CONSOLIDATED RESULTS Q3:FY17 · • New holding company, Edcon Acquisition Company Limited, which...

CONSOLIDATED RESULTS Q3:FY17

BERNIE BROOKES CHIEF EXECUTIVE OFFICER

21 February 2017

EDGARS

EXECUTIVE SUMMARY

CAPITAL STRUCTURE & TRANSACTION

MACRO ECONOMIC ENVIRONMENT

FINANCIAL REVIEW

STRATEGY & TURNAROUND INITIATIVES

WAY FORWARD

AGENDA

EDGARS EDGARS 1

EXECUTIVE SUMMARY • Transaction closed 1 February 2016, resulting in a deleveraging of the business reducing gross

operating company debt from R29.2 billion to R5.3 billion ─ Gross leverage circa 3.6x ─ Cash interest cover circa 3.9x

• New holding company, Edcon Acquisition Company Limited, which is to be renamed • Appointment of new Board • Sale of Legit effective 29 January 2017

CAPITAL RESTRUCTURING

AND NEW BOARD

Q3:FY17 • Retail sales declined by 2.8% to R8,441 million • Retail cash sales increased by 0.7% • Retail credit sales decreased by 8.7% • Controllable costs continue to be well managed • Adjusted EBITDA decreased by 16.3% to R963 million • Excluding the one-off net gain realised as a result of the Group’s Exchange Offer concluded in

the third quarter 2016, the net loss for the period would have decreased by R732 million from R1,092 million to R360 million

FINANCIAL REVIEW

2

EXECUTIVE SUMMARY (CONTINUED)

RECENT DEVELOPMENTS

• Team: Dedicated Strategy and Program Management resources allocated across Edcon Journey Initiatives

• Edgars: Initiatives underway – New Look & Feel, Dedicated Service, Range construction

• Discount Division: Initiatives underway – In-store experience, Every Day Low Price & Cost Savings

• Specialty: Legit sale complete. Portfolio strategy review underway including diagnostic on CNA and Cellular chains

• IT: Strategy complete with transformation (cost out initiatives, core systems replacement) mobilization underway including market engagement

• Supply Chain: Strategy and roadmap complete and roll-out underway

• Customer/Loyalty: Strategy developed and initial value target identified

• Cost Savings Initiatives: Savings being realized across LeanHQ, GNFR, COGS and Property Initiatives

STRATEGY & TURNAROUND

INITIATIVES

3

• R1.5 billion cash injection representing balance of R2.3billion in additional shareholder funding net of bridge funding already received

• Settlement of circa R400 million in fees representing transaction closing fees and arranging fees associated with new facilities

• Decision taken to discontinue River Island as an international brand

NEW BOARD OF DIRECTORS

• Rhodes Scholar at Oxford, graduating with a Masters in Philosophy, Politics and Economics.

• He spent twenty two years with De Beers and Anglo American, the last five of which he was Group CEO of De Beers.

• Gareth serves as a director and in some instances chairman of South African and international mining and resource companies.

• He is also a non executive Director of Julius Bär Holding Limited Listed Swiss bank, and serves on the Senior Advisory Board of TowerBrook Capital Partners.

GARETH PENNY NON-EXECUTIVE CHAIRMAN

BERNIE BROOKES CHIEF EXECUTIVE OFFICER

• CEO of Edcon since September 2015.

• He has an extensive and highly successful career in retail spanning over 40 years.

• Bernie has a strong philanthropic ethic serving both the industry and charitable endeavours through his involvement with the World Retail Congress, the Salvation Army of Australia and various institutions supporting cancer and other medical research.

• In January 2017, Bernie was awarded the Order of Australia for his service to Australian business, and in recognition of his numerous philanthropic contributions.

4


• Rhidwaan obtained a B.Compt. Honours degree in 1983, before passing the South African Chartered Accounting Board Examination in 1984.

• Rhidwaan joined Mobil Oil Southern Africa in 1986 as a Project Accountant. He was later appointed as the Chief Executive Officer of Energy Africa Limited.

• He is currently the Chief Executive Officer of Rapid African Energy Holdings. He also serves as a director on boards of various companies.

RHIDWAAN GASANT NON-EXECUTIVE DIRECTOR

DAPHNE MOTSEPE NON-EXECUTIVE DIRECTOR

• Daphne obtained her Master of Business Administration in 1996.

• She is a seasoned consumer finance executive who worked for ABSA as Chief Executive for the Unsecured Lending Cluster.

• Prior to this, Daphne held a number of senior finance and operational positions in the FMCG, petroleum and SME development sectors.

• She has also held executive roles at the South African Post Office, and was the Managing Executive for ABSA Small Business.

• Daphne currently serves on the boards of a number of companies.

5


• Grant graduated from the University of Cape Town with a B.Sc. Hons in Electrical Engineering in 1992.

• After four years with the Anglo American Group and two years in strategy consulting with The Monitor Group, Grant joined Massmart as Executive Assistant to the Executive Chairman.

• In 2005, he was appointed the Deputy Chief Executive Officer, and Chief Executive Officer in July 2007.

• Grant serves on the boards of various companies.

GRANT PATTISON NON-EXECUTIVE DIRECTOR

KEITH WARBURTON NON-EXECUTIVE DIRECTOR

• After qualifying as a Chartered Accountant, Keith started his business career at an audit firm, after which he embarked on a broad career in business and commerce.

• He has previously served as the Chief Financial Officer, Chief Operating Officer, and as an Executive Director of the Clicks Group.

• He has been involved in the retail industry since 1990, working for companies like Truworths, Foschini, Homechoice and the Metro group, among others.

• He also serves on the boards of various companies.

6


• Marti has an MBA and is a Certified Valuation Analyst.

• Over a 35 year career, Marti has served in a variety of leadership roles at both investment management and financial advisory firms.

• She was the Founder and President of Murray Analytics, Inc. a professional services firm.

• Prior to founding Murray Analytics, Marti was Senior Managing Director at Goldin Associates.

• She has authored several articles on restructuring and risk management, and has been a frequent speaker at investor conferences worldwide on distressed debt and activist investing.

MARTI P MURRAY NON-EXECUTIVE DIRECTOR

7

MANAGEMENT TEAM

ANDREW LEVERMORE Chief Executive: Edgars

ANDY JURY Chief Executive: Specialty Stores

URIN FERNDALE Chief Executive: Jet

RICHARD VAUGHAN Chief Financial Officer

MELANIE NAIDU Chief Human Resources & Transformation Officer

ANTHONY COELHO Chief Information Officer: Group Information Technology

MARIANNE JONES Chief Customer Officer, Investor Relations & Strategic Assignments

JASON JACKSON Chief Strategy Officer & Strategic Assignments

CHARLES VIKISI Chief Legal Counsel & Group Secretary

BERNIE BROOKES Chief Executive Officer

ANDREW THORNDIKE Chief Operations Officer

8

EXECUTIVE SUMMARY



FINANCIAL REVIEW


WAY FORWARD

AGENDA

9

TRANSACTION OVERVIEW

10 EDGARS | WINTER 16

SUBSTANTIAL NEW MONEY INJECTION

• Existing creditors committed to fund up to R2,870 million to significantly shore up the Group’s liquidity position

• R575 million New Revolving Credit Facility(1)

• R2,295 million-equivalent USD-denominated New Holdco 1 PIK A-1 Notes(2)

MATERIAL DELEVERAGING

OF THE OPERATING COMPANY

• Senior secured creditors to equitise 50% of their outstanding claims and novate their reinstated claims to a holding company

• c. R3,200 million of second and third-ranking super senior claims to be novated to a holding company

• Pro forma for the transaction, gross leverage at the operating company to decline to 3.6x from 18.9x

REDUCTION OF CASH INTEREST

BURDEN

• New commitments and novated claims at the holding companies to be PIK-only instruments

• Pro forma for the transaction, cash interest coverage at the operating company to increase to 3.9x from 0.6x

EXTENSION OF MATURITIES

• Most indebtedness at the operating company to mature December 2019(3)

• New commitments and novated claims at the holding companies to mature December 2022

(1) Raised at Edcon Limited. (2) Raised at [New Holdco 1] (3) The Super Senior Liquidity Facility will mature in December 2017, with a one year extension BOARDMANS

11

PRO-FORMA CAPITAL STRUCTURE

FX rates as at 24 December 2016: R14:05:$ and R14.67:€ 1 Converted RCF Facility is R1,250m

2 New RCF Facility is R575m

CASH INTEREST INTEREST EXPENSE

P.A

DRAWN AMOUNT (ZARM) LEVERAGE CURRENCY MATURITY BASE RATES MARGIN PIK MARGIN CASH PIK

Edcon Limited (Operating company) Super Senior Credit Facility (Converted RCF Facility)1 - ZAR 31-Dec-19 JIBAR 5.0% 3.0% Super Senior Credit Facility (New RCF Facility) 2 - ZAR 31-Dec-19 JIBAR 5.0% 3.0% Super Senior Credit Facility (Term) 2,115 1.4x ZAR 31-Dec-19 JIBAR 5.0% 3.0% 274 63

Super Senior Liquidity Facility A1

627 0.4x EUR 31-Dec-17 EURIBOR 4.0% 8.0% 25 50 Super Senior Liquidity Facility A2 1,987 1.3x EUR 31-Dec-17 EURIBOR 4.0% 8.0% 79 159 First ranking Opco debt 4,729 3.2x 378 272 Capital leases 315 0.2x ZAR Other debt 277 0.2x ZAR Total Opco debt 5,321 3.6x 378 272 LTM pro forma adjusted EBITDA (Dec-16) 1,475

Gross leverage at Edcon Limited will decrease to 3.6x from 18.9x using LTM pro-forma adjusted EBITDA, and yearly cash interest expense will approximate R378 million.

12

• Legit chain identified as potential asset for sale in strategic review

• Strong interest from range of potential trade and financial purchasers

• Disposal improves Edcon’s liquidity position and intensifies focus on core department stores and value chain offerings

• Sale of business for R637 million cash

• Cash-free, debt-free sale

• Sale of assets, going concern basis

• Retailability - fashion retail holding company: ~200 stores across SA, Namibia, Botswana, Zambia

• Partnered by material shareholder Metier Private Equity: ~R6 billion funds under management

• Flagship chains Beaver Canoe, Style

SALE OF LEGIT

12

Purchase consideration of R637m, sale effective 29 January 2017

Deal overview Purchaser details Transaction mechanics

13

EXECUTIVE SUMMARY



FINANCIAL REVIEW


WAY FORWARD

AGENDA

BOARDMANS

22 23 24 25 26 27 28

(1)

-

1

2

3

03-2

014

05-2

014

07-2

014

09-2

014

11-2

014

01-2

015

03-2

015

05-2

015

07-2

015

09-2

015

11-2

015

01-2

016

03-2

016

05-2

016

07-2

016

09-2

016

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

GDP GROWTH AND UNEMPLOYMENT RATE

5 6 7 8 9

10 11

04-2

014

06-2

014

08-2

014

10-2

014

12-2

014

02-2

015

04-2

015

06-2

015

08-2

015

10-2

015

12-2

015

02-2

016

04-2

016

06-2

016

08-2

016

10-2

016

12-2

016 4

5.5

7

8.5

10

11.5

12-2

014

02-2

015

04-2

015

06-2

015

08-2

015

10-2

015

12-2

015

02-2

016

04-2

016

06-2

016

08-2

016

10-2

016

12-2

016

EXCHANGE RATES

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

Source: SARB & StatsSA 14

MACRO BACKDROP

EXCHANGE RATES

01-2

016

02-2

016

03-2

016

04-2

016

05-2

016

06-2

016

07-2

016

08-2

016

09-2

016

10-2

016

11-2

016

12-2

016

USDZAR EURZAR

4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0%

Q1:20

15

Q2:20

15

Q3:20

15

Q4:20

15

Q1:20

16

Q2:20

16

Q3:20

16

Q4:20

16

Q1:20

17

Q2:20

17

Q3:20

17

INFLATION

-16 -14 -12 -10

-8 -6 -4 -2 0

Q4:20

14

Q1:20

15

Q2:20

15

Q3:20

15

Q4:20

15

Q1:20

16

Q2:20

16

Q3:20

16

Q4:20

16

-5%

0%

5%

10%

06-2

015

07-2

015

08-2

015

09-2

015

10-2

015

11-2

015

12-2

015

01-2

016

02-2

016

03-2

016

04-2

016

05-2

016

06-2

016

07-2

016

08-2

016

09-2

016

10-2

016

11-2

016

Retail trade sales Textiles,footwear and leather goods

74 75 76 77 78 79 80

09-2

014

11-2

014

01-2

015

03-2

015

05-2

015

07-2

015

09-2

015

11-2

015

01-2

016

03-2

016

05-2

016

07-2

016

09-2

016

FNB/BER CONSUMER CONFIDENCE INDEX

RETAIL SALES HOUSEHOLD DEBT TO GROSS DISPOSABLE INCOME RATIO

Source: SARB & StatsSA 15

MACRO BACKDROP

EDGARS

EXECUTIVE SUMMARY



FINANCIAL REVIEW


WAY FORWARD

AGENDA

16

Q3:FY17 Q3:FY16

• Retail sales ↓ 2.8% ↓ 1.7%

• Cash sales ↑ 0.7% ↑ 4.0%

• Credit sales ↓ 8.7% ↓ 9.9%

• LFL Sales ↓ 2.9% ↓ 3.2%

Q3:FY17 Q3:FY16

• Gross profit ↓ 3.1% ↓ 3.0%

• Adjusted EBITDA ↓ 16.3% ↓ 7.5%

• Transaction with creditors finalised with control transferred on 1 February 2017

• Debt in Edcon Limited significantly reduced

• Legit sale previously announced effective 29 January 2017

Trading environment challenging, increased competition, macro-economic factors continue to weigh on customers & credit granting remains restricted

Deliberate competitive entry price points. Markdown reduction in the Edgars division. Discount division markdowns in line with comparative period whilst Specialty increased markdowns in line with strategy to exit select international brands

Transaction with creditors finalised, balance sheet post 1 February 2017 no longer laden with debt, new ownership and appointment of the new Board

SALE

S PR

OFI

TS

STR

ATEG

Y

17

KEY FEATURES

• Retail sales decreased 2.5% - Cash sales increased 4.8% and credit sales

decreased 10.2%

- November and December retail sales flat, compared to negative 8.3% in October 2016 compared to Q3:FY16

- Trading across all merchandise categories improved compared to the first half of fiscal 2017

• Gross margin of 38.6% down from 42.4% - Planned decease through competitive entry

price points

- Discounts offered to customers in form of gift cards

- Reduction in value of markdowns

• 2 new Edgars stores opened and 2 stores closed

• Aged inventory at acceptable levels

Q3:FY17 Q3:FY16

Retail sales growth (%) (2.5) (2.0)

LFL sales growth (%) (3.1) (3.2)

GP margin (%) 38.6 42.4

Total number of stores 206 206

Capex spend (R’m) 17 56

Av space (‘000sqm) 725 727

206 stores* · LSM 6-10

*Includes 1 Edgars sales store and 1 Edgars Emporium store

18

EDGARS DIVISION – Q3:FY17

394 stores · LSM 4-7


19

DISCOUNT DIVISION – Q3:FY17 • Sales decreased 4.9%

- Cash sales decreased 3.0% and credit sales decreased by 9.2%

- Customers sensitive to macro-economic climate

- Ladieswear showed positive growth whilst remaining categories still negative

• Gross margin percentage decreased by 1.9% - Better entry price points

- Enhanced price perception and brand franchise

- Markdowns still high in light of better entry price points

• 5 new Jet stores opened and 1 store closed

• Inventory ageing profile at acceptable levels

Q3:FY17 Q3:FY16



GP margin (%) 32.2 34.1



Av space (‘000sqm) 579 589

SPECIALTY DIVISION – Q3:FY17

MONO-BRANDED STORES



197* stores · LSM 7-10



*Includes 11 Samsung stores


20

• Retail sales decreased 0.4% - Cash sales increased 1.1%, credit sales

decreased 4.7%

- Positive growth in categories such as ladieswear, menswear, childrenswear, cosmetics and homeware

- Footwear, cellular and CNA underperformed

• Margin impacted by: - Aggressive markdown and clearance

activity particularly in Boardmans, CNA and monobrands

• 10 new stores opened - 5 Edgars Active, 1 Red Square, 2 CNA (1

Samsung) and 2 mono-branded stores

• 15 stores closed - 1 Edgars Active, 2 Edgars Shoe Gallery, 2

Legit, 5 CNA and 5 Mono-branded stores

• Exits - Shoe Gallery format exited - Geox, Tom Tailor, Express, CR7, One-

Green Elephant, DIGEL, Lucky Brand, Express, River Island etc.

Q3:FY17 Q3:FY16



GP margin (%) 29.2 33.2



Av space (‘000sqm) 257 258

KEY FINANCIALS

21

EDGARS

STATEMENT OF COMPREHENSIVE INCOME

22

(R millions) Q3:FY17 Q3:FY16 % change

Retail sales 8 441 8 685 (2.8)

Gross profit 2 901 3 259 (11.0)

Gross profit margin 34.4 37.5 (310)pts

Other income 317 340 (6.8)

Store costs (1 813) (1 795) 1.0

Other operating costs(1) (1 349) (1 145) 17.8

Share of profits of associates and insurance business 197 122 61.5

Trading profit 253 781 (67.6)

Adjusted EBITDA 963 1 151 (16.3)

EDGARS JET (1) Includes non-recurring costs of R410 million in Q3:FY17 (Q2:FY16 – R116 million). See cost analysis – Q3:FY17.

PRO FORMA ADJUSTED EBITDA

23

(R millions) Q3:FY17 Q3:FY16 % change

Trading profit(1) 253 781 (67.6)

Depreciation & amortisation 234 248 Net asset write off(2) 10 3

EBITDA losses/(gains) from Edgars Shoe Gallery(3) 1 (1)

EBITDA losses from brands exited(4) 55 4 Non-recurring costs(5) 410 116

Adjusted EBITDA 963 1 151

(16.3)

EBITDA losses from brands planned to be exited(6) Legit EBITDA(7)

9 4 (72) (66)

Pro forma adjusted EBITDA 900 1 089 (17.4)

(1) Q3:FY16 has been re-presented as a result of ceasing to classify the trade receivable card portfolio in Lesotho, Namibia, Botswana and Swaziland as held-for-sale. (2) Relates to assets written off in connection with store conversions, net of related proceeds. (3) The Group is exiting the Edgars Shoe Gallery retail format. This adjustment removes the EBITDA profit or loss generated from the Shoe Gallery formats. (4) Adjustment to remove the EBITDA gain or loss from certain brands being Express, Geox, Lucky Brand, One Green Elephant, Tom Tailor and a number of other international brands which the Group is strategically exiting. (5) Relates to transitional project related expenditure in Q3:FY17 of R55 million, strategic initiative costs in Q3:FY17 of R370 million of which, R319 million relates to the transaction with creditors (Q3:FY16: R78 million was incurred for

strategic initiatives), a R42 million credit in Q3:FY17 which reverses a prior provision raised in fiscal 2016 relating to a penalty which has not materialised, R7 million in Q3:FY17 relating to brand penalty cost incurred and a non-recurring cost of R20 million incurred in respect of our agreement with Absa. In Q3:FY16, the non-recurring costs additionally included, R7 million head office restructure costs, a R33 million lease cost adjustment and an onerous lease credit of R2 million.

(6) The Group has strategically identified an additional international brand it has planned to exit. This adjustment reflects the EBITDA profit or loss associated with this brand. (7) EBITDA relating to the Legit business which during the second quarter of 2017, the Group announced it has agreed to sell.

RED SQUARE

OTHER OPERATING COSTS STORE COSTS

• Other operating costs decreased 4.5% - Decease in fees to Bain capital affiliate

- Reduction in manpower costs following head office restructure

• Non-recurring costs increased primarily due to the various strategic initiatives of which R319 million relates to transaction with creditors.

• Store costs well managed increasing by 1.0%. • Rental costs were up 6.4% • Manpower costs were up 8.4% • Stock loss, printing and stationery, security and

operating lease adjustment reductions during the quarter

• Rental and manpower constitute 62.6% of total costs for Q3:FY17 (58.8% in Q3:FY16).

24

COST ANALYSIS – Q3:FY17

BOARDMANS

(R millions) Q3:FY17 Q3:FY16 %

change

Other operating costs 877 918 (4.5)

Store card administration 62 111 (44.1)

Non-recurring costs 410 116

Total other operating costs 1 349 1 145 17.8

25

1 260

(263) (35)

(341) 668

3 115

529

1 297

Working Capital

Trade receivables, other receivables &

prepayments

Trade and other

payables

CASH FLOW – Q3:FY17

25

Opening cash balance

Operating activities(a)

Net financing costs

Tax Capex Working capital

Closing cash balance

Financing activities

R’m

(35) (316)

1 611

Inventories

(a) Includes R302 million outflow relating to transaction with creditors

26 EDGARS

EXECUTIVE SUMMARY



FINANCIAL REVIEW


WAY FORWARD

AGENDA

27

ROADMAP WITH STRATEGIC INITIATIVES

27 JET

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

TRADING TERMS

INVENTORY

Savings realized and locked in

Savings being realized



Initiatives underway – new look & feel, dedicated service, range construction

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

28

EDGARS: STRATEGIC AND TACTICAL INITIATIVES

28

EDGARS BRAND BUILDING

• Re-invest in Edgars brand and private Labels

• Reduce focus on promotions: Everyday low price items and simplified promotions

• Further roll out of Kelso stand-alone store (Bedford Centre)

• Launched Edgars transactional website

CUSTOMER EXPERIENCE

• Simplified administration work in stores and focus on customer facing activities

• Continued implementation of NPS (100 stores YTD), showing positive uplifts

• Roll out dedicated service (30 stores) and new look and feel (23 stores)

CATEGORY MANAGEMENT

• Transitioned to 4 seasons for more flexibility

• Introduced range pyramid to manage risk

• Finalise brand positioning across categories

• Create strong KVIs at attractive prices

• Reduce number of suppliers to improve scale benefits and simplify assortments

• Adopting systematic approach to markdowns to clear stock

CREDIT & FINANCIAL SERVICES • Drive sales of FS products with new account openings

CHANGE MANAGEMENT • Communicate regularly on transformation programme and achievements to Edgars employees

• Employee engagement launched and recognition programs relaunched

29

DISCOUNT: STRATEGIC AND TACTICAL INITIATIVES

29

SALES GROWTH

• In-store experience: New store lay-out, stronger price call-outs and simplified signage rolling out to stores - improvements in sales and GP growth vs. Chain being realised

• Optimal allocation: Matching supply and demand through depot hold-backs, resulting in positive sales vs. other stores (only SA)

• Lay-by: Continue to drive lay-by offer

• Marketing: Framework for marketing strategy developed with stronger focus on price call-outs

• General merchandise: 40 top food SKU’s selling in JetMart stores and offering customers bulk deals at great prices

• Omni-channel: Launched Jet online and Jet Click-and-Collect in November 2016

GP IMPROVEMENT

• Product ranges: Selective price increases and continued range rationalisation in Home Hards and Female

• Pricing: Re-establishing price perception in the market through increased contribution and 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: Continued advertising savings on costs through POS reduction, media optimisation, less campaigns and integrated campaigns with Credit & Financial Services

• Operations: Continued focus on cost savings on controllable costs

• Jet Club: Celebration of the Stars campaign successfully re-launched

30

SPECIALTY: STRATEGIC AND TACTICAL INITIATIVES

30

• Full-scale review of customer value proposition initiated in January 2017: simplify and clarify what CNA stands for • Refocus of business around core categories (stationery, reading/learning, gifting supplies) • Rationalise store footprint

• Onboarding new brands • Key focus on customer satisfaction and in-store experience, with higher-intensity product and service training • Continued push for online sales through click and collect online functionality • Focus on categories that differentiate from, and compliment, Edgars cosmetics offering

• Overhaul online sales supporting processes and logistics to improve lead times and customer satisfaction • Review and refocus customer target market to deliver tailored product offering and refreshed brand message • Rationalise store footprint

• Drive differentiated private label product to improve profitability and support global brands • Marketing and promotional strategies to clarify and enhance athlesuire wear brand identity • Continue to improve store performance and customer experience • Re introduction of Converse

Cellular • Develop complimentary strategic relationships with Mobile Network Providers to ensure tailored product offerings and enhanced in-store experience

• Review product range to improve offering in cellular accessories

International Brands

• Review portfolio to exit underperforming brands and leverage high performing brands • Improve product flow and seasonality to drive alignment with South African cycles • Review pricing model to ensure customer value

• Sale of business completed

31

CREDIT & FINANCIAL SERVICES

31

CREDIT PORTFOLIO

• Successfully implemented a revised new account acquisition strategy between Edcon and ABSA: Edcon acquires ~80% of new accounts on balance sheet since November 2016 resulting in more control over new business credit sales

• Successfully implemented revised new account credit limit strategy: Increase credit limits offered on new account to align with competitors

• Implemented revised new account application process, in line with new affordability regulations without significantly impacting on volume and turn around times

• Introduced focused credit marketing campaigns, resulting in increased shopping frequency

• Enhanced collections efficiencies, resulting in improved portfolio performance

• Successfully tested various regulatory aligned credit limit increase strategies

FINANCIAL SERVICES PRODUCTS

• Continued strong performance of Hollard insurance partnership

• Successfully implemented revised credit limit strategy thereby supporting future growth

COMMERCIAL SALES GROWTH

• Successfully introduced new commercial sales unit with positive sales contribution over festive period

• Strong growth in gift card sales on the back of new corporate partnerships

32 EDGARS

EXECUTIVE SUMMARY



FINANCIAL REVIEW


WAY FORWARD

AGENDA

33

WAY FORWARD

33

• Transaction with creditors completed, focus now shifted to business operations

• Continue to drive the 3 pillars of the strategy: customer centricity, empowerment and simplicity

• Strategy starting to impact with sales improvement each quarter

• Continued focus on credit sales initiatives

• Continued focus on strategic and tactical initiatives of each division

• Finalise the rationalisation of international brands in the Specialty division

• Continue to enhance private label offering

• Store optimisation and service delivery model rolled out to further stores including NPS

• Range rationalisations continued

• Supply chain and logistics initiatives to be implemented

• Journey to improved IT infrastructure

• Enhance loyalty offering to customers

JET

THANK YOU Q3:FY17 CONSOLIDATED RESULTS

For more information Our website: www.edcon.co.za Edcon contacts for more information: Chief Customer Officer, Investor Relations & Strategic Assignments Marianne Jones [email protected]

EDGARS

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CONSOLIDATED RESULTS Q3:FY17 · • New holding company, Edcon Acquisition Company Limited, which...

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