgars Chain
The chain recorded turnover of ZWL$390m (2018: ZWL$368m) out of 26 stores (2018: 25) an increase of 6%. Units sold for the year were 1.399m (2018: 1.736m), a decrease of 19.4%. The chain's profit to sales ratio declined to 24.1% from 27.3% in 2018. Edgars Kadoma was re-opened at a new site in November 2019, having burnt down last year.
Jet Chain
Total sales were ZWL$218.7m (2018: ZWL$245.2m) out of 27 stores (2018: 25) a decrease of 10.8%. Two new stores were opened in Banket and Chegutu. Units sold for the year were 1.797m (2018: 2.483m), a decrease of 27.6%. The Chain's profit to sales ratio declined to 19.6% from 22.8% in 2018.
Credit Management
The quality of the Group's debtors book is good with 3.0% of the book over 30 days due and 75.5% being current as at end of the year. Total active accounts were 150 817 (2018: 151 522).
Edgars Chain debtors were ZWL$73.7m (2018: ZWL$123m) after an allowance for credit losses of ZWL$0.2m (2018:ZWL$3.1m). Bad debts written off net of recoveries for the period averaged 0.6% (2018: 1.8%) of lagged credit sales, and 0.1 % of lagged debtors (2018: 0.1%). Edgars chain active accounts as at end of December were 98 795 (2018: 102 159).
Jet Chain debtors were at ZWL$20.4m (2018: ZWL$39.1m) after an allowance for credit losses of ZWL$0.1m (2018: ZWL$3.2m). Bad debts written off net of recoveries for the period equated to 0.8% (2018: 1.4%) of lagged credit sales, and 0.2% of lagged debtors (2018: 0.5%). Jet Chain active accounts as at December 2019 were 51 619 (2018: 49 548).
Manufacturing The factory made an operating profit of ZWL$12.6m (2018: ZWL$1.8m loss). 6% (2018: 8%) of sales were exports while 94% (2018: 92%) were made to the Edgars and Jet chains.
Microfinance
The microfinance business revenue declined marginally to ZWL$12.4m from ZWL$12.8m, making a profit after tax of ZWL$924k (2018: ZWL$5.2m). Loans to customers declined to ZWL$6.5m (2018: ZWL$27.1m) after an allowance for credit losses of ZWL$0.05m (2018:ZWL$0.5m).
The quality of the loan book was good with 3.5% of the book over 30 day due and 83.5% being current as at end of December 2019. Total active loan accounts as at the end of December 2019 were 11 314 (2018: 8 111). Bad debts written off net of recoveries for the period averaged 0.3 % of loan book (2018: 0.3%).
Financing and Cashflow
Gearing was at 0.20 (2018:0.22). The Group had US$ 219,036 in foreign liabilities as at 5 January 2020.
Executive movements Mrs Buhlebenkosi Mpofu leaves the Group at the end of May 2020 to pursue other opportunities after having served the Group for four years, one of which was as the Chief Finance Officer. We wish her well in her endeavours and thank her for her contribution during her tenure of service to the Group.
OUTLOOK
The tough operating environment continues to impact negatively on the Group's growth strategy. In particular, The Covid 19 pandemic, hyperinflationary environment, liquidity challenges and foreign currency shortages. Management will continue to devise adequate survival strategies to preserve the Group's balance sheet.
Post Covid-19, clothing retail will not be the same and the Group is pursuing various initiatives to future proof the business.
The Board welcomes the new shareholder, SSCG Africa Holdings, who bought Bellfield (Pty) Limited, the Group's major shareholder from Edcon, during the year 2019.
DIVIDEND
Owing to the impact of Covid-19 pandemic, your Company will not declare a dividend this year.
APPRECIATION
The year has seen a very challenging operational environment for the business. I take this opportunity to thank fellow Board colleagues, management and staff for their contributions in the period under review. Similarly I extend my appreciation to our loyal customers as well as our landlords, bankers and suppliers for their continued support.
T N SIBANDA
CHAIRMAN
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