The 125-year-old stationery retailer CNA has been placed in business rescue, its management team confirmed on Tuesday.
Business rescue means that a company gets breathing space from debt and other repayments, while business rescue practitioners take full management control. They then decide whether the business can be restructured to survive. Failing that, they would aim to achieve a better return for the company’s creditors and shareholders than an immediate liquidation of the company would.
Fin24 previously reported that CNA is behind on payments to suppliers and landlords. The retailer has been hard-hit by the Covid-19 pandemic, which kept customers out of the country’s big malls, and its stores.
One of its suppliers is Jonathan Ball Publishers, and its CEO, Eugene Ashton, told Fin24 that he believes going into business rescue will be a positive development for CNA.
“It will at least give them a chance to try rectify things. It was always going to be difficult taking over the business during the Covid-19 pandemic,” Ashton said.
“Business rescue is a logical consequence, and I am sure suppliers will work with them [CNA] to try [to] see if they can take themselves out of this situation. This is the right course of action and probably the best one too, for suppliers. There is no point in liquidating the business now because there are no material assets.”
Tashya Giyapersad and Simi Maharaj have been appointed as CNA’s business rescue practitioners, a director of the retailer confirmed.
CNA’s former owner Edcon was placed in business rescue in April last year, with all of its assets eventually sold off. Edcon sold CNA to an investment group, Astoria, with Exclusive Books’ former CEO Benjamin Trisk also taking a 30% stake. Astoria sold its 70% stake back to management last month.
Trisk is currently at war with the CNA board. Directors accused Trisk of contacting business rescue practitioners without their consent and then announced that he had resigned in April – which Trisk disputed.
Struggling stationery group CNA has removed Benjamin Trisk as a director from its operations after a meeting on Monday, according to a statement from the company’s former CEO.
The management team at CNA allegedly tabled a resolution to remove Trisk as director of CNA operations, which Trisk has labelled as “preposterous” and “spurious”.
Trisk claims he will go to court.
JSE-listed investment group Astoria previously sold its 70% interest to the rest of the management team, including CNA operations director Rob Shortt, CFO Nazir Patel and director of procurement Olinka Nell.
Astoria purchased CNA from Edcon in February last year for R1 and subsequently contributed further capital to pay for transaction costs.
Trisk, who holds the remaining 30% of CNA, said he and his legal team believed the share purchase from Astoria by the rest of the management team was “unlawful” and carried consequences for any funding the group was trying to negotiate.
The group, whose landlords and suppliers have experienced delays in payments from the stationer, has openly said it is facing major financial problems. It also says its problems were worsened by the shadow cast by the legal battle between Trisk and his former employer, Exclusive Books, which became public knowledge six weeks ago.
After CNA received negative feedback about this from funders and creditors, members of its management team held a meeting with Trisk on April 19, where they say he offered to resign. CNA has told him it has accepted his resignation from that date. Trisk has denied these claims.
Stationery retailer CNA is facing a financial crisis, with its board threatening legal action against its controversial CEO and creditors claiming they have not been paid for months.
After only a year at the helm, investment company Astoria announced last week that it sold its stake in CNA Holdings to management.
Astoria had purchased 70% of CNA from Edcon for R1.2-million from Edcon. It said it did not provide any “further equity or debt funding” to CNA.
A director of Astoria told Fin24 that they sold because they “were not able to add any value and the management team thought they could”.
The sale agreement was amicable.
However, the board of CNA is now accusing CEO Benjamin Trisk, formerly of Exclusive Books, of attempting to put the company in business rescue without consulting them, alleging that he submitted documents that show the board agreed to business rescue when they had not.
According to an article in Fin24, Trisk has refuted this claim as “complete rubbish”.
In addition, CNA director Rob Shortt and Trisk have both confirmed that CNA has fallen behind on payments to landlords and suppliers.
Creditors say they are in the dark as CNA battles to avoid business rescue, with one creditor has still not been paid for January purchases. A payment plan proposed by the retailer saw terms of 60 days effectively change to 120 days, subject to cash flow.
Last week, CNA contacted creditors to state that the proposed payment plan would be amended further with part payment now likely at the end of the month. The letter stated that the retailer needed time to put funding in place.
CNA’s stores are not as well stocked as they should be, which may point to the fact that suppliers are no longer providing stock until payments are received.
In the event that CNA does enter business rescue, it is likely that creditors will only receive 4c on the rand.
According to a recent BusinessLive article, CEO of CNA, Benjamin Trisk, “only expects a recovery for the stationery business when back-to-school shopping starts in 2021”.
Edcon bought CNA for R141-million in 2002; it sold it for R1 to Astoria Investments in February.
Due to the Covid-19 pandemic and the five-week nationwide lockdown, consumer spend is under pressure on the back of a weak economy and a rise in retrenchments.
Growing digital platforms are selling competing products, often at better prices.
Trisk believes an improvement in CNA sales would come when consumers returned to shops. Foot traffic at the larger malls remains down, though some mall owners say while shopping fewer times a month, customers are buying more each time.
Trisk has reiterated his plans to revive CNA by:
- Improving the retailer’s book selection and adding more local African literature and books in local languages
- Improving the signage, curation and display in-store
- Cutting CNA product lines
- Removing chocolates, snacks, and tech products including laptops, cellphones and chargers
The embattled Edcon Group has announced the sale of CNA to a consortium of investors led by JSE-listed Astoria Investments.
The buyout is led by Jan van Niekerk, who heads asset manager RECM and Calibre (RAC) together with Piet Viljoen. RAC took control of Mauritius-based Astoria last year.
The appointed team leader is Benjamin Trisk, who was the CEO of Exclusive Books.
All of the 167 CNA stores, along with the brand, will be sold as part of the transaction, which still needs to be approved by the authorities.
The transaction value was not disclosed, but the sale includes CNA staff, stock, fittings and leases. Trade creditors and other debt will remain with Edcon.
Edcon CEO Grant Pattison explains: “Edcon has a simple business model that is focused on delivering an enhanced customer experience, and an optimised store portfolio, ultimately creating a focus on our three divisions: Edgars, Jet, and Thank U.
“As I have always said, CNA is an important but not a strategic part of the Edcon business, as it is not focused on clothing, beauty and home categories, and we would only sell if it’s good for CNA.
“The new owners have the muscle and extensive management focus and leadership expertise to invest in the business. I am also pleased that this transaction will not result in any job losses.”
According to a statement, the Astoria consortium intends to focus CNA on books, stationery, magazines and gifting. It will signal a move away from technology items such as phones and laptops.
“We believe that this transaction will be welcomed by staff, landlords and suppliers including publishers, both locally and internationally,” said Astoria Investments.
“The ongoing process of consolidating, merging and rebranding of the businesses, will ensure an offering of a selected set of private and some international brands, while also being a fashion and beauty retailer that provides credit.”
Edcon has been staring into a financial abyss for the past few years. It has billions in debt, which has snowballed since American investment firm Bain Capital bought it in 2007.
Last year, the group was saved from collapse by securing a R2.7-billion lifeline – a deal struck with landlords, the Public Investment Corporation, and creditors.
The loss-making Boardmans and Red Square chains have since been shut, and a number of prominent stores – including the Edgars in Rosebank mall, and various CNA outlets – have been closed.
Edcon Holdings said on Thursday that it will be closing three of their chains: Boardmans, Red Square and La Senza lingerie.
This is the latest strategy to save the company after dwindling sales and profits.
By shutting down the other chains they hope to attract more customers to their flagship Edgars stores.
The decision to shut down certain chains comes from the newly appointed CEO Grant Pattison who took over the position fro Bernie Brookes. Edcon is South Africa’s largest non-food retailer.
The Johannesburg company has had a hard time staying afloat amid weak consumer spending and economic growth and in 2016, the company had to be taken over by banks and bank holders to stop it from collapsing.
Under Pattison’s plan, Edgars will cut down on more than 1 300 stores’ footprints as well as reduce floor space by 17% over the next five years to increase profitability.
They will also be focusing on Edgars mainly, which sells most of the of the items that are available in the stores that are being shut down.
Other stores that have made the cut include CNA and Jet.
Pattison said that he thinks that the company can turn. He said, “The quicker we can do this, the better”.
The urgency to make changes comes after Edcon retail sales dropped by 9,4% in three months through December 23 while adjusted earnings before tax, taxes depreciation and amortisation declining by 25%.
The owners of Edcon Holdings are Frank Templeton Sanford C. Bernstein & Co. LLC and Harvard University Pension Fund. They took over when Edcon was struggling under foreign-currency debt that was used to finance the takeover by Bain Capital Private Equity LP in 2007.
The 89-year-old company also employs 14 000 permanent a significant number in a country where more than 1 in 4 people are unemployed.
At the of last year, the company’s net debt was R4,2 billion. Some of the other attempts to revive the company include increasing the workforce, decreasing prices and bringing in international brands.
Edcon said earlier this year that they were in talks with creditors about refinancing debt to strengthen the balance sheet. Edcon also has liquidity facilities and credit facilities that will be maturing towards the end of 2018.
By Lauren Hartzenberg for BizCommunity
A rebrand is on the cards for CNA and Edgars stores as part of Edcon’s turnaround strategy to win back shoppers, reported Business Day on Friday.
CNA and Edgars stores to sport new lookFormer Massmart CEO Grant Pattison replaced Bernie Brookes as Edcon chief executive at the start of this year, and has since been focusing on reconfiguring the retail group’s offerings.
While Edgars and Jet had continued to trade positively in ladieswear and footwear according to its latest quarterly performance report, overall Edcon reported a 9.4% drop in retail sales for the third quarter while total group revenues decreased 8% to R8.2bn owing to a decrease in retail sales of R795m compared with the prior period.
The departmental store retailer has been battling to maintain market share in South Africa’s increasingly competitive retail environment, with European retailers like H&M entering the local market and expanding its footprint at a rapid rate.
Despite challenges, Pattinson has stated that the company is recommitting to the departmental store model, explaining that the model “offers convenience”.
Edgars is in the process of a logo facelift, which would complement the new store layouts and the roll-out of its next-generation stores, CEO Mike Elliott told Business Day.
CNA will also be undergoing a rebrand and would be consolidating its focus on stationery, educational materials and arts and craft. “A new store layout would ensure customers could do self-service,” said CNA’s general manager, Julie Day.
According to an article published in the Sunday Times at the weekend, former Exclusive Books CEO Benjamin Trisk is willing to re-engineer Edcon’s flailing CNA brand.
This follows his recent departure from the book retailer after a breakdown with the company’s shareholders. Hired in 2013, he spent the past five years in charge of a turn-around strategy after the store had experienced a series of failures.
Trisk told Business Times this week that he would only consider joining CNA if approached. “I would probably look at it very seriously. However, I must make it clear that I have not been approached.”
“But I’m not leaping into anything. I’ve had one approach from overseas which I can’t talk about at the moment. Locally I’ve also had approaches, but I think it’s quite early in the cycle,” he said.
CNA: Edcon’s white elephant
CNA has long been in the doldrums. In 1997, Wooltru bought CNA out of CNA-Gallo for R447-million.
A turnaround plan was implemented but failed dismally and in 2001, the company was sold to Gordon Kay & Associates for R192-million. By the following year, CNA was in liquidation.
Edcon, under the leadership of US retailer Steve Ross, snapped up CNA for R141-million, but 16 years later the retail brand continues to make losses.
CNA is part of Edcon’s speciality division, that once housed Legit, Edgars Shoe Gallery and the group’s non-profitable brands.
According to The Sunday Times, Chris Gilmour, an investment analyst, said: “They tried hard, but couldn’t win. They [Edcon] are thinking about getting out anyway, they can’t keep on putting more money into it. [CNA] is a pile of unadulterated rubbish that should have died 20 years ago.”
Gilmour said South Africa didn’t have a high-street retail culture anymore, making it difficult for brands such as CNA to have a market “and as a result the model is completely shot”.
Meanwhile, Alec Abraham, a senior equity analyst at Sasfin Wealth, told The Sunday Times: “I don’t know what they [CNA] are and I don’t know if they know what they are.”
He said there was a likelihood that CNA would end up in a similar situation to that of Musica, where “they can’t find a buyer because no one wants to buy this unfit business and they are running with the idea as long as they are not losing money on it. And if they are going to be the last man standing, then so be it.”
An Edcon spokesperson has confirmed that CNA is not for sale.
According to Edcon’s latest financial results, for the 13 weeks to December 23 last year, CNA has 196 stores, including 11 Samsung stores, positioning its offering in electronics, stationery, gaming and the limited book retail offering.
Original article by Palesa Vuyolwethu Tshandu for The Sunday Times
South Africa’s troubled retailer, Edcon Group, has said that it would appoint Grant Pattison, the former Massmart boss, as its new chief executive next February in a vote of confidence for home grown talent.
South African-born Pattison has been tasked with implementing the group’s strategy, revitalising CNA, growing Edcon’s cellular business and growing the company in South Africa and the rest of the African continent.
Speaking to journalists at the company’s headquarters in Johannesburg yesterday, Pattison said he planned to step up to the challenge of restoring the Edcon’s image.
“The challenge of restoring Edcon to its former glory is both a privilege and a massive challenge,” he said.
Edcon has lost significant market share from local and international competitors, and was trying to claw back its diminishing customer base.
Pattison said he was not fazed by challenges in the retail sector.
“I am a professional chief executive and someone has to step and help the company through these times,” Pattison said.
Pattison, who is currently a non-executive director, will replace Bernie Brookes. Brookes will step down following a two-year tenure at Edcon.
Brookes, the former managing director of the Myer Group, is set to extend his contract, which was due to run until January next year.
To ensure a smooth transition, Pattison will be appointed as Edcon’s chief executive and chief operations officer designate on June 5, joining the executive management of the group and reporting to Brookes.
Brookes said that CNA had lost its path and the company would need to spend R100 million to revitalise the stores’ brand image.
“CNA fiddled in far too many categories. When you fiddle, you fail. We will take CNA back to its roots of being a stationery store. For example we were selling DVDs,” he said.
Brookes said that the company would eliminate the sale of items like toys at CNA.
“We will limit the sale of toys to peak periods like Christmas and Valentine’s Day,” he said.
Edcon is the largest clothing, footwear and general merchandise retailer in South Africa, completed by the sale of its Legit business for R637 million.
It operates more than 1400 stores with nine store formats and annual revenues of R25.2 billion.
The company said it had put the brakes on opening new stores and that there were 120 less stores this year compared with last year as part of the company’s plan to consolidate struggling operations.
“We have more space than any other retailer in South Africa. In some cases we have stores in the central business districts and we have stores in rural areas which are struggling because of the drought.
“We are planning to close struggling stores, and we will change labels in favour of more profitable ones,” he said.
Edcon, whose division includes Edgars, Boardmans, Red Square and mono-branded stores, has decided to exit international brands in favour of local brands.
By Dineo Faku for www.iol.co.za
Embattled Edcon company CNA has taken a new tack in a bid to generate revenue and keep customers coming through the doors by opening a Digital pop-up store on one of its larger premises in the Cresta Mall in Johannesburg.
A recent article by Hilton Tarrant for Moneyweb highlighted the plight of CNA:
CNA has become an awkward appendage, made more clear when one reads the Edcon financial statements. The group’s retail division is split into two segments: ‘Edgars’ and ‘Discount’. The latter is Jet and Legit, while the former is everything else, including the foreign brands it has launched in the country, like Topshop, River Island, and T.M. Lewin.
And then there’s CNA. Edcon CEO Jürgen Schreiber told Business Day that it’s considering the sale of “non-core stores”. There’s a lot of “non-core” in Edcon, including Boardmans and possibly Red Square, but surely CNA is first on that list?
Truth is CNA was never enough of a book shop to be a book shop. Or a toy store to be a toy store. Or a stationery outlet to be a stationery outlet. The only thing it was ever really good at was being a news agent. The huge variety of magazines available on its shelves was unmatched. But it’s 2015. Traditional news agents are either extinct or on the endangered list.
A foray into mobile phones and laptops seemed to be one bright light a few years back. But CNA never carried the breadth and depth of product to make it an obvious must-stop.
Perhaps CNA has revisited this idea with its new digital pop-up shops.