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(FORMERLY SELECT RETAIL GROUP LIMITED)
(REGISTRATION NUMBER 05/17491/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("TI" OR "THE COMPANY")
ABRIDGED PRE-LISTING STATEMENT
THE ABRIDGED PRE-LISTING STATEMENT SET OUT BELOW IS NOT AN INVITATION TO THE
PUBLIC TO SUBSCRIBE FOR SHARES IN THE COMPANY.
THE INFORMATION IS PROVIDED IN TERMS OF THE LISTINGS REQUIREMENTS OF THE
JOHANNESBURG STOCK EXCHANGE ("JSE") WITH REGARDS TO ABRIDGED PRE-LISTING
STATEMENTS AND HAS BEEN EXTRACTED FROM THE DETAILED PRE-LISTING STATEMENT OF
TI, COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AS SET OUT BELOW.
1. RATIONALE FOR THE LISTING OF TI
THE DECISION BY WOOLTRU LIMITED ("WOOLTRU") TO DISTRIBUTE 186 726 558 TI SHARES
REPRESENTING 43,5% OF THE TI SHARES IN ISSUE, BY WAY OF A DIVIDEND IN SPECIE TO
ITS SHAREHOLDERS ("THE DISTRIBUTION"), WHICH WILL RESULT IN THE SEPARATE
LISTING OF TI ON THE JSE ON 11 MAY 1998, WAS TAKEN TO ACHIEVE THE FOLLOWING
OBJECTIVES:
- TO ESTABLISH A SEPARATE IDENTITY FOR TI AND RAISE THE PROFILE OF THE COMPANY
BOTH LOCALLY AND INTERNATIONALLY;
- TO CREATE THE OPPORTUNITY OF FINANCING EXPANSION INDEPENDENTLY THROUGH THE
ISSUE OF TI SHARES AND FACILITATE THE ENTERING INTO OF APPROPRIATE STRATEGIC
RELATIONSHIPS;
- TO EXPOSE THE DIRECTORSHIP, MANAGEMENT AND STAFF OF TI TO THE DEMANDS OF THE
FINANCIAL MARKET PLACE AND TO INCENTIVISE THEM BY THE OWNERSHIP OF MARKETABLE
SHARES WHICH ARE DIRECTLY LINKED TO THE PERFORMANCE OF TI; AND
- TO MAXIMISE SHAREHOLDER WEALTH BY PROVIDING INVESTORS WITH THE CHOICE OF
INVESTING IN WOOLTRU AND/OR DIRECTLY IN TI.
2. BACKGROUND TO THE FORMATION OF TI
PRIOR TO 1994, TI, AT THE TIME NAMED SELECT RETAIL GROUP LIMITED, HOUSED A
RANGE OF SPECIALISED SOUTH AFRICAN RETAIL FORMATS WITHIN THE WOOLTRU GROUP,
INCLUDING TRUWORTHS LIMITED ("TRUWORTHS"), TOPICS (PROPRIETARY) LIMITED
("TOPICS") AND LEADING CONCEPTS. IN DECEMBER 1994 A 90% INTEREST IN SPORTSGIRL
SPORTSCRAFT GROUP PROPRIETARY LIMITED ("SPORTSGIRL"), AN AUSTRALIAN FASHION
RETAILER, WAS ACQUIRED FOR R148 MILLION WHICH EXTENDED THE OPERATIONS OF THE TI
GROUP OUTSIDE SOUTH AFRICA. IN 1997 LEADING CONCEPTS WAS SOLD AND THE OWNERSHIP
OF TOPICS WAS TRANSFERRED TO WOOLTRU.
THE FOCUS AND VISION OF TI IS TO EXPAND AS AN INTERNATIONAL GROUPING OF FASHION
RETAIL BUSINESSES OPERATING IN TERMS OF THE PRINCIPLES AND PHILOSOPHY OF
TRUWORTHS. THE OPERATIONS OF TRUWORTHS AND SPORTSGIRL ARE SEPARATELY DESCRIBED
BELOW. HOWEVER, THROUGH TI, A COMMON BUSINESS PHILOSOPHY AND APPROACH IS
MAINTAINED AND WILL BE EXTENDED TO NEW ACQUISITIONS.
3. TRUWORTHS - HISTORY, NATURE OF THE BUSINESS AND PROSPECTS
3.1 HISTORY
TRUWORTHS HAD ITS BEGINNINGS IN 1917 WHEN THE FIRST STORE, OPERATING UNDER THE
NAME OF THE ALLIANCE TRADING COMPANY, OPENED IN CAPE TOWN. ALL MERCHANDISE WAS
IMPORTED AND THE STORE QUICKLY ACQUIRED A REPUTATION AS A DISTRIBUTOR OF
EXCLUSIVE FASHIONS. IN 1935 THE ALLIANCE TRADING COMPANY CHANGED ITS NAME TO
TRUWORTHS FASHION HOUSE AND COMMENCED TRADING IN JOHANNESBURG OFFERING FASHION
MERCHANDISE AND EXTENDED CREDIT FACILITIES. A SECOND STORE OPENED IN CAPE TOWN
A YEAR LATER. WITH THE ADVENT OF WORLD WAR 2 (WITH THE CONSEQUENT LIMITATIONS
ON THE ABILITY TO IMPORT FASHION GARMENTS), TRUWORTHS BEGAN TO SOURCE ITS OWN
FABRICS AND TO USE LOCAL MANUFACTURERS TO PRODUCE FASHION GOODS.
FROM THE TIME OF ITS LISTING IN 1946 TO THE TIME OF THE MERGER WITH WOOLWORTHS
HOLDINGS LIMITED ("WOOLWORTHS") IN 1981, WHICH RESULTED IN THE CREATION OF
WOOLTRU AS THE LISTED HOLDING COMPANY OF BOTH OPERATIONS AND THE DELISTING OF
TRUWORTHS, TRUWORTHS CONTINUED TO GROW IN SIZE AND PROFITABILITY. DURING THIS
PERIOD OTHER TRADING DEVELOPMENTS TOOK PLACE, INCLUDING GEOGRAPHIC EXPANSION,
WITH TRUWORTHS OWNING CHAINS IN ZIMBABWE (THEN RHODESIA) AND THE UNITED KINGDOM
AS WELL AS THE TOPICS AND TOP CENTRE CHAINS IN SOUTH AFRICA. IN THE 1960`S
TRUWORTHS` OPERATIONS ALSO INCLUDED A NUMBER OF PROFITABLE BOUTIQUE STYLE
OPERATIONS. SUBSEQUENT TO THE MERGER WITH WOOLWORTHS, TRUWORTHS CONTINUED TO
EXPAND PRINCIPALLY BY WAY OF ORGANIC GROWTH IN THE FOLLOWING AREAS:
- THE DANIEL HECHTER OPERATION, WHICH COMMENCED IN 1984, IS NOW REPRESENTED IN
6 FREE STANDING STORES AND FORMS PART OF 55 OTHER TRUWORTHS STORES, WITH AN
ANNUAL TURNOVER OF APPROXIMATELY R120 MILLION;
- TRUWORTHS MAN WAS CONCEIVED IN 1988. OVER THE PAST 10 YEARS IT HAS GROWN TO
AN ANNUAL TURNOVER OF OVER R200 MILLION. IT NOW TRADES IN 18 FREE STANDING
STORES AND IS REPRESENTED IN 145 OTHER TRUWORTHS STORES;
- L T D (LEISURE TIME DRESSING) IS THE LATEST TRUWORTHS FORMAT. IT OPENED ITS
FIRST STORE IN THE V & A WATERFRONT IN 1992 AND CURRENTLY HAS ANNUAL SALES OF
R35 MILLION. IT OPERATES IN 6 FREE STANDING STORES AND IN 19 OTHER STORES; AND
- INTERNATIONAL FRANCHISING INVOLVES ASSOCIATIONS WITH FRANCHISEES AND
LICENSEES OPERATING STORES OUTSIDE THE BORDERS OF SOUTH AFRICA. THERE ARE NOW 6
STORES OPERATING IN THE MIDDLE EAST, MOZAMBIQUE AND BOTSWANA. ANTICIPATED
ANNUAL EXPORT SALES THIS YEAR ARE R8 MILLION.
3.2 NATURE OF BUSINESS
- TRADING IDENTITIES
THE TRUWORTHS TRADING FORMULA COMPRISES INTERLINKED RETAILING CONCEPTS EACH
ENCOMPASSING A TRADING IDENTITY AND UNIQUE LIFESTYLE WHICH IS SEPARATE FROM,
YET COMPLEMENTARY TO, THE BROADER TRUWORTHS RETAILING CONCEPT. THE TRADING
CONCEPTS ARE TRUWORTHS LADIES, TRUWORTHS MAN, DANIEL HECHTER, INWEAR, L T D AND
TRUWORTHS FINE JEWELLERY. TRUWORTHS MARKETS THE LARGE MAJORITY OF ITS PRODUCTS
UNDER ITS OWN PRIVATE LABELS.
- STORE OPERATIONS
ONE OF TRUWORTHS` KEY COMPETITIVE ADVANTAGES IS ITS ABILITY TO INTERACT ITS
VARIOUS CONCEPT STORES IN THE MOST SUITABLE COMBINATION FOR EACH PHYSICAL
LOCATION. THERE ARE, FOR EXAMPLE, 18 TRUWORTHS MAN, 6 DANIEL HECHTER AND 6 L T
D STAND ALONE STORES IN ADDITION TO THE 195 TRUWORTHS LADIES STORES WITH A
COMBINATION OF THE ABOVE IN MANY INSTANCES. OVER 20 TRUWORTHS STORES ARE
MULTIPLE FORMAT FASHION EMPORIUMS WHICH INCORPORATE MOST OF THE TRUWORTHS
FORMATS IN ONE STORE AND YET STILL MAINTAIN EACH SEPARATE LIFESTYLE IDENTITY.
THE FULL FASHION EMPORIUM HAS BEEN VERY SUCCESSFUL IN EACH OF ITS LOCATIONS AND
IS IN DEMAND BY SHOPPING CENTRE DEVELOPERS AND OPERATORS OF MAJOR SHOPPING
MALLS THROUGHOUT SOUTH AFRICA. THERE ARE 219 TRUWORTHS STORES IN SOUTH AFRICA,
5 IN NAMIBIA AND 1 IN SWAZILAND. STORE OPERATIONS RANGE IN TURNOVER FROM R70
000 PER MONTH TO THE LARGER EMPORIUM STORES IN EXCESS OF R3 MILLION PER MONTH.
TRUWORTHS CONTINUES TO ASPIRE TO ITS VISION AS THE LEADING FASHION RETAILER IN
SOUTH AFRICA. CONSEQUENTLY IT IS ESSENTIAL THAT THE IMAGE AND DESIGN OF ITS
STORES REPRESENT THE CURRENT INTERNATIONAL STYLE. IN ORDER TO ACHIEVE THIS,
TRUWORTHS REMODELS ITS STORES ON A CONTINUOUS BASIS WITH ALMOST ALL STORES
BEING COMPLETELY REDESIGNED EVERY 6 TO 7 YEARS. THE COSTS OF REFURBISHMENT THIS
YEAR WILL APPROXIMATE R39,5 MILLION.
3.3 INFORMATION SYSTEMS
INFORMATION SYSTEMS AND RELATED TECHNOLOGY HAVE PLAYED A CRITICAL ROLE IN
TRUWORTHS. STABLE AND HIGHLY INTEGRATED SYSTEMS HAVE ENABLED THE BUSINESS TO
MAKE EFFECTIVE STRATEGIC AND OPERATIONAL DECISIONS, AS WELL AS ASSISTING IN THE
LOWERING OF OPERATING COSTS.
TRUWORTHS UTILISES SOPHISTICATED MERCHANDISE PLANNING SYSTEMS, COMPRISING BOTH
PURCHASED SOFTWARE AND PROGRAMS DEVELOPED IN-HOUSE ON THE BASIS OF
INTERNATIONAL BEST PRACTICES, WHICH ENABLE THE MERCHANDISE INFORMATION TO BE
UPDATED AND FINE-TUNED REGULARLY IN RESPONSE TO CHANGING CONSUMER DEMANDS.
THESE SYSTEMS ALLOW MANAGEMENT TO CONTROL INVENTORY IN A PRECISE AND DYNAMIC
WAY AND TO EFFECT CHANGES TO PLANNED STOCK LEVELS ON AN ONGOING BASIS. THEY
ENSURE RAPID REACTION TO CHANGING SALES PATTERNS AND ARE ABLE, ON A DAILY
BASIS, TO TRACK THE MERCHANDISE PERFORMANCES IN TERMS OF STYLE, COLOUR AND SIZE
BY STORE.
ALL STORES ARE EQUIPPED WITH ELECTRONIC POINT-OF-SALE EQUIPMENT AND ARE LINKED,
ON A REAL TIME BASIS, ACROSS THE COUNTRY. IN THE LAST 3 FINANCIAL YEARS
TRUWORTHS HAS SPENT APPROXIMATELY R18 MILLION ON TECHNOLOGY AND IS COMMITTED TO
CONTINUE INVESTING TO ENSURE THAT DECISION MAKERS ARE SUPPORTED BY THE BEST
TECHNOLOGY AVAILABLE.
STATE OF THE ART TECHNOLOGY HAS ENABLED TRUWORTHS TO OPEN WINDOWS OF
OPPORTUNITY WHICH WERE PREVIOUSLY UNAVAILABLE INCLUDING THE IMPLEMENTATION OF
NEW AND CREATIVE METHODS OF ASSESSING CUSTOMER`S INDIVIDUAL NEEDS BOTH FOR
CREDIT AND FOR MARKETING ACTIVITIES.
3.4 CREDIT SERVICES
THE PROVISION OF AFFORDABLE AND RESPONSIBLE CREDIT HAS BEEN PART OF THE
TRUWORTHS SUCCESS STORY FOR MANY YEARS. FOR OVER 40 YEARS TRUWORTHS HAS GRANTED
ITS CUSTOMERS CREDIT ON A 6 MONTHS INTEREST FREE BASIS. TRUWORTHS HAS MORE
RECENTLY INTRODUCED A 12 MONTHS INTEREST BEARING CREDIT PLAN AND, IN THE
INSTANCE OF JEWELLERY, FOR PERIODS RANGING FROM 12 TO 24 MONTHS FOR THOSE OF
ITS CUSTOMERS WHO CHOOSE TO PURCHASE ON AN EXTENDED PAYMENT PLAN.
TRUWORTHS` INVESTMENT IN DEBTORS, CONSISTING OF 900 000 CUSTOMERS, COMPRISES
APPROXIMATELY R400 MILLION. CREDIT SALES, WHICH APPROXIMATE 75% OF TURNOVER,
NUMBER ON AVERAGE 350 000 TRANSACTIONS PER MONTH. OF SIGNIFICANCE IS THE RAPID
TRANSFORMATION OF THE ACCOUNT BASE TO ACCURATELY REFLECT THE POPULATION
DEMOGRAPHICS OF SOUTH AFRICA. TRUWORTHS ENCOURAGES THE TRANSFORMATION OF ITS
ACCOUNT BASE AS IT WELCOMES INTO ITS STORES THE MANY THOUSANDS OF PREVIOUSLY
DISADVANTAGED SOUTH AFRICANS.
DEBTORS RISK MANAGEMENT SYSTEMS ENABLE IT TO PROFESSIONALLY MANAGE THE RISK
INHERENT IN THE CREDIT BOOK MORE EFFECTIVELY THAN BEFORE AND, WITH ENCOURAGING
RESULTS ESPECIALLY OVER THE PAST FEW MONTHS.
PROVISION FOR DOUBTFUL DEBTS IS ASSESSED ON A MONTHLY BASIS BY CALCULATING THE
STATISTICAL RISK OF DELINQUENCY, WHICH IS DEPENDENT ON A NUMBER OF FACTORS
INCLUDING THE BEHAVIOURAL AND RISK PROFILE OF EACH ACCOUNT.
THE PROVISION FOR DOUBTFUL DEBTS AT THE END OF FEBRUARY 1998, WHICH IS
STATISTICALLY CALCULATED, REPRESENTS APPROXIMATELY 4,5% OF GROSS DEBTORS.
TRUWORTHS MANAGEMENT CONSIDERS THE CURRENT STATISTICAL TRENDS TO BE FAVOURABLE.
ALL BAD DEBTS HAVE BEEN FULLY PROVIDED FOR IN THE HISTORICAL DATA.
OVER THE PAST NINE MONTHS CREDIT SALES HAVE INCREASED BY 7% AND CASH SALES BY
14%. THIS CONTAINMENT OF GROWTH IN CREDIT SALES IS A DIRECT RESULT OF THE
APPLICATION OF RESTRICTIVE CREDIT BECAUSE OF MANAGEMENT`S DESIRE TO CAREFULLY
MANAGE RISK IN THE PREVAILING ECONOMIC CLIMATE.
3.5 PROSPECTS
3.5.1 TRACK RECORD
TRUWORTHS HAS SHOWN A COMPOUND GROWTH IN PROFIT BEFORE INTEREST AND TAXATION OF
28% PER ANNUM OVER THE PAST TEN YEARS. OVER THE LAST FIVE YEARS CONSISTENT
COMPOUND GROWTH IN PROFIT BEFORE INTEREST AND TAXATION OF 15% PER ANNUM HAS
BEEN ACHIEVED. THIS RESULT HAS BEEN ACHIEVED IN A PERIOD WHICH HAS ARGUABLY
BEEN ONE OF THE MOST DIFFICULT FOR FASHION RETAILERS IN SOUTH AFRICA FOR MANY
YEARS.
UNDER THESE CIRCUMSTANCES TRUWORTHS HAS ACHIEVED PRE-TAX MARGINS CONSISTENTLY
IN EXCESS OF 18%. UNDOUBTEDLY, THE REASONS FOR TRUWORTHS` CONSISTENT
PERFORMANCE ARE MANY, BUT ESSENTIALLY CENTRE ON TRUWORTHS` UNIQUE CAPACITY TO
BUILD ON THE TRUWORTHS NAME, NEW FORMATS AND CONCEPTS WHICH GROW INTO UNIQUE
ASPIRATIONAL BRANDS THEMSELVES. THESE ASPIRATIONAL FORMATS NOT ONLY GENERATE
SUBSTANTIAL PROFITS, THEY ALSO ENHANCE TRUWORTHS` POSITION AND IMAGE IN THE
MARKET PLACE.
3.5.2 CAPACITY FOR GROWTH
PERHAPS THE MOST EXCITING PROSPECT OF ALL IS IN THE FUTURE OF TRUWORTHS ITSELF.
TRUWORTHS` IS A HIGHLY REGARDED BRAND IN THE MARKET AND HAS YET TO BE
DEVELOPED TO ITS CAPACITY. TRUWORTHS IS MORE THAN A STORE; IT IS A HIGHLY
REGARDED BRAND WHICH IS ASPIRATIONAL TO YOUTHFUL SOUTH AFRICANS IRRESPECTIVE OF
AGE, SEX OR RACE. DESPITE ITS SIZE, ITS APPEAL TO LANDLORDS THROUGHOUT SOUTH
AFRICA AND ITS HIGH DENSITY TRADING (SALES/SQUARE METRE) IT NEVERTHELESS ONLY
HAS A MARKET SHARE OF ABOUT 15% OF THE MEASURED MARKET AS QUOTED BY THE RETAIL
LIAISON COMMITTEE.
OVER TIME, AND WITH A RAPID EXPANSION STRATEGY, IT SHOULD CONTINUE TO GROW
MARKET SHARE IRRESPECTIVE OF THE CIRCUMSTANCES IN THE ECONOMY. GIVEN THE
PROSPECT OF AN IMPROVING ECONOMIC CLIMATE EVOLVING IN SOUTH AFRICA INCLUDING
DECLINING INTEREST RATES, LOWER INFLATION, A RELATIVELY STABLE CURRENCY AND
DEMUTUALISATION, PROSPECTS SHOULD BECOME BUOYANT.
CONTINUED GROWTH IN THE TRUWORTHS LADIES BUSINESS HAS BEEN LIMITED BY SPACE
AVAILABILITY IN THE MAJOR SHOPPING MALLS. OVER THE PAST 18 MONTHS MANAGEMENT
HAS EMBARKED ON A CONCERTED EFFORT TO ACQUIRE ADDITIONAL SPACE IN PRIME TRADING
LOCATIONS. THIS INITIATIVE WILL CONTINUE TO BE AN AREA OF ATTENTION IN THE
SHORT TO MEDIUM TERM.
THE REMAINING FORMATS TRUWORTHS MAN, DANIEL HECHTER, L T D AND TRUWORTHS FINE
JEWELLERY ARE RELATIVELY SMALL IN SIZE IN EACH MARKET. THEY EACH HAVE GROWTH
POTENTIAL AS THEY DEVELOP AND INCREASE MARKET SHARE IN RELATION TO THEIR MORE
MATURE COMPETITORS.
THE AREA OCCUPIED BY THE VARIOUS TRUWORTHS FORMATS HAS INCREASED BY 19 200
SQUARE METRES IN THE LAST FOUR YEARS TO 95 000 SQUARE METRES CURRENTLY
OCCUPIED. GROWTH OF 20 000 SQUARE METRES IN THE NEXT THREE YEARS IS EXPECTED.
4. SPORTSGIRL - HISTORY, NATURE OF THE BUSINESS AND PROSPECTS
4.1 HISTORY
SPORTSGIRL IS ONE OF AUSTRALIA`S LEADING SPECIALITY FASHION RETAILERS. FOR OVER
75 YEARS SPORTSGIRL HAS BEEN A DESIGNER AND WHOLESALER OF QUALITY FASHION AND
FOR OVER 45 YEARS IT HAS RETAILED ITS PRODUCTS TO YOUTHFUL AUSTRALIAN MEN AND
WOMEN. IT HAS EARNED AN EXCELLENT REPUTATION FOR CONSISTENCY AND VALUE. ITS
FAMILY OF WELL-KNOWN IN-HOUSE BRANDS COVERS THE LIFESTYLE OF AUSTRALIA`S
FASHION-AWARE QUALITY-CONSCIOUS MEN AND WOMEN. 'SPORTSGIRL', 'SPORTSCRAFT' AND
'DAVID LAWRENCE' ARE AMONGST THE BETTER-KNOWN FASHION BRANDS IN AUSTRALIAN
RETAILING.
SPORTSGIRL WAS ACQUIRED WITH THE INTENTION OF NOT ONLY DEVELOPING TI
INTERNATIONALLY, IN THE CONTEXT OF TI`S STATED PHILOSOPHY, BUT WITH THE
ENVISAGED OPPORTUNITIES OF EFFECTING SYNERGIES AND RETURNING SPORTSGIRL TO
POSITIVE PERFORMANCES. WITH THIS INTENTION A CLOSE WORKING RELATIONSHIP
DEVELOPED, PARTICULARLY WITH REFERENCE TO MERCHANDISE SELECTION, RANGES AND
PROCESSES.
THERE ARE CURRENTLY 141 'SPORTSGIRL', 'SPORTSCRAFT' AND DESIGN RELATED STORES
IN AUSTRALIA AND 24 CONCEPT STORES WITHIN RECOGNISED RETAIL OUTLETS SUCH AS
DAVID JONES, AHERNS AND JOHN MARTINS. IN ADDITION THERE ARE 17 'SPORTSGIRL'
AND 'SPORTSCRAFT' STAND ALONE STORES IN NEW ZEALAND AND 6 SPORTSGIRL` CONCEPT
STORES IN SINGAPORE.
ANNUAL TURNOVER FOR SPORTSGIRL IN 1997 WAS APPROXIMATELY A$179 MILLION (R632
MILLION).
4.2 NATURE OF BUSINESS
THE BUSINESS CARRIED ON BY SPORTSGIRL CURRENTLY COMPRISES:
- SPORTSGIRL (INCLUDING DAVID LAWRENCE) AND SPORTSCRAFT RETAIL OPERATIONS; AND
- A MANUFACTURING DIVISION.
4.2.1 RETAIL OPERATIONS
SIMILARLY TO TRUWORTHS, SPORTSGIRL HAS ALSO DEVELOPED STORES AS BRANDS AND
BRANDS AS STORES UNDER THE BRAND NAMES OF SPORTSGIRL, SPORTSCRAFT AND DAVID
LAWRENCE. THE CONCEPTS ARE DESIGNED TO WORK ADJACENT TO ONE ANOTHER OR IN STAND
ALONE POSITIONS. THE CONCEPTS ARE VISUALLY EXCITING AND REFLECT THE PRESTIGE OF
THE BRANDS. MANAGEMENT HAS ALSO RECENTLY EMBARKED UPON EMPORIUM-STYLE STORES
WITH ENCOURAGING RESULTS.
4.2.2 MANUFACTURING DIVISION
THE MANUFACTURING DIVISION, IN ADDITION TO SUPPLYING SPORTSGIRL AND
SPORTSCRAFT, DIRECTS MORE THAN 50% OF ITS PRODUCTION TO OUTSIDE CUSTOMERS. THE
LARGEST DEPARTMENT STORES IN AUSTRALIA ARE NOW ACTIVE CUSTOMERS OF THE
MANUFACTURING OPERATION.
CURRENT ANNUAL TURNOVER IS OVER A$20 MILLION (R67 MILLION), OF WHICH OVER A$14
MILLION (R47 MILLION) IS WITH THIRD PARTIES.
4.3 PROSPECTS
DEPRESSED ECONOMIC CONDITIONS AND MODEST PRODUCT SELECTION WERE THE CAUSE OF
THE DECLINE IN PROFITS FOR THE 6 MONTHS ENDED 31 DECEMBER 1997 TO A$1 MILLION
(DOWN FROM A$1,7 MILLION FOR THE SAME PERIOD THE PREVIOUS YEAR). THESE SAME
FACTORS ARE LIKELY TO CAUSE THE RESULTS FOR THE FULL YEAR TO BE UNEXCITING.
HOWEVER, SPORTSGIRL MANAGEMENT HAS OVER THE PAST THREE YEARS MADE GREAT STRIDES
IN MANY KEY AREAS OF THE BUSINESS. MODERN INFORMATION TECHNOLOGY HAS BEEN
INSTALLED AT HEAD OFFICE AND STORES, EXPENSES HAVE BEEN REDUCED, AN APPEALING
NEW STORE DESIGN HAS BEEN LAUNCHED WHICH HAS PROVED SUCCESSFUL AND PROFESSIONAL
MANAGEMENT PROCESSES HAVE BEEN INITIATED IN THE MERCHANDISE AREA. THIS HAS
RESULTED, FOR EXAMPLE, IN STOCK LEVELS BEING 15 % DOWN ON THE PREVIOUS YEAR IN
DECEMBER 1997.
HOWEVER THE ONLY AREA THAT HAS YET TO DELIVER TO EXPECTATION IS THE MOST
IMPORTANT OF ALL, THE PRODUCT. THIS IS NOW THE KEY MANAGEMENT FOCUS. A NEW
BUYING TEAM HAS BEEN RECRUITED AND CO-OPERATION WITH TRUWORTHS IN DESIGN AND
BUYING IS IN THE PROCESS OF BEING FORMALISED.
SALES GROWTH IS THE KEY TO FUTURE SUCCESS. THE BRANDS ARE WELL REGARDED IN THE
MARKET PLACE AND SO CONSISTENT SUPPLY OF APPROPRIATE WANTED FASHION WILL RESULT
IN SALES AND PROFIT GROWTH. SUCCESS HERE WILL ENABLE THE GOAL OF 6% TO 8%
OPERATING RETURN ON SALES TO BECOME A REALITY.
5. TI PROSPECTS
TIS` PROSPECTS CAN BE EXAMINED BY EXTRACTING THE INDIVIDUAL COMPONENTS OF ITS
STRATEGY:
- TRUWORTHS, WHICH CONTRIBUTES ALMOST ALL OF TI`S PROFITS, IS A SOUNDLY MANAGED
RETAIL BUSINESS WITH A PROVEN TRACK RECORD AND WITH OPPORTUNITIES FOR EXCITING
GROWTH IN EACH OF ITS UNDERLYING BUSINESSES (TRUWORTHS LADIES, TRUWORTHS MAN,
DANIEL HECHTER, L T D, AND TRUWORTHS FINE JEWELLERY);
- THE INVESTMENT IN SPORTSGIRL IS SMALL IN RELATION TO TI`S CAPITALISATION
(ABOUT 5% TO 7%). SHOULD THE APPLICATION OF THE TRUWORTHS METHODOLOGY AND
RETAIL PHILOSOPHIES PROVE TO BE SUCCESSFUL, OPERATING PROFITS OF 6% TO 8% OF
SALES ARE ACHIEVABLE IN THE NEXT NUMBER OF YEARS. AS SPORTSGIRL HAS TAX LOSSES
OF ABOUT A$96 MILLION, CONTRIBUTION TO TI WOULD THEN BE SIGNIFICANT; AND
- OTHER OPPORTUNITIES ARE BEING SOUGHT BOTH WITHIN SOUTH AFRICA AND ABROAD. AS
TRUWORTHS IS UNGEARED AND FOLLOWING THE LISTING, TI WILL HAVE THE ABILITY TO
RAISE CAPITAL, TI WILL ACTIVELY SEEK TO ACQUIRE BUSINESSES WITH OPPORTUNITIES
FOR EXPANSION THAT CAN BENEFIT FROM TRUWORTHS` METHODOLOGIES AND TECHNOLOGY.
INVESTMENTS WILL BE CONTAINED TO ENSURE TRUWORTHS` RESOURCES ARE NOT UNDULY
STRETCHED. IN ORDER TO ACHIEVE THIS OBJECTIVE, STRATEGIC INVESTMENTS WILL BE A
FEW, CLEARLY SYNERGISTIC WITH TRUWORTHS, AND MUST ALREADY EMPLOY COMPETENT AND
COMMITTED MANAGEMENT.
6. SHARE CAPITAL
AS AT 11 MAY 1998, THE DATE OF LISTING OF TI, THE AUTHORISED AND ISSUED SHARE
CAPITAL OF THE COMPANY WILL BE AS FOLLOWS:
R000'S
AUTHORISED
650 000 000 ORDINARY SHARES OF 0,015 CENT PER SHARE 98
ISSUED
429 307 896 ORDINARY SHARES OF 0,015 CENT PER SHARE 64
SHARE PREMIUM 80 953
81 017
7. FINANCIAL INFORMATION
7.1 INCOME STATEMENTS
THE CONSOLIDATED INCOME STATEMENTS OF THE TI GROUP FOR THE YEAR ENDED 30 JUNE
1997 AND EACH OF THE PRECEDING FOUR YEARS HAVE BEEN EXTRACTED FROM THE
INDEPENDENT REPORTING ACCOUNTANTS` REPORT. THE AUDITOR`S REPORTS CONTAINED IN
THE FINANCIAL STATEMENTS OF TI FOR THE YEAR ENDED 30 JUNE 1997 AND FOR EACH OF
THE PRECEDING FOUR YEARS WERE ISSUED WITHOUT QUALIFICATION.
1997 1996 1995 1994 1993
R000'S R000'S R000'S R000'S R000'S
REVENUE 1 696 112 1 448 660 1 071 569 729 706 626 173
NET PROFIT BEFORE
EXCEPTIONAL ITEMS 202 605 177 286 145 868 135 450 105 995
EXCEPTIONAL ITEMS (8 883) 11 765 - - (1 087)
NET PROFIT
BEFORE TAXATION 193 722 189 051 145 868 135 450 104 908
TAXATION (66 706) (60 512) (53 317) (57 016) (44 469)
NET PROFIT AFTER
TAXATION 127 016 128 539 92 551 78 434 60 439
MINORITY INTERESTS (1 491) (338) 627 - -
NET PROFIT ATTRIBUTABLE
TO ORDINARY
SHAREHOLDERS 125 525 128 201 93 178 78 434 60 439
EARNINGS PER SHARE
(CENTS) 29,6 30,7 23,0 19,4 15,0
HEADLINE EARNINGS
PER SHARE (CENTS) 31,2 27,6 22,6 18,9 14,8
DIVIDEND PER SHARE
(CENTS)* 11,1 9,9 8,1 6,8 5,3
NET ASSET VALUE
PER SHARE (CENTS) 114,7 89,9 62,8 56,2 40,0
RATE OF TAXATION (%) 34,4 32,0 36,6 42,1 42,4
WEIGHTED AVERAGE
NUMBER OF SHARES
IN ISSUE (000'S)** 424 740 417 771 404 954 404 010 404 000
* THE DIVIDEND PER SHARE IS BASED ON A DIVIDEND COVER OF 2,8 TIMES IN RELATION
TO HEADLINE EARNINGS WHICH REFLECTS THE COMPANY'S INTENDED DIVIDEND POLICY AND
WHICH ASSUMES A DIVIDEND DISTRIBUTION IN THE FORM OF CASH.
** THE WEIGHTED AVERAGE NUMBER OF SHARES IN ISSUE HAVE BEEN RETROSPECTIVELY
ADJUSTED FOR THE CONSOLIDATION OF 639 376 002 SHARES OF 0,01 CENT EACH INTO
426 250 668 SHARES OF 0,015 CENT EACH.
CAPITALISATION SHARES ISSUED IN LIEU OF DIVIDEND DECLARATIONS ARE
PROPORTIONATELY WEIGHTED IN TERMS OF THE PERIOD IN WHICH THEY ARE ISSUED BUT
ARE NOT RETROSPECTIVELY ADJUSTED FOR, IN THE DETERMINATION OF THE WEIGHTED
AVERAGE NUMBER OF SHARES IN ISSUE, IN ANY GIVEN YEAR.
7.2 OPERATING STATISTICS
7.2.1 OPERATING STATISTICS OF TRUWORTHS
1997 1996 1995 1994 1993
TURNOVER (R000'S) 1 004 997 912 140 799 982 715 848 612 846
GROWTH IN TURNOVER (%) 10,2 14,0 11,8 16,8 16,9
NET PROFIT BEFORE
EXCEPTIONAL ITEMS
AND TAXATION (R000'S) 193 623 173 181 152 752 135 723 104 908
GROWTH IN NET
PROFIT BEFORE
EXCEPTIONAL ITEMS
AND TAXATION (%) 11,8 13,4 12,6 29,4 19,4
NET PROFIT BEFORE
EXCEPTIONAL ITEMS
AND TAXATION TO
TURNOVER (%) 19,3 19,0 19,1 19,0 17,1
NUMBER OF STORES 221 216 209 202 194
TRADING AREA (M2) 93 007 88 066 83 076 78 414 73 820
NUMBER OF EMPLOYEES 2 728 2 733 2 828 2 698 2 722
TURNOVER PER
EMPLOYEE (R000'S) 368 334 283 265 225
TURNOVER PER
SQUARE METRE (R'S) 10 806 10 357 9 630 9 129 8 302
7.2.2 OPERATING STATISTICS OF SPORTSGIRL
1997 1996 1995
TURNOVER (A$000'S) 179 000 170 000 164 000
GROWTH IN TURNOVER (%) 5,3 3,7 (15,5)
NET PROFIT BEFORE
EXCEPTIONAL ITEMS
AND TAXATION (A$000'S) 2 022 751 (13 300)
GROWTH IN NET PROFIT
BEFORE EXCEPTIONAL ITEMS
AND TAXATION (%) 169,2 - 39,3
NET PROFIT BEFORE
EXCEPTIONAL ITEMS AND
TAXATION TO TURNOVER (%) 1,1 0,4 (8,1)
NUMBER OF STORES 173 154 135
TRADING AREA (M2) 37 864 34 782 32 221
NUMBER OF EMPLOYEES 958 880 770
TURNOVER PER EMPLOYEE (A$000'S) 187 193 213
TURNOVER PER
SQUARE METRE (A$'S) 4 727 4 888 5 090
NOTE: MANAGEMENT CONTROL OF SPORTSGIRL WAS ASSUMED BY TI IN DECEMBER 1994.
8. DIRECTORS
AREA OF RESPONSIBILITY ADDRESS
8.1 DIRECTORS OF TI
ALBERT EDWARD PARFETT NON-EXECUTIVE CHAIRMAN 8 AVENUE ST LEON,
BANTRY BAY, 8001
MICHAEL SAMUEL MARK CHIEF EXECUTIVE 27 KLAASENBOSCH
DRIVE,
CONSTANTIA, 7800
ROBERT GILMOUR DOW NON-EXECUTIVE 20 BRISTOL ROAD,
SAXONWOLD, 2196
COLIN ARTHUR HALL NON-EXECUTIVE 3 BEAUFORT ROAD,
BRYANSTON, 2021
BERRIL DAVID LAPIN NON-EXECUTIVE 1307 OZONE AVENUE,
SANTA MONICA,
CA 90405, USA
LOUISE ARLENE TAGER NON-EXECUTIVE 48 8TH AVENUE,
LOWER HOUGHTON, 2198
8.2 DIRECTORS OF TRUWORTHS
MICHAEL SAMUEL MARK EXECUTIVE CHAIRMAN 27 KLAASENBOSCH
DRIVE,
CONSTANTIA, 7800
DEREK LESLIE KOHLER RETAIL OPERATIONS 33 DUCKITT AVENUE,
CONSTANTIA, 7800
PHILIP ANTHONY MCINNES HUMAN RESOURCES 6 LE ROUX LANE,
CONSTANTIA, 7800
PHILIP EDWIN SNELLING SPECIALITY MERCHANDISE 3 BROMMAERT AVENUE,
CONSTANTIA, 7800
ANTHONY JOSEPH TAYLOR RETAIL STORES 3 VALLEY ROAD,
KENILWORTH, 7700
KEITH D. M. WARBURTON FINANCE SILVERHURST ESTATE,
CONSTANTIA ROAD,
CONSTANTIA, 7800
ROGER MORTON WYATT ARCHITECTURE & DESIGN 39 SEDGEMOOR ROAD,
CAMPS BAY, 8001
8.3 DIRECTORS OF SPORTSGIRL
MICHAEL SAMUEL MARK CHAIRMAN 27 KLAASENBOSCH
DRIVE,
CONSTANTIA, 7800
FRANCIS PATRICK WHITFORD MANAGING 63 KENSINGTON ROAD,
SOUTH YARRA
VICTORIA 3141,
AUSTRALIA
MARK STEPHEN ASHBY FINANCE 19 DOBELL DRIVE,
ELTHAM
VICTORIA 3095,
AUSTRALIA
ALBERT EDWARD PARFETT NON-EXECUTIVE 8 AVENUE ST LEON,
BANTRY BAY, 8001
KEVIN MARTIN WINTERBURN RETAIL OPERATIONS 114 POLARIS DRIVE,
TEMPLESTOWE
VICTORIA 3106,
AUSTRALIA
9. LISTING OF SHARES ON THE JSE
THE JSE HAS GRANTED A LISTING OF ALL OF THE ISSUED SHARE CAPITAL OF TI IN THE
INDUSTRIAL - "STORES" SECTOR OF THE JSE LIST WITH EFFECT FROM THE COMMENCEMENT
OF BUSINESS ON 11 MAY 1998 UNDER THE ABBREVIATED NAME "TRUWTHS".
10. DETAILED PRE-LISTING STATEMENT
COPIES OF A CIRCULAR TO WOOLTRU SHAREHOLDERS AND THE PRE-LISTING STATEMENT OF
TI, WILL BE AVAILABLE FROM TODAY, 17 APRIL 1998 TO 11 MAY 1998 DURING NORMAL
BUSINESS HOURS AT :
- THE REGISTERED OFFICES OF TI, SRG HOUSE, 1 MOSTERT STREET, CAPE TOWN, 8001;
AND
- HSBC SIMPSON MCKIE (PROPRIETARY) LIMITED, HSBC PLACE, 6-9 RIVIERA ROAD,
HOUGHTON, 2198.
11. EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
RESOLUTIONS ARE TO BE PROPOSED AT AN EXTRAORDINARY GENERAL MEETING OF TI
SHAREHOLDERS TO BE HELD ON 22 MAY 1998 WHICH, IF APPROVED, WILL AUTHORISE THE
DIRECTORS OF TI TO ISSUE SHARES FOR CASH AND TO PLACE THE AUTHORISED UNISSUED
SHARE CAPITAL OF THE COMPANY UNDER THE CONTROL OF THE DIRECTORS, SUBJECT TO THE
REQUIREMENTS OF THE JSE, UNTIL THE NEXT ANNUAL GENERAL MEETING OF THE COMPANY.
12. SALIENT DATES
1998
LISTING OF TI SHARES UNDER THE ABBREVIATED NAME "TRUWTHS"
IN THE INDUSTRIAL - "STORES" SECTOR OF THE JSE LIST
WITH EFFECT FROM MONDAY, 11 MAY
TI SHARE CERTIFICATES POSTED ON OR ABOUT MONDAY, 11 MAY
EXTRAORDINARY GENERAL MEETING OF TI SHAREHOLDERS FRIDAY, 22 MAY
NOTE: THESE DATES AND TIMES MAY BE CHANGED AT THE INSTANCE OF THE COMPANY
SHOULD CIRCUMSTANCES SO REQUIRE. ANY CHANGE WILL BE PUBLISHED IN THE PRESS.
CAPE TOWN
16 APRIL 1998.
INVESTMENT HOUSE AND JOINT SPONSORING BROKERS
HSBC SIMPSON MCKIE
LEGAE SECURITIES (PTY) LIMITED
CORPORATE ADVISERS
INVESTEC MERCHANT BANKING
AUDITORS AND REPORTING ACCOUNTANTS
ERNST & YOUNG
ATTORNEYS
BERNADT VUKIC POTASH & GETZ
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