| Thu 21 Feb 2008, 17:03 | | TRU - Truworths International - Unaudited Interim Results for the 27 weeks |
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TRU
TRU
TRU - Truworths International - Unaudited Interim Results for the 27 weeks
ended 30 December 2007 and dividend declaration
Truworths International Limited
Incorporated in the Republic of South Africa)
Registration number 1944/017491/06)
JSE Code: TRU
NSX Code: TRW
ISIN: ZAE000028296
Unaudited Interim Results
for the 27 weeks ended 30 December 2007
- MERCHANDISE SALES UP 20% (26 weeks up 15%)
- OPERATING PROFIT UP 27% (26 weeks up 19%)
- HEADLINE EARNINGS PER SHARE UP 26% (26 weeks up 18%)
- INTERIM DIVIDEND UP 20%
GROUP BALANCE SHEETS
30 Dec 24 Dec 24 Jun
2007 2006 2007
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 774 708 755
Property, plant and equipment 496 431 455
Goodwill 72 72 72
Intangible assets 52 56 55
Financial assets 129 149 155
Deferred tax 25 - 18
Current assets 2 988 2 478 2 582
Inventories 420 368 353
Trade and other receivables 2 195 1 838 1 962
Financial assets 13 - 13
Prepayments 5 9 38
Cash and cash equivalents 355 263 216
Total assets 3 762 3 186 3 337
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 45 23 36
Treasury shares (530) (528) (421)
Non-distributable reserve 17 20 23
Retained earnings 3 189 2 764 2 756
Attributable to equity holders
of the parent 2 721 2 279 2 394
Minority interest 17 6 10
Total equity 2 738 2 285 2 404
Non-current liabilities 82 103 97
Deferred tax - 12 -
Post-retirement medical benefit obligation 26 24 25
Cash-settled compensation liability 7 20 23
Straight-line operating lease obligation 49 47 49
Current liabilities 942 798 836
Trade and other payables 770 672 606
Minority interest loan 30 34 30
Provisions 37 26 44
Tax payable 105 66 156
Total liabilities 1 024 901 933
Total equity and liabilities 3 762 3 186 3 337
Number of shares in issue
(adjusted for treasury shares) (millions) 430.9 435.5 433.5
Net asset value per share (cents) 635 525 555
GROUP INCOME STATEMENTS
27 weeks 26 weeks 52 weeks
to 30 Dec to 24 Dec to 24 Jun
2007 2006 2007
Unaudited Unaudited Change Audited
Note Rm Rm % Rm
Revenue 3 3 334 2 721 23 5 326
Sale of merchandise 3 018 2 513 20 4 858
Cost of sales (1 359) (1 125) (2 166)
Gross profit 1 659 1 388 20 2 692
Net trading expenses (863) (720) 20 (1 420)
Other income 59 46 95
Depreciation and amortisation (48) (41) (82)
Employment costs (297) (276) (557)
Occupancy costs (186) (167) (333)
Other operating costs (391) (282) (543)
Trading profit 796 668 19 1 272
Interest received 241 151 345
Profit before tax 1 037 819 27 1 617
Tax expense (337) (2 65) (527)
Profit for the period 700 554 26 1 090
Attributable to:
Equity holders of the parent 693 549 1 080
Minority interest 7 5 10
700 554 1 090
Dividends per share declared in
respect of the period (cents) 72 60 20 120
Basic and headline earnings per
share (cents) 159.9 126.5 26 248.6
Fully diluted basic and
headline earnings per share (cents) 156.4 122.7 27 242.5
Weighted average number of
shares in issue (millions) 433.3 433.9 434.5
Key ratios:
Gross margin (%) 55 55 55
Net trading expenses to sale of
merchandise (%) 29 29 29
Trading margin (%) 26 27 26
Operating margin (%) 34 33 33
GROUP CASH FLOW STATEMENTS
27 Weeks 26 Weeks 52 Weeks
to 30 Dec to 24 Dec to 24 Jun
2007 2006 2007
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading 857 732 1 389
Cash earnings before interest, tax,
depreciation and amortisation 857 732 1 389
Working capital movements (110) (177) (372)
Cash generated from operations 747 555 1 017
Interest received 241 151 345
Tax paid (391) (346) (549)
Cash inflow from operations 597 360 813
Dividends paid (260) (195) (456)
Net cash from operating activities 337 165 357
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and
equipment to maintain operations (17) (18) (31)
Acquisition of property, plant and
equipment to expand operations (69) (67) (117)
Acquisition of computer software - (5) (8)
Acquisition of net investment in subsidiary - (29) (29)
Minority shareholders` loans repaid - - (4)
Loans receivable advanced - (2) (3)
Loans receivable repaid 2 3 4
Acquisition of derivative financial
instruments (14) (12) (22)
Proceeds on disposal of derivative
financial instruments 8 4 4
Settlement of cash-settled
compensation liability (8) (4) (4)
Net cash used in investing activities (98) (130) (210)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 9 9 22
Shares repurchased by subsidiaries (109) - (167)
Costs incurred in cancelling shares - - (3)
Funding of post-retirement benefit
obligation - - (2)
Net cash (used in)/from financing
activities (100) 9 (150)
Net increase/(decrease) in cash and
cash equivalents 139 44 (3)
Cash and cash equivalents at the
beginning of the period 216 219 219
Cash and cash equivalents at the end
of the period 355 263 216
Key ratios:
Cash flow per share (cents) 138 83 187
Cash equivalent earnings per share
(cents) 173 142 268
GROUP STATEMENTS OF CHANGES IN EQUITY
30 Dec 24 Dec
2007 2006
Unaudited Unaudited
Rm Rm
Balance at the beginning of the period 2 394 1 908
Profit for the period 693 549
Effective portion of cash flow hedge (12) 6
Deferred tax on cash flow hedge 4 -
Dividends paid (260) (195)
Premium on shares issued 9 9
Shares repurchased (109) -
Share option expense 2 2
Balance at the end of the period 2 721 2 279
Comprising:
Share capital and premium 45 23
Treasury shares (530) (528)
Non-distributable reserve 17 20
Retained earnings 3 189 2 764
Attributable to equity holders of the parent 2 721 2 279
Minority interest 17 6
Total equity 2 738 2 285
NOTES
1 BASIS OF PREPARATION
The Group`s interim financial statements have been prepared in accordance with
IAS 34 - Interim Financial Reporting.
The half-year information presented has neither been audited nor reviewed by
the Group`s external auditors.
2 ACCOUNTING POLICIES
The accounting policies and methods of computation applied in the preparation
of these financial statements are consistent with those applied in the
preparation of the Group`s annual financial statements for the period ended 24
June 2007. New accounting standards and interpretations that have become
applicable to the Group since that date have been adopted and their impact has
not been material.
3 REVENUE
27 Weeks 26 Weeks 52 Weeks
to 30 Dec to 24 Dec to 24 Jun
2007 2006 2007
Unaudited Unaudited Change Audited
Rm Rm % Rm
Sale of merchandise 3 018 2 513 20 4 858
Retail sales 2 999 2 500 4 835
Franchise sales 19 13 23
Interest received 241 151 345
Investment interest 17 12 27
Trade receivable interest 224 139 318
Fees earned 60 44 95
Commission 47 35 75
Other 11 8 18
Royalties 2 1 2
Display fees 12 10 21
Lease rental income 3 3 7
3 334 2 721 23 5 326
4 BASIC AND HEADLINE EARNINGS
During the current and comparative period there was no difference between basic
and headline earnings.
5 RESTATEMENT OF COMPARATIVES
Some of the comparative figures relating to the 26-week period to 24 December
2006 have been restated to align with the presentation used in the annual
financial statements.
6 SEGMENT REPORTING
The primary segments of the Group have been identified as the Truworths, Uzzi
and YDE business units with reference to the Group`s internal management
structure. This basis is representative of management`s review processes and
the Group`s financial reporting structures. The source and nature of business
risks and returns are segmented on the same basis. The Group`s main
geographical regions consist of southern Africa and outside of southern Africa,
based on the location of the Group`s customers. Southern Africa comprises South
Africa, Namibia, Swaziland, Botswana and Lesotho.
6.1 Primary segments
Rm Truworths YDE Uzzi Corporate* Total
2007
Segment revenue** 3 218 42 58 16 3 334
Gross profit 1 624 - 35 - 1 659
Segment result 978 20 21 (223) 796
Profit for the period 670 14 15 1 700
Segment assets 5 151 54 74 (1 517) 3 762
Segment liabilities 868 34 72 50 1 024
2006
Segment revenue** 2 633 32 44 12 2 721
Gross profit 1 362 - 26 - 1 388
Segment result 780 12 15 (139) 668
Profit/(loss) for the
period 551 10 11 (18) 554
Segment assets*** 3 910 55 66 (845) 3 186
Segment liabilities 796 52 5 48 901
* "Corporate" represents unallocated segments and consolidation entries.
** Segment revenue includes interest on trade receivables.
*** Segment assets includes trade and other receivables.
6.2 Geographical segments
Rm Southern Africa Other Total
2007
Segment revenue ** 3 315 19 3 334
Segment assets *** 3 762 - 3 762
2006
Segment revenue ** 2 708 13 2 721
Segment assets *** 3 186 - 3 186
7 CAPITAL COMMITMENTS
30 Dec 24 Dec 24 Jun
2007 2006 2007
Unaudited Unaudited Audited
Rm Rm Rm
Capital expenditure authorised but not
contracted:
Plant and equipment 184 85 270
8 EVENTS SUBSEQUENT TO PERIOD END
Acquisition
On 1 January 2008 the Group acquired the 49% shareholding owned by the
minorities of Uzzi (Pty) Limited for R65 million. The Group now holds 100% of
the share capital.
9 SEASONALITY
Historically there has been no material seasonal variation in trading between
the first and second halves of the financial period, however, management is of
view that trading for the second half will be at a rate of growth lower than
was achieved in the first half due to the fact that the first half comprises an
additional week of trading.
10 RELATED PARTY TRANSACTIONS
Related party transactions similar to those disclosed in the Group`s annual
financial statements for the period ended 24 June 2007 took place during the
period.
INTERIM DIVIDEND
The directors have resolved to declare a cash dividend in respect of the 27
weeks ended 30 December 2007 in the amount of 72 (2006: 60) cents per share to
holders of the company`s shares reflected in the company`s register on the
record date, being Friday 14 March 2008.
The last day to trade in the company`s shares cum dividend is Friday 7 March
2008. Trading in the company`s shares ex dividend will commence on Monday 10
March 2008. The dividend will be paid in South African Rand on Monday 17 March
2008.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday 10 March 2008 to Friday 14 March
2008, both days inclusive.
In accordance with the company`s articles of association, the directors have
determined that dividends amounting to less than 1 000 cents due to any one
holder of the company`s shares held in certificated form will not be paid,
unless otherwise requested in writing, but aggregated with other such amounts
and donated to a charity to be nominated by the directors.
By order of the board
C Durham Cape Town
Company Secretary 21 February 2008
COMMENTARY
Truworths International Limited is an investment holding, trading and
management company listed on the JSE and the Namibian Stock Exchanges. Its
trading subsidiaries, Truworths, Young Designers Emporium (`YDE`) and Uzzi,
are engaged in the retailing of fashion apparel and related merchandise.
Truworths International Limited and its subsidiaries (`the Group`) operate
primarily in southern Africa.
GROUP RESULTS
In a challenging trading environment over 27 weeks, group sale of merchandise
increased to R3 018 million (R2 901 million excluding week 27). This was 20%
more than in the prior period (15% excluding week 27).
The buoyant retail trading conditions of recent years slowed during the period
as a result of the seven interest rate increases totalling 350 basis points
over the last 18 months and a general rise in the cost of living most evidently
reflected by food price inflation and an increasing fuel price. The
introduction of the National Credit Act in June 2007 served to slow new credit
extension and credit line increases, dampening consumer demand.
Based on a corporate tax rate of 29%, headline and basic earnings per share of
159.9 cents (149.8 cents excluding week 27) equate to a 26% increase (18%
excluding week 27) compared to the prior period`s 126.5 cents; this is in line
with indications in the Group`s trading statement on SENS on 18 January 2008.
An interim cash dividend of 72 cents a share has been declared, 20% more than
that declared in respect of the prior period.
Sales growth included comparable store sales growth of 11% (7% excluding week
27), with product inflation of approximately 6%. Trading space increased by 11%
relative to the position at 24 December 2006 through the opening of 21
Truworths, 20 Identity, two YDE and nine Uzzi stores and the closure of four
Truworths stores.
Divisional sales growth
Sales Change Change
30 Dec 2007 % %
27 weeks 27 weeks 26 weeks
Rm on prior period on prior period
Truworths 1 790 14 10
Truworths Man 538 13 8
Daniel Hechter 390 33 28
Identity 354 39 34
Uzzi 58 32 27
Group retail sales 3 130 19 14
Franchise sales 19 46 46
Accounting reclassifications (131)
Sale of merchandise 3 018 20 15
YDE agency sales 126 26 21
The Group`s performance under demanding circumstances reflects its single-
minded focus on satisfying customer needs, enhancing processes to manage the
risk of fashion and other key areas within the business, developing new
initiatives and formats, improving efficiencies through targeted spending and
increased productivity, increasing trading space prudently and continuing the
development of brand integrity. As testimony to the success of this formula,
operating profit increased by 27% to R1 037 million, and the operating margin
improved from 33% to 34%. The gross margin of 55% remained at a similar level
to that in the prior period with expenses growing by 20%, primarily as a result
of increased debtors` costs and the expenditure related to the operation o f
newly opened stores.
The Group continued its investment in world class credit management systems.
It also continued to apply strict credit granting criteria during the period
which nonetheless saw its active account base at period end expand from
approximately 1.5 to 1.8 million accounts. The debtors book grew by 24% during
the period. Group credit sales represented 71% of total Group retail sales
while 82% of active accountholders were able to purchase at period end versus
89% in 2006.
The increases in the Group`s net bad debts and doubtful debt allowances (which
are shown below) are at the upper end of management expectations but
nevertheless continue to compare favourably with industry norms. The Group
maintained its high qualifying payment percentage (one of the highest in the
industry) and the quality of the debtors book remains good. The additional
interest income earned during the period has adequately offset the increased
net bad debt. The allowance for doubtful debts has been increased to 9.8% of
the debtors book due to higher net bad debt which is likely to flow from the
significant growth in new accounts over the last few years as well as the
effects of general economic conditions on consumer behaviour.
Key debtor statistics
Dec 07 Jun 07 Dec 06
Net bad debt write-off as a % of credit sales 5.1 3.6 3.2
Net bad debt write-off as a % of debtors` book 9.6 6.6 6.6
Doubtful debt allowance as a % of debtors` book 9.8 7.9 7.1
SHARE REPURCHASES
During the period 4 million shares were repurchased at a total cost of R109
million at an average price of R26.77 per share. A total of 21 million shares
(4.7% of total shares in issue) are now held as treasury shares.
UZZI MINORITY ACQUISITION
On 1 January 2008, the Group exercised its option to acquire the 49% minority
shareholding in Uzzi and now holds 100%. Uzzi now operates 35 stores in the
upper-end male fashion market. Trading results to date have exceeded
management`s expectations.
CEO CONTRACT
The board is pleased to announce that it has concluded an agreement with the
Chief Executive to renew his service contract for a further period of three
years ending on 30 June 2011. Details of this contract, the material terms of
which are substantially in line with those of the existing contract, will be
disclosed in the Group`s 2008 annual report.
OUTLOOK
Group retail sales of merchandise for the first seven weeks of the second half
of the current financial period reflect growth of 16% on the prior comparable
period. The retail environment is likely to be a tough one over the forthcoming
months. Nonetheless, management anticipates that trading activity in the period
to June 2008 is likely to yield satisfactory real earnings growth, as the Group
has consistently achieved for many years, albeit at a lower level than was
achieved in the 2007 period.
H Saven MS Mark
Chairman Chief Executive Officer
21 February 2008
Truworths International Limited: (Registration number 1944/017491/06)
JSE Limited code: TRU NSX code: TRW ISIN: ZAE000028296
Registered office: No. 1 Mostert Street, Cape Town 8001. PO Box 600, Cape Town
8000, South Africa
Sponsor in South Africa: Barnard Jacobs Mellet Corporate Finance (Pty)
Limited.
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Limited
Auditors: Ernst & Young Inc.
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107, South
Africa or Transfer Secretaries (Pty) Limited, Shop 12, Kaiserkrone Centre,
Post Street Mall, Windhoek. PO Box 2401, Windhoek, Namibia
Company secretary: C Durham
Directors: H Saven (Chairman)#**, MS Mark (CEO)*, RG Dow#**, CT Ndlovu#**,
SM Ngebulana#**, AE Parfett#**, AJ Taylor*, MA Thompson#** and WM van der Merwe*
*Executive #Non-executive **Independent
These results are available on www.truworths.co.za
Date: 21/02/2008 17:03:18 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
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