Edcon mulls business rescue following lockdown
It looks like Covid-19 might be on the verge of claiming its first scalp in the big business community.
Clothing retail giant Edcon revealed that the coronavirus has had a negative impact on the company and it would lose close to a billion rand during the 21-day lockdown period. Edcon chief executive Grant Pattison told the company's service providers during a teleconference that the impact of the fast-spreading Covid-19 could see the company heading into business rescue.
Edcon owns popular retail outlets Edgars and Jet and books and stationery outlet CNA.
Pattison said Edcon's turnover declined by 45% year-on-year after President Cyril Ramaphosa on March 15 declared a national state of disaster.
"By the end of today (Friday), when we will lockdown all our South African stores, we will be about R400m below forecasted sales and cash for the month. "… we will lockdown the African stores at the end of the month as well. As you all know, March and November are months of constrained liquidity for Edcon. So the timing of the lockdown couldn't have been worse. We have in normal circumstaances anticipated and planned for a tight month end.
The sales and expected drop in collections of the debtors book means that we only have sufficient liquidity to pay salaries, which we deem a priority during these extremely uncertain times. As a result, we are unable to honour any accounts payable during these uncertain times. The presidential lockdown order further means we will lose a further R800m in turnover. During the 21 days we expect a significant shortage of cash," he said.
Pattison delivered the devastating news after the coronavirus official infection rate rose to 900 people on Thursday.
"Once the lockdown is behind us, we will next week turn our attention to building a reopening plan... we will be heavily dependent of business support packages offered by government, other agencies and funders. We also can't really be sure for how long this lockdown will last. We will be during this lockdown period keep some parts of our credit, insurance and the call centre open as required by regulations. Management will continue to look at all options and there may be some tough recommendations to the board after the lockdown period, including having to consider business rescue," he said.
He added that orders already placed with suppliers may be cancelled.
"Any future trade between us may be dependent on your assessment of our ability to pay for both arrears and future purchases and orders and services. In the midst of our stress and fears, we acknowledge the material impact our financial situation has on you and your businesses and the devastating impact our decisions will have on your operations. We can only sympathise with you," he said, before breaking into tears.
"We hope that we will all emerge from this and get an opportunity to repair the collective damage. Management and the board of Edcon wish you, your employees and families safe, good health in the coming weeks," he said.
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