Edcon focuses on business, not listing, as investor consortium calls the shots

● Edcon, having announced Grant Pattison as the man who would fix and list the retailer, has backtracked on its JSE plans after management’s sluggish strategy failed to win back consumers.

But the shareholders who injected capital into Edcon to ensure its survival may have a different agenda.

Edcon CEO Pattison, speaking on the sidelines of the group’s strategy presentation on Thursday, told Business Times: “What I can tell you with absolute certainty is that in the short term there is no JSE listing.

“It can be seen as somewhat disrespectful of our current owners for me to announce that we are listing.

“I think it’s a bad idea that management teams and CEOs decide on who the shareholders are.”

Bernie Brookes stepped down as Edcon CEO this year after spending his two-year contract with the ailing retailer focusing on recapitalising the business through a buyout by a consortium of investors including US-based Franklin Templeton, Absa and FirstRand’s First National Bank.

Pattison said that when Brookes was hired by Bain Capital in 2015, “he was brought here to list the company”.

“When he arrived, he found the company unlistable.”

While Pattison conceded that a listing was also talked about when he was brought in, he said the situation had since “completely changed formally in the near term”.

Edcon, the owner of Edgars, Jet and CNA, has endured a crippling debt crisis, loss of market share and the closure of some of its stores.

The department-store retailer has failed at winning over consumers as reactive strategies are inflicted on its customers.

An analyst who did not want to be named said “the decision ultimately lies with the shareholders at this moment in time.

“But from a management perspective I believe they will need to execute on the new strategy, improve key metrics, return to profitability and further improve its capital structure.

“Edcon has communicated to the market quite regularly, firstly it was the debt restructure coupled with regular interaction with the investment community through calls and quarterly results and now it was a strategy update.

“I would think these are signs of a potential coming to market in the next two to five years, but unlikely in the short term,” the analyst said.

Edcon, which has publicly listed debt on the Irish Stock Exchange, had reported a decrease in net third party, resulting in net debt of R4.2-billion as of September 23 2017 after it was bought out by the consortium, which eased the burden on the retailer.

Franklin Templeton and Absa declined to comment on the company’s plans to list.

Alec Abraham, a senior equity analyst at Sasfin Securities, said he agreed with Pattison’s strategy not to list.

“Just because you’ve got a new turnaround plan, it doesn’t mean anything until it’s fully implemented and you see tangible and sustainable results.

On the surface, Edcon’s new strategy created a better impression “than what I’m accustomed to seeing over the past couple of years ”, he said.

“They do appear to be moving in the right direction. It does seem like they are making the right moves in the Edgars business. But it’s clear that it’s still a work in progress,” Abraham said.

However, what is clear is the shareholders are running the show at Edcon.

“We are not setting the company up for a listing, we are setting it up to run it for shareholders, but specifically shareholders who will decide who owns it,” Pattison said.