GROUP INTERIM RESULTS for the 26 weeks ended December 2011 Agenda - - PowerPoint PPT Presentation

GROUP INTERIM RESULTS for the 26 weeks ended December 2011

Agenda

• The retail and economic environment
• Review of the interim period
• Trading and operating performance
• Credit management
• Capital management
• African expansion
• Outlook
• Questions

The retail and economic environment

Retail and economic environment

Impact South African retail sales rose at the fastest pace in eight months in December 2011 to 8.7% year-on-year (November 2011: 6.8%). December CPI was the highest for 2011 at 6.1% (Dec 2010: 3.5%). Positive growth in GDP, however growth is slowing. Third quarter of 2011 1.4%. Interest rates are expected to remain at current low levels for at least the remainder of the 2012 financial year. Unemployment at a high rate of 23.9% for the fourth quarter of 2011 (Second and third quarter of 2011, 25.7% and 25% respectively). At a national level, the percentage and number of consumers with impaired credit records remains high.

Review of the interim period

Financial highlights

Sale of merchandise of R 4.7 billion up 11% Trading profit of R 1.4 billion up 15% Operating profit of R 1.7 billion up 14% Headline earnings of R 1.2 billion up 14% Headline earnings per share (HEPS) of 277.6 cents up 14%

Financial targets

Jun 2012 Target Dec 2011 Actual Dec 2010 Actual Gross margin (%) 54-57 56.9 56.6 Operating margin (%) 33-36 36.8 35.9 Return on equity (%) 40-45 45* 44* Return on assets (%) 44-48 49* 47* Inventory turn (times) 6.0-6.5 6.2* 6.6* Asset turnover (times) 1.2-1.5 1.3* 1.3*

* Annualised

Key financial ratios

Dec 2011 Dec 2010 Jun 2011 Trading margin (%) 29.7 28.7 28.3 Profit before interest paid, tax, depreciation and amortisation (EBITDA) margin (%) 38.3 37.5 38.0 Total liabilities to total equity (%) 27 28 23 Cash and cash equivalents to total equity (%) 32 35 30 Return on capital (%) 66* 64* 61 Net asset value per share (cents) 1 326 1 182 1 192

* Annualised

4.9 5.7 6.2 6.9 7.9 3.0 3.3 3.7 4.2 4.7 1.1 1.3 1.4 1.6 1.9 0.7 0.8 0.9 1.0 1.2

• 1

2 3 4 5 6 7 8

• 0.3

0.6 0.9 1.2 1.5 1.8 2.1 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Sale of merchandise (Rbn) Profit after tax (Rbn)

Sale of merchandise and profit after tax

Compound growth rates: Profit after tax: Dec 3 year 14%, 5 year16% Jun 3 year 14%, 5 year18% Profit after tax (Rbn) Sale of merchandise (Rbn) Compound growth rates: Sale of merchandise: Dec 3 year 12%, 5 year 13% Jun 3 year 12%, 5 year 16%

Gross profit trend

2.7 3.1 3.4 3.8 4.5 1.7 1.8 2.1 2.4 2.7 55 55 55 55 57 55 55 56 57 57

• 10

20 30 40 50 60

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Gross profit (Rbn) Gross margin (%) Average: Gross margin: Dec 3 year 56.7%, 5 year 56.0% Jun 3 year 55.7%, 5 year 55.4% Compound growth rates: Gross profit: Dec 3 year 14%, 5 year 14% Jun 3 year 13%, 5 year 17% Gross profit (Rbn) Gross margin (%)

Analysis of trading expenses

Dec 2011 Rm Dec 2010 Rm change

• n prior

period % Depreciation and amortisation 68 68

• Employment costs

449 445 1 Occupancy costs 369 327 13 Trade receivables costs 284 222 28 Other operating costs 213 213

• Trading expenses

1 383 1 275 8

Analysis of trading expenses (continued)

Trading expenses increased 8%:

• Depreciation and amortisation (unchanged on prior period):

– Capital expenditure of R 86 million in the period.

• Employment costs (1% growth):

– Excluding non-comparable costs, fair value on interest free loans and the provision for incentive bonuses, comparable employment costs increased by 6%.

• Occupancy costs (13% growth):

– A net 14 stores opened from Dec 2010 to Dec 2011. – Trading space growth of 4.5% on Dec 2010 (2.3% on Jun 2011). – Excluding non-comparable store costs, comparable occupancy costs increased 8%. – Normal rental escalations averaged 8% during the period. – Electricity cost increased 33% (comparable electricity costs increased 25%).

Analysis of trading expenses (continued)

• Trade receivable costs (28% growth):

– Net bad debt as a percentage of gross trade receivables increased to 8.0% (Dec 2010: 7.5%, Jun 2011: 6.8%). – The doubtful debt allowance remained at 10.1% of gross trade receivables (Dec 2010: 10.1%, Jun 2011: 10.1%). – The interest income earned (including notional interest)

• f

R 290 million (Dec 2010: R 259 million) on the debtors’ book during the period offsets net bad debts and associated costs of R 284 million (Dec 2010: R 222 million).

• Other operating costs (unchanged on prior period):

– Excluding non-comparable costs and foreign exchange profits of R 25 million (R 16 million unrealised and R 9 million realised), (Dec 2010: R 13 million unrealised loss and R 7 million realised loss), comparable other operating costs increased 11%.

Trading expenses as a % of sale of merchandise

* Expense growth in the 2007 financial period: Acquisition of Uzzi (30 stores), 38 new stores and higher trade receivable costs. 31 21 11 6 10 20 11 10 12 8 32 33 33 32 31 31 31 31 30 30

• 5

10 15 20 25 30 35 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Expense % growth Trading expenses to sales %

*

% Average: Trading expenses to sales: Dec 3 year 30.3%, 5 year 30.6% Jun 3 year 32.0%, 5 year 32.2% Compound growth rates: Trading Expenses: Dec 3 year 10%, 5 year 12% Jun 3 year 9%, 5 year 15%

1.3 1.4 1.5 1.8 2.2 0.8 0.8 1.0 1.2 1.4 26 24 24 26 28 26 26 27 29 30

• 5

10 15 20 25 30

• 0.5

1.0 1.5 2.0 2.5 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Trading profit (Rbn) Trading margin (%)

Trading profit performance

Trading profit (Rbn) Trading margin (%) Compound growth rates: Trading profit: Dec 3 year 18%, 5 year 16% Jun 3 year 18%, 5 year 18% Average: Trading margin: Dec 3 year 28.7%, 5 year 27.6% Jun 3 year 26.0%, 5 year 25.6%

Operating profit performance

1.6 1.9 2.1 2.4 2.9 1.0 1.2 1.3 1.5 1.7 35 35 36 36 38 36 36 36 38 38 33 33 34 34 36 34 35 34 36 37

• 5

10 15 20 25 30 35 40

• 0.5

1.0 1.5 2.0 2.5 3.0 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Operating profit (Rbn) EBITDA margin (%) Operating margin (%) Compound growth rates: Operating profit: Dec 3 year 14%, 5 year 16% Jun 3 year 15%, 5 year 18% Operating profit (Rbn) Margins (%) Average: Operating Margin: Dec 3 year 35.7%, 5 year 35.2% Jun 3 year 34.7%, 5 year 34.0% Average: EBITDA Margin: Dec 3 year 37.3%, 5 year 36.8% Jun 3 year 36.7%, 5 year 36.0%

Headline earnings and dividend per share

Cents per share 120 144 171 200 262 72 88 102 128 249 296 338 378 456 160 185 203 243 278

• 50

100 150 200 250 300 350 400 450 500 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 DPS HEPS

*

*Dividend deferred until after 1 April 2012

Compound growth rates: HEPS: Dec 3 year 15%, 5 year 17% Jun 3 year 15%, 5 year 20% Compound growth rates: DPS: Jun 3 year 22%, 5 year 24%

Cash flows for the period

1 483 236 334 557 17 1 007 565 69 83 14 304

• 200

400 600 800 1 000 1 200 1 400 1 600 EBITDA Working capital movement Interest received Tax paid Capex maintenance Free cash flow Dividends Capex expand Share buy-backs Other Net cash flow Rm

Statements of financial position

Dec 2011 Rm Dec 2010 Rm change

• n

prior period % Jun 2011 Rm Non-current assets 1 115 1 099 1 1 093 Prepayments and derivative financial assets 36 58 (38) 79 Cash and cash equivalents 1 793 1 790

• 1 489

Trade and other receivables 3 514 3 006 17 3 033 Inventories 666 555 20 530 Total assets 7 124 6 508 9 6 224 Total equity 5 610 5 068 11 5 046 Non-current liabilities 91 101 (10) 84 Current liabilities 1 423 1 339 6 1 094 Total equity and liabilities 7 124 6 508 9 6 224

Return on equity

* Annualised % 50 48 44 40 41 53 51 45 44 45

• 10

20 30 40 50 60 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007* Dec 2008* Dec 2009* Dec 2010* Dec 2011* Average: Return on equity: Dec 3 year 44.7%, 5 year 47.6% Jun 3 year 41.7%, 5 year 44.6%

Inventory turn

Times 6.1 6.5 6.1 6.9 6.4 6.4 6.4 6.1 6.6 6.2

• 1

2 3 4 5 6 7 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007* Dec 2008* Dec 2009* Dec 2010* Dec 2011* Inventory turn average: Dec 3 year 6.3 times, 5 year 6.3 times Jun 3 year 6.5 times, 5 year 6.4 times * Annualised

Trading and

• perating

performance

Sale of merchandise

Divisional sales Dec 2011 Rm Dec 2010 Rm change on prior period % Jun 2011 Rm Truworths ladieswear 1 741 1 615 8 3 068 Truworths menswear 935 865 8 1 581 Identity 743 595 25 1 127 Daniel Hechter 593 542 9 972 Elements 240 223 8 403 Inwear 216 204 6 386 LTD 214 187 14 312 Other* 138 124 11 231 Retail sales 4 820 4 355 11 8 080 Franchise sales 19 19

• 35

Accounting reclassifications (150) (142) 6 (257) Sale of merchandise 4 689 4 232 11 7 858 YDE agency sales 149 133 12 250

*Includes cellular, Truworths Jewellery and Truworths Living divisions

Retail divisional sales contribution

Truworths ladieswear Truworths menswear Identity Daniel Hechter Elements Inwear LTD Other

Dec 2011 Dec 2010

36% 19% 15% 12% 5% 5% 5% 3% 37% 20% 14% 12% 5% 5% 4% 3%

Retail sales growth analysis

Retail sales Rm Retail sales growth % LFL store growth % Product Inflation % Unit growth: comparable stores % Unit growth: new stores % Dec 2011 4 820 11 6 8 (2) 5 Dec 2010 4 355 15 11 1 10 4 Dec 2009 3 778 11 3 10 (7) 8 Jun 2011 8 080 14 9 4 5 5 Jun 2010 7 118 11 4 4

• 7

Jun 2009 6 441 12 5 10 (5) 7

Ladies and menswear market share

20.9 21.9 22.3 21.7 22.2 22.6 20.8 21.9 22.1 21.4 21.7 22.0 20 21 22 23 Jun 09 Jun 10 Jun 11 Dec 09 Dec 10 Dec 11 Ladieswear Menswear

%

Based on figures from the Retail Liaison Committee (RLC)

Sales densities trend

Sales density growth (%) R per m2 17 4 (2) 4 8 3 2 (1) 10 3 28 802 29 965 29 307 30 462 32 979 30 359 31 096 30 793 33 996 35 097

• 5 000

10 000 15 000 20 000 25 000 30 000 35 000 40 000

• 5
• 5

10 15 20 25 30 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Sales density % growth Sales density Compound growth rate: Dec 3 year 4%, 5 year 4% Jun 3 year 3%, 5 year 6%

Group stores

Dec 2011 Dec 2010 Jun 2011 Truworths 272 268 270 Identity 169 159 164 Uzzi 57 54 56 Truworths Man 29 32 29 YDE 19 19 19 Daniel Hechter 4 4 3 LTD 2 2 2 Total 552 538 543 Trading area (m2 000) Truworths 206 198 202 Identity 46 43 44 Uzzi 4 4 4 Total (excl YDE) 256 245 250 YDE 6 6 6 Total 262 251 256 Growth (%) 4.5 4.1 5.3

Truworths - Sandton

Credit management

National Credit Regulator statistics

Millions %

(Source: Credit Bureau Monitor, third quarter 2011 statistics)

7.3 7.9 8.2 8.4 8.6 8.5 8.6 8.6 8.8 8.8 41.6 44.1 45.3 46.0 46.9 46.3 46.5 46.4 46.7 46.2

• 5

10 15 20 25 30 35 40 45 50

• 1

2 3 4 5 6 7 8 9 10 Dec 2008 Jun 2009 Dec 2009 Mar 2010 Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011

• No. of consumers with impaired records (millions)

Consumers with impaired records (%)

Key trade receivable statistics

Dec 2011 Dec 2010 Jun 2011 Jun 2010 Number of active accounts (000's) 2 403 2 100 2 194 1 975 Growth in active accounts (%) 14 9 11 6 Gross trade receivables (before doubtful debt allowance) (Rm) 3 853 3 305 3 333 2 835 Growth in gross trade receivables (before doubtful debt allowance) (%) 17 16 18 11 Credit sales as a % of retail sales (%) 73 70 71 70 Qualifying payment (%) 90 90 90 90 Applicants granted credit (%) 39 35 38 33

Key trade receivable statistics (continued)

Dec 2011 Dec 2010 Jun 2011 Jun 2010 Active account holders able to purchase at period-end (%) 88 89 86 85 Overdue values as a % of gross trade receivables (%) 9 9 13 14 Net bad debt as a % of credit sales (%) 4.3 4.1 3.9 5.6 Net bad debt as a % of gross trade receivables (%) 8.0 7.5 6.8 9.8 Doubtful debt allowance as a % of gross trade receivables (%) 10.1 10.1 10.1 10.7 Trade receivable interest as a % of gross trade receivables (%) 15.3 15.7 16.3 17.3

Trade receivable costs vs. interest received

Rm

• No. of

accounts 000’s 318 488 549 491 543 224 271 237 259 290 280 464 432 385 390 224 242 228 222 284 1 689 1 799 1 856 1 975 2 194 1 775 1 823 1 926 2 100 2 403

• 500

1 000 1 500 2 000 2 500 3 000

• 100

200 300 400 500 600 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Trade receivable interest Rm Trade receivable costs Rm Number of active accounts 000's

Overdue values as a percentage of gross trade receivables

9.6 9.4 10.3 10.5 10.3 12.0 12.4 10.8 8.7 9.0

• 2

4 6 8 10 12 14 Dec 2002 Dec 2003 Dec 2004 Dec 2005 Dec 2006 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 %

Active account holders able to purchase

% 87 86 87 89 88

• 10

20 30 40 50 60 70 80 90 100 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Able to purchase Delinquent

Aging of debtors’ book

%

87 87 88 90 90 7 7 6 5 5

• 10

20 30 40 50 60 70 80 90 100 Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 < 30 days 30-59 days 60-89 days 90 days +

Capital management

Capital management

• Dividends:

– Dividend payments of R 565 million during the period which relate to the final dividend declared for June 2011. – Having considered the transitional arrangements relating to the phasing out

• f Secondary Tax on Companies (STC) and its replacement with Dividends

Tax, the board has decided to defer the declaration of an interim dividend until after 1 April 2012, but as soon as practicable thereafter. – It is anticipated that the Group’s full year dividend cover will be adjusted accordingly.

• Share buy-backs

– The Group repurchased 1.2 million shares at an average price of R69.03 per share for a total of R83 million during the period. – Since the inception of the share buy-back programme in 2002, 81 million shares have been repurchased at a total cost of R1.7 billion at an average price of R21.51. – 43.4 million shares (R 475 million) at an average cost of R10.95 have been cancelled. – The balance of 37.8 million shares (8.2% of total shares in issue) are held as treasury shares.

Capital utilisation

Rm Rm 683 785 968 353 420 565 198 216 186 138 95 86 159 34 394 34

• 83

234 551 171 293 479 276 1 252 1 567 1 728 823 1 006 1 024

• 200

400 600 800 1 000 1 200 1 400 1 600 1 800 2 000

• 200

400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Jun 2009 Jun 2010 Jun 2011 Dec 2009 Dec 2010 Dec 2011 Dividends Capex Share buy-backs Acquisitions Carried forward Cash flow from operations

Planned capital expenditure for the remainder of 2012

Actual spend for Dec 2011 Rm Actual spend for Dec 2010 Rm Planned spend for Jun 2012 Rm Actual spend for Jun 2011 Rm Store development 69 66 154 120 Computer infrastructure 12 17 40 31 Distribution facilities 3 8 20 14 Head office refurbishment 1 1 3 1 Motor vehicles 1 3 1 4 Land

• 16

Total 86 95 218 186

African expansion

African store revenue

Revenue to total sales % Dec 2011 Rm Dec 2010 Rm change on prior period % Jun 2011 Rm Namibia 1.7 83 74 12 142 Swaziland 0.6 29 32 (9) 59 Botswana 0.1 5

• n/m
• Mauritius

0.1 3

• n/m
• Total corporate store revenue

2.5 120 106 13 201 Botswana 0.2 8 8

• 15

Kenya 0.1 6 5 20 9 Zambia 0.1 3 2 50 5 Lesotho

• 2

3 (33) 5 Tanzania

• *

1 (100) 1 Total franchise sales 0.4 19 19

• 35

Total African store revenue 2.9 139 125 11 236

*Revenue less than R500 000

African store footprint

Mauritius Nigeria Angola Namibia South Africa Lesotho Swaziland Botswana Zimbabwe Zambia Tanzania Kenya Ghana Mauritius

Dec 2011

• No. of

stores Dec 2010

• No. of

stores Jun 2011

• No. of

stores Namibia 12 12 12 Swaziland 5 5 5 Botswana 2

• Mauritius

2

• Total corporate stores

21 17 17 Botswana 8 8 8 Kenya 5 4 5 Zambia 3 2 2 Tanzania 2 2 2 Lesotho 1 1 1 Total franchise stores 19 17 18 Total African stores 40 34 35

African expansion

• The Group holds approximately 35% of the issued shares
• f Truworths Ltd (Zimbabwe) which has 16 Truworths

stores, 18 Number 1 stores and 25 Topics stores.

• Plan to open corporate stores in the following countries

during the remainder of the financial period:

– Nigeria – Ghana – Botswana

• Plan to open corporate stores in Zambia during 2012/2013.
• Plan to open franchise stores in Angola during 2012/2013.

Identity Bagatelle Mall (Mauritius)

Outlook

Outlook

• Management remains committed to the Group’s business philosophy which has guided
• perating activities ably over many years. The supply of internationally inspired, high quality

fashionable clothing to youthful South Africans continues to drive the Group’s strategy and will remain the focus for the period ahead.

• Retail sales for the first eight weeks of the second half of the 2012 financial period increased

by 11.1% over the corresponding period in 2011 compared to 9.8% for the first eight weeks

• f the second half of the 2011 financial period.
• Generally subdued economic growth is expected for the remainder of the 2012 financial
• period. Product inflation is anticipated to remain between 6% and 8% for the balance of the

2012 financial period. Annual growth in trading space is planned at approximately 6%, with 13 stores expected to open in South Africa and 6 in the rest of Africa in the second half of the 2012 financial period.

• The Group continues to seek opportunities to utilise cash resources to generate competitive

returns for shareholders.

Questions

Disclaimer

Disclaimer

This announcement 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.