Edcon shifts focus to efficiency gains

Photographer: Robbie Tshabalala

Image credit: Business Day

The debt rearrangement, in which bondholders took a haircut, cut Edcon's outstanding debt to R20.7bn in the quarter ended June, from R22.7bn a year earlier. In addition to reducing the capital owed, Edcon had also achieved an interest saving of R1bn this year, CEO Jurgen Schreiber said.

"The debt is now at levels that I can say are sustainable for now. Our focus now is to improve operations," he said.

Total losses for the three months to June jumped 66% compared with the June quarter last year, to R828m. The biggest part of the loss resulted from foreign exchange losses of R583m, in addition to a derivative loss of R53m, according to the financial statement. The bulk of these losses, however, will not materialise as they relate to the recently restructured 2019 senior fixed-rate notes.

Edcon's credit sales have declined sharply to 42% of total sales in the quarter. A few years ago it sold most of its merchandise on credit. Asked what level of credit sales was sustainable, Mr Schreiber said: "There is no magic number but 42% is a figure that makes you less vulnerable (to economic slowdowns when clients don't pay)."

Asked whether Edcon would now seek to restructure the remaining debt, Mr Schreiber said: "We've only just converted this one, now we have to focus on operations and the possible sale of noncore assets as a way of reducing debt in the short term."

He acknowledged that debt levels were still high.

Edcon was restructuring its loss-making CNA Stores, which would include redesigning the facilities, and reducing the size and number of branches, Mr Schreiber said. Stores targeted for closure will be those making a loss. In the big malls a redesign of the stores has begun.

Private equity company Bain bought and delisted Edcon in 2007 in a R27bn transaction.

The company asked bond investors to exchange its €400m notes attracting 13.8% interest a year and due in 2019 for longerdated bonds with a lower coupon. Almost all investors accepted the restructuring.