UNAUDITED CONSOLIDATED RESULTS Q1:FY18 18 AUGUST 2017 EDGARS 0 - - PowerPoint PPT Presentation

EDGARS

UNAUDITED CONSOLIDATED RESULTS

Q1:FY18

18 AUGUST 2017

1

AGENDA

1. Q1:FY18 OVERVIEW 2. MACRO ECONOMIC ENVIRONMENT 3. FINANCIAL REVIEW 4. STRATEGY AND TURNAROUND INITIATIVES 5. WAY FORWARD

2

Q1:FY18 OVERVIEW

• Edcon Group trading profit up 165.4% to R89 million from a loss of R136 million
• Pro-forma adjusted EBITDA increased by 12.7% to R354 million
• Like-for-like retail sales decreased by 1.4% while Edgars like-for-like sales rose

1.6% over the quarter

• Improved results delivered despite retail credit sales decreasing by 7.4% and

cash sales down 8.0%

• Gross profit margin up 60 bps from 38.3% to 38.9%
• Overall sales performance impacted by the removal of certain international

brands, sale of Legit and closure of stores and trading environment

• Compared to this time last year, Edcon traded with 219 less stores and a

4% reduction in square meterage

• Once off costs removed from the system following the exit of 27 international

brands, non-productive space and the clearance of aged stock

EDGARS

3

Q1:FY18 OVERVIEW

• Stock disciplines resulting in inputs and clearance shifts into a

normal retail cycle

• Strategy implementation well underway in Jet and Edgars, with

improved sales performance

• Merchandise strategy of range rationalisation, focused supplier

management, fresher stock and more competitive pricing

• Business model ‘test and learn’ process completed in CNA and Active
• The R1.5 billion investment in IT is underway to halve the IT costs by

year three, and transform the Edcon IT infrastructure

• Staff retention improved with the stabilisation of the balance sheet

and strategic transformation process

• Transition of company leadership progressing seamlessly
• Results validates turnaround strategy

EDGARS JET

4

EDCON HAS UNDERGONE A RESTRUCTURE TO STREAMLINE OPERATIONS ON CORE BUSINESS

SPECIALTY

Cellular

International Brands

We have made the strategic decision to re-align corporate divisions in order to streamline

• perations and optimise scale efficiencies found in the larger Edcon Brands.

PREVIOUS STRUCTURE: NEW STRUCTURE

SPECIALTY

International Brands

Cellular*

Boardmans & Red Square have moved into the Edgars division Edgars Active has moved into the Jet division

*Cellular is allocated to chains for reporting purposes

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• 2. MACRO ECONOMIC ENVIRONMENT

RICHARD VAUGHAN - CFO

6 22 23 24 25 26 27 28

(1)

• 1

2 3

06-2016 07-2016 08-2016 09-2016 10-2016 11-2016 12-2016 01-2017 02-2017 03-2017 04-2017 05-2017 06-2017

Real GDP (y-o-y %) Unemployment rate (%)

GDP GROWTH AND UNEMPLOYMENT RATE

4 5 6 7 8 9 06-2016 07-2016 08-2016 09-2016 10-2016 11-2016 12-2016 01-2017 02-2017 03-2017 04-2017 05-2017 06-2017

4 5.5 7 8.5 10 11.5

06-2015 08-2015 10-2015 12-2015 02-2016 04-2016 06-2016 08-2016 10-2016 12-2016 02-2017 04-2017 06-2017

EXCHANGE RATES PRIVATE SECTOR CREDIT EXTENSION (Y-O-Y %) REPO AND PRIME RATE EXCHANGE RATES

06-2016 07-2016 08-2016 09-2016 10-2016 11-2016 12-2016 01-2017 02-2017 03-2017 04-2017 05-2017 06-2017

USDZAR EURZAR

MACRO BACKDROP

Source: SARB & StatsSA

7

4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% Q3:2015 Q4:2015 Q1:2016 Q2:2016 Q3:2016 Q4:2016 Q1:2017 Q2:2017 Q3:2017 Q4:2017 Q1:2018

INFLATION

• 20
• 15
• 10
• 5

Q1:2016 Q2:2016 Q3:2016 Q4:2016 Q1:2017 Q2:2017 Q3:2017 Q4:2017 Q1:2018

• 10%
• 5%

0% 5% 10% 15% 03-2016 04-2016 05-2016 06-2016 07-2016 08-2016 09-2016 10-2016 11-2016 12-2016 01-2017 02-2017 03-2017 04-2017 05-2017 Retail trading sales Textiles, footwear and leather goods 71 72 73 74 75 76 77 78 79 80 12-2014 02-2015 04-2015 06-2015 08-2015 10-2015 12-2015 02-2016 04-2016 06-2016 08-2016 10-2016 12-2016

FNB/BER CONSUMER CONFIDENCE INDEX RETAIL SALES

HOUSEHOLD DEBT TO GROSS DISPOSABLE INCOME RATIO

Source: SARB & StatsSA

MACRO BACKDROP

8

• 3. FINANCIAL REVIEW

BERNIE BROOKES – CEO RICHARD VAUGHAN - CFO

9

• Retail Sales, excluding Legit, Edgars Shoe

Gallery and non-profitable brands being exited, decreased 3.8%. This was affected by weak consumer demand, fierce price competition from competitors, ongoing promotions and a warm winter marginally offset by an Easter shift into April 2017

• LFL strengthening
• GP improved by 60bps through renegotiated

rebates and settlement discounts

• Promotional and clearance activity decreased

however, input costs increased and first margins were additionally impacted by better entry points introduced in fiscal 2017

• Pro-forma adjusted EBITDA up 12.7%, our

best quarter since Q1:FY16 Results demonstrate the initial indicators of our turnaround strategy which has:

• Improved customer service scores
• Improved retail sales performance
• 12.7% increase in pro-forma adjusted EBITDA through cost out initiatives and

markdown control

• Staff retention has improved

SALES PROFITS STRATEGY

KEY FEATURES – GROUP Q1:FY18

Q1:FY18 Q1:FY17 Retail sales ↓ 7.8% ↓ 8.1% Cash sales ↓ 8.0% ↓ 2.7% Credit sales ↓ 7.4% ↓ 15.6% LFL sales ↓ 1.4 % ↓ 9.6% Q1:FY18 Q1:FY17 Gross profit 38.9% 38.3% Pro-forma adjusted EBITDA R354m R314m EDGARS

10

• Retail sales decreased 2.9%
• Improved customer experience, focused

category management, driving credit and financial services products and change management is starting to show benefits to our customers with a positive 1.6%

• LFL sales growth in Q1:FY18
• Ladieswear, childrenswear, footwear and

cosmetics had positive retail sales growth

• Cash sales decreased 0.5% and credit

sales decreased 5.5%

• Easter shift to April 2017
• Gross margin of 42.4% up from 41.8%
• Increased supplier discounts
• Reduced markdown activity
• 3 new Edgars stores and 3 new Edgars

Cosmetics Emporium stores opened

• 5 Edgars stores, 9 Edgars Cosmetics

Emporium stores closed Q1:FY18 Q1:FY17 Retail sales growth (%) (2.9) (8.5) LFL sales growth (%) 1.6 (12.3) GP margin (%) 42.4 41.8 Total number of stores 308 306 Capex spend (R’m) 66 61 Av space (‘000sqm) 765 765

EDGARS DIVISION – Q1:FY18

219 stores* · LSM 6-10

*Includes 202 Edgars Stores, 1 Edgars sales store ,16 Edgars Cosmetics Emporium

40 stores · LSM 7-10 49 stores · LSM 5-10

11

• Retail sales decreased 2.3%
• LFL sales growth decreased by 1.6% as

strategic initiatives started to show benefits through improved in-store experience, re-freshed business model, lay-bye offers, customer service and merchandise assortment improvements

• Cash sales decreased 2.6% and credit sales

decreased by only 1.8%

• Easter moved to April in 2017 from March

last year

• Gross margin of 34.7% from 34.2%
• Improved supplier rebates and discounts
• Reduced markdown activity
• 20 new Jet stores and 2 Jet Mart stores
• pened
• 4 Jet stores, 3 Jet Mart stores and 1

Edgars Active Store closed

Q1:FY18 Q1:FY17 Retail sales growth (%) (2.3) (8.9) LFL sales growth (%) (1.6) (8.4) GP margin (%) 34.7 34.2 Total number of stores 711 700 Capex spend (R’m) 34 24 Av space (‘000sqm) 652 657

408 stores · LSM 4-7 122 stores · LSM 4-7

JET DIVISION – Q1:FY18

181 stores · LSM 4-7

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• Includes CNA, mono-branded stores and Legit

in Q1:FY18. Q1:FY17 additionally includes the entire Legit business and Edgars Shoe Gallery

• Excluding Legit, Edgars Shoe Gallery and

unprofitable international brands, retail sales decreased 12.7% ( 37% reduction in meterage)

• Cash sales decreased 40.8% (18.3% excl. Legit

and Edgars Shoe Gallery)

• Credit sales decreased 39.4% (12.6% excl.

Legit and Edgars Shoe Gallery)

• Margin improvement through:
• Renegotiated supplier rebates and discounts
• Excluding Legit, Edgars Shoe Gallery and

international brands being exited, gross margin % increased 340 bps to 39.5% from 36.1%

• 2 mono-branded opened
• 5 stores closed
• 1 CNA and 4 mono-branded stores
• 10 Legit stores in Botswana disposed during

the quarter Q1:FY18 Q1:FY17 Retail sales growth (%) (40.5) (6.9) LFL sales growth (%) (10.6) (7.0) GP margin (%) 38.7 37.9 Total number of stores 266 496 Capex spend (R’m) 14 17 Av space (‘000sqm) 97 156

MONO-BRANDED STORES 195* stores · LSM 7-10 71 stores · LSM 5-10

*Includes 11 Samsung stores

10* stores · LSM 5-8

*Stores in Botswana sold effective April 2017

SPECIALTY DIVISION – Q1:FY18

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STATEMENT OF COMPREHENSIVE INCOME

(R millions) Q1:FY18 Q1:FY17 % change Retail sales

5 508 5 973 (7.8)

Gross profit

2 142 2 286 (6.3)

Gross profit margin

38.9 38.3 0.6pts

Other income

327 454 (28.0)

Store costs

(1 559) (1 703) (8.5)

Other operating costs(1)

(1 003) (1 169) (14.2)

Share of profits of associates and insurance business

182 (4)

Trading profit

89 (136) 165.4

PROFORMA ADJUSTED EBITDA

354 314 12.7

(1) Includes non-recurring costs of R10 million in Q1: FY18 (Q1: FY17 – R120 million). See cost analysis –Q1: FY18

14

(R millions)

Q1:FY18 Q1:FY17 % change Trading profit/(loss)

89 (136)

165.4 Depreciation & amortisation

240 244

Net asset write off(1)

10 5

EBITDA losses from brands exited(2)

3 6

EBITDA losses/(gains) from Edgars Shoe Gallery(3)

• EBITDA losses/(gains) from the Legit business(4)

2 (10)

Non-recurring costs(5)

10 120

Adjusted EBITDA 354 229 54.6 Brand and administration fee income from insurance business(6) Share of profits from insurance business(6)

(118) 203

PRO FORMA ADJUSTED EBITDA 354 314 12.7

(1) Relates to assets written off in connection with the closure of stores, net of relates proceeds where applicable. (2) Adjustment to remove the EBITDA gains or losses achieved from certain brands being exited such as: Express, Geox, Lucky Brand, One Green Elephant, River Island, Tom Tailor and other international brands which the Group has strategically committed to exit. (3) Adjustment to remove the EBITDA losses or gains from the Edgars Shoe Gallery retail format which the Group closed in fiscal 2017. (4) Adjustment to remove the EBITDA gains relating to the Legit business sold. (5) Non-recurring costs in Q1:FY18 related to a debit of R7 million for employee restructure costs, a R2 million credit for transitional project related expenditure accruals at 25 March 2017, reversed in the first quarter 2018, R4 million expense incurred from a brand penalty fee and unrecovered costs of R1 million as a result of flood and storm damage. Non-recurring costs in Q1:FY17 relate to transitional costs incurred of R78 million, strategic initiative costs of R34 million (excludes costs of R212 million relating to the Agreement with creditors and the Restructuring) and a non-recurring cost of R8 million relating to our strategic partnership with Absa. (6) The investment in HBA prior to the Restructuring completed in fiscal 2017 was held by Edcon Holdings Limited which was a related party company of Edcon Acquisition Proprietary Limited and the profits from the insurance business were previously consolidated by Edcon Holdings Limited. Previously Edcon Limited received a brand and administration fee from the insurance business arrangement. On 31 January 2017, in connection with the Restructuring, Edcon Holdings Limited sold its investment in HBA to Edcon Acquisition Proprietary Limited and such investment was consolidated from that date. Pro forma adjusted EBITDA is intended to show adjusted EBITDA as if Edcon Acquisition Proprietary Limited Group had always consolidated the share of profits from the insurance business instead of Edcon Holdings Limited.

PRO FORMA ADJUSTED EBITDA

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OTHER OPERATING COSTS STORE COSTS

COST ANALYSIS Q1:FY18

• Other operating costs excl. non-recurring costs

decreased by 5.3% attributable to renegotiated contracts offset by additional manpower costs for IT as the Group embarks on its IT strategy

• Store costs well managed decreasing by 8.5%
• Closure of unprofitable stores during the

quarter

• Rental and manpower constitute 61.7% of

total costs for Q1:FY18 (59.9% in Q1:FY17)

(R millions) Q1:FY18 Q1: FY17 % change

Other operating costs

(excl. non-recurring costs)

993 1 049 (5.3) Non-recurring costs 10 120 TOTAL 1 003 1 169 (14.2)

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CASH FLOW – Q1:FY18

198 117 280 63 101

OPERATING ACTIVITIES OPENING CASH BALANCE WORKING CAPITAL MOVEMENT CAPEX NET FINANCING COSTS FINANCING ACTIVITIES

7

TAX

1 651

CLOSING CASH BALANCE 455 (315) Trade and other revceivables1 Inventories (23) Trade and

• ther payables

(1) Includes R39 million proceeds relating to the sale of the written down trade receivables book sold in fiscal 2017.

1 787 R’m

Working capital

17

(R millions)(1) Cash PIK Q1:FY18 Q1:FY17

Super Senior Secured debt EUR Refinanced Facility A1 due 31 December 2017(2) E+4.00% 8.00% 632 EUR Super Senior Facility due 31 December 2017 – Facility A2(2,3) E+4.00% 8.00% 1 972 2 075 ZAR Super Senior RCF Term Loan due 31 December 2019(4) J+5.00% 3.00% 2 131 3 297 ZAR Converted revolving credit Facility until 31 December 2019(4,5) J+5.00% 3.00% 1 250 ZAR Super Senior Hedging Debt due 31 December 2017(6) JIBAR 8.00% 675 EUR Super Senior Term Loan due 31 December 2017(6) EURIBOR 8.00% 633 EUR Super Senior PIK notes due 30 June 2019(6) 8.00% 1 842 Senior Secured debt ZAR term loan due 31 December 2017(6) J+7.00% 3.00% 3 020 EUR fixed rate note due 1 March 2018(6) 9.50% 10 244 USD fixed rate note due 1 March 2018(6) 9.50% 3 780 Lease liabilities 302 319 EUR Senior secured PIK Toggle notes due 30 June 2019(6) 9.75% (no toggle) 12.75% (toggle) 481 Other Loans (7) 206 304 Gross third party debt 6 493 26 670 Derivatives 50 Cash held in escrow on Legit sale (634) Cash and cash equivalents (1 651) (1 111) Net third party debt 4 208 25 609

(1) FX rates at end Q1:FY17 were R15.19:$ and R16.81:€; and at the end of Q1:FY18 were R12.97:$ and R14.48:€. (2) The maturities may be extended in exchange for a cash margin uplift from 4.0% to 9.0% if certain leverage conditions are satisfied. (3) The maturity may be extended to 30 September 2018 or 31 December 2018 if certain leverage conditions are satisfied. (4) The maturity may be extended to 31 December 2020 if certain refinancing conditions are satisfied. (5) The total available facility is R1,825 million of which R575 million was undrawn at 24 June 2017. (6) This debt was restructured or amended as part of the Restructuring. (7) The portion of this debt relating to Zimbabwe was R137 million in Q1:FY18 and R229 million in Q1:FY17. (8) At the end of the period R204 million of a Super Senior LC facility were utilised for guarantees and LC’s.

EDGARS | WINTER 16

NET THIRD PARTY DEBT

JET

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• 4. STRATEGY & TURNAROUND INITIATIVES

BERNIE BROOKES - CEO

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ROADMAP WITH STRATEGIC INITIATIVES

2016 2017

INITIATIVE STATUS UPDATE

OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP

GROWTH ENABLERS COST LEAN HQ & OPERATING MODEL GNFR COGS REDUCTION PROPERTY EDGARS CHAIN: TURNAROUND/CUSTOMER CENTRICITY JET CHAIN: LEAN DISCOUNT RE-POSITIONING SPECIALTY CHAINS: STRATEGY REVIEW AND REFRESH CREDIT SALES LOYALTY PROGRAM CUSTOMER CENTRICITY IT STRATEGY AND RENEWAL PLAN SUPPLY CHAIN & LOGISTICS ROADMAP SUPPLIER ENGAGEMENT INVENTORY

Savings realized and locked in Savings being realized Savings being realized Savings being realized Initiatives underway – customer experience, category management, change management Initiatives underway – In-store experience, every day low price & cost savings Legit sale complete Portfolio strategy review underway Own book sales picking up ( over R400m) Strategy developed and initial value target identified NPS roll-out underway Strategy and roadmap complete. RFP’s launched Strategy and roadmap complete. Roll-out underway Review underway Review underway

1 2 3 4 5 6 7 8 9 10 11 12 13 14

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EDGARS: STRATEGIC AND TACTICAL INITIATIVES

EDGARS BRAND BUILDING

• Continued investment in Edgars brand and sub-brands
• Further roll-out of Private Label stand-alone stores

CUSTOMER EXPERIENCE

• NPS integrated into the business with positive results
• Product knowledge training continuing for Dedicated Service staff
• Successful localised offers tested with accelerated roll-out planned for remainder of financial year

CATEGORY MANAGEMENT

• New range building process incorporated into business-as-usual practices and optimised with enabling tools
• Private Label brand books leveraged in development of brand communication and positioning strategies
• Continued focus on strong KVIs at attractive prices
• Further enhanced partnerships with key suppliers to ensure alignment on strategic plans
• Continued monitoring of stock position with rigorous process to clear unwanted stock

CREDIT & FINANCIAL SERVICES

• Supporting operational processes and incentives aligned to driving credit sales
• Credit-customer life-cycle management process implemented

CHANGE MANAGEMENT

• Continued focus on employee engagement platforms reinforced with implementation of tailored learning

materials

• Leadership development programmes and talent identification panels in place
• Quarterly store operations incentive model implemented

RED SQUARE AND BOARDMANS

• Red Square and Boardmans fully integrated into Edgars operating division
• Operational alignment complete and strategic positioning commenced

21

JET: STRATEGIC AND TACTICAL INITIATIVES

SALES GROWTH

• Optimise store footprint: improve store productivity & profitability by identifying opportunities for consolidations,

carve outs & reductions

• Turnaround JetMart: through localisation, changed customer perception and exiting categories that don’t fit with the

brand

• New Growth: continued roll out of small store formats
• Category Management: recapture lost market share in key categories while remaining price competitive
• Redefine Active: stabilise and grow active to capture the youth market while improving profitability
• In-store experience: improved store shopping experience for customers through layout & visual changes
• Customer Centricity: embedded a truly effective customer centric marketing strategy that is right for the brand and

rolled out NPS to all stores

GP IMPROVEMENT

• Markdowns: improved GP through better markdown management
• Pricing: Continued focus on everyday low price items and key entry price points

CREDIT & FINANCIAL SERVICES

• 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

COST SAVINGS

• Advertising: Revised strategy in place and has been realising media, cost and ROI efficiencies
• Lean operating model: Continued focus on cost savings

PEOPLE

• Improving employee engagement: Continued focus on people initiatives to improve the employee experience that

empowers employees to deliver on business results

• Improving strategic capability: Continued focus on leadership capability, through the launch of the Jet Retail and

Leadership Academy to improve leadership and functional competencies to deliver on business results

22

SPECIALTY: STRATEGIC AND TACTICAL INITIATIVES

• Consolidation of supplier base completed
• Pilot revised product range and layout – CNA aims to re-establish itself as the dominant

stationery retailer through an expanded stationery range that includes a greater selection of fun and trendy products. This will be associated with a revised store layout to emphasise these changes

• Pilot of localised ranges under way to refine product offering by location
• Ongoing evaluation of store network, including a potential revision in location strategy

CELLULAR

• Optimize range – Establish a top selling core range of products with localised supporting ranges of

higher and lower selling price products tailored by geographic node

• Improved allocation - reduced store grids, to increase customer journey consistency and simplify

processes

• Improve in-store visibility through in store advertising, and where possible relocating the Cellular

pad closer to financial services

• Increase connections and improve customer life cycle management
• Drive online sales

INTERNATIONAL BRANDS

• Continue exit of River Island and other underperforming in-store brands

(River Island will continue to be available via their website)

• Continually engage on-going brands to collaboratively improve go to market propositions that

deliver brand equity, aspirational product and customer experience while strengthening and enhancing the fashion credibility of the Edgars brand

• Right-size store footprint

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SHIFTS & SAVINGS

• Increased collaboration, commitment and trust across the entire demand chain to achieve full

potential.

• Focused on a lean sourcing operation through innovation, transparency and sustainability

resulting in increased productivity per headcount

• On track to reduce reliance on indirect vendors (3rd party imports) from 44% to 17% by Winter 2018
• Shifts & vendor management across our direct vendor base to achieve estimated savings of 4% to

6%

• Consolidation, across programs to maximise scale and drive volume
• Increased vendor support for capability and capacity management
• Reallocating sourcing geographies and vendors to align with market trends

LOCAL/REGIONAL FOCUS

• Total Direct Local / Regional spend to increase by 4% to 6% versus FY17
• South African production estimated at 68 -72% of total Local / Regional spend
• Increase Regional sourcing to support our Africa growth strategy
• Achieve shorter lead-times by pursuing fabric bundling

CELROSE & EDDELS

• New denim plant fully operational, creating 150 new jobs
• Established a dedicated knits line for ladieswear resulting in an additional 60 machinists
• Product expansion to heels and boots together with 4 dedicated pump lines has resulted to 330 new

jobs

COGS: SAVINGS AND INITIATIVES

24

EFFICIENT LOGISTICS

• “Speedlining” initiative fully implemented and DC to store lead-times have reduced by 2.5 days
• 80% of DC deliveries processed and dispatched to the depot on the same day
• DC delivery windows for non replenishment product (Fashion) have been adjusted to ensure no stock

is held in the DC’s over weekends resulting in positive working capital benefit

• Continued collaboration with the chains to smooth weekly flow of inputs are yielding positive results

with Merchant groups

• Design & implementation of the lead-time cube has increased visibility of lead-times across the

Supply Chain network

MINIMAL STOCK ROOM PROCESSING

• Ramping up delivery of floor ready merchandise to stores i.e. Hanger Value Added Service (VAS),

which helps free up store staff to focus on customer service

• The delivery of floor ready merchandise not only reduces processing times (store receipt to floor) but

also stock losses/damages as merchandise is sent directly to the sales floor

IMPROVED ALLOCATION

• Hold back initiative has been rolled out with holdback styles performing well above the 15%

markdown reduction target

• Shifting focus to multiple orders thereby reducing interest on inventory and improve working capital

SUPPLY CHAIN: STRATEGIC AND TACTICAL INITIATIVES

25

IT TRANSFORMATION UPATE

• Networks, Service Desk and Desktop

renegotiations finalised

• Data Centre to be finalised by year end

INFRASTRUCTURE

• RFP activity completed with contract awarded
• Software license negotiations expected to be

finalised by end August INTEGRATION

• RFP activity nearing completion
• Short-listed vendors selected and final

negotiations underway POS

MERCHANDISE AND PLANNING FINANCE BUSINESS INTELLIGENCE

• RFP activity nearing completion
• Short-listed vendors selected and final

negotiations underway

• RFP activity nearing completion
• Short-listed vendors selected and final

negotiations underway

• RFP activity nearing completion
• Short-listed vendors selected and final

negotiations underway

IT ROADMAP DEVELOPED

3 year timeline for primary project delivery, starting with systems implementation mid-2017 after completion of vendor contracting period

26

CREDIT, FINANCIAL SERVICES & COMMERCIAL SALES

CREDIT PORTFOLIO

• Revised Absa acquisition strategy positively driving credit sales: The revised strategy, which

was implemented in November 2016, has resulted in stronger credit sales growth across all Chains and is expected to gain further momentum over FY18 festive trade period

• Reintroduction of Regulatory compliant automated credit limit increases: The reintroduction of

ACLI’s has resulted in positive growth in credit sales with the real benefit expected over the festive trade period

• Positive progress with revised compliance, new account application and credit limit increase

processes: First phase of process expected to be implemented by October 2017 focused on improved customer experience

• Introduce targeted credit marketing campaigns, resulting in increased shopping frequency
• Continuous focus collections efficiency, resulting in improved portfolio performance
• Continue to consider various funding option for Edcon funded portfolio to support continuous

growth

FINANCIAL SERVICES PRODUCTS

• Continued strong performance of Hollard insurance partnership
• Introduction of revised Legal product expected to further support growth

COMMERCIAL SALES GROWTH

• Commercial sales unit continues to positively contribute to Group sales
• Gift card sales continue to show strong growth though new corporate partnerships
• More focused 3rd party credit offering positively contributing to credit sales
• Piloting corporate sales offering with strong future growth prospects
• Piloting term loan financing model in selected CNA and JetMart stores to support big ticket item

sales

27

• 5. WAY FORWARD

BERNIE BROOKES - CEO

28

WAY FORWARD

The roll-out of the strategic and tactical initiatives for all areas of the business will continue, which include:

• Enhancing the rationalisation of the overall range
• Accelerating the store optimisation and service delivery model across

additional stores

• Being even more competitive on price
• Initiating faster stock turns
• Improving the private label offering
• Deliver floor ready merchandise to stores
• Improved stock allocations
• Completing the implementation of the Net Promotor Score (NPS) system,

while further embedding customer service into the various chains

• Continue to develop Jet small store concept
• Advancing the plans for the turn-around of CNA, Cellular and other

businesses.

• Promote and support local manufacturing
• Launch the new Thank U Loyalty Programme
• Focus on preparation for Christmas

EDGARS

29

EDGARS

UNAUDITED CONSOLIDATED RESULTS

Q1:FY18

18 AUGUST 2017

For more information: www.edcon.co.za | investorrelations@edcon.co.za EDGARS