On a conference call this morning, Edcon CEO Grant Pattison broke down, telling suppliers the company only has sufficient liquidity to pay salaries but is "unable to honour any other accounts payable during this period".
Following the president’s first announcement on Sunday, 15 March, Edcon’s turnover has declined 45% in comparison to the same period last year.
Pattison told suppliers that by the end of today, when the country goes into lockdown, Edcon "will be about R400m below forecasted sales and cash for the month".
Pattison confirmed the authenticity of the recording, saying, "I am gutted".
He says Edcon is prioritising paying salaries to staff during these extremely uncertain times.
"We are not giving up, we will work closely with government and funders to find a way to continue trading after the lock down has ended. Our problems just highlights the challenge of necessarily pushing pause on the economy, knowing you will have to restart it when safe again," said Pattison.
In the call, Pattison told suppliers that they would next week turn their attention to building a re-opening plan.
"I am not sure what this looks like or even if it’s possible. We will be heavily dependent on business support packages offered by government and other agencies and funders. We also can’t really be sure how long this lock-down will last. We will be, during this lock-down time, keep some parts of credit, insurance and the call-center open as required by the regulations.
"Management will continue to look at all options – and there may be some really tough recommendations to be made to the board after the lockdown period, including having to consider business rescue. CIPC have for the moment issued a practice note explaining they will "not invoke its powers under Section 22 of the Companies Act" for reasons related to the Corona Crisis, for a period of time.
"I am therefore unable to make you any promises other than to keep you updated of developments or plans the Board approves. For your own planning, it would be prudent for you to consider that orders already placed with you may be cancelled, the DC will remain closed, and that any future trade between us will be dependent on your own assessment of our ability to pay for both arrears and future purchases."
Towards the end of the call, Pattison begins to cry and wishes the suppliers well over this time.
"In the midst of our own stress and fears, we acknowledge the material impact our financial situation has on you and your businesses and the devastating effect our decisions will have on your operations, which we can only sympathise with. We hope that we will all emerge from this and get an opportunity to repair the collective economic damage. The Management and Board of Edcon wishes you, your employees’ and your families’ safety and good health during the coming weeks."
An anonymous supplier who was on this call commented, "I have just been on a conference call with the CEO of Edcon to suppliers . They will honour salaries and nothing else this month. I do not want to kick anyone while they are down, I simply want it to be known that Grant Pattison (CEO), took the call himself, was in tears at not being able to pay suppliers but told us all the truth. His courage and bravery should be recognised when so many other business people are ducking and diving to avoid having difficult conversations."
A statement issued by Edcon later states that in addition to the abovementioned shortfall, the Presidential lockdown order means Edcon will lose a further R800m in turnover during the 21 days, thus expecting a significant shortage of cash by end of April.
"Edcon Management is currently focused on implementing the lockdown, but once this is done, Edcon will focus its attention on building a business plan for when the lock-down ends.
"We will be working closely with government and other stakeholders to understand what sort of assistance they can provide to us and will confirm with the various stakeholders once decisions have been made," the statement added.