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THE FOSCHINI GROUP LIMITED - Statement by the CEO at the Annual General Meeting

Release Date: 03/09/2018 12:15
Code(s): TFG TFGP     PDF:  
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Statement by the CEO at the Annual General Meeting

Reg. No.: 1937/009504/06
Share code : TFG - TFGP
ISIN : ZAE000148466 – ZAE000148516

At TFG’s 81st Annual General Meeting held today, CEO Doug
Murray and CEO Designate Anthony Thunström, updated the
meeting as follows:

Notwithstanding challenging trading environments experienced
in South Africa and the United Kingdom, the Group produced
good results for the 2018 financial year with turnover growth
of 21,4% and growth in headline earnings, excluding
acquisition costs, of 9,6%. This earnings growth, together
with the Group’s ongoing focus on capital optimisation,
resulted in a 44,8% growth in free cash flow for the year.

TFG Africa’s turnover growth was 6,3%, with cash turnover
growth of 7,3% and credit turnover growth of 5,3%. Turnover
growth in TFG London was 23,5% (GBP). Excluding Hobbs,
acquired in November 2017, TFG London turnover grew by 4,2%
(GBP). The balance of the growth in the Group’s turnover was
contributed by TFG Australia, which was acquired during this
financial year.

Headline earnings per share for the year, excluding the
acquisition costs incurred with the RAG, G-Star RAW Australian
franchise stores and Hobbs acquisitions, as well as the buy-
out of the remaining minority shareholders in Phase Eight,
increased by 3,4% to 1 136,5 cents per share, up from
1 099,2 cents per share in the previous year.

A final cash dividend of 420,0 cents per share was declared,
an increase of 5,0% compared to the prior year. Accordingly,
the total dividend for the year amounted to 745,0 cents per
share, an increase of 3,5%.

In concluding my last AGM as CEO, I would like to record my
sincere appreciation and thanks to every member of staff with
whom I have had the pleasure of interacting, during my 33
years with the Group and in particular the last 11 as CEO.
I would also like to thank our Chairman, Michael Lewis, for
his invaluable input, wisdom and support over many years and
my colleagues on the Supervisory Board for their guidance and
To my colleagues on the Operating Board, a massive thank you.
Together we have achieved much success over the past years,
and I have no doubt this will continue under Anthony’s
In addition, a heartfelt thank you to our executive and
operating teams of TFG London, led by Ben Barnett, and TFG
Australia, led by Gary Novis, who have played a pivotal role
in the ongoing diversification and success of our Group.
Lastly, to our customers, shareholders and stakeholders, thank
you for your continued support of our Group. I trust your
loyalty will continue to be rewarded.
I am pleased to now hand over to Anthony Thunström, TFG’s new
CEO, who will provide a trading update for the 2019 financial
year to date.

Trading conditions remain difficult and constrained in South
Africa,the United Kingdom and in Australia however our
performance in each of these markets remains very satisfactory
relative to our respective peer groups. Group turnover for the
first 20 weeks of this financial year increased by 32,0%
compared to the corresponding prior period, in line with
management’s expectation.

As commented on in our March 2018 year-end results
presentation, the shift of Easter and school holidays into
March 2018 negatively impacted TFG Africa’s April 2018 trade.
This, combined with the introduction of the VAT increase on 1
April 2018, led to a challenging start to the 2019 financial
year. Despite this, TFG Africa’s turnover for the 20 weeks
grew by 7,6% with comparable turnover growth of 4,0%. Cash
turnover grew by 8,5% while credit turnover growth was 6,5%.
The growth and all the key metrics in respect of the retail
debtors’ book are in line with management’s expectation.

UK high street trading conditions remain challenging and as
has been well publicised, a number of UK retailers including
House of Fraser, have been placed under administration. Whilst
this consolidation creates further opportunities for TFG
London’s brands, the House of Fraser situation has negatively
impacted TFG London’s trade through the House of Fraser
website and their concessions. In addition, whilst not
material to the Group, it appears likely that TFG London will
incur some degree of bad debt write-off as a result of House
of Fraser entering administration. On a more positive note, we
understand that House of Fraser is likely to keep the majority
of its department stores trading into the future.
Turnover for TFG London grew by 52% (GBP) for the first 20
weeks of this financial year. Including appropriate
comparative numbers for Hobbs, turnover for TFG London is up
2,6%. The multi-brand strategy continues to deliver
outperformance against the broader UK retail market, with
International showing particularly strong growth in turnover
and margin contribution.

After 20 weeks, turnover growth for TFG Australia is 15,0%
compared to the same period last year.

The Group’s strategy of diversification across cash and credit
turnover, portfolio of brands, geographies and sales channels,
as well as its commitment to its strategic objectives of
Customer, Leadership, Profit and Growth, continues to underpin
the Group’s resilience and success. Digital transformation is
increasingly viewed as a key strategic priority for the Group
and both significant investment and progress in this area

In terms of the Group’s stated strategic focus areas for the
year, the following progress has been made:
 - An additional two brands, Donna and The Fix, launched their
    online selling during the past five months, increasing the
    Group’s online offering to 22 of the 28 TFG brands.
 - The establishment of TFG London’s shared service platform
    remains a key pillar to support our brand development and
    acquisition strategy and progress continues to plan.
 - The test launch of a TFG Africa brand in Australia remains
    on track with 6 outlets to be opened this financial year.

The outlook for trading conditions for TFG Africa and TFG
London remains subdued, while we continue to be optimistic
regarding the outlook for TFG Australia. The performance of
the Group during the second half of this financial year
remains largely dependent on Black Friday as well as Christmas
trade, both of which performed exceptionally well in the prior
year, creating a high base for this year’s performance.

As was announced on SENS on 1 August 2018, the Board is
pleased to welcome Bongiwe Ntuli to TFG as Chief Financial
Officer and executive director of the Group with effect from
14 January 2019. We wish her well in her new position.

I would like to thank all our dedicated staff for their hard
work and continued excellent performance during the year.
On behalf of the Board, I would also like to thank Doug Murray
for the significant contribution made by him during his 33
years’ service, 11 of which were as CEO.
During his tenure, TFG grew:
  • turnover from R7,2 billion in 2007 to R28,6 billion in
     2018 – a compound annual growth rate of 13,4%;
   • outlets from 1 332 in four countries to 4 034 in 32
     countries; and
   • brands from 14 in 2007 to 28 in 2018.

This growth in the Group led to a share price increase for TFG
from R52,00 in September 2007 to R223,75 on 29 March 2018,
with the Group’s market capitalisation at end March 2018 being
R52,9 billion.From a societal impact perspective, the number
of people directly employed grew from 15000 to nearly 28000
and capital expenditure grew from R304 million to R897
This success was achieved through hard work, innovation and
collaboration from Doug and his leadership team, both in terms
of strategy and execution. Doug’s contribution to TFG is not
only measured in numbers but is also evident in his
contribution to the Group’s culture and people development –
both key strengths of and differentiators for TFG.
Given his wealth of knowledge and experience, the Board has
appointed Doug as a consultant to the end of September 2019
and as a non-executive director from 1 October 2019 and we
look forward to his continued involvement with the Group.
It is with great pleasure that I congratulate our new CEO,
Anthony Thunstrom. Anthony possesses all the qualities to lead
TFG into the next phase of development. He understands and
embraces the Group’s culture and he enjoys the confidence of
the Supervisory Board, his executive colleagues and the entire
I am also delighted at the appointment of Bongiwe Ntuli,
effective 14 January 2019, as the Group’s new CFO and we all
look forward to working with her.
As mentioned in the 2018 Integrated Annual Report, I
acknowledge the passing of Clive Hirschsohn, a former Group
Managing Director who joined the Group when his family’s
business, American Swiss, was acquired by Foschini Limited in
1967. The Board and all who knew him express their condolences
to his family.

Shareholders are advised that this trading update has not been
reviewed or reported on by the Company’s external auditors.
Cape Town
3 September 2018

UBS South Africa Proprietary Limited

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