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TRUWORTHS INTERNATIONAL LIMITED
OVERVIEW
AS ANTICIPATED, GROUP HEADLINE EARNINGS IMPROVED FOLLOWING THE CURTAILMENT OF
LOSSES AT THE DISCONTINUED AUSTRALIAN SUBSIDIARY, SPORTSGIRL. THE INTERIM
RESULTS FOR THE PERIOD ENDED 31 DECEMBER 1999 INDICATED THAT MANAGEMENT DID NOT
ANTICIPATE GROWTH IN EARNINGS FROM CONTINUING OPERATIONS FOR THE FULL YEAR. IT
TRANSPIRED THAT THE CONTINUING OPERATIONS COMPRISING THE SOUTHERN AFRICAN
TRUWORTHS BUSINESS SHOWED A MARGINAL DECLINE IN HEADLINE EARNINGS, ARISING FROM
A CHANGE IN THE DEBTOR WRITE-OFF POLICY AND REDUCED INVESTMENT INCOME.
FOLLOWING THE SALE OF THE SPORTSGIRL BUSINESS, MANAGEMENT WAS ABLE TO FOCUS ON
THE TRUWORTHS BUSINESS.
COMMENTS ON RESULTS
GROUP
HEADLINE EARNINGS FROM ALL OPERATIONS INCREASED BY 19,8% TO R147,9 (1999:
R123,5) MILLION AND BY 16,4% TO 32,8 (1999: 28,2) CENTS PER SHARE. THE DECLINE
IN HEADLINE EARNINGS PER SHARE FROM CONTINUING OPERATIONS WAS 4,2% TO 37,3
CENTS.
LOSSES ARISING FROM THE DISCONTINUANCE OF SPORTSGIRL AND AN IMPAIRMENT OF A
HEADLEASE INVESTMENT ARE REFLECTED IN EXCEPTIONAL ITEMS OF R157,4 MILLION AND
RESULTED IN ATTRIBUTABLE EARNINGS DECLINING FROM A PROFIT OF R130,7 MILLION IN
1999 TO A LOSS OF R9,4 MILLION.
THE GROUP'S BALANCE SHEET IS UNGEARED, WITH HEALTHY CASH BALANCES OF R150,9
MILLION, NOTWITHSTANDING THE REPAYMENT OF SPORTSGIRL BORROWINGS OF R180,9
MILLION.
NET ASSET VALUE PER SHARE DECLINED 3,6 % TO 160,5 (1999:166,5) CENTS.
CONTINUING OPERATIONS
- TRUWORTHS
IMPROVED TURNOVER AND HIGHER REVENUES FROM FRANCHISE OPERATIONS IN AFRICA AND
THE MIDDLE EAST POSITIVELY INFLUENCED TRUWORTHS RESULTS. RETAIL SALES AT
TRUWORTHS GREW 13,5% TO R1,4 BILLION FROM R1,2 BILLION IN 1999. THIS GROWTH,
WHICH ACCELERATED IN THE LAST QUARTER, CAME THROUGH GOOD CORE DEPARTMENT SALES
AND THE RELATIVE SUCCESS OF THE NEW VENTURE INTO COSMETICS, THE ELEMENTS
CONCEPT. THE IDENTITY CASH CHAIN HAS, AFTER SOME EARLIER TEETHING PROBLEMS,
PROVED TO BE A CONCEPT WORTH DEVELOPING FURTHER.
A MORE CONSERVATIVE APPROACH TO THE WRITE-OFF OF POORLY PERFORMING DEBTORS AND
REDUCED INVESTMENT AND EXPORT PARTNERSHIP INCOME, RESULTED IN A 4,2% DECLINE IN
OPERATING PROFIT BEFORE INTEREST TO R241,3 (1999: R251,8) MILLION.
DISCONTINUING OPERATIONS
- SPORTSGIRL
SPORTSGIRL ACHIEVED SALES OF R286,1 (1999 FULL YEAR: R695,3) MILLION FOR THE
FIVE MONTH PERIOD TO 25 NOVEMBER 1999 WHEN THE COMPANY WAS PLACED UNDER
VOLUNTARY ADMINISTRATION. THIS FOLLOWED A REASSESSMENT OF THE GROUP'S
INVESTMENT IN SPORTSGIRL SINCE THE COMPANY WAS REPORTING SIGNIFICANT ONGOING
OPERATING DEFICITS. SPORTSGIRL INCURRED A LOSS AFTER INTEREST OF R20,3 (1999
FULL YEAR: R45,1) MILLION.
A DEED OF ARRANGEMENT, RECOMMENDED BY THE ADMINISTRATORS AS BEING IN THE
COMMERCIAL INTERESTS OF CREDITORS, WAS CONCLUDED ON 16 MAY 2000.
DIRECTORATE
ON 30 JUNE 2000 MR A E PARFETT RETIRED AS CHAIRMAN OF THE COMPANY AND MR M S
MARK WAS APPOINTED IN HIS STEAD.
PROSPECTS
ASSUMING REASONABLE ECONOMIC CONDITIONS PREVAIL, MANAGEMENT IS CONFIDENT OF
IMPROVED RESULTS IN THE FORTHCOMING YEAR. INCREASED EARNINGS ARE EXPECTED TO
COME FROM CONTINUED IMPROVEMENT IN THE CORE BUSINESS AND GROWTH STRATEGIES
WHICH INCLUDE FURTHER EXPANSION OF THE IDENTITY AND ELEMENTS BUSINESSES AND
FRANCHISE OPERATIONS. THE BENEFITS OF A CRITICAL RE-EVALUATION OF EXPENSES
SHOULD BE SEEN IN THE YEAR AHEAD.
INCOME STATEMENT
AUDITED AUDITED
52 WEEKS 52 WEEKS
ENDED ENDED
30 JUNE 30 JUNE
2000 1999 CHANGE
NOTE R'000 R'000
REVENUE 3 1 772 888 2 024 654 (12,4)
CONTINUING OPERATIONS 1 486 811 1 329 316 11,8
DISCONTINUING OPERATIONS 286 077 695 338 (58,9)
COST OF SALES (811 999) (906 363)
GROSS PROFIT 960 889 1 118 291 (14,1)
CONTINUING OPERATIONS 810 775 735 795 10,2
DISCONTINUING OPERATIONS 150 114 382 496 (60,8)
OPERATING COSTS (733 346) (901 938)
OPERATING PROFIT/(LOSS)
BEFORE INTEREST AND
TAXATION 227 543 216 353 5,2
CONTINUING OPERATIONS 241 279 251 829 (4,2)
DISCONTINUING OPERATIONS (13 736) (35 476) 61,3
INTEREST PAID (8 087) (10 246)
CONTINUING OPERATIONS (1 503) (606)
DISCONTINUING OPERATIONS (6 584) (9 640)
OPERATING PROFIT/(LOSS)
BEFORE EXCEPTIONAL ITEMS 219 456 206 107 6,5
CONTINUING OPERATIONS 239 776 251 223 (4,6)
DISCONTINUING OPERATIONS (20 320) (45 116) 55,0
EXCEPTIONAL ITEMS 4 (157 428) 869
CONTINUING OPERATIONS (11 000) 3 745
DISCONTINUING OPERATIONS (146 428) (2 876)
NET PROFIT/(LOSS)
BEFORE TAXATION 62 028 206 976
CONTINUING OPERATIONS 228 776 254 968
DISCONTINUING OPERATIONS (166 748) (47 992)
TAXATION (71 464) (76 165)
NET (LOSS)/PROFIT
AFTER TAXATION (9 436) 130 811
OUTSIDE SHAREHOLDERS'
INTEREST IN LOSSES/(PROFITS) 11 (118)
NET (LOSS)/PROFIT
ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS (9 425) 130 693
DIVIDENDS (15 705) (15 264)
RETAINED (LOSS)/PROFIT
FOR THE PERIOD (25 130) 115 429
TRANSFER TO NON-
DISTRIBUTABLE RESERVES (2 242) (916)
REVERSAL OF TRANSLATION
RESERVES IN
DISCONTINUING OPERATIONS 13 567 -
RETAINED PROFIT AT BEGINNING
OF PERIOD 647 644 533 131
RETAINED PROFIT AT END
OF PERIOD 633 839 647 644
HEADLINE EARNINGS PER SHARE
ALL OPERATIONS (CENTS) 32,8 28,2 16,4
CONTINUING OPERATIONS (CENTS) 37,3 38,9 (4,2)
FULLY DILUTED HEADLINE
EARNINGS PER SHARE
ALL OPERATIONS (CENTS) 32,2 27,8 15,5
CONTINUING OPERATIONS (CENTS) 36,6 38,5 (5,0)
EARNINGS PER SHARE
ALL OPERATIONS (CENTS) (2,1) 29,8 (107,0)
CONTINUING OPERATIONS (CENTS) 34,8 40,7 (14,4)
FULLY DILUTED EARNINGS
PER SHARE
ALL OPERATIONS (CENTS) (2,0) 29,5 (107,0)
CONTINUING OPERATIONS (CENTS) 34,2 40,3 (15,1)
DISTRIBUTION PER SHARE
(AWARDED AND
PROPOSED) (CENTS) 12,5 12.5 -
WEIGHTED AVERAGE
NUMBER OF SHARES
IN ISSUE (000'S) 451 546 438 842 2,9
BALANCE SHEET
AUDITED AUDITED
AT 30 JUNE AT 30 JUNE
2000 1999
R'000 R'000
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 122 894 176 864
INVESTMENTS AND LOANS 195 431 221 161
CURRENT ASSETS
INVENTORIES 123 702 205 584
TRADE AND OTHER RECEIVABLES 523 185 500 266
CASH AND CASH EQUIVALENTS 150 903 244 122
1 116 115 1 347 997
EQUITY AND LIABILITIES
ORDINARY SHAREHOLDERS' INTEREST 734 569 746 587
OUTSIDE SHAREHOLDERS' INTEREST 219 2 354
734 788 748 941
INTEREST-BEARING LIABILITIES - 146 580
INTEREST-FREE LIABILITIES 381 327 452 476
1 116 115 1 347 997
NUMBER OF SHARES IN ISSUE (000'S) 457 709 448 511
NET ASSET VALUE PER SHARE (CENTS) 160,5 166,5
CASH FLOW STATEMENT
AUDITED AUDITED
52 WEEKS 52 WEEKS
ENDED ENDED
30 JUNE 30 JUNE
2000 1999
R'000 R'000
NET CASH INFLOW FROM OPERATIONS 178 467 140 903
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (54 703) (78 124)
NET CASH OUTFLOW FROM
FINANCING ACTIVITIES (4 609) (5 368)
NET INCREASE IN CASH
AND CASH EQUIVALENTS 119 155 57 411
NET CASH OUTFLOW ON DISCONTINUANCE (76 893) -
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIODS RESTATED 124 138 66 727
CASH AND CASH EQUIVALENTS
AT END OF THE PERIOD 166 400 124 138
NOTES TO THE
AUDITED GROUP RESULTS
1 BASIS OF PREPARATION
THESE AUDITED GROUP RESULTS CONSTITUTE A SUMMARY OF THE GROUP'S AUDITED ANNUAL
FINANCIAL STATEMENTS. SUCH FINANCIAL STATEMENTS HAVE BEEN PREPARED ON THE
HISTORICAL COST BASIS AND INCORPORATE ACCOUNTING POLICIES WHICH, EXCEPT FOR THE
CHANGE IN POLICY MENTIONED BELOW, ARE CONSISTENT WITH THOSE APPLIED IN THE
PREVIOUS PERIOD. THE AUDITED ANNUAL FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH SOUTH AFRICAN STATEMENTS OF GENERALLY ACCEPTED ACCOUNTING
PRACTICE.
2 ACCOUNTING POLICY
DURING THE YEAR THE GROUP CHANGED ITS DISCLOSURE AND PRESENTATION POLICY IN
RESPECT OF ITS PARTICIPATION IN EXPORT PARTNERSHIPS. PREVIOUSLY, INVESTMENTS IN
THESE PARTNERSHIPS WERE TREATED AS PAYMENTS OF TAXATION. THE INVESTMENTS ARE
NOW REFLECTED AS ASSETS ON THE BALANCE SHEET, WITH A CORRESPONDING AMOUNT
APPEARING AS A DEFERRED TAXATION LIABILITY. THE PRIOR YEAR'S COMPARATIVE
FIGURES HAVE BEEN RESTATED ACCORDINGLY. THE RESTATEMENT DOES NOT HAVE AN INCOME
STATEMENT EFFECT.
2000 1999 CHANGE
R'000 R'000 %
3 REVENUE
SALE OF MERCHANDISE 1 702 426 1 941 993 (12,3)
INTEREST RECEIVED
INVESTMENTS 11 187 24 339 (54,0)
TRADE RECEIVABLES 44 781 46 335 (3,4)
DIVIDENDS 9 421 7 450 26,5
ROYALTIES AND FRANCHISE FEES 991 566
MANAGEMENT AND ADMINISTRATIVE
FEES 4 082 3 971
1 772 888 2 024 654 (12,4)
4 EXCEPTIONAL ITEMS
NET (IMPAIRMENT)/WRITE-UP OF
INVESTMENT (11 000) 3 745
RESTRUCTURING COSTS - (2 876)
LOSSES ON DISCONTINUANCE OF
SPORTSGIRL (146 428) -
(157 428) 869
5 DISCONTINUING OPERATIONS
ON 25 NOVEMBER 1999, SPORTSGIRL WAS PLACED UNDER VOLUNTARY ADMINISTRATION. AS
THIS RESULTED IN A CESSATION OF MANAGEMENT CONTROL, SUBSEQUENT RESULTS HAVE NOT
BEEN CONSOLIDATED. DUE TO UNCERTAINTY, AMOUNTS RECEIVABLE FROM THE
ADMINISTRATORS IN RESPECT OF THE GROUP'S CLAIMS AGAINST SPORTSGIRL HAVE NOT
BEEN RECOGNISED. THE WRITE-OFF OF ASSETS EXISTING AT 31 DECEMBER 1999, TOGETHER
WITH THE NEGATIVE FOREIGN CURRENCY TRANSLATION RESERVES ACCUMULATED SINCE
ACQUISITION AND THE PROFESSIONAL AND OTHER COSTS INCURRED OR ANTICIPATED IN
RESPECT OF THE DISCONTINUANCE OF OPERATIONS, HAVE RESULTED IN AN EXCEPTIONAL
ITEM OF R146,4 MILLION. THERE IS NO EFFECT ON TAXATION AS SPORTSGIRL IS IN AN
ASSESSED LOSS POSITION.
2000 1999 CHANGE
R'000 R'000 %
6 HEADLINE EARNINGS
HEADLINE EARNINGS ON ALL
OPERATIONS WERE ARRIVED AT AFTER
BRINGING TO ACCOUNT:
NET (LOSS)/PROFIT ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS (9 425) 130 693
EXCEPTIONAL ITEMS, EXCLUDING
RESTRUCTURING COSTS * 157 428 (3 743)
PROFIT ON SALE OF FIXED ASSETS * (66) (3 413)
147 937 123 537 19,8
* NET OF TAXATION AND OUTSIDE SHAREHOLDERS' INTEREST
7 COMPARATIVE FIGURES
CERTAIN COMPARATIVE FIGURES HAVE BEEN REGROUPED AND RESTATED.
8 CAPITALISATION SHARE AWARD AND DIVIDEND ALTERNATIVE
THE DIRECTORS HAVE RESOLVED TO AWARD CAPITALISATION SHARES TO SHAREHOLDERS
REGISTERED AT THE CLOSE OF BUSINESS ON FRIDAY, 1 SEPTEMBER 2000, PROVIDED THAT
SUCH SHAREHOLDERS MAY ELECT INSTEAD TO RECEIVE THE FINAL DIVIDEND TO BE
DECLARED IN RESPECT OF THE YEAR ENDED 30 JUNE 2000.
THE BASIS ON WHICH THE CAPITALISATION SHARES WILL BE AWARDED WILL BE DETERMINED
BY THE RATIO THAT 6,5C MULTIPLIED BY 1,07 BEARS TO THE WEIGHTED AVERAGE TRADED
PRICE OF THE COMPANY'S SHARES ON THE JOHANNESBURG STOCK EXCHANGE FOR THE FOUR
BUSINESS DAYS ENDING ON THURSDAY, 28 SEPTEMBER 2000. SHAREHOLDERS WILL BE
ENTITLED TO DECLINE THE CAPITALISATION SHARE AWARD OR ANY PART THEREOF AND
ELECT TO RECEIVE THE FINAL CASH DIVIDEND OF 6,5C PER SHARE
A CIRCULAR CONTAINING DETAILS OF THE AWARD AND THE DIVIDEND ALTERNATIVE,
TOGETHER WITH A FORM OF ELECTION, WILL BE MAILED TO SHAREHOLDERS ON OR ABOUT 8
SEPTEMBER 2000. DULY COMPLETED FORMS OF ELECTION ARE REQUIRED TO BE RETURNED BY
29 SEPTEMBER 2000. CERTIFICATES IN RESPECT OF CASH DIVIDENDS AND FRACTIONAL
ENTITLEMENTS EXCEEDING R6,00 WILL BE MAILED ON OR ABOUT 9 OCTOBER 2000. LESSER
AMOUNTS DUE TO SHAREHOLDERS WILL BE DONATED TO A REGISTERED CHARITY IN
ACCORDANCE WITH THE COMPANY'S ARTICLES OF ASSOCIATION.
9 ANNUAL REPORT
THE AUDITED ANNUAL FINANCIAL STATEMENTS WILL BE DISTRIBUTED TO SHAREHOLDERS ON
OR ABOUT 20 SEPTEMBER 2000.
10 APPROVAL
THESE RESULTS WERE APPROVED BY THE BOARD OF DIRECTORS ON 17 AUGUST 2000 AND ARE
SIGNED ON ITS BEHALF BY
M S MARK A E PARFETT
CHAIRMAN AND DIRECTOR
CHIEF EXECUTIVE OFFICER