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TRU - Truworths International Limited - Unaudited Interim Group Results For the

Release Date: 18/02/2010 14:21
Code(s): TRU
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TRU - Truworths International Limited - Unaudited Interim Group Results For the 26 weeks ended 27 December 2009 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 27 December 2009 * Sale of merchandise up 12% * Trading profit up 18% * Diluted headline earnings per share up 10% * Dividend per share up 16% * Gross margin at 56% * Operating margin at 34% GROUP PROFILE Truworths International Limited is an investment holding, trading and management company listed on the JSE and the Namibian Stock Exchange. Its trading subsidiaries, Truworths Limited and Young Designers Emporium (Pty) Limited (YDE), 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 While lower interest rates and real wage increases have been positive for consumers, these have not yet resulted in a marked improvement in discretionary spending by South Africans. Ongoing job losses, rising utility and fuel costs have continued to keep consumers under pressure. In this challenging retail trading environment Group sale of merchandise for the 26 week trading period to 27 December 2009 (the period) increased by 12% to R3 689 million. Comparable store sales grew 3% and product inflation averaged approximately 10%. Trading space has increased by 10% since 28 December 2008 following the opening of 12 Truworths, 17 Identity, 13 Uzzi and 3 YDE stores and the closure of 1 Identity and 6 Truworths stores. At the end of the period the Group had 513 stores (2008: 475). The Group continued to gain market share. Based on figures from the retail liaison committee (RLC) for December 2009, the Group increased its ladieswear RLC market share to 21.7% (2008: 20.6%) and menswear RLC market share to 19.1% (2008: 18.4%). Sale of merchandise 27 Dec 28 Dec % change 2009 2008 on prior
Rm Rm period Truworths Ladieswear 2 045 1 892 8 Truworths Menswear 736 657 12 Identity 519 438 18 Daniel Hechter 478 428 12 Retail sales 3 778 3 415 11 Franchise sales 18 23 (22) Accounting reclassifications (107) (132) (19) Sale of merchandise 3 689 3 306 12 YDE agency sales 123 127 (3) The trading margin improved to 27% (2008: 26%) with trading profit increasing 18% to R1 billion and the gross margin improved to 56% (2008: 55%). Expenses grew by 10%, mainly due to inflation and the increase in employment and occupancy costs attributable to the expansion in trading space. Trade receivable interest received decreased 13% on the prior period as a result of reduced debtors` book interest rates that are linked to the South African Reserve Bank repurchase rate and the lower levels of debtor delinquency. The operating performance translated into a 10% increase in headline earnings per share (HEPS) to 203.3 cents (2008: 184.7 cents). Diluted HEPS of 199.4 cents were also 10% higher (2008: 181.3 cents). An interim cash dividend of 102 cents per share, based on a dividend cover of 2.0 times HEPS, has been declared, 16% more than the prior period. CREDIT MANAGEMENT The doubtful debt allowance as a percentage of gross trade receivables improved to 11.3% (2008: 11.9%), contributing in part to the 6% reduction in trade receivable costs to R228 million. Management is satisfied with the quality of the book and the reduced level of the doubtful debt allowance. The Group maintained a qualifying payment percentage of 90% necessary for customers to avoid delinquency. During the period the Group continued to apply its standard credit granting criteria, resulting in an active account base growth of 6% to over 1.9 million accounts with a 65% (2008: 59%) rejection rate on new applications. The debtors` book grew by 11% from December 2008 to R2.8 billion. Group credit sales comprised 69%(2008: 68%) of retail sales with 88% (2008: 87%) of active account holders able to purchase at the end of the period. CASH AND FINANCIAL POSITION The Group`s statement of financial position continued to strengthen, with net asset value per share increasing from 772.1 cents to 953.1 cents. The return on equity at 45% (2008: 51%) is lower than the prior period due to increased levels of cash retained by the Group, but is in the upper end of the target range set by the Group. The Group remains in a strong cash position, with cash and cash equivalents of R1 072 million at the end of the period (2008: R723 million). During the period the Group generated R470 million from operating activities and utilised cash to increase trading space, develop an additional distribution facility, repurchase shares and pay dividends. SHARE REPURCHASES During the period 808 000 shares were repurchased at an average price of R41.85 per share for a total of R33 million. Since the inception of the share buy-back programme in 2002, 74 million shares have been repurchased at an average cost of R17.14 per share and a total cost of R1 271 million. Forty-three million of these shares (at an average cost of R10.95 per share and a total cost of R475 million) have been cancelled. At the end of the period 31 million shares (7% of total shares in issue) were held as treasury shares. OUTLOOK Retail sales for the first seven weeks of the second half of the 2010 financial period reflect growth of 11% on the prior period. The trading environment is expected to remain challenging as the country emerges from the recession, and management does not currently anticipate any marked improvement in consumer spending over the balance of the financial year. Management will continue to focus on consistent and innovative merchandising strategies to manage the risk of fashion, control credit risk and contain expenses. The Group remains committed to investing appropriately for longer-term growth, with trading space planned to increase by approximately 6% on June 2009. DIRECTORATE Tony Taylor, the Deputy Managing Director of Truworths Limited, retires with effect from 31 March 2010, but will remain on the Truworths International Board as a Non-executive Director. H Saven MS Mark Chairman Chief Executive Officer 18 February 2010 INTERIM DIVIDEND The directors have resolved to declare a cash dividend from retained earnings in respect of the period ended 27 December 2009 in the amount of 102 cents (2008: 88.0 cents) per share to holders of the company`s shares reflected in the company`s register on the record date, being Friday, 12 March 2010. The last day to trade in the company`s shares cum dividend is Friday, 5 March 2010. Trading in the company`s shares ex dividend will commence on Monday, 8 March 2010. The dividend will be paid in South African Rand on Monday, 15 March 2010. Consequently no dematerialisation or rematerialisation of the company`s shares may take place over the period from Monday, 8 March 2010 to Friday, 12 March 2010, 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 Company Secretary Cape Town 18 February 2010 GROUP STATEMENTS OF FINANCIAL POSITION at 27 Dec at 28 Dec at 28 Jun 2009 2008 2009 Unaudited Unaudited Audited Rm Rm Rm
ASSETS Non-current assets 1 005 896 927 Property, plant and equipment 700 557 618 Goodwill 90 90 90 Intangible assets 45 50 48 Derivative financial asset 23 42 25 Available-for-sale asset 1 - 1 Loans and receivables 95 97 97 Deferred tax 51 60 48 Current assets 4 185 3 491 3 579 Inventories 532 469 463 Trade and other receivables 2 555 2 280 2 281 Derivative financial asset 20 8 23 Prepayments 6 11 45 Cash and cash equivalents 1 072 723 767 Total assets 5 190 4 387 4 506 EQUITY AND LIABILITIES Equity Share capital and premium 70 60 65 Treasury shares (796) (751) (763) Retained earnings 4 719 3 935 4 208 Non-distributable reserves 54 35 41 Total equity 4 047 3 279 3 551 Non-current liabilities 96 110 94 Post-retirement medical benefit obligation 34 30 32 Cash-settled compensation obligation 14 30 14 Straight-line operating lease obligation 48 50 48 Current liabilities 1 047 998 861 Trade and other payables 926 830 705 Derivative financial liability 5 15 18 Provisions 40 36 49 Tax payable 76 117 89 Total liabilities 1 143 1 108 955 Total equity and liabilities 5 190 4 387 4 506 Number of shares in issue (net of treasury shares) (millions) 424.6 424.7 424.9 Net asset value per share (cents) 953.1 772.1 835.7 Key ratios Return on equity (%) 45 51 44 Return on capital (%) 67 74 65 GROUP STATEMENTS OF COMPREHENSIVE INCOME 26 weeks 26 weeks 52 weeks
to 27 Dec to 28 Dec to 28 Jun 2009 2008 2009 Unaudited Unaudited % Audited Note Rm Rm change Rm
Revenue 3 4 036 3 684 10 7 014 Sale of merchandise 3 689 3 306 12 6 247 Cost of sales (1 631) (1 493) (2 817) Gross profit 2 058 1 813 14 3 430 Other income 80 74 153 Trading expenses (1 138) (1 039) 10 (2 083) Depreciation and amortisation (59) (53) (109) Employment costs (383) (343) (672) Occupancy costs (283) (239) (496) Trade receivable costs (228) (242) (432) Other operating costs (185) (162) (374) Trading profit 1 000 848 18 1 500 Interest received 267 304 (614) Profit before tax 1 267 1 152 10 2 114 Tax expense (403) (365) (680) Profit for the period attributable to owners of the parent 864 787 10 1 434 Other comprehensive income for the period, net of tax 1 11 11 Movement in effective portion of cash flow hedge 1 15 14 Deferred tax thereon - (4) (4) Revaluation of available- for-sale asset - - 1 Total comprehensive income for the period attributable to owners of the parent 865 798 8 1 445 Basic earnings per share (cents) 203.3 184.7 10 337.2 Headline earnings per share (cents) 203.3 184.7 10 337.6 Fully diluted basic earnings per share (cents) 199.4 181.3 10 331.3 Fully diluted headline earnings per share (cents) 199.4 181.3 10 331.7 Weighted average number of shares (millions) 424.9 426.0 425.3 Key ratios Gross margin (%) 56 55 55 Trading expenses to sale of merchandise (%) 31 31 33 Trading margin (%) 27 26 24 Operating margin (%) 34 35 34 GROUP STATEMENTS OF CASH FLOWS 26 weeks 26 weeks 52 weeks to 27 Dec to 28 Dec to 28 Jun 2009 2008 2009 Unaudited Unaudited Audited
Rm Rm Rm CASH FLOWS FROM OPERATING ACTIVITIES Cash flow from trading and cash EBITDA* 1 062 920 1 661 Working capital movements (87) (65) (246) Cash generated from operations 975 855 1 415 Interest received 267 304 614 Tax paid (419) (446) (777) Cash inflow from operations 823 713 1 252 Dividends paid (353) (309) (683) Net cash from operating activities 470 404 569 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of plant and equipment to maintain operations (28) (16) (31) Acquisition of property, plant and equipment to expand operations (110) (63) (164) Acquisition of computer software - (1) (3) Proceeds on disposal of plant and equipment - - 1 Loans advanced - (2) (1) Loans repaid 1 4 7 Proceeds on disposal of cash-settled call options 20 10 14 Settlement of cash-settled compensation obligation (20) (9) (14) Net cash used in investing activities (137) (77) (191) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds on shares issued 5 10 15 Shares repurchased by subsidiaries (33) (147) (159) Net cash used in financing activities (28) (137) (144) Net increase in cash and cash equivalents 305 190 234 Cash and cash equivalents at the beginning of the period 767 533 533 Cash and cash equivalents at the end of the period 1 072 723 767 Key ratios Cash flow per share (cents) 193.7 167.4 294.4 Cash equivalent earnings per share (cents) 217.3 202.0 377.6 Cash realisation rate (%) 89 83 78 * Earnings before interest, tax, depreciation and amortisation GROUP STATEMENTS OF CHANGES IN EQUITY 27 Dec 28 Dec 2009 2008 Unaudited Unaudited Rm Rm
Total equity at the beginning of the period 3 551 2 920 Total comprehensive income for the period 865 798 Dividends (353) (309) Premium on shares issued 5 10 Shares repurchased (33) (147) Share-based payment 12 7 Total equity at the end of the period 4 047 3 279 Comprising: Share capital and premium 70 60 Treasury shares (796) (751) Retained earnings 4 719 3 935 Non-distributable reserves 54 35 Total equity 4 047 3 279 Dividends declared per share in respect of the period (cents) 102 88 SELECTED EXPLANATORY NOTES 1 BASIS OF PREPARATION The Group`s interim report has been prepared in accordance with International Financial Reporting Standards (IFRSs), and the presentation and disclosure requirements of IAS 34: Interim Financial Reporting, the South African Companies Act and the Listings Requirements of the JSE. 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 this report are consistent with those applied in the preparation of the Group`s annual financial statements for the period ended 28 June 2009, except for the following: During the period, the Group adopted the following new and amended IFRSs to the extent that they are applicable to its activities: - IFRS 2, Share-based payment: Vesting conditions and cancellations - IFRS 2, Share-based payment: Group cash-settled share-based payment transactions (adopted earlier than required) - IFRS 3, Business combinations (Revised) and IAS 27, Consolidated and separate financial statements (Amended) including consequential amendments to IFRS 7, IAS 21, IAS 28, IAS 31 and IAS 39 - IFRS 7, Financial instruments: Disclosures - IAS 39, Financial instruments: Recognition and measurement - Eligible hedged items - Annual improvements to IFRSs (May 2008 and April 2009) (some improvements have been adopted earlier than required) Where the adoption of the standard is deemed to have an impact on the accounting policies, financial position or performance of the Group, this is described below: IFRS 3, Business combinations (Revised) and IAS 27, Consolidated and separate financial statements (Amended) The changes to IFRS 3 (Revised) and IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. The change in accounting policy was applied prospectively and had no impact on the financial position or performance of the Group. IFRS 7, Financial instruments: Disclosures The amendments to the standard are intended to improve fair value measurement and liquidity risk disclosures in financial statements. The amendments were applied prospectively and had no significant impact on the Group`s disclosures. Annual improvements to IFRSs In May 2008 and April 2009 the IASB issued an omnibus of amendments to its standards, primarily with a view to remove inconsistencies and clarify wording. In some instances, the adoption of these amendments resulted in minor changes to accounting policies but did not have any impact on the financial position or performance of the Group. Various other new and amended IFRSs and International Financial Reporting Interpretations Committee (IFRIC) interpretations that have been issued and are effective, have not been adopted by the Group as they are not applicable to its activities. 3 REVENUE 26 weeks 26 weeks 52 weeks to 27 Dec to 28 Dec to 28 Jun 2009 2008 2009
Unaudited Unaudited % Audited Rm Rm change Rm Sale of merchandise 3 689 3 306 12 6 247 Retail sales 3 671 3 283 6 209 Franchise sales 18 23 38 Interest received 267 304 (12) 614 Trade receivables interest 237 271 549 Investment interest 30 33 65 Other income 80 74 8 153 Commission 38 42 82 Display fees 16 14 29 Financial services income 16 10 23 Lease rental income 5 4 10 Other 3 2 6 Royalties 2 2 3 Total 4 036 3 684 10 7 014 4 SEGMENT REPORTING The Group`s reportable segments have been identified as the Truworths and YDE business units. The Truworths business unit comprises the retailing activities conducted by the Truworths ladieswear and menswear divisions, and its Identity, Daniel Hechter and franchise departments, through which the Group retails fashion apparel comprising clothing, footwear and other fashion products to women, men and children. The YDE business unit comprises the agency activities through which the Group retails clothing, footwear and related products on behalf 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 reported on an IFRS basis and evaluated based on sales and operating profit or loss. Truworths YDE Corporate# Group 2009 Rm Rm Rm Rm Total third party revenue* 3 991 45 - 4 036 Depreciation and amortisation 58 1 - 59 Interest received 266 1 267 Profit for the period 849 13 2 864 Profit before tax 1 247 18 2 1 267 Tax expense (398) (5) - (403) Capital expenditure 133 5 - 138 Other segment information Gross margin % 56 - - 56 Trading margin % 27 39 - 27 Operating margin % 34 41 - 34 Inventory turn times 6.1 - - 6.1 Credit: cash sales mix % 69:31 23:77 - 69:31 2008 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) Capital expenditure 80 - - 80 Other segment information 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 * Segment revenue includes trade receivable interest and management fees # `Corporate` represents unallocated segments and consolidation entries 2009 2009 2008 2008 Third party revenue Rm % Rm % South Africa 3 923 97.2 3 573 97.0 Namibia 67 1.7 64 1.7 Swaziland 28 0.7 24 0.7 Franchise sales 18 0.4 23 0.6 Rest of Africa 9 0.2 9 0.3 Botswana 8 0.2 9 0.2 Middle East 1 0.0 5 0.1 Total third party revenue 4 036 100 3 684 100 5 CAPITAL COMMITMENTS 27 Dec 28 Dec 28 Jun 2009 2008 2009
Unaudited Unaudited Audited Rm Rm Rm Capital expenditure authorised but not contracted: Store development 78 75 150 Distribution facilities 73 66 126 Computer infrastructure 14 25 27 Head office refurbishment 2 12 2 Total 167 178 305 Capital expenditure authorised and contracted: Land - 11 - The capital commitments will be financed by cash generated from operations and available cash resources, and are expected to be incurred in the remaining 2010 reporting period. 6 EVENTS AFTER THE END OF THE REPORTING PERIOD 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. 7 SEASONALITY Historically there has been no material seasonal variation in trading between the first and second halves of the financial period. 8 RELATED PARTY TRANSACTIONS Related party transactions similar to those disclosed in the Group`s annual financial statements for the period ended 28 June 2009 took place during the period. 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* and MA Thompson * Executive
Non-executive Independent
RESULTS ARE AVAILABLE ONLINE AT WWW.TRUWORTHS.CO.ZA Date: 18/02/2010 14:21:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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