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FOS FOSP
FOS
FOS/FOSP - Foschini Ltd - Reviewed Unaudited Provisional Results for the Year
Ended 31 March 2007
Foschini Ltd
Registration number 1937/009504/06
Share codes: FOS-FOSP
ISIN codes: ZAE000031019 - ZAE000031027
The following consolidated results of Foschini Limited for the year ended 31
March 2007 have been reviewed by the company`s auditors, KPMG Inc. Their
unqualified review report is available for inspection at the company`s
registered office.
HIGHLIGHTS
* Retail turnover up 12,4% to R7,2 billion (14,6% for the comparable 52 weeks)
* Profit before tax up 19,8% to R1,78 billion (22,8% for the comparable 52
weeks)
* Operating margin increased to 26,1%
* Headline earnings per share up 15,4% to 534,2 cents per share (18,5% for the
comparable 52 weeks)
* Final dividend declared increased 21,4% to 170,0 cents per share
* Total dividend for the year increased by 22,7% to 270,0 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
2007 2006 % Change
Reviewed Audited
Revenue 8 361,3 7 306,7 14,4
======= ======= =======
Rm Rm %
Retail turnover 7 230,0 6 432,1 12,4
Cost of turnover 4 195,1 3 707,9
-------- --------
Gross profit 3 034,9 2 724,2
Interest received (note 4) 873,8 644,1
Dividends received 22,8 13,4
Net trading expenses (note 5) (2 044,5) (1 814,4)
-------- --------
Operating profit before finance 1 887,0 1 567,3
charges
Interest paid 104,7 79,1
-------- --------
Profit before tax 1 782,3 1 488,2 19,8
Income tax expense 590,3 479,2
-------- --------
Profit for the year 1 192,0 1 009,0
======== ========
Attributable to:
Equity holders of Foschini Limited 1 119,2 986,9 13,4
Minority interest 72,8 22,1
-------- --------
Profit for the year 1 192,0 1 009,0
======== ========
RECONCILIATION OF ATTRIBUTABLE PROFIT TO HEADLINE EARNINGS
Profit attributable to equity 1 119,2 986,9
holders of Foschini Limited
-------- --------
Headline earnings 1 119,2 986,9 13,4
======== ========
EARNINGS PER ORDINARY SHARE (cents)
- Basic 534,2 463,0 15,4
- Headline 534,2 463,0 15,4
- Diluted (basic) 514,8 449,6 14,5
- Diluted (headline) 514,8 449,6 14,5
DIVIDEND PER ORDINARY SHARE
(cents)
- Interim 100,0 80,0 25,0
- Final 170,0 140,0 21,4
------ ------ ------
- Total 270,0 220,0 22,7
------ ------ ------
Dividend cover (times) 2,0 2,1
CONSOLIDATED BALANCE SHEET
2007 2006
Reviewed Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 782,1 654,4
Goodwill and intangibles 30,9 29,6
Preference share investment 200,0 -
Loans 2,9 4,1
Private label card receivables 155,0 90,1
Loan receivables 706,3 497,6
Participation in export partnerships 103,5 108,6
Deferred taxation 179,7 152,1
-------- --------
2 160,4 1 536,5
-------- --------
Current assets
Inventory (note 6) 1 292,9 1 116,7
Preference share investment - 200,0
Trade receivables - retail 2 235,2 2 116,6
Private label card receivables 671,7 390,0
Other receivables and prepayments 186,6 97,6
Loan receivables 160,2 319,9
Participation in export partnerships 7,6 8,5
Cash 69,1 62,5
-------- --------
4 623,3 4 311,8
-------- --------
Total assets 6 783,7 5 848,3
======== ========
EQUITY AND LIABILITIES
Equity attributable to equity holders of 3 823,6 3 267,9
Foschini Limited
Minority interest 181,3 88,9
------- -------
Total equity 4 004,9 3 356,8
------- -------
Non-current liabilities
Interest-bearing debt 1 014,6 797,0
Operating lease liability 121,0 113,3
Deferred taxation 146,8 153,9
-------- --------
1 282,4 1 064,2
-------- --------
Current liabilities
Short-term loans 5,9 8,0
Trade and other payables 1 139,1 978,5
Taxation payable 234,7 327,9
Employee benefit accruals 116,7 112,9
-------- --------
1 496,4 1 427,3
-------- --------
Total liabilities 2 778,8 2 491,5
-------- --------
Total equity and liabilities 6 783,7 5 848,3
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity Minority Total
holders of interest equity
Foschini
Limited
Rm Rm Rm
Equity at 31 March 2005 as 2 496,8 16,0 2 512,8
previously stated
Operating lease adjustment (note 145,0 - 145,0
7)
-------- -------- --------
Equity at 31 March 2005 restated 2 641,8 16,0 2 657,8
Profit for the year 986,9 22,1 1 009,0
Change in degree of control - 74,7 74,7
Profit on dilution of interest in 189,1 - 189,1
subsidiary
Share-based payments reserve 19,0 - 19,0
movements
Dividends paid (388,8) (23,9) (412,7)
Delivery of shares by share trust 80,1 - 80,1
Shares purchased by share trust (256,9) - (256,9)
Unrealised loss on hedging (3,3) - (3,3)
instruments
------- ------- -------
Equity at 31 March 2006 3 267,9 88,9 3 356,8
Profit for the year 1 119,2 72,8 1 192,0
Change in degree of control - 71,2 71,2
Profit on dilution of interest in 112,1 - 112,1
subsidiary
Share-based payments reserve 19,2 - 19,2
movements
Dividends paid (500,6) (51,6) (552,2)
Delivery of shares by share trust 92,9 - 92,9
Shares purchased by share trust (288,4) - (288,4)
Unrealised gain on hedging 1,3 - 1,3
instruments
------- ------- -------
Equity at 31 March 2007 3 823,6 181,3 4 004,9
======= ======= =======
SUPPLEMENTARY INFORMATION
2007 2006
Net ordinary shares in issue (millions) 212,0 212,6
Weighted average ordinary shares in issue 209,5 213,1
(millions)
Tangible net asset value per ordinary share 1 789,4 1 523,4
(cents)
CONSOLIDATED CASH FLOW STATEMENT
2007 2006
Reviewed Audited
Rm Rm
Cash flows from operating activities
Operating profit before working capital 1 205,3 1 091,7
changes (note 8)
Increase in working capital (210,4) (530,4)
------- -------
Cash generated by operations 994,9 561,3
Increase in private label card receivables (346,6) (188,4)
Increase in loan receivables (49,0) (158,6)
Interest received 873,8 644,1
Interest paid (104,7) (79,1)
Taxation paid (718,2) (464,2)
Dividends paid (552,2) (412,7)
------- -------
Net cash inflows (outflows) from operating 98,0 (97,6)
activities
------- -------
Cash flows from investing activities
Purchase of property, plant and equipment (306,1) (313,5)
Proceeds from sale of property, plant and 4,2 4,8
equipment
Decrease in participation in export 6,0 94,2
partnerships
Decrease in loans 1,2 2,5
Shares purchased by share trust (288,4) (256,9)
Proceeds on dilution of interest in subsidiary 183,3 263,8
------- -------
Net cash outflows from investing activities (399,8) (205,1)
------- -------
Cash flows from financing activities
Proceeds on delivery of shares by share trust 92,9 80,1
Increase in interest-bearing debt 217,6 243,6
(Decrease) increase in short-term loans (2,1) 5,3
------- -------
Net cash inflows from financing activities 308,4 329,0
------- -------
Net increase in cash and cash equivalents 6,6 26,3
during the year
Cash and cash equivalents at the beginning of 62,5 36,2
the year
------- -------
Cash and cash equivalents at the end of the 69,1 62,5
year
======= =======
NOTES
1. The reviewed provisional results for the year ended 31 March 2007 have
been prepared in accordance with the group`s accounting policies,
which comply with International Financial Reporting Standards (IFRS)
and have been consistently applied with those adopted for the year
ended 31 March 2006.
Certain comparative figures have been reclassified in order to improve
disclosure.
2. These financial statements incorporate the financial statements of the
company, all its subsidiaries and all entities over which it has
operational and financial control.
3. Included in share capital are 16,9 (2006: 16,9) million shares, which
are owned by a subsidiary of the company, and 11,6 (2006: 11,0)
million shares, which are owned by the share incentive trust. These
have been eliminated on consolidation.
2007 2006
Rm Rm
4. Interest received
Trade receivables - retail 299,3 253,0
Loan receivables 336,5 287,0
Private label card receivables 237,0 100,2
Sundry - financial services 1,0 3,9
-------- --------
873,8 644,1
======== ========
5. Net trading expenses
Depreciation and amortisation (174,1) (148,9)
Employee costs: normal (920,9) (813,9)
Employee costs: bonuses & restraint (24,4) (51,9)
payments
Employee costs: share-based payments (19,2) (19,0)
Store occupancy costs: normal (512,7) (459,6)
Store occupancy costs: operating lease (7,7) 6,8
liability adjustment
Net other operating costs (385,5) (327,9)
--------- ---------
(2 044,5) (1 814,4)
======== ========
6. Inventory
Merchandise 1 194,8 1 047,1
Raw materials 44,4 19,2
Goods in transit 34,3 25,0
Shopfitting stock 18,1 23,2
Consumables 1,3 2,2
-------- --------
1 292,9 1 116,7
======== ========
7. Operating lease adjustment
During the course of the year, the straight-line model used to
calculate the operating lease liability was reassessed. This resulted
in an adjustment of R145 million to opening retained earnings. The
effect of the reassessment on the prior year income statement is not
material and accordingly, comparatives have not been restated.
8. Operating profit before working
capital changes
Operating profit before finance charges 1 887,0 1 567,3
Interest received (873,8) (644,1)
-------- --------
Operating profit before finance charges & 1 013,2 923,2
interest received
Non-cash items 192,1 168,5
-------- --------
Operating profit before working capital 1 205,3 1 091,7
changes
======== ========
SEGMENTAL ANALYSIS
Financial Financial Retail Retail
Services Services
2007 2006 2007 2006
Reviewed Audited Reviewed Audited
Rm Rm Rm Rm
REVENUE *
External 677,6 494,5 7 683,7 6 812,2
Inter-segment - - - -
------- ------- ------- -------
Total revenue 677,6 494,5 7 683,7 6 812,2
------- ------- ------- -------
SEGMENT RESULT
Operating profit before 408,5 317,1 1 478,5 1 250,2
finance charges
------- ------- ------- -------
External (31,0) (7,8) (73,7) (71,3)
Inter-segment (54,8) (56,2) 54,8 56,2
------- ------- ------- -------
Interest paid (85,8) (64,0) (18,9) (15,1)
Income tax expense (99,4) (73,5) (490,9) (405,7)
------- ------- ------- -------
Profit for the year 223,3 179,6 968,7 829,4
------- ------- ------- -------
* includes retail turnover, interest received, and other income
SEGMENT ASSETS
Non-current assets 919,2 609,9 1 241,2 926,6
Current assets 839,5 747,1 3 783,8 3 564,7
Inter-segment assets 12,9 12,9 (12,9) (12,9)
(liabilities)
------- ------- ------- -------
Total assets 1 771,6 1 369,9 5 012,1 4 478,4
------- ------- ------- -------
SEGMENT LIABILITIES
Non-current liabilites 391,6 224,6 890,8 839,6
Current liabilities 158,1 143,2 1 338,3 1 284,1
Inter-segment 725,4 676,4 (725,4) (676,4)
liabilities (assets)
------- ------- ------- -------
Total liabilities 1 275,1 1 044,2 1 503,7 1 447,3
------- ------- ------- -------
SEGMENT INFORMATION
Capital expenditure 13,2 3,6 292,9 309,9
Depreciation and 5,5 1,8 168,6 147,1
amortisation
SEGMENTAL ANALYSIS
(continued)
Consol- Consol-
idated idated
2007 2006
Reviewed Audited
Rm Rm
REVENUE *
External 8 361,3 7 306,7
Inter-segment - -
------- -------
Total revenue 8 361,3 7 306,7
------- -------
SEGMENT RESULT
Operating profit before 1 887,0 1 567,3
finance charges
------- -------
External (104,7) (79,1)
Inter-segment - -
------- -------
Interest paid (104,7) (79,1)
Income tax expense (590,3) (479,2)
------- -------
Profit for the year 1 192,0 1 009,0
------- -------
* includes retail turnover, interest received, and other income
SEGMENT ASSETS
Non-current assets 2 160,4 1 536,5
Current assets 4 623,3 4 311,8
Inter-segment assets - -
------- -------
Total assets 6 783,7 5 848,3
------- -------
SEGMENT LIABILITIES
Non-current liabilites 1 282,4 1 064,2
Current liabilities 1 496,4 1 427,3
Inter-segment - -
liabilities
------- -------
Total liabilities 2 778,8 2 491,5
------- -------
SEGMENT INFORMATION
Capital expenditure 306,1 313,5
Depreciation and 174,1 148,9
amortisation
All retail divisions within the group operate in an established retail market
and are therefore considered to be subject to similar risks and rewards.
COMMENT
GROUP OVERVIEW
This report covers 52 weeks compared to 53 weeks in the corresponding prior
period ended 31 March 2006 which distorts direct comparisons. In order to make
comparisons meaningful, percentages provided are given for both the 52-week and
53-week period ended 31 March 2006.
In the past five years our group has achieved compounded growth in headline
earnings per share of 56%. Coming off this extremely high base, our group has
once again achieved another year of good performance.
Notwithstanding the increasing interest rate cycle, the level of consumer
confidence and spending has remained strong. Retail turnover for the year
increased by 12,4% (14,6% in the case of 52 weeks) to R7,230 billion. Gross
margins for the period were marginally down by 0,4% on the previous year,
primarily as a result of a change in the sales mix. Headline earnings per
ordinary share increased by 15,4% (18,5% in the case of 52 weeks) to 534,2
cents, whilst the group`s operating margin increased to 26,1% from 24,3%. Cash
generated by operations for the year amounted to R994,9 million.
The dividend cover has been reduced to 2,0 from 2,1 times attributable headline
earnings per share. Accordingly the final dividend has increased by 21,4% to
170 cents per share. Dividends distributed in respect of the full year of 270
cents per share have increased by 22,7%.
In terms of the group`s agreement with the Standard Bank of South Africa Limited
(SBSA), Standard Bank has acquired a further 10% in RCS Investment Holdings
(RCSIH) with effect from 1 April 2007, increasing its holding in that company to
45%, the maximum possible in terms of the initial transaction. Subsequent to
the year-end the group received cash proceeds of R211,5 million in respect of
this transaction.
During the year under review the group opened 96 new stores across all
divisions, whilst 37 stores were closed. At the end of the year the group was
trading out of 1 332 stores with a trading area of 380 615 square metres, an
increase of 7,3% compared to the previous year.
TRADING DIVISIONS
The buoyant trading conditions experienced in the first half of the financial
year continued into the second half, albeit at lower growth levels, having
regard to the high base. Our divisions performed well, once again substantially
above our product inflation of approximately 4%. The exception to this was our
Foschini division which suffered stock shortages during the period August to
November resulting in a loss in turnover of approximately R100 million.
No. of Retail % Change % Change
stores turnover 52 52 versus 52 versus
weeks ended 53 weeks 52 weeks
31.03.07
Rm
@home 51 412,4 26,3 28,6
Exact! 180 682,6 15,2 17,4
Foschini stores 386 2 911,8 9,4 11,6
Jewellery division 316 1 022,5 14,5 16,3
Markham 191 1 138,3 15,9* 18,6*
Sports division 208 1 062,4 17,4 20,0
------ -------- -------- --------
Total 1 332 7 230,0 12,4 14,6
------ -------- -------- --------
*Growth excludes the discontinued RJL brand.
Total comparable 52-week same store turnover for the period grew by 8,0%, with
apparel growing 4,8%, cosmetics 15,5%, cellphones 26,9%, jewellery 10,7% and
homewares 2,6%.
Our @home division continued with a substantial increase in its store base
during the year and grew its turnover to R412,4 million, an increase of 28,6%.
Comparable 52-week same store growth of only 2,6% is primarily due to its own
cannibalisation as it rolls out additional stores.
Exact! maintained its strong performance with its sales densities continuing to
improve and achieved very satisfactory comparable 52-week same store growth of
12,9%.
The Foschini division had a disappointing year caused by the stock shortages
during August to November. These stock shortages were caused, in the main, by
changes to the in-house manufacturing process as well as the procurement lead-
time being reduced too aggressively in order to improve stock turns and
flexibility. This was corrected from December onwards, but because of this, the
comparable 52-week same store growth was only 3,7%.
The jewellery division comprising American Swiss Jewellers, Sterns & Matrix
traded well with comparable 52-week same store growth of 12,7%. This division
continues to be a leader in the retail jewellery market in southern Africa.
The Markham division traded well, with comparable 52-week same store growth of
8,2% (excluding the discontinued RJL brand). Its new store design concept has
now been rolled out to 72 stores, the balance still to be converted. Its RJL
brand was discontinued during the year with its real estate being converted into
other group formats - in the main Luella, the Foschini division`s new shoe and
accessory chain.
The sports division, trading as Totalsports, Sportscene, and DueSouth traded
well with growth in turnover of 20,0% and comparable 52-week same store growth
of 10,9%.
FOSCHINI RETAIL CREDIT AND FINANCIAL SERVICES
Foschini retail credit - our retail debtors book, which amounts to R2,2 billion,
increased by 5,6% during the year, whilst credit turnover increased by 8,5%
compared to the previous corresponding period. Cash sales as a percentage of
total sales increased from 30,8% to 33,3%. In our interim profit announcement
at the end of September 2006 we indicated that there was evidence that the
credit cycle had entered a new phase where conditions are not as favourable as
they had been in recent years. As a result of this, we strengthened our
collection procedures which has resulted in our collections from our debtors
being very satisfactory. Net bad debts as a percentage of credit transactions
increased only marginally from 2,4% to 2,6% which in the current economic cycle
is extremely good.
On 1 June 2007 the National Credit Act (NCA) will be implemented. The NCA makes
provision for more stringent evaluation of the ability of new and existing
account holders to service the credit which we grant them. Whilst the NCA will
make it more difficult for credit providers to operate with the same freedom as
before, we are supportive of the intent of the NCA and have applied substantial
time and resource to ensuring that on 1 June our policies, systems and processes
will be compliant with the NCA, whilst ensuring that the impact on our business
is minimal.
Our financial services division comprises RCS Personal Finance, our group`s
personal loans business, and RCS Cards, which offers credit to customers of
merchants outside of the group. This division continued with its satisfactory
performance, growing profits before tax by 27,5%, which currently represents
18,1% of our group`s profit before tax. As a result of the transaction with the
Standard Bank of South Africa Limited (SBSA), our group`s shareholding in this
division was 65% for the current year. This decreased by a further 10% to 55%
from 1 April 2007.
PROSPECTS
We anticipate opening in excess of 80 new stores across all divisions in the
year ahead.
Despite the recent increase in interest rates, turnover for the first 8 weeks of
the new financial year is in line with budget. Barring unforeseen
circumstances, we remain confident that we will be able to produce another year
of satisfactory growth.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 141 of 3,25% (6,5 cents per share) in respect of the six months
ending 30 September 2007 has been declared, payable on Monday, 1 October 2007 to
holders of 6,5% preference shares recorded in the books of the company at the
close of business on Friday, 28 September 2007.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 20 September 2007. Foschini Limited preference shares
will commence trading "ex" the dividend from the commencement of business on
Friday, 21 September 2007 and the record date, as indicated, will be Friday, 28
September 2007.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 21 September 2007 to
Friday, 28 September 2007, both dates inclusive.
FINAL ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared a final ordinary dividend of 170,0 cents per
ordinary share payable on Monday, 16 July 2007 to ordinary shareholders recorded
in the books of the company at the close of business on Friday, 13 July 2007.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Friday, 6 July 2007. Foschini Limited ordinary shares will
commence trading "ex" the dividend from the commencement of business on Monday,
9 July 2007 and the record date, as indicated, will be Friday, 13 July 2007.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Monday, 9 July 2007 to
Friday, 13 July 2007, both dates inclusive.
Certificated ordinary shareholders are reminded that all entitlements to
dividends with a value less than R5,00 per certificated shareholder will be
aggregated and the proceeds donated to a registered charity of the directors`
choice, in terms of the articles of association of the company.
------------------------------------------------------------------------------
Signed on behalf of the Board
E Osrin, Chairman D M Polak, CEO
31 May 2007
Non-executive directors:
E Osrin (Chairman), D M Nurek (Deputy Chairman), Prof. F Abrahams, S E Abrahams,
L F Bergman(Austrian), W V Cuba, N H Goodwin, M Lewis.
Executive directors:
D M Polak, R Stein, S N Bowley, A D Murray.
Company secretary:
D Sheard
Registered Office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall
Street, Johannesburg, 2001.
SPONSOR:
UBS South Africa (Pty) Ltd
Visit our website at http://www.foschinigroup.co.za/
Date: 31/05/2007 14:00:06 Produced by the JSE SENS Department.
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