Press Releases & Interviews

Edcon announces Staff Empowerment Trust

17 June 2005

Edcon, parent company of Edgars, Jet, CNA, Boardmans and Jet Mart, today announced another step in its overall transformation plan. The company said it has established a Staff Empowerment Trust which will benefit 18 000 permanent and permanent-part time employees. Approximately 93% of the value created in terms of the transaction will accrue to Edcon's black employees.
"The Trust will be issued with Class A shares representing approximately 10,6% of the enlarged issued share capital of Edcon," explained Edcon Chief Executive, Steve Ross, "conferring voting rights and an economic interest in 10,6% of the company." All black employees will receive units in the Staff Empowerment Trust notionally linked to the ‘A' shares, proportional to their job grade.

Participation will entitle the unit holders to receive, at no cost, ordinary shares in Edcon equal to the value of the increase in the Edcon share price above R500 (at the recommended share split announced today). This will require the present share price to almost double. Edcon's share price has more than doubled each year for the past three years.

In addition, bi-annual empowerment payments, directly linked to the earnings performance of Edcon and to its dividend declarations, will be distributed to the beneficiaries from inception.

"This will ensure that our employees remain aligned with the economic interests of the company," said Ross. "We are proud of what we've accomplished together and see this as a further affirmation and formalisation of staff empowerment."

The cost to Edcon will be approximately 2.9% of its market capitalisation (@R277/share). This includes both the cost of the semi-annual empowerment payments and the conversion rights of the Class A shares. The impact on headline earnings per share will be about 5%.

Ross has indicated that the empowerment trust will have five trustees elected from the ranks of Edcon employees. Edcon may appoint up to two further independent trustees, selected on the basis of their relevant experience.

"There has been consultation at all levels of our organisation and with Saccawu representatives," added Ross. "We believe that empowering our staff will increase benefits for all shareowners. This is a simple and transparent mechanism which demonstrates
 our long-term commitment to staff, whose performance directly affects the share price."

Initially, 85% of the available units will be allocated, with the remaining 15% being set aside to attract black talent in the future. It should be noted that an estimated 16% of Edcon's ordinary shares are currently owned by black shareholders through pension/provident funds and unit trusts.

Transformation at Edcon has been an important and evolving process. As at March 2005, 87% of employees are black, as are 57% of management. Edcon is also in the process of finalising revised procurement practices with the aim of supporting suppliers to achieve transformation in their businesses. Other steps will follow to bring overall black share ownership to more appropriate levels, within the time frames which may be suggested by any future Charter for the retail sector, or by any regulatory scheme.

The staff empowerment structure will be presented to shareholders for approval at a special general meeting which will follow the Annual General Meeting on 13 July 2005. A circular detailing the transaction is being mailed to shareowners on 17 June 2005.

View previous page