The Edcon group announced on Wednesday (29 April), that its board has passed a resolution authorising it to file for business rescue in the course of the next few days.
Following the coronavirus outbreak in South Africa, and the president’s first announcement on Sunday, 15 March Edcon said it has lost R2 billion sales.
“The sales miss, and the decline in collections of the debtor’s book has meant that meant that Edcon is unable to pay its suppliers for both the March and April month-ends,” it said.
Paying April salaries will require assistance from the UIF Covid-19 TERS programme, the retail group said.
Edcon said it also anticipates that the sales will be depressed for some time during the “Covid-19 Risk Adjusted Strategy” phase, which may last several months.
“The R2.7 billion (circa R230 million of which was still due to be received to March 2021) cash provided to Edcon in the last restructuring has been substantially utilised funding the losses for the financial years ending March 2019, and March 2020, as planned,” the group said.
Edcon said it was on track with its business plan to the end of December 2019.
“The R2 billion of lost sales during the Covid-19 crisis period which included the necessary “social distancing” measures, lockdown and extended lockdown, has consumed the group’s remaining cash.”
The group said that the transformation journey has been difficult, starting in April 2018 when it began implementing the “shrink” restructuring which included the return to a customer centric approach by focusing on product, in-store customer experience, and growing the credit business and customer base.
Edcon, said that its turnaround has been against strong headwinds, including “load shedding” and an economic recession in quarter three and quarter four of 2019.
It said that whilst some progress had already been made on the product and in-store experience, the first fully revamped offering would only have been realised in winter 2020.
Edcon said that it will open its doors and trade in line with the “level 4” regulations as indicated by the government’s “risk adjusted strategy”.
Chief executive, Grant Pattison, said: “Edcon’s stores will open on the 1 May, but we will have do so under “Business Rescue”. This decision was made in the best interest of our company and all our stakeholders.
“In the short time that has been available to us, we have been unable to raise the funds needed to pay the creditors for the March and April month-ends.”
To provide the company with a longer period to raise the money, the board has taken a decision to file for business rescue, he said.
“We will be working closely with the appointed Business Rescue Practitioners, shareholders and government to find a way to plug the financial hole. It is my hope that some version of the business will emerge to continue to serve customers.
“The safety and well-being of our employees, customers and partner employees is our priority as we open up again.I am unable to provide any further information at this stage other than to say that the company will continue to keep you updated on developments as the situation unfolds,” Pattison said.