CNA revenue will boost Edcon
July 11, 2003
By Vernon Wessels
Johannesburg - The 151 CNA stores in the stable of Edgars Consolidated Stores (Edcon) will generate R800 million in profitable turnover in the first full year of operation, according to Steve Ross, the chief executive of the retail group.
Edcon initially acquired 145 CNA stores for almost R1 million in October last year after the newsagent went into liquidation.
The group expected the CNA business to exceed R1 billion a year of primary cash sales by 2006, Ross wrote in the group's annual report.
On Tuesday Edcon will be holding its annual general meeting, at which it is expected to issue a trading update.
The purchase was "underlined by a strong strategic imperative to reach existing Edcon customers for more spend and to increase our efficiency by employing surplus capacity in credit, systems and distribution", Ross said.
Almost all the CNA stores were close to Edgars' locations.
There were numerous cross-merchandising and marketing opportunities, with product synergies such as music, cellular, stationery, backpacks and toys, and operational synergies such as information technology systems, distribution networks, human resources management, group purchasing, store design and property development.
"The current test in 17 CNA stores of selling on Edcon credit has proved an incremental benefit and this facility will be extended to all CNA stores this year," Ross said.
Edcon's acquisition of the debtors book of Retail Apparel Group (RAG) as well as selected properties in Botswana and South Africa would also prove beneficial in future, he added
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The group had retired the RAG brand and rebranded all 16 stores with the Jet name.
"The stores will deliver an additional R100 million in turnover at a higher profit rate as 10 of the stores are in Botswana and get the exchange rate benefit of trading in pula," Ross said.
The acquisition of five stores formerly operated by Super Mart in October last year would also contribute towards Edcon achieving a turnover target of R12 billion within three to five years.
The Super Mart business would contribute R800 million in cash sales by 2006, Ross said.
Turnover in the year to March increased 24 percent to R8.3 billion, with 9 percent attributable to the CNA and Super Mart acquisitions. It was the second consecutive year of improvement following a 2 percent revenue increase the previous year after seven lean years.
Attributable income more than doubled to R347.5 million in the year following a 42 percent increase in attributable profit the previous year.
Ross's package was increased by 53 percent to R7.6 million following the improved 2002 results. He received remuneration of R6.5 million; retirement, medical aid, accident and death benefits of R53 000; a bonus of R966 000; and other benefits worth R30 000.
The Edcon share price dipped 50c to R76.50 yesterday.
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