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Statement by the CEO at the annual general meeting
THE FOSCHINI GROUP LTD
Reg. No.: 1937/009504/06
Share code : TFG - TFGP
ISIN : ZAE000148466 – ZAE000148516
(“TFG”)
STATEMENT BY THE CEO AT THE ANNUAL GENERAL MEETING
At TFG’s 79th Annual General Meeting held today, CEO Doug Murray
updated the meeting as follows:
RESULTS FOR 2016
The group produced a good result for the year with total retail
sales growth of 31,2%. Excluding the impact of Phase Eight, the
group achieved retail sales growth of 11,6% with comparable sales
growth of 5,7%.
Cash sales growth excluding Phase Eight was stronger in the second
half of the year resulting in full year cash sales growth of 18,4%.
Credit sales growth was slightly slower in the second half,
impacted by the introduction of the Affordability Regulations which
we estimate cost the group approximately R170 million in
creditworthy turnover. Despite this, full year credit sales growth
was 5,9%, up from 4,3% in the previous year.
On 24 March 2016 the group acquired, through Phase Eight, all the
issued share capital of Whistles, a contemporary fashion brand for
men and women. As the acquisition was at the end of our financial
year, our 2016 results did not include any trading relating to
Whistles. However, Whistles’ at-acquisition balance sheet was
consolidated as at 31 March 2016.
Headline earnings per share from continuing operations, excluding
the once-off acquisition costs incurred in relation to the
acquisition of Whistles in the 2016 financial year and Phase Eight
in the 2015 financial year, increased by 17,6% to 1 055,8 cents per
share from 897,9 cents per share in the previous year. A final
scrip distribution with a cash alternative of 385,0 cents per share
was declared representing an increase of 18,5%. Accordingly, the
total distribution for the year amounted to 691,0 cents per share,
an increase of 17,5%, reflecting the growth in the underlying
continuing operations.
PROSPECTS FOR THE 2017 FINANCIAL YEAR
I would now like to comment briefly on the group’s prospects for
2017.
- The outlook for the South African economy remains challenging
with muted growth prospects, expected higher inflation and interest
rates, currency volatility and continued political uncertainty.
- The global economic environment also remains uncertain.
- Our strategic objectives are however clear and we continue to
remain focused on these strategies which brings a diversification
to the group across product categories, cash and credit sales,
targeted LSM markets and different geographies. We believe this
diversification positions us well through uncertain and challenging
economic times.
- In line with our strategy for long-term growth we will
continue to open new stores and anticipate increasing trading space
by approximately 6% in sub-Saharan Africa in the current year. In
addition, we plan to open in excess of 50 Phase Eight and 18
Whistles outlets internationally. We have also continued our e-
commerce roll-out with the launch of Foschini cosmetics and our
Markham and Fabiani brands, adding to our existing 7 brands already
online.
- Total sales growth for the first five months of this financial
year is 17,2% including our international division, comprising
Phase Eight and Whistles. Turnover excluding our international
division, grew by 9,5% over the previous period with same store
sales growth of 3,5%. Cash sales growth remains strong at 19,5%.
Credit sales growth at 1,5% has been severely impacted by the
reduction in new accounts as a result of the Affordability
Regulations and we estimate the loss to creditworthy turnover to be
approximately R300 million for this period.
- Our international division, Phase Eight and Whistles, is
performing well and in line with management’s expectations. All
strategic objectives set for this year are on track with Whistles
already generating a positive EBITDA.
- Crime related losses continue to escalate significantly and is
of great concern. To curb these costs we have invested in various
measures to identify trends and coordinate investigations and we
have embarked on the roll-out of a revised and enhanced security
strategy.
- Growth in our retail debtors’ book has slowed marginally due
to the lower credit sales but is in line with management’s
expectation.
- As always, the second half of the year is heavily dependent on
Christmas trading, which will largely determine the performance of
the group in the second half. We believe that continued commitment
to our strategy will support our efforts to achieve a reasonable
result for the coming year. We are however mindful of the current
environment in South Africa and the challenges posed by sluggish
economic growth, low consumer confidence and the negative impact of
the Affordability Regulations.
ACKNOWLEDGMENTS
Once more on behalf of my fellow board members and myself I thank
all our dedicated staff for their hard work and continued excellent
performance during the year.
Cape Town
6 September 2016
Sponsor:
UBS South Africa Proprietary Limited
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