(Bradlows, Barnetts, Electric Express, Joshua Doore, Morkels, Price ‘n Pride, Russells, Supreme, HiFi Corp, Incredible Connection, Timber City and others)
JD Group fell into a lossmaking position in the second half of last year – mostly because of a jump in “debtors’ costs”.
Half of that was debts written off and the other half new provisions for debts that are overdue.
The group’s debt cost escalated to R1.1 billion in the half year to December, pushing it into a loss of R159 million.
The jump in bad debt in the half year was sudden and severe with a threefold increase compared with a year earlier. The debt cost was equal to the full year debtors’ cost incurred by the group in the entire 2009, which had been the worst on record.
JD Group is owed about R8.7 billion by people who bought things on credit. About half of that sits in accounts that are more than a month overdue.
Back in 2012, the ratio was just 25%.
(Lewis, Best Home and Electric, My Home and Monarch Insurance Company) Lewis’ results for the year to March tell a similar tale. The group makes almost the same amount of money from finance and insurance charges as it does from selling merchandise.
Its revenue of R5.3 billion included finance charges of R1.2 billion and insurance premiums of R688 million.
The problem is that the finance income has to be weighed against the losses caused by debtors that stop paying.
Lewis’ debtor costs jumped to R702 million from R540 million a year earlier – mostly in the form of bad debts and repossession losses. Lewis has about 680 000 account holders and the number of those that are “satisfactorily” up to date on payments is eroding every year.
The percentage that is nearly up to date was 74.5% in 2011, but is now 68.3%. Lewis is still making money, although the drop in its net profit from R911 million to R842 million is largely due to the jump in debt costs.
The black hole inside African Bank was the furniture retail group Ellerines, which it bought in 2008.
Ellerines owns the Ellerines brand as well as Beares, Furniture City, Wetherleys and Dial-a-Bed.
In its last financial year before African Bank’s recent implosion, Ellerines wrote off 31.5% of its loan book, about R2 billion, and still had a further 25% of loans classified as nonperforming because they were more than three months overdue.
Ellerines responded by extending less credit. In the nine months to the end of June, the effect of that was a 12% drop in sales to R2.8 billion.
The part of sales done on credit fell from R2 billion to R1.5 billion. The company was placed in business rescue shortly before African Bank’s curatorship this month.
But the general contraction in credit – and the increasing inability of people to repay the loans and accounts they have spreads far beyond Ellerines and African Bank.