| Thu 18 Feb 2010, 14:21 | | TRU - Truworths International Limited - Unaudited Interim Group Results For the |
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TRU
TRU
TRU - Truworths International Limited - Unaudited Interim Group Results For the
26 weeks ended 27 December 2009
TRUWORTHS INTERNATIONAL LIMITED
(Registration number 1944/017491/06)
JSE Limited code: TRU
NSX code: TRW
ISIN: ZAE000028296
Unaudited Interim Group Results For the 26 weeks ended 27 December 2009
* Sale of merchandise up 12%
* Trading profit up 18%
* Diluted headline earnings per share up 10%
* Dividend per share up 16%
* Gross margin at 56%
* Operating margin at 34%
GROUP PROFILE
Truworths International Limited is an investment holding, trading and
management company listed on the JSE and the Namibian Stock Exchange. Its
trading subsidiaries, Truworths Limited and Young Designers Emporium (Pty)
Limited (YDE), are engaged in the retailing of fashion apparel and related
merchandise. Truworths International Limited and its subsidiaries (the Group)
operate primarily in southern Africa.
FINANCIAL PERFORMANCE
While lower interest rates and real wage increases have been positive for
consumers, these have not yet resulted in a marked improvement in discretionary
spending by South Africans. Ongoing job losses, rising utility and fuel costs
have continued to keep consumers under pressure. In this challenging retail
trading environment Group sale of merchandise for the 26 week trading period to
27 December 2009 (the period) increased by 12% to R3 689 million. Comparable
store sales grew 3% and product inflation averaged approximately 10%.
Trading space has increased by 10% since 28 December 2008 following the opening
of 12 Truworths, 17 Identity, 13 Uzzi and 3 YDE stores and the closure of
1 Identity and 6 Truworths stores. At the end of the period the Group had 513
stores (2008: 475).
The Group continued to gain market share. Based on figures from the retail
liaison committee (RLC) for December 2009, the Group increased its ladieswear
RLC market share to 21.7% (2008: 20.6%) and menswear RLC market share to 19.1%
(2008: 18.4%).
Sale of merchandise
27 Dec 28 Dec % change
2009 2008 on prior
Rm Rm period
Truworths Ladieswear 2 045 1 892 8
Truworths Menswear 736 657 12
Identity 519 438 18
Daniel Hechter 478 428 12
Retail sales 3 778 3 415 11
Franchise sales 18 23 (22)
Accounting reclassifications (107) (132) (19)
Sale of merchandise 3 689 3 306 12
YDE agency sales 123 127 (3)
The trading margin improved to 27% (2008: 26%) with trading profit increasing
18% to R1 billion and the gross margin improved to 56% (2008: 55%). Expenses
grew by 10%, mainly due to inflation and the increase in employment and
occupancy costs attributable to the expansion in trading space.
Trade receivable interest received decreased 13% on the prior period as a
result of reduced debtors` book interest rates that are linked to the South
African Reserve Bank repurchase rate and the lower levels of debtor
delinquency.
The operating performance translated into a 10% increase in headline earnings
per share (HEPS) to 203.3 cents (2008: 184.7 cents). Diluted HEPS of
199.4 cents were also 10% higher (2008: 181.3 cents).
An interim cash dividend of 102 cents per share, based on a dividend cover of
2.0 times HEPS, has been declared, 16% more than the prior period.
CREDIT MANAGEMENT
The doubtful debt allowance as a percentage of gross trade receivables improved
to 11.3% (2008: 11.9%), contributing in part to the 6% reduction in trade
receivable costs to R228 million. Management is satisfied with the quality of
the book and the reduced level of the doubtful debt allowance. The Group
maintained a qualifying payment percentage of 90% necessary for customers to
avoid delinquency. During the period the Group continued to apply its standard
credit granting criteria, resulting in an active account base growth of 6% to
over 1.9 million accounts with a 65% (2008: 59%) rejection rate on new
applications. The debtors` book grew by 11% from December 2008 to R2.8 billion.
Group credit sales comprised 69%(2008: 68%) of retail sales with 88% (2008: 87%)
of active account holders able to purchase at the end of the period.
CASH AND FINANCIAL POSITION
The Group`s statement of financial position continued to strengthen, with net
asset value per share increasing from 772.1 cents to 953.1 cents. The return on
equity at 45% (2008: 51%) is lower than the prior period due to increased
levels of cash retained by the Group, but is in the upper end of the target
range set by the Group.
The Group remains in a strong cash position, with cash and cash equivalents of
R1 072 million at the end of the period (2008: R723 million). During the period
the Group generated R470 million from operating activities and utilised cash to
increase trading space, develop an additional distribution facility, repurchase
shares and pay dividends.
SHARE REPURCHASES
During the period 808 000 shares were repurchased at an average price of R41.85
per share for a total of R33 million.
Since the inception of the share buy-back programme in 2002, 74 million shares
have been repurchased at an average cost of R17.14 per share and a total cost
of R1 271 million. Forty-three million of these shares (at an average cost of
R10.95 per share and a total cost of R475 million) have been cancelled. At the
end of the period 31 million shares (7% of total shares in issue) were held as
treasury shares.
OUTLOOK
Retail sales for the first seven weeks of the second half of the 2010 financial
period reflect growth of 11% on the prior period. The trading environment is
expected to remain challenging as the country emerges from the recession, and
management does not currently anticipate any marked improvement in consumer
spending over the balance of the financial year.
Management will continue to focus on consistent and innovative merchandising
strategies to manage the risk of fashion, control credit risk and contain
expenses.
The Group remains committed to investing appropriately for longer-term growth,
with trading space planned to increase by approximately 6% on June 2009.
DIRECTORATE
Tony Taylor, the Deputy Managing Director of Truworths Limited, retires with
effect from 31 March 2010, but will remain on the Truworths International Board
as a Non-executive Director.
H Saven MS Mark
Chairman Chief Executive Officer
18 February 2010
INTERIM DIVIDEND
The directors have resolved to declare a cash dividend from retained earnings
in respect of the period ended 27 December 2009 in the amount of 102 cents
(2008: 88.0 cents) per share to holders of the company`s shares reflected in
the company`s register on the record date, being Friday, 12 March 2010.
The last day to trade in the company`s shares cum dividend is Friday, 5 March
2010. Trading in the company`s shares ex dividend will commence on Monday,
8 March 2010. The dividend will be paid in South African Rand on Monday,
15 March 2010.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday, 8 March 2010 to Friday, 12 March
2010, 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
Company Secretary
Cape Town
18 February 2010
GROUP STATEMENTS OF FINANCIAL POSITION
at 27 Dec at 28 Dec at 28 Jun
2009 2008 2009
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 1 005 896 927
Property, plant and equipment 700 557 618
Goodwill 90 90 90
Intangible assets 45 50 48
Derivative financial asset 23 42 25
Available-for-sale asset 1 - 1
Loans and receivables 95 97 97
Deferred tax 51 60 48
Current assets 4 185 3 491 3 579
Inventories 532 469 463
Trade and other receivables 2 555 2 280 2 281
Derivative financial asset 20 8 23
Prepayments 6 11 45
Cash and cash equivalents 1 072 723 767
Total assets 5 190 4 387 4 506
EQUITY AND LIABILITIES
Equity
Share capital and premium 70 60 65
Treasury shares (796) (751) (763)
Retained earnings 4 719 3 935 4 208
Non-distributable reserves 54 35 41
Total equity 4 047 3 279 3 551
Non-current liabilities 96 110 94
Post-retirement medical benefit
obligation 34 30 32
Cash-settled compensation obligation 14 30 14
Straight-line operating lease
obligation 48 50 48
Current liabilities 1 047 998 861
Trade and other payables 926 830 705
Derivative financial liability 5 15 18
Provisions 40 36 49
Tax payable 76 117 89
Total liabilities 1 143 1 108 955
Total equity and liabilities 5 190 4 387 4 506
Number of shares in issue (net of
treasury shares) (millions) 424.6 424.7 424.9
Net asset value per share (cents) 953.1 772.1 835.7
Key ratios
Return on equity (%) 45 51 44
Return on capital (%) 67 74 65
GROUP STATEMENTS OF COMPREHENSIVE INCOME
26 weeks 26 weeks 52 weeks
to 27 Dec to 28 Dec to 28 Jun
2009 2008 2009
Unaudited Unaudited % Audited
Note Rm Rm change Rm
Revenue 3 4 036 3 684 10 7 014
Sale of merchandise 3 689 3 306 12 6 247
Cost of sales (1 631) (1 493) (2 817)
Gross profit 2 058 1 813 14 3 430
Other income 80 74 153
Trading expenses (1 138) (1 039) 10 (2 083)
Depreciation and
amortisation (59) (53) (109)
Employment costs (383) (343) (672)
Occupancy costs (283) (239) (496)
Trade receivable costs (228) (242) (432)
Other operating costs (185) (162) (374)
Trading profit 1 000 848 18 1 500
Interest received 267 304 (614)
Profit before tax 1 267 1 152 10 2 114
Tax expense (403) (365) (680)
Profit for the period
attributable to owners
of the parent 864 787 10 1 434
Other comprehensive income
for the period, net of tax 1 11 11
Movement in effective
portion of cash flow hedge 1 15 14
Deferred tax thereon - (4) (4)
Revaluation of available-
for-sale asset - - 1
Total comprehensive income for
the period attributable to owners
of the parent 865 798 8 1 445
Basic earnings per share (cents) 203.3 184.7 10 337.2
Headline earnings per share (cents) 203.3 184.7 10 337.6
Fully diluted basic earnings
per share (cents) 199.4 181.3 10 331.3
Fully diluted headline
earnings per share (cents) 199.4 181.3 10 331.7
Weighted average number
of shares (millions) 424.9 426.0 425.3
Key ratios
Gross margin (%) 56 55 55
Trading expenses to sale of
merchandise (%) 31 31 33
Trading margin (%) 27 26 24
Operating margin (%) 34 35 34
GROUP STATEMENTS OF CASH FLOWS
26 weeks 26 weeks 52 weeks
to 27 Dec to 28 Dec to 28 Jun
2009 2008 2009
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 1 062 920 1 661
Working capital movements (87) (65) (246)
Cash generated from operations 975 855 1 415
Interest received 267 304 614
Tax paid (419) (446) (777)
Cash inflow from operations 823 713 1 252
Dividends paid (353) (309) (683)
Net cash from operating activities 470 404 569
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment to
maintain operations (28) (16) (31)
Acquisition of property, plant and
equipment to expand operations (110) (63) (164)
Acquisition of computer software - (1) (3)
Proceeds on disposal of plant and equipment - - 1
Loans advanced - (2) (1)
Loans repaid 1 4 7
Proceeds on disposal of cash-settled
call options 20 10 14
Settlement of cash-settled
compensation obligation (20) (9) (14)
Net cash used in investing activities (137) (77) (191)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 5 10 15
Shares repurchased by subsidiaries (33) (147) (159)
Net cash used in financing activities (28) (137) (144)
Net increase in cash and cash equivalents 305 190 234
Cash and cash equivalents at the
beginning of the period 767 533 533
Cash and cash equivalents at the end
of the period 1 072 723 767
Key ratios
Cash flow per share (cents) 193.7 167.4 294.4
Cash equivalent earnings
per share (cents) 217.3 202.0 377.6
Cash realisation rate (%) 89 83 78
* Earnings before interest, tax, depreciation and amortisation
GROUP STATEMENTS OF CHANGES IN EQUITY
27 Dec 28 Dec
2009 2008
Unaudited Unaudited
Rm Rm
Total equity at the beginning of the period 3 551 2 920
Total comprehensive income for the period 865 798
Dividends (353) (309)
Premium on shares issued 5 10
Shares repurchased (33) (147)
Share-based payment 12 7
Total equity at the end of the period 4 047 3 279
Comprising:
Share capital and premium 70 60
Treasury shares (796) (751)
Retained earnings 4 719 3 935
Non-distributable reserves 54 35
Total equity 4 047 3 279
Dividends declared per share in respect of the
period (cents) 102 88
SELECTED EXPLANATORY NOTES
1 BASIS OF PREPARATION
The Group`s interim report has been prepared in accordance with International
Financial Reporting Standards (IFRSs), and the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, the South African
Companies Act and the Listings Requirements of the JSE.
The 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 this report are consistent with those applied in the preparation of the
Group`s annual financial statements for the period ended 28 June 2009, except
for the following:
During the period, the Group adopted the following new and amended IFRSs to the
extent that they are applicable to its activities:
- IFRS 2, Share-based payment: Vesting conditions and cancellations
- IFRS 2, Share-based payment: Group cash-settled share-based payment
transactions (adopted earlier than required)
- IFRS 3, Business combinations (Revised) and IAS 27, Consolidated and separate
financial statements (Amended) including consequential amendments to IFRS 7,
IAS 21, IAS 28, IAS 31 and IAS 39
- IFRS 7, Financial instruments: Disclosures
- IAS 39, Financial instruments: Recognition and measurement - Eligible hedged
items
- Annual improvements to IFRSs (May 2008 and April 2009) (some improvements
have been adopted earlier than required)
Where the adoption of the standard is deemed to have an impact on the
accounting policies, financial position or performance of the Group, this is
described below:
IFRS 3, Business combinations (Revised) and IAS 27, Consolidated and separate
financial statements (Amended)
The changes to IFRS 3 (Revised) and IAS 27 (Amended) will affect future
acquisitions or loss of control of subsidiaries and transactions with
non-controlling interests. The change in accounting policy was applied
prospectively and had no impact on the financial position or performance of the
Group.
IFRS 7, Financial instruments: Disclosures
The amendments to the standard are intended to improve fair value measurement
and liquidity risk disclosures in financial statements. The amendments were
applied prospectively and had no significant impact on the Group`s disclosures.
Annual improvements to IFRSs
In May 2008 and April 2009 the IASB issued an omnibus of amendments to its
standards, primarily with a view to remove inconsistencies and clarify wording.
In some instances, the adoption of these amendments resulted in minor changes
to accounting policies but did not have any impact on the financial position or
performance of the Group.
Various other new and amended IFRSs and International Financial Reporting
Interpretations Committee (IFRIC) interpretations that have been issued and are
effective, have not been adopted by the Group as they are not applicable to its
activities.
3 REVENUE 26 weeks 26 weeks 52 weeks
to 27 Dec to 28 Dec to 28 Jun
2009 2008 2009
Unaudited Unaudited % Audited
Rm Rm change Rm
Sale of merchandise 3 689 3 306 12 6 247
Retail sales 3 671 3 283 6 209
Franchise sales 18 23 38
Interest received 267 304 (12) 614
Trade receivables interest 237 271 549
Investment interest 30 33 65
Other income 80 74 8 153
Commission 38 42 82
Display fees 16 14 29
Financial services income 16 10 23
Lease rental income 5 4 10
Other 3 2 6
Royalties 2 2 3
Total 4 036 3 684 10 7 014
4 SEGMENT REPORTING
The Group`s reportable segments have been identified as the Truworths and YDE
business units. The Truworths business unit comprises the retailing activities
conducted by the Truworths ladieswear and menswear divisions, and its Identity,
Daniel Hechter and franchise departments, through which the Group retails
fashion apparel comprising clothing, footwear and other fashion products to
women, men and children. The YDE business unit comprises the agency activities
through which the Group retails clothing, footwear and related products on
behalf of emerging South African designers.
Management monitors the operating results of the business segments separately
for the purpose of making decisions about resources to be allocated and of
assessing performance. Segment performance is reported on an IFRS basis and
evaluated based on sales and operating profit or loss.
Truworths YDE Corporate# Group
2009 Rm Rm Rm Rm
Total third party revenue* 3 991 45 - 4 036
Depreciation and amortisation 58 1 - 59
Interest received 266 1 267
Profit for the period 849 13 2 864
Profit before tax 1 247 18 2 1 267
Tax expense (398) (5) - (403)
Capital expenditure 133 5 - 138
Other segment information
Gross margin % 56 - - 56
Trading margin % 27 39 - 27
Operating margin % 34 41 - 34
Inventory turn times 6.1 - - 6.1
Credit: cash sales mix % 69:31 23:77 - 69:31
2008
Total third party revenue* 3 640 44 - 3 684
Depreciation and amortisation 51 2 - 53
Interest received 303 1 - 304
Profit for the period 770 15 2 787
Profit before tax 1 129 21 2 1 152
Tax expense (359) (6) - (365)
Capital expenditure 80 - - 80
Other segment information
Gross margin % 55 - - 55
Trading margin % 25 45 - 26
Operating margin % 34 48 - 35
Inventory turn times 6.4 - - 6.4
Credit: cash sales mix % 68:32 21:79 - 68:32
* Segment revenue includes trade receivable interest and management fees
# `Corporate` represents unallocated segments and consolidation entries
2009 2009 2008 2008
Third party revenue Rm % Rm %
South Africa 3 923 97.2 3 573 97.0
Namibia 67 1.7 64 1.7
Swaziland 28 0.7 24 0.7
Franchise sales 18 0.4 23 0.6
Rest of Africa 9 0.2 9 0.3
Botswana 8 0.2 9 0.2
Middle East 1 0.0 5 0.1
Total third party revenue 4 036 100 3 684 100
5 CAPITAL COMMITMENTS 27 Dec 28 Dec 28 Jun
2009 2008 2009
Unaudited Unaudited Audited
Rm Rm Rm
Capital expenditure authorised but not
contracted:
Store development 78 75 150
Distribution facilities 73 66 126
Computer infrastructure 14 25 27
Head office refurbishment 2 12 2
Total 167 178 305
Capital expenditure authorised and contracted:
Land - 11 -
The capital commitments will be financed by cash generated from operations and
available cash resources, and are expected to be incurred in the remaining 2010
reporting period.
6 EVENTS AFTER THE END OF THE REPORTING PERIOD
No event, material to the understanding of the unaudited Group interim results,
has occurred between the end of the interim period and date of approval.
7 SEASONALITY
Historically there has been no material seasonal variation in trading between
the first and second halves of the financial period.
8 RELATED PARTY TRANSACTIONS
Related party transactions similar to those disclosed in the Group`s annual
financial statements for the period ended 28 June 2009 took place during the
period.
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 (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* and MA Thompson
* Executive
Non-executive Independent
RESULTS ARE AVAILABLE ONLINE AT WWW.TRUWORTHS.CO.ZA
Date: 18/02/2010 14:21:02 Produced by the JSE SENS Department.
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