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THE FOSCHINI GROUP LIMITED - Unaudited interim results for the half-year ended 30 September 2021, ordinary and preference dividends declarations

Release Date: 11/11/2021 09:00
Code(s): TFG TFGP     PDF:  
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Unaudited interim results for the half-year ended 30 September 2021, ordinary and preference dividends declarations

THE FOSCHINI GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/009504/06)
Ordinary share code: TFG
Preference share code: TFGP
ISIN: ZAE000148466
ISIN: ZAE000148516
(“TFG” or “the Company”)

SUMMARY OF THE UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE HALF-
YEAR ENDED 30 SEPTEMBER 2021, CASH AND PREFERENCE DIVIDENDS DECLARATIONS

HIGHLIGHTS
   -   Group revenue up 47,1% to R20,4 billion
   -   Group retail turnover up 51,8% to R19,0 billion
   -   Robust online retail turnover growth of 12,5% on the high base of the
       prior period, contributing 10,7% to total Group retail turnover
   -   Strong cash retail turnover growth of 56,8%, contributing 79,1% to
       total Group retail turnover
   -   Continued market share gains in Mens and Womens categories according
       to the Retail Liaison Committee (increase in market share of 4,8% for
       H1 FY2022 compared to H1 FY2021)
   -   Gross profit up 64,0% to R9,3 billion
   -   Operating profit before acquisition costs and gain on bargain
       purchase up 563,8% to R1,9 billion
   -   Headline earnings up 641,2% to R1,3 billion
   -   Basic earnings per share up 116,3% to 319,5 cents per share (Sept
       2020: 147,7 cents per share^)
   -   Headline earnings per share up 572,2% to 393,4 cents per share (Sept
       2020: headline loss per share of 83,3 cents per share^)
   -   Strong cash generation from operations of R3,9 billion with a net
       increase in cash and cash equivalents of R0,9 billion
   -   Further reduction in net debt from R1,3 billion (March 2021 pre-IFRS
       16)* to R0,8 billion (Sept 2021 pre-IFRS 16)*
   -   Resumption of dividends with an interim dividend declared of 170,0
       cents per share (Sept 2020: no interim dividend declared)

* Pro forma information used to calculate net debt pre-IFRS 16
^ The earnings per ordinary share figures above have been restated from
what was previously reported in order to reflect the impact of the bonus
element arising from the rights issue. As required by IAS 33, the basic and
diluted weighted average number of shares for the prior corresponding
period have been adjusted retrospectively to account for the bonus element
arising from the rights issue

COMMENTARY

STRONG RECOVERY POST-COVID EVIDENT IN KEY METRICS; PERFORMANCE ENABLED BY
INVESTMENT IN STRATEGIC INITIATIVES

The Group delivered a strong performance during the six months ended 30
September 2021 (‘current period’ or ‘H1 FY2022’), recovering from the
unprecedented trading conditions in the six months ended 30 September 2020
(‘prior period’ or ‘H1 FY2021’) caused by the COVID-19 pandemic. This
performance was achieved despite continued disruptions during the current
period, including extended lockdowns in Australia and New Zealand; and the
civil unrest and resumption of load shedding in South Africa.

Group retail turnover grew by 51,8%, supported by continued market share
gains, expansion of our footprint and brand portfolio and further growth in
online retail turnover. According to the Retail Liaison Committee, TFG
achieved market share gains in South Africa of 4,8% in the Mens and Womens
categories for H1 FY2022 compared to H1 FY2021.

This strong trade, along with our continued focus on resetting our cost
base, enabled a growth of 641,2% in headline earnings and 572,2% in
headline earnings per share.

OPERATING CONTEXT

In South Africa, trading conditions during the current period were impacted
by the civil unrest in July 2021, continued record high unemployment -
which impacts consumer confidence and spend - and load shedding.

As previously announced on the JSE Stock Exchange News Service (‘SENS’),
198 South African stores were looted and damaged to varying degrees by the
civil unrest experienced in the KwaZulu-Natal (KZN) province and parts of
the Gauteng province. The Group reopened 145 of these stores by the end of
September 2021 with a further 22 stores reopening by December 2021. The
remainder of the stores will only reopen from 2022 onwards due to the
extensive structural damage caused. The Group estimates that retail
turnover in excess of R400 million was lost during the current period as a
result of the civil unrest.

As previously announced on SENS, the Group has insurance policies in place
and is able to claim for the damages and losses of income as a result of
the business interruption. The total SASRIA claim for damages and asset
losses is estimated at R613 million and the Group has received two interim
payments from SASRIA to date, R200 million during the current period and a
further R260 million subsequent to period end. Further insurance payments
are expected in the second half of the financial year.

The Group has raised an accrual of R100 million in the current period
related to expected insurance recoveries in respect of losses of profit due
to the business interruption.

In TFG Australia, further lockdowns and restrictions impacted the business
during the current period. Performance was strong in Q1 FY2022, but during
Q2 FY2022 an estimated 43,5% of its trade days were lost as State
Governments attempted to curb the spread of the COVID-19 Delta variant. In
total, TFG Australia lost approximately 25% of its trading hours for the
current period. At the end of September 2021 the two significant Australian
states, New South Wales and Victoria, as well as New Zealand, were still in
lockdown. Both these Australian states have a roadmap to reopen non-
essential retail with restrictions once a 70-80% vaccination target has
been reached. For New South Wales, stores reopened on 11 October 2021,
while for Victoria, stores reopened from 30 October 2021.

The remaining lockdown restrictions in England were relaxed from 19 July
2021 and demand for TFG London products has continued to exceed
expectation, an indication that consumer confidence and footfall in the UK
retail market is recovering.

FINANCIAL PERFORMANCE

The Group achieved retail turnover of R19,0 billion, enabled by improved
performance across all retail turnover drivers.

Cash retail turnover increased by 56,8% compared to the prior period and
now contributes 79,1% to total Group retail turnover. Credit retail
turnover, purposefully restricted by stringent acceptance criteria in line
with prevailing economic conditions, grew by 35,3% over the same period.

Online retail turnover, building on the high base of the prior period,
increased by 12,5% and now contributes 10,7% to total Group retail
turnover. Our continued strategic focus on technology-led omnichannel
retailing supported outlet retail turnover growth of 58,4% over the same
period.

Growth in the various merchandise categories was as follows:

                                                 H1 FY2022
                                           Contribution to
Merchandise category           H1 FY2022   retail turnover

Clothing                           57,1%             82,4%

Homeware                           38,5%              5,1%

Cosmetics                          23,5%              2,2%

Jewellery                          48,8%              3,2%

Cellphones                         22,5%              7,1%

Total Group                        51,8%            100,0%

The Group is encouraged by the recovery in gross profit, which increased by
64,0% to R9,3 billion. This recovery is particularly pleasing, considering
the Group’s investment in price and the impact of certain global trends
which continue to put downward pressure on gross profit margins, including
casualisation, shifts in product mix and the significant increase in the
cost of transport and logistics.

The focus on cost control and the reduction of our cost base continued
during the current period, with tangible savings yielded from our ongoing
business optimisation projects. While trading expenses increased by 39,9%
compared to the prior period, this was in part due to the base impact of
the COVID-19-related rental concessions and various government assistance
received in the prior period, as well as the impact in the current period
of the acquisition of JET and continued strategic investments in technology
and local manufacturing. Trading expenses as a percentage of Group retail
turnover improved to 43,7% in the current period from 47,4% in the prior
period.

Basic earnings per share and headline earnings per share increased by
116,3% and 572,2% respectively. Earnings performance in the prior period
was impacted by the COVID-19 pandemic and related outlet closures, as well
as, inter alia, by the non-comparable acquisition of certain commercially
viable stores and selected assets of JET in South Africa (effective 25
September 2020) and in Botswana, the Kingdom of Eswatini, Lesotho and
Namibia (effective on various dates in December 2020 and January 2021). The
inclusion of a bargain purchase gain on acquisition of R694,3 million as
well as acquisition costs of R14,3 million in the prior period has impacted
specifically on basic earnings per ordinary share and diluted earnings per
ordinary share.

FINANCIAL POSITION

The Group continued to strengthen its balance sheet through a further
reduction in net debt from R1,3 billion (March 2021 pre-IFRS 16)* to R0,8
billion (Sept 2021 pre-IFRS 16)* and a net increase in cash and cash
equivalents of R0,9 billion.

* Pro forma information used to calculate net debt pre-IFRS 16

Particularly pleasing is the continued improvement in inventory which
increased by only 2,5% compared to the balance as at 31 March 2021.

SEGMENTAL PERFORMANCE

All three territories were impacted by external factors during the current
period which reduced their available trading hours.

TFG Africa lost c.7% of its trading hours due to load shedding, riots and
COVID-19-related store closures while TFG London lost c.9% of its trading
hours due to lockdowns and restricted trade. As outlined above, TFG
Australia was impacted most, losing c.25% of its trading hours as a result
of government-enforced lockdowns.

Despite the lost trading hours, all three segments recovered strongly
compared to the prior period with retail turnover growths in the respective
segments as follows:

                                                 H1 FY2022
                                              Contribution
                                                  to Group
                                                    retail
Business segment                H1 FY2022   turnover (ZAR)

TFG Africa (ZAR)                    59,5%            69,4%

TFG London (GBP)                    65,6%            15,3%

TFG Australia (AUD)                 39,2%            15,3%

Group (ZAR)                         51,8%           100,0%

Both online and outlet channels contributed to the strong recovery in all
three territories, with the respective growths and contributions as
follows:

                                   H1 FY2022                     H1 FY2022
                                      Online                        Outlet
                    H1 FY2022   contribution       H1 FY2022  contribution
                online retail     to segment   outlet retail    to segment
Business             turnover         retail        turnover        retail
segment                growth       turnover          growth      turnover

TFG Africa
(ZAR)                   15,7%           3,0%           61,4%         97,0%
TFG London
(GBP)                   24,0%          45,1%          128,5%         54,9%
TFG Australia
(AUD)                   22,4%          11,0%           41,6%         89,0%
Group (ZAR)             12,5%          10,7%           58,4%         89,3%

CREDIT

The new account approval strategy remained conservative for the current
period. Approval rates were restricted to c.25%, ensuring that the level of
risk remains within management expectations. Marketing initiatives were
however resumed in this financial year, increasing demand for new accounts
by 55% compared to the prior period. In addition to the negative impact on
credit sales as a result of the lockdowns in the prior period, the increase
in new accounts approved resulted in a significant improvement in year-on-
year credit sales. Year-on-year credit sales reflected growth of 35,3% for
the current period.

Despite the improvement in credit sales, robust customer payment behaviour
contributed to the retail net debtors’ book of R6,5 billion decreasing by
4,8% compared to the prior period. The allowance for impairment as a
percentage of the debtors’ book improved to 20,0% (Sept 2020: 25,0%) due to
the tighter risk criteria maintained for new accounts during the pandemic.
Customer payment behaviour has remained healthy and the cash collected for
the current period exceeded that of the prior period.

STORE PORTFOLIO

At 30 September 2021, the Group traded out of 4 294 outlets across 25
countries. Expansion of outlets continued during the current period with
the opening of 183 outlets, while 173 outlets were closed, which includes
102 concessions in TFG London.

The outlet movement in the respective business segments was as follows:

                                                                 TFG
Outlets                         TFG Africa   TFG London    Australia   Group

Opening balance at 1
April 2021                           2 929          801          554   4 284

New outlets                            125           32           26     183

Closed outlets                        (53)        (115)           (5)  (173)

Closing balance at 30
September 2021                       3 001          718           575  4 294

SUPERVISORY BOARD UPDATES

As was announced on SENS on 2 July 2021, Samuel Ellis Abrahams retired from
TFG’s Supervisory Board at the conclusion of the Company’s annual general
meeting on 2 September 2021 after twenty three years of valued service.

OUTLOOK

Trading conditions and consumer confidence are likely to remain under
pressure. The Group, however, continues to demonstrate its resilience and
agility and is well positioned to benefit from the continued post-COVID
recovery in all territories in which we operate.

We remain committed to the prioritisation of our strategic investments in
technology, local sourcing, new stores and brands. We are confident with
the strength of our balance sheet which enables us to capitalise on organic
and inorganic growth opportunities and we will continue with our strong
focus on expense control and capital management.

As always, the second half of the Group’s financial year is heavily
dependent on Black Friday and Christmas trade, which will largely determine
performance for the full year.

PRO FORMA INFORMATION
Pro forma information for net debt pre-IFRS 16 was used in this
announcement as this is a key metric within the Group’s debt reporting.

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 net debt pre-IFRS 16 numbers were calculated as follows:

                                  30 Sept 2021       31 March 2021
                                            Rm                  Rm
Total interest-bearing
debt                                  14 720,6            14 344,6
Less: Cash and cash
equivalents                            5 743,7             4 843,2
Net debt                               8 976,9             9 501,4
Less: Lease liabilities                8 200,9             8 186,9
Net debt pre-IFRS 16                     776,0             1 314,5

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 pro
forma financial information has not been audited or reviewed by the
Company’s external auditors. 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 2022.

RESULTS PRESENTATION WEBCAST

A live webcast of the interim results presentation will be broadcast at
10:00 am (SAS) on Thursday, 11 November 2021. A registration link for the
webcast will be available on the Company’s website at www.tfglimited.co.za.
The slides for the interim results presentation will be made available on
the Company’s website prior to the commencement of the webcast. A delayed
version of the webcast will be available later on the same day.

INTERIM ORDINARY CASH DIVIDEND DECLARATION

Notice is hereby given that the directors have declared an interim gross
cash dividend of 170,0 cents (136,00000 cents net of dividend withholding
tax) per ordinary share for the six-month period ended 30 September 2021.

The dividend has been declared from income reserves.

A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.
The issued share capital at the declaration date is 331 027 300 ordinary
shares.

The salient dates for the dividend will be as follows:

Publication of declaration data                 Thursday, 11 November 2021
Last day of trade to receive a dividend         Tuesday, 4 January 2022
Shares commence trading “ex” dividend           Wednesday, 5 January 2022
Record date                                     Friday, 7 January 2022
Payment date                                    Monday, 10 January 2022

Share certificates may not be dematerialised or rematerialised between
Wednesday, 5 January 2022 and Friday, 7 January 2022, both days inclusive.

PREFERENCE DIVIDEND DECLARATION

Notice is hereby given that the directors have declared a gross preference
dividend (no. 170) of 3,25% or 6,5 cents per share (5,20000 cents net of
dividend withholding tax) per preference share for the six-month period
ending 31 March 2022.

The dividend has been declared from income reserves.

A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.

The issued share capital at the declaration date is 200 000 preference
shares.

The salient dates for the dividend will be as follows:

Publication of declaration data                 Thursday, 11 November 2021
Last day of trade to receive a dividend         Tuesday, 8 March 2022
Shares commence trading “ex” dividend           Wednesday, 9 March 2022
Record date                                     Friday, 11 March 2022
Payment date                                    Monday, 14 March 2022

Share certificates may not be dematerialised or rematerialised between
Wednesday, 9 March 2022 and Friday, 11 March 2022, both days inclusive.

Signed on behalf of the Supervisory Board.

M Lewis                                      A E Thunström
Chairman                                     Chief Executive Officer

Cape Town
11 November 2021

ABOUT THIS ANNOUNCEMENT

Statement and availability
This short form announcement is the responsibility of the Company’s
directors and is only a summary of the information in the full
announcement. The unaudited interim condensed consolidated results were
approved by the Board of Directors on 11 November 2021 and the information
in this announcement has been correctly extracted from the unaudited
interim condensed consolidated results. Any investment decisions by
investors and/or shareholders should be based on consideration of the full
announcement, which has been published on SENS and is available at:
https://senspdf.jse.co.za/documents/2021/JSE/ISSE/TFG/Int2021.pdf
and on the Company's website at:
https://tfglimited.co.za/investor-information/financial-reports-and-
presentations/

An electronic copy of the full announcement may be requested and obtained,
at no charge, from the Company Secretary at company_secretary@tfg.co.za.

DIRECTORATE AND STATUTORY INFORMATION

Non-executive Directors:
M Lewis (Chairman), Prof. F Abrahams, C Coleman, G H Davin, D Friedland, B
L M Makgabo-Fiskerstrand, A D Murray, E Oblowitz, N V Simamane, R Stein

Executive Directors:
A E Thunström, B Ntuli

Company Secretary:
D van Rooyen

Registration number:
1937/009504/06

Tax reference number:
9925/133/71/3P

Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500, South Africa

Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, South
Africa

Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Visit our website at http://www.tfglimited.co.za

Date: 11-11-2021 09:00:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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