Edgars Stores Limited AGM Trading update to April 2014

Revenue
The year started fairly positively with successful results from Back to School & Back to Work which gave a boost to January. From then, the quarter was downhill all the way. The uncertainty surrounding civil servants’ packages and the acute liquidity crunch in the economy resulted in an abysmal performance in February and March – which dragged sales down to 3% below last year for the first quarter. April recovered somewhat owing to civil servants back pay and we closed the four months at 2.5% below last year.

Gross margins are consistent with last year at 45.3%

Operating profit level – YTD loss of $281000.

Finance costs
– Finance costs YTD are 12.3% worse than budget and 7.9% worse than last year.

Profit after tax.
Some of our efforts to control costs beat budget, as did late payment charges, and we were therefore able to achieve a PAT ahead of budget for the four months but still significantly below last year.

Debtors
Remain in good shape as customers continue to pay, albeit later than last year. Current debtors are 73.7% of the book (2013- 76.5%) and the Number of customer accounts has increased to 200 854, of which 70% were active as at end April 2014. Recently launched initiatives, including The Club and extended credit terms, will help in re-activating accounts and improving collections. Bad debt remains low at 0,4% of debtors.

Stocks
Edgars Chain – 12 weeks cover and Jet is overstocked at 15 weeks.

Borrowings
Total borrowings are $15.8m, of which $5.9m is current and $9.9m repayable after April 2015. Finance costs amount to 3.5% of turnover to date.

Manufacturing –with the support of the retail chains, the factory continues to be profitable. Carousel is producing an outstanding range of mens and boys casual wear which is selling well in store.

New stores

• Edgars Cameron / Bank Street Harare opened in March 2014
• Jet Chitungwiza will be opened on 30 May and Jet Beitbridge in June

Going Forward.
The Edgars chain performance has lifted significantly in May with the 12MTP extended credit offering being a big hit with customers. It is early days to tell how much impact the 12MTP credit product will have on the business for the year.
Jet is struggling against the massive discounting being undertaken by Power Sales as they rationalise their stores.

Even given the improved performance from the Edgars chain, if nothing significant changes in the macro-economic environment, our results could be below the promises made in March. It is too early to say by how much, we will have to see how 12MTP continues to impact in the months ahead.