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TRUWORTHS INTERNATIONAL LIMITED - Unaudited group interim report for the 26 weeks ended 30 December 2018

Release Date: 21/02/2019 16:45
Code(s): TRU     PDF:  
 
Wrap Text
Unaudited group interim report for the 26 weeks ended 30 December 2018

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 30 December 2018


KEY FEATURES          
Retail sales                                         up 2% to R10.5 billion
Gross margin                                                          52.3%
Operating margin                                                      21.7%
Headline and diluted headline earnings per share                    down 5%
Net asset value per share                                           up 8.5%
Cash generated from operations                                 R2.6 billion
Interim dividend per share                                        249 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 account retailing of fashion clothing, footwear, related merchandise 
and homeware. 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.

ADOPTION OF NEW ACCOUNTING STANDARDS
During the reporting period the Group adopted the newly effective accounting standards IFRS 9: 
Financial Instruments and IFRS 15: Revenue from Contracts with Customers. The Group adopted these 
standards retrospectively by adjusting opening balances on 2 July 2018, being the commencement 
date of the reporting period, rather than restating comparative financial information. Refer to 
note 15 of the condensed Group interim financial statements for further information.

The most significant impact of IFRS 9 relates to the impairment of the Group's trade receivables 
based on a forward-looking expected credit loss (ECL) model. This has resulted in a significant 
increase in the doubtful debts provision in respect of the in-store account portfolio, mainly 
driven by the recognition of lifetime expected credit losses in respect of certain receivables as 
well as the impact of forward-looking information.

The adoption of IFRS 15 did not have a material impact on the Group.

TRADING AND FINANCIAL PERFORMANCE 
The Group continued to experience difficult trading conditions in both its primary markets. 
In South Africa, low economic growth, high unemployment, modest increases in negotiated wages 
and higher average fuel and utility prices contributed to low consumer confidence and constrained 
spending, while Brexit uncertainty and weak consumer sentiment continues to negatively impact 
the UK economy. Group retail sales for the 26-week period ended 30 December 2018 (the current 
period) increased 2.0%* to R10.5 billion relative to the R10.3 billion reported for the 26-week 
period ended 31 December 2017 (the prior period). 

Account sales comprised 51% (2017: 50%) of Group retail sales for the current period, with account 
and cash sales increasing by 3.7%* and 0.3%* respectively, relative to the prior period.

Retail sales for Truworths Africa (being the Group, excluding the UK-based Office segment and 
comprising mainly the Truworths businesses in South Africa) increased by 2.4%* to R7.6 billion 
relative to the prior period's R7.4 billion, with account sales increasing by 3.7% and cash sales 
decreasing by 0.4%. Account sales comprised 70% of these retail sales (2017: 69%). Like-for-like 
store retail sales remained unchanged relative to the prior period, while product deflation averaged 
1.5% (2017: 1.5% deflation).

Retail sales for the Group's UK-based Office segment (Office) decreased in Sterling terms by 3.0% to 
£157 million relative to the prior period's £162 million. In Rand terms, however, retail sales for 
Office increased by 0.8% to R2.9 billion. Office continued to show strong online performance, 
with online retail sales growing at 7.2% and comprising approximately 33% of retail sales for 
the current period. 

Group sale of merchandise, which comprises Group retail sales, together with wholesale and franchise 
sales and delivery fee income, less accounting adjustments, increased 1.3% to R10.2 billion.

*  In Truworths Africa the end-of-winter-season sale commenced in week 1 of the current period, 
   whereas it commenced in week 53 of the 2017 reporting period, and hence did not occur in the prior 
   period. Accordingly, the 26 weeks' trading of the current period is not directly comparable to the 
   26 weeks' trading of the prior period.

Divisional sales         
                                                             26 weeks to  26 weeks to     Change on
                                                             30 Dec 2018  31 Dec 2017  prior period
                                                                      Rm           Rm             %
Truworths ladieswear                                               2 042        2 066          (1.2)
Truworths designer emporium@                                         772          780          (1.0)
Total Truworths ladieswear                                         2 814        2 846          (1.1)
Office                                                             2 871        2 848           0.8
Truworths menswear‡                                                2 070        2 070             -
Identity                                                           1 220        1 189           2.6
Truworths kids emporium#                                             744          630          18.1
Other^                                                               772          706           9.3
Group retail sales                                                10 491       10 289           2.0
Wholesale sales                                                       41           25          64.0
Delivery fee income                                                   30           26          15.4
Franchise sales                                                        -            3          (100)
Accounting adjustments~                                             (379)        (295)         28.5
Sale of merchandise                                               10 183       10 048           1.3
YDE agency sales                                                     137          143          (4.2)
                              
@  Daniel Hechter Ladies, Ginger Mary, Glamour, LTD Ladies and Earthaddict.
‡  Truworths Man, Uzzi, Daniel Hechter Mens and LTD Mens.
#  LTD Kids, Earthchild and Naartjie.
^  Cosmetics, Cellular, Truworths Jewellery, Office London (South Africa) and Loads of Living.
~  Refer to note 4 of the condensed Group interim financial statements for further information.

Since the prior period-end a net 10 stores were closed across all brands. Truworths Africa opened 
10 stores and closed 14, while Office opened 1 store and closed 7, resulting in an increase in 
trading space of 0.8% (Truworths reflected an increase of 1.0% and Office recorded a decrease of 
2.7%). At the end of the current period the Group had 967 stores (including 37 concession outlets) 
(2017: 977 stores, including 39 concession outlets).

The Group's gross margin was stable at 52.3% (2017: 52.4%). Truworths Africa's gross margin 
was also stable at 55.6% (2017: 55.5%), while the gross margin in Office declined to 44.0% (2017: 44.7%).

Trading expenses increased 3.2% to R3.8 billion (2017: R3.7 billion) and constituted 37.6% of sale 
of merchandise (2017: 37.0%). Excluding foreign exchange losses of R76 million in the prior period 
(the net foreign exchange movement in the current period was nil), trading expenses increased 5.3%. 
Refer to Account Management for further details on trade receivable costs. 

Interest received decreased 21.2% to R562 million (2017: R713 million). The decrease is mainly due 
to the restructuring of the Group's South African funding arrangements in June 2018, the growth in 
accounts opened post the November 2015 amendments to the maximum prescribed interest rates under 
the National Credit Act, as well as the reduction in interest earned in respect of stage 3 accounts 
following the adoption of IFRS 9 (refer to note 15.2 of the condensed Group interim financial statements).

The reduction in interest received also impacted operating profit, which decreased 8.6% to R2.2 billion. 
Consequently, the operating margin decreased to 21.7% from 24.0%. The operating margin in Truworths 
Africa decreased to 27.1% (2017: 29.7%) and in Office to 8.3% (2017: 10.1%). 

Finance costs decreased materially by 69.9% compared to the prior period, reflecting the achievement 
of a key objective of the funding restructuring. 

Headline earnings per share (HEPS) and diluted HEPS decreased 4.7% to 361.8 cents and 5.1% to 
360.0 cents respectively compared to the prior period's HEPS of 379.8 cents and diluted HEPS 
of 379.3 cents. 

An interim dividend of 249 cents per share has been declared (2017: 261 cents per share), 
maintaining the dividend cover at 1.5 times. 

FINANCIAL POSITION 
The Group's financial position remains strong, with net asset value per share increasing by 8.5% to 
2 622 cents since the prior period-end (2017: 2 416 cents). Excluding the impact of the adoption 
of IFRS 9, net asset value per share increased 10.7% to 2 674 cents.

Inventories increased 8.1% to R2.1 billion at the end of the current period (2017: R1.9 billion). 
Excluding the reclassification from provisions to inventories arising from the adoption of IFRS 15 
(refer to note 15.1 of the condensed Group interim financial statements for further information), 
inventories increased 6.2%. Inventory turn decreased to 4.6 times (2017: 4.9 times), largely as a 
result of the challenging trading environment faced by Office. Excluding the inventory of Office, 
gross inventory decreased 3.5% and inventory turn increased to 5.8 times (2017: 5.7 times).

Interest-bearing borrowings at the current period-end decreased to R1.3 billion from R3.2 billion 
at the prior period-end (June 2018: R1.7 billion), mainly due to the restructuring of the funding 
arrangements in South Africa to achieve an efficient and more cost-effective capital base. Refer to 
note 9 of the condensed Group interim financial statements for further information. 

Trade and other payables increased to R2.9 billion at the end of the current period (2017: 
R1.8 billion), mainly because creditor payments for December 2018 were made after the current 
period-end compared to December 2017 when payments were made before the prior period-end. 

CAPITAL MANAGEMENT 
During the current period the Group generated R2.6 billion in cash from operations and this funded 
dividend payments (R688 million), capital expenditure (R261 million) and loan repayments 
(R360 million). Creditors and tax payments were made after the current period-end, boosting the 
cash inflow from operations and consequently the cash realisation rate.

The cash realisation rate, which is a measure of how profits are converted into cash, was 159% for 
the current period (2017: 100%), and was impacted by the timing of month-end creditors and tax 
payments. If creditors and tax had been paid by the current period-end, the cash realisation rate 
would have been approximately 90%.

The Group was in a net cash to equity position of 9.6% at the end of the current period (2017: net 
debt to equity of 8.4%), principally due to the timing of creditors and tax payments as explained 
above. If creditors and tax had been paid before the end of the current period net debt to equity 
would have been approximately 2%. 

ACCOUNT MANAGEMENT 
Gross trade receivables in respect of the Truworths Africa debtors book (relating to the Truworths, 
Identity and YDE businesses) totalled R6.4 billion (2017: R6.3 billion) and the number of active 
accounts increased by 4.0% to 2.7 million. Active account holders able to purchase and overdue 
balances as a percentage of gross trade receivables were at 86% (2017: 87%) and 10% (2017: 10%) 
respectively.

IFRS 9 was adopted retrospectively on the commencement date of the current period with an adjustment 
to the Group's opening retained earnings. The initial adjustment to the doubtful debt provision of 
R310 million on adoption of IFRS 9, along with the reclassification of the provision in respect of 
debtors over 180 days of R85 million, resulted in a 56.8% increase in the provision to R1 090 million, 
constituting 19.0% of gross trade receivables at the transition date. The increase is principally 
due to the recognition of lifetime expected credit losses in respect of stage 2 and stage 3 trade 
receivables, as well as the consideration of forward-looking information, which were not allowed 
under the previous accounting standard.

The adoption of IFRS 9 does not impact on the Group's credit management practices and business 
model and these will continue to be consistently applied as in the past.

At the current period-end the doubtful debt provision improved marginally to 18.8% of gross trade 
receivables. Trade receivable costs increased 3.2% to R674 million (2017: R653 million), resulting 
from the increase in the quantum of the doubtful debt provision, off-set by a 2.1% decrease in net 
bad debt and the IFRS 9 reclassification of interest received.

The Group uses accounts as an enabler of sales to customers in the mainstream middle-income 
South African market, as opposed to operating a financial services business. No fees are charged to 
customers, such as initiation fees, club fees, collection fees or magazine fees, except for an 
annual account service fee of R32. Financial services income only constitutes 0.4% of sale of 
merchandise (refer to note 4 of the condensed Group interim financial statements for further information). 

OUTLOOK
Retail trading conditions in the Group's two major markets are expected to remain difficult over the 
remainder of the 2019 financial period. Our determination to react to environmental challenges, 
yet preserve our intrinsic business philosophy, has kept the business healthy and on track over the 
past few environmentally challenging years. We recognise some early positive signs that point to 
possible improvement in both major markets from the next financial period onwards.

South Africa: Truworths
Ongoing low economic growth, together with a weak labour market and high unemployment, will continue 
to depress disposable income levels. While consumer confidence among middle-income South Africans is 
positive and stable, retail spending is expected to come under renewed strain in the months ahead 
from rising utility costs and uncertainty ahead of the country's general election in May. Any power 
outages will put further pressure on sales performance.

Sales revenue is expected to benefit from the new e-commerce platform and the lay-by offerings in 
South Africa. The continued improvement in the health of the account portfolio, the ongoing growth 
in both new and total accounts in good standing, the strong cash flow and balance sheet, and the 
implementation of various strategic initiatives augur well for the medium-term prospects of Truworths. 

Truworths' retail sales for the first seven weeks of the second half of the 2019 financial period 
increased 2.0% compared to the corresponding seven-week period in the 2018 financial period. 

United Kingdom: Office
The fragile retail economy in the UK is expected to remain under extreme pressure amidst rising 
concerns over the faltering negotiations ahead of the end-March Brexit deadline. However, staff morale 
is high in the business despite the challenging environment. The key strategic initiatives in the 
coming months that will drive future growth in the UK operations include the 'Store of the Future' 
concepts in Office (Oxford Street) and in Offspring (Selfridges), and significant new developments 
in the highly successful e-commerce platform, which already contributes 33% of Office sales.

Office's retail sales for the first seven weeks of the second half of the 2019 financial period increased 
by 5.4% in Sterling compared to the corresponding seven-week period in the 2018 financial period. 

Group: Trading space
Trading space is planned to increase by approximately 2% for the 2019 financial period (comprising 
2% growth in Truworths and 5% decrease in Office), but to remain essentially unchanged in the 2020 
financial period (Truworths 0% to 1% and Office 0.5% to 2%).


H Saven                 MS Mark
Chairman                Chief Executive Officer


INTERIM 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 30 December 2018 in the amount of 249 South African cents 
(2017: 261 South African cents) per ordinary share to shareholders reflected in the company's 
register on the record date, being Friday, 15 March 2019.

The last day to trade in the company's shares cum dividend is Tuesday, 12 March 2019. Consequently 
no dematerialisation or rematerialisation of the company's shares may take place over the period 
from Wednesday, 13 March 2019 to Friday, 15 March 2019, both days inclusive. Trading in the company's 
shares ex dividend will commence on Wednesday, 13 March 2019. The dividend is scheduled to be paid 
in South African Rand (ZAR) on Monday, 18 March 2019.

Dividends will be paid net of dividends tax (currently 20%), 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 20%, will result in a net cash dividend per 
share of 199.2 South African cents. The company has 442 746 445 ordinary shares in issue on 
21 February 2019. 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. 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
21 February 2019

One Capital
JSE Sponsor

Merchantec Capital 
NSX Sponsor


CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION
                                                           Note   at 30 Dec   at 31 Dec    at 1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
ASSETS                         
Non-current assets                                                    7 087       6 515       6 904 
Property, plant and equipment                                         1 795       1 674       1 726 
Goodwill                                                      6       1 642       1 529       1 629 
Intangible assets                                             7       3 252       2 976       3 227 
Derivative financial assets                                              10          11          10 
Assets held at fair value*                                               28          25          30 
Loans and receivables                                                    98          64         109 
Deferred tax                                                            262         236         173 
                         
Current assets                                                       10 095      10 107       8 587 
Inventories                                                           2 101       1 944       2 072 
Trade and other receivables                                           5 378       5 697       5 110 
Derivative financial assets                                              15           -          73 
Prepayments                                                             185         169         350 
Cash and cash equivalents                                             2 416       2 297         982 
Total assets                                                         17 182      16 622      15 491 
                         
EQUITY AND LIABILITIES                         
Total equity                                                         11 243      10 386      10 369 
Share capital and premium                                               734         706         729 
Treasury shares                                               8      (1 055)       (901)     (1 083)
Retained earnings                                                    11 571      11 054      10 932 
Non-distributable reserves                                               (7)       (473)       (209)
                         
Non-current liabilities                                               2 186       3 492       2 363 
Interest-bearing borrowings                                   9       1 214       2 532       1 268 
Deferred tax                                                            482         445         477 
Put option liability                                                    269         304         389 
Straight-line operating lease obligation                                141         149         155 
Post-retirement medical benefit obligation                               59          58          55 
Cash-settled compensation liability                                      17           -          15 
Leave pay obligation                                                      4           4           4 
                         
Current liabilities                                                   3 753       2 744       2 759 
Trade and other payables                                              2 854       1 781       1 800 
Provisions                                                              192         113         140 
Interest-bearing borrowings                                   9         126         637         419 
Bank overdraft                                                            -           -         263 
Derivative financial liabilities                                          -          61           -
Tax payable                                                             581         152         137 
Total liabilities                                                     5 939       6 236       5 122 
Total equity and liabilities                                         17 182      16 622      15 491 
                         
Number of shares in issue (net of treasury shares) (millions)         428.8       429.9       428.3 
Net asset value per share (cents)                                     2 622       2 416       2 421 
                         
Key ratios                         
Return on equity^ (%)                                                    29          33          27 
Return on capital^ (%)                                                   40          48          40 
Return on assets^ (%)                                                    26          29          25 
Inventory turn^ (times)                                                 4.6         4.9         4.0 
Asset turnover^ (times)                                                 1.2         1.2         1.1 
Net (cash)/debt to equity (%)                                          (9.6)        8.4         9.3 
Net (cash)/debt to EBITDA^ (times)                                     (0.2)        0.2         0.2 

* Reported as 'available-for-sale assets' under IAS 39.
^ Ratios for December have been annualised.
                         

CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME
                                               Note    26 weeks    26 weeks                52 weeks
                                                      to 30 Dec   to 31 Dec                to 1 Jul
                                                           2018        2017                    2018
                                                      Unaudited   Unaudited           %     Audited
                                                             Rm          Rm      change          Rm
Revenue                                           4      10 896      10 912           -      19 254
                              
Sale of merchandise                               4      10 183      10 048           1      17 547 
Cost of sales                                            (4 857)     (4 783)                 (8 354)
Gross profit                                              5 326       5 265           1       9 193 
Other income                                      4         147         151                     279 
Trading expenses                                         (3 830)     (3 713)          3      (6 954)
Depreciation and amortisation                              (200)       (192)                   (387)
Employment costs                                         (1 137)     (1 068)                 (2 109)
Occupancy costs                                          (1 203)     (1 135)                 (2 240)
Trade receivable costs                                     (674)       (653)                 (1 099)
Other operating costs                                      (616)       (665)                 (1 119)
Trading profit                                            1 643       1 703          (4)      2 518 
Interest received                                 4         562         713         (21)      1 420 
Dividends received                                4           4           -                       8 
Operating profit                                          2 209       2 416          (9)      3 946 
Finance costs                                               (40)       (133)        (70)       (250)
Profit before tax                                         2 169       2 283          (5)      3 696 
Tax expense                                                (599)       (627)                 (1 031)
Profit for the period                                     1 570       1 656          (5)      2 665 
                              
Attributable to:                              
Equity holders of the company                             1 550       1 632                   2 643 
Holders of the non-controlling interest                      20          24                      22 
Profit for the period                                     1 570       1 656                   2 665 
                              
Other comprehensive income/(losses) to be reclassified 
to profit or loss in subsequent periods                      40         (71)                    242 
Movement in foreign currency translation reserve             40         (71)                    244 
Fair value adjustment on assets held at fair value 
through other comprehensive income (IAS 39)                   -           -                      (2)
                              
Other comprehensive (losses)/income not to be reclassified 
to profit or loss in subsequent periods                      (1)          -                       2 
Re-measurement gains on defined benefit plans                 -           -                       2 
Fair value adjustment on assets held at fair value 
through other comprehensive income (IFRS 9)                  (1)          -                       - 
                              
Other comprehensive income/(losses) for the period, 
net of tax                                                   39         (71)                    244
                              
Attributable to:                              
Equity holders of the company                                35         (62)                    218 
Holders of the non-controlling interest                       4          (9)                     26 
Other comprehensive income/(losses) for the period, 
net of tax                                                   39         (71)                    244 
Total comprehensive income for the period                 1 609       1 585                   2 909
                              
Attributable to:                              
Equity holders of the company                             1 585       1 570                   2 861 
Holders of the non-controlling interest                      24          15                      48 
Total comprehensive income for the period                 1 609       1 585                   2 909 
                              
Basic earnings per share (cents)                          361.8       379.8          (5)      614.8 
Headline earnings per share (cents)               5       361.8       379.8          (5)      615.7 
Diluted basic earnings per share (cents)                  360.0       379.3          (5)      611.8 
Diluted headline earnings per share (cents)       5       360.0       379.3          (5)      612.7 
Weighted average number of shares (millions)              428.4       429.7                   429.9 
Diluted weighted average number of shares (millions)      430.5       430.3                   432.0 
                              
Key ratios                              
Gross margin (%)                                           52.3        52.4                    52.4 
Trading expenses to sale of merchandise (%)                37.6        37.0                    39.6 
Trading margin (%)                                         16.1        16.9                    14.4 
Operating margin (%)                                       21.7        24.0                    22.5 
                              

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
2018                                             
Balance at the beginning of the 
period as previously reported         729    (1 083)   10 932      (209)  10 369         -   10 369 
Adjustment on adoption of IFRS 9        -         -      (223)        -     (223)        -     (223) 
Restated balance at the beginning 
of the period                         729    (1 083)   10 709      (209)  10 146         -   10 146 
Total comprehensive income for 
the period                              -         -     1 550        35    1 585        24    1 609 
Profit for the period                   -         -     1 550         -    1 550        20    1 570 
Other comprehensive income for 
the period                              -         -         -        35       35         4       39 
Dividends paid                          -         -      (688)        -     (688)        -     (688) 
Premium on shares issued in terms 
of the 1998 share option scheme         5         -         -         -        5         -        5 
Cost of shares vested and transferred 
to participants in terms of the 2012 
restricted share scheme                 -        28         -       (28)       -         -        - 
Share-based payments                    -         -         -        51       51         -       51 
Movement in put option liability        -         -         -       144      144       (24)     120 
Balance at 30 December 2018           734    (1 055)   11 571        (7)  11 243         -   11 243 
                                             
2017                                             
Balance at the beginning of 
the period                            706      (939)   10 212      (529)   9 450         -    9 450 
Total comprehensive income for 
the period                              -         -     1 632       (62)   1 570        15    1 585 
Profit for the period                   -         -     1 632         -    1 632        24    1 656 
Other comprehensive losses for 
the period                              -         -         -       (62)     (62)       (9)     (71) 
Dividends paid                          -         -      (790)        -     (790)        -     (790) 
Utilisation of treasury shares in 
respect of the exercise of options in 
terms of the 1998 share option scheme   -        19         -       (11)       8         -        8 
Cost of shares vested and transferred 
to participants in terms of the 2012 
restricted share scheme                 -        19         -       (19)       -         -        - 
Share-based payments                    -         -         -        38       38         -       38 
Acquisition of non-controlling 
interest                                -         -         -         1        1        (2)      (1) 
Movement in put option liability        -         -         -       109      109       (13)      96 
Balance at 31 December 2017           706      (901)   11 054      (473)  10 386         -   10 386 
                                             
Cents per share:                     2018      2017                              
Cash dividend declared in respect 
of the period                         249       261                              
                                             

CONDENSED GROUP STATEMENTS OF CASH FLOWS
                                                           Note    26 weeks    26 weeks    52 weeks
                                                                  to 30 Dec   to 31 Dec    to 1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
CASH FLOWS FROM OPERATING ACTIVITIES                         
Cash flow from trading and cash EBITDA*                               1 943       1 993       2 965 
Working capital movements                                               667        (156)        172 
Cash generated from operations                                        2 610       1 837       3 137 
Interest received                                                       562         710       1 425 
Dividends received                                                        4           -           8 
Finance costs                                                           (37)       (129)       (244)
Tax paid                                                               (157)       (486)       (855)
Cash inflow from operations                                           2 982       1 932       3 471 
Dividends paid                                                         (688)       (790)     (1 925)
Net cash from operating activities                                    2 294       1 142       1 546 
                         
CASH FLOWS FROM INVESTING ACTIVITIES                         
Acquisition of plant and equipment to expand operations                (190)       (171)       (344)
Acquisition of plant and equipment to maintain operations               (49)        (41)        (86)
Acquisition of computer software                                        (22)        (14)        (55)
Proceeds on disposal of shares                                            -           8           - 
Net acquisition of business                                               -          (8)         (8)
Premiums paid to insurance cell                                           -           -          (9)
Amounts received from insurance cell                                      2           4           5 
Loans and receivables repaid                                             11           -           2 
Loans advanced                                                            -          (2)        (47)
Disposal of mutual fund units                                             -           -           1 
Payment of contingent consideration obligation                            -         (62)        (62)
Net cash used in investing activities                                  (248)       (286)       (603)
                         
CASH FLOWS FROM FINANCING ACTIVITIES                         
Proceeds on shares issued                                                 5           -          23 
Shares repurchased by subsidiaries                                        -           -        (184)
Borrowings repaid                                             9        (360)       (597)     (2 979)
Borrowings incurred                                                       -           -         800 
Contributions to post-retirement medical benefit plan asset               -           -          (3)
Acquisition of non-controlling interest                                   -          (1)         (2)
Net cash used in financing activities                                  (355)       (598)     (2 345)
                         
Net increase/(decrease) in cash and cash equivalents                  1 691         258      (1 402)
Cash and cash equivalents at the beginning of the period                719       2 055       2 055 
Net foreign exchange difference                                           6         (16)         66 
CASH AND CASH EQUIVALENTS AT THE REPORTING DATE                       2 416       2 297         719 
                         
Key ratios                          
Cash flow per share (cents)                                           696.1       449.6       807.4 
Cash equivalent earnings per share (cents)                            436.7       451.5       738.3 
Cash realisation rate (%)                                               159         100         109 
                         
* Cash EBITDA is 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 30 December 2018 
     (interim report) have been prepared in compliance with, and containing the information required 
     by, the International Financial Reporting Standards (IFRS), the SAICA Financial Reporting 
     Guides as issued by the Accounting Practices Committee, 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 1 July 2018.

     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, except where 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 accordance with IFRS and consistent with those applied in the 
          preparation of the Group's annual financial statements for the period ended 1 July 2018, 
          except for the adoption of IFRS 9: Financial Instruments and IFRS 15: Revenue from 
          Contracts with Customers. The Group elected to apply both these standards on a modified 
          retrospective basis with effect from the commencement date of the reporting period, 
          being 2 July 2018, and accordingly comparative amounts for the December 2017 reporting 
          period have not been restated. Refer to note 15 for further information.

          Other IFRS, amendments and International Financial Reporting Interpretations Committee 
          (IFRIC) interpretations not applicable to Group activities
          Various other 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  IFRS, amendments and IFRIC interpretations issued but not yet effective
          The following IFRS and amendments, that are relevant to the Group, have been issued but 
          are not effective for the period under review. The Group will adopt these no later than 
          their effective dates, to the extent that they are applicable to its activities:

          IFRS 16: Leases
          Effective for annual periods beginning on or after 1 January 2019
          The Group has numerous leases that will, in terms of the new standard, be recognised in 
          the statement of financial position. The standard is effective for the Group's financial 
          period commencing on 1 July 2019. The quantitative impact is under consideration by the 
          Group, as is the assessment of whether to transition using the fully retrospective 
          approach or the modified retrospective approach. 

          IFRIC Interpretation 23: Uncertainty over Income Tax Treatment
          Effective for annual periods beginning on or after 1 January 2019
          The interpretation addresses the accounting for income taxes when tax treatments involve 
          uncertainty that affects the application of IAS 12 and does not apply to taxes or levies 
          outside the scope of IAS 12, nor does it specifically include requirements relating to 
          interest and penalties associated with uncertain tax treatments. Management is in the 
          process of assessing the potential impact of this new interpretation on the Group.

          IFRS 17: Insurance Contracts
          Effective for annual periods beginning on or after 1 January 2021
          IFRS 17 establishes principles for the recognition, measurement, presentation and disclosure 
          of insurance contracts issued to ensure that entities provide relevant information in a way 
          that faithfully represents those contracts. Management has not yet assessed the potential 
          impact of this new standard on the Group.

     3.3  Basis of consolidation of financial results
          The condensed Group interim financial statements comprise the consolidated 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 30 Dec   to 31 Dec                to 1 Jul
                                                           2018        2017                    2018
                                                      Unaudited   Unaudited           %     Audited
                                                             Rm          Rm      change          Rm
4    REVENUE                         
     Sale of merchandise                                 10 183      10 048           1      17 547 
     Retail sales                                        10 491      10 289                  17 963 
     Accounting adjustments*                               (379)       (295)                   (518)
     Wholesale sales                                         41          25                      46 
     Delivery fee income                                     30          26                      51 
     Franchise sales                                          -           3                       5 
     Interest received                                      562         713         (21)      1 420 
     Trade receivables interest#                            538         642                   1 286 
     Investment interest                                     24          71                     134 
     Other income                                           147         151          (3)        279 
     Commission                                              66          70                     128 
     Financial services income                               36          32                      58 
     Display fees                                            27          28                      56 
     Lease rental income                                     12          13                      26 
     Insurance recoveries                                     -           4                       3 
     Other                                                    6           3                       7 
     Royalties                                                -           1                       1 
     Dividends received from insurance business 
     arrangements                                             4           -                       8 
     Total revenue                                       10 896      10 912           -      19 254
                              
     * 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 provision for 
       sales returns.
     # Impacted by the adoption of IFRS 9. Refer to note 15.2 for further information.

                                                                   26 weeks    26 weeks    52 weeks
                                                                  to 30 Dec   to 31 Dec    to 1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
5    RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS                    
     Profit for the period, attributable to equity holders of 
     the company                                                      1 550       1 632       2 643 
     Adjusted for:                    
     Loss on write-off of plant and equipment                             -           -           3 
     Impairment of fixed and financial assets                             -           -           1 
     Headline earnings                                                1 550       1 632       2 647 
                         
6    GOODWILL                    
     Balance at the beginning of the reporting period                 1 629       1 552       1 552 
     Movement in exchange rate through other comprehensive income        13         (23)         77 
     Balance at the reporting date                                    1 642       1 529       1 629 
                         
     Goodwill acquired through business combinations is allocated to the Truworths Ltd and Office 
     Retail Group Ltd cash-generating units and tested for impairment biannually at each reporting 
     date. No impairments were deemed necessary.                         

                                                                   26 weeks    26 weeks    52 weeks
                                                                  to 30 Dec   to 31 Dec    to 1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
7    INTANGIBLE ASSETS                    
     Balance at the beginning of the reporting period                 3 227       3 037       3 037 
     Additions                                                           22          14          55 
     Additions arising on acquisition of Loads of Living                  -           2           2 
     Disposals                                                            -           -           - 
     Cost                                                                 -         (42)        (42)
     Accumulated amortisation                                             -          42          42 
     Amortisation                                                       (27)        (16)        (46)
     Movement in exchange rate through other comprehensive income        30         (61)        179 
     Balance at the reporting date                                    3 252       2 976       3 227 
                         
     The trademarks have been allocated to the Truworths Ltd and Office Retail Group Ltd 
     cash-generating units, are considered to have indefinite useful lives and are tested for 
     impairment biannually at each reporting date. No impairments were deemed necessary.
                         
                                                                   26 weeks    26 weeks    52 weeks
                                                                  to 30 Dec   to 31 Dec    to 1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
8    TREASURY SHARES                    
     Balance at the beginning of the reporting period                 1 083         939         939 
     Shares repurchased in respect of the 2012 restricted share scheme    -           -         184 
     Utilisation of treasury shares in respect of the exercise of 
     options in terms of the 1998 share option scheme                     -         (19)          - 
     Cost of shares vested and transferred to participants in terms 
     of the 2012 restricted share scheme                                (28)        (19)        (40)
     Balance at the reporting date                                    1 055         901       1 083 
                         
9    INTEREST-BEARING BORROWINGS                    
     Balance at the beginning of the reporting period, comprising:    1 687       3 785       3 785 
     Non-current portion of interest-bearing borrowings               1 268       3 641       3 641 
     Current portion of interest-bearing borrowings                     419         144         144 
     Borrowings repaid                                                 (360)       (597)     (2 979)
     Borrowings incurred                                                  -           -         800 
     Movement in exchange rate through other comprehensive income        10         (23)         75 
     Amortisation of arrangement fees                                     3           4          18 
     Net finance charges accrued                                          -           -         (12)
     Balance at the reporting date, comprising:                       1 340       3 169       1 687 
                         
     Non-current portion of interest-bearing borrowings               1 214       2 532       1 268 
     Current portion of interest-bearing borrowings                     126         637         419 
                         
     The R2.6 billion variable-rate long-term loans comprising South African Rand-based debt in the 
     form of three separate unsecured facilities advanced to the Group's main operating subsidiary, 
     Truworths Ltd, were repaid during the reporting period ended 1 July 2018 and refinanced with an 
     unsecured term loan of R500 million repayable in June 2021 and an unsecured revolving credit 
     facility of R1.2 billion. These facilities bear variable interest at margins of 1.35 and 
     1.29 percentage points, respectively, above the three-month Johannesburg Interbank Agreed Rate 
     (JIBAR).

10   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 as well as homeware. Included in the Truworths business unit is the YDE 
     business unit which comprises the agency activities through which the Group retails clothing, 
     footwear and related products on behalf of emerging South African designers, as well as the 
     Loads of Living business unit which retails homeware. 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.

     Management monitors the operating results of the business segments separately for the purpose 
     of making decisions about resources to be allocated and for assessing performance. Segment 
     performance is reported on an IFRS basis and evaluated based on revenue, EBITDA and profit 
     before tax.

                                                                               Consoli-
                                                                                 dation
                                                      Truworths      Office     entries       Group
                                                             Rm          Rm          Rm          Rm
     2018                                   
     Total third-party revenue                            7 963       2 937          (4)     10 896
     Third party                                          7 960       2 936           -      10 896
     Inter-segment                                            3           1          (4)          -
     Trading expenses                                     2 780       1 053          (3)      3 830
     Depreciation and amortisation                          154          46           -         200
     Employment costs                                       785         354          (2)      1 137
     Occupancy costs                                        777         426           -       1 203
     Trade receivable costs                                 661          13           -         674
     Other operating costs                                  403         214          (1)        616
     Interest received                                      561           1           -         562
     Finance costs                                           26          14           -          40
                                        
     Profit for the period                                1 389         181           -       1 570
     Profit before tax                                    1 940         229           -       2 169
     Tax expense                                           (551)        (48)          -        (599)
                                        
     Segment assets                                      14 078       6 568      (3 464)*    17 182
     Segment liabilities                                  3 290       2 653          (4)      5 939
                                        
     Capital expenditure                                    241          20           -         261
                                        
     Other segmental information                                   
     Gross margin (%)                                      55.6       44.0                     52.3
     Trading margin (%)                                    19.3       8.2                      16.1
     Operating margin (%)                                  27.1       8.3                      21.7
     Inventory turn# (times)                                5.8       3.3                       4.6
     Account:cash sales mix (%)                           70:30       0:100                   51:49
                                        
     2017                                   
     Total third-party revenue                            8 023       2 894          (5)     10 912
     Third party                                          8 019       2 893           -      10 912
     Inter-segment                                            4           1          (5)          -
     Trading expenses                                     2 713       1 004          (4)      3 713
     Depreciation and amortisation                          140          52           -         192
     Employment costs                                       722         346           -       1 068
     Occupancy costs                                        738         397           -       1 135
     Trade receivable costs                                 653           -           -         653
     Other operating costs                                  460         209          (4)        665
     Interest received                                      713           -           -         713
     Finance costs                                          118          15           -         133
                                        
     Profit for the period                                1 436         220           -       1 656
     Profit before tax                                    2 005         278           -       2 283
     Tax expense                                           (569)        (58)          -        (627)
                                        
     Segment assets                                      14 328       5 754      (3 460)*    16 622
     Segment liabilities                                  3 846       2 390           -       6 236
                                        
     Capital expenditure                                    195          31           -         226
                                        
     Other segmental information                                   
     Gross margin (%)                                      55.5        44.7                    52.4
     Trading margin (%)                                    19.7        10.1                    16.9
     Operating margin (%)                                  29.7        10.1                    24.0
     Inventory turn# (times)                                5.7         3.9                     4.9
     Account:cash sales mix (%)                           69:31       0:100                   50:50
                                        
     * Elimination of investment in Office as well as inter-segment assets and liabilities.
     # Annualised.

                                                                2018                    2017     
                                                               Contribution            Contribution
                                                                 to revenue              to revenue
                                                             Rm           %          Rm           %
     Third-party revenue                          
     South Africa                                         7 699        70.7       7 732        70.9 
     United Kingdom                                       2 620        24.0       2 596        23.8 
     Germany                                                150         1.4         152         1.4 
     Republic of Ireland                                    138         1.3         116         1.1 
     Namibia                                                105         1.0         117         1.1 
     Botswana                                                58         0.5          60         0.5 
     Swaziland                                               55         0.5          51         0.5 
     Rest of Europe                                          15         0.2          14         0.1 
     Mauritius                                               14         0.1          13         0.1 
     Lesotho                                                 13         0.1          12         0.1 
     Zambia                                                  11         0.1          17         0.2 
     United States                                           10         0.1           9         0.1 
     Kenya                                                    5           -*          9         0.1 
     Middle East and Asia                                     2           -*          3           -* 
     Australia                                                1           -*          3           -* 
     Ghana                                                    -           -           8           -* 
     Total third-party revenue                           10 896         100      10 912         100 
                              
     * Zero due to rounding.
               
                                                                     30 Dec      31 Dec       1 Jul
                                                                       2018        2017        2018
                                                                  Unaudited   Unaudited     Audited
                                                                         Rm          Rm          Rm
11   CAPITAL COMMITMENTS
     Store renovation and development                                   269         258         415 
     Computer software and infrastructure                               117         104         160 
     Buildings                                                            -          33           - 
     Distribution facilities                                             13           3          14 
     Head office refurbishment                                            8           6          10 
     Motor vehicles                                                       6           2           7 
     Capital expenditure authorised but not contracted                  413         406         606 

     Head office refurbishments                                           -           -           5
     Buildings                                                           73           -         135
     Capital expenditure authorised and contracted                       73           -         140 

     Total capital commitments                                          486         406         746
                         
     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 2019 reporting period.

12   EVENTS AFTER THE REPORTING DATE
     No event, material to the understanding of this interim report, has occurred between the 
     reporting date and the date of approval.

13   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 Black Friday and the Christmas trading 
     period. For the past two financial periods (since the acquisition of Office), the Group's first 
     half retail sales have ranged between approximately 56% and 57% of annual retail sales.

14   RELATED PARTY TRANSACTIONS
     Related party transactions similar to those disclosed in the Group's annual financial statements 
     for the period ended 1 July 2018 took place during the interim period. 

15   ADOPTION OF NEW ACCOUNTING STANDARDS
     15.1  IFRS 15: Revenue from Contracts with Customers
           IFRS 15: Revenue from Contracts with Customers provides a single control-based revenue 
           recognition model and clarifies the principles for recognising revenue from contracts 
           with customers. The Group has adopted IFRS 15 with effect from the commencement of the 
           current reporting period on a modified retrospective basis. Accordingly, the comparative 
           information in this report has not been restated and continues to be reported under 
           IAS 18: Revenue.

           IFRS 15: Revenue from Contracts with Customers supersedes IAS 18: Revenue. The core 
           principle is that the Group should recognise revenue to depict the transfer of promised 
           goods or services to customers at an amount that reflects the consideration to which the 
           Group expects to be entitled in exchange for those goods or services. Revenue is 
           recognised when performance conditions are satisfied and a customer obtains control of a 
           good or service, from which point in time the customer has the ability to direct the use 
           and obtain the benefits from the good or service.

           The Group assessed the impact of the new standard and concluded that it is limited, 
           in all material respects, to the recognition of the Group's provision for sales returns. 
           IFRS 15 requires revenue and cost of sales to be adjusted for the selling and cost prices 
           of expected merchandise returns against the sales returns provision and inventory 
           respectively. Under IAS 18 the Group provided for sales returns within provisions, on a 
           gross profit basis, with corresponding adjustments to sale of merchandise. Accordingly, 
           the adoption of IFRS 15 has resulted in reclassifications between sale of merchandise 
           and cost of sales in the statement of comprehensive income, and inventories and 
           provisions in the statement of financial position, with no impact on retained earnings 
           or profit or loss. The sales return asset is disclosed within inventory while the related 
           sales returns provision is disclosed within provisions, as follows:

                                                              26 weeks to               26 weeks to
                                                              30 Dec 2018      IFRS 15  30 Dec 2018
                                                                Unaudited  adjustments    Unaudited
                                                                   IAS 18    Unaudited      IFRS 15
                                                                       Rm           Rm           Rm
           Statement of financial position                    
           Inventories                                              2 064           37        2 101 
           Provisions                                                (155)         (37)        (192)

     15.2  IFRS 9: Financial Instruments
           IFRS 9 replaces IAS 39 and addresses the classification, measurement and derecognition of 
           financial assets and liabilities, and introduces new rules for hedge accounting and a 
           new impairment model for financial assets.

           Adoption of IFRS 9
           The Group has adopted IFRS 9 retrospectively on the commencement date of the reporting 
           period, being 2 July 2018, with an adjustment to the Group's opening retained earnings at 
           that date. The Group has elected not to restate its comparative financial statements. 
           Accordingly, the Group's financial position and results for the current period, insofar 
           as they are subject to IFRS 9, are not comparable to the prior period.

           The impact of IFRS 9 on the Group is summarised as follows: 
           -  The impairment of financial assets, particularly of the Group's trade receivables 
              comprising its in-store account portfolio, has changed significantly due to the 
              application of an expected credit loss (ECL) model taking into consideration forward-
              looking information. 
           -  The recognition of interest income in respect of credit-impaired trade receivables on 
              their net carrying amount, i.e. after taking into account impairment provisions. 
           -  The classification of financial assets.

           Classification and measurement
           IFRS 9 requires all financial assets to be classified and measured on the basis of the 
           Group's business model for managing those assets and their contractual cash flow 
           characteristics. The business model assessment is performed at a portfolio level. 
           Apart from the 'own credit risk' requirements, classification and measurement of financial 
           liabilities is unchanged from IAS 39 requirements. Based on the business model 
           assessments, management has classified the financial assets held by the Group as follows:

                                             Measurement category                Carrying values at 2 July 2018
                                                                                 IAS 39      IFRS 9  Difference
                                         IAS 39                  IFRS 9              Rm          Rm          Rm
           Non-current financial assets                              
           Derivative financial assets   FVPL                    FVPL                10          10           -
           Assets held at fair value*    Available-for-sale      FVOCI/FVPL          30          30           -
           Loans and receivables         Loans and receivables   Amortised cost     109         109           -
                                   
           Current financial assets                              
           Trade and other receivables   Loans and receivables   Amortised cost   5 110       4 800        (310)
           Derivative financial assets   FVPL                    FVPL                73          73           -
           Cash and cash equivalents     Amortised cost          Amortised cost     982         982           -
                                   
           FVPL = Fair value through profit or loss
           FVOCI = Fair value through other comprehensive income
           * Reported as 'available-for-sale assets' under IAS 39.

           Impairment of financial assets and recognition of interest
           In terms of IFRS 9 financial assets measured at amortised cost are impaired based on an 
           ECL model, as opposed to an incurred loss model under IAS 39. The Group has adopted the 
           general approach, which involves a three-stage approach to the recognition of credit 
           losses and interest:

                                    Stage 1                          Stage 2                       Stage 3
           Description              Credit risk has not increased    Credit risk has increased     Credit-impaired
                                    significantly since initial      significantly since initial
                                    recognition                      recognition     
           Recognition of ECLs      12-month ECLs                    Lifetime ECLs                 Lifetime ECLs
           Recognition of interest  Effective interest on            Effective interest on         Effective interest on
                                    gross carrying amount            gross carrying amount         net carrying amount

           The measurement of ECLs reflects a probability-weighted outcome, the time value of money 
           and the best forward-looking information available to the Group. The measurement of ECLs 
           considers the probability of write-off, the expected timing of write-off, the Group's 
           anticipated exposure at the time of write-off, as well as the loss resulting from the 
           write-off. The calculated ECLs are discounted using the blended, portfolio-level effective 
           interest rate of the in-store account portfolio and the original effective interest rate 
           applicable to other financial assets held at amortised cost.

           Financial assets can move in both directions through the stages of the impairment model. 
           At each reporting date the Group assesses whether financial assets carried at amortised 
           cost are credit-impaired and therefore classified as stage 3. A financial asset is credit-
           impaired when one or more events that have a detrimental impact on the estimated future 
           cash flows of the financial asset have occurred. The Group's definition of credit-impaired 
           is aligned to its internal definition of default, as IFRS 9 does not define default. 
           The Group has adopted the rebuttable presumption that default occurs when a customer's 
           in-store account is in arrears for more than 90 days based on contractual payment 
           requirements.

           When a financial asset is classified as stage 3 (i.e. credit-impaired), interest income is 
           recognised only on the net carrying amount (i.e. the gross carrying amount less the 
           impairment provision) based on the original effective interest rate. The recognition of 
           contractual interest income on the gross carrying amount of the financial asset is 
           suspended during this stage and only resumes if and when the financial asset is reclassified 
           from stage 3. The application of this requirement in the current period has resulted in the 
           reclassification of trade receivables interest of R52 million to trade receivable costs.

           The credit facilities comprising in-store accounts offered by the Group are conditional 
           upon and may only be used for the purchase of merchandise sold by the Group. Accordingly, 
           no provision is made for ECLs against unutilised credit facilities based on the fact that 
           these facilities do not meet the definition of loan commitments.

           Forward-looking information
           The calculation of ECLs incorporates forward-looking variables, which include the following: 
           -  an economic overlay model, developed using linear regressions to model the relationship 
              between historic lagged and future macroeconomic indicators and ECL provisions; 
           -  the potential impact of industry-specific challenges, including changes in the regulatory 
              environment; and
           -  expert management judgement.

           Base, optimistic and cautious scenarios are developed using the aforementioned variables 
           and are weighted based on management's best estimate of their relative likelihood of 
           occurrence. This result is compared to the base position and an adjustment is made to the 
           output of the ECL models. This process involves significant judgement and is governed by 
           a formally mandated committee appointed by the board of the Group's wholly-owned 
           subsidiary and licensed credit provider, Truworths Ltd.

           Write-off policy
           The Group's write-off policy in respect of trade receivables has remained unchanged with 
           the implementation of IFRS 9. Trade receivables are written off when an in-store account 
           customer is in a legal status or meets all of the following criteria:
           -  the customer has been in default for seven months;
           -  the customer has not made a qualifying payment for more than one month; and
           -  the customer has not met certain behavioural risk score cut-offs determined by the 
              Group's credit management practices.

           The Group utilises both its in-house collection department as well as external collection 
           specialists to recover outstanding amounts.

           Impact on the financial statements
           IFRS 9 was adopted without restating comparative information:

                                                                    Audited               Unaudited
                                                                1 July 2018     IFRS 9  2 July 2018
                                                                         Rm         Rm           Rm
           Statement of financial position                       
           Non-current assets                    
           Deferred tax                                                 173          87         260 
                         
           Current assets                    
           Trade and other receivables                                5 110        (310)      4 800 
                         
           Equity                    
           Retained earnings                                         10 932        (223)     10 709

           The following table reconciles the aggregate opening doubtful debt provision under 
           IAS 39 to the ECL provision under IFRS 9, showing separately the retained earnings 
           impact at the transition date:
 
                                                                               Doubtful    Retained
                                                                                   debt    earnings
                                                                              provision      impact
                                                                                     Rm          Rm
           Doubtful debt provision per IAS 39 as at 1 July 2018                     695           -
           180 days reclassification*                                                85           -
           IFRS 9 adjustment, recognised in retained earnings                       310        (310)
           ECL provision per IFRS 9 as at 2 July 2018                             1 090        (310)
           Movement in ECL provision since transition, recognised in 
           profit or loss                                                           110           -
           ECL provision as at 30 December 2018                                   1 200        (310)
                    
           * The doubtful debt provision reported under IAS 39 excluded the provision of R85 million 
             for trade receivables that were over 180 days in arrears at 1 July 2018, which amount 
             was credited directly against trade receivables. Under IFRS 9 this has been reclassified 
             accordingly.               


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.truworthsinternational.com
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 in Namibia
Merchantec Capital

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/COO)
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/COO)*, DN Dare*, RG Dow§‡, JHW Hawinkels§‡, 
M Makanjee§‡, CT Ndlovu§‡, RJA Sparks§‡, AJ Taylor§‡ and MA Thompson§‡
* Executive  § Non-executive  ‡ Independent


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