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TRU/ TRW - Truworths - Interim condensed consolidated financial statements
Truworths International Limited:
(Registration number: 1944/017491/06)
JSE code: TRU; NSX code: TRW; ISIN: ZAE000028296
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
26 WEEKS ENDED 24 DECEMBER 2006
* MERCHANDISE SALES UP 30%
* HEADLINE EARNINGS PER SHARE UP 37%
* OPERATING PROFIT UP 32 %
* INTERIM DIVIDEND UP 36%
CONSOLIDATED BALANCE SHEETS
Restated
24 Dec 25 Dec 25 Jun
2006 2005 2006
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 708 585 574
Property, plant and equipment 431 371 379
Intangible assets 128 76 73
Financial assets 149 138 122
Current assets 2 478 2 373 2 060
Financial assets - 30 -
Inventories 368 320 290
Trade and other receivables 1 853 1 406 1 519
Prepayments 9 7 32
Cash and cash equivalents 248 610 219
Total assets 3 186 2 958 2 634
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 23 205 14
Treasury shares (528) (480) (528)
Equity-settled compensation 17 11 15
reserve
Cash flow hedging reserve 3 - (3)
Retained earnings 2 764 2 192 2 410
Attributable to equity holders of 2 279 1 928 1 908
the parent
Minority interest 40 - -
Total equity 2 319 1 928 1 908
Non-current liabilities 103 93 87
Deferred tax 12 18 11
Post-retirement medical benefit 24 25 23
obligation
Cash-settled compensation 20 7 7
liability
Straight-line operating lease 47 43 46
obligation
Current liabilities 764 937 639
Trade and other payables 698 582 492
Tax payable 66 355 147
Total liabilities 867 1 030 726
Total equity and liabilities 3 186 2 958 2 634
Number of shares in issue 435.5 441.3 433.9
(million)
(adjusted for treasury shares)
Net asset value per share (cents) 523 437 440
CONSOLIDATED INCOME STATEMENTS
26 weeks Restated % 52 weeks
to 24 Dec 26 weeks change to
2006 to 25 Dec 25 Jun
Unaudited 2005 2006
Rm Unaudited Audited
Rm Rm
Note
Revenue 4 2 713 2 116 28 4 191
Sale of merchandise 2 513 1 933 30 3 816
Cost of sales (1 125) (897) (1 765)
Gross profit 1 388 1 036 34 2 051
Trading expenses (720) (559) 29 (1 097)
Depreciation and (41) (35) (74)
amortisation
Employment costs (266) (224) (442)
Occupancy costs (167) (140) (272)
Other operating costs (246) (160) (309)
Trading profit 668 477 40 954
Dividends received - 1 2
Interest received 151 141 288
Profit before tax 819 619 32 1 244
Tax expense (265) (207) (420)
Profit for the period 554 412 34 824
Attributable to:
Equity holders of the 549 411 823
parent
Minority interest 5 1 1
554 412 824
Earnings per share 5
(cents)
Basic and headline 126.5 92.6 37 186.4
Fully diluted basic 122.7 89.7 37 181.0
and headline
Dividends declared
for the period
(cents) 60 44 36 89
Number of shares in
issue (million)
Weighted average 433.9 445.1 441.6
Fully diluted 447.3 458.2 454.8
weighted average
Key ratios (%)
Gross margin 55 54 54
Total expenses to 29 29 29
sale of merchandise
Trading margin 27 25 25
Operating margin 33 32 33
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable
to equity
holders of Minority Total
the parent interest equity
Unaudited Rm Rm Rm
Balance at 26 June 2005 1 823 13 1 836
Profit for the period (as 414 1 415
previously stated)
Associate not equity accounted (3) - (3)
Profit for the period (restated) 411 1 412
Dividends (166) - (166)
Acquisition of interest in - (14) (14)
subsidiary
Premium on shares issued 8 - 8
Shares repurchased (150) - (150)
Share option expense 2 - 2
Balance at 25 December 2005 1 928 - 1 928
Balance at 25 June 2006 1 908 - 1 908
Profit for the period 549 5 554
Dividends (195) - (195)
Acquisition of interest in - 35 35
subsidiary
Premium on shares issued 9 - 9
Share option expense 2 - 2
Effective portion of cash flow 6 - 6
hedge
Balance at 24 December 2006 2 279 40 2 319
CONSOLIDATED CASH FLOW STATEMENTS
Restated 52 weeks
to
25 Jun
2006
Audited
Rm
26 weeks 26 weeks
to 24 Dec to 25 Dec
2006 2005
Unaudited Unaudited
Note Rm Rm
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash flow from trading 734 533 1 048
Dividends received - 1 2
Cash EBITDA* 734 534 1 050
Working capital movements (192) (88) (274)
Cash generated from operations 542 446 776
Interest received 151 141 288
Tax paid (348) (135) (563)
Cash inflow from operations 345 452 501
Dividends paid (195) (166) (362)
Net cash from operating 150 286 139
activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property, plant
and equipment
to maintain operations (18) (13) (21)
Acquisition of property, plant
and equipment
to expand operations (67) (44) (79)
Acquisition of computer (5) (5) (7)
software
Proceeds on disposal of
property, plant and
equipment - 1 1
Acquisition of interest in 6 (29) (26) (26)
subsidiary
Loans advanced (2) (45) (56)
Loans repaid 3 6 37
Acquisition of held-for- (12) (14) (23)
trading financial assets
Proceeds on disposal of
held-for-trading financial 4 - -
assets
Settlement of cash-settled (4) - -
compensation liability
Proceeds on disposal of - - 30
preference shares
Net cash used in investing (130) (140) (144)
activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds on shares issued 9 8 17
Shares repurchased by - (150) (198)
subsidiaries
Shares repurchased and - - (200)
cancelled
Funding of post-retirement - - (1)
benefit obligation
Net cash from/(used in) 9 (142) (382)
financing activities
Net increase/(decrease) in
cash and
cash equivalents 29 4 (387)
Cash and cash equivalents at
the
beginning of the period 219 606 606
CASH AND CASH EQUIVALENTS
AT THE END OF THE PERIOD 248 610 219
Key ratios (cents)
Cash flow per share 80 102 114
Cash equivalent earnings per 142 101 202
share
* Earnings before interest, tax, depreciation and amortisation
SELECTED EXPLANATORY NOTES
1 Basis of preparation
The Group`s interim condensed consolidated financial statements have been
prepared in accordance with IAS 34 - Interim Financial Reporting.
The half-year information presented has neither been audited nor reviewed by
the Group`s external auditors.
2 Accounting policies
The accounting policies and methods of computation applied in the preparation
of these financial statements are consistent with those applied in the
preparation of the Group`s annual financial statements for the period ended 25
June 2006. New accounting standards and interpretations that have become
applicable to the Group since that date have been adopted and their impact has
not been material.
3 Restatement of comparative figures
Comparative figures for the 26 weeks ended 25 December 2005 have been restated
to ensure a more relevant presentation of results as per the requirements of
IAS1 and the full adoption of International Financial Reporting Standards
(`IFRS`) and accounting interpretation changes relating to the application of
South African Statements of Generally Accepted Accounting Practice. Details of
these adjustments have been set out in note 29 to the annual financial
statements for the period ended 25 June 2006. The effect on basic and headline
earnings per share in the comparative period is a decrease of 0,4 cents to
92,6 cents per share as a result of the decision not to equity account for the
associate in Zimbabwe on the grounds of immateriality.
Restated 52 weeks
to
25 Jun
2006
Audited
Rm
26 weeks 26 weeks
to 24 Dec to 25 Dec
2006 2005
Unaudited Unaudited %
Rm Rm change
4 Revenue
Sale of merchandise 2 513 1 933 30 3 816
Retail sales 2 500 1 923 3 800
Franchise sales 13 10 16
Interest received 151 141 288
Investment interest 12 20 31
Trade receivable interest 139 121 257
Fees earned 46 37 76
Commission 35 28 58
Display fees 10 8 17
Royalties 1 1 1
Lease rental income 3 4 9
Dividends received - 1 2
2 713 2 116 28 4 191
5 BASIC AND HEADLINE EARNINGS
During the current and comparative period there was no difference between
basic and headline earnings.
6 BUSINESS COMBINATION
Acquisition of Uzzi (Pty) Limited
On 3 July 2006, the Group acquired 51% of the share capital and shareholder`s
loan of Uzzi (Pty) Limited (`Uzzi`), a newly formed company. On the same day
Uzzi acquired from Uzzi Clothing (Cape) (Pty) Limited the Uzzi business, which
specialises in the retail of upper end men`s fashion clothing, as a going
concern. The acquisition has been accounted for using the purchase method. The
interim financial statements include the results of Uzzi for 25 weeks from the
acquisition date.
The fair values of the identifiable assets and designated liabilities of Uzzi
at the date of acquisition were:
Fair Carrying
value value
Unaudited
Rm Rm
Property, plant and equipment 3 3
Trademark 35 35
Inventories 7 7
Trade and other receivables 1 1
Cash and cash equivalents 8 8
Trade and other payables (2) (2)
Net assets acquired 52 52
Goodwill arising on acquisition 20
72
Minority interest (35)
Total acquisition cost 37
Net cash outflow on acquisition:
Net cash acquired with the subsidiary 8
Cash paid (35)
Acquisition costs (2)
Net cash outflow (29)
From the date of acquisition, Uzzi has contributed R11 million to the profit
for the period of the Group. There would be no material difference in profit
contribution had the acquisition taken place at the beginning of the period.
Uzzi`s retail sales would have increased by R2 million to R46 million had the
combination taken place at the beginning of the period.
The goodwill is attributable to the Uzzi business` good locations and its
strong position and profitability in the men`s clothing market.
7 Segment Reporting
Segmental information is not disclosed as the Group is regarded as having only
a single material southern African retailing segment.
24 Dec 25 Dec 25 Jun
2006 2005 2006
Unaudited Unaudited Audited
Rm Rm Rm
8 Capital commitments
Capital expenditure authorised
but not contracted:
Plant and equipment 85 49 172
9 SEASONALITY
Historically there has been no material seasonal variation in trading between
the first and second halves of the financial period. However, given the
excellent results recorded in the period under review, management is of the
view that trading for the second half may be at a rate of growth lower than
was achieved in the first half.
10 EVENTS SUBSEQUENT TO PERIOD END
No event which is material to the understanding of this report has occurred
between the financial period end and the date of this report.
11 RELATED PARTY TRANSACTIONS
Related party transactions similar to those disclosed in the Group`s annual
financial statements for the period ended 25 June 2006 took place during the
period.
INTERIM DIVIDEND
The directors have resolved to declare a dividend in respect of the 26 weeks
ended 24 December 2006 in the amount of 60 (2005: 44) cents per share to
holders of the company`s shares reflected in the company`s register on the
record date, being Friday 9 March 2007.
The last day to trade in the company`s shares cum dividend is Friday 2 March
2007. Trading in the company`s shares ex dividend will commence on Monday 5
March 2007. The dividend will be paid in South African Rand on Monday 12 March
2007.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday 5 March 2007 to Friday 9 March
2007, 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 charity to be nominated by the directors.
By order of the board
C Durham Cape Town
Company Secretary 14 February 2007
COMMENTARY
Truworths International Limited is an investment holding and management
company listed on the JSE Limited and the Namibian Stock Exchange. Its
trading subsidiaries, Truworths Limited, Young Designers Emporium (Pty)
Limited (`YDE`) and Uzzi (Pty) Limited are engaged either directly or through
franchises and agencies, in the retailing of fashion apparel and related
merchandise. Truworths International Limited and its subsidiaries (`the
Group`) operate primarily in southern Africa.
GROUP RESULTS
The Group experienced excellent trading across all areas of the business and
continued to build on its enduring record of superior earnings growth.
Group sale of merchandise, which includes retail and franchise sales,
increased to R2 513 million. This reflected a 30% increase (28% excluding
Uzzi) relative to the corresponding period in 2005.
Headline earnings per share increased by 37% to 126.5 cents, in line with the
indication provided in the January trading statement that they would be 32% to
38% higher than the restated 92.6 cents at December 2005. The prior period`s
results required restatement as a consequence of the full adoption of
International Financial Reporting Standards. An interim dividend of 60 cents
per share has been declared, 36% higher than the 44 cents declared in the
corresponding period. Dividend cover has been maintained at 2,1 times headline
earnings per share.
Sales growth included comparable store sales growth of 19% with product
inflation of approximately 2%. During the period 6 Truworths, 10 Identity and
2 YDE stores were opened which increased trading space by 5% relative to the
position at June 2006. Trading space increased by 11% compared to December
2005.
Group sale of merchandise reflected excellent growth of 33% for the second
quarter relative to the comparable quarter in the prior period, following a
26% increase in the first quarter.
Sale of merchandise in all divisions exceeded expectations for the period.
Divisional sales growth for the period was as follows:
Sales % change on
Rm prior period
Truworths 1 569 23
Truworths Man 477 27
Daniel Hechter 293 34
Identity 254 47
Uzzi 44 -
Group retail sales 2 637 29
Franchise sales 13 30
2 650 29
Accounting reclassifications (137) -
Sale of merchandise 2 513 30
YDE agency sales 100 16
The gross margin improved to 55% against 54% in the comparable period,
primarily as a consequence of lower markdowns and other stock adjustments.
Expenses increased by 29% mainly as a result of the opening of new stores,
which impacted on both employee and occupancy costs, higher provisions for
bonus and turnover rentals, increased customer promotional activities and an
increase in debtor costs.
Operating profit increased by 32% to R819 million, with the operating margin
improving to 33%, mainly due to gains in market share, improvement in trading
margins and increases in productivity in terms of sales per square metre and
per full-time employee.
While continuing to apply strict criteria for credit granting, the Group has
managed to achieve solid growth in new customer accounts and in the active
account base which now comprises about
1,5 million accounts. The debtors` book grew by 30% during the period,
attributable to the increase in credit sales and the trend by customers to
move from the six month interest-free plan to interest-bearing credit plans.
Group credit sales represented 73% of total retail sales. The percentage of
active accountholders able to purchase was 89% at period end.
The quality of the debtors` book remains high and compares well with sector
benchmarks. As a result of management`s strategy to increase the account base
and grow the debtors` book, net bad debt write-off to credit sales and the
gross debtors` book increased to 3.2% and 6.5% respectively. Adequate
provisions, in accordance with the Group`s risk parameters, have been raised.
CASH AND FINANCIAL POSITION
The Group remains in a sound cash position with cash and cash equivalents of
R248 million at period end. During the period the Group utilised cash to fund
the Uzzi acquisition, capital expenditure and working capital requirements.
ACQUISITIONS
On 3 July 2006, the Group fulfilled the remaining conditions precedent for the
acquisition of a majority interest in Uzzi which operates 26 stores in the
upper-end male fashion market. Trading results to date have exceeded
management`s expectations. The integration of Uzzi into the Group`s systems
and support infrastructures is progressing well and should be completed in the
second quarter of 2007. The Group continues to pursue various acquisitions in
the retail sector that will fit strategically with existing operations and to
which management can add value.
PROSPECTS
Group retail sales for the first seven weeks since 24 December 2006 reflect
growth of 19% (17% excluding Uzzi) on the prior corresponding period. With the
further expansion of trading space, market share gains and continued emphasis
on the fashionability of merchandise, management is confident that trading for
the second half of the 2007 financial period will yield good growth, albeit at
a rate lower than was achieved in the first half.
APPROVAL
The interim condensed consolidated financial statements were approved by the
directors on 14 February 2007, and are signed on their behalf by:
H Saven M S 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.
P O Box 600, Cape Town 8000, South Africa
Lead sponsor in South Africa: Barnard Jacobs Mellet Corporate Finance (Pty)
Limited. Joint sponsor: Standard Bank of South Africa Limited. Sponsor in
Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
Auditors: Ernst & Young
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited 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, P O Box 2401, Windhoek, Namibia
Company secretary: C Durham
Directors: H Saven (Chairman)+, M S Mark (Chief Executive Officer)*, R G Dow+,
C T Ndlovu+, A E Parfett+, A J Taylor*,
M A Thompson+ and W M van der Merwe*
*Executive, +Non-executive and independent
Date: 14/02/2007 16:16:02 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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