Leadership at every level delivers exceptional returns for all Edcon stakeholders
18 May 2005
Another year of macroeconomic stability and increasing consumer confidence has underpinned exceptional performance by Edcon for the year ended 2 April 2005, benefiting all of its stakeholders. Headline earnings per share rose 68% to 2 661 cents and total dividends per share increased by 75% to 1 345 cents.
CEO Steve Ross said his team of over 18 000 employees had generated returns well beyond the company's internal targets.
Edcon created a total of R4 billion of additional wealth, in cash value added terms, for the South African economy.
"Shareowners have benefited from our success by earning a 40,3% return on their equity. In recognition of their vital role in creating a winning internal culture 37% of the wealth has been directed to employees' remuneration. Furthermore, we paid R513 million in taxes and created an additional 2 651 jobs during the year, said Ross.
The Group announced sales growth of 29% to R13,6 billion. This compares favourably to the industry's 17% growth and translates into continued growth in Edcon's market share. Confirming the sustainable momentum of its business model, the benefits of economies of scale from acquisitions and a continued focus on operational efficiencies, Edcon's attributable earnings rose by 83%, exceeding R1 billion for the first time.
Other key features of the results include:
In the Department Stores Division - incorporating Edgars, CNA, Boardmans, Red Square, Prato and Temptations - productivity enhancements in merchandise, space and staff management, facilitated a 68% increase in trading profit. The core Edgars chain (including Red Square, Prato and Temptations) grew its turnover by 26% with zero inflation and only 6% additional average retail space. Its stock turn improved to5,5 times from 5,2 times in the previous year. CNA increased its sales by 16%, with price deflation of 3%. Boardmans' results are in line with Edcon's targets, with the chain reporting sales of R241 million.
The Discount Division - incorporating Jet, Jet Mart (previously SuperMart), Legit and Jet Shoes - reported a 78% increase in trading profit. Jet (including Legit and Jet Shoes), the main component of the division, reported a 34,0% rise in retail sales over the previous year with only 5% additional average retail space. Jet's customers enjoyed selling price deflation of 18%. Inventory turn advanced from 7,2 times to 8,6 times over the period under review. Jet Mart's full year sales were unchanged from the prior year, with 3% deflation in selling prices. The chain's performance improved over the course of the year, with 7% growth being reported for the second half of the financial year. Stock turn at Jet Mart improved to 4,9 times from 4,6 times in the prior year.
The strength of the Group's Credit and Financial Services Division was evidenced by a 55% advance in net profit from financing to R209 million from R135 million in the previous year. This was achieved despite the lower interest rate environment. Importantly, cash sales account for 37% of total sales, similar to last year's 38%, demonstrating that the Group's success has not been driven by a disproportionate increase in credit activity. Furthermore, 88% of the debtors' book remained current.
Cash inflow from operations increased to R1 399 million from R201 million last year. This strong financial position comfortably financed the store expansion capital expenditure, as well as the purchase consideration of R79 million relating to the Boardman's acquisition.
"More affluence, coupled with service delivery from government, in terms of housing, water and electricity, will continue to stimulate demand for Edcon's products," said Ross. "We believe this is a structural, not simply a cyclical, economic upturn and hence our stakeholders should expect another meaningful rise in earnings, above that of the sales growth for the year ahead."