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Unaudited Group Interim Results for the 26 weeks ended 30 December 2012
Truworths International Ltd
Registration number: 1944/017491/06
JSE code: TRU
NSX code: TRW
ISIN: ZAE000028296
UNAUDITED GROUP INTERIM RESULTS
For the 26 weeks ended 30 December 2012
CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION
at 30 Dec at 25 Dec at 1 July
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 1 239 1 115 1 197
Property, plant and equipment 812 733 775
Goodwill 90 90 90
Intangible assets 105 77 94
Derivative financial assets 33 24 34
Available-for-sale assets 3 1 3
Loans and receivables 138 148 143
Deferred tax 58 42 58
Current assets 7 461 6 009 5 720
Inventories 739 666 670
Trade and other receivables 4 041 3 514 3 421
Derivative financial assets 20 34 7
Prepayments 18 2 62
Cash and cash equivalents 2 643 1 793 1 560
Total assets 8 700 7 124 6 917
EQUITY AND LIABILITIES
Total equity 6 645 5 610 5 981
Share capital and premium 278 183 205
Treasury shares (1 438) (1 274) (1 274)
Retained earnings 7 680 6 608 6 944
Non-distributable reserves 125 93 106
Non-current liabilities 97 91 97
Post-retirement medical benefit obligation 49 44 47
Cash-settled compensation obligation 10 5 12
Straight-line operating lease obligation 38 42 38
Current liabilities 1 958 1 423 839
Trade and other payables 1 344 1 221 598
Provisions 61 57 73
Tax payable 553 145 168
Total liabilities 2 055 1 514 936
Total equity and liabilities 8 700 7 124 6 917
Number of shares in issue (net of treasury
shares) (millions) 423.9 423.0 424.0
Net asset value per share (cents) 1 567.6 1 326.2 1 410.6
Key ratios
Return on equity* (%) 44 45 40
Return on capital* (%) 62 66 58
Return on assets* (%) 45 49 46
Inventory turn* (times) 6.2 6.2 5.7
Asset turnover* (times) 1.2 1.3 1.3
* Ratios for December have been annualised
CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME
Note 26 weeks 26 weeks 53 weeks
to 30 Dec to 25 Dec to 1 July
2012 2011 2012
Unaudited Unaudited % Audited
Rm Rm change Rm
Revenue 4 5 876 5 130 15 9 769
Sale of merchandise 5 368 4 689 14 8 830
Cost of sales (2 303) (2 021) (3 820)
Gross profit 3 065 2 668 15 5 010
Other income 117 107 208
Trading expenses (1 625) (1 383) 17 (2 759)
Depreciation and amortisation (76) (68) (138)
Employment costs (504) (449) (890)
Occupancy costs (425) (369) (746)
Trade receivable costs (379) (284) (533)
Other operating costs (241) (213) (452)
Trading profit 1 557 1 392 12 2 459
Interest received 390 334 17 728
Dividends received 1 - 3
Profit before tax 1 948 1 726 13 3 190
Tax expense (545) (553) (965)
Profit for the period, fully
attributable to owners of the parent 1 403 1 173 20 2 225
Other comprehensive income
Movement in effective portion of
cash flow hedge 9 3 11
Deferred tax on movement in effective
portion of cash flow hedge (3) (1) (3)
Other comprehensive income for the
period, net of tax 6 2 8
Total comprehensive income for the
period, fully attributable to owners
of the parent 1 409 1 175 20 2 233
Basic earnings per share (cents) 331.3 277.6 19 526.3
Headline earnings per share (cents) 331.3 277.6 19 526.7
Fully diluted basic earnings per
share (cents) 324.8 272.3 19 516.6
Fully diluted headline earnings per
share (cents) 324.8 272.3 19 517.1
Weighted average number of shares
(millions) 423.5 422.5 422.8
Key ratios
Gross margin (%) 57.1 56.9 56.7
Trading expenses to sale of
merchandise (%) 30.3 29.5 31.2
Trading margin (%) 29.0 29.7 27.8
Operating margin (%) 36.3 36.8 36.1
CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
30 Dec 25 Dec
2012 2011
Unaudited Unaudited
Rm Rm
Total equity at the beginning of the period 5 981 5 046
Total comprehensive income for the period 1 409 1 175
Profit for the period 1 403 1 173
Other comprehensive income for the period 6 2
Dividends (666) (566)
Premium on shares issued 15 24
Shares repurchased (106) (83)
Share-based payment 12 14
Total equity at the end of the period 6 645 5 610
Comprising:
Share capital and premium 278 183
Treasury shares (1 438) (1 274)
Retained earnings 7 680 6 608
Non-distributable reserves 125 93
Total equity 6 645 5 610
Cents per share:
Dividends declared in respect of the period 204 169
CONDENSED GROUP STATEMENTS OF CASH FLOWS
26 weeks 26 weeks 53 weeks
to 30 Dec to 25 Dec to 1 July
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 1 662 1 483 2 653
Working capital movements 73 (236) (802)
Cash generated from operations 1 735 1 247 1 851
Interest received 390 334 728
Dividends received 1 - 3
Tax paid (160) (557) (964)
Cash inflow from operations 1 966 1 024 1 618
Dividends paid (665) (565) (1 281)
Net cash from operating activities 1 301 459 337
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
to expand operations (95) (66) (166)
Acquisition of plant and equipment to maintain
operations (24) (17) (37)
Acquisition of computer software (15) (3) (23)
Loans repaid 7 - 15
Loans advanced - (10) (16)
Acquisition of mutual fund units - - (2)
Net cash used in investing activities (127) (96) (229)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 15 24 46
Shares repurchased by subsidiaries (106) (83) (83)
Net cash used in financing activities (91) (59) (37)
Net increase in cash and cash equivalents 1 083 304 71
Cash and cash equivalents at the beginning
of the period 1 560 1 489 1 489
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 2 643 1 793 1 560
Key ratios
Cash flow per share (cents) 464.2 242.4 382.7
Cash equivalent earnings per share (cents) 356.1 296.6 565.8
Cash realisation rate (%) 130 82 68
* Earnings before interest received, tax, depreciation and amortisation
SELECTED EXPLANATORY NOTES
1 STATEMENT OF COMPLIANCE
The interim condensed Group financial statements ("interim report") have been
prepared in compliance with International Financial Reporting Standards (IFRS),
the AC 500 Standards as issued by the Accounting Practices Board, IAS 34: Interim
Financial Reporting, the Companies Act (No 71 of 2008, as amended) of South Africa
and the JSE Listings Requirements.
The interim report does not include all the information and disclosures required in
the annual financial statements, and should be read in conjunction with the Group's
annual financial statements as at 1 July 2012.
The information contained in the interim report has neither been audited nor reviewed
by the Group's external auditors. These condensed financial statements have been
prepared under the supervision of MJV Sardi CA(SA), the Chief Financial Officer of
the Group.
2 BASIS OF PREPARATION
The interim report has been prepared in accordance with the going concern and
historical cost bases, unless otherwise indicated. The accounting policies are
applied consistently throughout the Group. The presentation and functional currency
used in the preparation of the interim report is the South African Rand [ZAR] (Rand)
and all amounts are rounded to the nearest million, unless otherwise indicated.
3 ACCOUNTING POLICIES AND METHODS OF COMPUTATION
The accounting policies and methods of computation applied in the preparation of the
interim report are consistent with those applied in the preparation of the Group's
annual financial statements for the period ended 1 July 2012, except for the adoption
of IAS 1: Presentation of Financial Statements (Amended) as described below.
IAS 1: Presentation of Financial Statements (Amended)
The amendments to IAS 1 require items that are recognised in other comprehensive
income, that may be reclassified ("recycled") to profit or loss in a future period, to
be presented separately from those items that may never be reclassified to profit or
loss. The adoption of IAS 1 (Amended) only affects the presentation of the Group's
interim report and has had no impact on the Group's financial position or performance.
IFRS, amendments and International Financial Reporting Interpretations Committee
(IFRIC) interpretations not applicable to Group activities
Various other new and amended IFRS and IFRIC interpretations that have been issued
and are effective, have not been adopted by the Group as they are not applicable to
its activities.
26 weeks 26 weeks 53 weeks
to 30 Dec to 25 Dec to 1 Jul
2012 2011 2012
Unaudited Unaudited % Audited
Rm Rm change Rm
4 REVENUE
Sale of merchandise 5 368 4 689 14 8 830
Retail sales 5 533 4 820 9 104
Accounting adjustments (171) (150) (298)
Franchise sales 6 19 24
Other income 117 107 9 208
Commission 61 54 103
Display fees 26 21 45
Financial services income 24 21 39
Lease rental income 3 6 8
Other 2 3 10
Royalties 1 2 3
Interest received 390 334 17 728
Trade receivables interest 342 290 630
Investment interest 48 44 98
Dividends received 1 - 3
Total revenue 5 876 5 130 15 9 769
5 SEGMENT REPORTING
The Group's reportable segments have been identified as the Truworths and Young
Designers Emporium (YDE) business units. The Truworths business unit comprises all
the retailing activities conducted by the Group, through which the Group retails
fashion apparel comprising clothing, footwear and other fashion products to women,
men and children, other than by the YDE business unit. 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
revenue and profit before tax.
Consoli-
dation
Truworths YDE entries Group
Rm Rm Rm Rm
2012
Total third party revenue 5 825 58 (7) 5 876
Third party 5 814 58 4 5 876
Inter-segment 11 - (11) -
Depreciation and amortisation 74 2 - 76
Interest received 331 3 - 334
Profit for the period 1 385 18 - 1 403
Profit before tax 1 923 25 - 1 948
Tax expense (538) (7) - (545)
Capital expenditure 132 2 - 134
Gross margin (%) 57.1 - - 57.1
Trading margin (%) 28.5 41.6 - 29.0
Operating margin (%) 35.8 42.6 - 36.3
Inventory turn (times) 6.2 - - 6.2
Credit:cash sales mix (%) 72:28 24:76 - 72:28
2011
Total third party revenue 5 083 55 (8) 5 130
Third party 5 072 55 3 5 130
Inter-segment 11 - (11) -
Depreciation and amortisation 66 2 - 68
Interest received 331 3 - 334
Profit for the period 1 157 16 - 1 173
Profit before tax 1 704 22 - 1 726
Tax expense (547) (6) - (553)
Capital expenditure 78 8 - 86
Gross margin (%) 56.9 - - 56.9
Trading margin (%) 29.3 40.8 - 29.7
Operating margin (%) 36.3 41.5 - 36.8
Inventory turn (times) 6.2 - - 6.2
Credit:cash sales mix (%) 73:27 24:76 - 73:27
2012 2012 2011 2011
Contri- Contri- Contri- Contri-
bution to bution to bution to bution to
revenue revenue revenue revenue
Rm % Rm %
Third party revenue
South Africa 5 693 96.9 4 991 97.3
Namibia 89 1.5 83 1.6
Botswana 28 0.5 5 0.1
Swaziland 26 0.4 29 0.6
Zambia 9 0.2 - -
Nigeria 8 0.1 - -
Ghana 7 0.1 - -
Mauritius 5 0.1 3 0.1
Lesotho 5 0.1 - -
Franchise sales 6 0.1 19 0.3
Total third party revenue 5 876 100 5 130 100
30 Dec 25 Dec 1 Jul
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
6 CAPITAL COMMITMENTS
Capital expenditure authorised but not contracted:
Store development 114 85 211
Distribution facilities 40 17 43
Computer infrastructure 25 28 51
Motor vehicles 2 - 6
Head office refurbishment - 2 4
Total capital commitments 181 132 315
The capital commitments will be financed from cash generated from operations and
available cash resources and are expected to be incurred in the remainder of the
2013 reporting period.
7 EVENTS AFTER THE END OF THE REPORTING PERIOD
No event, material to the understanding of this interim report, has occurred between
the end of the interim period and the 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 1 July 2012 took place during the period.
COMMENTARY
GROUP PROFILE
Truworths International Ltd is an investment holding and management company listed
on the JSE and the Namibian Stock Exchange. Its principal trading subsidiaries,
Truworths Ltd and Young Designers Emporium (Pty) Ltd, are engaged either directly or
through agencies and franchises, in the retailing of fashion apparel and related
merchandise. Truworths International Ltd and its subsidiaries (the Group) operate
primarily in southern Africa, with further operations in the rest of Africa.
TRADING AND FINANCIAL PERFORMANCE
Group retail sales increased by 14.8% to R5.5 billion for the 26-week period ended
30 December 2012 (the period) compared to the prior 26-week period. Comparable store
retail sales grew by 9.8% (2011: 6.2%) while product inflation averaged 3%
(2011: 8%) for the period. Group sale of merchandise, which comprises Group retail
sales and franchise sales less accounting adjustments, grew 14.4% to R5.4 billion
(2011: R4.7 billion).
Trading space increased by 8.1% over the prior period-end following the opening of a
net 18 Truworths, 19 Identity and 5 Truworths Man stores, while 2 Uzzi stores and
1 YDE store were closed. At the end of the period the Group had 591 stores
(2011: 552), including 40 stores in the rest of Africa (2011: 21) following the
opening of 6 stores in Botswana, 4 stores in Nigeria, 4 stores in Lesotho, 3 stores
in Zambia and 2 stores in Ghana.
The Group continued to record market share gains. Based on figures from the recently
reconstituted Retail Liaison Committee (RLC) for December 2012, the Group increased
its ladieswear RLC market share of clothing to 23.9% (2011: 23.5% restated), while
its menswear market share grew to 22.4% (2011: 22.0%).
Divisional sales %
30 Dec 25 Dec change
2012 2011 on prior
Rm Rm period
Truworths ladieswear 1 961 1 741 13
Truworths menswear 1 088 935 16
Identity 876 743 18
Daniel Hechter 681 593 15
LTD 260 214 21
Elements 256 240 7
Inwear 250 216 16
Other* 161 138 17
Retail sales 5 533 4 820 15
Franchise sales 6 19 (68)
Accounting adjustments (171) (150) 14
Sale of merchandise 5 368 4 689 14
YDE agency sales 151 149 1
* Includes Cellular, Truworths Jewellery and Truworths Living divisions
(discontinued in 2012)
The gross margin increased to 57.1% (2011: 56.9%). Trading profit increased 12% to
R1.6 billion (2011: R1.4 billion) as trading expenses increased 17% to R1.6 billion
(2011: R1.4 billion), mainly as a result of higher trade receivable costs. Trading
expenses as a percentage of the sale of merchandise increased to 30.3% (2011: 29.5%).
Interest received increased 17% to R390 million (2011: R334 million). The inventory
turn remained at 6.2 times.
Operating profit increased 13% to R1.9 billion (2011: R1.7 billion) and the operating
margin decreased marginally to 36.3% (2011: 36.8%).
Headline earnings per share (HEPS) were 331.3 cents, an increase of 19% over the
prior period's 277.6 cents. This performance is in line with the earnings range in
the Group's trading statement released on SENS on 18 January 2013. Diluted HEPS of
324.8 cents were 19% higher (2011: 272.3 cents) over the prior period.
The Group's financial position strengthened, with net asset value per share increasing
by 18% to 1 567.6 cents (2011: 1 326.2 cents). The annualised returns on equity and
assets were 44% (2011: 45%) and 45% (2011: 49%) respectively. Asset turnover was at
1.2 times (2011: 1.3 times).
CREDIT MANAGEMENT
Gross trade receivables grew by 15.8% to R4.5 billion, with the Group's active account
base growing by 7% to approximately 2.6 million accounts.
The growth in the trade receivables book is attributable to Group credit retail sales
growing 13% over the prior period (12% and 22% higher in Truworths and Identity
respectively) and a continuing shift from shorter-term interest-free to longer-term
interest-bearing payment plans. Credit sales contributed 72% (2011: 73%) to total
sales for the period. At period-end 87% (2011: 88%) of the Group's active account
holders were able to purchase.
As anticipated by management, the credit environment has become more challenging
with consumer delinquency levels increasing. The doubtful debt allowance as a
percentage of gross trade receivables increased to 10.6% (2011: 10.1%) and net bad
debt as a percentage of gross trade receivables increased to 9.3% (2011: 8.0%).
These factors contributed to trade receivable costs increasing 33% to R379 million
(2011: R284 million).
CAPITAL MANAGEMENT
The Group continues to manage its capital through a combination of capital
expenditure to sustain the organic growth of the business, share buy-backs and
dividends.
During the period the Group generated R2.0 billion in cash from operations and this
funded dividend payments (R665 million), share buy-backs (R106 million), store
development (R110 million) and maintenance to existing plant, property and equipment
(R24 million). Cash and cash equivalents increased 47% to R2.6 billion at the
period-end, largely as a result of the timing of tax payments which fell after the
period-end.
The Group repurchased 1.2 million shares at an average price of R92.10 per share for
a total of R106 million during the period. Since the inception of the share buy-back
programme in 2002, 82 million shares have been repurchased at a total cost of
R1.9 billion at an average price of R22.48.
Capital expenditure of R181 million has been committed for the remainder of the 2013
financial period.
DIRECTORATE
Chief Executive Officer Contract
The board is pleased to announce that it has concluded an agreement with the Chief
Executive Officer, Michael Mark, to extend his service contract until 30 June 2015.
He has been Chief Executive Officer of the Group since 1991. Salient features of
this contract, the material terms of which are substantially in line with those
of the existing contract, will be disclosed in the Group's 2013 integrated annual
report.
Management appointment
The board is pleased to announce the appointment of David Pfaff as Group Chief
Financial Officer (Designate) with effect from 1 April 2013. David will undergo
an induction programme and will thereafter be appointed as Group Chief Financial
Officer. David (47), a chartered accountant, has previously spent seven years with
a large listed IT company in the period up to 2008 as Chief Financial Officer. He
has spent the last four years as an independent consultant in London where he has
been instrumental in setting up a number of entrepreneurial ventures.
OUTLOOK
The credit environment is expected to deteriorate further in the months ahead owing
to increasing levels of consumer indebtedness. This is likely to impact on both the
Group's delinquency experience and active account growth, even though strict credit
granting and risk policies will continue to be applied.
In this increasingly challenging environment the Group will strive to maintain its
sales momentum by delivering high quality internationally inspired clothing across
the brand portfolio.
Retail sales for the first seven weeks of the second half of the 2013 financial
period increased by 9.3% over the first seven weeks of the second half of
the 2012 financial period.
H Saven MS Mark
Chairman Chief Executive Officer
DIVIDEND
The directors of the company have resolved to declare a gross cash dividend from
retained earnings in respect of the 26-week period ended 30 December 2012 in the
amount of 204 cents (2011: 169 cents) per share to shareholders reflected in the
company's register on the record date, being Friday, 15 March 2013.
The last day to trade in the company's shares cum dividend is Friday, 8 March 2013.
Trading in the company's share ex dividend will commence on Monday, 11 March 2013.
Consequently no dematerialisation or rematerialisation of the company's shares may
take place over the period from Monday, 11 March 2013 to Friday, 15 March 2013, both
days inclusive. The dividend will be payable in South African Rand on Monday,
18 March 2013.
Dividends will be paid net of dividends tax of 15%, to be withheld and paid to the
South African Revenue Service on behalf of the company. Such tax must be withheld
unless beneficial owners of the dividend have provided the necessary documentary
proof to the relevant regulated intermediary (being a broker, CSD participant,
nominee company or the company's transfer secretaries Computershare Investor Services
(Pty) Ltd, PO Box 61051, Marshalltown, 2107 South Africa) that they are exempt
therefrom, or entitled to a reduced rate, as a result of a double taxation agreement
between South Africa and the country of tax domicile of such owner.
The withholding tax, if applicable at the rate of 15%, will result in a net cash
dividend per share of 173.40 cents. No secondary tax on companies (STC) credits were
utilised when determining the net dividend. The company has 462 889 265 ordinary
shares in issue on 20 February 2013.
In accordance with the company's recently adopted new memorandum of incorporation:
- the dividend will only be paid by electronic funds transfer, and no cheque payments
will be made. Accordingly, shareholders who have not yet provided their bank account
details should do so by contacting the company's transfer secretaries; and
- the directors have determined that gross dividends amounting to less than 1 000
cents, due to any one shareholder of the company's shares held in certificated form,
will not be paid, unless otherwise requested in writing, but the net amount thereof
will be aggregated with other such net amounts and donated to a charity to be
nominated by the directors.
By order of the board
C Durham
Company Secretary
Cape Town
20 February 2013
CORPORATE INFORMATION
Truworths International Ltd: Registration number 1944/017491/06
Tax reference number: 9875/145/71/7
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 in South Africa: One Capital Sponsor Services (Pty) Ltd
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Ltd
Auditors: Ernst & Young Inc.
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street
Johannesburg 2001; PO Box 61051, Marshalltown 2107, South Africa;
or Transfer Secretaries (Pty) Ltd, Shop 8, Kaiserkrone Centre, Post Street Mall,
Windhoek, Namibia; PO Box 2401, Windhoek, Namibia
Company Secretary: C Durham
Directors: H Saven (Chairman) §, MS Mark (CEO)*, MJV Sardi (CFO)*, RG Dow §,
CT Ndlovu §, SM Ngebulana §, RJA Sparks §, AJ Taylor § and MA Thompson §
* Executive § Non-executive Independent
Date: 20/02/2013 03:10:00 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
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