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Truworths - Audited Group Results for the 52 weeks ended 30 June 2004
TRUWORTHS INTERNATIONAL LIMITED
(Registration number 1944/017491/06)
("Truworths" or "the group")
Code: TRU
ISIN: ZAE000028296
AUDITED GROUP RESULTS FOR THE 52 WEEKS ENDED 30 JUNE 2004
- EARNINGS TOP R500 MILLION
- RECORD SALES OF R2.7 BILLION UP 17.9%
- TRADING PROFIT UP 47.1%
- ANNUAL DIVIDEND PER SHARE UP 41.2%
- HEADLINE EARNINGS PER SHARE UP 27.9%
- OPERATING MARGIN REACHES 27.4%
BALANCE SHEETS
Audited Audited
30 June 30 June
2004 2003 Change
Note Rm Rm %
ASSETS
Non-current assets 449.1 409.3
Property, fixtures, vehicles, plant,
equipment and software 275.8 277.9
Goodwill 38.4 -
Investments 105.1 109.5
Loans 29.8 21.9
Current assets 1 638.6 1 430.9
Inventories 198.0 169.2
Trade and other receivables 963.2 796.2
Prepayments 23.0 20.4
Cash and cash equivalents 454.4 445.1
Total assets 2 087.7 1 840.2 13.4
EQUITY AND LIABILITIES
Share capital 0.1 0.1
Share premium 177.4 153.2
Retained earnings 1 586.1 1 262.7
1 763.6 1 416.0
Treasury shares (275.3) (81.0)
Shareholders" equity 1 488.3 1 335.0
Minority interest 12.1 -
Total shareholders" equity 1 500.4 1 335.0 12.4
Non-current liabilities 94.2 121.3
Deferred tax 76.3 86.0
Retirement benefit obligation 17.9 35.3
Current liabilities 493.1 383.9
Trade and other payables 336.6 269.9
Short-term provisions 0.4 6.0
Current tax payable 156.1 108.0
Total liabilities 587.3 505.2
Total equity and liabilities 2 087.7 1 840.2
Number of shares in issue (adjusted
for treasury shares) (millions) 446.4 460.4
Net asset value per share (cents) 336.1 290.0 15.9
INCOME STATEMENTS
Audited Audited
52 weeks 52 weeks
2004 2003 Change
Note Rm Rm %
Revenue 4 2 903.9 2 462.3 17.9
Sale of merchandise 2 718.7 2 306.0 17.9
Cost of sales (1 287.3) (1 140.5)
Gross profit 1 431.4 1 165.5 22.8
Expenses 5 (833.8) (759.3) 9.8
Trading profit 597.6 406.2 47.1
Dividends received 2.7 1.7
Interest received 145.7 142.4
Profit before finance costs, exceptional
items and tax 746.0 550.3 35.6
Finance costs (0.2) (0.5)
Profit before exceptional items and tax 745.8 549.8
Exceptional items 6 15.4 (1.3)
Profit before tax 761.2 548.5 38.8
Income tax expense (243.5) (158.1)
Profit after tax 517.7 390.4
Minority interest (0.5) -
Net profit attributable to shareholders 517.2 390.4 32.5
Cents per share:
Dividends declared for the period 48.0 34.0 41.2
Interim 21.0 13.0
Final 27.0 21.0
Headline earnings 7 110.0 86.0 27.9
Basic earnings 113.0 85.7 31.9
Fully diluted headline earnings 107.4 84.3 27.4
Fully diluted basic earnings 110.4 84.1 31.3
Weighted average shares (adjusted for
treasury shares)(millions) 457.8 455.6
CASH FLOW STATEMENTS
Cash flows from operating activities
Cash flow from trading 671.6 479.1
Dividends received 2.7 1.7
Cash EBITDA 674.3 480.8 40.2
Working capital movements (139.6) (53.1)
Cash generated from operations 534.7 427.7 25.0
Finance costs (0.2) (0.5)
Interest received 144.4 140.9
Tax paid (205.2) (123.0)
Cash inflow from operations 473.7 445.1
Dividends paid (193.6) (118.2)
Net cash from operating activities 280.1 326.9
Cash flows from investing activities
Purchase of property, fixtures, vehicles,
plant, equipment and software to maintain
operations (18.7) (20.7)
Purchase of property, fixtures, vehicles,
plant, equipment and software to expand
operations (42.5) (42.1)
Proceeds on disposal of property, fixtures,
vehicles, plant, equipment and software 0.9 0.9
Cash flow on business acquired net of cash (25.6) -
Loans advanced (8.3) (2.0)
Loans repaid 0.4 -
Decrease in investments 5.5 8.2
Net cash used in investing activities (88.3) (55.7)
Cash flows from financing activities
Proceeds on share issue 24.5 27.9
Odd lot shares repurchased and cancelled - (0.1)
Shares repurchased by subsidiary (194.6) (13.4)
Sale of shares held by share trust 0.3 25.0
Contribution paid in respect of retirement
benefit obligation (22.8) -
Net cash (used in)/from financing activities (192.6) 39.4
Net (decrease)/increase in cash and cash
equivalents (0.8) 310.6
Net cash inflow from discontinued operations 10.1 0.7
Cash and cash equivalents for the period 9.3 311.3
Cash and cash equivalents at the beginning
of the period 445.1 133.8
Cash and cash equivalents at the end of
the period 454.4 445.1
Cash flow per share (cents) 103.5 97.7
Cash equivalent earnings per share (cents) 125.9 97.5
Cash realisation rate (%) 82.2 100.2
STATEMENTS OF CHANGES IN TOTAL
SHAREHOLDERS" EQUITY
Share Total
capital & Retained Treasury Minority shareholders"
premium earnings shares interest equity
Rm Rm Rm Rm Rm
Balance at 30 June
2002 125.5 998.9 (92.6) - 1 031.8
AC133: Financial
instruments
adjustment - (8.2) - - (8.2)
Restated balance at
30 June 2002 125.5 990.7 (92.6) - 1 023.6
Net profit
attributable to
shareholders - 390.4 - - 390.4
Dividends - (118.4) - - (118.4)
Shares issued 28.1 - - - 28.1
Odd lot shares
repurchased and
cancelled (0.1) - - - (0.1)
Share issue expenses
written off (0.2) - - - (0.2)
Sale of shares held
by share trust - - 25.0 - 25.0
Shares repurchased - - (13.4) - (13.4)
Balance at 30 June
2003 153.3 1 262.7 (81.0) - 1 335.0
Net profit
attributable to
shareholders - 517.2 - 0.5 517.7
Minority interest in
business acquired - - - 11.6 11.6
Dividends - (193.8) - - (193.8)
Shares issued 24.6 - - - 24.6
Share issue expenses
written off (0.1) - - - (0.1)
Sale of shares held
by share trust (0.3) - 0.3 - -
Shares repurchased - - (194.6) - (194.6)
Balance at 30 June
2004 177.5 1 586.1 (275.3) 12.1 1 500.4
NOTES
1. Basis of preparation
This announcement has been extracted from the group"s 2004 audited annual
financial statements, which have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice.
2. Accounting policies
The accounting policies adopted in the preparation of the group"s annual
financial statements are consistent in all material respects with those applied
in the prior period, except for the adoption during the current period of
accounting statement AC132: Consolidated financial statements and accounting for
investments in subsidiaries, in so far as it requires a share purchase trust
which meets the definition of a subsidiary to be consolidated.
3. Comparative figures
To meet the requirements of AC132: Consolidated financial statements and
accounting for investments in subsidiaries, in so far as it requires a share
purchase trust which meets the definition of a subsidiary to be consolidated,
certain non-material changes to comparative information at June 2003 have been
made.
Audited Audited
52 weeks 52 weeks
2004 2003 Change
Rm Rm %
4. Revenue
Sale of merchandise 2 718.7 2 306.0
Commission 17.3 -
Display fees 6.6 -
Dividends 2.7 1.7
Interest 145.7 142.4
Lease rental income 8.3 7.2
Royalties 1.6 2.1
Warehousing and management fees 3.0 2.9
2 903.9 2 462.3 17.9
5. Expenses
Depreciation 68.8 66.8 3.0
Employment costs 348.9 304.1 14.7
Occupancy costs 208.2 176.9 17.7
Other operating costs 207.9 211.5 (1.7)
833.8 759.3 9.8
6. Exceptional items
Distributions from discontinued operations 10.1 0.7
Impairment in value of listed investment - (2.0)
Release of discontinued operations provision 5.3 -
15.4 (1.3)
7. Headline earnings
Headline earnings have been calculated in terms
of SAICA Circular 7/2002 as follows:
Net profit attributable to shareholders 517.2 390.4
Exceptional items (15.4) 1.3
Net surplus on asset realisation after tax - (0.1)
Amortisation of goodwill 1.7 -
Headline earnings 503.5 391.6 28.6
8. Capital commitments
Capital expenditure authorised but not
contracted for:
Computer equipment and software 26.2 20.3
Fixtures, plant and equipment 77.2 49.5
103.4 69.8
9. Contingent liabilities
Export partnership participation
The South African Revenue Service (SARS) is continuing its investigation into
the tax treatment by certain other companies participating
in export partnerships with financial periods ending after 1 March 1996. Legal
advice, obtained by the managing partner, Trencor Limited, has confirmed that
the tax treatment
adopted in relation to participation in these
partnerships has been appropriate. Trencor
Limited has warranted certain material aspects
of the partners" participation, including any
exposure that might arise in the event that
SARS were to raise assessments in respect of
this participation.
Deferred tax liability in respect of the
group"s export partnership participation
with financial periods ending after
1 March 1996 (excluding interest and
penalties) 76.9 82.6
DIVIDEND
The directors have resolved to declare a dividend in respect of the six months
ended 30 June 2004 in the amount of 27.0 (2003: 21.0) cents per share to holders
of the company"s shares reflected in the company"s register on the record date,
being Friday 10 September 2004.
The last day to trade in the company"s shares cum dividend is Friday 3 September
2004. Trading in the company"s shares ex dividend will commence on Monday 6
September 2004. The dividend will be paid in South African Rand on Monday 13
September 2004.
Consequently no dematerialisation or rematerialisation of the company"s shares
may take place over the period from Monday 6 September 2004 to Friday 10
September 2004, 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 19 August 2004
Truworths International Limited is a JSE Securities Exchange South Africa listed
investment holding company with trading subsidiaries engaged either directly or
through franchises in the retailing of fashion apparel and related merchandise.
The group operates primarily in southern Africa.
Group results
The group has had another very good year, with further improvements in all key
performance indicators. Net attributable profit of R517.2 million was 32.5%
higher than the R390.4 million achieved in 2003. Headline earnings rose 28.6% to
R503.5 million and headline earnings per share by 27.9% to 110 cents. Excluding
the effect of the R18.7 million transfer pricing tax credit from the 2003
results, headline earnings per share for that period would have been 81.8 cents
thereby reflecting a rise in 2004 of 34.5%. The return on average shareholders"
equity increased to 36.6%.
A final dividend of 27 cents per share has been declared. Together with the
interim dividend of 21 cents per share, this is 41.2% more than the distribution
to shareholders for 2003. The dividend cover has been revised to 2.3 times
headline earnings from 2.5 times in 2003.
Sales and operations
The record sales of merchandise, including franchise sales, of R2 718.7 million
for the 52-week period were achieved against a strong base. The favourable
circumstances that underpinned trading in the first 26 weeks improved through
the second half. At the interim stage sales growth of 15.2% to R1 376.1 million
was reported, while second half sales grew by 20.8% to R1 342.6 million. The
increase for the full year was 17.9%, excluding sales by Young Designers
Emporium (`YDE"), which markets merchandise on behalf of designers, on an agency
basis, in return for commission.
Several significant milestones distinguished the group"s trading performance in
a year in which the retail sector was stimulated by lower interest rates and
reduced inflation:
- An 11.7% increase in trading density was complemented by an 11.7% rise in
sales of merchandise per full-time equivalent employee. The record sales were
achieved on a modest 6.4% increase in trading space. Five Truworths stores and
20 Identity stores opened and two Truworths stores and one Identity store
closed. Stock turn of 6.5 times was at a similar level to last year.
- The favourable response to the group-wide focus on enhanced quality in a lower
inflation environment resulted in notable improvements in sales, particularly in
Truworths Man, Daniel Hechter, LTD, Identity and Fine Jewellery.
- In contrast to the estimated average growth in sales of 15.9% for the
clothing, footwear and textiles sector, the group achieved 18.2% growth in
retail sales (sales of merchandise excluding franchise sales), including
comparable store sales growth of 13.5%. The average product inflation in
Truworths, excluding Identity, was approximately 5%.
- Gross margins improved, resulting in a 22.8% increase in gross profit. This
was driven by better merchandise buying margins, lower markdowns and other stock
adjustments.
- As a result of the improved gross margins, continued control of expenses, and
better sales per square metre and per full-time employee, trading profits
increased 47.1% from R406.2 million to R597.6 million and operating margins
increased to 27.4% from 23.9%.
Credit services
While the group"s conservative credit granting policies were maintained over the
period, increased disposable consumer income and higher levels of consumer
confidence saw credit sales grow by 19.2% and trade accounts receivable by 21.3%
to R972.9 million. Credit sales represented 73% of total retail sales compared
to 72% for 2003. Net bad debts as a percentage of gross debtors were 4.3%
compared to 5.1% in 2003, while net bad debts as a percentage of credit sales
were 2.2% (2003: 2.5%). The quality of the debtors" book was further improved,
with better collections and a larger number of customers whose accounts were
current and were thus able to purchase. The basis for the calculation of the
doubtful debts provision is consistent with that of 2003. The group continued to
write off trade receivables in accordance with its strict ageing policy.
Exceptional items
A total distribution of R10.1 million, made to creditors of the discontinued
Australian operations, was received during the period and has been recorded as
an exceptional item. An amount of R5.3 million, previously provided in respect
of costs of final closure of these operations, was released to income and is
also reflected as an exceptional item.
Cash and financial position
As a result of a continued high quality of earnings, attributable cash flow per
share improved to 103.5 cents from 97.7 cents. Cash earnings before interest,
depreciation and amortisation (cash EBITDA) amounted to R674.3 million, an
increase of 40.2% on 2003. Although capital expenditure was lower, there were
larger working capital requirements as well as greater tax obligations because
of higher earnings and increased dividend payments during the period.
Cash and cash equivalents were maintained at similar levels to the prior period.
This was mostly due to further repurchases of shares amounting to R194.6 million
by the group subsidiary, Truworths Ltd, an additional contribution paid in
respect of retirement benefit obligations of R22.8 million and the acquisition
of 75% of the assets of Young Designers Emporium of R34.9 million.
Share repurchases
The R194.6 million repurchase during the period of 20.4 million shares at an
average price of R9.52 per share brought repurchases since inception of the buy-
back programme in the 2002 financial year to a total of 36.2 million shares at a
cost of R274.8 million and at an average price of R7.59.
Acquisition of Young Designers Emporium (YDE)
Following approval from the competition commission and the satisfaction of other
conditions, the agreement to purchase a 75% interest in the YDE fashion
retailing chain took effect from 1 December 2003. The YDE chain offers leading
edge niche fashion merchandise under various emerging labels on an agency basis,
and operates nationally from 11 stores in premier shopping malls, as well as
from a factory shop outlet. The founder of the business, Paul Simon, was
retained as YDE"s chief executive officer and together with his brother, Mark,
holds a minority interest.
The acquisition, which broadens the group"s talent base in fashion design and
retail, was financed from the group"s cash resources. YDE"s assets and results
have been consolidated in these results. The profits of YDE did not materially
affect earnings for the period.
Outlook
The group"s strategy for the year ahead is focused on further development of new
initiatives and formats, continued reinvigoration of the core business, store
expansion to increase trading space by an estimated 13% during the course of the
year and empowering Truworths people to grow and deliver in the challenging
retail arena. Sales growth in excess of 20% for the first seven weeks of the new
financial period, indicates a continuing acceptance of the Truworths formula.
Despite uncertainty in the world economy and the potential impact of various
scenarios on the South African economy, management remains positive about
trading prospects into 2005.
Audit opinion
The external auditors" unqualified audit opinion on the June 2004 annual
financial statements is available for inspection at the company"s registered
office.
Approval
This announcement was approved by the directors on 19 August 2004 and is signed
on their behalf by:
H Saven MS Mark
Chairman Chief executive officer
Truworths International Limited: (Registration number 1944/017491/06)
JSE code: TRU NSX code: TRW ISIN: ZAE000028296
Registered office: No. 1 Mostert Street, Cape Town 8001. PO Box 600, Cape Town
8000, South Africa
Sponsor: HSBC Investment Services (Africa) (Pty) Ltd
Auditors: Ernst & Young
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg 2001. (P O 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+, WM van der Merwe* *Executive +Non-
executive Independent
These results are available on our website at www.truworths.co.za
Date: 19/08/2004 02:30:51 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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