Financial Reporting in Hyper Inflationary Economies - IAS 29
We are operating in a hyper inflationary environment and the entity will continue reporting in compliance with IAS 29. However, for this trading update, the Group reported based on historical cost.
Group Performance
The Group has not been spared from the impact of diminishing consumer purchasing power with YTD turnover to April 2020 increasing by 465% on last year while units sold were down 18%. EBITDA, at $50.6 million, was 850% up from last year.
Inventory: The business benefited from the 2019 year-end overstock position, as a result, no additional stock needed to be bought for January and February 2020. Retail inventory at $131 million, grew 555% from last year.
Edgars Chain
Unit sales were down 21% compared to 2019.
Dollar Sales as at end March trading were 457% above last year.
Jet Chain
Unit sales were down 10% compared to 2019.
Dollar Sales as at end March trading were 559% above last year.
Financial Services
Debtors book: Gross debtors were at ZWL$114 million (fully hedged), which is a 354% increase from last year.
Interest Income for the period was ZWL$29.5 million (2018: ZWL$2.2 million)
Debtors Book Quality: 6.1% of the debtors book were over 30 days due and 80.6% was current. The debtors book performance is clean although we anticipate some deterioration due to COVID 19 effects.
Total active accounts at the end of March were 151 540 (2019: 148 734).
Carousel
Unit sales were down 73% below 2019
Dollar sales as at end of March trading were 136% above last year
Club Plus
Loan book size was at ZWL$9.1 million being 91% growth over last year.
Interest Income for the period was ZWL$2.1 million, a 182% increase from last year.
EBITDA: at ZWL$0.9 million increased 175% from last year.
Borrowings and Gearing: Total borrowings have increased to ZWL$149 million (December 2019: ZWL$59.8 million). ZWL$80 million of this is short term debt. Finance costs increased by 13 192% compared to last year. This cost line continues to increase in line with increasing minimum lending rates and increased borrowings.
Liabilities: Trade and other liabilities of ZWL$77 million are 600% up on last year. Foreign liabilities as reported at year end have been settled.
Outlook: The Covid 19 pandemic has severely impacted businesses across the world, Edgars Stores Limited has not been spared. The lockdown declared by Government on the 30th of March 2020 and the extension thereafter, resulted in loss of sales for both Edgars and Jet Chains as well as our manufacturing unit (Carousel). Collections from debtors also declined.
Operating expenses are expected to increase due to the need to procure sanitizing and cleaning materials, protective clothing and thermometers for use in curbing the spread of the virus in our environment. The cost of continued mandatory screening tests may not be sustainable in the foreseeable future.
The business resumed trading on the 5th of May 2020, starting with a few stores and extending to all stores at the date of this update. Resultantly, sales and collections are picking up, albeit at a slow pace. The operating environment continues to be volatile, uncertain and disposable incomes are lagging behind inflation. However, the re-introduction of multicurrency payment modes is most welcome and has had a positive impact on the business.
Management will continue to monitor the operating environment and map the right strategies to navigate this landscape.
Linda Masterson
GROUP CHIEF EXECUTIVE OFFICER