ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH 2012 1 | TFG ANALYST PRESENTATION MARCH 2012
AGENDA • Overview of the economy and retail environment Doug Murray • Review of the year Doug Murray • Financial review Ronnie Stein • Divisional review Doug Murray • Financial services Peter Meiring • Outlook Doug Murray • Questions All 2 | TFG ANALYST PRESENTATION MARCH 2012
OVERVIEW OF THE OVERVIEW OF THE ECONOMY ECONOMY AND RETAIL AND RETAIL ENVIRONMENT ENVIRONMENT 3 | TFG ANALYST PRESENTATION MARCH 2012
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT • The outlook for the global economy remains highly uncertain. After improving in the early stages of 2012, more recent events in Europe have created greater uncertainty. • South Africa, with its open economy, is not escaping the uncomfortable international situation and the global growth environment will now be less supportive of domestic growth than was expected towards the end of 2011 and early 2012 • As a result, the BER have left unchanged their GDP forecast (Apr 2012) at 2,8% in 2012 and 3,6% in 2013 • Interest rates are expected to remain unchanged through 2012 • Inflation has risen from its low point in Sept 2010 (of 3,2%) and is currently projected to remain above 6% for 2012 whilst easing to 5,8% during 2013 • After averaging R6,90 / $ in the 1 st half of 2011, the Rand depreciated significantly in the 2 nd half of 2011. Improved global sentiment initially saw the Rand recover this year, only to depreciate again since mid-May • Although real wage increases are still evident in many sectors, rising food, fuel and electricity prices are eroding consumers‟ purchasing power • Overall household consumption expenditure is projected to slow to 3,4% in 2012 (from 4,9% in 2011) before rebounding to a sturdier 4,3% in 2013 4 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR 5 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR • Our group trades predominantly in the mass-middle market space and our customers have benefited from an environment driven by • Continued low interest rates • Real wage increases • Low inflation environment, albeit rising • Continue to reap benefits of our strategic initiatives: • Supply chain • CRM – growth in active account base and rewards programme launched • Driving top-line growth – pricing efficiencies passed on to customers • Opening of new stores – 150 stores were opened (20 closed) • RCS Group: • Performed well • DMTN programme continues to be successful (at year-end R1 billion surplus funding available to support future growth) • Intention to separately list RCS in the future 6 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR CONT. • New brands / acquisitions: • Upmarket luxury menswear brand Fabiani acquired effective 1 October 2011 • As a consequence thereof, the 2 G-Star franchise stores in South Africa were acquired with effect from April 2012, with rights to roll out further stores • As part of the group‟s supply chain initiatives, Prestige Clothing acquired with effect from 1 March 2012 – will enable the group to meet the increased demands for seasonal fast-fashion merchandise • 1 st Charles & Keith store opened in August 2011 • Strong market share gains in all merchandise categories 7 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR CONT. • Group turnover up 17,0% to R11,6 billion • Headline earnings per share up 22,1% to 772,0 cents • Diluted headline earnings per share up 23,6% to 766,1 cents • Operating margin increased to 24,0% from 23,2% • Dividend • final dividend increased by 25,0% to 265,0 cents per share • total dividend for the year increased by 30,0% to 455,0 cents per share • 580k new accounts opened, with active accounts growing by 8,2% • Net bad debt as a percentage of closing debtors‟ book at 9,4% (last year 9,2%) • Recourse gearing of 14,8% 8 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR: RETAIL TURNOVER BY MERCHANDISE CATEGORY 2012 2011 2012 same store (Rm) (Rm) 2012 growth growth 7 747,9 6 550,9 Clothing 18,3% 11,3% 1 224,3 1 134,2 Jewellery 7,9% 2,6% 1 109,1 894,8 Cellphones 23,9% 18,5% 747,7 677,6 Cosmetics 10,3% 5,6% 801,5 679,0 Homeware & furniture 18,0% 13,5% 11 630,5 9 936,5 Total 17,0% 10,6% • All merchandise categories continued to perform well, gaining market share in all categories, particularly our largest product category, clothing • Jewellery, being a more discretionary commodity, traded satisfactorily taking into account the substantial increase in the gold price • Homewares & furniture produced very good results • Product inflation for the year of approximately 6% 9 | TFG ANALYST PRESENTATION MARCH 2012
REVIEW OF THE YEAR: RLC COMPARISON TFG vs RLC moving average clothing turnover growth TFG 25.0 RLC 20.0 15.0 10.0 5.0 0.0 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Apr-11 Mar-12 TFG 18,4 % TFG 19,7 % RLC 10,7 % RLC 9,5 % • TFG figures include clothing turnover of the following divisions: Foschini, Markham and Exact • Apparel turnover in TFG Sports division not included • Significant outperformance of the general market 10 | TFG ANALYST PRESENTATION MARCH 2012
FINANCIAL REVIEW 11 | TFG ANALYST PRESENTATION MARCH 2012
FINANCIAL PERFORMANCE SINCE 2002 Years ended 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Retail turnover (Rm) 3 289,9 3 880,6 4 410,0 5 279,3 6 432,1 7 230,0 7 668,7 8 089,6 8 605,2 9 936,5 11 630,5 Retail turnover growth % 10,4 18,0 13,6 19,7 21,8 12,4 6,1 5,5 6,4 15,5 17,0 Compound retail turnover growth % 15,9 14,5 13,7 12,5 12,8 13,2 Operating profit before finance charges(Rm) 348,5 582,0 814,6 1 204,8 1 567,3 1 887,0 1 905,5 2 025,5 1 972,6 2 301,2 2 786,5 Headline earnings per share (cents) 87,9 162,2 237,1 359,6 463,0 534,2 547,0 559,5 521,4 632,3 772,0 HEPS % change 75,4 84,5 46,2 51,7 28,8 15,4 2,4 2,3 (6,8) 21,3 22,1 Compound HEPS growth % 48,4 40,7 30,3 29,7 28,9 28,2 Dividends per share 31,0 56,0 94,0 164,0 220,0 270,0 288,0 288,0 288,0 350,0 455,0 Compound dividend growth % 34.1 • Upward cycle between 2002 to 2007 • Operating profit increased from R349m to R1 887m • 3-year slowdown between 2008 and 2010 • 2011 onwards - upward cycle 12 | TFG ANALYST PRESENTATION MARCH 2012
FINANCIAL REVIEW: 2012 Income Statement for the year ended 31 March 2012 (Rm) 2011 (Rm) % change Retail turnover 11 630,5 9 936,5 17,0 Cost of turnover (6 750,1) (5 768,1) Gross profit 4 880,4 4 168,4 Interest income 1 712,1 1 486,2 Dividend income 9,9 12,1 Other revenue 1 178,3 935,8 Trading expenses (4 994,2) (4 301,3) Operating profit before finance charges 2 786,5 2 301,2 Finance cost (284,9) (250,1) Profit before tax 2 501,6 2 051,1 22,0 Income tax expense (809,8) (662,3) Profit for the year 1 691,8 1 388,8 Attributable to: Equity holders of The Foschini Group Limited 1 582,1 1 301,8 21,5 Non-controlling interest 109,7 87,0 HEPS (cents) 772,0 632,3 22,1 Diluted HEPS (cents) 766,1 619,9 23,6 13 | TFG ANALYST PRESENTATION MARCH 2012
REVENUE 2012 (Rm) 2011 (Rm) % growth Retail turnover 11 630,5 9 936,5 17,0 Interest income 1 712,1 1 486,2 15,2 Dividend income 9,9 12,1 (18,2) Other revenue 1 178,3 935,8 25,9 Total 14 530,8 12 370,6 17,5 • Good growth in retail turnover • Interest received will be dealt with separately • Retail book interest up 21,1% • RCS Group interest up 10,2% • Other revenue growth 25,9% • Club income + 17,4% • Customer charges income +34,9% • Insurance income + 26,6% • Cellular income - one2one airtime product + 11,2% • These products should continue to grow as our customer base grows 14 | TFG ANALYST PRESENTATION MARCH 2012
GROSS PROFIT 2012 2011 Gross profit (Rm) 4 880,4 4 168,4 Gross margin (%) 42,0 42,0 • Input margin constant • Improved pricing passed on to customers with focus on top-line growth • Mark downs well controlled 15 | TFG ANALYST PRESENTATION MARCH 2012
INTEREST RECEIVED 2012 (Rm) 2011 (Rm) % growth Trade receivables – retail 853,7 705,2 21,1 Receivables – RCS Group 842,4 764,2 10,2 Sundry 16,0 16,8 Total 1 712,1 1 486,2 15,2 • Due to the impact of NCA capping formula, interest yields at their lowest • Increase in interest received driven by higher average books • Interest received from retail debtors‟ book up 21,1% • Impact of good account growth • Increased credit sales • Increase in number of 12-month accounts continues to increase the yield • 86,6% of balances now attracting interest (LY 84,6%, interim 84,8%) • Interest received by RCS Group up 10,2% • Improved from -4% last year, and + 3,9% at half-year • Gradual improvement as the book grows • Peter Meiring will deal with this in more detail in his section 16 | TFG ANALYST PRESENTATION MARCH 2012
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