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FOS FOSP
FOS
FOS/FOSP - Foschini Limited - Unaudited Interim profit announcement
Foschini Limited
Registration number: 1937/009504/06
Share codes: FOS & FOSP
ISIN codes: ZAE000031019 & ZAE000031027
UNAUDITED INTERIM PROFIT ANNOUNCEMENT
The following are the Foschini group results for the half-year ended September
2007. This report has not been audited or reviewed by the company`s auditors.
HIGHLIGHTS
- Retail turnover up 8,8% to R 3,7 billion
- Profit before tax up 12,5% to R 804,9 million
- Headline earnings per share up 12,2% to 236,0 cents
- Interim dividend declared increased 18,0% to 118,0 cents per share
- Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
26 weeks ended 52 weeks
ended
30.09.2007 30.09.2006 31.03.2007
Unaudited Unaudited Change Audited
Rm Rm % Rm
Revenue (note 5) 4 428,6 3 941,6 8 431,7
Retail turnover 3 666,3 3 370,2 8,8 7 230,0
Cost of turnover 2 153,5 1 982,9 4 195,1
Gross profit 1 512,8 1 387,3 3 034,9
Interest received 510,2 424,3 873,8
(note 6)
Dividends received 8,2 5,0 22,8
Net trading (1 167,9) (1 070,7) (2 044,5)
expenses (note 7)
Operating profit 863,3 745,9 1 887,0
before finance 15,7
charges
Interest paid 58,4 30,3 104,7
Profit before tax 804,9 715,6 12,5 1 782,3
Income tax expense 261,8 235,7 590,3
Profit for the 543,1 479,9 13,2 1 192,0
period
Attributable to:
Equity holders of 493,2 442,4 1 119,2
Foschini Limited
Minority interest 49,9 37,5 72,8
Profit for the 543,1 479,9 1 192,0
period
RECONCILIATION OF ATTRIBUTABLE PROFIT TO HEADLINE EARNINGS
Profit attributable 493,2 442,4 1 119,2
to equity holders
of Foschini Limited
Headline earnings 493,2 442,4 11,5 1 119,2
EARNINGS PER ORDINARY SHARE (CENTS)
Basic 236,0 210,3 12,2 534,2
Headline 236,0 210,3 12,2 534,2
Diluted (basic) 230,7 203,9 13,2 514,8
Diluted (headline) 230,7 203,9 13,2 514,8
DIVIDEND PER ORDINARY SHARE (CENTS)
Interim 118,0 100,0 100,0
Final - - 170,0
Total 118,0 100,0 18,0 270,0
DIVIDEND COVER (times) 2,0 2,1 2,0
CONSOLIDATED BALANCE SHEET
Sept. 2007 Sept. 2006 March 2007
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 829,3 732,0 782,1
equipment
Goodwill and intangible 32,6 31,2 30,9
assets
Preference share investment 200,0 200,0 200,0
Loans 1,5 4,7 2,9
Private label card 178,4 130,4 155,0
receivables
Loan receivables 651,7 520,2 706,3
Participation in export 101,8 104,0 103,5
partnerships
Deferred taxation 179,7 152,1 179,7
2 175,0 1 874,6 2 160,4
Current assets
Inventory (note 8) 1 338,3 1 177,6 1 292,9
Trade receivables - retail 2 243,0 2 101,2 2 235,2
Private label card 773,0 462,2 671,7
receivables
Other receivables and 84,7 73,4 186,6
prepayments
Loan receivables 147,8 339,8 160,2
Participation in export 6,1 9,3 7,6
partnerships
Cash 72,1 65,8 69,1
4 665,0 4 229,3 4 623,3
Total assets 6 840,0 6 103,9 6 783,7
EQUITY AND LIABILITIES
Equity attributable to 3 381,9 3 382,9 3 823,6
equity holders of Foschini
Limited
Minority interest 265,9 146,0 181,3
Total equity 3 647,8 3 528,9 4 004,9
Non-current liabilities
Interest-bearing debt 1 675,7 862,9 1 014,6
Operating lease liability 133,1 118,8 121,0
Deferred taxation 146,8 149,6 146,8
1 955,6 1 131,3 1 282,4
Current liabilities
Short-term loans 9,7 7,5 5,9
Trade and other payables 1 076,8 960,0 1 139,1
Taxation payable 20,6 366,5 234,7
Employee benefit accruals 129,5 109,7 116,7
1 236,6 1 443,7 1 496,4
Total liabilities 3 192,2 2 575,0 2 778,8
Total equity and liabilities 6 840,0 6 103,9 6 783,7
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Equity Minority Total
holders of interest equity
Foschini
Limited
Rm Rm Rm
Equity at 31 March 2006 3 267,9 88,9 3 356,8
Profit for the half-year 442,4 37,5 479,9
Change in degree of control - 71,2 71,2
Profit on dilution of 112,1 - 112,1
interest in subsidiary
Share-based payments reserve 9,0 - 9,0
movements
Dividends paid (292,9) (51,6) (344,5)
Proceeds on delivery of 0,4 - 0,4
shares by share trust
Shares purchased by share (181,8) - (181,8)
trust
Unrealised gain on hedging 25,8 - 25,8
instruments
Equity at 30 September 2006 3 382,9 146,0 3 528,9
Profit for the half-year 676,8 35,3 712,1
Share-based payments reserve 10,2 - 10,2
movements
Dividends paid (207,7) - (207,7)
Proceeds on delivery of 92,5 - 92,5
shares by share trust
Shares purchased by share (106,6) - (106,6)
trust
Unrealised loss on hedging (24,5) - (24,5)
instruments
Equity at 31 March 2007 3 823,6 181,3 4 004,9
Profit for the half-year 493,2 49,9 543,1
Change in degree of control - 119,5 119,5
Profit on dilution of 92,1 - 92,1
interest in subsidiary
Share-based payments reserve 15,8 - 15,8
movements
Dividends paid (352,2) (84,8) (437,0)
Proceeds on delivery of 72,1 - 72,1
shares by share trust
Shares purchased by share (760,4) - (760,4)
trust and subsidiary
Unrealised loss on hedging (2,3) - (2,3)
instruments
Equity at 30 September 2007 3 381,9 265,9 3 647,8
SUPPLEMENTARY INFORMATION
SUPPLEMENTARY
INFORMATION
Sept. 2007 Sept. 2006 March 2007
Unaudited Unaudited Audited
Net ordinary shares in issue 203,1 209,2 212,0
(millions)
Weighted average ordinary 209,0 210,4 209,5
shares in issue (millions)
Tangible net asset value per 1 649,1 1 604,1 1 789,4
ordinary share (cents)
CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED CASH FLOW
STATEMENT
Sept. 2007 Sept. 2006 March 2007
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before 470,5 435,8 1 191,5
working capital changes
(note 10)
Increase in working capital (3,1) (37,5) (218,1)
Cash generated by operations 467,4 398,3 973,4
Increase in private label (124,7) (112,5) (346,6)
card receivables
Decrease (increase) in loan 67,0 (42,5) (49,0)
receivables
Interest received 510,2 424,3 873,8
Interest paid (58,4) (30,3) (104,7)
Taxation paid (note 11) (475,9) (201,4) (718,2)
Dividends received 8,2 5,0 22,8
Dividends paid (437,0) (344,5) (552,2)
Net cash (outflows) inflows (43,2) 96,4 99,3
from operating activities
Cash flows from investing
activities
Purchase of property, plant (146,5) (165,5) (304,4)
and equipment
Proceeds from sale of 2,7 1,9 4,0
property, plant and
equipment
Acquisition of client list (2,8) - (2,8)
Decrease in participation in 3,2 3,8 6,0
export partnerships
Decrease (increase) in loans 1,4 (0,6) 1,2
Proceeds on dilution of 211,6 183,3 183,3
interest in subsidiary
Net cash inflows (outflows) 69,6 22,9 (112,7)
from investing activities
Cash flows from financing
activities
Shares purchased by share (760,4) (181,8) (288,4)
trust and subsidiary
Proceeds on delivery of 72,1 0,4 92,9
shares by share trust
Increase in interest-bearing 661,1 65,9 217,6
debt
Increase (decrease) in short- 3,8 (0,5) (2,1)
term loans
Net cash (outflows) inflows (23,4) (116,0) 20,0
from financing activities
Net increase in cash and 3,0 3,3 6,6
cash equivalents during the
period
Cash and cash equivalents at 69,1 62,5 62,5
the beginning of the period
Cash and cash equivalents at 72,1 65,8 69,1
the end of the period
NOTES
1. The unaudited results for the half-year ended 30 September 2007 have been
prepared in accordance with IAS 34 Interim Financial Reporting, using the
group`s accounting policies, that are in line with International
Financial Reporting Standards (IFRS) and have been consistently applied
to prior periods. 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 24,0(2006: 16,9) million shares which are
owned by a subsidiary of the company, and 13,4(2006: 14,4) million shares
which are owned by the share incentive trust. These have been eliminated
on consolidation.
4. The results of our RCS home loans venture are currently treated as an
associate. The accounting treatment is currently being reviewed and the
impact on these results is not material.
Sept. 2007 Sept. 2006 March 2007
Unaudited Unaudited Audited
Rm Rm Rm
5. REVENUE
Retail turnover 3 666,3 3 370,2 7 230,0
Interest received (refer 510,2 424,3 873,8
note 6)
Dividends received - retail 8,2 5,0 22,8
Merchant`s commission - RCS 19,2 15,5 36,2
financial services
Club income - retail 74,5 45,6 96,1
Club income - RCS financial 2,7 1,9 4,2
services
Customer charges income - 44,9 15,6 39,7
retail
Customer charges income - 8,5 8,2 16,0
RCS financial services
Insurance income - retail 18,8 16,5 35,5
Insurance income - RCS 36,8 32,4 66,9
financial services
Sundry income 38,5 6,4 10,5
4 428,6 3 941,6 8 431,7
6. INTEREST RECEIVED
Trade receivables - retail 176,7 162,1 299,3
Loan receivables 167,6 164,7 336,5
Private label card 165,9 97,5 237,0
receivables
Sundry - RCS financial - - 1,0
services
510,2 424,3 873,8
7. NET TRADING EXPENSES
Depreciation and (98,0) (84,0) (174,1)
amortisation
Employee costs: normal (500,7) (422,5) (920,9)
Employee costs: bonuses and (32,9) - (24,4)
restraint payments
Employee costs: share-based (15,8) (9,0) (19,2)
payments
Store occupancy costs: (270,6) (245,8) (512,7)
normal
Store occupancy costs: (12,1) (5,6) (7,7)
operating lease liability
adjustment
Other income 243,8 142,1 305,0
Other operating costs (481,6) (445,9) (690,5)
(1 167,9) (1 070,7) (2 044,5)
8. INVENTORY
Merchandise 1 271,6 1 075,9 1 194,8
Raw materials 45,6 30,4 44,4
Goods in transit 1,2 44,8 34,3
Shopfitting stock 16,7 23,1 18,1
Consumables 3,2 3,4 1,3
1 338,3 1 177,6 1 292,9
9. OPERATING LEASE ADJUSTMENT
During the course of last 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.
10. OPERATING PROFIT BEFORE
WORKING CAPITAL CHANGES
Operating profit before 863,3 745,9 1 887,0
finance charges
Interest received (510,2) (424,3) (873,8)
Dividends received (8,2) (5,0) (22,8)
Non-cash items 125,6 119,2 201,1
Operating profit before 470,5 435,8 1 191,5
working capital changes
11. TAXATION PAID
Due to a timing difference, the taxation cashflow during the current
period includes a payment which relates to the prior period.
SEGMENTAL ANALYSIS
26 weeks ended 30.09.2007
RCS Retail Consolidated
Financial
Services
Unaudited Unaudited Unaudited
Rm Rm Rm
REVENUE *
External 437,1 3 991,5 4 428,6
Inter-segment - - -
Total revenue 437,1 3 991,5 4 428,6
SEGMENT RESULT
Operating profit before 226,4 636,9 863,3
finance charges
External interest (23,4) (35,0) (58,4)
Inter-segment interest (30,7) 30,7 -
Interest paid (54,1) (4,3) (58,4)
Income tax expense (57,9) (203,9) (261,8)
Profit for the period 114,4 428,7 543,1
* includes retail turnover, interest received and other income
SEGMENT ASSETS
Non-current assets 896,4 1 278,6 2 175,0
Current assets 936,4 3 728,6 4 665,0
Inter-segment assets 14,0 (14,0) -
(liabilities)
Total assets 1 846,8 4 993,2 6 840,0
SEGMENT LIABILITIES
Non-current liabilities 486,9 1 468,7 1 955,6
Current liabilities 127,6 1 109,0 1 236,6
Inter-segment liabilities 673,7 (673,7) -
(assets)
Total liabilities 1 288,2 1 904,0 3 192,2
SEGMENT INFORMATION
Capital expenditure 3,2 143,3 146,5
Depreciation and 5,8 92,2 98,0
amortisation
SEGMENTAL ANALYSIS (cont.)
26 weeks ended 30.09.2006
RCS Retail Consolidated
Financial
Services
Unaudited Unaudited Unaudited
Rm Rm Rm
REVENUE *
External 327,6 3 614,0 3 941,6
Inter-segment - - -
Total revenue 327,6 3 614,0 3 941,6
SEGMENT RESULT
Operating profit before 208,4 537,5 745,9
finance charges
External interest (26,7) (3,6) (30,3)
Inter-segment interest (24,0) 24,0 -
Interest (paid) received (50,7) 20,4 (30,3)
Income tax expense (50,7) (185,0) (235,7)
Profit for the period 107,0 372,9 479,9
* includes retail turnover, interest received and other income
SEGMENT ASSETS
Non-current assets 677,0 1 197,6 1 874,6
Current assets 828,0 3 401,3 4 229,3
Inter-segment assets 12,9 (12,9) -
(liabilities)
Total assets 1 517,9 4 586,0 6 103,9
SEGMENT LIABILITIES
Non-current liabilities 362,3 769,0 1 131,3
Current liabilities 106,2 1 337,5 1 443,7
Inter-segment liabilities 673,1 (673,1) -
(assets)
Total liabilities 1 141,6 1 433,4 2 575,0
SEGMENT INFORMATION
Capital expenditure 3,5 162,0 165,5
Depreciation and 1,8 82,2 84,0
amortisation
SEGMENTAL ANALYSIS (cont.)
52 weeks ended 31.03.2007
RCS Retail Consolidated
Financial
Services
Audited Audited Audited
Rm Rm Rm
REVENUE *
External 721,6 7 710,1 8 431,7
Inter-segment - - -
Total revenue 721,6 7 710,1 8 431,7
SEGMENT RESULT
Operating profit before 408,5 1 478,5 1 887,0
finance charges
External interest (31,0) (73,7) (104,7)
Inter-segment interest (54,8) 54,8 -
Interest paid (85,8) (18,9) (104,7)
Income tax expense (99,4) (490,9) (590,3)
Profit for the year 223,3 968,7 1 192,0
* includes retail turnover, interest received and other income
SEGMENT ASSETS
Non-current assets 919,2 1 241,2 2 160,4
Current assets 839,5 3 783,8 4 623,3
Inter-segment assets 12,9 (12,9) -
(liabilities)
Total assets 1 771,6 5 012,1 6 783,7
SEGMENT LIABILITIES
Non-current liabilities 391,6 890,8 1 282,4
Current liabilities 158,1 1 338,3 1 496,4
Inter-segment liabilities 725,4 (725,4) -
(assets)
Total liabilities 1 275,1 1 503,7 2 778,8
SEGMENT INFORMATION
Capital expenditure 13,2 291,2 304,4
Depreciation and 5,5 168,6 174,1
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
In our latest annual report we indicated that this year would be one of the
most difficult that the group would experience for many years, but we continue
to believe that this will be short lived and that the economy will once again
continue its upward momentum with the government`s current spending on
infrastructure, as well as the build-up to the Soccer World Cup in 2010.
Interest rates have increased seven times since June 2006 which, together with
petrol price hikes and the National Credit Act (NCA) that became effective on
1 June 2007, have dampened the economy and have made life more difficult for
the average South African consumer.
Trading conditions for the first half of this year have been challenging,
particularly since the introduction of the NCA. In the circumstances, our
group has achieved another period of acceptable performance. Retail turnover
for the first six months increased by 8,8%. Gross margins for the period were
marginally up by 0,1% on the previous period, mainly as a result of a change
in the sales mix, with cellphone turnover being weaker than the other product
categories.
Operating profit increased by 15,7%, whilst profit before tax increased by
12,5%. After the deduction of the minority interest in RCS Investment Holdings
(Pty) Ltd, the group`s financial services division, attributable income has
increased by 11,5%. Headline earnings per share increased by 12,2% to 236,0
cents.
The group`s operating margin for the period increased to 23,5% from 22,1%.
During the period under review 47 new stores were opened whilst 9 stores were
closed across all divisions. At the end of the period the group was trading
out of 1 370 stores with a trading area of 392 859 square metres, an increase
of 3,2% during the current trading period.
The group`s dividend cover has been retained at two times attributable
headline earnings per share. Accordingly, the interim dividend has increased
by 18,0% to 118 cents per share from 100 cents in the corresponding period. It
remains the group`s policy to annually review the group`s dividend cover at
the year-end.
TRADING DIVISIONS
Taking into account the more muted consumer environment all our divisions
performed satisfactorily.
Retail turnover and growths in the various divisions were as follows:
No. of Retail % change
stores turnover Rm
@home 56 206,9 10,1
Exact! 183 336,2 7,7
Foschini 394 1 531,9 9,9
Markham 199 564,0 6,5
Jewellery division 323 490,8 11,1
Sports division 215 536,5 10,6
-------- -------- --------
Total 1 370 3 666,3 8,8
-------- -------- --------
Total same store sales for the period grew by 4,7%, with apparel growing 4,8%,
cosmetics 10,7%, cell phones by 0,7%, jewellery by 8,2% and homewares by 0,3%.
The Foschini division traded satisfactorily with same store growth of 4,8%.
The Markham division had a disappointing first half with same store growth of
3,7%. In the period since the half-year trading in this division has
improved.
The Jewellery division, comprising American Swiss Jewellers, Sterns and
Matrix, continues to be a leader in the retail jewellery market in southern
Africa and traded well. Same store growth was 8,2%.
Exact! with its lower LSM customer base, had same store growth of 4,9%.
The Sports division, trading as Sportscene, Totalsports and DueSouth, traded
satisfactorily with growth in turnover of 10,6% and same store growth of 4,8%.
Our @home division continues to expand and increased its store base to 56
during the period. This division achieved same store growth of 0,3% in this
extremely competitive market sector.
28 new stores will be opened in the second half of the year.
FG Financial Services - our retail debtors` book, which amounts to R2,2
billion, has increased marginally during the period, reflecting positive
collections, in line with our more aggressive collection procedures which we
referred to in our annual report at the end of last year.
Notwithstanding the downturn in the economic cycle, our collections from our
debtors remain extremely positive and our debtors` book over this period has
seen only a marginal deterioration. Net bad debts as a percentage of credit
transactions increased marginally from 2,6% to 3,1%.
Cash sales as a percentage of total sales increased from 31,9% to 35,0%.
RCS GROUP
RCS Group provides a range of broader financial services to both customers of
the group, as well as to customers of retailers outside the group. At present
these financial services comprise RCS personal loans, RCS cards, RCS private
label cards, RCS home loans and RCS vehicle finance. This division
experienced a challenging 6 months, particularly with the introduction of the
NCA, and grew its profit before tax for the period by 9,3%. As a result of
the transaction with the Standard Bank of South Africa Limited (SBSA), our
group`s shareholding in this division decreased by a further 10% to 55% from 1
April 2007.
PROSPECTS
Retail turnover for the first four weeks of the second half has been
challenging. The second half of the year is largely dependent on the level of
Christmas trading and should turnover growth levels experienced during the
first half be maintained, we should be able to produce a satisfactory result
for the full year.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 142 of 3,25% (6,5 cents per share) in respect of the six months
ending 31 March 2008 has been declared, payable on Monday, 31 March 2008 to
holders of 6,5% preference shares recorded in the books of the company at the
close of business on Friday, 28 March 2008.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Wednesday, 19 March 2008. Foschini Limited preference shares
will commence trading "ex" the dividend from the commencement of business on
Thursday, 20 March 2008 and the record date, as indicated, will be Friday, 28
March 2008.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Thursday, 20 March 2008 to
Friday, 28 March 2008, both dates inclusive.
INTERIM ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared an interim ordinary dividend of 118 cents per
ordinary share payable on Monday, 7 January 2008 to ordinary shareholders
recorded in the books of the company at the close of business on Friday, 4
January 2008.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 27 December 2007. Foschini Limited ordinary shares
will commence trading "ex" the dividend from the commencement of business on
Friday, 28 December 2007 and the record date, as indicated, will be Friday, 4
January 2008.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 28 December 2007 to
Friday, 4 January 2008, 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
Cape Town
1 November 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, 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) Ltd, Ground Floor, 70 Marshall
Street, Johannesburg, 2001
Sponsor:
UBS South Africa (Pty) Ltd
Visit our website at http://www.foschinigroup.com/
Date: 01/11/2007 14:16:29 Produced by the JSE SENS Department.
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