| Mon 21 Feb 2011, 12:50 | | TRU - Truworths International Limited - Unaudited group interim results for the |
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TRU
TRU
TRU - Truworths International Limited - Unaudited group interim results for the
26 weeks ended 26 December 2010
TRUWORTHS INTERNATIONAL LIMITED
(Registration number 1944/017491/06)
JSE Limited code: TRU
NSX code: TRW
ISIN: ZAE000028296
UNAUDITED GROUP INTERIM RESULTS
For the 26 weeks ended 26 December 2010
Sale of merchandise UP 15%
Gross margin at 57%
Operating profit UP 20%
Operating margin at 36%
Fully diluted headline earnings per share UP 19%
Dividend per share UP 25%
COMMENTARY
GROUP PROFILE
Truworths International Limited is an investment holding and management company
listed on the JSE 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 in sub-Saharan Africa.
FINANCIAL PERFORMANCE
Group sale of merchandise increased by 15% to R4 232 million relative to the 26-
week period ended 27 December 2009 (the prior period). Comparable store retail
sales grew 11% (2009: 3%) and product inflation averaged approximately 1% (2009:
10%).
Trading space has increased by 4% to 538 stores since 27 December 2009,
following the opening of 7 Truworths, 5 Truworths Man, 10 Identity and 6 Uzzi
stores and the closure of 1 Identity and 2 Uzzi stores.
The Group continued to record clothing market share gains. Based on data from
the retail liaison committee (RLC) for December 2010, the Group increased its
ladieswear RLC market share to 22.2% (2009: 21.7%) and menswear RLC market share
to 21.7% (2009: 21.4%).
Divisional sales 26 Dec 27 Dec % change
2010 2009 on prior
Rm Rm period
Truworths ladieswear 1 615 1 415 14
Truworths menswear 865 736 18
Identity 595 519 15
Daniel Hechter 542 478 13
Elements 223 207 8
Inwear 204 183 11
LTD 187 143 31
Other* 124 97 28
Retail sales 4 355 3 778 15
Franchise sales 19 18 6
Accounting reclassifications (142) (107) 33
Sale of merchandise 4 232 3 689 15
YDE agency sales 133 123 8
* includes cellular, Truworths Jewellery and Truworths Living
The gross and operating margins increased to 56.6% (2009: 55.8%) and 35.9%
(2009: 34.3%) respectively, with operating profit increasing 20% to
R1 519 million. Expense growth of 12% was attributable to the net effect of the
expansion in trading space and a 3% decrease in trade receivable costs. Trade
receivable interest increased 9% on the prior period as a result of growth in
gross trade receivables, but was off-set by the improvement in the quality of
the debtors` book and decrease in interest rates. Inventory turn at the end of
the period was 6.6 times compared to 6.1 times at the prior period-end.
Headline earnings per share (HEPS) were 242.7 cents, an increase of 19% over the
prior period`s 203.3 cents. This is in line with the forecast range in the
Group`s trading statement released on SENS on 14 January 2011. Fully diluted
HEPS of 238.0 cents were 19% higher (2009: 199.4 cents).
An interim cash dividend of 128 cents per share, 25% more than the prior period,
has been declared based on a dividend cover of 1.9 times HEPS.
CREDIT MANAGEMENT
The debtors` book continued to perform satisfactorily as anticipated by
management. The doubtful debt allowance and net bad debts to gross trade
receivables improved to 10.1% (2009: 11.3%) and 7.5% (2009: 11.3%) 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, with a 65% (2009: 65%) rejection rate on new
applications resulting in an active account base growth of 9% to
2.1 million accounts. Gross trade receivables grew by 16% from the prior period-
end to R3.3 billion. Credit sales comprised 70% (2009: 69%) of retail sales,
with 89% (2009: 88%) of active account holders able to purchase at the period-
end.
FINANCIAL POSITION
The Group`s financial position continued to strengthen, with net asset value per
share increasing by 24% to 1 182.2 cents. The annualised return on equity at
44%, return on assets at 47% and asset turnover at 1.3 times, is marginally
lower than in the prior period as a consequence of increased cash levels.
Group cash and cash equivalents totalled R1 790 million at the period-end (2009:
R1 072 million). During the period the Group generated R1 006 million from
operations and utilised cash primarily for dividend payments
(R420 million), store development (R66 million), computer infrastructure and
technology (R17 million), and distribution and warehousing facilities
(R8 million). Capital expenditure of R210 million has been committed for the
2011 financial period.
DIRECTORATE
Chief Executive Officer`s Contract
The board is pleased to announce that it has concluded an agreement with the
Chief Executive Officer, Michael Mark, to extend his service contract until
30 June 2013. He has been Chief Executive Officer of the Group since 1991.
Salient features 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
2011 annual report.
Appointment of Chief Financial Officer
The board is pleased to announce the appointment of Mark Sardi as Chief
Financial Officer and an executive director of the Group with effect from
21 February 2011. Mark (41), a chartered accountant, was previously head of
investment banking at a leading banking group and has undergone an extended
induction since joining the Group as Chief Financial Officer Designate in
July 2010. He will assume operational responsibility for the Group`s finance,
company secretarial, legal, project, operational risk and internal audit
departments.
OUTLOOK
Whilst the results for the first half of the financial year reflect the
cumulative benefits of low interest rates, low inflation and higher real wage
increases, management is cautious to assume that a sustained recovery in
South African consumer spending is evident. Clothing inflation from higher
cotton prices and China supply constraints are likely to be challenges for the
Group for at least the remainder of the financial year.
Relative to the prior corresponding period, retail sales for the first eight
weeks of the second half of the 2011 financial year increased by 9.8%. However,
markdowns applied over this trading period were at lower levels than the prior
corresponding period. Annual growth in trading space is planned to increase by
approximately 6% by June 2011.
Management continues to focus on driving sales growth in this environment
through innovative merchandising strategies; further enhancing the quality of
the debtors` book through prudent credit risk management and containing expense
growth. The Group`s strong financial position will enable management to consider
share buy-backs and potential investment and acquisition opportunities that are
complementary to the current merchandise offering.
H Saven MS Mark
Chairman Chief Executive Officer
21 February 2011
INTERIM DIVIDEND
The directors have resolved to declare an interim cash dividend from retained
earnings in respect of the 26-week period ended 26 December 2010 in the amount
of 128 cents (2009: 102 cents) per share to holders of the company`s shares
reflected in the company`s register on the record date, being Friday,
18 March 2011.
The last day to trade in the company`s shares cum dividend is Friday,
11 March 2011. Trading in the company`s shares ex dividend will commence on
Monday, 14 March 2011. The dividend will be paid in South African Rand on
Tuesday, 22 March 2011.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday, 14 March 2011 to Friday,
18 March 2011, 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
21 February 2011
GROUP STATEMENTS OF FINANCIAL POSITION
at 26 Dec at 27 Dec at 27 Jun
2010 2009 2010
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets 1 099 1 005 997
Property, plant and equipment 715 700 694
Goodwill 90 90 90
Intangible assets 71 45 65
Derivative financial assets 46 23 20
Available-for-sale asset 1 1 1
Loans and receivables 140 95 94
Deferred tax 36 51 33
Current assets 5 409 4 185 4 412
Inventories 555 532 450
Trade and other receivables 3 006 2 555 2 561
Derivative financial assets 40 20 35
Prepayments 18 6 48
Cash and cash equivalents 1 790 1 072 1 318
Total assets 6 508 5 190 5 409
EQUITY AND LIABILITIES
Equity
Share capital and premium 151 70 79
Treasury shares (797) (796) (797)
Retained earnings 5 638 4 719 5 026
Non-distributable reserves 76 54 63
Total equity 5 068 4 047 4 371
Non-current liabilities 101 96 97
Post-retirement medical benefit
obligation 39 34 36
Cash-settled compensation obligation 13 14 12
Straight-line operating lease obligation 49 48 49
Current liabilities 1 339 1 047 941
Trade and other payables 1 148 926 762
Derivative financial liability 13 5 -
Provisions 67 40 59
Tax payable 111 76 120
Total liabilities 1 440 1 143 1 038
Total equity and liabilities 6 508 5 190 5 409
Number of shares in issue (net of
treasury shares) (million) 428.7 424.6 425.3
Net asset value per share (cents) 1 182.2 953.1 1 027.7
Key ratios
Return on equity (%) 44 45 40
Return on capital (%) 64 67 60
Return on assets (%) 47 49 44
Inventory turn (times) 6.6 6.1 6.9
Asset turnover (times) 1.3 1.4 1.3
GROUP STATEMENTS OF COMPREHENSIVE INCOME
26 weeks 26 weeks
to 26 Dec to 27 Dec
2010 2009
Unaudited Unaudited
Note Rm Rm
Revenue 3 4 629 4 036
Sale of merchandise 4 232 3 689
Cost of sales (1 835) (1 631)
Gross profit 2 397 2 058
Other income 92 80
Trading expenses (1 275) (1 138)
Depreciation and amortisation (68) (59)
Employment costs (445) (383)
Occupancy costs (327) (283)
Trade receivable costs (222) (228)
Other operating costs (213) (185)
Trading profit 1 214 1 000
Interest received 305 267
Profit before tax 1 519 1 267
Tax expense (487) (403)
Profit for the period, fully attributable
to owners of the parent 1 032 864
Other comprehensive income for the period,
net of tax (1) 1
Movement in effective portion of cash
flow hedge (1) 1
Deferred tax on movement in effective portion
of cash flow hedge - -
Total comprehensive income for the period,
fully attributable to owners of the parent 1 031 865
Basic earnings per share (cents) 242.7 203.3
Headline earnings per share (cents) 242.7 203.3
Fully diluted basic earnings per share (cents) 238.0 199.4
Fully diluted headline earnings per share (cents) 238.0 199.4
Weighted average number of shares (million) 425.3 424.9
Key ratios
Gross margin (%) 56.6 55.8
Trading expenses to sale of merchandise (%) 30.1 30.8
Trading margin (%) 28.7 27.1
Operating margin (%) 35.9 34.3
52 weeks
to 27 Jun
2010
% Audited
change Rm
Revenue 15 7 659
Sale of merchandise 15 6 937
Cost of sales (3 098)
Gross profit 16 3 839
Other income 162
Trading expenses 12 (2 201)
Depreciation and amortisation ( 121)
Employment costs (759)
Occupancy costs (582)
Trade receivable costs (385)
Other operating costs (354)
Trading profit 21 1 800
Interest received 14 560
Profit before tax 20 2 360
Tax expense (756)
Profit for the period, fully attributable
to owners of the parent 19 1 604
Other comprehensive income for the period,
net of tax 1
Movement in effective portion of cash flow hedge 2
Deferred tax on movement in effective portion
of cash flow hedge (1)
Total comprehensive income for the period, fully
attributable to owners of the parent 19 1 605
Basic earnings per share (cents) 19 377.7
Headline earnings per share (cents) 19 377.9
Fully diluted basic earnings per share (cents) 19 370.2
Fully diluted headline earnings per share (cents) 19 370.4
Weighted average number of shares (million) 424.7
Key ratios
Gross margin (%) 55.3
Trading expenses to sale of merchandise (%) 31.7
Trading margin (%) 25.9
Operating margin (%) 34.0
GROUP STATEMENTS OF CASH FLOWS
26 weeks 26 weeks 52 weeks
to 26 Dec to 27 Dec to 27 Jun
2010 2009 2010
Unaudited Unaudited Audited
Rm Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 1 332 1 062 1 934
Working capital movements (132) (87) (216)
Cash generated from operations 1 200 975 1 718
Interest received 305 267 560
Tax paid (499) (419) (711)
Cash inflow from operations 1 006 823 1 567
Dividends paid (420) (353) (785)
Net cash from operating activities 586 470 782
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment to
maintain operations (17) (28) (34)
Acquisition of property, plant and
equipment to expand operations (70) (110) (158)
Acquisition of computer software (8) - (24)
Proceeds on disposal of plant
and equipment - - 1
Acquisition of derivative financial
instruments (31) - -
Loans advanced (60) - -
Loans repaid - 1 4
Net cash used in investing activities (186) (137) (211)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 72 5 14
Shares repurchased by subsidiaries - (33) (34)
Net cash from/(used in) financing
activities 72 (28) (20)
Net increase in cash and cash
equivalents 472 305 551
Cash and cash equivalents at the
beginning of the period 1 318 767 767
Cash and cash equivalents at the end
of the period 1 790 1 072 1 318
Key ratios
Cash flow per share (cents) 236.5 193.7 369.0
Cash equivalent earnings per share (cents) 269.7 217.3 412.3
Cash realisation rate (%) 88 89 89
* Earnings before interest received, tax, depreciation and amortisation
GROUP STATEMENTS OF CHANGES IN EQUITY
26 Dec 27 Dec
2010 2009
Unaudited Unaudited
Rm Rm
Total equity at the beginning of the period 4 371 3 551
Total comprehensive income for the period 1 031 865
Dividends (420) (353)
Premium on shares issued 72 5
Shares repurchased - (33)
Share-based payment 14 12
Total equity at the end of the period 5 068 4 047
Comprising:
Share capital and premium 151 70
Treasury shares (797) (796)
Retained earnings 5 638 4 719
Non-distributable reserves 76 54
Total equity 5 068 4 047
Cents per share:
Dividends declared in respect of the period 128 102
SELECTED EXPLANATORY NOTES
1 BASIS OF PREPARATION
The Group`s interim report has been prepared in accordance with International
Financial Reporting Standards (IFRS), and the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, the South African Companies
Act (61 of 1973, as amended) and, where applicable, AC 500 Standards as issued
by the Accounting Practices Board or its successor and the Listings Requirements
of the JSE.
The information contained in the interim report 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 27 June 2010, except for the
following:
During the period, the Group adopted the following amended IFRS to the extent
that they are applicable to its activities:
- IAS 24: Related Party Disclosures (Revised)
- Annual improvements to IFRS (May 2010)
The adoption of the revised standard and improvements has had the following
consequences for the accounting policies, financial position or performance of
the Group:
IAS 24: Related Party Disclosures (Revised)
The revised standard clarifies the definition of a related party in order to
simplify the identification of such parties and to eliminate inconsistencies in
the application of the standard. Although the revised standard is only effective
for annual periods beginning on or after 1 January 2011, the Group has elected
to adopt the entire standard in the current period. As required, the revised
standard has been applied retrospectively. In some instances, the adoption of
the revised standard has resulted in minor additional disclosures, but has not
had any impact on the financial position or performance of the Group.
Annual improvements to IFRS (May 2010)
In May 2010, the International Accounting Standards Board issued an omnibus of
amendments to its standards, affecting six standards and one interpretation. The
Group has adopted those amendments that are effective for annual periods
beginning on or after 1 July 2010. In some instances, the adoption of these
amendments has resulted in minor changes to accounting policies, but has not had
any impact on the financial position or performance of the Group.
Various other new and amended IFRS 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 26 Dec to 27 Dec to 27 Jun
2010 2009 2010
Unaudited Unaudited % Audited
Rm Rm change Rm
Sale of merchandise 4 232 3 689 15 6 937
Retail sales 4 355 3 778 7 118
Accounting reclassifications (142) (107) (211)
Franchise sales 19 18 30
Interest received 305 267 14 560
Trade receivables interest 259 237 491
Investment interest 46 30 69
Other income 92 80 15 162
Commission 47 38 78
Display fees 19 16 34
Financial services income 15 16 31
Lease rental income 6 5 10
Other 3 3 3
Royalties 2 2 6
Total 4 629 4 036 15 7 659
4 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 with reference to retail sales and operating profit or loss.
Truworths YDE Corporate# Group
2010 Rm Rm Rm Rm
Total third party
revenue* 4 589 49 (9) 4 629
Depreciation and
amortisation 66 2 - 68
Interest received 305 - - 305
Profit for the
period 1 031 14 (13) 1 032
Profit before tax 1 512 20 (13) 1 519
Tax expense (481) (6) - (487)
Capital
expenditure 93 2 - 95
Other segment
information
Gross margin (%) 57 - - 57
Trading margin (%) 28 40 - 29
Operating margin (%) 36 41 - 36
Inventory turn (times) 6.6 - - 6.6
Credit:cash sales
mix (%) 70:30 23:77 - 70:30
2009
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
* Total third party revenue includes, where applicable, sale of merchandise,
interest received, commission, display fees, financial services income and
royalties. No inter-segment revenue has been recognised in the current or prior
period.
# `Corporate` represents unallocated segments and consolidation entries.
2010 2010 2009 2009
Third party revenue Rm % Rm %
South Africa 4 504 97.3 3 923 97.2
Namibia 74 1.6 67 1.7
Swaziland 32 0.7 28 0.7
Franchise sales 19 0.4 18 0.4
Rest of Africa 11 0.2 9 0.2
Botswana 8 0.2 8 0.2
Middle East - - 1 -
Total third party revenue 4 629 100 4 036 100
5 CAPITAL COMMITMENTS 26 Dec 27 Dec 27 Jun
2010 2009 2010
Rm Rm Rm
Capital expenditure authorised but not contracted:
Store development 84 78 150
Computer infrastructure 21 73 38
Distribution facilities 6 14 14
Motor vehicles 3 - 6
Head office refurbishment 1 2 2
Total 115 167 210
The capital commitments will be financed by cash generated from operations and
available cash resources, and are expected to be incurred in the remainder of
the 2011 reporting period.
6 EVENTS AFTER THE END OF THE REPORTING PERIOD
No event, material to the understanding of this interim report, has occurred
between the end of the interim period and the 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 27 June 2010 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)*, MJ Sardi (CFO)*, 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: 21/02/2011 12:50:01 Produced by the JSE SENS Department.
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JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
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employees and agents accept no liability for (or in respect of) any direct,
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