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

Release Date: 03/09/2019 12:00
Code(s): TFG TFGP     PDF:  
Wrap Text
Statement by the CEO at the Annual General Meeting

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

At TFG’s 82nd Annual General Meeting held today, CEO Anthony
Thunström, updated the meeting as follows:

The Group continued to create value for our stakeholders
during the 2019 financial year with turnover growth of 19,6%,
gross margin at 53,6%, up from 52,5% at March 2018, and growth
in headline earnings of 12%. Free cash flow was at 86,8% of
net profit and Group gearing reduced to 56,6%, down from 62%
at the previous year-end.

A final dividend of 450,0 cents per share was declared for the
year, bringing the total dividend for the year to 780,0 cents
per share, an increase of 4,7%.

We are proud of achieving a level 6 B-BBEE rating for the past
financial year.

As indicated in our 2019 Integrated Annual Report, we expected
subdued trading conditions to continue across each of the
major territories that we operate in.

In South Africa, the constrained economic environment persists
with continued fuel price increases, higher taxes and
increasing unemployment all contributing to reduced consumer

The United Kingdom retail environment also remains subdued,
with continued footfall decline in shopping centres and on the
high street, continuing online migration and ongoing Brexit

Trading conditions in Australia remain satisfactory.

Against this backdrop, Group turnover grew 8,1% for the first
21 weeks of the 2020 financial year compared to the same
period in the previous financial year. Cash turnover for TFG
Africa grew by 14,1%, which reflects significant market share
growth, with growth in credit turnover of 0,9%, reflecting the
Group’s prudent approach to credit extension, particularly in
the current environment and even more so now that the National
Credit Amendment Bill was signed into law on 13 August 2019.
This approach does however entail an opportunity cost both in
terms of additional turnover growth that has been forgone as
well as potential credit income that is not being generated.

The turnover growth in each of our business segments was as

Business      Currency      Total       Comparable    Contribution
segment                     turnover    turnover      to Group
                            growth      growth        turnover
TFG Africa    ZAR                  8,1%          6,8%        62,2%
TFG London    Pound                0,1%          N/A*        22,1%
TFG           Australian          10,2%          5,3%        15,7%
Australia     dollar
*   Approximately 76% of TFG London’s outlets are concessions. As
     concessions by nature change floor space on a continuous basis,
     a comparable turnover number is not calculated.

Turnover growth for TFG Australia, excluding the G-Star
franchise stores disposed of in December 2018, was 15,0%.
Excluding concession turnover from House of Fraser, an
independently owned UK department store placed under
administration in August 2018, TFG London’s turnover grew by

Group online turnover, now contributing 9,3% to total
turnover, grew by 9,9% with growth in the three business
segments as follows:

Business         Currency       Online             Online turnover
segment                         turnover           contribution to
                                growth             business
TFG Africa       ZAR                         58,5%             1,6%
TFG London       Pound                       -1,5%            33,6%
TFG Australia    Australian                  35,6%             5,6%

Excluding online turnover from House of Fraser, TFG London’s
online turnover grew by 6,8%.

Within TFG Africa, positive total turnover growth was achieved
across all merchandise categories with growths in the
respective categories being:

Merchandise      Total          Comparable     Contribution
category         turnover       turnover       to TFG
                 growth         growth         Africa
Clothing                 8,7%       7,2%        72,5%
Homeware                 7,7%       5,1%         7,3%
Cosmetics                0,1%      -0,2%         4,8%
Jewellery                4,7%       4,5%         6,4%
Cellphones              10,4%      10,6%         9,0%

The ongoing focus on supply chain, continued to yield positive
outcomes, with product price deflation in TFG Africa averaging
approximately -2,4%.

The Group’s ongoing commitment to its strategic objectives of
Customer and Employee Obsession, Leadership, Profit and Growth
together with its strategy of diversification across cash and
credit turnover, portfolio of brands, geographies and sales
channels, continues to underpin the Group’s resilience and

The execution of these strategies is supported by the business
optimisation project that commenced at the start of the year
at the TFG South African Head Office, with the aim of ensuring
that the Group’s investment in shared services, IT platforms
and applications, over the past few years, yields the required
efficiencies and cost reduction in the future. Similarly,
several significant retail-focused, digital transformation
projects have commenced and are well progressed to ensure that
the Group remains at the forefront of a rapidly changing
retail landscape.

The outlook for trading conditions across all three of the
Group’s business segments remains subdued and challenging,
particularly over the most recent period as regards South
Africa. We are however confident that the Group’s commitment
to the successful execution of its strategy, underpinned by a
relentless focus on digital transformation and our commitment
to making decisions that align with the TFG culture, will
continue to produce good results for the Group over time.

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


Pro forma management account information for TFG Australia and
TFG London were used in this announcement for illustrative
purposes only to provide an indicative turnover growth for
these business segments.

In TFG Australia, turnover for the period 1 April to 24 August
2018 relating to the G-Star franchise stores were removed as
if the disposal of these stores took place effective 31 March
In TFG London, all turnover transacted through House of Fraser
were removed to illustrate the impact of House of Fraser going
into administration during August 2018.

This pro forma information, because of its nature, may not be
a fair reflection of the Group’s results of operations,
financial position, changes in equity or cash flows. There are
no events subsequent to the reporting date which require
adjustment to the pro forma information.

The pro forma management account turnover numbers used were:

                                  Year ended   Year ending
                                  March 2019   March 2020
                                  £m           £m            % change
TFG London turnover for
the period 1 April to 24
August                            163,9        164,0         0,1%
Turnover through House
of Fraser (1 April to 24
August) #                         15,6         8,9           -42,9%
Comparable TFG London
turnover                          148,3        155,1         4,6%

                                  Year ended   Year ending
                                  March 2019   March 2020
                                  £m           £m            % change
TFG London online
turnover for the period
1 April to 24 August              55,9         55,1          -1,5%^
Online turnover through
House of Fraser (1 April
to 24 August) #                   5,1          0,9           -83,3%^
Comparable TFG London
online turnover                   50,8         54,2          6,8%^

    Difference due to rounding.

                                  Year ended   Year ending
                                  March 2019   March 2020
                                  A$m          A$m           % change
TFG Australia for the
period 1 April to 24
August                            192,3        211,9         10,2%
G-Star RAW franchise
stores (1 April 2017 to
24 August 2017) #                 8,0
Comparable TFG Australia          184,3        211,9         15,0%
# The adjustment is based on management accounts. The Group is satisfied
with the quality of these management accounts which are unaudited.

The directors are responsible for compiling the pro forma
financial information in accordance with the JSE Limited
Listings Requirements and in compliance with the SAICA Guide
on Pro Forma Financial Information. The underlying information
used in the preparation of the pro forma financial information
has been prepared using the accounting policies in place for
the year ending 31 March 2020.

Cape Town
3 September 2019

UBS South Africa Proprietary Limited

Date: 03/09/2019 12:00:00
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