Edgars skates struggling Edcon

Sometimes brilliant business decisions are just that, brilliant; sometimes they are just luck.

The acquisition of Edgars Limited by Mauritian investment management firm SSCG Africa Holdings last year was part of a restructuring of the former’s South African parent company Edcon Holdings.

Two weeks ago Edcon filed for administration after losing 2 billion rand in sales and failing to pay suppliers due the coronavirus imposed lockdown in that country.

But the signs had been written on the wall for quite some time now.

In December 2016, Edcon approached a United States bankruptcy court filing for a Chapter 15 Bankruptcy protection as it sought help in implementing a debt restructuring that was already underway back at home.

Chapter 15 (of the US Bankruptcy Code) gives a foreign debtor a way to gain access to US Bankruptcy Courts for the purpose of administering assets or taking action for the debtor in this country.

And just last year, Edcon received a lifeline when the Public Investment Corporation (PIC), landlords and creditors funded a R2,7-billion recapitalisation deal to keep the firm afloat.

It is the restructuring that came with this deal that nailed the coffin in splitting the ties between Edgars Limited and parent company Edcon.

It followed an earlier transaction, which saw the two entities agreeing to a US$1,5 million deal that allowed the local unit to acquire the Edgars and Jet trademarks from Edcon.

Edgars has officially welcomed its new majority shareholder:

“The board  welcomes the new shareholder,  SSCG Africa Holdings,  who  bought Bellfield (Pty) Limited, the Group’s  major shareholder  from Edcon, during the year  2019,” said Edgars chairman Themba Sibanda in a statement accompanying the firm’s financials for the 52 weeks to January 2020.

Having just managed to break ties with struggling Edcon, Edgars now, perhaps, faces the biggest challenge of its existence – Covid-19.

The Covid-19 pandemic has had unparalleled devastating effects on the global economy, trade and businesses as countries all over the world have imposed lockdowns as a strategy to contain the further spread of the infectious virus.

As of yesterday, World Health Organisation (WHO) figures showed that over 4,1 million cases of Covid-19 and around 290 000 deaths had been reported globally. It’s an addition to the macroeconomic challenges that most companies in Zimbabwe have already been facing.

“The tough operating environment continues to  impact negatively on  the group’s growth strategy. In particular, the Covid-19 pandemic,  hyper-inflationary environment, liquidity challenges and foreign currency shortages.

“Management will continue to devise adequate survival strategies to preserve  the group’s balance sheet. Post Covid-19, clothing retail will not  be the same and the group is pursuing various initiatives to future  proof the business,” said the Edgars chairman.

The broader economic challenges had a negative impact on Edgars’ numbers during the period under review. The group’s turnover decreased by  5 percent from $629 million in  the previous year to $595 million in the current year, despite a 23 percent decrease  in  units sold.

“Revenue performance for the last quarter,  usually our peak turnover period, performed below expectations mainly due to subdued consumer spending in general  and  challenges with mobile  payment platforms,” said the chairman.

Profit after tax for the period stood at $17,9 million, an 81 percent decrease  from $91, 8 million in  the same  period  last year.

“The business continues to prioritise cost containment. The Group  closed the year in  an overstock position but  this was fresh stock  and  placed the group at an advantage for first quarter trading.”

The board did not declare a dividend for the period under review.