Chairman's Statement
The statement is prepared on the basis of inflation adjusted numbers.
CAUTIONARY- RELIANCE ON THE INFLATION ADJUSTED REVIEWED FINANCIAL STATEMENTS
The Directors have exercised due care in applying judgements in the preparation of these financial statements. However there are material and pervasive impacts from the change in functional currency in Zimbabwe on February 2019 that resulted in non-compliance with IAS 21: Effects of Changes in Foreign Exchange Rates and initial application of IAS 29: Financial Reporting in Hyperinflationary Economies. Other impacts have been highlighted in the “basis of preparation” paragraph of this press release as read in conjunction with the full half-year review opinion. This resulted in related qualifications in the half-year review opinion, which limits the usefulness of the financial statements.
TRADING ENVIRONMENT
The trading environment for the first six months was significantly impacted by the Covid-19 lockdowns in January, February and the last two weeks of June. The Company is not designated as an essential service provider and as a result lost close to seven trading weeks due to store closures and reduced trading hours. Limited social, educational and economic activity during the period also meant that demand for clothing over this period was lower than normal. As at the end of June turnover was significantly behind target.
Notwithstanding the challenging environment, positive business sentiment, stable interest and exchange rates, and a lag in inflation ensured that our financial services business units continued to perform and remain profitable over the period, ably sustaining operations.
GROUP PERFORMANCE
Unit sales – cumulative units sold were 945 000 as at end of Quarter 2, which was 2% below last year (2020: 963,000 units).
Gross margins - gross profit margin improved from 42% to 46% in inflation adjusted terms compared to the same period last year. This was driven by fresh inventory assortments and increased imports.
The impact of lockdowns on trading was such that it necessitated the increase in borrowings in order for the business to service ongoing commitments such as occupancy and utility costs, as well as ensuring that our employees were remunerated on time. The increased borrowings were at an average interest rate of 44.4% per annum (2020: 43% per annum).
At the end of June the company had US$190,000 in foreign liabilities which it is able to service from existing resources.
New stores - Jet Nkwame Nkrumah (Harare) and Jet Mutoko opened in April and August 2021 respectively. In October we are looking forward to the opening of Edgars Avondale, and Jet Hwange stores.
Edgars Chain - unit sales of 344,249 were down 6% (2020: 366,720). Credit sales constituted 68.1% of total sales compared to 64.7% for Quarter 1. Stocks closed at 13.7 weeks cover (2020: 17.2 weeks).
Jet Chain - unit sales of 526,691 were up 1% (2020: 523,034). Credit sales made up 46.5% of the total sales up from 40.9% at the end of Quarter 1. Stocks closed at 15.7 weeks cover (2020: 18.3 weeks cover).
Financial Services
Finance income was up 249% year-on-year and 6.6% up in Quarter 2 relative to Quarter 1. This was despite the fact that interest rates were reviewed downwards over the period.
The debtors’ book increased from ZW$519m in June 2020 to ZW$639m in June 2021. The book performance remains healthy, with 86.3% (2020: 67.4%) of book being current, compared to 84.9% in Quarter 1. Active accounts at 37.4%, while stable throughout the year, declined relative to prior year (June 2020: 44.6%). Collections were good at 36.7% of the book, compared to 39.8% in Quarter 1.
Carousel Manufacturing
Unit sales declined to 74,021 from 121,093 units in 2020 resulting in lower efficiencies relative to last year. The factory secured its first export sales to the region in this quarter and management continues exploring export markets for more opportunities.
Club Plus - Micro Finance
The loan book increased by 150.4% to ZW$76m compared to ZW$30.5m last year. Interest income was up 85% from Quarter 1 and 209% year on year in inflation adjusted terms. The quality of the book remains good with over 80% of the book current.
COVID 19
The business has continued to learn from and adjust to the effects of the Covid-19 pandemic which present an ongoing risk. We joined the Ministry of Health’s efforts to encourage vaccination through the rollout of a staff vaccination drive and vaccination discounts for staff and customers respectively. We are proud to note that as of end of August 2021 over 66% of our staff have been fully vaccinated.
DIRECTORATE
Happiness Vundla was appointed Chief Finance Officer effective 1 September 2021 after Bright Ndlovu retired from the Board and as Chief Finance Officer (CFO) effective 31 August 2021. The Board, management and staff would like to welcome Ms Vundla on her new role, and to thank Mr Ndlovu for his contributions over the years.
OUTLOOK
The effects of Covid-19 are difficult to predict in the outlook period. It is hoped that the ongoing COVID-19 vaccination programme being spearheaded by The Government of Zimbabwe will result in the achievement of herd immunity thereby making it unnecessary for Government to resort to lockdowns in the future.
Since the relaxing of lockdowns, trading in the chains has seen significant improvement with an increase in customer footfall. We hope that this momentum will be maintained going forward. Traditionally the last quarter of the year contributes 35%-40% of annual turnover. Management is confident that the profit forecast will be met.
We are looking to increase our geographic footprint through the opening of new stores as and when the opportunity presents itself.
APPRECIATION
On behalf of the Board of Directors I would like to thank our stakeholders – customers, suppliers and employees for their commitment and support through the first half of the year.
T N SIBANDA
CHAIRMAN
19 October 2021