INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 DECEMBER 2018 1 2 3 - - PowerPoint PPT Presentation

GROUP INTERIM RESULTS

FOR THE 26 WEEKS ENDED 30 DECEMBER 2018

2 1 3 6 4 5

3

1

4

• Continued challenging trading environment
• GDP growth remained subdued
• Disposable income growth under pressure due to relatively higher fuel and energy prices and VAT rate

increase

• Relatively weaker and highly volatile Rand
• Continued high levels of unemployment
• Political and consumer uncertainty ahead of 2019 general elections
• Power outages to further impact retail sales and consumer confidence

SOUTH AFRICA – ECONOMIC ENVIRONMENT

5

• Extremely tough retail environment
• Company Voluntary Arrangements in 2018 increased by more than 50% — 125 retail companies went into

administration

• Over 1 000 fashion retail stores closed
• Retail footfall down 2.6%
• Growth in sales contributed mainly by online, now accounting for 20% of all UK retail sales
• Uncertainty remains ahead of 29 March 2019 EU exit

UNITED KINGDOM – ECONOMIC ENVIRONMENT

Source: Deloitte Retail Trends

6

2

7

• Weak top-line growth owing to deteriorating economic conditions
• Gross margin steady at 52.3%
• Well managed costs across the Group
• Headline earnings per share down 5%
• Dividend cover maintained at 1.5 times
• Strong balance sheet reflected in 9% growth in net asset value per share
• Continued strong cash generation
• Group in net cash position at Dec 2018 due to timing of creditors and tax payments
• IFRS 9 adoption resulted in an increase in the doubtful debt provision

GROUP – TRADING OVERVIEW

8

Dec 2 2018 Actual Jun 2019 Targets Gross margin (%) 52.3 .3 51 – 55 Operating margin (%) 21.7 .7 19 – 24 Return on equity* (%) 29 29 23 – 28 Return on assets* (%) 26 26 20 – 25 Inventory turn* (times) 4.6 .6 3.5 – 4.5 Asset turnover* (times) 1.2 .2 0.9 – 1.3

GROUP – PERFORMANCE AGAINST TARGETS

*Annualised and impacted by seasonality between the first and second half of the financial period

9

Dec 2 2018 Dec 2017 Change on prior period % Retail sales (Rm) 10 491 10 289 2 Gross margin (%) 52.3 .3 52.4 Trading profit (Rm) 1 6 643 1 703 (4) Trading margin (%) 16.1 .1 16.9 Diluted HEPS (cents) 360 360 379 (5) Dividend per share (DPS) (cents) 249 249 261 (5) Cash generated from operations* (Rm) 2 6 610 1 837 42 Net asset value per share (cents) 2 6 622 2 416 9

GROUP – FINANCIAL PERFORMANCE

* Dec 2018 positively impacted by timing of creditors and tax payments

10 10

Dec 2 2018 Rm Rm Dec 2017 Rm Change on prior period % Sale of merchandise 10 1 183 10 048 1 Cost of sales (4 (4 8 857) (4 783) 2 Gross p profit 5 3 326 5 265 1 Other income 147 147 151 (3) Trading expenses (3 (3 8 830) (3 713) 3 Trading p profit 1 6 643 1 703 (4) Interest and dividends received 566 566 713 (21) Operating profit 2 2 209 2 416 (9) Finance costs (4 (40) (133) (70) Profit before tax 2 1 169 2 283 (5) Tax expense (5 (599) (627) (4) Profit for the p period 1 5 570 1 656 (5)

GROUP – SUMMARISED INCOME STATEMENT

Decrease mainly due to:

• Restructuring of Group’s South

African funding arrangements

• Growth in accounts opened post the

November 2015 amendments to the maximum prescribed interest rates under the NCA

• Adoption of IFRS 9

Decrease due to restructuring of Group’s South African funding arrangements in June 2018.

11 11

GROUP – DPS AND DILUTED HEPS

Compound growth rates: DHEPS: Dec: 5-year 1%, 3-year (4%) Compound growth rates: DPS: Dec: 5-year 3%, 3-year (3%) (cents) 236 270 270 261 249 249 333 404 392 379 360 360

• 50

100 150 200 250 300 350 400 450 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 DPS DHEPS

12 12

40 42 38 33 29 29 55 60 55 48 40 40

• 10

20 30 40 50 60 70 Dec 2014* Dec 2015* Dec 2016* Dec 2017* Dec 2018* ROE ROC

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

* Annualised

(%) %) Average: ROE: Dec: 5-year 36.4%, 3-year 33.3% Average: ROC: Dec: 5-year 51.6%, 3-year 47.7%

13 13

40 29 29 29 26 26 1.3 1.1 1.1 1.2 1.2 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1

• 5

10 15 20 25 30 35 40 45 50 Dec 2014* Dec 2015* Dec 2016* Dec 2017* Dec 2018* Return on assets Asset turnover

GROUP – RETURN ON ASSETS AND ASSET TURNOVER

Return on assets (%) %) Average: Return on assets: Dec: 5-year 30.6%, 3-year 28.0% Average: Asset turnover: Dec: 5-year 1.2 times, 3-year 1.2 times

* Annualised

Asset turnover (times)

14 14

Dec 2 2018 Rm Rm Dec 2017 Rm Change on prior period % Property, plant and equipment 1 7 795 1 674 7 Goodwill 1 6 642 1 529 7 Intangible assets 3 2 252 2 976 9 Other non-current assets 398 398 336 18 Cash and cash equivalents 2 4 416 2 297 5 Trade and other receivables 5 3 378 5 697 (6) Inventories 2 1 101 1 944 8 Other current assets 200 200 169 18 Total a assets 17 1 182 16 622 3 Total equity 11 2 243 10 386 8 Non-current liabilities 2 1 186 3 492 (37) Current liabilities 3 7 753 2 744 37 Total e equity a and l liabilities 17 1 182 16 622 3

GROUP – STATEMENTS OF FINANCIAL POSITION

15 15

GROUP – CAPITAL MANAGEMENT

Dec 2 2018 Dec 2017 Net (c (cash) / ) / debt Net (c (cash) / ) / debt to e equity % Net debt Net debt to equity % Group Rm (1 (1 0 076) (1 (10) 872 8 Group, normalised* Rm 237 2 Truworths Rm (1 (1 1 117) (1 (10) 547 5 Office £m 2.2 .2 1 19.5 10

* Creditors and tax payments were made after the current period-end compared to December 2017 when payments were made before the prior period-end

16 16

• Dividends

– Interim dividend per share decreased 5% to 249 cents

• Financial position

– Financial position remains strong with net asset value per share up 9% to 2 622 cents – Since the inception of the share buy-back programme in 2002, 96 million shares have been repurchased at a total cost of R3 billion at an average price of R31 per share

GROUP – CAPITAL MANAGEMENT (CONTINUED)

17 17

GROUP – TRADING SPACE

Dec 2 2018 ‘000 m2 Dec 2017 ‘000 m2 Change on prior period % Truworths 386.2 .2 382.5 1.0 Office 15.6 .6 16.0 (2.7) Total 401.8 .8 398.5 0.8

18 18

GROUP – DIVERSIFICATION

TRUWORTHS OFFICE GROUP TRUWORTHS OFFICE GROUP

RETAIL SALES CASH:ACCOUNT SALES (%)

South Africa 97% Rest of Africa 3% United Kingdom 93% Rest of Europe 7% South Africa 71% UK and Europe 27% Rest of Africa 2% Account 70% Cash 30% Cash 100% Account 51% Cash 49% R7 620 m R2 871 m R10 491 m R7 620 m R2 871 m R10 491 m

19 19

GROUP – DIVERSIFICATION (CONTINUED)

TRUWORTHS OFFICE GROUP OFFICE GROUP

PRODUCT MIX

TRUWORTHS

STORE LOCATIONS

Footwear 100% Clothing and accessories 65% Footwear 35% South Africa 95% Rest of Africa 5% United Kingdom 88% Rest of Europe 12% South Africa 80% UK and Europe 16% Rest of Africa 4% Clothing and accessories 89% Footwear 10% Homeware 1% R7 620 m R2 871 m R10 491 m 814 stores 153 stores 967 stores

20 20

GROUP – CASH FLOW ANALYSIS

1 943 667 566 (37) (157) (49) 2 933 (688) (212) 18 2 051 (360) 1 691#

• 500

1 000 1 500 2 000 2 500 3 000 3 500 Cash EBITDA* Working capital movements Interest and dividends received Finance costs Tax paid Capex maintenance Free cash flow Dividends paid Capex expansion Other Net cash increase before loan repayments Loans repaid Net cash increase for the period

(Rm)

# Impacted by timing of creditors and tax payments. If

creditors and tax were paid before the period-end, the net cash increase for the period would have been approx. R400 million.

* Earnings before interest, tax, depreciation and amortisation

21 21

GROUP – E-COMMERCE

• New truworths.c

.co.z .za e-commerce website launched

in February 2018

• Delivery to store (Click & Collect) or to chosen address
• 99%+

%+ order fulfilment rate achieved to date

• truworths.co.za is generating the turnover of a medium-sized

Truworths store

• Website profitable within f

first year

• Constant evolution and improvement to the website
• Brands available online include:
• Online sales increased 7%

7%

• Comprising nearly 33%

33% of retail sales

• 101 stores are able to fulfil online orders through the

direct despatch channel (December 2017: 82 stores), improving the availability of stock that can be ordered for next day delivery

• Latest enhancements includes additions of new wish list,

personalised product recommendations and home pages, geolocation technology and increased availability of inventory

• Sales improved by addition of multi-currency pricing

to office.co.uk

• Further integration of the store and online channels through

launch of ‘in store look up’ functionality on the website

9% 9% of Group retail sales

22 22

2

23 23

• Retail sales increased 2%
• Gross margin improved marginally to 55.6% (Dec 2017: 55.5%)
• Profit before tax decreased 3%
• Continued strong cash generation
• Inventory turn of 5.8 times (Dec 2017: 5.7 times)
• More efficient funding structure implemented in June 2018
• Active account growth benefiting from outcome of affordability court case
• Lay-bys and e-commerce sales contributing positively

TRUWORTHS – TRADING OVERVIEW

24 24

TRUWORTHS – FINANCIAL PERFORMANCE

Dec 2 2018 Dec 2017 Change on prior period % Sale of merchandise (Rm) 7 2 251 7 158 1 Gross margin (%) 55.6 .6 55.5 Trading profit (Rm) 1 3 398 1 411 (1) Trading margin (%) 19.3 .3 19.7

25 25

Retail sales Rm Retail sales growth % LFL store growth % Product inflation/ (deflation) % Unit growth: Comp stores % Unit growth: Non-comp stores % Dec-18 18 7 6 620 2

• (2

(2) 2 2 Dec-17* 7 441 1 (3) (2) (1) 4 Dec-16 7 387

• (3)

16 (19) 3 Dec-15 7 393 19 10 9 1 9 Dec-14 6 232 5 (1) 6 (7) 6

TRUWORTHS – RETAIL SALES GROWTH ANALYSIS

* Compared to weeks 2 to 27 (4 July 2016 to 1 January 2017) of the 2017 financial period

26 26

TRUWORTHS – MERCHANDISE INFLATION TREND

Merchandise inflation (%) %) ( 4) ( 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 2019 Winter

27 27

Dec 2 2018 Rm Rm Dec 2017 Rm Change on prior period %

Truworths ladieswear 2 0 042 2 066 (1) Truworths designer emporium* 772 772 780 (1) Truworths ladieswear emporium 2 8 814 2 846 (1) Truworths menswear# 2 0 070 2 070

• Truworths kids emporium@

744 744 630 18 Other^ 772 772 706 9 Truworths emporium 6 4 400 6 252 2 Identity 1 2 220 1 189 3 Truworths retail sales 7 6 620 7 441 2 YDE agency sales 137 137 143 (4)

TRUWORTHS – DIVISIONAL RETAIL SALES

* Daniel Hechter Ladies, Ginger Mary, Glamour, LTD Ladies and Earthaddict # Truworths Man, Uzzi, Daniel Hechter Mens and LTD Mens @ LTD Kids, Earthchild and Naartjie ^ Cosmetics, Cellular, Truworths Jewellery, Office London (South Africa) and Loads of Living

28 28

TRUWORTHS – TRADING SPACE

Dec 2 2018 ‘000 m2 Dec 2017 ‘000 m2 Truworths 292.0 .0 289.3 Identity 72.0 .0 71.0 Uzzi 4.1 .1 4.2 Loads of Living 4.1 .1 4.1 Earthchild and Earthaddict 3.2 .2 3.4 Naartjie 1.8 .8 2.2 Office London 1.4 .4 1.0 Kids emporium (standalone) 0.5 .5 0.1 Naartjie and Earthchild 0.2 .2 0.2 Total e excluding Y YDE 379.3 .3 375.5 YDE 6.9 .9 7.0 Total 386.2 .2 382.5 % Change on prior period 1.0 .0

29 29

TRUWORTHS – NUMBER OF RETAIL LOCATIONS

Dec 2018 Dec 2017 Stores Departments within stores Total locations Stores Departments within stores Total locations Truworths 347 347

• 347

347 349

• 349

Identity 258 258

• 258

258 257

• 257

Uzzi 47 47 225 225 272 272 50 212 262 Earthchild 39 39 66 66 105 105 38 59 97 Earthaddict 14 14 64 64 78 78 15 33 48 Truworths Man 35 35 316 316 351 351 37 315 352 Naartjie 32 32 59 59 91 91 32 47 79 YDE 21 21

• 21

21 21

• 21

Loads of Living 13 13 1 14 14 13

• 13

Office London 15 15

• 15

15 10

• 10

Daniel Hechter 3 327 327 330 330 3 327 330 LTD* 6 250 250 256 256 3 227 230 Ginger Mary 2 295 295 297 297 2 291 293

* Includes LTD Kids 145 (Dec 2017: 122) departments

30 30

TRUWORTHS – CHANGE IN NUMBER OF STORES

Stores Dec 17 New stores

• pened

Stores closed Stores Dec 18 Truworths 349 3 (5) 347 347 Identity 257 4 (3) 258 258 Uzzi 50 1 (4) 47 47 Earthchild and Earthaddict 42 1 (4) 39 39 Truworths Man 37

• (2)

35 35 Naartjie 27

• (4)

23 23 YDE 21

• 21

21 Office London 10 5

• 15

15 Loads of Living 13

• 13

13 Naartjie and Earthchild 4 1

• 5

5 Kids Emporium (standalone) 1 3

• 4

4 Daniel Hechter 3

• 3

3 LTD 2

• 2

2 Ginger Mary 2

• 2

2 Total 818 18 (22) 814 814

31 31

TRUWORTHS – REST OF AFRICA CORPORATE STORES

Retail sales Dec 2 2018 Rm Rm Retail sales Dec 2017 Rm Change on prior period % Retail sales Dec 2 2018 LC'm 'm Retail sales Dec 2017 LC'm Change on prior period % Number of stores Dec 2018 Number of stores Dec 2017 Namibia 101 101 114 (11) N$101 N$114 (11) 18 18 Botswana 56 56 58 (3) P42 P44 (5) 8 8 Swaziland 53 53 49 8 E53 E49 8 5 5 Mauritius 14 14 13 8 Rs33 Rs32 3 2 2 Lesotho 13 13 12 8 M13 M12 8 2 2 Zambia 11 11 17 (35) ZM ZMW9 ZMW12 (25) 3 7 Kenya 5 5 5

• KSh38

KSh42 (10) 2 2 Ghana#

• 7

(100) GH GHȻ - GHȻ3 (100)

• Total

253 253 275 40 40 44

# The Ghana stores ceased trading on 3 December 2017.

32 32

TRUWORTHS – SALES DENSITIES TREND

(R/m2) Compound growth rates: Sales density: Dec: 10-year 1%, 5-year (1%), 3-year (3%) 30 793 33 996 35 097 37 881 37 144 36 717 39 179 38 489 36 418 35 924 20 000 25 000 30 000 35 000 40 000 45 000 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018

33 33

3.3 4.0 3.9 4.0 4.0 55.3 55.3 55.0 55.5 55.6

• 10

20 30 40 50 60 70

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Gross profit Gross margin

TRUWORTHS – GROSS PROFIT TREND

Compound growth rates: Gross profit: Dec: 5-year 5%, 3-year 0% Average: Gross margin: Dec: 5-year 55.3%, 3-year 55.4% Gross profit (Rbn) Gross margin (%) %)

34 34

TRUWORTHS – TRADING EXPENSES

Dec 2 2018 Rm Rm Dec 2017 Rm Change on prior period % Depreciation and amortisation 154 154 140 10 Employment costs 785 785 722 9 Occupancy costs 779 779 738 6 Trade receivable costs 661 661 653 1 Other operating costs 403 403 459 (12) Trading expenses 2 7 782 2 712 3*

* Excluding foreign exchange losses of R0 million in 2018 and R76 million in 2017, trading expenses grew 6%.

35 35

Depreciation and amortisation

• Capital expenditure of R241 million (Dec 2017: R195 million) in the period
• Excluding non-comparable stores, depreciation and amortisation increased 4%

Employment c costs

• Excluding non-comparable store and other costs, employment costs increased 4%

Occupancy c costs

• Trading space increased 1%
• Excluding non-comparable store and other costs, occupancy costs increased 5%
• Comparable store rentals (excluding turnover rent) increased 4%

TRUWORTHS – ANALYSIS OF TRADING EXPENSES

9%

increase

10%

increase

6%

increase

36 36

Trade receivable c costs

• Excluding the IFRS 9 stage 3 interest reclassification (R52 million), trade receivable costs increased 9%
• Net bad debt decreased 5%  Gross bad debts decreased 3% and bad debt recoveries increased 6%
• Doubtful debt allowance decreased from 19.0%* at Jun 2018 to 18.8% (Dec 2017: decreased from 12.7% at

Jun 2017 to 12.4%) of gross trade receivables

– IFRS 9 and growth in book resulted in a R110 million charge to the income statement (Dec 2017: R33 million)

• Collection and other trade receivable costs increased 4%
• Net cost of the book showed a deficit of R170 million (Dec 2017: R79 million). The increase on Dec 2017 is due

to lower interest received and the higher doubtful debt allowance charge in the current period Other operating costs

• Excluding foreign exchange losses in the prior period (R76 million) other operating costs increased 5%
• Management remains focused on cost containment

TRUWORTHS – ANALYSIS OF TRADING EXPENSES (CONTINUED)

1%

increase

12%

decrease

* IFRS 9 adopted with effect from commencement of the current period

37 37

TRUWORTHS – TRADING PROFIT PERFORMANCE

Compound growth rates: Trading profit: Dec: 5-year (1%), 3-year (6%) Average: EBITDA margin: Dec: 5-year 32.0%, 3-year 31.0% Average: Trading margin: Dec: 5-year 21.2%, 3-year 19.7% Trading profit (Rbn) Margins (%) %) 1.4 1.7 1.4 1.4 1.4 33 34 32 32 29 29 23 24 20 20 19 19

• 5

10 15 20 25 30 35 40

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Trading profit EBITDA margin Trading margin

38 38

TRUWORTHS – CAPITAL EXPENDITURE

Actual Dec 2 2018 Rm Rm Actual Dec 2017 Rm Planned Jun 2019 Rm Actual Jun 2018 Rm Store renovations and development 144 144 148 356 320 Computer infrastructure and software 27 27 19 101 59 Land, buildings and refurbishment 68 68 23 149 31 Motor vehicles 1 3 7 4 Distribution facilities 1 2 12 5 Total 241 241 195 625 419

39 39

TRUWORTHS – CASH FLOW ANALYSIS

(Rm)

1 655 567 565 (26) (129) (46) 2 586 (688) (195) 18 1 721 (302) 1 419#

• 500

1 000 1 500 2 000 2 500 3 000 Cash EBITDA* Working capital movements Interest and dividends received Finance costs Tax paid Capex maintenance Free cash flow Dividends paid Capex expansion Other Net cash increase before loan repayments Loans repaid Net cash increase for the period * Earnings before interest, tax, depreciation and amortisation

# Impacted by timing of creditors and tax payments. If

creditors and tax were paid before the period-end, the net cash increase for the period would have been approx. R250 million.

40 40

2

41 41

Appointed CEO October 2018

• More than 25 years experience

across all aspects of global retail

• Held various roles within Nike for

5 years

• Previous experience includes Gap,

Tesco and M&S

OFFICE – LEADERSHIP CHANGES

Lorenzo M Moretti (4 (48)

CEO

Kerry van d der M Merwe (4 (42)

CFO

Appointed CFO October 2018

• More than 18 years retail

experience

• 15 years of Truworths Group

experience

• Joined Office in June 2016
• Responsible for Finance, Human

Resources, Information Technology, Properties Lorenzo’s contribution to Office to date includes:

• Entrenching the Office Business Philosophy and Values
• Renewed focus and energy to the business
• New initiatives as a result of a deep understanding of brands

42 42

• Retail sales decreased by 3% to £157 million
• Like-for-like retail sales decreased 3% on the prior period, with declining standalone store LFL retail sales

being partially offset by growths in concession store and e-commerce retail sales

• Decrease in gross margin to 44.0% (Dec 2017: 44.7%) primarily due to a shift in the full price/markdown

mix

• E-commerce sales increased 7% to £51 million (Dec 2017: £48 million), comprising 33% (Dec 2017: 30%)
• f retail sales
• Inventory turn of 3.0 times (Dec 2017: 3.2 times)
• Strong cash generation with cash generated from operations at £21 million*
• Net debt to equity reduced to 1%* (Dec 2017: 10%)

OFFICE – TRADING OVERVIEW

* Impacted by timing of creditors payments

43 43

OFFICE – FINANCIAL PERFORMANCE

Dec 2 2018 Dec 2017 Change on prior period % Retail sales (£m) 156.7 .7 161.5 (3) Gross margin (%) 44.0 .0 44.7 Trading expenses (£m) 57.5 .5 56.6 2 EBITDA (£m) 15.8 .8 19.9 (21) Operating profit (£m) 13.3 .3 17.0 (22) Operating margin (%) 8.3 .3 10.4

44 44

OFFICE – RETAIL SALES AND STORES BY COUNTRY

Retail sales Dec 2 2018 £m £m Retail sales Dec 2017 £m Change on prior period % Number o

• f

stores Dec 2 2018 Number of stores Dec 2017 United Kingdom 143.3 .3 147.7 (3) 135 135 141 Germany 6.9 .9 7.9 (13) 8 8 Republic of Ireland 6.3 .3 5.7 11 7 7 United States of America 0.2 .2 0.2

• 3

3 Total 156.7 .7 161.5 (3) 153 153* 159*

* Including 37 concession stores (2017: 39 concession stores)

45 45

Dec 2 2018 £m £m Dec 2017 £m Change on prior period % Depreciation and amortisation 2.5 .5 3.0 (17) Employment costs 19.3 .3 19.3

• Occupancy costs

23.3 .3 22.5 4 House of Fraser write-off 0.7 .7

• 100

Other operating costs 11.7 .7 11.8 (1) Trading expenses 57.5 .5 56.6 2

OFFICE – TRADING EXPENSES

Excluding the House of Fraser write-off, trading expenses were unchanged

46 46

Depreciation and amortisation

• Capital expenditure of £1.1 million (Dec 2017: £1.9 million) in the period
• Decrease due to assets becoming fully depreciated and lower capital expenditure during the

period Employment c costs (u (unchanged)

• Excluding once-off costs, employment costs decreased 3%

Occupancy c costs

• Comparable occupancy costs remained unchanged

OFFICE – ANALYSIS OF TRADING EXPENSES

17%

decrease

4%

increase

47 47

House o

• f Fraser write-off
• £0.7 million write-off due to House of Fraser entering administration

Other operating costs

• Comparable other operating costs increased by 7% due to increased e-commerce

spending to grow sales

OFFICE – ANALYSIS OF TRADING EXPENSES (CONTINUED)

1%

decrease

48 48

15 730 5 455 50 (613) (1 529) (156) 18 937 (938) 17 999 (3 174) 14 825#

• 5 000

10 000 15 000 20 000 25 000 Cash EBITDA* Working capital movements Interest received Finance costs Tax paid Capex maintenance Free cash flow Capex expansion Net cash increase before loan repayments Loans repaid Net cash increase for the period

OFFICE – CASH FLOW ANALYSIS

(£’000)

* Earnings before interest, tax, depreciation and amortisation

# Impacted by timing of creditors payments. If creditors

were paid before the period-end, the net cash increase for the period would have been approx. £8 million.

49 49

3

50 50

• South African credit market growing across all sectors (NCR report Q2 2018)
• Overall credit health under pressure with industry early defaults growing, which has driven the TransUnion

Consumer Credit Index down to below 50, indicating deteriorating credit health

• Truworths in a different cycle with Good/Bad odds and 4+ cycle balance improving year-on-year and

relative to our retail credit competitors (Principa data)

• Truworths accounts continue to appeal to the market with record application volumes, with the majority

from applicants under the age of 30

• With the increased volume of applications, predominantly from people under the age of 30, the overall

credit risk approval rate decreased

• This was in-line with expectations as our strict credit granting criteria were maintained
• The net effect was a strong growth in the number of accounts opened and strong sales growth from new

accounts

• Sustained improvement in collections operations and credit strategy have driven down the overdue

percentage and reduced the net provision

TRUWORTHS ACCOUNTS – OVERVIEW

51 51

TRANSUNION – SA CONSUMER CREDIT INDEX

The TransUnion S SA C Consumer C Credit Index (C (CCI) ) fell s sharply from 50 in Q3 2018 to 45 i in Q4 2 2018.

The key driver of the decline is rising loan defaults. The proportion of total consumer accounts 3 months in arrears has been rising steadily since Q4 2017 and in Q4 2018 was around 13% higher than the 2017 lows. This trend has not been matched by a rise in distressed borrowing signals, however poor employment conditions, high fuel prices in Q4, weak income growth, and higher interest rates all appear to have taken their toll on consumer credit health.

Accounts in early default (3 months in arrears) increased 10% year-on-year in Q4. There

continues to be a lack of evidence of worsening.

Household c cash f flow remained unchanged. Household d debt servicing costs increased slightly during the quarter. The Reserve Bank hiked

the repo rate by 25bps during Q4 2018.

Distressed borrowing (revolving credit utilisation) with revolving credit utilisation falling 1.3% y/y

in Q3. Overall TransUnion consumer credit behaviour data nonetheless shows rising consumer stress.

• The index measures consumer credit health where 50

50 is t the break-even level between improvement and deterioration.

• Data weighting in the TransUnion CCI

− Defaults and distressed borrowing – 50% 50% − Household cash flow – 35% 35% − Debt servicing cost – 15% 15%

45 45

Q4 2018

50 50

Q3 2018

55 55

Q4 2017

Q4 2018 CCI: Key facts and figures

TransUnion SA Consumer Credit Index

Source: TransUnion, ETM, Macrobond

52 52

TRUWORTHS ACCOUNTS – NEW ACCOUNT APPLICATIONS

Truworths appeals to the young market as ± 50% of account applicants are under 30 and ± 25% are under 25

Age distribution (%) %) 24 24 20 14 14 4

• 5

10 15 20 25 30 18 - 24 25 - 29 30 - 34 35 - 39 40 - 49 50+

53 53

TRUWORTHS ACCOUNTS – NEW APPLICATIONS VS. ACCEPTANCE RATE

• No. of new account

applications ('000) (%) %)

• 5

10 15 20 25 30 35 40

• 200

400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018

• No. of new account applications ('000)

Risk approved % Opened applications %

54 54

TRUWORTHS ACCOUNTS – NEW ACCOUNT OPENINGS

Opened accounts

Strong growth in opened accounts

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2017 2018 2019

55 55

TRUWORTHS ACCOUNT – SALES GROWTHS

Accounts sales growth year-on-year 2015 % 2016 % 2017 % 2018 2018 % Months on book 1 – 12 months 25 (17)

• 17

17 13 – 24 months 2 20 (19) (5 (5) 25 – 36 months 1 (1) 13 (2 (20) 36+months 16 7 2 2

Positive for the future

56 56

TRUWORTHS ACCOUNTS – SHOPPABLE ACCOUNTS

• No. of

accounts Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2018 2019

57 57

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18 Aug-18 Nov-18

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20% Good/Bad Ratio Year-on

• n-Year Change

Y-on-Y % Change Industry Excl. Truworths Y-on-Y % Change Truworths GROUP Industry Excl. Truworths Truworths GROUP

TRUWORTHS – TOTAL GOOD(0-1)/TOTAL BAD (2+) BALANCE RATIO

Source: Principa Excludes Edcon

Total Good(0-1)/Total Bad (2+) balance ratio for Truworths has improved, while the Industry deteriorated compared to same period last year

IMPROVING DETERIORATING

58 58

• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2015-08 2015-11 2016-02 2016-05 2016-08 2016-11 2017-02 2017-05 2017-08 2017-11 2018-02 2018-05 2018-08 2018-11 % % Year-on

• n-Year change

4+ + Cycle Balances Industry Excl. Truworths Truworths GROUP Y-on-Y % Change Industry Excl. Truworths Y-on-Y % Change Truworths GROUP

TRUWORTHS – % OF BOOK BALANCE 4+ CYCLES DELINQUENT

Truworths Total 4+ Balances improved while industry remained the same

DETERIORATING IMPROVING

Source: Principa Excludes Edcon

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TRUWORTHS ACCOUNTS – STATISTICS

Dec 2 2018 Dec 2017 Number of active accounts (000's) 2 6 688 2 592 Change in number of active accounts (%) 4 (1) Gross trade receivables (before doubtful debt allowance) (Rm) 6 3 396 6 334 Change in gross trade receivables (before doubtful debt allowance) (%) 1

• Account sales as a % of retail sales

(%) 70 70 69 Qualifying payment (%) 90 90 90 Accounts opened to applications ratio (%) 23 23 24 Active account holders able to purchase (%) 86 86 87 Overdue values as a % of gross trade receivables (%) 10 10 10

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TRUWORTHS ACCOUNTS – STATISTICS (CONTINUED)

Note Dec 2 2018 Dec 2017 Net bad debt as a % of account sales (%) 8.4 .4 9.2 Net bad debt as a % of account revenue 1 (%) 7.6 .6 8.1 Net bad debt as a % of gross trade receivables 2 (%) 14.0 .0 14.8 Doubtful debt allowance as a % of gross trade receivables 3 (%) 18.8 .8 12.4 Trade receivable interest as a % of gross trade receivables 4 (%) 16.8 .8 20.2

Notes 1. Account revenue includes account sales, trade receivables interest and annual account administration fee 2. Annualised Non-comparable information 3. Increase in doubtful debt allowance relative to prior period due to adoption of IFRS 9 4. Annualised and impacted by adoption of IFRS 9. Excluding the IFRS 9 interest reclassification, trade receivable interest as a % of gross trade receivables would have been 18.4.

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National Credit Amendment Bill

• The 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

• Eligible consumers will be able to apply for debt intervention and if their application is successful they could be

granted anything from rearrangement of the debts to suspension of the credit agreements in part or in full for 12 months (which may be extended by a further 12 months) or even in certain instances the extinguishment of the debt after a period of time

• 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

• Scenarios on the potential impact of the Bill have been considered in our forward-looking doubtful debt allowance

TRUWORTHS ACCOUNTS – REGULATIONS

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IFRS 9 Financial Instruments

• Effective from the 2019 financial period
• Significant changes include:

– Provision for lifetime expected credit losses in respect of stage 2 and 3 trade receivables – Interest revenue on stage 3 accounts are reclassified from Interest Income to Trade Receivable Costs

• Transition date

– Transition date provision increased to 19% - increase in provision attributable to: » Provision for lifetime expected losses (stage 2 and 3) » Forward-looking information, taking into account economic and legislative outlook – Increase in provision on transition date was processed through retained earnings

• Full transition disclosure will be included in June 2019 results

TRUWORTHS ACCOUNTS – ACCOUNTING STANDARDS

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STRATEGIC FOCUS AREAS

Group focus areas

• Truworths and Office continue to collaborate
• Investigate strategic acquisitions

Truworths focus areas

• New store concepts
• Merchandise
• E-commerce
• Lay-bys
• Supply chain
• Data-driven decision-making
• Brand marketing

Office focus areas

• New store concept
• Marketing, customer engagement and loyalty
• Expansion and growth of e-commerce
• Supply chain

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Context: One of a kind EXPERIENTIAL concept store by TRUWORTHS

• An upmarket brand offering a collection of fashion, beauty and homeware
• Create a modern retail experience for the discerning female customer
• Elevate the Truworths offering and brand identity
• Aimed at capturing market share in the better-end segment by offering our higher LSM customer a range
• f products with unique appeal
• Create a space that is customisable by region and can be rolled out into better-end malls or more exclusive

smaller retail environments

• Allows for easy experimentation with both products and mix
• First store to open in April 2019 in the V&A Waterfront, Cape Town

TRUWORTHS STRATEGIC FOCUS AREAS – NEW STORE CONCEPTS

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ID K Kids: Successfully piloted ID Kids range in 26 Identity stores in summer 2018

• Rolling out to a large number of stores for summer 2019
• Range is focused on the 2-8 year age group and covers both Girls and Boys collections
• Utilise the extensive in-house childrenswear experience; look and feel aligned with the DNA of Identity and

is “cool and fun” New e emporium c concept: Launched refreshed emporium store concept

• Tygervalley store includes Loads of Living
• Enhancements to existing Ladies and Men’s concept

Other New Concept/s /s

TRUWORTHS STRATEGIC FOCUS AREAS – NEW STORE CONCEPTS (CONTINUED)

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Product life-cycle m management (P (PLM) ) system

• Benefits include:

– Increased visibility for stakeholders, including management, across all stages of the range development process – Focus on the customer by improving product quality – Improve merchandising performance through improved margins and sourcing – Support range growth by decreasing time-to-market – Increase efficiency through better reporting, visibility and reduced redundancy – Improved inter-departmental communication

• Maintain simplicity in terms of process and system integration as well as limiting disruption to the

business

TRUWORTHS STRATEGIC FOCUS AREAS – MERCHANDISE

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Merchandise management system

• Upgrade core merchandise operations management system
• New system provides flexible application with high functionality for future growth
• Leverage new features and improve omni-channel capabilities
• Improved integration with other systems (including point-of-sale, inventory management, e-commerce,

pricing and finance)

• Replace legacy code customisations with best practice
• Facilitate future upgrades of point-of-sale and planning systems

TRUWORTHS STRATEGIC FOCUS AREAS – MERCHANDISE (CONTINUED)

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Ladieswear r range b building review p project

• Consider consolidation of certain sub departments within the Ladieswear portfolio
• Maintain the identity of our brands while enabling us to show clearly what Truworths stands for in terms
• f volume and promotional items
• Drive improved margins and value offerings through volume consolidation and bulk negotiations

Buying p process r review

• Buying process reviewed to allow merchants to spend more time with product and maximise trade
• pportunities

TRUWORTHS STRATEGIC FOCUS AREAS – MERCHANDISE (CONTINUED)

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• New platform positions Truworths for e-commerce growth in South Africa
• Continue to add brands and enhance functionality and customer experience
• Omni-channel commerce allows customers to transact with Truworths in the manner they choose
• E-commerce model profitable from day 1, trading margin already exceeding that of stores
• Positive brand interactions reinforcing long-term relationship with customers
• Fashion delivery sub-project to go live in April 2019

– Customer orders in store – Fulfilment through e-commerce order management engine

• Currently evaluating best architecture for launch of Loads of Living and Identity websites in late

2019/early 2020

TRUWORTHS STRATEGIC FOCUS AREAS – E-COMMERCE

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• Lay-bys rolled out across the store portfolio in last quarter of calendar 2018
• Lay-by payment option well received by customers
• Allows customer to select merchandise and pay off over three months
• Non-account customers who are unable to pay upfront can still buy Truworths merchandise
• Processed over 120 000 lay-bys for more than 100 000 customers since launch
• Lay-bys contribute approximately 1% of retail sales
• Average of 80% of lay-bys are fulfilled
• All lay-by customers are loyalty members and form part of a customer management strategy to encourage

repeat purchases and cross-selling of accounts

TRUWORTHS STRATEGIC FOCUS AREAS – LAY-BYS

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New d distribution centre

• Aimed at meeting distribution requirements for the next 15 to 20 years
• Create capacity for all future unit processing, inventory capacity and storage requirements, including

business growth, changes in allocation strategies, maximising replenishment opportunities, facilitating e- commerce growth and the ability to absorb new acquisitions

• Project commenced and estimated to run over three years at an estimated cost of R400 million – R500

million

• Being built adjacent to current DC in Epping, Cape Town

TRUWORTHS STRATEGIC FOCUS AREAS – SUPPLY CHAIN

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Credit

• New account optimisation project complete and new credit strategies are live
• Credit authorisation and limit increase optimisation projects underway

Merchandise

• Extensive engagement with specialist providers of artificial intelligence and machine-learning solutions to

assist with various aspects of the merchandise process

TRUWORTHS STRATEGIC FOCUS AREAS – DATA-DRIVEN DECISION MAKING

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Integrated brand m marketing

• Develop a consistent brand image for the emporium and constituent brands
• Determine a process and structure to communicate the brand image to entice customers with an

aspirational and authentic portrayal of our brand DNA across all channels and customer touch points

TRUWORTHS STRATEGIC FOCUS AREAS – BRAND MARKETING

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New s store concept

• “Store of the future” concept to be launched in March 2019 in Office (Oxford Street) and June 2019 in

Offspring (Selfridges)

Marketing, , customer engagement a and l loyalty

• Customer research and analysis exercise well under way
• Enhanced understanding of customer will be used to adapt customer approach

Expansion and g growth of e e-commerce

• Ongoing enhancement of customer experience and transactional touch points, including new omni-channel

payment options, improved click & collect and website redesign

Supply c chain

• Review of the current warehousing and distribution model to extract efficiencies

OFFICE STRATEGIC FOCUS AREAS

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• Team motivated and re-energised by new CEO
• Offspring outperforming the marketplace and growing our position within our community @ Offspring,

making us a strategic global account with key partners

• Deep market research in progress to understand our Office “muse” and most profitable customers already

redirecting our channel marketing and gaining traction

• Office and Offspring new websites launching in summer
• Refocusing of our own-brand buying and sourcing to improve sell through, differentiation and positioning

within the marketplace

• Office to become an exciting and differentiated place for our customer to shop while managing tighter

inventory positions

• New omni-channel capabilities landing throughout the year, improving service, multichannel conversion and

productivity for both Office and Offspring

OFFICE HIGH IMPACT “NEW CEO” INITIATIVES

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• Converting Greenford Warehouse to become a faster response digital hub for London and mainland Europe
• Continued closure of non-profitable and off-strategy retail, freeing up working capital to redirect to on-

strategy locations and growth drivers

• Introduction of accessories to both Office and Offspring to drive basket size of associated products e.g.

back to school/college bags

• Trial bigger, better and digitally-enabled store strategy in partnership with our key suppliers

OFFICE HIGH IMPACT “NEW CEO” INITIATIVES (CONTINUED)

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• Continued pressure on consumers – Ongoing low economic growth, together with a weak labour market

and high unemployment

• Retail spending expected to come under renewed strain in the months ahead from rising utility costs and

uncertainty ahead of the country’s general election in May

• Sales revenue expected to benefit from new e-commerce platform and layby offering in South Africa
• Positive factors for the medium term include:

– Continued improvement in health of the account portfolio – Ongoing growth in both new and total accounts in good standing – Strong cash flow and balance sheet – Implementation of various strategic initiatives

• Trading space expected to grow 2% for full 2019 financial period

TRUWORTHS – OUTLOOK

Retail sales for the first 7 weeks of the second half of the 2019 financial period increased relative to the corresponding period in 2018.

2%

increase

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• Fragile retail economy in UK will remain under extreme pressure amidst rising concerns over the faltering

negotiations ahead of the end-March Brexit deadline

• Staff morale is high in the business despite the challenging environment
• Key strategic initiatives in the coming months that will drive future growth include:

– “Store of the Future” concepts in Office (Oxford Street) and in Offspring (Selfridges) – Significant new developments in the highly successful e-commerce platform

• Trading space expected to decrease 5% for full 2019 financial period

OFFICE – OUTLOOK

Retail sales for the first 7 weeks of the second half of the 2019 financial period increased in Sterling relative to the corresponding period in 2018.

5%

increase

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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

• perating 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

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