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TRU - Truworths International - Unaudited Interim Group Results For The
26 Weeks Ended 28 December 2008 and dividend declaration
Truworths International Limited
(Registration number 1944/017491/06)
JSE Limited code: TRU
NSX code: TRW
ISIN: ZAE000028296
UNAUDITED INTERIM GROUP RESULTS for the 26 weeks ended 28 December 2008
SALE OF MERCHANDISE UP 10%(14% excluding week 27 of prior period)
OPERATING PROFIT UP 11%(18% excluding week 27 of prior period
OPERATING MARGIN REACHES 35%
HEADLINE EARNINGS PER SHARE UP 16%(23% excluding week 27 of prior period)
DILUTED HEADLINE EARNINGS PER SHARE UP 16% (24% excluding week 27 of prior
period)
INTERIM DIVIDEND UP 22%
COMMENTARY
GROUP PROFILE
Truworths International Limited is an investment holding, management and
trading company listed on the JSE Limited and the Namibian Stock Exchange. Its
trading subsidiaries, Truworths Limited and Young Designers Emporium (Pty)
Limited,are engaged in the retailing of fashion apparel and related merchandise.
Truworths International Limited and its subsidiaries (`the Group`) operate
primarily in southern Africa.
FINANCIAL PERFORMANCE
In a challenging retail environment, Group sale of merchandise for the 26 week
trading period to 28 December 2008 (`the period`) increased 10% to R3 306
million relative to the 27 week period to 30 December 2007 (`the prior
period`).
After excluding the additional trading week in the prior period, Group sale of
merchandise reflects an increase of 14% (inclusive of comparable store sales
growth of 7%), with product inflation of approximately 6%. Trading space
increased by 11% relative to the prior period following the opening of
17 Truworths, 18 Identity and 2 Uzzi stand-alone stores and the closure of
6 Truworths stores. At the end of the period, the Group had 475 stores.
% change on % change on
28 Dec prior period prior period
2008 (excluding (including
26 weeks week 27) week 27)
Sale of merchandise Rm 2007 2007
Truworths 1 892 10 6
Truworths Man* 657 15 10
Daniel Hechter 428 14 9
Identity 438 28 24
Group retail sales 3 415 13 9
Franchise sales 23 21 21
Accounting reclassifications (132) 2 2
Sale of merchandise 3 306 14 10
YDE agency sales 127 5 1
*Includes Truworths Man, Uzzi, Hemisphere, Hemisphere Sport, Studio and Exstream
The Group`s performance under demanding trading conditions again reflects the
benefits of its clearly defined business model and a focus on satisfying
customer needs for quality fashion, together with controlled spending, increased
productivity and growth in trading space in appropriate locations.
These strategies have translated into an operating margin of 35% and an 11%
increase in operating profit to R1 152 million. The gross margin of 55% remains
at a similar level to the prior period. Expenses grew by 11%, primarily as a
result of increased occupancy costs owing to the investment in new stores.
Inventory levels continue to be well managed, with an inventory turn of 6.4
times.
Headline and basic earnings per share of 184.7 cents reflect a 16% increase
(23% excluding week 27 of the prior period) compared to the prior period`s
159.9 cents. This is in line with the forecast in the Group`s trading statement
issued on SENS on 15 January 2009. Diluted headline and basic earnings per
share of 181.3 cents were 16% higher (24% excluding week 27 of the prior
period) than the 156.4 cents achieved in the prior period. An interim cash
dividend of 88 cents a share has been declared, reflecting an increase of 22%
over the prior period. Dividend cover remains at 2.1 times headline earnings
per share.
The Group statement of financial position continues to be strong, with net asset
value per share increasing from 635 cents in the prior period to 772 cents and a
return on equity of 51% (53% in the prior period) being achieved.
CREDIT MANAGEMENT
The Group continued to apply its standard credit granting criteria during the
period and the active account base grew by 3% from the prior period to
approximately 1.8 million accounts, with a 59% rejection rate on new account
applications. The growth should be measured against the high base of active
accounts established over the last five years during which active accounts have
grown by approximately 1 million. Gross trade receivables grew by 9% when
compared to the prior period. Group credit sales represented 68% of Group retail
sales compared to 71% in the prior period. The lower mix of credit sales
reflects the strong sales growth in Identity which is primarily a cash based
business. Consistent with the prior period, 87% of active account holders were
able to purchase at period-end.
Trade receivable costs increased by 8%, compared to a 61% increase in the prior
period. Net bad debts and the allowance for doubtful debts, each as a
percentage of gross trade receivables, were 11.9%. However, the additional
interest income earned on the debtors` book during the period more than offset
the increased net bad debts and associated costs. The Group maintained the
qualifying payment percentage of 90% (one of the highest in the industry)
necessary for customers to avoid delinquency. Management is satisfied with the
improved quality of the debtors` book.
CASH AND FINANCIAL POSITION
The Group remains in a sound cash position, with cash and cash equivalents of
R723 million at the end of the period. During the period, the Group increased
cash and cash equivalents by R190 million compared to R139 million in the prior
period, utilised R147 million to fund share repurchases and spent R80 million to
fund capital expenditure.
SHARE REPURCHASES
During the period, 5 million shares were repurchased at an average price of
R29.06 per share for a total of R147 million. A total of 29.5 million shares
(6.5% of total shares in issue) are now held as treasury shares. Since
inception of the repurchase programme in 2002, the company has spent R1.2
billion on share repurchases and 43.4 million shares(purchased at an average
cost of R10.95) have been cancelled.
OUTLOOK
Group retail sales for the first seven weeks of the second half of the 2009
financial period reflect a growth of 20% on the prior comparable period,
however, management does not expect retail sales to continue at this level.
While the decline in interest rates and lower fuel costs are positive for
consumers, the retail trading environment remains difficult and management does
not expect conditions to materially improve over the remainder of the 2009
period.
The Group will continue to invest in the longer term growth of the business and
plans to increase trading space in the second half of the 2009 period by
opening 20 new stores across all brands and refurbishing or expanding a
further 7 stores. The Group is confident of achieving real earnings growth for
the financial period ending June 2009 and remains committed to achieving the
financial targets detailed in the Group`s 2008 annual report.
H Saven MS Mark
Chairman Chief Executive Officer
18 February 2009
INTERIM DIVIDEND
The directors have resolved to declare a cash dividend from retained income in
respect of the 26 weeks ended 28 December 2008 in the amount of 88 (2007: 72)
cents per share to holders of the company`s shares reflected in the company`s
register on the record date, being Friday, 13 March 2009.
The last day to trade in the company`s shares cum dividend is Friday, 6 March
2009. Trading in the company`s shares ex dividend will commence on Monday, 9
March 2009. The dividend will be paid in South African Rand on Monday, 16 March
2009.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday, 9 March 2009 to Friday, 13 March
2009, 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 other wise 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
Company Secretary
Cape Town
18 February 2009
GROUP STATEMENTS OF FINANCIAL POSITION
at 28 Dec at 30 Dec at 29 June
2008 2007 2008
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 896 774 848
Property, plant and equipment 557 496 527
Goodwill 90 72 90
Intangible assets 50 52 53
Derivative financial instruments 42 21 16
Loans and receivables 97 108 99
Deferred tax 60 25 63
Current assets 3 491 2 988 3 055
Inventories 469 420 397
Trade and other receivables 2 280 2 195 2 077
Derivative financial instruments 8 13 5
Prepayments 11 5 43
Cash and cash equivalents 723 355 533
Total assets 4 387 3 762 3 903
EQUITY AND LIABILITIES
Equity
Share capital and premium 60 45 50
Treasury shares (751) (530) (604)
Retained earnings 3 935 3 189 3 457
Non-distributable reserves 35 17 17
Equity attributable to owners of the
parent 3 279 2 721 2 920
Minority interest - 17 -
Total equity 3 279 2 738 2 920
Non-current liabilities 110 82 85
Post-retirement medical benefit
obligation 30 26 28
Cash-settled compensation liability 30 7 7
Straight-line operating lease
obligation 50 49 50
Current liabilities 998 942 898
Trade and other payables 845 770 658
Minority interest loans - 30 -
Provisions 36 37 43
Tax payable 117 105 197
Total liabilities 1 108 1 024 983
Total equity and liabilities 4 387 3 762 3 903
Number of shares in issue
(net of treasury shares) (millions) 424.7 430.9 428.3
Net asset value per share (cents) 772 635 682
Key ratios
Return on equity (%) 51 53 48
Return on capital (%) 74 79 71
GROUP STATEMENTS OF COMPREHENSIVE INCOME
26 weeks 27 weeks 53 weeks
to 28 Dec to 30 Dec to 29 June
2008 2007 2008
Unaudited Unaudited % Audited
Note Rm Rm change Rm
Revenue 3 3 684 3 334 10 6 322
Sale of merchandise 3 306 3 018 10 5 651
Cost of sales (1 493) (1 359) (2 568)
Gross profit 1 813 1 659 9 3 083
Other income 74 75 146
Trading expenses (1 039) (938) 11 (1 874)
Depreciation and amortisation (53) (48) (96)
Employment costs (343) (308) (600)
Occupancy costs (239) (202) (415)
Trade receivable costs (242) (224) (464)
Other operating costs (162) (156) (299)
Trading profit 848 796 7 1 355
Interest received 304 241 26 525
Profit before tax 1 152 1 037 11 1 880
Tax expense (365) (337) (596)
Profit for the period 787 700 12 1 284
Profit for the period
attributable to:
Owners of the parent 787 693 14 1 277
Minority interest - 7 7
787 700 12 1 284
Other comprehensive income
Movement in effective portion of
cash flow hedge 15 (12) (17)
Deferred tax on movement in
effective portion of cash
flow hedge (4) 4 5
Other comprehensive income for the
period, net of tax 11 (8) (12)
Total comprehensive income for the
period 798 692 15 1 272
Total comprehensive income
attributable to:
Owners of the parent 798 685 16 1 265
Minority interest - 7 7
798 692 15 1 272
Cents per share:
Basic and headline earnings 184.7 159.9 16 295.6
Fully diluted basic and headline
earnings 181.3 156.4 16 289.6
Weighted average number of
shares in issue (millions) 426.0 433.3 432.0
Key ratios
Gross margin (%) 55 55 55
Trading expenses to sale of
merchandise (%) 31 31
33
Trading margin (%) 26 26 24
Operating margin (%) 35 34 33
GROUP STATEMENTS OF CASH FLOWS
26 weeks 27 weeks 53 weeks
to 28 Dec to 30 Dec to 29 June
2008 2007 2008
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash
EBITDA* 920 857 1 474
Working capital movements (65) (110) (104)
Cash generated from operations 855 747 1 370
Interest received 304 241 525
Tax paid (446) (391) (595)
Cash inflow from operations 713 597 1 300
Dividends paid (309) (260) (575)
Net cash from operating activities 404 337 725
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment
to maintain operations (16) (17) (32)
Acquisition of property, plant and
equipment to expand operations (63) (69) (129)
Acquisition of computer software (1) - (5)
Net investment in subsidiary - - (35)
Minority shareholder loans acquired - - (30)
Loans advanced (2) - -
Loans repaid 4 2 10
Acquisition of derivative financial
instruments - (14) (18)
Proceeds on disposal of derivative
financial instruments 10 8 9
Settlement of cash-settled
compensation liability (9) (8) (9)
Net cash used in investing activities (77) (98) (239)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 10 9 14
Shares repurchased by subsidiaries (147) (109) (183)
Net cash used in financing activities (137) (100) (169)
Net increase in cash and cash
equivalents 190 139 317
Cash and cash equivalents at the
beginning of the period 533 216 216
CASH AND CASH EQUIVALENTS AT THE END
OF THE PERIOD 723 355 533
Key ratios
Cash flow per share (cents) 167 138 301
Cash equivalent earnings per share (cents) 202 173 314
Cash realisation rate (%) 83 80 96
* Earnings before interest, tax, depreciation and amortisation
GROUP STATEMENTS OF CHANGES IN EQUITY
28 Dec 30 Dec
2008 2007
Unaudited Unaudited
Rm Rm
Total equity at the beginning of the period 2 920 2 404
Total comprehensive income for the period 798 692
Dividends paid (309) (260)
Premium on shares issued 10 9
Shares repurchased (147) (109)
Share option expense 7 2
Total equity at the end of the period 3 279 2 738
Comprising:
Share capital and premium 60 45
Treasury shares (751) (530)
Retained earnings 3 935 3 189
Non-distributable reserves 35 17
Attributable to owners of the parent 3 279 2 721
Minority interest - 17
Total equity 3 279 2 738
Cents per share:
Dividends declared in respect of the period 88 72
SELECTED EXPLANATORY NOTES
1 BASIS OF PREPARATION
The Group`s interim financial statements have been prepared in accordance with
International Financial Reporting Standards (`IFRS`) and the presentation and
disclosure requirements of IAS 34: Interim Financial Reporting.
The 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
29 June 2008, except for the following:
During the period, the Group adopted earlier than required IAS 1 (revised),
`Presentation of Financial Statements`. Such adoption did not have any material
effect on the performance or position of the Group.
The principal effect of this change is as follows:
- The revised standard affects the presentation of owner changes in equity and
comprehensive income.
- The Group income statements have been replaced by the Group statements of
comprehensive income.
- Under the revised standard, all owner changes in equity are presented in the
Group statements of changes in equity while all non-owner changes in equity are
presented under `other comprehensive income`, a component of the Group
statements of comprehensive income.
- In addition, the titles `balance sheets` and `cash flow statements` are
replaced by `statements of financial position` and `statements of cash flows`
respectively.
As a result of the above, the disclosure changes are as follows:
- The movement in the effective portion of the cash flow hedge and the related
deferred tax is presented under `other comprehensive income` in the statements
of comprehensive income, whereas previously it was disclosed in the statements
of changes in equity.
- Similarly, the items above, together with profit for the period, are replaced
by `total comprehensive income` in the statements of changes in equity.
26 weeks 27 weeks 53 weeks
to 28 Dec to 30 Dec to 29 June
2008 2007 2008
Unaudited Unaudited % Audited
Rm Rm change Rm
3 REVENUE
Sale of merchandise 3 306 3 018 10 5 651
Retail sales 3 283 2 999 5 617
Franchise sales 23 19 34
Interest received 304 241 525
Investment interest 33 17 37
Trade receivables interest 271 224 488
Other income 74 75 146
Commission 42 47 86
Royalties 2 2 2
Lease rental income 4 3 8
Display fees 14 12 26
Other 12 11 24
Total 3 684 3 334 10 6 322
4 RESTATEMENT OF COMPARATIVE FIGURES
Some of the comparative figures relating to the 27 week period to December 2007
have been restated to align with the presentation used in the annual financial
statements for the period ended 29 June 2008.
5 SEGMENT REPORTING
The Group`s reportable segments have been identified as the Truworths and YDE
business units:
- Truworths is a retailer in fashion apparel providing a local blend of
clothing and other products to women, men and children.
- YDE retails, on an agency basis, the clothing and other related products of
emerging South African designers.
Management monitors the operating results of the business segments separately
for the purpose of making decisions about resources to be allocated and of
assessing performance. Segment performance is evaluated based on sales and
operating profit or loss.
28 December 2008 Truworths YDE Corporate# Group
Rm Rm Rm Rm
Total third party revenue* 3 640 44 - 3 684
Depreciation and amortisation 51 2 - 53
Interest received 303 1 - 304
Profit for the period 770 15 2 787
Profit before tax 1 129 21 2 1 152
Tax expense (359) (6) - (365)
Segment assets** 6 368 96 (2 077) 4 387
Segment liabilities 1 154 18 (64) 1 108
Capital expenditure 80 - - 80
Gross margin % 55 - - 55
Trading margin % 25 45 - 26
Operating margin % 34 48 - 35
Inventory turn times 6.4 - - 6.4
Credit : cash sales mix % 68:32 21:79 - 68:32
30 December 2007
Total revenue* 3 233 45 56 3 334
Third party 3 233 43 58 3 334
Inter-segment - 2 (2) -
Depreciation and amortisation 45 2 1 48
Interest received 239 1 1 241
Profit for the period 670 14 16 700
Profit before tax 993 20 24 1 037
Tax expense (323) (6) (8) (337)
Segment assets** 5 450 85 (1 773) 3 762
Segment liabilities 961 37 26 1 024
Capital expenditure 83 3 - 86
Gross margin % 55 - - 55
Trading margin % 25 45 - 26
Operating margin % 34 47 - 34
Inventory turn times 6.4 - - 6.4
Credit : cash sales mix % 72:28 21:79 - 71:29
* Segment revenue includes interest on trade receivables
** Segment assets include trade and other receivables
# `Corporate` represents unallocated segments and consolidation entries
28 Dec 2008 30 Dec 2007
Third party revenue Rm % Rm %
South Africa 3 573 97 3 249 97
Namibia 64 2 47 1
Swaziland 24 1 19 1
Franchise sales 23 - 19 1
Botswana 9 - 8 -
Middle East 5 - 5 -
Rest of Africa 9 - 6 -
Total third party revenue 3 684 100 3 334 100
Non-current assets^
South Africa 692 614
Namibia 4 5
Swaziland 1 1
Total non-current assets 697 620
^ Non-current assets represent property, plant and equipment, goodwill and
intangible assets
28 Dec 30 Dec 29 Jun
2008 2007 2008
Unaudited Unaudited Audited
Rm Rm Rm
6 CAPITAL COMMITMENTS
Capital expenditure authorised but not
contracted:
Store development 75 80 145
Head office refurbishment 12 9 13
Warehousing facilities 66 58 69
Computer infrastructure 25 37 31
178 184 258
Capital expenditure authorised and
contracted:
Land 11 - 11
7 EVENTS SUBSEQUENT TO PERIOD-END
No event, material to the understanding of the unaudited Group interim results,
has occurred between the end of the interim period and date of approval.
8 SEASONALITY
Historically there has been no material seasonal variation in trading between
the first and second halves of the financial period.
9 RELATED PARTY TRANSACTIONS
Related party transactions similar to those disclosed in the Group`s annual
financial statements for the period ended 29 June 2008 took place during the
period.
THESE RESULTS ARE AVAILABLE ON www.truworths.co.za
Truworths International Limited: (Registration number 1944/017491/06)
JSE Limited 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 in South Africa: Barnard Jacobs Mellet Corporate Finance (Pty) Limited.
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
Auditors: Ernst & Young Inc.
Transfer secretaries: Computershare Investor Services (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 #^
SM Ngebulana #^ AE Parfett #^, AJ Taylor*, MA Thompson#^ and WM van der Merwe*
* Executive # Non-executive ^ Independent
Date: 18/02/2009 14:13:02 Supplied by www.sharenet.co.za
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