CONSOLIDATED
RESULTS
Q3:FY17
BERNIE BROOKES
CHIEF EXECUTIVE OFFICER
21 February 2017
EDGARS
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
1
EDGARS
EDGARS
EXECUTIVE SUMMARY
• Transaction closed 1 February 2016, resulting in a deleveraging of the business reducing gross
operating company debt from R29.2 billion to R5.3 billion
CAPITAL
RESTRUCTURING
AND
NEW BOARD
─ Gross leverage circa 3.6x
─ Cash interest cover circa 3.9x
• New holding company, Edcon Acquisition Company Limited, which is to be renamed
• Appointment of new Board
• Sale of Legit effective 29 January 2017
Q3:FY17
• Retail sales declined by 2.8% to R8,441 million
• Retail cash sales increased by 0.7%
FINANCIAL
REVIEW
• Retail credit sales decreased by 8.7%
• Controllable costs continue to be well managed
• Adjusted EBITDA decreased by 16.3% to R963 million
• Excluding the one-off net gain realised as a result of the Group’s Exchange Offer concluded in
the third quarter 2016, the net loss for the period would have decreased by R732 million from
R1,092 million to R360 million
2
EXECUTIVE SUMMARY (CONTINUED)
• Team: Dedicated Strategy and Program Management resources allocated across Edcon Journey
Initiatives
• Edgars: Initiatives underway – New Look & Feel, Dedicated Service, Range construction
• Discount Division: Initiatives underway – In-store experience, Every Day Low Price & Cost Savings
STRATEGY &
TURNAROUND
INITIATIVES
• Specialty: Legit sale complete. Portfolio strategy review underway including diagnostic on CNA and
Cellular chains
• IT: Strategy complete with transformation (cost out initiatives, core systems replacement) mobilization
underway including market engagement
• Supply Chain: Strategy and roadmap complete and roll-out underway
• Customer/Loyalty: Strategy developed and initial value target identified
• Cost Savings Initiatives: Savings being realized across LeanHQ, GNFR, COGS and Property
Initiatives
• R1.5 billion cash injection representing balance of R2.3billion in additional shareholder funding net of
bridge funding already received
RECENT
DEVELOPMENTS
• Settlement of circa R400 million in fees representing transaction closing fees and arranging fees
associated with new facilities
• Decision taken to discontinue River Island as an international brand
3
NEW BOARD OF DIRECTORS
GARETH PENNY
NON-EXECUTIVE CHAIRMAN
• Rhodes Scholar at Oxford, graduating
with a Masters in Philosophy, Politics
and Economics.
• He spent twenty two years with De
Beers and Anglo American, the last five
of which he was Group CEO of De
Beers.
4
BERNIE BROOKES
CHIEF EXECUTIVE OFFICER
• CEO of Edcon since September 2015.
• He has an extensive and highly
successful career in retail spanning over
40 years.
• Gareth serves as a director and in some
instances chairman of South African and
international mining and resource
companies.
• Bernie has a strong philanthropic ethic
serving both the industry and charitable
endeavours through his involvement with
the World Retail Congress, the Salvation
Army of Australia and various institutions
supporting cancer and other medical
research.
• He is also a non executive Director of
Julius Bär Holding Limited Listed Swiss
bank, and serves on the Senior Advisory
Board of TowerBrook Capital Partners.
• In January 2017, Bernie was awarded
the Order of Australia for his service to
Australian business, and in recognition of
his numerous philanthropic contributions.
NEW BOARD OF DIRECTORS
RHIDWAAN GASANT
NON-EXECUTIVE DIRECTOR
• Rhidwaan obtained a B.Compt. Honours
degree in 1983, before passing the
South African Chartered Accounting
Board Examination in 1984.
• Rhidwaan joined Mobil Oil Southern
Africa in 1986 as a Project Accountant.
He was later appointed as the Chief
Executive Officer of Energy Africa
Limited.
• He is currently the Chief Executive
Officer of Rapid African Energy
Holdings. He also serves as a director
on boards of various companies.
DAPHNE MOTSEPE
NON-EXECUTIVE DIRECTOR
• Daphne obtained her Master of Business
Administration in 1996.
• She is a seasoned consumer finance
executive who worked for ABSA as Chief
Executive for the Unsecured Lending
Cluster.
• Prior to this, Daphne held a number of
senior finance and operational positions
in the FMCG, petroleum and SME
development sectors.
• She has also held executive roles at the
South African Post Office, and was the
Managing Executive for ABSA Small
Business.
• Daphne currently serves on the boards
of a number of companies.
5
NEW BOARD OF DIRECTORS
GRANT PATTISON
NON-EXECUTIVE DIRECTOR
• Grant graduated from the University of
Cape Town with a B.Sc. Hons in
Electrical Engineering in 1992.
• After four years with the Anglo American
Group and two years in strategy
consulting with The Monitor Group,
Grant joined Massmart as Executive
Assistant to the Executive Chairman.
• In 2005, he was appointed the Deputy
Chief Executive Officer, and Chief
Executive Officer in July 2007.
• Grant serves on the boards of various
companies.
KEITH WARBURTON
NON-EXECUTIVE DIRECTOR
• After qualifying as a Chartered
Accountant, Keith started his business
career at an audit firm, after which he
embarked on a broad career in business
and commerce.
• He has previously served as the Chief
Financial Officer, Chief Operating Officer,
and as an Executive Director of the
Clicks Group.
• He has been involved in the retail
industry since 1990, working for
companies like Truworths, Foschini,
Homechoice and the Metro group,
among others.
• He also serves on the boards of various
companies.
6
NEW BOARD OF DIRECTORS
MARTI P MURRAY
NON-EXECUTIVE DIRECTOR
• Marti has an MBA and is a Certified Valuation Analyst.
• Over a 35 year career, Marti has served in a variety of leadership roles at both investment management
and financial advisory firms.
• She was the Founder and President of Murray Analytics, Inc. a professional services firm.
• Prior to founding Murray Analytics, Marti was Senior Managing Director at Goldin Associates.
• She has authored several articles on restructuring and risk management, and has been a frequent
speaker at investor conferences worldwide on distressed debt and activist investing.
7
MANAGEMENT TEAM
BERNIE BROOKES
Chief Executive Officer
8
RICHARD VAUGHAN
Chief Financial Officer
ANDREW LEVERMORE
Chief Executive: Edgars
URIN FERNDALE
Chief Executive: Jet
ANDY JURY
Chief Executive:
Specialty Stores
ANDREW THORNDIKE
Chief Operations Officer
MELANIE NAIDU
Chief Human Resources &
Transformation Officer
ANTHONY COELHO
Chief Information Officer:
Group Information Technology
MARIANNE JONES
Chief Customer Officer,
Investor Relations &
Strategic Assignments
JASON JACKSON
Chief Strategy Officer
& Strategic Assignments
CHARLES VIKISI
Chief Legal Counsel
& Group Secretary
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
9
TRANSACTION OVERVIEW
10
SUBSTANTIAL
NEW MONEY
INJECTION
• Existing creditors committed to fund up to R2,870 million to
significantly shore up the Group’s liquidity position
• R575 million New Revolving Credit Facility(1)
• R2,295 million-equivalent USD-denominated New Holdco
1 PIK A-1 Notes(2)
MATERIAL
DELEVERAGING
OF THE
OPERATING
COMPANY
• Senior secured creditors to equitise 50% of their outstanding
claims and novate their reinstated claims to a holding company
• c. R3,200 million of second and third-ranking super senior
claims to be novated to a holding company
• Pro forma for the transaction, gross leverage at the operating
company to decline to 3.6x from 18.9x
REDUCTION OF
CASH INTEREST
BURDEN
• New commitments and novated claims at the holding
companies to be PIK-only instruments
• Pro forma for the transaction, cash interest coverage at the
operating company to increase to 3.9x from 0.6x
EXTENSION OF
MATURITIES
• Most indebtedness at the operating company to mature
December 2019(3)
• New commitments and novated claims at the holding
companies to mature December 2022
(1) Raised at Edcon Limited. (2) Raised at [New Holdco 1] (3) The Super Senior Liquidity Facility will mature in December 2017, with a one year extension
EDGARS BOARDMANS
| WINTER 16
PRO-FORMA CAPITAL STRUCTURE
INTEREST EXPENSE
P.A
CASH INTEREST
DRAWN
AMOUNT
(ZARM)
LEVERAGE
CURRENCY
MATURITY BASE RATES
MARGIN
PIK MARGIN
CASH
PIK
Edcon Limited (Operating company)
Super Senior Credit Facility (Converted RCF Facility)1
-
ZAR
31-Dec-19
JIBAR
5.0%
3.0%
Super Senior Credit Facility (New RCF Facility) 2
-
ZAR
31-Dec-19
JIBAR
5.0%
3.0%
JIBAR
5.0%
3.0%
274
63
Super Senior Credit Facility (Term)
2,115
1.4x
ZAR
31-Dec-19
Super Senior Liquidity Facility A1
627
0.4x
EUR
31-Dec-17 EURIBOR
4.0%
8.0%
25
50
Super Senior Liquidity Facility A2
1,987
1.3x
EUR
31-Dec-17 EURIBOR
4.0%
8.0%
79
159
First ranking Opco debt
4,729
3.2x
378
272
315
0.2x
ZAR
ZAR
378
272
Capital leases
Other debt
277
0.2x
Total Opco debt
5,321
3.6x
LTM pro forma adjusted EBITDA (Dec-16)
1,475
Gross leverage at Edcon Limited will decrease to 3.6x from 18.9x using LTM pro-forma adjusted EBITDA,
and yearly cash interest expense will approximate R378 million.
11
FX rates as at 24 December 2016: R14:05:$ and R14.67:€
1 Converted RCF Facility is R1,250m
2 New RCF Facility is R575m
SALE OF LEGIT
Purchaser details
Deal overview
•
•
•
•
Legit chain identified as
potential asset for sale in
strategic review
Strong interest from
range of potential trade
and financial purchasers
•
Disposal improves Edcon’s
liquidity position and
•
intensifies focus on core
department stores and
value chain offerings
Retailability - fashion retail
holding company: ~200
stores across SA, Namibia,
Botswana, Zambia
Partnered by material
shareholder Metier Private
Equity: ~R6 billion funds
under management
Flagship chains Beaver
Canoe, Style
Transaction mechanics
•
Sale of business for
R637 million cash
•
Cash-free, debt-free
sale
•
Sale of assets, going
concern basis
Purchase consideration of R637m, sale effective 29 January 2017
12
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
13
BOARDMANS
11
10
9
8
7
6
5
14
12-2016
12-2016
11-2016
10-2016
09-2016
08-2016
USDZAR
10-2016
08-2016
06-2016
04-2016
07-2016
06-2016
Unemployment rate (%)
02-2016
12-2015
10-2015
05-2016
04-2016
03-2016
02-2016
GDP GROWTH AND UNEMPLOYMENT RATE
08-2015
PRIVATE SECTOR CREDIT EXTENSION (Y-O-Y %)
06-2015
04-2015
22
02-2015
1
01-2016
2
12-2014
09-2016
07-2016
05-2016
03-2016
3
12-2016
10-2016
08-2016
06-2016
04-2016
01-2016
11-2015
09-2015
07-2015
05-2015
03-2015
01-2015
11-2014
09-2014
07-2014
05-2014
Real GDP (y-o-y %)
02-2016
12-2015
10-2015
08-2015
06-2015
04-2015
02-2015
12-2014
10-2014
08-2014
06-2014
(1)
03-2014
-
04-2014
MACRO BACKDROP
EXCHANGE RATES
EURZAR
28
27
26
25
24
23
REPO AND PRIME RATE
11.5
8.5
10
5.5
7
4
Source: SARB & StatsSA
-5%
15
Retail trade sales
74
09-2016
07-2016
05-2016
03-2016
01-2016
11-2015
09-2015
07-2015
0%
05-2015
5%
03-2015
10%
01-2015
Q3:2017
Q2:2017
Q1:2017
Q4:2016
Q3:2016
Q2:2016
Q1:2016
Q4:2015
Q3:2015
Q2:2015
Q4:2016
Q3:2016
Q2:2016
Q1:2016
Q4:2015
Q3:2015
Q2:2015
Q1:2015
Q4:2014
INFLATION
11-2014
RETAIL SALES
0
-2
-4
-6
-8
-10
-12
-14
-16
09-2014
Textiles,footwear and leather goods
11-2016
10-2016
09-2016
08-2016
07-2016
06-2016
05-2016
04-2016
03-2016
02-2016
01-2016
12-2015
11-2015
10-2015
09-2015
08-2015
Q1:2015
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
07-2015
06-2015
MACRO BACKDROP
FNB/BER CONSUMER CONFIDENCE INDEX
HOUSEHOLD DEBT TO GROSS DISPOSABLE INCOME RATIO
80
79
78
77
76
75
Source: SARB & StatsSA
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
16
EDGARS
KEY FEATURES
17
PROFITS
Deliberate competitive entry
price points. Markdown
reduction in the Edgars
division. Discount division
markdowns in line with
comparative period whilst
Specialty increased
markdowns in line with
strategy to exit select
international brands
STRATEGY
SALES
Q3:FY17
Trading environment
challenging, increased
competition, macro-economic
factors continue to weigh on
customers & credit granting
remains restricted
Transaction with creditors
finalised, balance sheet post
1 February 2017 no longer
laden with debt, new
ownership and appointment
of the new Board
Q3:FY16
• Retail sales
↓ 2.8%
↓ 1.7%
• Cash sales
↑ 0.7%
↑ 4.0%
• Credit sales
↓ 8.7%
↓ 9.9%
• LFL Sales
↓ 2.9%
↓ 3.2%
Q3:FY17
Q3:FY16
• Gross profit
↓ 3.1%
↓ 3.0%
• Adjusted EBITDA
↓ 16.3%
↓ 7.5%
• Transaction with creditors finalised with
control transferred on 1 February 2017
• Debt in Edcon Limited significantly
reduced
• Legit sale previously announced effective
29 January 2017
EDGARS DIVISION – Q3:FY17
• Retail sales decreased 2.5%
Q3:FY17
- Cash sales increased 4.8% and credit sales
decreased 10.2%
- November and December retail sales flat,
compared to negative 8.3% in October 2016
compared to Q3:FY16
- Trading across all merchandise categories
improved compared to the first half of fiscal
2017
• Gross margin of 38.6% down from
42.4%
Retail sales growth (%)
(2.5)
(2.0)
LFL sales growth (%)
(3.1)
(3.2)
GP margin (%)
38.6
42.4
Total number of stores
206
206
206 stores* · LSM 6-10
*Includes 1 Edgars sales store and 1
Edgars Emporium store
- Planned decease through competitive entry
price points
Capex spend (R’m)
17
56
- Discounts offered to customers in form of
gift cards
Av space (‘000sqm)
725
727
- Reduction in value of markdowns
• 2 new Edgars stores opened and 2
stores closed
• Aged inventory at acceptable levels
18
Q3:FY16
DISCOUNT DIVISION – Q3:FY17
• Sales decreased 4.9%
Q3:FY17
- Cash sales decreased 3.0% and credit
sales decreased by 9.2%
- Customers sensitive to macro-economic
climate
Retail sales growth (%)
(4.9)
(2.1)
- Ladieswear showed positive growth whilst
remaining categories still negative
LFL sales growth (%)
(3.8)
(3.3)
GP margin (%)
32.2
34.1
- Better entry price points
Total number of stores
522
526
- Enhanced price perception and brand
franchise
Capex spend (R’m)
40
10
- Markdowns still high in light of better entry
price points
Av space (‘000sqm)
579
589
• Gross margin percentage
decreased by 1.9%
• 5 new Jet stores opened and 1
store closed
• Inventory ageing profile at
acceptable levels
19
Q3:FY16
394 stores · LSM 4-7
128 stores · LSM 4-7
SPECIALTY DIVISION – Q3:FY17
186 stores · LSM 4-7
• Retail sales decreased 0.4%
Q3:FY17
- Cash sales increased 1.1%, credit sales
decreased 4.7%
- Positive growth in categories such as
ladieswear, menswear, childrenswear,
cosmetics and homeware
- Footwear, cellular and CNA
underperformed
• Margin impacted by:
- Aggressive markdown and clearance
activity particularly in Boardmans, CNA and
monobrands
• 10 new stores opened
-
5 Edgars Active, 1 Red Square, 2 CNA (1
Samsung) and 2 mono-branded stores
Q3:FY16
38 stores · LSM 7-10
Retail sales growth (%)
(0.4)
(0.1)
LFL sales growth (%)
(1.5)
(3.6)
GP margin (%)
29.2
33.2
Total number of stores
768
766
197* stores · LSM 7-10
*Includes 11 Samsung stores
50 stores · LSM 5-10
Capex spend (R’m)
7
30
Av space (‘000sqm)
257
258
MONO-BRANDED
STORES
87 stores · LSM 5-10
• 15 stores closed
-
•
20
1 Edgars Active, 2 Edgars Shoe Gallery, 2
Legit, 5 CNA and 5 Mono-branded stores
Exits
-
Shoe Gallery format exited
-
Geox, Tom Tailor, Express, CR7, OneGreen Elephant, DIGEL, Lucky Brand,
Express, River Island etc.
210 stores · LSM 5-8
KEY FINANCIALS
EDGARS
21
STATEMENT OF COMPREHENSIVE INCOME
(R millions)
Q3:FY17
Q3:FY16
Retail sales
8 441
8 685
(2.8)
Gross profit
2 901
3 259
(11.0)
Gross profit margin
34.4
37.5
(310)pts
Other income
317
340
(6.8)
Store costs
Other operating costs
22
(1)
% change
(1 813)
(1 795)
1.0
(1 349)
(1 145)
17.8
Share of profits of associates and insurance
business
197
122
61.5
Trading profit
253
781
(67.6)
Adjusted EBITDA
963
1 151
(16.3)
(1) Includes non-recurring costs of R410 million in Q3:FY17 (Q2:FY16 – R116 million). See
cost analysis – Q3:FY17.
EDGARS
JET
PRO FORMA ADJUSTED EBITDA
Q3:FY17
(R millions)
Trading profit(1)
Depreciation & amortisation
Net asset write off
(2)
EBITDA losses/(gains) from Edgars Shoe Gallery(3)
(4)
EBITDA losses from brands exited
Non-recurring costs
(5)
Adjusted EBITDA
Q3:FY16
% change
253
781
234
248
10
3
1
(1)
55
4
410
116
963
1 151
EBITDA losses from brands planned to be exited(6)
Legit EBITDA(7)
9
4
(72)
(66)
Pro forma adjusted EBITDA
900
1 089
(67.6)
(16.3)
(17.4)
RED SQUARE
(1)
(2)
(3)
(4)
(5)
23
Q3:FY16 has been re-presented as a result of ceasing to classify the trade receivable card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale.
Relates to assets written off in connection with store conversions, net of related proceeds.
The Group is exiting the Edgars Shoe Gallery retail format. This adjustment removes the EBITDA profit or loss generated from the Shoe Gallery formats.
Adjustment to remove the EBITDA gain or loss from certain brands being Express, Geox, Lucky Brand, One Green Elephant, Tom Tailor and a number of other international brands which the Group is strategically exiting.
Relates to transitional project related expenditure in Q3:FY17 of R55 million, strategic initiative costs in Q3:FY17 of R370 million of which, R319 million relates to the transaction with creditors (Q3:FY16: R78 million was incurred for
strategic initiatives), a R42 million credit in Q3:FY17 which reverses a prior provision raised in fiscal 2016 relating to a penalty which has not materialised, R7 million in Q3:FY17 relating to brand penalty cost incurred and a non-recurring
cost of R20 million incurred in respect of our agreement with Absa. In Q3:FY16, the non-recurring costs additionally included, R7 million head office restructure costs, a R33 million lease cost adjustment and an onerous lease credit of R2
million.
(6) The Group has strategically identified an additional international brand it has planned to exit. This adjustment reflects the EBITDA profit or loss associated with this brand.
(7) EBITDA relating to the Legit business which during the second quarter of 2017, the Group announced it has agreed to sell.
COST ANALYSIS – Q3:FY17
OTHER OPERATING COSTS
STORE COSTS
• Store costs well managed increasing by 1.0%.
• Other operating costs decreased 4.5%
- Decease in fees to Bain capital affiliate
- Reduction in manpower costs following head office restructure
• Non-recurring costs increased primarily due to the
various strategic initiatives of which R319 million
relates to transaction with creditors.
(R millions)
Other operating costs
Store card administration
Non-recurring costs
Total other operating
costs
24
Q3:FY17 Q3:FY16
• Rental costs were up 6.4%
• Manpower costs were up 8.4%
• Stock loss, printing and stationery, security and
operating lease adjustment reductions during
the quarter
• Rental and manpower constitute 62.6% of total
costs for Q3:FY17 (58.8% in Q3:FY16).
%
change
877
918
(4.5)
62
111
(44.1)
410
116
1 349
1 145
17.8
BOARDMANS
CASH FLOW – Q3:FY17
R’m
(263)
(35)
668
(341)
1 260
529
Working Capital
1 611
(316)
(35)
1 297
Opening cash
balance
25
Inventories
Operating
activities(a)
Working
capital
Trade receivables,
other receivables &
prepayments
Capex
Tax
3 115
Trade and
other
payables
Net financing
costs
(a)
Financing
activities
Closing cash
balance
Includes R302 million outflow relating to transaction with creditors
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
26
EDGARS
ROADMAP WITH STRATEGIC INITIATIVES
2016
OCT
2017
NOV
DEC
JAN
FEB
MAR
APR
MAY
INITIATIVE
STATUS UPDATE
JUN
JUL
AUG
SEP
1
LEAN HQ & OPERATING MODEL
2
GNFR
Savings being realized
3
COGS REDUCTION
Savings being realized
4
PROPERTY
Savings being realized
5
EDGARS CHAIN: TURNAROUND/CUSTOMER CENTRICITY
6
JET CHAIN: LEAN DISCOUNT RE-POSITIONING
7
SPECIALTY CHAINS: STRATEGY REVIEW AND REFRESH
8
CREDIT SALES
Own book sales picking up ( over R400m)
9
LOYALTY PROGRAM
Strategy developed and initial value target
identified
10
CUSTOMER CENTRICITY
11
IT STRATEGY AND RENEWAL PLAN
Strategy and roadmap complete.
RFP’s launched
12
SUPPLY CHAIN & LOGISTICS ROADMAP
Strategy and roadmap complete.
Roll-out underway
13
TRADING TERMS
Review underway
14
INVENTORY
Review underway
Savings realized and locked in
COST
GROWTH
ENABLERS
27
Initiatives underway – new look & feel,
dedicated service, range construction
Initiatives underway – In-store experience,
every day low price & cost savings
Legit sale complete
Portfolio strategy review underway
NPS roll-out underway
JET
EDGARS: STRATEGIC AND TACTICAL INITIATIVES
• Re-invest in Edgars brand and private Labels
EDGARS BRAND
BUILDING
• Reduce focus on promotions: Everyday low price items and simplified promotions
• Further roll out of Kelso stand-alone store (Bedford Centre)
• Launched Edgars transactional website
• Simplified administration work in stores and focus on customer facing activities
CUSTOMER
EXPERIENCE
• Continued implementation of NPS (100 stores YTD), showing positive uplifts
• Roll out dedicated service (30 stores) and new look and feel (23 stores)
• Transitioned to 4 seasons for more flexibility
• Introduced range pyramid to manage risk
CATEGORY
MANAGEMENT
• Finalise brand positioning across categories
• Create strong KVIs at attractive prices
• Reduce number of suppliers to improve scale benefits and simplify assortments
• Adopting systematic approach to markdowns to clear stock
CREDIT & FINANCIAL
SERVICES
CHANGE MANAGEMENT
28
• Drive sales of FS products with new account openings
• Communicate regularly on transformation programme and achievements to Edgars employees
• Employee engagement launched and recognition programs relaunched
DISCOUNT: STRATEGIC AND TACTICAL INITIATIVES
• In-store experience: New store lay-out, stronger price call-outs and simplified signage rolling out to
stores - improvements in sales and GP growth vs. Chain being realised
• Optimal allocation: Matching supply and demand through depot hold-backs, resulting in positive
sales vs. other stores (only SA)
SALES GROWTH
• Lay-by: Continue to drive lay-by offer
• Marketing: Framework for marketing strategy developed with stronger focus on price call-outs
• General merchandise: 40 top food SKU’s selling in JetMart stores and offering customers bulk deals
at great prices
• Omni-channel: Launched Jet online and Jet Click-and-Collect in November 2016
GP IMPROVEMENT
CREDIT & FINANCIAL
SERVICES
• Product ranges: Selective price increases and continued range rationalisation in Home Hards and
Female
• Pricing: Re-establishing price perception in the market through increased contribution and focus on
everyday low price items and key entry price points
• Credit: Revised agreement with ABSA resulting in more control over new business credit sales
• FS: Continue to drive additional income on insurance products through the operations channel
• Advertising: Continued advertising savings on costs through POS reduction, media optimisation,
less campaigns and integrated campaigns with Credit & Financial Services
COST SAVINGS
• Operations: Continued focus on cost savings on controllable costs
• Jet Club: Celebration of the Stars campaign successfully re-launched
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SPECIALTY: STRATEGIC AND TACTICAL INITIATIVES
Cellular
International
Brands
30
•
•
•
Full-scale review of customer value proposition initiated in January 2017: simplify and clarify what CNA stands for
Refocus of business around core categories (stationery, reading/learning, gifting supplies)
Rationalise store footprint
•
•
•
•
Onboarding new brands
Key focus on customer satisfaction and in-store experience, with higher-intensity product and service training
Continued push for online sales through click and collect online functionality
Focus on categories that differentiate from, and compliment, Edgars cosmetics offering
•
•
•
Overhaul online sales supporting processes and logistics to improve lead times and customer satisfaction
Review and refocus customer target market to deliver tailored product offering and refreshed brand message
Rationalise store footprint
•
•
•
•
Drive differentiated private label product to improve profitability and support global brands
Marketing and promotional strategies to clarify and enhance athlesuire wear brand identity
Continue to improve store performance and customer experience
Re introduction of Converse
•
•
Develop complimentary strategic relationships with Mobile Network Providers to ensure tailored product offerings and enhanced instore experience
Review product range to improve offering in cellular accessories
•
•
•
Review portfolio to exit underperforming brands and leverage high performing brands
Improve product flow and seasonality to drive alignment with South African cycles
Review pricing model to ensure customer value
•
Sale of business completed
CREDIT & FINANCIAL SERVICES
• Successfully implemented a revised new account acquisition strategy between Edcon and
ABSA: Edcon acquires ~80% of new accounts on balance sheet since November 2016 resulting in
more control over new business credit sales
• Successfully implemented revised new account credit limit strategy: Increase credit limits
offered on new account to align with competitors
CREDIT PORTFOLIO
• Implemented revised new account application process, in line with new affordability regulations
without significantly impacting on volume and turn around times
• Introduced focused credit marketing campaigns, resulting in increased shopping frequency
• Enhanced collections efficiencies, resulting in improved portfolio performance
• Successfully tested various regulatory aligned credit limit increase strategies
FINANCIAL SERVICES
PRODUCTS
COMMERCIAL SALES
GROWTH
31
• Continued strong performance of Hollard insurance partnership
• Successfully implemented revised credit limit strategy thereby supporting future growth
• Successfully introduced new commercial sales unit with positive sales contribution over festive
period
• Strong growth in gift card sales on the back of new corporate partnerships
AGENDA
EXECUTIVE SUMMARY
CAPITAL STRUCTURE & TRANSACTION
MACRO ECONOMIC ENVIRONMENT
FINANCIAL REVIEW
STRATEGY & TURNAROUND INITIATIVES
WAY FORWARD
32
EDGARS
WAY FORWARD
• Transaction with creditors completed, focus now shifted to
business operations
• Continue to drive the 3 pillars of the strategy: customer centricity,
empowerment and simplicity
• Strategy starting to impact with sales improvement each quarter
• Continued focus on credit sales initiatives
• Continued focus on strategic and tactical initiatives of each division
• Finalise the rationalisation of international brands in the Specialty
division
• Continue to enhance private label offering
• Store optimisation and service delivery model rolled out to further
stores including NPS
• Range rationalisations continued
• Supply chain and logistics initiatives to be implemented
• Journey to improved IT infrastructure
• Enhance loyalty offering to customers
33
JET
THANK YOU
Q3:FY17
CONSOLIDATED
RESULTS
For more information
Our website: www.edcon.co.za
Edcon contacts for more information:
Chief Customer Officer, Investor
Relations & Strategic Assignments
Marianne Jones
[email protected]
EDGARS