Edgars secures US$5 million loan facility

Edgars Stores Limited has secured a US$5 million loan facility from a local bank to retire its expensive debts and to finance working capital.

Group finance director Mr Vusa Mpofu confirmed last week the funds were drawn down at the end of last month.

“The funding obtained was mainly used to retire more expensive debt,” said Mr Mpofu. “The funding was obtained from a local bank.”

The Zimbabwe Stock Exchange-listed clothing retail giant has received support from its shareholders Edcon of South Africa.

Edcon controls 40 percent of Edgars.

In its trade update for the five months to May, Edgars said borrowings for the group stood at US$16,7million at a cost of 16,49 percent a year.

To this period, financing tenor and rates had improved with the US$5 million deal being clinched for a two-year period.

The weighted average rate of interest is projected to decrease to 16 percent from the 18,2 percent in December 2010.

A modest rise in disposable incomes last year led to Edgars’ strong monthly growth.

“Since January we have detected stagnation in disposable incomes,” said Edgars in its update.

“However, because we are coming off a low base, group turnover for the five months grew 85 percent to US$15,2 million,”

During the same period, retail unit sales grew 47,1 percent and a gross margin of 51,5 percent was achieved, compared with 49 percent last year.

Dollar figures grew faster than units partly due to price increases filtering through after the cotton and wool price increases last year.

“The bulk, however, was a result of the launch of upmarket brands in October, as well as better stocking in areas that can carry better margins,” added Edgars.

The number of debtors’ accounts grew to 127 910 from 111 199 reported at year end and the debtors’ book currently stands at US$12,2 million.

Monthly collections were an average of 24 percent of opening debtors. “Bad debt” handovers, as a percentage of lagged debtors, stood at 0,49 percent.

Edgars said merchandise assortments in ladies’ wear improved significantly with notable quality improvements being made by local suppliers.

Imports and internationally recognised brands were also introduced in the stores.

“We expect the half-year topline results to be around 90 percent up on last year while, at profit after tax, we should produce a modest profit against the US$1,7 million loss last year,” said the update report.

Source: The Herald Zimbabwe