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Truworths - Abridged audited group results for the 52 weeks ended 30 June 2005
Truworths International Limited:
(Registration number 1944/017491/06)
JSE code: TRU & ISIN: ZAE000028296
Abridged audited group results for the 52 weeks ended 30 June 2005
MERCHANDISE SALES UP 21%
RECORD SALES R3.3bn
HEADLINE EARNINGS PER SHARE UP 32%
TOTAL DIVIDEND UP 44%
OPERATING MARGIN 29.8%
BALANCE SHEETS
Group
2005 2004
Audited Audited
Rm Rm
ASSETS
Non-current assets 451.4 449.1
Property, fixtures, vehicles, plant,
equipment and software 305.6 275.8
Goodwill 38.4 38.4
Investments 78.5 105.1
Loans 28.7 29.8
Deferred tax 0.2 -
Current assets 2 132.8 1 638.6
Inventories 262.3 198.0
Trade and other receivables 1 216.9 963.2
Prepayments 21.7 23.0
Cash and cash equivalents 631.9 454.4
Total assets 2 584.2 2 087.7
EQUITY AND LIABILITIES
Share capital 0.1 0.1
Share premium 197.1 177.4
Retained earnings 1 936.5 1 553.0
2 133.7 1 730.5
Treasury shares (330.2) (275.3)
Shareholders" equity 1 803.5 1 455.2
Minority interest 13.2 12.1
Total shareholders" equity 1 816.7 1 467.3
Non-current liabilities 84.6 127.3
Deferred tax 20.5 62.8
Post-retirement medical benefit obligation 20.9 17.9
Operating lease obligation 43.2 46.6
Current liabilities 682.9 493.1
Trade and other payables 416.9 336.6
Short-term provisions 0.2 0.4
Current tax payable 265.8 156.1
Total liabilities 767.5 620.4
Total equity and liabilities 2 584.2 2 087.7
Number of shares in issue
(millions)* 447.5 446.4
Net asset value per share (cents) 403.0 326.0
* adjusted for treasury shares
INCOME STATEMENTS
Group
2005 2004
Rm Rm
Audited Audited
Note 52 weeks 52 weeks
Revenue 3 3 512.3 2 903.9
Sale of merchandise 3 286.0 2 718.7
Cost of sales (1 540.7) (1 287.3)
Gross profit 1 745.3 1 431.4
Depreciation (71.8) (68.8)
Occupancy costs (231.9) (201.5)
Employment costs (382.1) (348.9)
Other operating costs (243.2) (214.6)
Trading profit 816.3 597.6
Dividends received 2.0 2.7
Interest received 161.7 145.7
Profit before finance costs,
exceptional items and tax 980.0 746.0
Finance costs - (0.2)
Profit before exceptional
items and tax 980.0 745.8
Exceptional items 4 - 15.4
Profit before tax 980.0 761.2
Income tax expense (329.3) (243.5)
Profit after tax 650.7 517.7
Minority interest (2.7) (0.5)
Net profit for the period 648.0 517.2
Cents per share:
Dividends 69.0 48.0
Final - Payable September 2005 37.0 27.0
Interim - Paid March 2005 32.0 21.0
Headline earnings 5 144.8 110.0
Basic earnings 144.8 113.0
Fully diluted headline earnings 140.8 107.4
Fully diluted basic earnings 140.8 110.4
STATEMENTS OF CHANGES IN TOTAL SHAREHOLDERS" EQUITY
GROUP
Share capital Retained
and premium earnings
Rm Rm
Balance at 30 June 2003 153.3 1 262.7
AC105 lease adjustment - (33.1)
Restated balance
as at 30 June 2003 153.3 1 229.6
Net profit for
the period - 517.2
Minority interest
in business acquired - -
Dividends - (193.8)
Shares issued
net of expenses 24.5 -
Sale of shares
held by share trust (0.3) -
Shares repurchased - -
Balance at
30 June 2004 177.5 1 553.0
Net profit
for the period - 648.0
Dividends - (264.5)
Shares issued
net of expenses 19.7 -
Shares repurchased - -
Balance at 30 June 2005 197.2 1 936.5
Total
share-
Treasury Minority holders"
shares interest equity
Rm Rm Rm
Balance at 30 June 2003 (81.0) - 1 335.0
AC105 lease adjustment - - (33.1)
Restated balance
as at 30 June 2003 (81.0) - 1 301.9
Net profit for
the period - 0.5 517.7
Minority interest
in business acquired - 11.6 11.6
Dividends - - (193.8)
Shares issued
net of expenses - - 24.5
Sale of shares
held by share trust 0.3 - -
Shares repurchased (194.6) - (194.6)
Balance at
30 June 2004 (275.3) 12.1 1 467.3
Net profit
for the period - 2.7 650.7
Dividends - (1.6) (266.1)
Shares issued
net of expenses - - 19.7
Shares repurchased (54.9) - (54.9)
Balance at 30 June 2005 (330.2) 13.2 1 816.7
CASH FLOW STATEMENTS
Group
2005 2004
Rm Rm
52 weeks 52 weeks
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading 892.7 671.6
Dividends received 2.0 2.7
Cash earnings before interest, tax,
depreciation and amortisation 894.7 674.3
Working capital movements (237.7) (139.6)
Cash generated from operations 657.0 534.7
Finance costs - (0.2)
Interest received 160.0 144.4
Tax paid (262.0) (205.2)
Cash inflow from operations 555.0 473.7
Dividends paid (265.9) (193.6)
Net cash from operating activities 289.1 280.1
CASH FLOWS FROM INVESTING ACTIVITIES
Net operational assets acquired (101.6) (60.3)
Cash flow on business acquired net of cash - (25.6)
Loans advanced (0.2) (8.3)
Loans repaid 1.4 0.4
Decrease in investments 24.7 5.5
Net cash used in investing activities (75.7) (88.3)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on share issue 19.7 24.5
Shares repurchased by subsidiary (54.9) (194.6)
Sale of shares held by share trust - 0.3
Retirement benefit obligation payment (0.7) (22.8)
Net cash used in financing activities (35.9) (192.6)
Net increase/(decrease) in
cash and cash equivalents 177.5 (0.8)
Net cash inflow from
discontinued operations - 10.1
Cash and cash equivalents for the period 177.5 9.3
Cash and cash equivalents at
the beginning of the period 454.4 445.1
Cash and cash equivalents at
the end of the period 631.9 454.4
Cash flow per share (cents) 124.0 103.5
Cash equivalent earnings per share (cents) 152.4 125.9
Cash realisation rate (%) 81.4 82.2
NOTES
1 Basis of preparation
The information in this announcement has been extracted from the group"s 2005
audited annual financial statements, which have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice and
which have been audited by the group"s external auditors, Ernst & Young, whose
unqualified audit opinion is available for inspection at the company"s
registered office.
2 Accounting policies
The accounting policies adopted in the preparation of the group"s audited
annual financial statements are consistent in all material respects with those
applied in the prior period.
Audited Audited
52 weeks 52 weeks
2005 2004 Change
Rm Rm %
3 Revenue
Sale of merchandise 3 286.0 2 718.7
Commission received 33.1 17.3
Display fees received 14.4 6.6
Dividends received 2.0 2.7
Investment interest received 39.7 38.0
Trade receivables interest received 122.0 107.7
Lease rental income received 9.2 8.3
Royalties received 1.4 1.6
Warehousing and
management fees received 4.5 3.0
3 512.3 2 903.9 21
4 Exceptional items
Distributions from
discontinued operations - 10.1
Release of discontinued
operations provisions - 5.3
- 15.4
5 Headline earnings
Headline earnings
have been calculated in
terms of SAICA
Circular 7/2002 as follows:
Net profit for the period 648.0 517.2
Exceptional items - (15.4)
Amortisation of goodwill - 1.7
Headline earnings 648.0 503.5 29
6 Capital commitments
Capital expenditure
authorised but not
contracted for:
Computer equipment and software 24.4 26.2
Fixtures, fittings,
plant and equipment 83.2 77.2
107.6 103.4 4
7 Comparative figures
Comparative figures in respect of royalties received has been
restated in revenue.
DIVIDEND
The directors have resolved to declare a final dividend in respect of the year
ended 30 June 2005 in the amount of 37.0 (2004: 27.0) cents per share to holders
of the company"s shares reflected in the company"s register on the record
date, being Friday 9 September 2005.
The last day to trade in the company"s shares cum dividend is Friday 2
September 2005. Trading in the company"s shares ex dividend will commence on
Monday 5 September 2005. The dividend will be paid in South African Rand on
Monday 12 September 2005.
Consequently no dematerialisation or rematerialisation of the company"s shares
may take place over the period from Monday 5 September 2005 to Friday 9
September 2005, both days inclusive.
In accordance with the company"s articles of association, the directors have
determined that dividends amounting to less than 1 000 cents due to any one
holder of the company"s shares held in certificated form will not be paid,
unless otherwise requested in writing, but aggregated with other such amounts
and donated to a registered charity to be nominated by the directors.
By order of the board
C Durham Cape Town
Company Secretary 18 August 2005
COMMENTS
Truworths International Limited is an investment holding company listed on the
JSE Limited. Its trading subsidiaries are engaged either directly or through
franchises and agencies, in the retailing of fashion apparel and related
merchandise. The group operates primarily in southern Africa.
The retail environment
High levels of consumer confidence continued to prevail as a result of the
successful management of the domestic economy over the past decade. The retail
sector enjoyed another period of good growth as consumers" disposable income
benefited from lower interest rates and a reduction in personal taxation, and
evidence of a structural change in the country"s transforming economy became
apparent.
Group results
As a consequence of the vibrancy of the fashion retail sector and the success of
our business philosophy and strategies, headline earnings per share for the 52-
week period to 30 June 2005 increased by 32% to 144.8 cents. Fully diluted
headline earnings increased 31% to 140.8 cents. The return on average
shareholders" equity increased to 40% and there was a 24% rise in net asset
value per share to 403.0 cents.
A final dividend of 37 cents per share has been declared. Together with the
interim dividend of 32 cents per share, this is 44% more than the distribution
to shareholders for 2004. The dividend cover was reduced to 2.1 times headline
earnings.
Sales of merchandise, including franchise sales, increased 21% to R3.3
billion, with a growth of 9% in retail space, through opening of nine
Truworths stores, one Truworths Man store and 12 Identity stores. Comparable
store sales grew by 14% over the period and product inflation was
approximately 5%. All merchandise divisions showed strong growth as indicated
below:
Sales Rm % change
on 2004
Truworths 2 110 18
Truworths Man 575 21
Daniel Hechter 337 28
Identity 247 43
3 269 21
Franchise 17 (6)
Total 3 286 21
The group"s overall performance reflects the successful management of the risk
of fashion by ensuring ongoing excellence in its buying and merchandising
strategies together with ongoing disciplined expense management. The 33%
increase in inventories at year end was the result of the early purchase of
summer merchandise. Inventory levels have subsequently returned to normal
levels. There were further gains in market share and productivity in terms of
sales per square metre and per full-time employee. Trading profit increased by
37%, gross margin improved by 0.4% and operating costs as a percentage of sales
reduced to 28% from 31%. Unusually high growth in new stores space, the
expansion and renovation of existing stores, and the first time inclusion of YDE
stores for the full year, have accounted mainly for the increase in operating
costs.
Young Designers" Emporium (YDE) achieved a 19% growth in agency sales to R149
million and although its earnings for the period were in line with
management"s expectations, there are clearly opportunities for significant
improvements in forthcoming years.
There was a noticeable growth in credit uptake during the period from both new
and existing accounts. The debtors" book increased by 25% to R1.2
billion, with active accounts now exceeding one million. Credit sales grew 23%
compared to 2004, and as a percentage of total retail sales were 74% compared
to 73% in 2004.
The group continued to account for bad debts in accordance with a strict ageing
policy. A doubtful debts provision has been calculated on a basis consistent
with that of the prior period. The quality of the debtors" book remains high.
Arrears and net bad debt, as a percentage of the book, is similar to that
reported at the end of our previous financial year.
During the period the group, together with other affected retailers, approved
a settlement arrangement with the South African Revenue Service in relation to
the taxation of its participation in container export partnerships in prior
periods. In terms of the settlement, SARS agreed to terminate its
investigation of the partnerships and waive all claims for interest and
penalties, provided the partners agreed to accelerate the recognition and
payment of portion of the taxation attributable to their participation in the
partnerships in question. In terms of the arrangement, the group made a
taxation payment of R37 million subsequent to year end. As provision was made at
the onset of the partnership participation through the deferred taxation
liability, recognition and payment of this taxation has had no material impact
on the group"s income statement. As a result of the settlement agreement no
contingent liability has been disclosed.
An analysis by management has concluded that the recently emphasised requirement
of accounting standards that operating lease expenses be brought to account on a
straight line basis over the lease period, rather than in accordance with the
annual cash flows, had an impact on opening retained earnings at 1 July 2003 of
R33.1 million after tax. The impact on current and prior year profits and
minority interest is not material.
Cash flows and financial position
The group"s financial position strengthened, with cash and cash equivalents
increasing 39% to R632 million at period end. This was despite increased working
capital requirements of R238 million, capital expenditure of R102 million,
further share buybacks amounting to R55 million and dividend payments of R266
million. Tax payments in the period amounted to R262 million.
Shortly after the reporting period, an amount of R245 million
(2004: R151 million) was paid in respect of provisional tax and creditors"
payments.
Cash earnings before interest, depreciation and amortisation
amounted to R895 million, a 33% increase on the prior period. Cash flow per
share improved 20% to 124.0 cents.
The group remains focused on the optimum utilisation of its cash resources
through suitable acquisition opportunities, share buybacks and the re-
evaluation of its dividend cover. During the period the group revised its
dividend cover to 2.1 times from 2.3 times and undertook further share
buybacks amounting to R55 million. As previously advised, the group"s
acquisition strategy is to target retail opportunities that have a synergistic
fit and which can be easily integrated into the group"s systems, management
structures and supply chain processes.
Transformation
Management has meaningfully extended its initiatives in employment equity,
skills development and corporate social investment during the year. The
group is committed to continuing a process of further transformation and
economic empowerment of its stakeholders, such that an acceptable balance
between the social imperatives and commercial benefits of such a process can
be achieved, thereby ensuring the sustainability of the group in a competitive
market sector.
Management structure
During the year, the board approved an amended management structure aimed at
providing greater focus and accountability in business units, and enhanced
career opportunities to top performing senior managers through the
establishment of divisional director and executive positions. The board is of
the view that this structure will enhance communication, reporting lines and
motivation, and lead to superior financial performance in key business units.
Outlook
The benefits of low interest and inflation rates and improved disposable
incomes, together with the further development of the structural changes
evident in the South African economy, should continue to support a buoyant
retail environment. This perspective is reflected in merchandise sales for the
seven weeks since 30 June 2005 being comfortably ahead of budget. Market share
gains, further productivity improvements for which the group has become
renowned, continued reinvigoration of the group"s brands and measured
expansion of trading space lead management to be optimistic about business
prospects in the current year, even after having regard for the significant
trading base established over previous years.
Registered office: No. 1 Mostert Street, Cape Town 8001. PO Box 600, Cape Town
8000, South Africa
Lead sponsor: Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Joint sponsor: Standard Bank of South Africa Limited
Auditors: Ernst & Young
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107, South
Africa, or Transfer Secretaries (Pty) Limited, Shop 12, Kaiserkrone Centre,
Post Street Mall, Windhoek, PO Box 2401, Windhoek, Namibia
Company secretary: C Durham
Directors: H Saven (Chairman)##++, MS Mark (CEO)*, RG Dow##++, CT Ndlovu##++,
AE Parfett##++, AJ Taylor*,
MA Thompson##++ and WM van der Merwe* *Executive
##Non-executive ++Independent
These results are available on our website
www.truworths.co.za
TRUWORTHS
TRUWORTHS MAN
DANIEL HECHTER
LTD
INWEAR
TRUWORTHS ELEMENTS
JEWELLERY
YDE
IDENTITY
Date: 18/08/2005 02:08:26 PM Supplied by www.sharenet.co.za
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