Wrap Text
The Foschini Group Limited's results for the half-year ended 30 September 2014
The Foschini Group Limited
Registration number: 1937/009504/06
Share codes: TFG-TFGP
ISIN codes: ZAE000148466 – ZAE000148516
The following are The Foschini Group Limited’s results for the
half-year ended 30 September 2014.
This report has not been audited or reviewed by the company’s
auditors.
SALIENT FEATURES
- Retail turnover up 9,7% to R7,3 billion
- Strong cash sales growth of 20,3% now representing 44,2% of
turnover
- Headline earnings per share from continuing operations up 8,0%
to 403,3 cents
- Total headline earnings per share up 3,3% to 426,5 cents
- Interim dividend increased by 8,2% to 263,0 cents per share
- Sustained strong financial position
- RCS transaction completed
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated
Sept 2014 March 2014
Sept 2013
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and
equipment 1 813,3 1 632,6 1 696,1
Goodwill and intangible
assets 91,9 120,2 63,4
RCS Group card receivables - 376,5 -
RCS Group loan receivables - 667,6 -
Participation in export
partnerships 20,8 26,1 23,9
Deferred taxation asset 351,3 311,7 337,1
---------- ---------- ----------
2 277,3 3 134,7 2 120,5
---------- ---------- ----------
Current assets
Inventory (note 4) 2 846,6 2 635,2 2 775,9
Trade receivables – retail 5 971,0 5 502,0 5 796,6
RCS Group card receivables - 3 046,7 -
RCS Group loan receivables - 375,5 -
Other receivables and
prepayments 454,6 928,3 465,5
Participation in export
partnerships 8,5 14,3 11,9
Cash 433,1 801,3 301,3
Tax receivable 26,2 - -
---------- ---------- ----------
9 740,0 13 303,3 9 351,2
---------- ---------- ----------
Assets associated with
disposal group (note 5) –
RCS Group - - 5 631,5
---------- ---------- ----------
Total assets 12 017,3 16 438,0 17 103,2
========== ========== ==========
EQUITY AND LIABILITIES
Equity attributable to
equity holders of The
Foschini Group Limited 7 759,3 6 959,3 7 228,6
Non-controlling interest 2,5 784,2 861,3
--------- --------- ----------
Total equity 7 761,8 7 743,5 8 089,9
--------- --------- ----------
LIABILITIES
Non-current liabilities
Interest-bearing debt 1 576,8 1 377,8 1 584,7
RCS Group external funding - 2 261,8 -
Operating lease liability 220,4 190,8 208,2
Deferred taxation liability 36,5 71,8 42,7
Post-retirement defined
benefit plan 186,4 104,5 180,4
---------- ---------- ----------
2 020,1 4 006,7 2 016,0
---------- ---------- ----------
Current liabilities
Interest-bearing debt 226,6 1 378,7 1 375,7
RCS Group external funding - 1 014,3 -
Trade and other payables 1 999,8 2 255,3 1 853,0
Operating lease liability 9,0 21,9 8,0
Taxation payable - 17,6 59,4
---------- ---------- ----------
2 235,4 4 687,8 3 296,1
---------- ---------- ----------
Liabilities associated with
disposal group (note 5) –
RCS Group - - 3 701,2
---------- ---------- ----------
Total liabilities 4 255,5 8 694,5 9 013,3
---------- ---------- ----------
Total equity and liabilities 12 017,3 16 438,0 17 103,2
========== ========== ==========
CONDENSED CONSOLIDATED INCOME STATEMENT
Restated 6
6 months months Year ended
ended 30 ended 30 31 March
Sept 2014 Sept 2013 2014
Unaudited Unaudited % Audited
Rm Rm change Rm
Continuing
operations
Revenue (note 6) 8 538,3 7 750,7 16 362,9
========= ========= =========
Retail turnover 7 305,1 6 660,9 9,7 14 159,0
Cost of turnover (3 986,3) (3 627,7) (7 579,4)
--------- --------- ---------
Gross profit 3 318,8 3 033,2 6 579,6
Interest income
(note 7) 663,5 548,2 1 148,1
Other revenue (note
8) 569,7 541,6 1 055,8
Trading expenses
(note 9) (3 305,0) (2 959,1) (6 246,6)
--------- --------- ---------
Operating profit
before finance
charges 1 247,0 1 163,9 2 536,9
Finance costs (85,6) (66,3) (161,8)
--------- --------- ---------
Profit before tax 1 161,4 1 097,6 2 375,1
Income tax expense (339,8) (323,1) (691,5)
--------- --------- ---------
Profit from
continuing
operations 821,6 774,5 6,1 1 683,6
Discontinued
operations
Profit from
discontinued
operations, net of
tax (note 5) – RCS
Group 86,2 149,2 321,1
Profit on disposal
of discontinued
operations (note 5)
– RCS Group 273,2 - -
--------- --------- ------ ---------
Profit for the
period 1 181,0 923,7 27,9 2 004,7
========= ========= ====== =========
Attributable to:
Continuing
operations 821,4 774,3 1 683,1
Discontinued
operations 320,6 82,5 176,5
--------- --------- ---------
Equity holders of
The Foschini Group
Limited 1 142,0 856,8 33,3 1 859,6
Non-controlling
interest 39,0 66,9 145,1
--------- --------- ------ ---------
Profit for the
period 1 181,0 923,7 27,9 2 004,7
========= ========= ====== =========
EARNINGS PER
ORDINARY SHARE
(CENTS)
Total
Basic 559,6 412,1 35,8 902,8
Headline 426,5 413,0 3,3 908,9
Diluted (basic) 557,4 410,3 35,9 896,6
Diluted (headline) 424,8 411,2 3,3 902,7
Continuing
operations
Basic 402,5 372,7 8,0 817,1
Headline 403,3 373,6 8,0 818,7
Diluted (basic) 400,9 371,0 8,0 811,5
Diluted (headline) 401,7 371,9 8,0 813,1
Discontinued
operations
Basic 157,1 39,4 298,7 85,7
Headline 23,2 39,4 (41,1) 90,2
Diluted (basic) 156,5 39,3 298,2 85,1
Diluted (headline) 23,1 39,3 (41,2) 89,6
Weighted average
ordinary shares in
issue (millions) 204,1 207,9 206,0
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months Restated 6 Year ended
ended 30 Sept months ended 31 March
2014 30 Sept 2013 2014
Unaudited Unaudited % Audited
Rm Rm change Rm
Profit for the
period 1 181,0 923,7 2 004,7
---------- ---------- ----------
Other
comprehensive
income:
Items that will
never be
reclassified to
profit or loss
Actuarial losses
on post-
retirement
defined benefit
plan - - (69,8)
Deferred tax on
items that will
never be
reclassified to
profit or loss - - 19,5
Items that are or
may be
reclassified to
profit and loss
Movement in
effective portion
of changes in
fair value of
cash flow hedges 24,2 64,7 40,6
--------- --------- ---------
Continuing
operations 32,4 26,6 6,9
Discontinued
operations (8,2) 38,1 33,7
--------- --------- ---------
Foreign currency
translation
reserve movements 0,8 5,7 (3,2)
--------- --------- ---------
Continuing
operations 0,8 4,7 (5,0)
Discontinued
operations - 1,0 1,8
--------- --------- ---------
Deferred tax on
items that are or
will be
reclassified to
profit or loss (6,8) (19,4) (11,3)
---------- ---------- ----------
Other
comprehensive
income for the
period, net of
tax 18,2 51,0 (24,2)
---------- ---------- ----------
Total
comprehensive
income for the
period 1 199,2 974,7 1 980,5
========== ========== ==========
Attributable to:
Continuing
operations 845,5 798,2 1 632,8
Discontinued
operations 317,4 97,8 191,6
---------- ---------- ----------
Equity holders of
The Foschini
Group Limited 1 162,9 896,0 29,8 1 824,4
Non-controlling
interest 36,3 78,7 156,1
---------- ---------- ----------
Total
comprehensive
income for the
period 1 199,2 974,7 1 980,5
========== ========== ==========
SUPPLEMENTARY INFORMATION
Sept 2014 Sept 2013 March 2014
Unaudited Unaudited Audited
Net ordinary shares in issue
(millions) 204,1 206,2 204,3
Weighted average ordinary
shares in issue (millions) 204,1 207,9 206,0
Tangible net asset value per
ordinary share (cents) 3 756,8 3 317,4 3 507,2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
holders of Non-
The Foschini controlling
Group Limited interest Total equity
Rm Rm Rm
Equity at 31 March 2013 7 043,8 705,5 7 749,3
Profit for the period
Continuing operations 774,3 0,2 774,5
Discontinued operations 82,5 66,7 149,2
Other comprehensive income
Continuing operations
Movement in effective
portion of changes in fair
value of cash flow hedges 26,6 - 26,6
Foreign currency
translation reserve
movements 4,7 - 4,7
Deferred tax on movement in
other comprehensive income (7,4) - (7,4)
Discontinued operations
Movement in effective
portion of changes in fair
value of cash flow hedges 20,9 17,2 38,1
Foreign currency
translation reserve
movements 1,0 - 1,0
Deferred tax on movement in
other comprehensive income (6,6) (5,4) (12,0)
---------- ---------- ----------
Total comprehensive income
for the period 896,0 78,7 974,7
Contributions by and
distributions to owners
Share-based payments
reserve movements 43,8 - 43,8
Dividends paid (566,0) - (566,0)
Cancellation of issued
shares* - - -
Repurchase of shares (350,5) - (350,5)
Shares purchased in terms
of share incentive schemes (127,5) - (127,5)
Current tax on shares
purchased 6,5 - 6,5
Deferred tax on shares
purchased 13,2 - 13,2
---------- ---------- ----------
Equity at 30 September 2013 6 959,3 784,2 7 743,5
Profit for the period
Continuing operations 908,8 0,3 909,1
Discontinued operations 94,0 77,9 171,9
Other comprehensive income
Continuing operations
Actuarial losses on post-
retirement defined benefit
plan (69,8) - (69,8)
Movement in effective
portion of changes in fair
value of cash flow hedges (19,7) - (19,7)
Foreign currency
translation reserve
movements (9,7) - (9,7)
Deferred tax on movement in
other comprehensive income 25,0 - 25,0
Discontinued operations
Movement in effective
portion of changes in fair
value of cash flow hedges (2,4) (2,0) (4,4)
Foreign currency
translation reserve
movements 0,8 - 0,8
Deferred tax on movement in
other comprehensive income 1,4 1,2 2,6
---------- ---------- ----------
Total comprehensive income
for the period 928,4 77,4 1 005,8
Contributions by and
distributions to owners
Share-based payments
reserve movements 46,5 - 46,5
Dividends paid (500,9) (0,3) (501,2)
Cancellation of issued (0,1) - (0,1)
shares*
Repurchase of shares (250,0) - (250,0)
Proceeds on delivery of
shares by the trust 45,5 - 45,5
Deferred tax on shares
purchased (0,1) - (0,1)
---------- ---------- ----------
Equity at 31 March 2014 7 228,6 861,3 8 089,9
Profit for the period
Continuing operations 821,4 0,2 821,6
Discontinued operations 320,6 38,8 359,4
Other comprehensive income
Continuing operations
Movement in effective
portion of changes in fair
value of cash flow hedges 32,4 - 32,4
Foreign currency
translation reserve
movements 0,8 - 0,8
Deferred tax on movement in
other comprehensive income (9,1) - (9,1)
Discontinued operations
Movement in effective
portion of changes in fair
value of cash flow hedges (4,5) (3,7) (8,2)
Deferred tax on movement in
other comprehensive income 1,3 1,0 2,3
---------- ---------- ----------
Total comprehensive income
for the period 1 162,9 36,3 1 199,2
Contributions by and
distributions to owners
Share-based payments
reserve movements 47,9 - 47,9
Dividends paid (603,7) - (603,7)
Realisation of non-
controlling interest on
disposal of discontinued
operations - (895,1) (895,1)
Realisation of reserves on
disposal of discontinued
operations 24,2 - 24,2
Proceeds from sale of
shares in terms of share
incentive schemes 35,7 - 35,7
Shares purchased in terms
of share incentive schemes (171,2) - (171,2)
Current tax on shares
purchased 11,6 - 11,6
Deferred tax on shares
purchased 23,3 - 23,3
---------- ---------- ----------
Equity at 30 September 2014 7 759,3 2,5 7 761,8
========== ========== ==========
* zero as a result of rounding.
6 months 6 months Year ended
ended 30 ended 30 31 March
Sept 2014 Sept 2013 2014
Unaudited Unaudited Audited
DIVIDEND PER ORDINARY SHARE
(CENTS)
Interim 263,0 243,0 243,0
Final - - 293,0
------ ------ ------
Total 263,0 243,0 536,0
------ ------ ------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Restated 6
6 months months Year ended
ended 30 ended 30 31 March
Sept 2014 Sept 2013 2014
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before
working capital changes
(note 10) 1 506,0 1 733,1 3 000,6
Increase in working capital (113,5) (754,8) (930,3)
---------- ---------- ----------
Cash generated from
operations 1 392,5 978,3 2 070,3
Interest income 9,5 13,7 17,6
Finance costs (85,6) (192,5) (161,8)
Taxation paid (419,6) (432,7) (730,7)
Dividends paid (603,7) (566,0) (1 067,2)
---------- ---------- ----------
Net cash inflows (outflows)
from operating activities 293,1 (199,2) 128,2
---------- ---------- ----------
Cash flows from investing
activities
Purchase of property, plant
and equipment (321,5) (271,4) (554,2)
Proceeds from sale of
property, plant and
equipment 3,5 3,4 4,1
Repayment of participation
in export partnerships 6,5 8,0 12,6
Proceeds from disposal of
discontinued operations 1 442,7 - -
---------- ---------- ----------
Net cash inflows (outflows)
from investing activities 1 131,2 (260,0) (537,5)
---------- ---------- ----------
Cash flows from financing
activities
Repurchase of shares - (350,5) (600,5)
Shares purchased in terms
of share incentive schemes (171,2) (127,5) (127,5)
Proceeds from sale of
shares in terms of share
incentive schemes 35,7 - 45,5
Increase in RCS Group
external funding - 327,0 -
(Decrease) increase in
interest-bearing debt (1 157,0) 818,1 1 022,0
---------- ---------- ----------
Net cash (outflows) inflows
from financing activities (1 292,5) 667,1 339,5
---------- ---------- ----------
Net increase (decrease) in
cash during the period 131,8 207,9 (69,8)
Cash at the beginning of
the period 301,3 593,4 593,4
Cash at the beginning of
the year – discontinued
operations - - (222,4)
Effect of exchange rate
fluctuations on cash held - - 0,1
---------- ---------- ----------
Cash at the end of the
period 433,1 801,3 301,3
========== ========== ==========
NOTES
These unaudited interim condensed consolidated results were
prepared by the TFG Finance and Advisory department of The Foschini
Group Limited acting under supervision of Ronnie Stein CA(SA), CFO
of The Foschini Group Limited.
1. The unaudited interim condensed consolidated results for the
half-year ended 30 September 2014 have been prepared in accordance
with the group’s accounting policies, which comply with
International Financial Reporting Standards (IFRS), IAS 34 Interim
Financial Reporting, Financial Reporting Guides as issued by the
Accounting Practice Committee of the South African Institute of
Chartered Accountants, Financial Pronouncements as issued by
Financial Reporting Standards Council and disclosures required by
the Companies Act No. 71 of 2008 and the JSE Listings Requirements,
and, except as mentioned in note 2, have been consistently applied
with those in the prior year.
2. During the period, the group adopted the following revised
accounting standards:
Investment Entities (Amendments to IFRS 10 Consolidated Financial
Statements, IFRS 12 Disclosure of Interests in Other Entities and
IAS 27 Separate Financial Statements)
Offsetting Financial Assets and Financial Liabilities (Amendments
to IAS 32 Financial Instruments: Presentation)
Recoverable Amount Disclosure for Non-Financial Assets (Amendment
to IAS 36 Impairment of Assets)
Novation of Derivatives and continuation of Hedge Accounting
(Amendment to IAS 39 Financial instruments: Recognition and
measurement)
IFRIC 21 Levies
The adoption of these standards had no material impact on these
interim financial statements.
3. These financial statements incorporate the financial statements
of the company, all its subsidiaries and all entities over which it
has operational and financial control. For the year ended 31 March
2014, the RCS Group was treated as a discontinued operation held
for disposal in terms of IFRS 5. The comparatives for the period in
the income statement and in the statement of comprehensive income
have been restated accordingly. The RCS Group was disposed of on 30
June 2014 (refer to note 5).
Restated
6 months 6 months Year ended
ended 30 ended 30 31 March
Sept 2014 Sept 2013 2014
Unaudited Unaudited Audited
Rm Rm Rm
4. Inventory
Inventory at period end 2 846,6 2 635,2 2 775,9
========== ========== ==========
Inventory write-downs
included above 73,2 56,3 140,4
---------- ---------- ----------
5. Discontinued operations (RCS Group)
As was announced on SENS on 10 April 2014, the group together with
The Standard Bank of South Africa Limited, entered into agreements
which resulted in BNP Paribas Personal Finance S.A. becoming the
100% shareholder of the RCS Group. Accordingly, the RCS Group was
treated as a discontinued operation in terms of IFRS 5 for the year
ended 31 March 2014. The closing date of the transaction was 6
August 2014 and the effective date was 30 June 2014. TFG’s share of
the proceeds was R1,4 billion. For the period 1 April 2014 to 30
June 2014, the RCS Group has been disclosed as a discontinued
operation, and the profit on disposal of the RCS Group has been
disclosed separately from continuing operations.
3 months
April 2014 Restated 6 Year ended
– June months ended 31 March
2014 30 Sept 2013 2014
INCOME STATEMENT*
Interest income 298,2 541,5 1 118,7
Other income 164,5 302,4 634,5
------- ------- -------
Total credit income 462,7 843,9 1 753,2
Net bad debt (111,1) (166,4) (373,6)
Operating costs (166,6) (342,0) (668,7)
------- ------- -------
Operating profit before
finance charges 185,0 335,5 710,9
Finance costs (65,0) (128,3) (252,2)
------- ------- -------
Profit before tax 120,0 207,2 458,7
Income tax expense (33,8) (58,0) (137,6)
------- ------- -------
Profit from discontinued
operations 86,2 149,2 321,1
Profit on disposal of
discontinued operations 273,2 - -
------- ------- -------
Profit for the period 359,4 149,2 321,1
------- ------- -------
*6 months ended 30 September 2014 represents 3 months of trading
prior to the disposal of RCS Group.
In accordance with IFRS 5 the statement of financial position for
the period ended 30 September 2013 and accordingly the related cash
flow statement has not been restated. Refer below for the statement
of financial position of the RCS Group as at 30 September 2013:
STATEMENT OF FINANCIAL POSITION 30 Sept 2013
Assets and liabilities
Assets of disposal group
Property, plant and equipment 42,4
Goodwill and intangible
assets 56,9
RCS Group card receivables 3 423,2
RCS Group loan receivables 1 043,1
Deferred taxation asset 29,2
Other receivables and
prepayments 518,6
Cash 341,6
Tax receivable 16,1
-------
5 471,1
=======
Liabilities of disposal group
RCS Group external funding 3 276,1
Deferred taxation liability 20,5
Trade and other payables 414,9
-------
3 711,5
=======
6 months Restated 6 Year ended
ended 30 months ended 31 March
Sept 2014 30 Sept 2013 2014
Unaudited Unaudited Audited
Rm Rm Rm
6. Revenue
Retail turnover 7 305,1 6 660,9 14 159,0
Interest income (refer note
7) 663,5 548,2 1 148,1
Other revenue (refer note 8) 569,7 541,6 1 055,8
------- ------- -------
8 538,3 7 750,7 16 362,9
------- ------- -------
7. Interest income
Trade receivables – retail 654,0 540,4 1 130,5
Sundry 9,5 7,8 17,6
------- ------- -------
663,5 548,2 1 148,1
------- ------- -------
8. Other revenue
Publishing income 193,5 185,5 379,0
Collection cost recovery 151,8 143,9 287,6
Insurance income 173,6 170,1 299,6
Mobile one2one airtime income 43,4 39,3 84,5
Sundry income 7,4 2,8 5,1
------- ------- -------
569,7 541,6 1 055,8
------- ------- -------
9. Trading expenses
Depreciation (198,2) (173,2) (365,5)
Employee costs (1 056,8) (974,0) (2 048,3)
Occupancy costs (748,7) (663,3) (1 393,0)
Net bad debt (485,2) (441,3) (935,5)
Other operating costs (816,1) (707,3) (1 504,3)
---------- ---------- ----------
(3 305,0) (2 959,1) (6 246,6)
---------- ---------- ----------
10. Operating profit before
working capital changes
Profit before tax 1 161,4 1 304,8 2 375,1
Finance costs 85,6 192,5 161,8
---------- ---------- ----------
Operating profit before
finance charges 1 247,0 1 497,3 2 536,9
Interest income – sundry (9,5) (13,7) (17,6)
Non-cash items
Depreciation 198,2 181,3 365,5
Amortisation - 0,1 -
Operating lease liability
adjustment 13,2 16,1 19,7
Share-based payments 47,9 43,8 90,3
Post-retirement defined
benefit medical aid movement 6,0 - 6,1
Foreign currency translation
reserve movement 0,8 5,7 (5,0)
Loss on disposal of property,
plant and equipment 2,6 2,5 4,8
Profit on disposal of
property, plant and equipment (0,2) - (0,1)
---------- ---------- ----------
Operating profit before
working capital changes 1 506,0 1 733,1 3 000,6
---------- ---------- ----------
6 months Restated 6 Year ended
ended 30 months ended 31 March
Sept 2014 30 Sept 2013 2014
Unaudited Unaudited Audited
Rm Rm Rm
11. Reconciliation of profit for the period to headline earnings
Profit for the period
attributable to equity
holders of The Foschini Group
Limited 1 142,0 856,8 1 859,6
Adjusted for:
Profit on disposal of
property, plant and equipment (0,2) - (0,1)
Loss on disposal of property,
plant and equipment 2,6 2,5 4,8
Profit on disposal of
discontinued operations (273,2) - -
Impairment of loan
receivables - - 12,9
---------- ---------- ----------
Adjusted headline earnings
before tax 871,2 859,3 1 877,2
Tax on headline earnings
adjustments (0,7) (0,7) (4,9)
---------- ---------- ----------
Headline earnings 870,5 858,6 1 872,3
---------- ---------- ----------
12. Related parties
Related party transactions similar to those disclosed in the
group's annual financial statements for the year ended 31 March
2014 took place during the period. There are no significant related
party transactions which took place in the current period except as
mentioned in note 13.
13. Repurchase of shares
At the annual general meeting of the company held on 1 September
2014 shareholders approved a specific repurchase of 11 million
ordinary shares held by a wholly-owned subsidiary.
The specific repurchase was implemented on 19 September 2014 at an
average price of R117,39 per share, whereafter the shares were
cancelled and restored to authorised share capital. On 21 October
2014 11 million shares were delisted reducing the total shares in
issue from 222 005 054 shares to 211 005 054 shares.
14. Change in accounting policies (in line with year ended 31 March
2014)
14.1 Accounting for insurance cells
Previously the group consolidated the cell captives in terms of SIC
12 Special Purpose Entities. In terms of IFRS 10 Consolidated
Financial Statements, the cell captives did not meet the definition
of a deemed separate legal entity, i.e. it is not legally ring-
fenced from the insurer and is therefore no longer consolidated.
The cell captive arrangement with the insurer is accounted for as
an in-substance reinsurance contract issued by the group which is
in line with the accounting treatment of cell captive arrangements
for the year ended 31 March 2014. The comparatives have been
restated accordingly. The net assets of the insurance cell are
included as part of other receivables and prepayments and are no
longer consolidated.
The change in accounting policy had no effect on basic or headline
earnings per share, or on diluted basic or diluted headline
earnings per share.
The effect of the change is as follows:
As As
reported restated
30 Sept 30 Sept 2013 30 Sept
2013 Adjustment 2013
Rm Rm Rm
Other receivables and
prepayments 653,6 274,7 928,3
Cash 1 165,0 (363,7) 801,3
Trade and other payables (2 312,3) 57,0 (2 255,3)
Taxation payable (49,6) 32,0 (17,6)
14.2 Cost of turnover
During the year ended 31 March 2014, the group refined its
calculation of cost of turnover to only include those costs
directly related to the cost of merchandise. Certain costs
(promotional and related) previously included in cost of turnover
have now been included in trading expenses. This change was done
for easier comparison with others in the industry. Accordingly, the
gross profit previously reported for the period ending 30 September
2013 changes from 41,7% to 45,5% on the new basis. The change in
accounting policy had no effect on basic or headline earnings per
share, or on diluted basic or diluted headline earnings per share.
There is also no impact on the statement of financial position.
The effect of the change is as follows:
As As
reported 30 Sept restated
30 Sept 2013 30 Sept
2013* Adjustment 2013
Rm Rm Rm
Cost of turnover 3 882,9 (255,2) 3 627,7
Trading expenses 2 703,9 255,2 2 959,1
* The 30 September 2013 reported figures exclude the RCS Group.
15. Fair value
The carrying value less impairment provision of trade receivables
and payables are assumed to approximate their fair value due to the
short-term nature. There are no level 1 or level 3 financial
instruments within the group and there were no transfers between
levels during the period.
16. Events after the reporting period
No further significant events took place between the period ending
30 September 2014 and date of issue of this report.
GROUP SEGMENTAL ANALYSIS
Customer Central
Retail value and
trading added shared Total
divisions products Credit services Retail
Unaudited Unaudited Unaudited Unaudited Unaudited
6 months ended
30 September Rm Rm Rm Rm Rm
2014
External
revenue 7 305,1 410,5 151,8 7,4 7 874,8
External
interest
income - - 654,0 9,5 663,5
-------- -------- -------- -------- --------
Total revenue* 7 305,1 410,5 805,8 16,9 8 538,3
======== ======== ======== ======== ========
Inter-segment
revenue 9,6 9,6
External
finance costs (85,6) (85,6)
Depreciation
and
amortisation (198,2) (198,2)
======== ======== ======== ======== ========
Segmental
profit (loss)
before tax 1 501,9 229,1 70,9 (580,2) 1 221,7
Other material
non-cash items
Foreign
exchange
transactions 0,8
Share-based
payments (47,9)
Operating
lease
liability
adjustment (13,2)
--------
Group profit
before tax 1 161,4
Capital
expenditure 321,5
Segment assets 12 017,3
Segment
liabilities 4 255,5
Customer Central
Retail value and
trading added shared Total
divisions products Credit services Retail
Restated 6 Unaudited Unaudited Unaudited Unaudited Unaudited
month ended 30
September 2013 Rm Rm Rm Rm Rm
External
revenue # 6 660,9 394,9 143,9 2,8 7 202,5
External
interest
income - - 540,4 7,8 548,2
-------- -------- -------- -------- --------
Total revenue* 6 660,9 394,9 684,3 10,6 7 750,7
======== ======== ======== ======== ========
Inter-segment
revenue 25,9 25,9
External
finance costs (66,3) (66,3)
Depreciation
and
amortisation (173,2) (173,2)
======== ======== ======== ======== ========
Segmental
profit (loss)
before tax 1 452,3 224,3 11,8 (530,8) 1 157,6
Other material
non-cash items
Foreign
exchange
transactions (0,1)
Share-based
payments (43,8)
Operating
lease
liability
adjustment (16,1)
--------
Group profit
before tax 1 097,6
Capital
expenditure 256,2
Segment assets 10 966,9
Segment
liabilities 4 983,0
Customer Central
Retail value and
trading added shared Total
divisions products Credit services Retail
Audited Audited Audited Audited Audited
Year ended 31
March 2014 Rm Rm Rm Rm Rm
External
revenue 14 159,0 763,1 287,6 5,1 15 214,8
External
interest
income - - 1 130,5 17,6 1 148,1
-------- -------- -------- -------- --------
Total revenue* 14 159,0 763,1 1 418,1 22,7 16 362,9
======== ======== ======== ======== ========
Inter-segment
revenue 53,5 53,5
External
finance costs (161,8) (161,8)
Depreciation
and
amortisation (365,5) (365,5)
======== ======== ======== ======== ========
Segmental
profit (loss)
before tax 3 078,4 453,9 10,1 (1 052,3) 2 490,1
Other material
non-cash items
Foreign
exchange
transactions (5,0)
Share-based
payments (90,3)
Operating
lease
liability
adjustment (19,7)
--------
Group profit
before tax 2 375,1
Capital
expenditure 554,2
Segment assets 11 471,7
Segment
liabilities 5 312,1
Discontinued
operations –
Total
RCS Group Consolidated
Unaudited Unaudited
6 months ended Rm Rm
30 September
2014
External revenue 164,5 8 039,3
External interest income 298,2 961,7
-------- --------
Total revenue* 462,7 9 001,0
======== ========
Inter-segment revenue 2,7 12,3
External finance costs (65,0) (150,6)
Depreciation and amortisation (4,8) (203,0)
======== ========
Segmental profit before tax 480,4 1 702,1
Other material non-cash items
Foreign exchange transactions - 0,8
Share-based payments - (47,9)
Operating lease liability adjustment - (13,2)
-------- --------
Group profit before tax 480,4 1 641,8
Capital expenditure 4,9 326,4
Segment assets - 12 017,3
Segment liabilities - 4 255,5
Discontinued
operations – Total
RCS Group Consolidated
Unaudited Unaudited
Restated 6 Rm Rm
months ended
30 September
2013
External revenue # 299,4 7 501,9
External interest income 541,5 1 089,7
-------- --------
Total revenue* 840,9 8 591,6
======== ========
Inter-segment revenue 4,3 30,2
External finance costs (126,2) (192,5)
Depreciation and amortisation (8,2) (181,4)
======== ========
Segmental profit before tax 207,2 1 364,8
Other material non-cash items
Foreign exchange transactions - (0,1)
Share-based payments - (43,8)
Operating lease liability adjustment - (16,1)
-------- --------
Group profit before tax 207,2 1 304,8
Capital expenditure 15,2 271,4
Segment assets 5 471,1 16 438,0
Segment liabilities 3 711,5 8 694,5
Discontinued
operations – Total
RCS Group Consolidated
Audited Audited
Year ended 31 March 2014 Rm Rm
External revenue 634,5 15 849,3
External interest income 1 118,7 2 266,8
-------- --------
Total revenue* 1 753,2 18 116,1
======== ========
Inter-segment revenue 8,3 61,8
External finance costs (252,2) (414,0)
Depreciation and (17,4) (382,9)
amortisation
======== ========
Segmental profit before 456,9 2 947,0
tax
Other material non-cash
items
Foreign exchange
transactions 1,8 (3,2)
Share-based payments - (90,3)
Operating lease liability
adjustment - (19,7)
-------- --------
Group profit before tax 458,7 2 833,8
Capital expenditure 22,9 577,1
Segment assets 5 631,5 17 103,2
Segment liabilities 3 701,2 9 013,3
* Includes retail turnover, interest income and other income.
# March 2014 reflected a change in reportable segments as defined
by the board, being the chief operating decision-maker. The
September 2013 comparatives have been restated accordingly.
COMMENTARY
GROUP OVERVIEW
The group produced a satisfactory result in a difficult credit
cycle with total retail turnover increasing by 9,7% to R7,3
billion.
Cash sales continued to be buoyant growing by 20,3% reflecting the
desirability of our merchandise to our customers. Credit turnover
growth of 2,5% was however constrained by the credit health of our
consumers as well as our continued implementation of credit risk
management practices appropriate for this cycle.
The transaction in relation to TFG’s 55% interest in the RCS Group
was completed with a closing date of 6 August 2014. The effective
date of the transaction was 30 June 2014 and accordingly, the
results of the RCS Group for the three month period, are included
as profit from discontinued operations. TFG’s share of the
proceeds was R1,4 billion.
Total basic earnings per share increased by 35,8% to 559,6 cents
per share which includes the profit realised in the RCS Group
transaction of R273,2 million. Headline earnings per share from
continuing operations increased by 8,0% to 403,3 cents per share
whilst total headline earnings per share increased by 3,3% to 426,5
cents per share.
The group’s gross margins in all categories remained consistent
with the previous period.
Whilst expenses remain well controlled growing at 11,7%, we have
seen a significant increase in crime-related losses which is a
country-wide phenomenon.
The interim dividend has been increased by 8,2% to 263,0 cents per
share which is in line with the growth in the underlying continuing
operations.
The group continued to grow trading space by opening a further 109
stores, 14 of which are outside South Africa. At the end of the
period the group was trading out of 2 205 stores with an increase
in trading area of 4% during the period. Trading space growth for
the full year is expected to be approximately 7%.
MERCHANDISE CATEGORIES
Turnover growths in the various merchandise categories are as
follows:
% turnover growth % same store turnover growth
- Clothing 8,5% 3,3%
- Jewellery 5,4% 0,7%
- Cosmetics 9,0% 5,1%
- Homewares & furniture 13,2% 7,2%
- Cellphones 20,8% 16,4%
Total same store turnover grew by 4,7% whilst product inflation
averaged approximately 7%.
CASH SALES
We are pleased with the continued strong growth in cash sales of
20,3%. Cash sales as a percentage of total sales has increased to
44,2% from 40,3% in the previous period. The increasing
contribution of cash sales is as a result of our strategic focus on
driving cash versus credit turnover through inter alia
diversification of our product categories and broader LSM appeal.
We believe this positions us well through the economic cycles.
CREDIT
Continued implementation of appropriate credit risk measures
curtailed credit turnover growth to 2,5%. Whilst early signs of
improvement had become evident, the recent postal strikes have had
an adverse impact on collections in the short term.
The debtors’ book of R5,9 billion has increased by 3,0% since March
2014. Net bad debt as a percentage of closing debtors’ book
increased to 12,9% from 12,4% at the previous year end and remains
within management’s expectations. The debtors’ book is adequately
provisioned at 13,0% up from 12,3% at March 2014.
AFRICA
The group currently trades out of 134 stores outside of South
Africa. These stores performed well during the period with
turnover growth of 25,9% and same store turnover growth of 16,0%.
African expansion remains one of our strategic objectives with a
target of 280 – 300 stores outside of South Africa by 2018.
PROSPECTS
We expect to continue to benefit from strong cash sales growth in
the second half. Trading conditions in the credit side of our
business are likely to remain challenging until the current level
of consumer indebtedness normalises. Whilst we had already seen
some signs of improvement, this has been set back due to the postal
strikes. Until there are clear signs of sustained improvement in
consumer credit health, we will continue to apply strict credit
risk management practices.
We plan to open a further 100 stores in the second half.
For the first five weeks of the second half, retail turnover has
been at stronger levels, growing by 13% with cash growth at 23,5%
and credit growth at 5,9%. Our second half is heavily dependent on
festive season trading which will largely determine the performance
of our group for this period.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 156 of 3,25% (6,5 cents per share) (gross) in respect
of the six months ending 31 March 2015 has been declared from
income reserves, payable on Monday, 23 March 2015 to holders of
6,5% preference shares recorded in the books of the company at the
close of business on Friday, 20 March 2015.
The last day to trade (“cum” the dividend) in order to participate
in the dividend will be Friday, 13 March 2015. The Foschini Group
Limited preference shares will commence trading “ex” the dividend
from the commencement of business on Monday, 16 March 2015 and the
record date, as indicated, will be Friday, 20 March 2015.
Preference shareholders should take note that share certificates
may not be dematerialised or rematerialised during the period
Monday, 16 March 2015 to Friday, 20 March 2015, both dates
inclusive.
In terms of section 11.17 of the JSE Listings Requirements, the
following additional information is disclosed:
1) Local dividend tax rate is 15%;
2) No STC credits were utilised in determining the net dividend;
3) The dividend withholding tax, if applicable at the rate of
15%, will result in a net cash dividend per share of 5,52500
cents
4) The issued preference share capital of The Foschini Group
Limited is 200 000 shares at 6 November 2014; and
5) The Foschini Group Limited’s tax reference number is
9925/133/71/3P
INTERIM ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared a gross interim ordinary dividend of
263,0 cents per ordinary share from income reserves, for the period
ended 30 September 2014, payable on Monday, 5 January 2015 to
ordinary shareholders recorded in the books of the company at the
close of business on Friday, 2 January 2015.
The last day to trade (“cum” the dividend) in order to participate
in the dividend will be Tuesday, 23 December 2014. The Foschini
Group Limited ordinary shares will commence trading “ex” the
dividend from the commencement of business on Wednesday, 24
December 2014 and the record date, as indicated, will be Friday, 2
January 2015.
Ordinary shareholders should take note that share certificates may
not be dematerialised or rematerialised during the period
Wednesday, 24 December 2014 to Friday, 2 January 2015, both dates
inclusive.
In terms of section 11.17 of the JSE Listings Requirements, the
following additional information is disclosed:
1) Local dividend tax rate is 15%;
2) No STC credits were utilised in determining the net dividend;
3) The dividend withholding tax, if applicable at the rate of
15%, will result in a net cash dividend per share of 223,55000
cents
4) The issued ordinary share capital of The Foschini Group
Limited is 211 005 054 shares at 6 November 2014; and
5) The Foschini Group Limited’s tax reference number is
9925/133/71/3P
-------------------------------------------------------------------
Signed on behalf of the Board.
D M Nurek A D Murray
Chairman CEO
Cape Town
6 November 2014
Non-executive directors:
D M Nurek (Chairman), Prof. F Abrahams, S E Abrahams, D Friedland,
M Lewis, B L M Makgabo-Fiskerstrand, E Oblowitz, N V Simamane
Executive directors:
A D Murray, R Stein, P S Meiring
Company secretary:
D Sheard
Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East 7500
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall
Street, Johannesburg 2001
Sponsor:
UBS South Africa Proprietary Limited
Visit our website at http://www.tfglimited.co.za/
Date: 06/11/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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