Ed­con posts first profit since 2012

CityPress - - Business - JUSTIN BROWN busi­ness@city­press.co.za

Strug­gling re­tailer Ed­con this week de­liv­ered its first net profit since 2012 as a re­sult of the re­struc­tur­ing of the com­pany’s debt last year. How­ever, in con­trast, a key mea­sure of profit fell.

The group’s ad­justed earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion, which an­a­lysts watch closely as a profit mea­sure, fell by 9.8% in the De­cem­ber quar­ter to R1.127 bil­lion from R1.25 bil­lion in the same quar­ter in 2014.

Daniel Isaacs, an an­a­lyst with 36One As­set Man­age­ment, said the re­sults re­flected that the com­pany was un­der strain and had fun­da­men­tal prob­lems.

For the De­cem­ber quar­ter, Ed­con, which owns Edgars, Jet and CNA, re­ported a profit of R3.038 bil­lion com­pared with a loss of R180 mil­lion for the same quar­ter in 2014. For the first three quar­ters of the com­pany’s 2016 fi­nan­cial year, the group re­ported a profit of R204 mil­lion com­pared with a loss of R1.357 bil­lion dur­ing the same pe­riod in the 2015 fi­nan­cial year.

Ed­con CEO Bernie Brookes said that the key to the re­turn to profit for Ed­con was a re­fi­nanc­ing, or an ex­change of­fer, be­tween the com­pany and its lenders that re­sulted in the re­tailer re­duc­ing its debt by R4.5 bil­lion. The re­duc­tion in Ed­con’s debt meant the com­pany was no longer un­der pres­sure to sell as­sets to cut debt.

Brookes be­came the boss of Ed­con at the end of Septem­ber af­ter he left Aus­tralia’s largest retail depart­ment store, Myer.

How­ever, de­spite the debt re­struc­tur­ing at Ed­con, by the end of the De­cem­ber quar­ter, the group’s to­tal debt of al­most R37 bil­lion was greater than its as­sets by R5.4 bil­lion, which means that if all of Ed­con’s as­sets were sold off, its share­hold­ers would be left with a loss.

Brookes said that Ed­con was look­ing to save R500 mil­lion, which could be made up of R250 mil­lion from job cuts and R250 mil­lion in other costs, in­clud­ing travel ex­penses and a re­duc­tion in ad­ver­tis­ing agency costs.

He said that Ed­con con­tin­ued to lose mar­ket share to its retail com­peti­tors in the De­cem­ber quar­ter. “Ev­ery re­tailer in town is eat­ing our lunch,” Brookes said. Ed­con is los­ing mar­ket share to Wool­worths, Tru­worths and Mr Price, as well as in­ter­na­tional re­tail­ers.

Brookes said that one prob­lem at Ed­con was that the group had too many in­ter­na­tional brands, and some of its cus­tomers couldn’t af­ford th­ese brands and didn’t recog­nise them.

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