Wrap Text
Unaudited Group interim report
for the 26 weeks ended 25 December 2016
TRUWORTHS INTERNATIONAL LTD
REGISTRATION NUMBER: 1944/017491/06
JSE CODE: TRU
NSX CODE: TRW
ISIN: ZAE000028296
UNAUDITED GROUP INTERIM REPORT
FOR THE 26 WEEKS ENDED 25 DECEMBER 2016
KEY FEATURES Group, Group,
including Office excluding Office
Retail sales up 21% unchanged
Gross margin 52.6% 55.0%
Operating margin 24.9% 30.0%
Headline and diluted headline earnings per share down 3%
Net asset value per share up 8%
Cash generated from operations up 7%
to R2.2 billion
Interim dividend per share 270 cents
GROUP PROFILE
Truworths International Ltd (the company) is an investment holding and management
company listed on the JSE and the Namibian Stock Exchange. Its principal trading entities,
Truworths Ltd and Office Holdings Ltd, are engaged either directly or through subsidiaries,
concessions, agencies or franchises, in the cash and credit retailing of fashion clothing,
footwear and related merchandise. The company and its subsidiaries (the Group) operate
primarily in South Africa and the United Kingdom, and have an emerging presence in Germany,
the Republic of Ireland and other sub-Saharan African countries.
TRADING AND FINANCIAL PERFORMANCE
The Group continued to experience challenging trading conditions during the 26-week period
ended 25 December 2016 (the period). Factors contributing to the tough environment included
low economic growth, high product inflation resulting from Rand weakness, reduced foreign
revenues when translated into Rands owing to Pound Sterling weakness, and the negative
impact of the credit affordability assessment regulations in South Africa.
The high South African revenue base established in the corresponding prior 26-week period
ended 27 December 2015 (the comparable period), increased pressure on consumers from rising
inflation, especially in food prices, and a weak employment market characterised by job
losses and soft real growth in incomes have also impacted the Group's performance.
Group retail sales for the period increased by 21% to R10.2 billion relative to the comparable
period, with cash sales growing by 53% while credit sales remained unchanged. Credit sales
comprised 50% (2015: 60%) of Group retail sales for the period. These metrics are inclusive
of the non-comparable retail sales of the Group's UK business, Office, which is a cash
footwear retailer.
Excluding the contribution from Office, retail sales at R7.4 billion as well as cash and
credit sales for the period remained unchanged relative to the comparable period. It is to be
noted that the comparable period retail sales growth was 15%, excluding the contributions from
the Office, Earthchild and Naartjie acquisitions. Credit sales comprised 69% (2015: 69%)
of Group retail sales, excluding those attributable to Office, for the period. Comparable
store retail sales, which exclude those attributable to Office, decreased by 3%
(2015: increased by 10%) for the period while product inflation averaged 16% (2015: 9%).
Office recorded retail sales for the period of £159 million (R2.9 billion) relative to the
comparable period's £160 million. As Office's results were consolidated with effect from
23 November 2015, only £48 million of retail sales were included in the Group's results for
the comparable period.
Group sale of merchandise, which comprises Group retail sales, together with wholesale
and franchise sales and delivery fee income, less accounting adjustments, grew 21% to
R10.0 billion (2015: R8.3 billion).
During the period a net 7 stores were opened across all brands, resulting in an increase
in trading space of 2% (Truworths 2% and Office 1%). At the end of the period the Group had
939 stores (including 40 concession outlets) (2015: 932, including 52 concession outlets).
Divisional sales 25 Dec 27 Dec % change on
2016 2015 comparable
Rm Rm period
Office* 2 859 1 082 164
Truworths ladieswear 2 517 2 611 (4)
Truworths menswear 1 532 1 499 2
Identity 1 193 1 252 (5)
Truworths designer emporium** 937 938 -
Truworths kids emporium*** 585 517 13
Other**** 623 576 8
Group retail sales 10 246 8 475 21
Wholesale and franchise sales and delivery
fee income 62 5 >100
Accounting adjustments (note 4) (272) (208) 31
Sale of merchandise 10 036 8 272 21
YDE agency sales 155 163 (5)
* The comparable period Office sales were for the five weeks since acquisition, included
both Black Friday and Christmas trading, and were translated at a significantly
higher average rate of exchange compared to the current period's 26-week sales.
** Daniel Hechter, LTD and Earthaddict.
*** LTD Kids, Earthchild and Naartjie.
**** Cellular, Truworths Jewellery and Cosmetics divisions.
The Group's gross margin decreased to 52.6% (2015: 54.2%), principally due to the
acquisition of Office, which operates at a lower gross margin and which was only included
for five weeks in the comparable period's results. Excluding Office, the Group's gross margin
was stable at 55.0% (2015: 55.3%).
Trading expenses increased 30% to R3.7 billion (2015: R2.8 billion) and constituted
36.5% of sale of merchandise (2015: 34.0%). The increase is principally due to the
financial results of Office only being included for five weeks in the Group's comparable period
results. Excluding Office, as well as foreign exchange gains in the comparable period
(R110 million) and foreign exchange losses in the current period (R62 million), trading
expenses increased 5%. This increase is mainly as a result of increases in depreciation
and amortisation, occupancy costs and trade receivable costs (refer to the Credit
Management section below), partially off-set by decreases in employment costs and other
operating costs. Depreciation and amortisation increased 11%, but excluding non-comparable
stores, decreased 1%. Occupancy costs increased 8% (6% excluding non-comparable stores),
mainly as a result of lower average rental escalations due to successful rental
renegotiations. Employment costs decreased 3%, but reflected an increase of 4% if the
impact of non-comparable stores and incentives is excluded. Other operating costs
increased 8%, mainly as a result of foreign exchange losses during the period of
R62 million compared to foreign exchange gains in the comparable period of R110 million.
Excluding foreign exchange gains and losses, and the impairment of the Nigerian business
operations and the once-off Office deal costs* included in the comparable period results,
other operating costs reduced 2% owing to management's cost-saving initiatives.
Interest received increased 19% to R718 million (2015: R604 million) due to the 5% growth
in the debtors book and increases totalling 125 basis points in the South African repo
rate since the commencement of the comparable period. Operating profit increased 3% to
R2.5 billion while the operating margin decreased to 24.9% from 29.3% owing to the
reduction in the gross margin and the increase in trading expenses. Excluding Office,
the operating margin decreased to 30.0% (2015: 32.0%). If the impact of foreign exchange
gains in 2015 and foreign exchange losses in 2016 are also excluded the operating margin
increased to 30.9% (2015: 30.5%).
As a result of the interest-bearing borrowings raised towards the end of the comparable period
to fund operating expenditure, as well as the fact that Office's business operations are
geared, finance costs have increased by R94 million.
Headline earnings per share (HEPS) and diluted HEPS decreased 3% to 392.6 cents and
391.9 cents respectively. Relative to the comparable period's adjusted diluted HEPS of
432.5 cents (calculated by excluding the Office acquisition transaction costs), the Group's
diluted HEPS for the period decreased by 9%. An interim dividend of 270 cents per share
has been declared (2015: 270 cents per share).
* The once-off Office deal costs were on-charged to Office and therefore had no impact on
the Truworths net results.
FINANCIAL POSITION
The Group's financial position remains strong, with net asset value per share increasing
by 8% to 2 200.0 cents (2015: 2 036.7 cents) since the comparable period-end.
Following the finalisation of the purchase price allocation relating to the Office
acquisition (refer to note 36.1 of the Group's 2016 Audited Annual Financial Statements),
goodwill reduced significantly relative to the comparable period-end, with an increase in the
other identifiable assets acquired and liabilities assumed, notably intangible assets
and the related deferred tax liability. Goodwill reduced further due to Pound Sterling
depreciation.
Inventories decreased to R2.1 billion at the end of the period (2015: R2.7 billion).
This is mainly due to a 40% Rand reduction in Office inventory levels (21% in Pound
Sterling), resulting from the strategic focus on optimising the Office stockholding and
improving inventory turn. Excluding the inventory of Office, gross inventory increased
2% and inventory turn remained unchanged at 5.4 times.
Interest-bearing borrowings at the period-end decreased to R4.1 billion from R4.6 billion
at the comparable period-end as a consequence of a more favourable rate of Pound Sterling
translation and scheduled loan repayments.
CAPITAL MANAGEMENT
During the period the Group generated R2.2 billion in cash from operations and this
funded dividend payments (R357 million), capital expenditure (R261 million) and share
buy-backs (R101 million). Cash and cash equivalents increased 32% to R3.3 billion at
the end of the period.
Net debt to equity was 8% as a result of the early ending of the period at 25 December,
with month-end creditor payments being made after the period-end. If creditors had
been paid prior to the period-end, net debt to equity would have been approximately at
the Group's medium-term target of 25%.
CREDIT MANAGEMENT
Gross trade receivables in respect of the debtors book (Truworths, Identity and YDE)
grew by 5% to R6.4 billion since the comparable period-end. The growth in the book is
attributable to the increase in credit sales during the second half of the 2016 financial
year. The percentage of active account holders able to purchase at the end of the period
was at 85% compared to 86% at the comparable period-end and 82% at June 2016.
The doubtful debt allowance as a percentage of gross trade receivables has increased
marginally to 12.9% (2015: 12.8%). Trade receivable costs increased 9% to R721 million
(2015: R663 million) owing to an increase in net bad debt, partially off-set by the
relatively lower monetary increase in the provision for doubtful debts.
The new account acceptance rate remained unchanged from the comparable period at 29%,
while the Group's active account base declined 6% to 2.6 million accounts. This decline
is a consequence of the onerous administrative burden introduced by the credit
affordability assessment regulations which came into force in South Africa in September 2015,
requiring customers to produce documentation.
The Group has implemented various credit granting strategies, updated its information
systems and added efficiencies to its processes to attempt to mitigate the impact of these
regulations. The Group will continue to refine these strategies to further counter the
effects of these regulations.
The Group, together with two other major JSE-listed retailers, initiated legal action
in June 2016 against the National Credit Regulator and the Department of Trade and
Industry to have these regulations reviewed. The first court date is currently scheduled
to be in the second quarter of the 2017 calendar year.
OUTLOOK
South Africa: Truworths
Slow economic growth and pressure on the disposable incomes of consumers will impact trading
conditions, which are likely to remain challenging in the short term. The affordability
assessment regulations continue to limit our ability to open new accounts and grow credit
sales. The Group has taken action in an attempt to mitigate to some extent the impact of
these regulations.
Retail sales growth for the second half of the 2017 financial period will benefit from
the lower base recorded in the second half of the 2016 financial period. Product inflation
is also anticipated to reduce in the second half to high single-digit levels.
Truworths' retail sales since the interim period-end until 14 February remained unchanged
over those for the comparable period in 2016.
United Kingdom: Office
The trading environment in the United Kingdom is faced with uncertainty and low economic
growth prospects. The integration of the Office business into the Group will continue
during the balance of the 2017 financial period and further benefits are expected to be
realised from strategies already implemented, including improved inventory turn as well
as more effective systems and processes. Product inflation is anticipated to average
2% for the financial period.
Office's retail sales since the interim period-end until 14 February increased by 9%
in Pound Sterling over those for the comparable period in 2016.
Group: Trading space
The board remains committed to investing for longer-term growth, with trading space
planned to increase by approximately 2% for the 2017 financial period (Truworths 2%
and Office 1%), and by approximately 4% - 5% in the 2018 financial period
(Truworths 4% - 5% and Office 3%).
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 25 December 2016 in the amount
of 270 South African cents (2015: 270 South African cents) per ordinary share to
shareholders reflected in the company's register on the record date, being Friday,
10 March 2017.
The last day to trade in the company's shares cum dividend is Tuesday, 7 March 2017.
Consequently no dematerialisation or rematerialisation of the company's shares may
take place over the period from Wednesday, 8 March 2017 to Friday, 10 March 2017,
both days inclusive. Trading in the company's shares ex dividend will commence on
Wednesday, 8 March 2017. The dividend is scheduled to be paid in South African Rand
(ZAR) on Monday, 13 March 2017.
Dividends will be paid net of dividends tax (currently 15%), to be withheld and paid
to the South African Revenue Service. 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 229.5 South African cents. The company has 442 059 439 ordinary shares in
issue on 16 February 2017.
In accordance with the company's 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 to the
company's transfer secretaries.
The directors have determined that gross dividends amounting to less than
2 000 South African 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
16 February 2017
One Capital
JSE Sponsor
Merchantec Capital Namibia
NSX Sponsor
CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION
Note at 25 Dec at 27 Dec at 26 Jun
2016 2015 2016
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 6 614 7 108 7 413
Property, plant and equipment 1 632 1 542 1 622
Goodwill 1 563 5 008 1 805
Intangible assets 3 064 267 3 631
Derivative financial assets 13 - 15
Available-for-sale assets 30 16 32
Loans and receivables 65 80 78
Deferred tax 247 195 230
Current assets 11 240 11 020 9 648
Inventories 2 092 2 679 2 401
Trade and other receivables 5 702 5 568 5 281
Derivative financial assets - 73 -
Prepayments 162 205 374
Cash and cash equivalents 3 284 2 495 1 592
Total assets 17 854 18 128 17 061
EQUITY AND LIABILITIES
Total equity 9 440 8 536 8 625
Share capital and premium 706 570 706
Treasury shares 6 (961) (782) (882)
Retained earnings 10 224 8 503 8 903
Non-distributable reserves (529) 245 (102)
Non-current liabilities 4 848 5 067 5 481
Interest-bearing borrowings 3 743 4 290 4 042
Deferred tax 481 - 576
Put option liability 397 604 562
Post-retirement medical benefit obligation 62 60 57
Leave pay obligation 5 21 5
Straight-line operating lease obligation 160 36 181
Contingent consideration obligation - 56 58
Current liabilities 3 566 4 525 2 955
Trade and other payables 2 453 3 374 2 177
Interest-bearing borrowings 317 346 366
Provisions 78 153 150
Contingent consideration obligation 60 - 42
Derivative financial liability 13 - 25
Tax payable 645 652 195
Total liabilities 8 414 9 592 8 436
Total equity and liabilities 17 854 18 128 17 061
Number of shares in issue (net of
treasury shares) (millions) 429.1 419.1 424.5
Net asset value per share (cents) 2 200.0 2 036.7 2 031.8
CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME
Note 26 weeks 26 weeks 52 weeks
to 25 Dec to 27 Dec to 26 Jun
2016 2015 2016
Unaudited Unaudited % Audited
Rm Rm change Rm
Revenue 4 10 920 9 021 21 18 231
Sale of merchandise 4 10 036 8 272 21 16 654
Cost of sales (4 758) (3 786) (7 837)
Gross profit 5 278 4 486 18 8 817
Other income 4 156 140 274
Trading expenses (3 665) (2 812) 30 (6 240)
Depreciation and amortisation (199) (141) (345)
Employment costs (1 062) (828) (1 916)
Occupancy costs (1 079) (726) (1 822)
Trade receivable costs (721) (663) (1 092)
Other operating costs (604) (454) (1 065)
Trading profit 1 769 1 814 (2) 2 851
Interest received 4 718 604 19 1 288
Dividends received 4 10 5 15
Operating profit 2 497 2 423 3 4 154
Finance costs (145) (51) (208)
Profit before tax 2 352 2 372 (1) 3 946
Tax expense (645) (681) (1 129)
Profit for the period 1 707 1 691 1 2 817
Attributable to:
Equity holders of the company 1 678 1 683 2 804
Holders of the non-controlling
interest 29 8 13
Profit for the period 1 707 1 691 2 817
Other comprehensive (losses)/income
to be reclassified to profit or loss
in subsequent periods (632) 187 (216)
Fair value adjustment on available-
for-sale financial instruments 1 - 8
Movement in effective cash flow hedge - (54) (54)
Movement in foreign currency
translation reserve (633) 241 (170)
Other comprehensive income not to
be reclassified to profit or loss in
subsequent periods - - 7
Re-measurement gains on defined
benefit plans - - 7
Other comprehensive (losses)/income
for the period, net of tax (632) 187 (209)
Attributable to:
Equity holders of the company (560) 159 (191)
Holders of the non-controlling
interest (72) 28 (18)
Total comprehensive (losses)/income
for the period, net of tax (632) 187 (209)
Total comprehensive income for
the period 1 075 1 878 2 608
Attributable to:
Equity holders of the company 1 118 1 842 2 613
Holders of the non-controlling
interest (43) 36 (5)
Total comprehensive income for
the period 1 075 1 878 2 608
Basic earnings per share (cents) 392.6 401.7 (2) 667.1
Headline earnings per share (cents) 392.6 405.0 (3) 667.6
Diluted basic earnings per share
(cents) 391.9 400.4 (2) 665.4
Diluted headline earnings per
share (cents) 391.9 403.8 (3) 665.9
Weighted average number of
shares (millions) 427.4 419.0 420.3
Diluted weighted average number
of shares (millions) 428.2 420.3 421.4
Key ratios
Gross margin (%) 52.6 54.2 52.9
Trading expenses to sale of
merchandise (%) 36.5 34.0 37.5
Trading margin (%) 17.6 21.9 17.1
Operating margin (%) 24.9 29.3 24.9
CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Holders
Share Non- Equity of the
capital distribut- holders non-con-
and Treasury Retained able of the trolling Total
premium shares earnings reserves company interest equity
Rm Rm Rm Rm Rm Rm Rm
2016
Balance at the beginning
of the period 706 (882) 8 903 (102) 8 625 - 8 625
Total comprehensive income
for the period - - 1 678 (560) 1 118 (43) 1 075
Profit for the period - - 1 678 - 1 678 29 1 707
Other comprehensive income
for the period - - - (560) (560) (72) (632)
Dividends - - (357) - (357) - (357)
Shares repurchased - (101) - - (101) - (101)
Premium on shares vested
in terms of the restricted
share scheme - 22 - (22) - - -
Share-based payments - - - 33 33 - 33
Movement in put option
liability - - - 122 122 43 165
Balance at 25 December 2016 706 (961) 10 224 (529) 9 440 - 9 440
2015
Balance at the beginning
of the period 551 (770) 7 533 190 7 504 - 7 504
Total comprehensive income
for the period - - 1 683 159 1 842 36 1 878
Profit for the period - - 1 683 - 1 683 8 1 691
Other comprehensive income
for the period - - - 159 159 28 187
Dividends - - (713) - (713) - (713)
Premium on shares issued
in terms of the 1998
share option scheme 7 - - - 7 - 7
Premium on shares issued
in terms of the
restricted share scheme 12 (12) - - - - -
Share-based payments - - - 32 32 - 32
Acquisition of subsidiary - - - - - 432 432
Recognition of put option
liability - - - (136) (136) (468) (604)
Balance at 27 December 2015 570 (782) 8 503 245 8 536 - 8 536
Cents per share: 2016 2015
Cash dividend declared in respect of the period 270 270
CONDENSED GROUP STATEMENTS OF CASH FLOWS
26 weeks 26 weeks 52 weeks
to 25 Dec to 27 Dec to 26 Jun
2016 2015 2016
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 2 005 1 918 3 273
Working capital movements 211 146 (468)
Cash generated from operations 2 216 2 064 2 805
Interest received 715 604 1 288
Dividends received 10 5 15
Finance costs (158) - (177)
Tax paid (209) (112) (1 092)
Cash inflow from operations 2 574 2 561 2 839
Dividends paid (357) (713) (1 441)
Net cash from operating activities 2 217 1 848 1 398
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
to expand operations (174) (187) (441)
Acquisition of plant and equipment to
maintain operations (70) (51) (110)
Acquisition of computer software (17) (24) (48)
Proceeds on disposal of property, plant
and equipment - 13 22
Net acquisition of businesses - (2 495) (2 559)
Premiums paid to insurance cell - - (10)
Amounts received from insurance cell 2 4 6
Loans and receivables repaid 13 2 4
Payment of contingent consideration obligation (42) - -
Net cash used in investing activities (288) (2 738) (3 136)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued - 7 32
Shares repurchased by subsidiaries (101) - -
Loans repaid (62) (2 780) (2 613)
Loans received - 4 636 4 485
Contributions to post-retirement medical
benefit plan asset - - (1)
Net cash (used in)/from financing activities (163) 1 863 1 903
Net increase in cash and cash equivalents 1 766 973 165
Cash and cash equivalents at the beginning
of the period 1 592 1 462 1 462
Net foreign exchange difference (74) 60 (35)
CASH AND CASH EQUIVALENTS AT THE REPORTING DATE 3 284 2 495 1 592
Key ratios
Cash flow per share (cents) 602.2 611.2 675.5
Cash equivalent earnings per share (cents) 440.1 439.9 759.0
Cash realisation rate (%) 137 139 89
* Earnings before interest received, finance costs, tax, depreciation and amortisation.
SELECTED EXPLANATORY NOTES
1 STATEMENT OF COMPLIANCE
The condensed Group interim financial statements for the 26-week period ended
25 December 2016 (interim report) have been prepared in compliance with International
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council, IAS 34: Interim Financial Reporting,
the Companies Act (71 of 2008, as amended) of South Africa and the Listings
Requirements of the JSE.
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 26 June 2016.
The information contained in the interim report has neither been audited nor reviewed
by the Group's external auditors. The interim report has been prepared under the
supervision of Mr DB Pfaff 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 or Rand)
and all amounts are rounded to the nearest million, unless otherwise indicated.
3 ACCOUNTING POLICIES AND METHODS OF COMPUTATION
3.1 The accounting policies and methods of computation applied in the preparation
of the interim report are in terms of IFRS and consistent with those applied
in the preparation of the Group's annual financial statements for the period
ended 26 June 2016.
IFRS, amendments and International Financial Reporting Interpretations Committee
(IFRIC) interpretations not applicable to Group activities
Various new and amended IFRS and IFRIC interpretations have been issued and are
effective, however they are not applicable to the Group's activities during the
period.
3.2 Basis of consolidation of financial results
The condensed Group interim financial statements comprise the interim financial
statements of the company and its subsidiaries, and are prepared using uniform
accounting policies for like transactions and other events in similar circumstances.
26 weeks 26 weeks 52 weeks
to 25 Dec to 27 Dec to 26 Jun
2016 2015 2016
Unaudited Unaudited % Audited
Rm Rm change Rm
4 REVENUE
Sale of merchandise 10 036 8 272 21 16 654
Retail sales 10 246 8 475 17 015
Accounting adjustments* (272) (208) (404)
Wholesale sales 30 - -
Delivery fee income 26 - 34
Franchise sales 6 5 9
Interest received 718 604 19 1 288
Trade receivables interest 668 542 1 205
Investment interest 50 62 83
Other income 156 140 11 274
Commission 71 65 123
Financial services income 32 34 63
Display fees 34 31 63
Lease rental income 14 7 15
Royalties 1 1 3
Insurance recoveries 1 1 3
Other 3 1 4
Dividends received 10 5 15
Total revenue 10 920 9 021 21 18 231
* Accounting adjustments made in terms of IFRS and generally accepted accounting
practice relating to promotional vouchers, staff discounts on merchandise purchased,
cellular retail sales, notional interest on non-interest-bearing trade receivables
and the sales returns provision.
26 weeks 26 weeks 52 weeks
to 25 Dec to 27 Dec to 26 Jun
2016 2015 2016
Unaudited Unaudited Audited
Rm Rm Rm
5 RECONCILIATION OF PROFIT FOR THE PERIOD
TO HEADLINE EARNINGS
Profit for the period, fully attributable
to equity holders of the company 1 678 1 683 2 804
Adjusted for:
(Profit)/loss on disposal of property,
plant and equipment - (8) 2
Impairment of financial assets - 14 -
Other impairments - 8 -
Headline earnings 1 678 1 697 2 806
Once-off Office transaction-related costs - 121 111
Call option fair value adjustment - - (17)
Adjusted headline earnings 1 678 1 818 2 900
6 TREASURY SHARES
Opening balance 882 770 770
Shares repurchased in accordance with
general repurchase programme 101 - -
Shares issued and held under the restricted
share scheme - 12 123
Shares vested under the restricted share scheme (22) - (11)
Closing balance 961 782 882
7 SEGMENT REPORTING
The Group's reportable segments have been identified as the Truworths and Office
business units. The Truworths business unit comprises all the retailing activities
conducted by the Group in Africa, through which the Group retails fashion apparel
comprising clothing, footwear and other fashion products, including by the YDE
business which comprises the agency activities through which the Group retails
clothing, footwear and related products on behalf of emerging South African designers.
The Office business unit comprises the footwear retail activities conducted by the
Group through stores, concession outlets and an e-commerce channel in the United Kingdom,
Germany and the Republic of Ireland.
The YDE business disclosed in the comparable period is no longer considered a reportable
segment following the acquisition of Office. The comparable period amounts have been
restated accordingly.
Management monitors the operating results of the 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 Office entries Group
Rm Rm Rm Rm
2016
Total third party revenue 8 016 2 905 (1) 10 920
Third party 8 015 2 905 - 10 920
Inter-segment 1 - (1) -
Depreciation and amortisation 141 58 - 199
Employment costs 713 349 - 1 062
Occupancy costs 677 402 - 1 079
Trade receivable costs 720 1 - 721
Other operating costs 414 191 (1) 604
Interest received 718 - - 718
Finance costs 121 24 - 145
Profit for the period 1 446 261 - 1 707
Profit before tax 2 020 332 - 2 352
Tax expense (574) (71) - (645)
Segment assets 15 027 6 287 (3 460)* 17 854
Segment liabilities 5 188 3 226 - 8 414
Capital expenditure 223 38 - 261
Gross margin (%) 55.0 46.6 - 52.6
Trading margin (%) 19.8 12.2 - 17.6
Operating margin (%) 30.0 12.3 - 24.9
Inventory turn (times) 5.4** 3.6** - 4.6**
Credit:cash sales mix (%) 69:31 0:100 - 50:50
2015****
Total third party revenue 8 059 1 080 (118) 9 021
Third party 7 941 1 080 - 9 021
Inter-segment 118 - (118) -
Depreciation and amortisation 127 14 - 141
Employment costs 735 93 - 828
Occupancy costs 625 101 - 726
Trade receivable costs 663 - - 663
Other operating costs 388 184 (118) 454
Interest received 604 - - 604
Finance costs 45 6 - 51
Profit for the period 1 617 74 - 1 691
Profit before tax 2 258 114 - 2 372
Tax expense (641) (40) - (681)
Segment assets 13 994 7 704 (3 570)* 18 128
Segment liabilities 5 610 4 092 (110) 9 592
Capital expenditure 254 8 - 262
Gross margin (%) 55.3 47.3 - 54.2
Trading margin (%) 23.5 11.2 - 21.9
Operating margin (%) 32.0 11.2 - 29.3
Inventory turn (times) 5.4** 2.4** - 5.4***
Credit:cash sales mix (%) 71:29 0:100 - 60:40
* Elimination of investment in Office.
** Annualised.
*** Annualised and presented based on the results and financial position of the Group,
prior to consolidating the results and financial position of Office.
**** Includes the results of Office for five weeks.
2016 2015
Contribution Contribution
to revenue to revenue
Rm % Rm %
Third party revenue
South Africa 7 728 70.8 7 651 84.8
United Kingdom 2 669 24.4 1 016 11.3
Germany 145 1.3 31 0.3
Namibia 122 1.1 129 1.4
Republic of Ireland 91 0.8 33 0.4
Botswana 54 0.5 52 0.6
Swaziland 50 0.5 46 0.5
Zambia 16 0.2 17 0.2
Ghana 12 0.1 13 0.1
Mauritius 12 0.1 10 0.1
Lesotho 10 0.1 10 0.1
Nigeria - - 5 0.1
Kenya 5 -* 3 -*
Franchise sales - Kenya 6 0.1 5 0.1
Total third party revenue 10 920 100 9 021 100
* Zero due to rounding.
25 Dec 27 Dec 26 Jun
2016 2015 2016
Unaudited Unaudited Audited
Rm Rm Rm
8 CAPITAL COMMITMENTS
Capital expenditure authorised but not contracted:
Store renovation development 189 149 332
Distribution facilities 96 158 97
Computer software and infrastructure 71 37 80
Buildings 27 166 28
Head office refurbishment 6 7 7
Motor vehicles 2 4 3
Total capital commitments 391 521 547
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
2017 reporting period.
9 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.
10 SEASONALITY
Historically retail sales in the first half of the financial period have exceeded
those of the second half, because of the inclusion in the former of the Christmas
trading period. In the past five years the Group's first half retail sales have
ranged between approximately 53% and 56% of annual retail sales. These percentages
will change following the acquisition of Office, but the impact cannot be quantified
yet as Office has not yet been consolidated for a full reporting year.
11 RELATED PARTY TRANSACTIONS
Related party transactions similar to those disclosed in the Group's annual financial
statements for the period ended 26 June 2016 took place during the period.
ADMINISTRATION
Truworths International Ltd
Registration number 1944/017491/06
Tax reference number 9875/145/71/7
JSE code: TRU
NSX code: TRW
ISIN: ZAE000028296
Company secretary
Chris Durham, FCIS, PG Dip. Adv. Co Law (UCT)
Registered office
No. 1 Mostert Street, Cape Town, 8001, South Africa
Postal address
PO Box 600, Cape Town, 8000, South Africa
Contact details
Tel: +27 (21) 460 7911 Telefax: +27 (21) 460 7132
www.truworths.co.za
www.office.co.uk
Principal bankers
The Standard Bank of South Africa Ltd
Lloyds Bank plc
Auditors
Ernst & Young Inc.
Attorneys
Bernadt Vukic Potash and Getz
Edward Nathan Sonnenbergs
Spoor & Fisher
Webber Wentzel
Bowman Gilfillan
Shoosmiths
Sponsor in South Africa
One Capital Sponsor Services (Pty) Ltd
Sponsor in Namibia
Merchantec Capital Namibia (Pty) Ltd
Transfer secretaries
In South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, South Africa
PO Box 61051, Marshalltown, 2107, South Africa
Tel: +27 (11) 370 5000 Telefax: +27 (11) 688 5248
www.computershare.com
In Namibia
Transfer Secretaries (Pty) Ltd
Robert Mugabe Avenue No. 4
Windhoek, Namibia
PO Box 2401, Windhoek, Namibia
Tel: +264 (61) 22 7647 Telefax: +264 (61) 24 8531
Investor relations
David Pfaff (CFO)
Tel: +27 (21) 460 7956
Graeme Lillie (Tier 1 Investor Relations)
Tel: +27 (21) 702 3102
Directors
H Saven (Chairman)§‡, MS Mark (CEO)*, DB Pfaff (CFO)*, DN Dare*, RG Dow§‡, KI Mampeule§‡,
CT Ndlovu§‡, RJA Sparks§‡, AJ Taylor§‡ and MA Thompson§‡
* Executive § Non-executive ‡ Independent
Date: 16/02/2017 02:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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