Zimbabwe Stock Exchange-listed entity, Edgars Limited, says it intends to borrow more capital to fund its capex requirements, enhance growth in the micro finance unit and working capital, which has been under pressure due to inflation.
This, management said, has been necessitated by runaway inflation which reached 98 percent in May.
Managing director Linda Masterson told shareholders in a trading update that the retail chain is in the “process of increasing interest rates charged on customer accounts due to inflation and the increased cost of borrowing.”
Interest rates in the country are expected to shoot up following the introduction of SI 142 of 2019 which was supported by an upward review in the RBZ bank rate to 50 percent from 15 percent. Financial institutions in the market have already started putting up rates upwards of 30 percent.
Edgars has a $9,8 million debt burden from $3,5 million last year, $5,9 million is payable within 12 months and the balance is payable over the next 3 years. Masterson said for the period under review, finance costs have increased by 80 percent compared to last year.
“We expect this to go up further in line with the expected increase in the bank lending rates,” she said.
Meanwhile, Masterson said the group had recorded growth in profit after tax to $ 8,7 million for the year to date from $1,3 million last year after EBITDA increased by 524 percent to $16,3 million.
Edgar’s turnover grew 90 percent compared to the prior period last year but however with a contrasting story as unit sales decreased by 16 percent with Jet earning six and 10 percent growth for April and May respectively, while Edgars posted a 6 percent unit growth in May.
June turnover trended above 200 percent over the prior year until recent policy changes (SI 142) which slowed growth down to around 100 percent.
Retail business posted operating profit of $14 million up from $3,8 million last year and a 365 percent growth in EBITDA, due to continued focus on cost control by the management team and cost inflation trailing behind top line inflation.
The company’s loan book grew to $5,5 million from $2,2 million last year and has posted a year to date trading profit of $0,5 million up from a loss of $29 000 last year.
Finance income for the group (LPC and debtors interest) increased to $3,4 million this year from $2,8 million last year. Our debtors’ book is at its cleanest since dollarisation, credit goes to our credit teams and our customers for their timely payments.
Number of accounts at the end May increased to 285 016 from 269 190 (2018), with 52 percent being active compared to 58 percent last year.
Factory performance recorded year to date trading profit of $1,5 million, 41 percent above last year as unit growth was a 12 percent increase from last year.
Exports sales grew by 6 percent and the team continues to focus on more export growth. Trade and other liabilities closed at $15 million, 112 percent growth from last year. Edgars limited recorded significant decrease in foreign liabilities to US$200 000 from US$2,8 million last year.
Included in liabilities is an accrual of Z$2,3 million franchise fees which is part of the legacy debts.