| Thu 19 Aug 2010, 14:07 | | TRU - Truworths International - Preliminary report on the audited group results |
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TRU
TRU
TRU - Truworths International - Preliminary report on the audited group results
for the 52 weeks ended 27 June 2010
TRUWORTHS INTERNATIONAL
(Incorporated in the Republic of South Africa)
(Registration number 1944/017491/06)
JSE Code: TRU
NSX Code: TRW
ISIN: ZAE000028296
PRELIMINARY REPORT ON THE AUDITED GROUP RESULTS FOR THE 52 WEEKS ENDED 27 JUNE
2010
SALE OF MERCHANDISE UP 11%
TRADING PROFIT UP 20%
HEADLINE EARNINGS PER SHARE UP 12%
OPERATING MARGIN AT 34%
FINAL DIVIDEND UP 18%
NET ASSET VALUE PER SHARE UP 23%
GROUP PROFILE
Truworths International Limited is an investment holding and management company
listed on the JSE Limited and the Namibian Stock Exchange. Its trading
subsidiaries, Truworths Limited and Young Designers Emporium (Pty) Limited, are
engaged in the retailing of fashion apparel and related merchandise. Truworths
International Limited and its subsidiaries (the Group) operate primarily in
South Africa.
FINANCIAL PERFORMANCE
The Group delivered a satisfactory performance for the 52-week period ending
27 June 2010 (the period), despite global economic challenges which impacted on
the domestic trading environment. Group sale of merchandise increased by 11% to
R6 937 million relative to the 52-week period ended 28 June 2009 (the prior
period). Comparable store retail sales grew 4% (2009: 5%) and product inflation
averaged approximately 4% (2009: 10%).
Trading space increased by 6% over the prior period-end following the opening
of ten Truworths, thirteen Identity, ten Uzzi and two YDE stores and the
closure of seven stores. At the end of the period the Group had 523 stores
(2009: 495).
The Group continued to record market share gains. Based on figures from the
retail liaison committee (RLC) for June 2010, the Group increased its
ladieswear RLC market share of clothing to 21.9% (2009: 20.9%) and menswear RLC
market share to 21.9% (2009: 20.8%).
Divisional sales Jun 2010 Jun 2009
52 weeks 52 weeks
Rm Rm % change
Truworths ladieswear 2 727 2 506 9
Truworths menswear 1 372 1 220 12
Identity 966 821 18
Daniel Hechter 871 790 10
Elements 385 367 5
Inwear 355 335 6
LTD 247 204 21
Other* 195 198 (2)
Retail sales 7 118 6 441 11
Franchise sales 30 38 (21)
Accounting reclassifications (211) (232) (9)
Sale of merchandise 6 937 6 247 11
YDE agency sales 238 246 (3)
* Includes cellular, Truworths Jewellery and Truworths Living
The gross margin of 55.3% is slightly higher than the prior period. The
operating margin was maintained at 34.0% with operating profit increasing
12% to R2 360 million. The low expense growth of 6% was attributable to an 11%
decrease in trade receivable costs.
Headline earnings per share (HEPS) were 377.9 cents, which is an increase of
12% over the prior period`s 337.6 cents. This is in line with the forecast
range in the Group`s trading statement released on SENS on 16 July 2010. Fully
diluted HEPS of 370.4 cents were 12% higher (2009: 331.7 cents). A final cash
dividend of 98 cents per share has been declared. Total dividends in respect of
the period amount to 200 cents, 17% more than the prior period. Dividend cover
is 1.9 times headline earnings per share.
CREDIT MANAGEMENT
The debtors` book continued to improve in accordance with management`s
expectations. The doubtful debt allowance and net bad debts as percentages of
gross trade receivables improved to 10.7% (2009: 11.9%) and 9.8% (2009: 11.9%)
respectively. The Group maintained a qualifying payment percentage of 90% for
customers to avoid delinquency. During the period the Group continued to apply
its strict credit-granting criteria, resulting in an active account base growth
of 6% to over 1.9 million accounts with a 67% (2009: 61%) rejection rate on new
applications. Gross trade receivables grew by 11% from the prior period-end to
R2.8 billion. Credit sales comprised 70% (2009: 69%) of retail sales, with 85%
(2009: 84%) of active account holders able to purchase at the end of the period.
FINANCIAL POSITION
The Group statements of financial position continued to strengthen, with net
asset value per share increasing by 23% to 1 027.7 cents. The return on equity
at 40%, return on assets at 44% and asset turnover at 1.3 times, were within
management`s targeted range as outlined in the 2009 annual report.
The Group`s cash position reflects cash and cash equivalents of R1 318 million
at the end of the period (2009: R767 million). During the period the Group
generated R1 567 million from operating activities and utilised cash primarily
for dividend payments (R785 million), store development (R101 million),
distribution and warehousing facilities (R67 million) and computer
infrastructure and technology (R36 million). The Group repurchased 808 000
shares at an average price of R41.85 per share for a total of R34 million.
Capital expenditure of R210 million has been committed for the 2011 financial
period.
OUTLOOK
Retail sales for the first seven weeks of the 2011 financial period reflect
growth of 12.6% on the corresponding period in 2010.
Higher real wage increases, lower inflation and lower interest rates are
positive for consumers. As reported by the National Credit Regulator
personal debt levels in the South African economy remain high, although the
improved quality of the Group`s debtors` book augurs well for the 2011
financial period. Greater economic stability, albeit in a soft business
environment, is nevertheless more encouraging than the difficult conditions
experienced in the past few years.
Trading conditions are expected to remain challenging, but management will
continue to focus on its business philosophy which has served it well over so
many years. In essence the supply of internationally inspired, high quality
fashionable clothing to youthful South Africans will continue to be the driver
of our strategy for the period ahead.
The Group remains committed to investing appropriately for longer-term growth,
with trading space planned to increase by approximately 6% on June 2010.
H Saven MS Mark
Chairman Chief Executive Officer
19 August 2010
FINAL DIVIDEND
The directors have resolved to declare a final cash dividend from retained
earnings in respect of the period ended 27 June 2010 in the amount of 98 cents
(2009: 83 cents) per share to holders of the company`s shares reflected in the
company`s register on the record date, being Friday, 10 September 2010. The last
day to trade in the company`s shares cum dividend is Friday, 3 September 2010.
Trading in the company`s shares ex dividend will commence on Monday,
6 September 2010. The dividend will be paid in South African Rand on Monday,
13 September 2010. Consequently no dematerialisation or rematerialisation of the
company`s shares may take place over the period from Monday, 6 September 2010 to
Friday, 10 September 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
19 August 2010
GROUP STATEMENTS OF FINANCIAL POSITION
at 27 Jun at 28 Jun
2010 2009
Audited Audited
Rm Rm
ASSETS
Non-current assets 997 927
Property, plant and equipment 694 618
Goodwill 90 90
Intangible assets 65 48
Derivative financial assets 20 25
Available-for-sale asset 1 1
Loans and receivables 94 97
Deferred tax 33 48
Current assets 4 412 3 579
Inventories 450 463
Trade and other receivables 2 561 2 281
Derivative financial assets 35 23
Prepayments 48 45
Cash and cash equivalents 1 318 767
Total assets 5 409 4 506
EQUITY AND LIABILITIES
Equity
Share capital and premium 79 65
Treasury shares (797) (763)
Retained earnings 5 026 4 208
Non-distributable reserves 63 41
Total equity 4 371 3 551
Non-current liabilities 97 94
Post-retirement medical benefit
obligation 36 32
Cash-settled compensation obligation 12 14
Straight-line operating lease
obligation 49 48
Current liabilities 941 861
Trade and other payables 762 705
Derivative financial liability - 18
Provisions 59 49
Tax payable 120 89
Total liabilities 1 038 955
Total equity and liabilities 5 409 4 506
Number of shares in issue (net of
treasury shares) (millions) 425.3 424.9
Net asset value per share (cents) 1 027.7 835.7
Key ratios
Return on equity (%) 40 44
Return on capital (%) 60 65
GROUP STATEMENTS OF COMPREHENSIVE INCOME
52 weeks 52 weeks
to 27 Jun to 28 Jun
2010 2009
Audited % Audited
Note Rm change Rm
Revenue 3 7 659 9 7 014
Sale of merchandise 6 937 11 6 247
Cost of sales (3 098) (2 817)
Gross profit 3 839 12 3 430
Other income 162 153
Trading expenses (2 201) 6 (2 083)
Depreciation and
amortisation (121) (109)
Employment costs (759) (672)
Occupancy costs (582) (496)
Trade receivable costs (385) (432)
Other operating costs (354) (374)
Trading profit 1 800 20 1 500
Interest received 560 614
Profit before tax 2 360 12 2 114
Tax expense (756) (680)
Profit for the period,
fully attributable to
owners of the parent 1 604 12 1 434
Other comprehensive income
Movement in effective
portion of cash flow hedge 2 14
Deferred tax on movement
in effective portion of
cash flow hedge (1) (4)
Revaluation of
available-for-sale asset - 1
Other comprehensive
income for the period,
net of tax 1 11
Total comprehensive
income for the period,
fully attributable to
owners of the parent 1 605 11 1 445
Basic earnings per share (cents) 377.7 12 337.2
Headline earnings per share (cents) 377.9 12 337.6
Fully diluted basic
earnings per share (cents) 370.2 12 331.3
Fully diluted headline
earnings per share (cents) 370.4 12 331.7
Weighted average number
of shares (millions) 424.7 425.3
Key ratios
Gross margin (%) 55.3 54.9
Trading expenses to sale
of merchandise (%) 31.7 33.3
Trading margin (%) 25.9 24.0
Operating margin (%) 34.0 33.8
GROUP STATEMENTS OF CASH FLOWS
52 weeks 52 weeks
to 27 Jun to 28 Jun
2010 2009
Audited Audited
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 1 934 1 661
Working capital movements (216) (246)
Cash generated from operations 1 718 1 415
Interest received 560 614
Tax paid (711) (777)
Cash inflow from operations 1 567 1 252
Dividends paid (785) (683)
Net cash from operating activities 782 569
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment to
maintain operations (34) (31)
Acquisition of property, plant and
equipment to expand operations (158) (164)
Acquisition of computer software (24) (3)
Proceeds on disposal of plant and equipment 1 1
Loans advanced - (1)
Loans repaid 4 7
Net cash used in investing activities (211) (191)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 14 15
Shares repurchased by subsidiaries (34) (159)
Net cash used in financing activities (20) (144)
Net increase in cash and cash equivalents 551 234
Cash and cash equivalents at the
beginning of the period 767 533
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1 318 767
Key ratios
Cash flow per share (cents) 369.0 294.4
Cash equivalent earnings per share (cents) 412.3 377.6
Cash realisation rate (%) 89 78
* Earnings before interest, tax, depreciation and amortisation
GROUP STATEMENTS OF CHANGES IN EQUITY
27 Jun 28 Jun
2010 2009
Audited Audited
Rm Rm
Total equity at the beginning of the period 3 551 2 920
Total comprehensive income for the period 1 605 1 445
Profit for the period 1 604 1 434
Other comprehensive income for the period 1 11
Dividends (786) (683)
Premium on shares issued 14 15
Shares repurchased (34) (159)
Share-based payment 21 13
Total equity at the end of the period 4 371 3 551
Comprising:
Share capital and premium 79 65
Treasury shares (797) (763)
Retained earnings 5 026 4 208
Non-distributable reserves 63 41
Total equity 4 371 3 551
Cents per share:
Dividends 200 171
Final - payable September 98 83
Interim - paid March 102 88
SELECTED EXPLANATORY NOTES
1 BASIS OF PREPARATION
The information in this preliminary report has been extracted from the
Group`s 2010 annual financial statements, which have been prepared in compliance
with International Financial Reporting Standards (IFRS) and the South African
Companies Act of 1973. This preliminary report has been prepared in accordance
with IFRS and IAS 34, Interim Financial Reporting.
The Group`s 2010 annual financial statements and this preliminary report have
been audited by the Group`s external auditors, Ernst & Young Inc., and their
unqualified audit opinion on such financial statements and on this preliminary
report are available for inspection at the company`s registered office.
The Group`s 2010 annual financial statements have been prepared in accordance
with the going concern and historical cost bases except where otherwise
indicated in the Group`s accounting policies. The accounting policies have been
applied uniformly throughout the Group and are consistent with those applied in
the prior period, except as mentioned in note 2.
The presentation currency of the financial statements is the South African
Rand (R) and all amounts are rounded to the nearest million.
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 IFRS 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 - Improving Disclosures about
Financial Instruments
- IAS 39, Financial Instruments: Recognition and Measurement - Eligible Hedged
Items
- Annual improvements to IFRS (May 2008 and April 2009) (some improvements have
been adopted earlier than required)
Where the adoption of the standard, interpretation or improvement has 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 has been adopted and
will be applied prospectively and has had no impact on the financial position
or performance of the Group in the current or the prior period.
IFRS 7, Financial Instruments: Disclosures - Improving Disclosures about
Financial Instruments
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 IFRS
In May 2008 and April 2009 the IASB issued an omnibus of amendments to its
standards, primarily with a view to removing inconsistencies and clarifying
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.
IFRS, amendments and International Financial Reporting Interpretations Committee
(IFRIC) interpretations not applicable to Group activities
Various other new and amended IFRS and 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 52 weeks 52 weeks
to 27 Jun to 28 Jun
2010 2009
Audited Audited %
Rm Rm change
Sale of merchandise 6 937 6 247 11
Retail sales 7 118 6 441
Accounting reclassifications (211) (232)
Franchise sales 30 38
Interest received 560 614 (9)
Trade receivables interest 491 549
Investment interest 69 65
Other income 162 153 6
Commission 78 82
Display fees 34 29
Financial services income 31 23
Lease rental income 10 10
Royalties 3 3
Other 6 6
Total 7 659 7 014 9
4 RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Profit for the period, fully
attributable to owners of the parent 1 604 1 434
Adjusted for:
Loss on disposal of fixed assets 1 2
Headline earnings 1 605 1 436 12
5 SEGMENT REPORTING
The Group`s reportable segments have been identified as the Truworths and YDE
business units. The Truworths business unit comprises all the retailing
activities conducted by the Group, through which the Group retails fashion
apparel comprising clothing, footwear and other fashion products to women, men
and children, other than by the YDE business unit. 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
2010 Rm Rm Rm Rm
Total third party revenue* 7 568 89 2 7 659
Depreciation and amortisation 118 3 - 121
Interest received 558 1 1 560
Profit for the period 1 578 24 2 1 604
Profit before tax 2 325 33 2 2 360
Tax expense (747) (9) - (756)
Segment assets 7 410 139 (2 140) 5 409
Segment liabilities 1 143 26 (131) 1 038
Capital expenditure 211 5 - 216
Gross margin (%) 55.3 - - 55.3
Trading margin (%) 25.4 37.2 - 25.9
Operating margin (%) 33.5 38.2 - 34.0
Inventory turn (times) 6.9 - - 6.9
Credit:cash sales mix (%) 70:30 23:77 - 70:30
2009
Total revenue* 6 923 88 3 7 014
Third party 6 923 87 4 7 014
Inter-segment - 1 (1) -
Depreciation and amortisation 106 3 - 109
Interest received 608 2 4 614
Profit for the period 1 404 27 3 1 434
Profit before tax 2 073 38 3 2 114
Tax expense (669) (11) - (680)
Segment assets 6 495 101 (2 090) 4 506
Segment liabilities 1 022 12 (79) 955
Capital expenditure 196 2 - 198
Gross margin (%) 54.9 - - 54.9
Trading margin (%) 23.4 41.3 - 24.0
Operating margin (%) 33.2 43.6 - 33.8
Inventory turn (times) 6.1 - - 6.1
Credit:cash sales mix (%) 69:31 21:79 - 69:31
* Total third party revenue includes sale of merchandise, other income,
interest received and management fees. There was no inter-segment revenue in
the current period.
# `Corporate` represents unallocated segments and consolidation entries.
2010 2010 2009 2009
Third party revenue Rm % Rm %
South Africa 7 447 97.2 6 808 97.1
Namibia 127 1.7 121 1.7
Swaziland 55 0.7 47 0.7
Franchise sales 30 0.4 38 0.5
Botswana 15 0.2 15 0.2
Rest of Africa 14 0.2 16 0.2
Middle East 1 0.0 7 0.1
Total third party revenue 7 659 100 7 014 100
6 CAPITAL COMMITMENTS 2010 2009
Rm Rm
Capital expenditure authorised but not contracted:
Store development 150 150
Computer infrastructure 38 27
Distribution facilities 14 126
Motor vehicles 6 -
Head office refurbishment 2 2
Total 210 305
The capital commitments will be financed by cash generated from operations and
available cash resources, and are expected to be incurred in the 2011 reporting
period.
7 EVENTS AFTER THE END OF THE REPORTING PERIOD
No event, material to the understanding of this preliminary report, has
occurred between the end of the reporting period and the date of approval.
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#, MA Thompson# and AJ Taylor
* Executive Non-executive # Independent
RESULTS ARE AVAILABLE ONLINE AT WWW.TRUWORTHS.CO.ZA
Date: 19/08/2010 14:07:03 Produced by the JSE SENS Department.
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