During the year, retail sales rose 9.4% with same-store sales growth of 3.2% and the number of stores increased by 92 to 1233. Average retail space was expanded 8.7%.
Steve Binnie, chief financial officer, said the group had spent about R298m on the new stores, of which nine were Edgars stores and the balance were spread across the rest of the group. About R260m went into the new point-of sale system and other IT requirements, he said. Capital expenditure in the year ahead was not expected to be at these levels.
Absa Investments analyst Chris Gilmour said the group had indicated its confidence in the economy by opening so many new stores.
Edcon owns Edgars, Jet, CNA, Boardmans and Discom. It was bought two years ago for R25bn by US equity giant Bain Capital.
Active credit accounts grew to 4,3-million and bad debt to average debtors rose only marginally from 11.6% to 11.8%.
Gilmour said the results were a continuation of the improvement seen at half year. In addition, lower interest rates would benefit the company both in terms of reduced debt, which it incurred as a result of the buyout, and because lower rates would spur purchases on.
Operating cash flows, together with borrowing facilities, remain more than sufficient to fund Edcon's debt servicing obligations and operational cash flow needs, including capital expenditure and contractual commitments for the foreseeable future.
The company remains effectively hedged against exposure to interest rate changes and currency depreciation on its long term offshore borrowings.
During the year, the group repurchased listed floating rate notes and so recognised a net gain of R1,35bn, contributing to its ability to service its long-term debt. At the end of the year, borrowings stood at R1,8bn less than its revolving credit facility and R816m less than its borrowing base facility.
CEO Steve Ross said: “We were pleased with the financial results for the year. The group maintained its focus and disciplines to deliver solid growth and preserve our market share in what were difficult trading conditions.”
Edcon said growth had come from all chains and as a result of a focus on productivity, efficiencies and cost containment, the company delivered an earnings increase above that of sales.
Improved merchandising and centralised sourcing resulted in fewer mark-downs, contributing to gross profit margins in line with those of the prior year, despite a weaker rand. Profit from the credit and financial services division increased from R205m to R565m due to higher interest income.
Source: Business Day
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