Edcon steps in to rescue Zimbabwe unit

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HARARE: Edcon has supported Zimbabwe’s Edgars with guarantees for $7.2 million (R98.6m) in interest bearing loans and borrowings after the Harare unit sank to a $0.3m loss for the half year period to July 9, 2016.
Edgars Zimbabwe chairman Thembinkosi Sibanda said on Friday that the company had experienced weakening consumer demand in the period under review which was worsened by “liquidity constraints, business failures and delayed or non-payment of salaries”.
Sibanda said the company posted a 23 percent revenue decline to $23.1m as a result of the constrained operating environment and had now restructured through measures that included cost cutting and staff rationalisation.
“These initiatives have resulted in extra once-off costs amounting to $0.9m being incurred. This included retrenchment costs of $0.65m,” said Sibanda.
Edgars Zimbabwe said the measures and marked decline in sales volumes contributed to its loss position ballooning to $0.3m against last year’s $1.9m profit.
It said additional retrenchments cost the company $1.4m.
Sibanda said Edgars Zimbabwe’s facilities were “secured by a guarantee from the holding company ($7.2m)” and “cession of book debts” at $6m, with the average cost of borrowing for the period improving to 11 percent compared to 12 percent for the 2015 period.
The company said it anticipated improved revenue generation in the second half of the year and that the “leaner business model currently in place will help” attain a better profit position.
Sibanda said the company would not declare a dividend for the period.
Sales for Jet were 2.8 percent below 2015 at $7.7m. It said the overall sales value for the Edgars chain stores dropped by 31 percent to $14.5m for the period and was only expected to recover next year
The group has made doubtful debt provisions of $2m while write-offs for the period averaged 6.3 percent of lagged credit sales and 0.7 percent of lagged debtors.