Wrap Text
Unaudited interim condensed consolidated results for the half-year ended 30 September 2017
The Foschini Group Limited
Registration number: 1937/009504/06
Share codes: TFG-TFGP
ISIN codes: ZAE000148466 – ZAE000148516
Unaudited interim condensed consolidated results for the half-year
ended 30 September 2017
The following are The Foschini Group Limited’s results for the half-
year ended 30 September 2017.
This report has not been audited or reviewed by the company’s
auditors.
SALIENT FEATURES
• Group turnover up 9,2% (constant currency +12,6%) to R12,5
billion, a record for the Group
• Gross margin expansion from 45,5% to 46,7% for TFG Africa*
• Headline earnings excluding acquisition costs up 5,6% (constant
currency +7,9%)
• Headline earnings per share excluding acquisition costs up 1,6%
(constant currency +3,9%) to 504,9 cents
• Interim dividend of 325,0 cents per share – a 1,6% increase
• Successful R2,5 billion Accelerated Bookbuild launched to fund
acquisition of Retail Apparel Group
• Free cash flow up 58%
* TFG Africa includes all operations on the African continent.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Sept Sept March
2017 2016 2017
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 2 792,3 2 380,1 2 469,0
Goodwill and intangible assets 8 236,9 4 861,4 4 675,9
Participation in export
partnerships - 10,6 -
Deferred taxation asset 683,9 519,7 483,6
-------- -------- --------
11 713,1 7 771,8 7 628,5
-------- -------- --------
Current assets
Inventory (note 4) 6 276,0 5 126,5 5 511,2
Trade receivables – retail 7 121,0 6 669,5 7 000,7
Other receivables and prepayments 838,8 726,3 771,0
Concession receivables 267,9 272,8 246,1
Participation in export
partnerships - 2,5 -
Cash 744,8 973,5 878,5
-------- -------- --------
15 248,5 13 771,1 14 407,5
-------- -------- --------
Total assets 26 961,6 21 542,9 22 036,0
======== ======== ========
EQUITY AND LIABILITIES
Equity attributable to equity
holders of The Foschini Group
Limited 13 342,5 9 951,1 10 515,3
Non-controlling interest 4,1 4,5 4,2
-------- -------- --------
Total equity 13 346,6 9 955,6 10 519,5
-------- -------- --------
LIABILITIES
Non-current liabilities
Interest-bearing debt 5 724,9 4 119,4 4 442,2
Put option liability 113,2 40,7 74,7
Cash-settled share incentive
7,3 7,2 6,8
scheme
Operating lease liability 323,8 247,8 255,7
Deferred taxation liability 915,5 381,5 337,9
Post-retirement defined benefit
plan 241,6 225,2 233,1
-------- -------- --------
7 326,3 5 021,8 5 350,4
-------- -------- --------
Current liabilities
Interest-bearing debt 2 821,6 3 589,0 3 307,0
Trade and other payables 3 388,9 2 933,5 2 751,3
Operating lease liability 18,9 11,4 15,2
Taxation payable 59,3 31,6 92,6
-------- -------- --------
6 288,7 6 565,5 6 166,1
-------- -------- --------
Total liabilities 13 615,0 11 587,3 11 516,5
-------- -------- --------
Total equity and liabilities 26 961,6 21 542,9 22 036,0
======== ======== ========
CONDENSED CONSOLIDATED INCOME STATEMENT
Year
6 Months 6 Months ended 31
ended 30 ended 30 March
Sept 2017 Sept 2016 % 2017
Unaudited Unaudited change Audited
Rm Rm Rm
Revenue (note 5) 13 972,2 12 854,9 26 413,6
======== ======== ========
Retail turnover 12 469,1 11 415,7 9,2 23 548,7
Cost of turnover (6 109,3) (5 756,3) (11 845,2)
-------- -------- --------
Gross profit 6 359,8 5 659,4 11 703,5
Interest income (note 6) 883,2 862,8 1 736,9
Other income (note 7) 619,9 576,4 1 128,0
Trading expenses (note
8) (6 029,7) (5 369,5) (10 757,2)
-------- -------- --------
Operating profit before
acquisition costs and
finance costs 1 833,2 1 729,1 6,0 3 811,2
Aquisition costs (48,6) - -
Finance costs (339,4) (307,5) (607,4)
-------- -------- --------
Profit before tax 1 445,2 1 421,6 3 203,8
Income tax expense (404,2) (378,8) (851,3)
-------- -------- -------
-
Profit for the period 1 041,0 1 042,8 2
352,5
======== ======== ========
Attributable to:
Equity holders of The
Foschini Group Limited 1
1 040,2 042,3 2 351,4
Non-controlling interest 0,
0,8 5 1,1
-------- -------- --------
Profit for the period 2
1 041,0 1 042,8 352,5
======== ======== ========
Earnings per ordinary
share (cents)
Total
Basic 475,1 494,5 (3,9) 1 108,0
Diluted (basic) 472,5 491,6 (3,9) 1 098,6
Earnings per ordinary
share (excluding
acquisition costs)
(cents) - (Note 10)
Headline 1
504,9 496,8 1,6 099,2
Diluted (headline) 502,1 493,9 1,7 1 089,9
Weighted average ordinary
shares in issue (million) 219,0 210,8 212,2
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months Year ended
ended 30 ended 30 31
Sept 2017 Sept 2016 March 2017
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 1 041,0 1 042,8 2 352,5
-------- -------- --------
Other comprehensive income:
Items that are or may be
reclassified to profit or loss
Movement in effective portion of
changes in fair value of cash
flow hedges 32,8 (16,6) 24,2
Foreign currency translation
reserve movements 331,6 (604,8) (793,1)
Deferred tax on items that are or
may be reclassified to profit or
loss (9,2) 4,7 (6,8)
-------- -------- --------
Other comprehensive income for
the period, net of tax 355,2 (616,7) (775,7)
-------- -------- --------
Total comprehensive income for
the period 1 396,2 426,1 1 576,8
======== ======== ========
Attributable to:
Equity holders of The Foschini
Group Limited 1 395,4 425,6 1 575,7
Non-controlling interest 0,8 0,5 1,1
-------- -------- --------
Total comprehensive income for
the period 1 396,2 426,1 1 576,8
======== ======== ========
Sept 2017 Sept 2016 March 2017
Supplementary Information Unaudited Unaudited Audited
Net ordinary shares in issue
(million) 230,6 213,4 214,0
Weighted average ordinary shares
in issue (million) 219,0 210,8 212,2
Tangible net asset value per
ordinary share (cents) 2 214,1 2 385,0 2 728,7
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity
holders of Non-
The Foschini controllin Total
Group Limited g interest equity
Rm Rm Rm
Equity at 31 March 2016 - 9 896,7 4,0 9 900,7
audited
Profit for the period 1 042,3 0,5 1 042,8
Other comprehensive income
Movement in effective portion of
changes in fair value of cash
flow hedges (16,6) - (16,6)
Foreign currency translation
reserve movements (604,8) - (604,8)
Deferred tax on movement in
other comprehensive income 4,7 - 4,7
-------- -------- --------
Total comprehensive income for
the period 425,6 0,5 426,1
Contributions by and
distributions to owners
Share-based payments reserve
movements 60,2 - 60,2
Dividends paid (814,8) - (814,8)
Scrip distribution: share capital
issued and share premium raised 542,9 - 542,9
Proceeds from sale of shares in
terms of share incentive schemes 73,9 - 73,9
Shares purchased in terms of
share incentive schemes (233,4) - (233,4)
-------- -------- --------
Equity at 30 September 2016 -
unaudited 9 951,1 4,5 9 955,6
Profit for the period 1 309,1 0,6 1 309,7
Other comprehensive income
Movement in effective portion of
changes in fair value of cash
flow hedges 40,8 - 40,8
Foreign currency translation
reserve movements (188,3) - (188,3)
Deferred tax on movement in
other comprehensive income (11,5) - (11,5)
-------- -------- --------
Total comprehensive income for 1 150,1 0,6 1 150,7
the period
Contributions by and
distributions to owners
Share-based payments reserve 71,2 - 71,2
movements
Dividends paid (693,3) (0,9) (694,2)
Proceeds from sale of shares in
terms of share incentive schemes 77,4 - 77,4
Shares purchased in terms of
share incentive schemes (1,4) - (1,4)
Increase in the fair value of the
put option liability (39,8) - (39,8)
-------- -------- --------
Equity at 31 March 2017 - audited 10 515,3 4,2 10 519,5
Profit for the period 1 040,2 0,8 1 041,0
Other comprehensive income
Movement in effective portion of
changes in fair value of cash
flow hedges 32,8 - 32,8
Foreign currency translation
reserve movements 331,6 - 331,6
Deferred tax on movement in
other comprehensive income (9,2) - (9,2)
-------- -------- --------
Total comprehensive income for
the period 1 395,4 0,8 1 396,2
Contributions by and
distributions to owners
Share-based payments reserve
movements 71,9 - 71,9
Dividends paid (865,8) (0,9) (866,7)
Share capital issued and share
premium raised 2 474,5 - 2 474,5
Proceeds from sale of shares in
terms of share incentive schemes 6,8 - 6,8
Shares purchased in terms of
share incentive schemes (225,6) - (225,6)
Increase in the fair value of the
put option liability (30,0) - (30,0)
-------- -------- --------
Equity at 30 September 2017 -
unaudited 13 342,5 4,1 13 346,6
======== ======== ========
6 months 6 months Year ended
ended 30 ended 30 31
Sept 2017 Sept 2016 March 2017
Unaudited Unaudited Audited
Dividend per ordinary share
(cents)
Interim 325,0 320,0 320,0
Final - - 400,0
-------- -------- --------
Total 325,0 320,0 720,0
======== ======== ========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
6 months 6 months Year ended
ended 30 ended 30 31 March
Sept 2017 Sept 2016 2017
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before working
capital changes (note 9) 2 207,3 2 053,5 4 488,6
Increase in working capital (73,8) (268,2) (1 156,5)
-------- -------- --------
Cash generated from operations 2 133,5 1 785,3 3 332,1
Interest income 25,8 11,6 33,1
Finance costs (339,4) (307,5) (607,4)
Taxation paid (492,4) (353,3) (777,5)
Dividends paid (866,7) (271,9) (966,1)
-------- -------- --------
Net cash inflows from operating
activities 460,8 864,2 1 014,2
-------- -------- --------
Cash flows from investing
activities
Purchase of property, plant and
equipment and intangible assets (372,3) (435,8) (883,5)
Acquisition of assets through
business combinations (note 11) (2 712,3) - (33,8)
Proceeds from sale of property,
plant and equipment 5,8 5,3 32,0
Repayment of participation in
export partnerships - 1,3 14,4
-------- -------- --------
Net cash outflows from investing
activities (3 078,8) (429,2) (870,9)
-------- -------- --------
Cash flows from financing
activities
Shares purchased in terms of
share incentive schemes (225,6) (233,4) (234,8)
Proceeds from sale of shares in
terms of share incentive schemes 6,8 73,9 151,3
Increase in issued authorised
share capital 2 474,5 - -
Increase (decrease) in interest-
bearing debt 238,2 (119,2) 36,8
-------- -------- --------
Net cash inflows (outflows) from
financing activities 2 493,9 (278,7) (46,7)
-------- -------- --------
Net (decrease) increase in cash
during the period (124,1) 156,3 96,6
Cash at the beginning of the
period 878,5 888,8 888,8
Effect of exchange rate
fluctuations on cash held (9,6) (71,6) (106,9)
-------- -------- --------
Cash at the end of the period 744,8 973,5 878,5
======== ======== ========
CONSOLIDATED SEGMENTAL ANALYSIS
Retail
trading Customer Central and
division value-added shared
s products Credit services
Unaudited Unaudited Unaudited Unaudited
Rm Rm Rm Rm
6 months ended 30
September 2017
External revenue 9 300,0 429,9 171,0 19,0
External interest
income - - 857,4 25,4
-------- -------- -------- --------
Total revenue* 9 300,0 429,9 1 028,4 44,4
======== ======== ======== ========
External finance costs (296,7)
Depreciation and
amortisation (245,5)
Segmental profit
(loss) before tax 1 720,1 224,1 291,1 (892,0)
Retail
trading Customer Central and
division value-added shared
s products Credit services
Unaudit Unaudited Unaudited Unaudited
ed Rm Rm Rm
Rm
6 months ended 30
September 2016
External revenue 8 860,1 402,3 164,8 9,3
External interest
income - - 851,2 11,6
-------- -------- -------- --------
Total revenue* 8 860,1 402,3 1 016,0 20,9
======== ======== ======== ========
External finance costs (259,8)
Depreciation and
amortisation (206,1)
Segmental profit
(loss) before tax 1 668,2 204,6 256,8 (870,3)
Retail
trading Customer Central and
division value-added shared
s products Credit services
Audited Audited Audited Audited
Rm Rm Rm Rm
Year ended 31 March
2017
External revenue 18
912,8 783,3 331,5 13,2
External interest
income - - 1 703,8 33,1
-------- -------- -------- --------
Total revenue* 18 912,8 783,3 2 035,3 46,3
======== ======== ======== ========
External finance costs (526,8)
Depreciation and
amortisation (437,6)
Segmental profit
(loss) before tax 3 802,1 444,0 571,9 (1 802,2)
TFG TFG
London Australia
Unaudited Unaudited
Rm Rm
6 months ended 30
September 2017
External revenue 2 272,8 896,3
External interest
income - 0,4
-------- --------
Total revenue* 2 272,8 896,7
======== ========
External finance costs (38,7) (4,0)
Depreciation and
amortisation (57,5) (28,3)
Segmental profit
(loss) before tax 156,1 33,5
TFG TFG
London Australia
Unaudited Unaudited
Rm Rm
6 months ended 30
September 2016
External revenue 2 555,6 -
External interest
income - -
-------- --------
Total revenue* 2 555,6 -
======== ========
External finance costs (47,7) -
Depreciation and (55,7) -
amortisation
Segmental profit 222,3 -
(loss) before tax
TFG TFG
London Australia
Audited Audited
Rm Rm
Year ended 31 March
2017
External revenue 4 635,9 -
External interest
income - -
-------- --------
Total revenue* 4 635,9 -
======== ========
External finance costs (80,6) -
Depreciation and (102,7) -
amortisation
Segmental profit 345,3 -
(loss) before tax
Total retail Total retail Total retail
30 Sept 2017 30 Sept 2016 31 March 2017
Unaudited Unaudited Audited
External revenue 13 089,0 11 992,1 24 676,7
External interest
income 883,2 862,8 1 736,9
-------- -------- --------
Total revenue* 13 972,2 12 854,9 26 413,6
======== ======== ========
External finance costs (339,4) (307,5) (607,4)
Depreciation and
amortisation (331,3) (261,8) (540,3)
Segmental profit
before tax 1 532,9 1 481,6 3 361,1
Other material non-cash
items
Foreign exchange
transactions (1,5) 10,4 (4,0)
Share-based payments (71,9) (60,2) (131,4)
Operating lease
liability adjustment (14,3) (10,2) (21,9)
Group profit before tax 1 445,2 1 421,6 3 203,8
Capital expenditure 372,3 435,8 883,5
Segment assets 26 961,6 21 542,9 22 036,0
Segment liabilities 13 615,0 11 587,3 11 516,5
* Includes retail turnover, interest income and other income.
Previously named International division, comprising of the Phase Eight
and Whistles brands, has been renamed to the TFG London division.
During the current period, the Group acquired the Retail Apparel Group
(RAG) and G-Star RAW Australia franchise stores which will be reflected
in a new TFG Australia reportable segment as defined by the Operating
Board, being the chief operating decision-maker.
NOTES
1. The unaudited interim condensed consolidated results for the half-year
ended 30 September 2017 are prepared in accordance with the requirements
of the Companies Act of South Africa, and in accordance with and
containing the information required by IAS34: Interim Financial
Reporting, as well as the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as issued
by Financial Reporting Standards Council. The accounting policies applied
in the preparation of these unaudited interim condensed consolidated
results are in terms of International Financial Reporting Standards
(“IFRS”) and are consistent with those applied in the previous
consolidated annual financial statements except as noted in note 2. These
results were prepared by the TFG Finance and Advisory department of The
Foschini Group Limited, acting under supervision of Anthony Thunström
CA(SA), CFO of The Foschini Group Limited.
2. During the period, the Group adopted the following revised accounting
standards:
• Disclosure Initiative (Amendments to IAS7)
• Annual Improvements to IFRS 2014-2016 Cycle
The adoption of these standards had no material impact on these results.
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.
6 months 6 months
ended ended Year ended 31
30 Sept 30 Sept March 2017
2017 2016
Unaudited Unaudited Audited
Rm Rm Rm
4. Inventory
Inventory at period end 6 276,0 5 126,5 5 511,2
======== ======== ========
Inventory write-downs included
91,4 233,0
above 113,9
-------- -------- --------
5. Revenue
Retail turnover 12 469,1 11 415,7 23 548,7
Interest income (note 6) 883,2 862,8 1 736,9
Other income (note 7) 619,9 576,4 1 128,0
-------- -------- --------
13 972,2 12 854,9 26 413,6
-------- -------- --------
6. Interest income
Trade receivables – retail 857,4 851,2 1 703,8
Sundry 25,8 11,6 33,1
-------- -------- --------
883,2 862,8 1 736,9
-------- -------- --------
7. Other income
Publishing income 208,3 196,1 400,8
Collection cost recovery 171,0 164,8 331,5
Insurance income 181,0 162,3 289,0
Mobile one2one airtime income 40,6 43,9 93,5
Sundry income 19,0 9,3 13,2
-------- -------- --------
619,9 576,4 1 128,0
-------- -------- --------
8. Trading expenses
Depreciation and amortisation (331,3) (261,8) (540,3)
Employee costs (2 062,4) (1 799,9) (3 669,8)
Occupancy costs (1 461,1) (1 171,5) (2 431,8)
Net bad debt (464,6) (485,6) (896,1)
Other operating costs (1 710,3) (1 650,7) (3 219,2)
-------- -------- --------
(6 029,7) (5 369,5) (10 757,2)
-------- -------- --------
9. Operating profit before
working capital changes
Profit before tax 1 445,2 1 421,6 3 203,8
Finance costs 339,4 307,5 607,4
-------- -------- --------
Operating profit before finance
costs 1 784,6 1 729,1 3 811,2
Interest income – sundry (25,8) (11,6) (33,1)
Non-cash items
Depreciation and amortisation 331,3 261,8 540,3
Operating lease liability
adjustment 14,3 10,2 21,9
Share-based payments 71,9 60,2 131,4
Post-retirement defined benefit
medical aid movement 8,5 7,9 15,8
Foreign currency translation
reserve movements 1,5 (10,4) 4,0
Loss on disposal of property,
plant and equipment 21,4 6,5 12,2
Profit on disposal of property,
plant and equipment (0,4) (0,2) (15,1)
-------- -------- --------
2 207,3 2 053,5 4 488,6
-------- -------- --------
10. Reconciliation of profit for
the period to headline earnings
Profit for the period
attributable to equity holders of
The Foschini Group Limited 1 040,2 1 042,3 2 351,4
Adjusted for:
Profit on disposal of property,
plant and equipment (0,4) (0,2) (15,1)
Loss on disposal of property,
plant and equipment 21,4 6,5 12,2
-------- -------- --------
Headline earnings before tax 1 061,2 1 048,6 2 348,5
Tax on headline earnings
(15,7)
adjustments (4,3) (1,5)
-------- -------- --------
Headline earnings 1 056,9 1 047,1 2 332,8
Acquisition costs 48,6 - -
-------- -------- --------
Adjusted headline earnings* 1 105,5 1 047,1 2 332,8
-------- -------- --------
* Adjusted headline earnings is calculated to remove the impact of the
acquisition costs of the RAG & G-Star RAW franchise rights acquisition.
6 months
6 months ended Year
ended 30 Sept ended 31
30 Sept 2016 March
2017 Unaudite % 2017
Unaudited d change Audited
Earnings per ordinary share
(cents)
Total (excluding acquisition
costs)
Basic 497,3 494,5 0,6 1 108,0
Headline 504,9 496,8 1,6 1 099,2
Diluted (basic) 494,5 491,6 0,6 1 098,6
Diluted (headline) 502,1 493,9 1,7 1 089,9
Total
Basic 475,1 494,5 (3,9) 1 108,0
Headline 482,7 496,8 (2,8) 1 099,2
Diluted (basic) 472,5 491,6 (3,9) 1 098,6
Diluted (headline) 480,0 493,9 (2,8) 1 089,9
11. Acquisitions for the period
G-Star RAW franchise stores
With effect from 3 April 2017, the Group acquired 14 G-Star RAW franchise
stores in Australia for AUD13,9 million (R141,8 million).
Retail Apparel Group (RAG)
The Group has acquired 100% of the share capital of Retail Apparel Group
Pty Ltd (RAG) effective from 24 July 2017. RAG is a leading speciality
menswear retailer in the Australian market. The purchase has been
capped at the lower of 7 times RAG’s audited normalised EBITDA, for the
year ending June 2017, and AUD302,5 million which was adjusted for
normalised working capital and net debt at acquisition. The Group has
obtained 100% control of RAG and is exposed to variable returns from its
involvement with RAG. The Group has the ability to use its power through
potential voting rights over RAG to affect the amount of returns earned
by RAG.
The acquisition of RAG was at an enterprise value of AUD293,9 million
(R3 000,2 million) with an equity value of AUD263,2 million (R2 685,5
million) after taking into account net debt and related adjustments.
Certain fair values are provisional and subject to further review for a
period of up to one year from the acquisition date. The at-acquisition
AUD values have been translated at the closing exchange rate at 24 July
2017 of AUD1:R10,21. These results include two months of RAG trading.
TFG has measured the identifiable assets and liabilities of RAG at their
acquisition-date fair values.
The provisional at-acquisition values are presented below:
Rm AUDm
Non-current assets 2 217,8 217,4
Property, plant and equipment 251,7 24,7
Intangible assets 1 781,8 174,6
Deferred taxation asset 184,3 18,1
Current assets 751,7 73,6
Inventory 619,5 60,7
Other receivables and
17,2 1,6
prepayments
Cash 115,0 11,3
Non-current liabilities 1 001,2 98,1
Interest-bearing debt 416,4 40,8
Operating lease liability 55,2 5,4
Deferred taxation liability 529,6 51,9
Current liabilities 555,0 54,4
Trade and other payables 519,2 50,9
Taxation payable 35,8 3,5
Total identifiable net assets
1 413,3 138,5
at fair value
Goodwill arising from
1 272,2 124,7
acquisition
Purchase consideration 2 685,5 263,2
Cash and cash equivalents
(115,0) (11,3)
acquired
Cash outflow acquisition 2 570,5 251,9
Goodwill of AUD124,7 million (R1,3 billion) and the RAG brands amounting
to AUD173,0 million (R1,8 billion) has been recognised as intangible
assets at acquisition. Goodwill represents the value paid in excess of
the provisional fair value of the net assets. This consists largely of
the value assigned to the unique operating business model and future
growth prospects. Retail turnover and profit and loss for the two-month
trading post acquisition amounted to R792,8 million and R57,8
respectively. Acquisition costs related to the acquisition of R48,6
million have been expensed in the current period.
12. Related parties
During the period, the Group entered into related party transactions in
the ordinary course of business, the substance of which are similar to
those disclosed in the Group’s annual financial statements for the year
ended 31 March 2017.
13. Fair value
The carrying value less impairment provision of trade receivables and
payables are assumed to approximate their fair values due to the short-
term nature. The Group only has level 2 financial instruments. There are
no level 1 or level 3 financial instruments within the Group and there
were no transfers between levels during the period.
14. Subsequent events
No further significant events took place between the period ending 30
September 2017 and date of issue of this report.
15. Change in authorised Share Capital
On 4 August 2017, the Group made an application to the JSE for a listing
of 17 241 380 ordinary shares at an issue price of R145,00 per ordinary
share for a total consideration of R2,5 billion. The shares were
allotted and issued as a result of an Accelerated Bookbuild offering
that was launched and concluded after close of market on 31 July 2017.
On 4 August 2017, the total shares in issue increased from 219 515 434
shares to 236 756 814 shares.
16. Changes to auditors
In October 2017, the Group appointed Deloitte & Touche as their external
auditors for the year ending 31 March 2018.
17. Changes in directors
There were no changes in directors during the current period.
COMMENTARY
INTRODUCTION
Given the increasing global footprint of TFG, we will use the naming
conventions defined below to assist our stakeholders in understanding the
Group’s activities:
• “TFG” or “the Group” – refers to the consolidated performance of TFG
Limited and all its subsidiaries
• “TFG Africa” – refers to all operations on the African continent
• “TFG London” – refers to the consolidated performance of Dress Holdco
A Limited and all its subsidiaries including the Phase Eight and
Whistles’ brands
• “TFG Australia” – refers to the consolidated performance of TFG
Retailers Proprietary Limited and all its subsidiaries including the
Retail Apparel Group (RAG) and G-Star Australia brands
• “TFG International” – refers to all operations outside the African
continent and includes both TFG London and TFG Australia
In the commentary below, numbers quoted refer to the Group unless
otherwise specified.
BACKGROUND
As was announced on SENS on 25 May 2017, with a further update on 14 July
2017, the Group acquired, through a wholly-owned subsidiary, the entire
issued ordinary and preference share capital of RAG. The effective date
of the acquisition was 24 July 2017 and as a result, two months’ trading
of RAG has been included in these results.
In addition, the Group acquired 14 G-Star RAW franchise stores in
Australia with effect from 3 April 2017 and as such six months’ trading
has been included in these results.
PERFORMANCE OVERVIEW
The Group performed satisfactorily against a backdrop of difficult
political and economic conditions in both South Africa and the United
Kingdom, two of the three major economies in which we trade, and against a
strong base in the corresponding period.
Total Group retail turnover growth of 9,2% (constant currency 12,6%) was
achieved, with growth of 5,0% (ZAR) in TFG Africa and 4,1% (GBP) in TFG
London with the balance coming from TFG Australia. This growth is
pleasing, coming off a high base of 16,9% turnover growth in the
corresponding prior period. Comparable store turnover growth of 1,0% was
achieved in TFG Africa.
Group cash turnover grew by 11,1% for the period with growth of 3,8% (ZAR)
in TFG Africa and 4,1% (GBP) in TFG London with the balance coming from
TFG Australia. The low cash turnover growth in TFG Africa was due to the
challenging trading environment as well as the high base of 19,0% growth
achieved in the corresponding prior period. Turnover growth in TFG London
was driven by online channels, which now accounts for 28,3% of their total
turnover, as consumers shop less in high streets in favour of e-commerce
channels. Total cash turnover now contributes 62,5% to total Group
turnover (Sept 2016: 61,4%).
Group credit turnover growth at 6,2% was stronger than the growth in the
corresponding period of 1,4%. This was in line with expectation, as the
negative impact of the Affordability Regulations is now in the base.
Group gross margin for the period improved to 51,0% from 49,6% at
September 2016. In TFG Africa, gross margin improved across all
merchandise categories with the exception of cosmetics. Total gross
margin for TFG Africa was 46,7% compared to 45,5% at September 2016. TFG
London’s gross margin was 63,6% (Sept 2016: 63,9%).
Total Group trading expenses increased by 12,3% over the previous period
with growth of 6,8% in TFG Africa, 7,5% in TFG London and the balance as a
result of the inclusion of TFG Australia. Whilst our focus on cost
control continues, we are pleased with the resulting improvement in
expense growth that our cost saving initiatives have delivered thus far.
Headline earnings excluding acquisition costs grew by 5,6% (constant
currency +7,9%) for the period to R1,1 billion. Headline earnings per
share excluding acquisition costs increased by 1,6% (constant currency
+3,9%) to 504,9 cents per share for the period, up from 496,8 cents per
share in the previous period.
An interim cash dividend of 325,0 cents per share has been declared, an
increase of 1,6% (Sept 2016: 320,0 cents per share).
The Group opened 144 outlets during the period, 74 in TFG Africa, 46 in
TFG London and 24 in TFG Australia. In line with our focus on capital
allocation, specific focus was placed on underperforming outlets which
resulted in 77 closures during the period (TFG Africa: 30, TFG London:
39, TFG Australia: 8). This brings the total number of outlets at end
September to 3 809 in 32 countries. Net trading space in our African
operations increased by 2,5% since September 2016.
Our e-commerce roll-out continued during the period with the launch of
@homelivingspace and Exact. The Group now has a total of 17 brands
trading online, with turnover from online trading growing to 6% of total
turnover. E-commerce remains a key strategic focus area for the Group.
MERCHANDISE CATEGORIES
Turnover growths in the various merchandise categories are as follows:
% same
% store %
turnover turnover turnover
% growth growth growth
turnover (TFG (TFG (TFG
growth Africa) Africa) London)
(Group) ZAR ZAR GBP
Clothing 12,3% 7,4% 2,8% 4,1%
Jewellery (1,0)% (1,0)% (2,5)%
Cellphones 1,5% 1,5% (1,1)%
Homeware & furniture (0,8)% (0,8)% (4,5)%
Cosmetics (1,9)% (1,9)% (3,9)%
TFG Africa same store turnover grew by 1,0% whilst product deflation
averaged approximately 0,7%.
CREDIT
The retail debtors’ book of R7,1 billion, grew by 1,7% compared to March
2017 and by 6,8% compared to September 2016. Net bad debt decreased by
4,3% as strong recoveries growth was maintained at 13,3% (Sept 2016:
29,0%).
At September 2017, net bad debt as a percentage of the closing debtors’
book was 10,9%, down from 11,3% at March 2017 and 12,1% at September 2016.
The book continues to be adequately provisioned at 11,0%, down from 11,8%
at the previous year-end and 13,0% at the end of September 2016.
BALANCE SHEET STRUCTURE
A R2,5 billion Accelerated Bookbuild was successfully launched on 31 July
2017 to fund the acquisition of RAG. As a result, 17 241 380 ordinary
shares were issued at R145 per share, a 0,9% premium to the 30-day VWAP of
R143,68 as at the close of trade on 31 July 2017.
At September 2017, the Group’s total debt to equity improved to 58,5% from
65,3% at March 2017. TFG Africa’s recourse debt to equity ratio improved
to 46,0% from 53,6% at March 2017.
TFG AUSTRALIA
RAG’s trading for the two months’ since acquisition has been ahead of
management’s expectation. Clear strategic objectives and KPIs have been
set and are on track to be met by year-end.
G-Star trading for the past six months was impacted by stock availability
which has now largely been resolved.
OUTLOOK
The uncertainty within the domestic and global economy continues and this
has been further exacerbated by political issues which, particularly in
South Africa, have had a negative impact on consumer and business
confidence.
As previously mentioned, the Affordability Regulations have had and will
continue to have a negative impact on the Group’s credit turnover. The
Group, together with two other major listed retailers, initiated legal
action against the National Credit Regulator (NCR) and Department of Trade
and Industry (dti) and we await the ruling from the court case which was
heard in August of this year.
The Group, along with other corporates who belong to Business Leadership
South Africa (BLSA), has committed itself to the contract that BLSA
announced with South Africa. This contract highlights six key areas that
business believes will drive opportunity and inclusive growth across the
country whilst driving the eradication of corruption.
Despite the political and economic outlook, we believe that continued
commitment to our strategic objectives around growth, profit, customer and
leadership development will support our efforts to achieve a reasonable
result for the full year. We plan to open in excess of 100 new outlets in
the second half of the year and will continue our initiatives in respect
of working capital management and capital optimisation in the second half
of the year.
As always, the Group is heavily dependent on Christmas trading which will
largely determine our performance for the full year.
Total retail turnover growth for the first 5 weeks of the second half is
at similar levels to the first half.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 162 of 3,25% (6,5 cents per share) (gross) in respect of the
six months ending 31 March 2018 has been declared from income reserves,
payable on Monday, 19 March 2018 to holders of 6,5% preference shares
recorded in the books of the company at the close of business on
Friday, 16 March 2018. The last day to trade (“cum” the dividend) in order
to participate in the dividend will be Tuesday, 13 March 2018. The
Foschini Group Limited preference shares will commence trading “ex” the
dividend from the commencement of business on Wednesday, 14 March 2018 and
the record date, as indicated, will be Friday, 16 March 2018.
Preference shareholders should take note that share certificates may not
be dematerialised or rematerialised during the period Wednesday, 14 March
2018 to Friday, 16 March 2018, 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 20%;
2) The withholding tax, if applicable at the rate of 20%, will result
in a net cash dividend per share of 5,20000 cents;
3) The issued preference share capital of The Foschini Group Limited is
200 000 shares at 2 November 2017; and
4) 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 325,0
cents per ordinary share from income reserves, for the period ended 30
September 2017, payable on Monday, 8 January 2018 to ordinary shareholders
recorded in the books of the company at the close of business on Friday, 5
January 2018. The last day to trade (“cum” the dividend) in order to
participate in the dividend will be Tuesday, 2 January 2018. The Foschini
Group Limited ordinary shares will commence trading “ex” the dividend from
the commencement of business on Wednesday, 3 January 2018 and the record
date, as indicated, will be Friday, 5 January 2018.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Wednesday, 3 January
2018 to Friday, 5 January 2018, 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 20%;
2) The withholding tax, if applicable at the rate of 20%, will result
in a net cash dividend per share of 260,00000 cents;
3) The issued ordinary share capital of The Foschini Group Limited is
236 756 814 shares at 2 November 2017; and
4) The Foschini Group Limited’s tax reference number is 9925/133/71/3P.
Signed on behalf of the Board.
M Lewis A D Murray
Chairman CEO
Cape Town
2 November 2017
Non-executive Directors:
M Lewis (Chairman), Prof F Abrahams, S E Abrahams, G Davin, D Friedland,
B L M Makgabo-Fiskerstrand, E Oblowitz, N V Simamane, R Stein
Executive Directors:
A D Murray, A Thunström
Company Secretary:
D van Rooyen
Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
Sponsor:
UBS South Africa Proprietary Limited
Visit our website at http://www.tfglimited.co.za
Date: 02/11/2017 01:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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