Edgars HY2023 Financial Results

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November 1, 2023

16 Chairman’s report

Directors’ responsibility for the Interim Financial Information

The Directors of Edgars Stores Limited are responsible for the preparation and fair presentation of the Group’s interim condensed consolidated financial statements. The reviewed interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), in the manner required by the Companies and Other Business Entities Act (Chapter 24:31) and the Zimbabwe Stock Exchange listing requirements.

The principal accounting policies of the Group are consistent with those applied in the previous annual financial statements.

Cautionary – reliance on these interim condensed financial statements

The Directors would like to advise users to exercise caution on their use of these financial statements due to the material and pervasive impact of the technicalities brought about by the change in functional currency in Zimbabwe at the beginning of 2019 and its consequent impact on the usefulness of the financial statements for subsequent reporting periods. This was further compounded by the adoption of International Accounting Standard (IAS) 29 ‘Financial Reporting in Hyperinflationary Economies’.

Whilst the Directors have exercised reasonable due care in applying judgements that were deemed to be appropriate in the preparation of these financial statements, certain distortions may arise due to the various economic factors that may affect the relevance and reliability of the financial information presented in economies such as Zimbabwe, that are experiencing hyperinflation.

Change in functional currency

As highlighted in the 2022 Annual Report, the Government of Zimbabwe issued Statutory Instrument, SI 85 of 2020, which permitted the use of USD free funds for domestic transactions. As a result, the Directors noted a mix of USD and ZWL sales affecting the determination of the functional currency of the Group. The functional currency of the Group was resolved to have changed to United States Dollars with effect from 09 January 2023.

However the Group presentation currency has been maintained as the Zimbabwe Dollar (ZWL). The entity has opted to present the current year Zimbabwe dollars historical results for the period ended 09 July 2023. The Zimbabwe Dollars prior year inflation adjusted reviewed numbers have been used as comparatives for the statement of comprehensive income and statement of cashflows, while prior year audited inflation numbers have been used on the statement of financial position

Operating environment and overview

Throughout the financial reporting period ended 09 July 2023, the operating environment was characterised by rapid changes in the policy environment. The first quarter started with some optimism on the back of a slowed inflation coupled with a stable exchange rate. The situation negatively changed towards the end of the period under review with the official exchange rate which was 671 to the USD at the beginning of the year, deteriorating to 5700 at the end of June.

The exchange rate volatility coupled with the fluctuations in market liquidity in both ZWL$ and foreign currency continue to create challenges for the Group as well as the formal sectors of the economy, particularly as it relates to the pricing of goods and trading terms. The fiscal and monetary policy pronouncements made during the period, such as reduction in interest rates to 150% for ZWL loans, reduction in USD transactional tax to 2% from 4% and the 100% retention of domestic foreign currency earnings provided the much-needed additional finance for merchandise procurement. The high interest rates continue to pose a threat to the viability of companies who rely on debt financing for their operations, as well as affecting capital expenditure plans. The economy has noted a general increase in the use of foreign currency for domestic transactions and this has been confirmed by the Central Bank. Consumer demand remains subdued owing to the constrained ZWL$ liquidity.

Operating costs increased substantially during the period under review mainly driven by a significant increase in allowances for credit losses on the ZWL book whose risk was exacerbated by the increase in policy rates in July of last year. Other major cost drivers were the frequent power cuts which resulted in the business using more alternative power options such as generators and the rapidly depreciating ZWL currency which pushed operating costs upwards. Management intensified cost containment measures and recalibrated the business models in response to these price corrections as a way of preserving value and building a strong balance sheet for the business.

Financial performance

Notwithstanding the challenges in the operating environment, the Group closed the period with an improved performance over the prior period. In historical cost terms, the Group reported Revenue of ZWL$39 billion which is 22.43% down from that achieved in 2022 of ZWL$51 billion. Profit before tax of ZWL$4 billion was a decrease of 70% from the prior period of ZWL$14billion. The current year performance is attributed to the introduction of USD credit in July 2022, replacement cost-based pricing, inflationary stock holding gains, realignment of cost structures as well as initiatives implemented by Management to ensure fresher stock availability in our stores, regardless of the supply chain challenges. The significant exchange rate depreciation in April and May had the impact of wiping out consumer disposable income and consequently demand. The Group achieved a basic earnings loss per share of 268 cents, (2022: 1,040 cents).

Total Group units sold decreased by 14.8% from 1.28million to 1.09million compared to the same period last year.

While a sizable portion of our cash sales are in foreign currency, we believe that this proportion can be increased through favourable and consistent application of regulatory policies around trading in foreign currency.

Gearing increased to 0.23 in the current year from a prior year of 0.24. Funding was channelled towards growing the debtors’ book as well as merchandise procurement

Retail performance

Total retail merchandise revenue amounted to ZWL$32billion representing a 18% decrease on prior year. The split between credit and cash sales was 62% (2022:53%) and 38% (2022:47%). A significant portion of the sales are now being realised in USD.

The Edgars chain recorded turnover of ZWL$17.89 billion which is down 23% on prior year of ZWL$23.26 billion; the 443k units sold were down 17% from 532k in the comparative period. The split between credit and cash sales for ZWL was 64% (2022: 56%) and 36% (2022: 44%) while the USD had credit sales of 73% and cash sales of 27%. Stock covers closed at 15 weeks (2022:25 weeks).

Total sales for the Jet chain were ZWL$14.23 billion down 15% from ZWL$16.74 billion achieved in the comparative period. The split between credit and cash sales for ZWL was 28.4% (2022: 47.6%) and 71.6% (2022: 52.4 %) while the USD had credit sales of 70.3% and cash sales of 29.7%. Total Units sold for the period were down 4.1% from 608.9k to 583.7k. Stock covers closed at 16 weeks (2022:17.4 weeks).

Financial services

The gross retail debtors’ book closed the period at ZWL$45.1 billion representing a 83% growth on prior year of ZWL$24.7 billion This is as a result of introduction of the USD book and Management’s focus in growing it. Real USD book closed at USD8.3 million. Active accounts growth for the USD grew to 73.6k accounts attributed to new accounts drives as well as account conversion initiatives. The asset quality at 83.4% for the USD book and at 76.5% for the ZWL book (2022: 89.55%) in current status. Expected credit losses (ECLs) as at 09 July 2023 were 2.29% of the book compared to 4.0% as at 08 January 2023, demonstrating Management’s prudent application of the related credit loss accounting standards as the ‘deterioration’ is below the industry benchmark of 5.0%.

Club Plus Microfinance

The loan book closed at ZWL 3billion marking a 50% growth on the comparative period of ZWL 2billion. The business focus for the period was to grow the USD loan book to hedge against the inflationary environment persisting in the economy. Asset quality remains positive with 85.9% of the USD book being in current while the ZWL book was affected by the impact of the policy rates adjustments effected in July last year. Improved efficiencies in loan approval and disbursement processes have resulted in increased turnaround. We have seen an increase on the uptake of loan applications through our online platforms i.e. the mobile app, this has provided our customers with added convenience.

Carousel Manufacturing

The Manufacturing Division recorded a turnover of ZWL$2.40billion up 5% on prior year. Total units sold were down 1.4% to 67.9k (2022:68.9k). Revenue was adversely affected by shortage of skilled machinists in the first quarter, which has since been resolved. The unit has pivoted from open market towards the in-house chains in order to give the group a competitive edge over its competitors. We anticipate a resumption of exports in the following financial year.

Board membership

The Board wishes to advise stakeholders of the departure on 31 October 2023, of the following:

1. Ms Tjeludo Ndlovu, the Group Chief Executive Officer of the Group. Ms Ndlovu has been with the Group for 11 years, the last 3 at the helm of the Group. She has led the Group successfully since her appointment in July 2020 at the peak of the COVID 19 pandemic. It is with profound gratitude that the Board thanks Tjeludo for her service to the Group and wishes her well in her new challenge.

2. Ms Happiness Vundla, who has served as the Group Chief Finance Officer for the past two years. On behalf of the shareholders, Board of Directors, management and staff, I wish to convey the Group’s appreciation for the years of dedicated service to the Group.

Non-Executive Director Appointment

The Board would like to announce the appointment of Mr Mark Robb as Non- Executive Director with effect from 1 November 2023. Mark is a skilled IT professional with over 22 years multinational experience across Fintech, Banking, FMCG, Media, Manufacturing, and Agricultural sectors. He has a B. Com Honours Degree in Information Systems and Management from Rhodes University in South Africa and many other IT qualifications obtained from various Institutions.

The Board congratulates him on his appointment and looks forward to his contribution.


Management continues to remodel the business to capitalise on opportunities that arise in the very uncertain operating environment. Cost containment remains a focus area so as to ensure long term viability of the business.

The Group seeks to expand its geographic footprint through the opening of new stores in strategic locations. Smart merchandise procurement remains a key focus area to ensure that target margins are achieved without compromising the merchandise quality. We will continue to transform our customer experience through updating our stores to world class standards, offering widened merchandise ranges at affordable prices and flexible credit terms.

The operating environment will be impacted by the complex macro-economic factors. The surge in inflation and renewed currency volatility will remain key issues impacting on business performance. The recovery of the business is premised on the back of improved access to foreign currency through domestic sales to cover import requirements, a stable exchange rate and slower inflation. An emergent risk associated with cuts to oil production by OPEC countries has resulted in an upward review in oil prices, pushing up logistical costs. These will in turn affect the final landed cost of merchandise and fabric.


Regrettably, your Group will not declare a dividend for the 26 weeks to 09 July 2023. The position will be reviewed having assessed performance in the current year.


I wish to record my appreciation to management and staff for their great effort in sustaining the business in a difficult operating environment. I also thank my fellow directors for their wise counsel and our customers, suppliers, and other stakeholders for their ongoing support.

31 October 2023

Edgars Stores Abridged Reviewed Results for the 26 weeks ended 09 July 2023.pdf