1 1 2 3 5 6 4 2 1 R E V I E W O F T H E P E R I O D 3 3 - - PowerPoint PPT Presentation

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R E V I E W O F T H E P E R I O D

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SOUTH AFRICA – TRADING ENVIRONMENT

• Difficult trading environment.
• GDP growth remained subdued throughout 2017/2018 with negative growth

in Q1 of calendar 2018.

• Rising fuel and energy prices, VAT rate increase and weaker Rand.
• Take-home pay for SA consumers has dropped significantly.
• Consumer confidence has declined after initial boost at the start of the

calendar year following appointment of new president.

• Unemployment increased in Q2 of calendar 2018 to 27.2%.
• Uncertainty regarding land reform impacting on business and investor

confidence.

Sources: Stats SA, BankServAfrica

5

UNITED KINGDOM – TRADING ENVIRONMENT

• Extremely tough retail environment.
• GDP growth slowed in Q1 2018 to 1.2% (weakest since 2012).
• Retailers hit by soaring business rates and low consumer confidence.
• Customers impacted by Brexit-fuelled inflation.
• Number of retailers issuing profit warnings has doubled and the number of

companies filing for Company Voluntary Arrangements (CVA) has increased substantially.

• Continued inflationary pressure with CPI growth of 2.4% has squeezed

household income.

• Brexit-related uncertainty remains, although fiscal policy has been relaxed.

Source: UK Office for National Statistics

6 6

F I N A N C I A L R E V I E W I . G R O U P

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GROUP EXECUTIVE LEADERSHIP

David P Pfaff appointed G Group C Chief Operating Officer (C (COO)

• Appointment to newly created COO position effective immediately.
• Recognises David’s expanded responsibilities, which now include retail store operations in addition

to his existing portfolio of credit risk, credit operations, information systems and finance.

• He continues as Group Chief Financial Officer and head of the Group’s finance function.
• David has been with the Group since March 2013.

David P Pfaff (5 (53)

BCom, CA (SA), Dip Soc (Oxon) COO a and CFO

8

• Year-on-year performance impacted by 53rd week in the prior period.
• Top-line growth affected by challenging economic environment in SA and UK.
• Trading expenses well controlled, reducing by 2% on the prior period.
• Dividend cover maintained at 1.5 times.
• Strong balance sheet with improved net debt to equity ratio.
• South African debt restructured.
• Cash realisation rate of 109%.
• Net asset value per share growing at 10% to 2 421 cents.
• Opened 13 Office London stores in South Africa.
• Acquired homeware chain, Loads of Living, with 13 stores.
• Launched sophisticated e-commerce site in South Africa.

GROUP OVERVIEW

9

GROUP PERFORMANCE AGAINST TARGETS

Jun 2018 2018 Actual 52 weeks Jun 2018 Target 52 weeks Gross margin 52.4 .4% 51% – 55% Operating margin 22.5 .5% 20% – 25% Return on equity 27% 27% 26% – 31% Return on assets 25% 25% 22% – 27% Inventory turn 4.0 .0 times 3.5 – 4.5 times Asset turnover 1.1 .1 times 0.9 – 1.3 times

10 10

GROUP FINANCIAL PERFORMANCE

Jun 2018 52 weeks Jun 2017 2017 52 weeks* Change on prior period 52 on 5 52 weeks Jun 2017 53 weeks Change on prior period 52 on 53 weeks Sale of merchandise (Rm) 17 547 17 582 (0 (0.2 .2%) %) 18 065 (2.9%) Gross margin 52.4 .4% 52.6 .6% 52.6% Operating margin 22.5 .5% 22.6 .6% 23.3% Diluted HEPS (cents) 612.7 .7 620.8 .8 (1 (1.3 .3%) %) 660.9 (7.3%) Dividend per share (DPS) (cents) 420 420 452 452 452 (7.1%) Net asset value per share (cents) 2 2 421 421 2 2 201 2 201 10.0%

* Pro forma comparable 2017 52-week period.

11 11

GROUP DILUTED HEPS AND DPS (52 WEEKS)

Compound growth rates: Diluted HEPS: Jun: 5-year 1.8%, 3-year 1.2% Compound growth rates: DPS: Jun: 5-year 3.0%, 3 year 1.2% (cents)

*Pro forma comparable 2017 52-week period (2017 53-weeks: 661 cents per share).

385 405 452 452 420 420 569 592 666 621 613 613

• 100

200 300 400 500 600 700 Jun 2014 Jun 2015 Jun 2016 Jun 2017* Jun 2018 DPS Diluted HEPS

12 12

GROUP RETURN ON EQUITY (ROE) AND RETURN ON CAPITAL (ROC)

Average: ROE: Jun: 5-year 33.0%, 3-year 31.0% Average: ROC: Jun: 5-year 47.6%, 3-year 45.7% (%) %) 37 35 35 31 27 27 52 49 51 46 40 40

• 10

20 30 40 50 60 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 ROE ROC

Office UK acquired

13 13

GROUP RETURN ON TOTAL ASSETS AND ASSET TURNOVER

Return on assets (%) %) Asset turnover (times) Average: Return on assets: Jun: 5-year 31.0%, 3-year 25.0% Average: Asset turnover: Jun: 5-year 1.1 times, 3-year 1.1 times 42 38 24 26 25 25 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3

• 10

20 30 40 50 60 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Return on assets Asset turnover

Office UK acquired

14 14

GROUP ROIC vs WACC

(%) %) Average: ROIC: Jun: 5-year 19.8%, 3-year 16.7% Average: WACC: Jun: 5-year 13.6%, 3-year 13.3% 25 24 17 17 16 16 14 14 13 13 14 14

• 5

10 15 20 25 30 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 ROIC WACC

Office UK acquired

15 15

GROUP STATEMENTS OF FINANCIAL POSITION

Jun 2 2018 Rm Rm Jun 2017 Rm Change on prior period % Property, plant and equipment 1 7 726 1 637 5 Goodwill 1 6 629 1 552 5 Intangible assets 3 2 227 3 037 6 Other non-current assets 322 322 333 (3) Cash and cash equivalents 982 982 2 055 (52) Trade and other receivables 5 5 110 110 5 256 (3) Inventories 2 2 072 072 1 916 8 Other current assets 423 423 353 20 Total a assets 15 15 491 491 16 16 139 139 (4 (4) Total equity 10 10 369 369 9 450 10 Non-current liabilities 2 3 363 4 709 (50) Current liabilities 2 2 759 759 1 980 39 Total e equity a and l liabilities 15 15 491 491 16 16 139 139 (4 (4)

16 16

FINANCIAL POSITION

• Financial position remains strong with NAV per share up 10%

% to 2 421 cents. DIVIDENDS

• Final dividend of 159 cents per share (2017: 182 cents per share).
• Total dividend per share of 420 cents per share (2017: 452 cents per share).

GEARING

• Net debt to equity ratio:

– Group: : Reduced to 9.3% R968 million net debt (June 2017: 18.3% R1.7 billion net debt). – Truworths: : Reduced to 5.9% R605 million net debt (2017:11.9%, R1.2 billion net debt). – Office: : Reduced to 10.2% £20.1 million net debt (2017: 18.2%, £33.5 million net debt).

GROUP CAPITAL MANAGEMENT

17 17

GROUP SA DEBT FUNDING RESTRUCTURE

Jun 2018 Jun 2017 Facility Base rate Total Rm Rm Utilised Rm Rm Base r rate margin (ppts) Total Rm Utilised Rm Base rate margin (ppts)

Term loans 3-month JIBAR 500 500 500 500 + 1 1.3 .35 2 600 2 600 +1.73 to +2.18 Revolving credit 3-month JIBAR 1 2 200 300 300 + 1 1.2 .29 350

• + 1.73

Overdraft – Committed Prime 300 300 263 263

• 1.2

.25 300

• 1.25

Overdraft – Uncommitted Prime 700 700

• 1.2

.25 300

• 1.25

Total gross debt 2 7 700 1 0 063 3 550 2 600

18 18

GROUP DIVERSIFICATION

TRUWORTHS OFFICE GROUP

RETAIL SALES CASH: ACCOUNT SALES

South Africa 96% Rest of Africa 4% Rest of Europe 9% United Kingdom 91% South Africa 70% Rest of Africa 3% UK and Europe 27% Account 69% Cash 31% Cash 100% Account 50% Cash 50% R13 115 m R4 848 m R17 963 m R13 115 m R4 848 m R17 963 m

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GROUP DIVERSIFICATION

TRUWORTHS OFFICE

Clothing and accessories 89% Footwear 11% South Africa 95% Rest of Africa 5% Footwear 100% Clothing and accessories 65% Footwear 35% United Kingdom 88% Rest of Europe 12% South Africa 80% Rest of Africa 4% UK and Europe 16% 813 813 stores 156 156 stores 969 969 stores

PRODUCT MIX STORE LOCATIONS

GROUP

R13 115 m R4 848 m R17 963 m

20 20

GROUP CASH FLOWS

(Rm)

*Earnings before interest, tax, depreciation and amortisation.

777 (2 179) (1 402) 2 965 172 1 425 8 (244) (855) (86) 3 385 (1 925) (399) (161) (123) (2 000) (1 000)

• 1 000

2 000 3 000 4 000 5 000

EBITDA* Working capital movement Interest received Dividends received Finance costs Tax paid Capex maintenance Free cash flow Dividends Capex expand Net shares scheme buy-backs Other Cash flow before financing Net borrowings repaid Net cash decrease

Cash realisation rate of 109%

21 21

GROUP CASH REALISATION RATE

(%) %) 96 80 89 91 109 109

• 20

40 60 80 100 120 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Cash realisation rate

22 22 22 22

F I N A N C I A L R E V I E W

I I . T R U W O R T H S

2

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David P Pfaff (5 (53)

BCom, CA (SA), Dip Soc (Oxon) COO a and CFO

Sarah Proudfoot (5 (50)

National Diploma in Clothing Design Director: : Merchandise Ladiesware

Doug D Dare (5 (57)

BBus Sc Executive Director: : Buying and Merchandising

Sean F Furlong (5 (57)

Diploma in Marketing Management Director: : Planning and Logistics

TRUWORTHS EXECUTIVE LEADERSHIP

Michael M Mark (6 (65)

BCom, MBA, ACMA Chief Executive Officer

24 24

David P Pfaff (5 (53)

BCom, CA (SA), Dip Soc (Oxon) COO a and CFO

TRUWORTHS EXECUTIVE LEADERSHIP (CONTINUED)

Company Secretarial Store Retail Operations Information Systems Credit Operations Legal Internal Audit Risk and Analytics Finance

25 25

Doug D Dare (5 (57)

BBus Sc Executive Director: : Buying and Merchandising

TRUWORTHS EXECUTIVE LEADERSHIP (CONTINUED)

International Sourcing Menswear Homeware Marketing Menswear Quality Assurance Truworths Manufacturing Kids

26 26

Sean F Furlong (5 (57)

Diploma in Marketing Management Director: : Planning and Logistics

TRUWORTHS EXECUTIVE LEADERSHIP (CONTINUED)

Project Office Distribution and Logistics Merchandise Planning

27 27

Sarah Proudfoot (5 (50)

National Diploma in Clothing Design Director: : Merchandise Ladiesware

TRUWORTHS EXECUTIVE LEADERSHIP (CONTINUED)

Truworths Ladieswear Ladieswear Fashion Studio Marketing Ladieswear Identity Ladieswear

28 28

• Retail sales up 1% relative to the comparable prior period.
• Gross margin improved to 55.5% from 55.2%.
• Expense containment, down 2% (2017: up 9%).
• Trading profit up 9%* relative to the comparable prior period.
• Strong cash generation and reduction in debt due to funding restructure.
• Truworths account metrics improving.
• Documentary requirements rescinded after High Court ruling in favour of credit retailers.
• Acquired Loads of Living.
• Opened 13 'Office London' SA stores.
• Launched sophisticated new e-commerce site.
• Successfully trialled lay-bys.

TRUWORTHS FINANCIAL REVIEW

* Up 3% excluding foreign exchange gains and losses in current and prior period.

29 29

TRUWORTHS FINANCIAL PERFORMANCE

Jun 2018 52 weeks Jun 2017 52 weeks Change on prior period 52 on 52 weeks Jun 2017 53 weeks Change on prior period 52 on 53 weeks Sale of merchandise (Rm) 12 617 12 526 0.7% 12 907 (2.2%) Gross margin 55.5 .5% 55.2% 55.2% Trading profit (Rm) 2 2 240 240 2 055 9.0%* 2 262 (1.0%) Trading margin 17.8 .8% 16.4% 17.5% Operating profit (Rm) 3 3 667 667 3 555 3.2% 3 763 (2.6%) Operating margin 29.1 .1% 28.4% 29.2%

* Up 3% excluding foreign exchange gains and losses in current and prior period.

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• In the 2017 financial period the end-of-season sale commenced in the last (53rd) week, which was

not the case in the 2018 financial period.

• Adjusted for the estimated sales that could have been generated in the 52nd week of the 2018 period

had the end-of-season sale commenced in that week, the following growths would have been reported:

TRUWORTHS PERFORMANCE IMPACTED BY TIMING OF END-OF-SEASON SALE

Adjusted results Reported results Profit after tax: 2018 52 weeks vs 2017 52 weeks 5.8% 4.1% Profit after tax 2018 52 weeks vs 2017 53 weeks (0.4%) (1.9%)

Note: This is pro forma information prepared for illustrative purposes only, has not been subject to any independent auditor review and is the responsibility of management.

31 31

TRUWORTHS RETAIL SALES GROWTH ANALYSIS

Retail sales Rm Retail sales growth % LFL store growth % Product inflation % Unit growth: Comp stores % Unit growth: Non-comp stores % Jun 2018 52 weeks* 13 115 1 (3 (3) (1 (1) (2 (2) 4 Jun 2017 52 weeks# 13 061 (2) (5) 12 (17) 3 Jun 2016 52 weeks 13 264 14 7 9 (2) 7 Jun 2015 52 weeks 11 644 8 1 6 (5) 7 Jun 2014 52 weeks 10 762 7 1 9 (8) 6

*Compared to weeks 2 to 53 of the 2017 financial period.

# Jun 2017 retail sales weeks 1 to 52.

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TRUWORTHS MERCHANDISE INFLATION TREND

Inflation (%) %) (2)

• 2

4 6 8 10 12 14 16 2012 Summer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 2015 Winter 2015 Summer 2016 Winter 2016 Summer 2017 Winter 2017 Summer 2018 Winter 2018 Summer

33 33

TRUWORTHS DIVISIONAL RETAIL SALES

Jun 2 2018 52 w weeks Rm Rm Jun 2017 52 weeks Rm Change on prior period 52 on 52 weeks % Jun 2017 53 weeks Rm Change on prior period 52 on 53 weeks % Truworths ladieswear 3 7 753 3 860 (3) 3 988 (6) Truworths designer emporium 1 3 383 1 396 (1) 1 436 (4) Truworths ladieswear emporium 5 1 136 5 256 (2) 5 424 (5) Truworths menswear 3 6 663 3 656

• 3 759

(3) Truworths kids emporium 925 925 872 6 896 3 Other 1 3 309 1 159 13 1 183 11 Truworths emporium 11 0 033 10 943 1 11 2 262 (2 (2) Identity 2 0 082 2 067 1 2 129 (2) Truworths retail sales 13 1 115 13 010 1 13 3 391 (2 (2) YDE agency sales 254 254 271 (6) 278 (9)

Note: Truworths divisional retail sales based on new internal department structure.

34 34

TRUWORTHS TRADING SPACE

Jun 2018 2018 ‘000 m2 Jun 2017 ‘000 m2 Truworths 290 290 284 Identity 70 70 69 Uzzi 4 4 Earthchild and Earthaddict 3 3 Naartjie 2 2 Office London 1

• Total excluding YDE and Loads of Living

370 370 362 YDE 7 7 Loads of Living 4

• Total

381 381 369 369 3.3 .3% 1.6 .6%

Growth on prior period

Excluding Loads of Living, trading space grew by 2.2%.

2.2 .2%

35 35

TRUWORTHS NUMBER OF RETAIL LOCATIONS

Stores Jun Jun 18 18 Departments within s stores Total locations Stores Jun 17 Departments within stores Total locations Truworths 346

• 346

346 344

• 344

Identity 255

• 255

255 248

• 248

Uzzi 48 233 281 281 52 217 269 Earthaddict 18 34 52 52 18 27 45 Earthchild 29 56 85 85 31 42 73 Truworths Man 37 311 348 348 37 314 351 Naartjie 26 49 75 75 27 38 65 YDE 21

• 21

21 21

• 21

Loads of Living 13

• 13

13

• Office London

13

• 13

13

• Daniel Hechter

3 327 330 330 3 349 352 LTD 2 223 225 225 2 211 213 Ginger Mary 2 291 293 293 2 281 283

36 36

TRUWORTHS CHANGE IN NUMBER OF STORES

Jun 2017 New brands Stores closed New stores

• pened

Jun Jun 2018 2018 Truworths 344

• (5)

7 346 346 Identity 248

• (5)

12 255 255 Uzzi 52

• (4)
• 48

48 Earthchild and Earthaddict 43

• (2)
• 41

41 Truworths Man 37

• 37

37 Naartjie 27

• (1)
• 26

26 YDE 21

• (1)

1 21 21 Loads of Living

• 13
• 13

13 Office London

• 13
• 13

13 Naartjie and Earthchild 2

• 2

4 Daniel Hechter 3

• 3

LTD 2

• 2

Ginger Mary 2

• 2

Kids Emporium

• 2

2 Total 781 781 26 26 (1 (18) 24 24 813 813

Net 6 stores opened in 2018.

37 37

TRUWORTHS REST OF AFRICA CORPORATE STORES

Retail s sales Jun 2 2018 52 w weeks Rm Rm Retail s sales Jun Jun 2017 2017 52 w weeks Rm Change o

• n

prior period 52 o

• n 5

52 weeks % Retail sales Jun 18 52 weeks Local currency millions Retail sales Jun 2017 52 weeks Local currency millions Change on prior period 52

• n 52 weeks

Local currency % Number of stores Jun Jun 2018 2018 Number of stores Jun 2017 Namibia 204 204 213 213 (4 (4) 204 213 (4) 18 18 17 Botswana 100 100 93 93 8 8 78 72 8 8 8 Swaziland 94 94 92 92 2 94 92 2 5 5 Zambia 29 29 31 31 (6 (6) 22 22

• 3

3 7 Lesotho 23 23 20 20 15 15 23 20 15 2 2 Mauritius 21 21 20 20 5 55 52 6 2 2 Kenya 9 9

• 73

66 11 2 2 Ghana* 8 21 21 (6 (62) ) 3 7 (57)

• 4

Total 488 488 499 499 (2 (2) 40 47 47

* The Ghana stores ceased trading on 3 December 2017.

38 38

TRUWORTHS SALES DENSITIES TREND

Compound growth rates: Sales density: Jun: 5-year (0.2%), 3-year 0.4% R per m2 29 307 30 462 32 979 34 849 35 656 34 586 34 857 37 350 36 317* 35,256 10 000 15 000 20 000 25 000 30 000 35 000 40 000 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018

* Based on 2017 52-week sales.

39 39

TRUWORTHS GROSS PROFIT TREND

Gross profit (Rbn) Gross margin (%) %) Compound growth rates: Gross profit: Jun: 5-year 5%, 3-year 4% Average: Gross margin: Jun: 5-year 55.4%, 3-year 55.3% 5.8 6.2 7.1 7.1 7.0 55.9 55.2 55.3 55.2 55.5 50 51 52 53 54 55 56 57

• 1

2 3 4 5 6 7 8 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Gross profit Gross margin

40 40

TRUWORTHS ANALYSIS OF TRADING EXPENSES

Jun 18 18 Rm Rm Jun 17 Rm Change on prior period % Depreciation and amortisation 289 289 277 4 Employment costs 1 4 474 1 438 3 Occupancy costs 1 1 462 462 1 361 7 Trade receivable costs 1 1 099 099 1 207 (9) Other operating costs 720 720 875 (18)* Trading expenses 5 5 044 044 5 1 158 (2 (2) )

* 4% decrease excluding forex gains in 2018 (R29 million) and forex losses in 2017 (R93 million).

41 41

Depreciation and amortisation

• Excluding non-comparable stores, depreciation and amortisation unchanged.

Employment c costs

• Excluding non-comparable stores and other non-comparable costs,

employment costs increased by 1% (June 2017: 5%). Occupancy c costs

• A net 32 stores were added during 2018 as trading space grew by 3.3%

(space growth excluding Loads of Living 2.2%).

• Comparable store rentals increased by 5%.

TRUWORTHS ANALYSIS OF TRADING EXPENSES (CONTINUED) 4%

growth

7%

growth

3%

growth

42 42

Trade receivable costs

• Doubtful debt allowance decreased to 12.3% from 12.7% in 2017.
• Gross bad debt decreased by 2% compared to the prior period and recoveries

increased by 13%.

• Interest income of R1.29 billion earned on the debtors book during the period, down

from R 1.37 billion due to interest rate reductions and a decline in the book.

• Net cost of the book showed surplus of R71 million (2017: R41 million surplus).

Other operating costs

• Excluding foreign exchange, other operating costs decreased by 4%.
• Decrease attributable to ongoing cost containment efforts.
• Foreign exchange gains of R29 million (2017: R93 million losses).

TRUWORTHS ANALYSIS OF TRADING EXPENSES (CONTINUED) 9%

decrease

43 43

TRUWORTHS OPERATING PROFIT PERFORMANCE

Compound growth rates: Operating profit: Jun: 5-year 1.1%, 3-year 1.9% Average: EBITDA margin: Jun: 5-year 32.2%, 3-year 31.7% Average: Operating margin: Jun: 5-year 30.4%, 3-year 29.7% Operating profit (Rbn) Margins (%) %) 3.4 3.4 4.0 3.8 3.6 34 32 33 31 31 31 32 31 31 29 29 29

• 5

10 15 20 25 30 35 40

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Operating profit EBITDA margin Operating margin

44 44

TRUWORTHS CAPITAL EXPENDITURE

Jun 2019 Committed Rm Jun 2018 Actual Rm Rm Jun 2017 Actual Rm Change on prior period % Store renovations and development 355 320 320 335 (4) Computer infrastructure and software 102 59 59 56 5 Land, buildings and refurbishments* 150 31 31 13 138 Distribution facilities 12 5 1 400 Motor vehicles 7 4 2 100

Total 626

419 419 407 407 3

* Increase 2019 due to refurbishment of additional offices and parking.

45 45

TRUWORTHS CASH FLOW ANALYSIS

(Rm)

*Earnings before interest, tax, depreciation and amortisation.

543 2 585 174 1 423 8 (223) (797) (77) 3 093 (1 925) (342) (161) (122) (1 800) (1 (1 2 257) (2 000) (1 000)

• 1 000

2 000 3 000 4 000 5 000

EBITDA* Working capital movement Interest received Dividends received Finance costs Tax paid Capex maintenance Free cash flow Dividends Capex expand Net share scheme buy-backs Other Cash flow before financing Net borrowings repaid Net cash increase

46 46

TRUWORTHS CASH REALISATION RATE

96 80 83 84 110 110

• 20

40 60 80 100 120 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Cash realisation rate (%) %)

47 47 47 47

F I N A N C I A L R E V I E W

I I I . O F F I C E

2

48 48

David P Pfaff (5 (53)

BCom, CA (SA), Dip Soc (Oxon) Director

Jonathan Kutner (4 (45)

BA (Hons) Politics and Government Merchandising Director

Kerry van d der Merwe (4 (42)

BAccSci (Hons), CA (SA) Finance Director

Rob W Worthington (5 (53)

BSc (Hons) Psychology Multi Channel Director

OFFICE LEADERSHIP

Michael M Mark (6 (65)

BCom, MBA, ACMA Chairman

Brian McCluskey (5 (56)

CA Chief Executive Officer

Ghassan Hodeib (4 (46)

Buying Director

49 49

• Retail sales decreased by 2.5% on a comparable basis.
• Decrease in gross margin from 46.0% to 44.4%, led by:

– A greater proportion of sales on mark-down merchandise as opposed to full price. – A reduction in the margin of Made to Order (MTO) product (primarily in the first half of the year). – A shift in sports brand product sales mix towards lower margin sports brands.

• E-commerce sales contribute 31% of retail sales (2017: 28%).
• Inventory turn of 3.2 times, with improvement in age profile of stock.
• Trading expenses down 1% (2017: down 3%).
• Cash generated from operations at £22.0 million.
• Interest-bearing borrowings reduced from £69.3 million to £48.8 million due to scheduled and

additional loan repayments. Finance costs reduced from £2.4 million to £1.6 million.

• Net debt to equity reduced to 10% at June 2018 (2017: 18%).

OFFICE FINANCIAL REVIEW

50 50

OFFICE FINANCIAL PERFORMANCE

Jun 2018 52 weeks Jun 2017 52 weeks Change on prior period 52 on 52 weeks Jun 2017 53 weeks Change on prior period 52 on 53 weeks Sale of merchandise (£m) 286 286 293 (2%) 299 (4%) Gross margin 44.4 .4% 46.0% 46.0% EBITDA (£m) 21.8 .8 30.3 (28%) 32.3 (33%) Operating profit (£m) 16.1 .1 23.8 (32%) 25.9 (38%) Operating margin 5.6 .6% 8.1% 8.7%

51 51

OFFICE RETAIL SALES BY COUNTRY

Retail sales Jun 2018 52 52 weeks £m £m Retail sales Jun 2017 2017 52 52 weeks £m £m Retail sales Jun 2017 53 weeks £m Number

• f s

stores Jun 2018 Number of stores 2017 United Kingdom 257 257 264 264 270 138 138 138 Germany 13 13 14 14 14 8 8 Republic of Ireland 10 10 9 9 7 7 United States 1 1 1 3 3 Total 281 281 288 288 294 156 156* 156*

* Includes 40 concession stores (2017: 38)

52 52

OFFICE TRADING EXPENSES

Jun 2018 2018 £m £m Jun 2017 £m Change on prior period % Depreciation and amortisation 5.6 .6 6.5 (14) Employment costs 37.0 .0 38.0 (3) Occupancy costs 45.1 .1 45.9 (2) Other operating costs 23.5 .5 21.5 9 Trading expenses 111.2 .2 111.9 .9 (1 (1)

53 53

Depreciation and amortisation

• Lower capital expenditure over the last two financial years.

Employment costs

• Lower sales commissions and bonuses and reduction of store hours.

Occupancy costs

• Lower stand-alone store rent resulting from four stand-alone store closures.
• Lower onerous lease charge in current period.

Other operating costs

• Excluding non-comparable once-off items in the current and prior periods, other operating costs

increased by 5% (£1.0 million).

• E-commerce related promotion and fulfilment expenses increased by 5% (£0.8 million) as a result
• f a 5% increase in e-commerce sales.

OFFICE ANALYSIS OF TRADING EXPENSES 14%

decrease

3%

decrease

2%

decrease

9%

increase

54 54

OFFICE CASH FLOW ANALYSIS

(£’000)

*Earnings before interest, tax, depreciation and amortisation.

Cash generated from operating activities since acquisition of £67.5 million

21 693 327 70 (1 232) (3 234) (465) 17 159 (3 157) (62) 13 940 (20 929) (6 989) (10 000) (5 000)

• 5 000

10 000 15 000 20 000 25 000 EBITDA* Working capital movement Interest received Finance costs Tax paid Capex maintenance Free cash flow Capex expand Other Cash before financing Net borrowings repaid Net decrease for the period

55 55 55 55

A C C O U N T M A N A G E M E N T T R U W O R T H S

3

56 56

• South African credit environment has improved.
• Demand for Truworths accounts is increasing with over 2 million applications in 2018

financial period.

• Over 50% of applications customers under the age of 30.
• Percentage of applications opened improved to 25%.
• Consistent account assessment risk criteria applied.
• Sales from new accounts show strong growth.
• Good growth in shoppable accounts.
• A sustained period of improved collections has resulted in the book having the highest

percentage current accounts since 2011.

• Reduction in bad debts.
• Provision percentage to balance has improved on prior period.

TRUWORTHS ACCOUNTS – OVERVIEW

57 57

TRANSUNION – SA CONSUMER CREDIT INDEX

The TransUnion SA SA Consumer Credit Index (CCI) rose yet again in in Q1 2018 2018 to to 56 56 from 55 55 (preliminary 54 54) Improving credit health can no longer be considered marginal or temporary, with the index moving well into the 50s, suggesting notable

• improvement. Is this corroborated by other consumer-relevant data?

Broadly, yes. Retail and wholesale volumes improved in Q1 2018 according to Stats SA, as did business and consumer confidence according to BER and SACCI. The number of consumer accounts measured increased from 53.8 to 54 million, reinforcing a turnaround from a declining trend. New accounts in in default (3 months in arrears) fell 8.3% y/y in Q1, the largest recorded decline in 3-month arrear accounts since 2011. Household cash flow improved 2.2% y/y. Household debt service costs (South African Reserve Bank data) continued declining as the prime lending rate declined by 25 basis points during the quarter. Distressed borrowing (credit cards and store cards) revolving credit utilisation increased during the quarter.

35 40 45 50 55 60 65

Consumer credit index at highest level since 2011

53

Q1 2 2017

55

Q4 2 2017

56

Q1 2 2018

Source: TransUnion

58 58

724 941 1,222 1,306 1,520 1,659 1,790 1,993 1,740 2,088

• 500

1,000 1,500 2,000 2,500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

• No. of applications

TRUWORTHS ACCOUNTS – NEW ACCOUNT APPLICATIONS

(‘000)

Demand f for Truworths’ accounts/product is strong as evidenced by volume

• f n

new a account a applications e exceeding 2 m million for the f first time.

59 59

TRUWORTHS ACCOUNTS – NEW ACCOUNT APPLICATIONS

• 5

10 15 20 25 30 18 to 24 25 to 29 30 to 34 35 to 39 40 to 49 50+ Age distribution % (%) %)

Truworths appeals t to t the young market as ± 50 50% % of account applicants are u under 3 30 a and ± 25% % are u under 2 25.

60 60

• 5

10 15 20 25 30 35 40 45 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Risk approved

TRUWORTHS ACCOUNTS – RISK APPROVAL CRITERIA

Strict account r risk a approval criteria maintained.

(%) %)

61 61

TRUWORTHS ACCOUNTS – NEW ACCOUNT OPENINGS

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2018

Court ruling

After c court r ruling account openings have improved – average number o

• f accounts o
• pened per m

month increased b by 9,0 ,000.

• No. of

accounts

62 62

TRUWORTHS ACCOUNTS – ACCOUNT SALES GROWTHS

Accounts sales growth year-on-year Months on book 2012 % 2013 % 2014 % 2015 % 2016 % 2017 % 2018 2018 % 1 – 12 months 27 (4) (8) 14 11 (24) 21 21 13 – 24 months 16 26 (2) (7) 15 6 (2 (24) 25 – 36 months 12 16 24 (3) (3) 9 3 36+months 9 12 10 11 14 4 1

Positive for future

63 63

TRUWORTHS ACCOUNTS – SHOPPABLE ACCOUNTS

• No. of accounts

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 - Shoppable 2018 - Shoppable Jul 2017: 74k fewer able to shop Jun 2018: 74k more able to shop

64 64

TRUWORTHS ACCOUNTS – % OF BOOK BALANCE 4+ CYCLES DELINQUENT

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Industry Excl. Truworths Truworths GROUP

5% i % improvement i in the percent of a accounts 4 4+ + cycles d delinquent L LY 1 14% % TY13%

Source: Principa

65 65

• Sustained period of improved collections across all delinquency levels.
• Improved roll-rates indicative of improvement in quality of the portfolio.
• Consequential reduction in provision percentage to balance.
• Reduction in charge-off.
• Improvement in recoveries.

TRUWORTHS ACCOUNTS – COLLECTIONS

66 66

TRUWORTHS ACCOUNTS – STATISTICS

Jun 2018 2018 Jun 2017 Number of active accounts (000's) 2 5 591 2 542 Change in number of active accounts (%) 2 2 (4) Gross trade receivables (before doubtful debt allowance) (Rm) 5 6 663 5 838 Change in gross trade receivables (before doubtful debt allowance) (%) (3 (3) - Account sales as a % of retail sales (%) 69 69 70 Qualifying payment (%) 90 90 90 Accounts opened to applications ratio (%) 25 25 24

67 67

TRUWORTHS ACCOUNTS – STATISTICS (CONTINUED)

Jun 2018 2018 Jun 2017 Active account holders able to purchase at period-end (i.e. not in arrears) (%) 84 84 82 Overdue accounts as a % of gross trade receivables (%) 14 14 14 Net bad debt as a % of account sales (%) 9.2 .2 9.4 Net bad debt as a % of gross trade receivables (%) 14.7 .7 15.0 Doubtful debt allowance as a % of gross trade receivables (%) 12.3 .3 12.7 Trade receivable interest as a % of gross trade receivables (%) 22.7 .7 23.4

68 68

TRUWORTHS ACCOUNTS – INCOME VS. COSTS

(Rm) 577 522 581 674 785 887 1036 1273 1426 1349 1349 516 487 503 648 877 1082 1110 1277 1385 1278 1278

• 200

400 600 800 1 000 1 200 1 400 1 600 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Income Costs

69 69

• National Credit Amendment Bill

– Bill proposes, inter alia, debt relief for over-indebted consumers who earn less than R7 500 per month and have unsecured debt of less than R50 000. – These consumers will be able to apply to the National Credit Regulator(NCR) for debt intervention and follow a process to have their applications assessed first by the NCR and secondly the recommendations of the NCR assessed by the National Consumer Tribunal as to whether the debt should be re-arranged or be granted debt intervention. – The bill has met broad opposition and Truworths is using all available avenues to respond and comment on both via the National Clothing Retail Federation of South Africa and individually. – Due to uncertainty on how the bill will be implemented it is premature to comment on its potential impact.

• Doubtful debt allowance – IFRS 9

– Doubtful debt allowance under IFRS 9 likely to increase due to recognition of life-time expected losses. – This adjustment does not affect our credit strategy design process as these always considered the life-time provision. – The increase in the allowance on transition in FY19 will be adjusted through retained earnings.

TRUWORTHS ACCOUNTS – REGULATIONS AND ACCOUNTING STANDARDS

70 70 70 70

S T R A T E G I C F O C U S A R E A S

4

71 71

Truworths believe, as highlighted by leading apparel retail studies that:

• The predicted death of bricks and mortar retail stores at the hands of e-commerce has been

exaggerated.

• Studies have shown that omnichannel shoppers (online and in-store) are the most valuable

customers.

• Opening a new store today involves more focus on overall customer engagement and experience.
• Stores are no longer venues for merchandise selling, but are rather the locus of consumer

engagement, across all channels.

• Sophisticated retailers have systems that assign orders for fulfilment to the warehouse or to stores

based on a variety of analytical factors.

STRATEGIC FOCUS AREAS – THE FUTURE OF RETAIL

Extracts from: The Apparel Top 50 for 2018: Brick and Mortar and Digital Closing the Gap.

72 72

• The role of the store has changed significantly.

– Roughly 90 % of shopping is still done in a physical store and store is now just one stop along a customer’s journey through online sites and social media.

• The physical store has moved from a place of purchase to a place of brand experience.

– Artificial intelligence is becoming the core engine to drive change faster.

• E-commerce has obviously placed new pressures and expense on apparel companies, up and down

the supply chain. (In areas of logistics, fulfillment and returns).

• Increasingly, apparel companies are addressing the returns problem on the front end with sizing

algorithms, and on the back-end with better processes and technology.

STRATEGIC FOCUS AREAS – THE FUTURE OF RETAIL

Extracts from: The Apparel Top 50 for 2018: Brick and Mortar and Digital Closing the Gap.

73 73

Selected comments b by former C CEO o

• f J. C

Crew M Millard 'Mickey' Drexler re h his views on bricks and mortar retail:

• Drexler defended the legitimacy of physical retail for “bringing products to life”.
• Drugstores and retailers focused on commodities are headed for “major disruption”.
• Firmly believes physical stores have their place in the world. “I’m always looking for the unique and

the surprise, and things out there that are exciting. You can’t do that without a store. It’s a canvas to paint on. A store does bring to life the product. It brings to life a story. I think they have a place to stay”.

STRATEGIC FOCUS AREAS – THE FUTURE OF RETAIL

Extracts from talk by Mickey Drexler (ex CEO of J. Crew) at Retail Radicals forum at Columbia University.

74 74

STRATEGIC FOCUS AREAS

Group focus areas

• Truworths and Office continue to collaborate
• Investigate strategic acquisitions

Truworths focus areas

• Expand e-commerce
• New store concept
• Introduce lay-bys
• Supply chain

Office focus areas

• Office DNA
• New store formats
• Marketing, customer engagement and loyalty
• Expansion and growth of e-commerce

75 75

STRATEGIC FOCUS AREAS – TRUWORTHS E-COMMERCE

• New Truworths website launched February 2018.
• Profitable from day 1.
• Turnover equivalent of a mid-sized store.
• Office London live September 2018.
• Cosmetics and fragrances live before peak-trade.
• Fashion Finder will be launched in early 2019 to deliver a broader omni-channel experience.
• Loads of Living to be live before year ended June 2019.
• Identity next financial period.

76 76

STRATEGIC FOCUS AREAS – TRUWORTHS STORES

New s store concept:

• ‘Context’: An EXPERIENTIAL concept store by TRUWORTHS

– Flexible space of thoughtfully chosen sophisticated designer ladies fashion, fragrance and cosmetic beauty brands as well as homeware. – Curate our product offering and the manner in which we present it. – Two free standing stores planned to open in the 3rd/4th quarter of the 2019 financial year.

77 77

STRATEGIC FOCUS AREAS – TRUWORTHS LAY-BYS

Customer selected merchandise is set aside until the customer has fully paid off the item over 3

• months. This gives non-account customers, who are unable to pay up-front, access to Truworths

merchandise.

• Pilot has been running since October 2017.
• Encouraging results, with sales lifts of approximately 2%.
• Roll-out to all stores to be completed before festive trade 2018.

78 78

STRATEGIC FOCUS AREAS – TRUWORTHS SUPPLY CHAIN

• A large portion of the range is imported due to either price or manufacturing capabilities that cannot

be produced viably in South Africa.

– Both fabric and actual styling is in this case committed from 19 weeks prior to delivery.

• Local production is continuing to grow.

– Only commit to fabric and production capacity from 19 weeks prior to delivery. – Finalisation of the actual style is usually done 8+ weeks prior to delivery.

• The Quick Response initiative is continuing to grow.

– Fabric and production capacities are committed to 19 weeks prior to delivery. – Tests are performed early in the season and future styling is adapted to quickly get into ‘best sellers’. – Finalisation of colour and styling is done 4+ weeks prior to delivery.

• Another focus is our ‘Fast Fashion’ initiative.

– Commit to strategic fabric and production capacity 19 weeks prior to delivery. – Final styling, based on latest trends, is then committed to as low as 4 but usually about 8-10 weeks prior to delivery.

• Seasonal replenishment styles

– Replenishment style is ordered and delivered within 3 or 4 weeks.

79 79

STRATEGIC FOCUS AREAS – TRUWORTHS

• Service Obsessed A

Approach to C Customer – Service obsessed brand ambassadors – across all shopping mediums, an exceptional shopping experience, brand loyalty.

• Data-driven decision-making – Intelligent use of customer data – enhance customer-centricity.
• Integrated brand m

marketing – Consistent brand image for the emporium and constituent brands.

• Expansion of new brands – Loads of Living and Office London.

— Refine Loads of Living product offering and test new store concept. — Continue the roll-out of Office London stores.

80 80

• Business Philosophy and DNA

– Rolled out across the business and now incorporated into annual staff assessments.

• New store design

– Store design concept further refined after initial roll out to Arndale Manchester, Oxford and Bracknell. – 'Store of the future' concept is currently being developed with initial roll out planned for January 2019.

• Product and planning methodology and systems

STRATEGIC FOCUS AREAS – OFFICE OTHER AREAS

81 81 81 81

O U T L O O K

5

82 82

GROUP TARGETS 2019

Jun 2019 2019 Target 52 weeks Jun 2018 Actual 52 weeks Gross margin 51% % – 55% % 52.4% Operating margin 19% % – 24% 24% 22.5% Return on equity 23% % – 28% 28% 27% Return on assets 20% % – 25% 25% 25% Inventory turn 3.5 .5 – 4.5 .5 t times 4.0 times Asset turnover 0.9 .9 – 1.3 .3 t times 1.1 times

83 83

Retail sales for the first 6 weeks of the 2019 financial period.

• Continued pressure on consumers – low GDP growth, high unemployment and rising cost of living.
• Political uncertainty, consumer confidence and EM pressure remain obstacles for growth.
• Focused on strategic initiatives to mitigate pressures in the external environment.
• Lay-bys, e-commerce, roll-out of Loads of Living, new store concepts and products expected to

contribute.

• Improved debtors metrics a positive indicator for future sales.
• Inflationary outlook low at 0% for July to December 2018 (Summer 2018).
• Space growth for 2019 and 2020 at 2.5% and 1.5% respectively.
• Net new stores of 10 as 2019 will see the closure of 24 under-performing stores.

TRUWORTHS – OUTLOOK 11%*

increase

* Not directly comparable to the first 6 weeks of the prior period due to the shift in the start of the end-of-season sale.

84 84

• Brexit negotiations uncertainty will continue to negatively impact the trading environment.
• Stable inflation, better employment growth and wage inflation positive for UK household disposable

income.

• Improved ranges and product mix expected to address margin decline.
• Excellently positioned for growing online and mobile retail.
• Improved in-store experience aimed at attracting in-store customers.
• Marketing, customer engagement and loyalty initiatives to attract and retain customers and to

improve experience.

OFFICE – OUTLOOK

Retail sales for the first 6 weeks of the 2019 financial period.

3%

increase

85 85

6

Q U E S T I O N S

86 86

This presentation contains certain forward-looking statements with respect to the financial condition and results of operations of Truworths International Limited and its group companies, which by their nature involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: global and national economic conditions; growth in trading space; interest rates; credit and the associated risks of lending; merchandise clearance rates; inventory levels and stock turn; gross and operating margins achieved; and competitive and regulatory factors. The Group does not undertake to publicly update or revise any of these forward- looking statements, whether to reflect new information or future events or otherwise.

DISCLAIMER