| Thu 18 Aug 2011, 13:58 | | TRW - Truworths International Ltd - Truworths International Abridged Preliminary |
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TRU
TRU
TRW - Truworths International Ltd - Truworths International Abridged Preliminary
report on the Audited Group Results for the 52 weeks ended 26 June 2011
TRUWORTHS INTERNATIONAL LTD
(Registration number 1944/017491/06)
JSE Limited code: TRU
NSX code: TRW
ISIN: ZAE000028296
ABRIDGED PRELIMINARY REPORT ON THE AUDITED GROUP RESULTS
for the 52 weeks ended 26 June 2011
Sale of merchandise UP 13%
Gross margin at 57%
Trading profit UP 24%
Operating margin at 36%
Headline earnings per share UP 21%
Annual dividend per share UP 31%
GROUP PROFILE
Truworths International Ltd is an investment holding and management company
listed on the JSE and the Namibian Stock Exchange. Its principal trading
subsidiaries, Truworths Ltd and Young Designers Emporium (Pty) Ltd, are engaged
in the retailing of fashion apparel and related merchandise. Truworths
International Ltd and its subsidiaries (the Group) operate primarily in southern
Africa.
FINANCIAL PERFORMANCE
Group retail sales increased by 13.5% to R8.1 billion relative to the 52-week
period ended 27 June 2010 (the prior period). Comparable store retail sales
increased 8.9% (2010: 3.6%) and product inflation averaged 4% (2010: 4%).
Trading space increased by 5.4% relative to the prior period-end following the
opening of 12 Truworths, 12 Identity and 3 Uzzi stores and the closure of 7
stores. At the end of the period the Group had 543 stores (2010: 523).
The Group continued to record market share gains. Based on figures from the
retail liaison committee (RLC) for June 2011, the Group increased its ladieswear
RLC market share of clothing to 22.3% (2010: 21.9%) and menswear RLC market
share to 22.1% (2010: 21.9%).
Jun 2011 Jun 2010
52 weeks 52 weeks %
Divisional sales Rm Rm change
Truworths ladieswear 3 068 2 727 13
Truworths menswear 1 581 1 372 15
Identity 1 127 966 17
Daniel Hechter 972 871 12
Elements 403 385 5
Inwear 386 355 9
LTD 312 247 26
Other* 231 195 18
Retail sales 8 080 7 118 14
Franchise sales 35 30 17
Accounting reclassifications (257) (211) 22
Sale of merchandise 7 858 6 937 13
YDE agency sales 250 238 5
* includes cellular, Truworths Jewellery and Truworths Living divisions
Lower markdowns for the period contributed to the gross margin reaching 56.7%,
above the targeted range of 54% to 55%. The operating margin of 36.4% was higher
than the targeted range of 32% to 34% primarily as a result of low expense
growth, mainly due to a 1% increase in trade receivable costs. Inventory levels
increased 18% on the prior period-end resulting in inventory turn decreasing to
6.4 times (2010: 6.9 times), nevertheless within the targeted range of 6.0 to
6.5 times.
Headline earnings per share (HEPS) were 456.0 cents, an increase of 21% over the
prior period`s 377.9 cents. This performance is in line with the forecast range
in the Group`s trading statement released on SENS on 15 July 2011. Diluted HEPS
of 447.5 cents were 21% higher (2010: 370.4 cents). A final cash dividend of 134
cents per share has been declared, based on a dividend cover of 1.7 times (2010:
1.9 times). Total dividends declared in respect of the period amount to 262
cents, 31% more than the prior period.
CREDIT MANAGEMENT
The debtors` book continued to improve in accordance with management`s
expectations. The doubtful debt allowance and net bad debt as percentages of
gross trade receivables improved to 10.1% (2010: 10.7%) and 6.8% (2010: 9.8%)
respectively. By period-end the active account base had grown by 11% to
approximately 2.2 million accounts with the acceptance rate on new applications
increasing to 38% from 33%. Gross trade receivables grew by 18% to R3.3 billion
from the prior period-end. The growth in the debtors` book is attributable to
Group credit sales growing 16% over the prior period (14% and 38% higher in
Truworths and Identity respectively) and a shift in Truworths` credit sales from
shorter dated interest-free to longer-term interest-bearing payment plans.
Credit sales comprised 71% (2010: 70%) of retail sales, with 86% (2010: 85%) of
active account holders able to purchase at the period-end.
FINANCIAL POSITION
The Group`s statement of financial position continued to strengthen, with net
asset value per share increasing by 16% to 1 191.8 cents. The return on equity
at 41% and return on assets at 46% were higher than management`s targeted range
of 35% to 40% and 40% to 45% respectively. Asset turnover at 1.3 times was
within management`s targeted range of 1.2 to 1.5 times and remained unchanged
from the prior period.
CAPITAL MANAGEMENT
The Group produced a net increase in cash and cash equivalents at period-end of
R171 million (2010: R551 million). During the period the Group generated R1.7
billion in cash from operating activities which was used primarily for dividend
payments (R968 million), share buy-backs (R394 million), investment in store
development (R120 million), distribution and warehousing facilities (R30
million), and computer infrastructure and technology (R31 million). The Group
had cash and cash equivalents of R1.5 billion at the period-end (2010: R1.3
billion).
The Group repurchased 5.8 million shares at an average price of R68.14 per share
for a total of R394 million during the period. Since the inception of the share
buy-back programme in 2002, 80 million shares have been repurchased at a total
cost of R1.7 billion at an average price of R20.84. Since the period-end a
further 1.2 million shares were repurchased at R69.03 per share until the date
of this announcement for the consideration of R84 million.
The Group continued to evaluate potential acquisitions and implemented its
capital management strategy through a combination of capital expenditure, share
buy-backs and reducing dividend cover.
Capital expenditure of R218 million has been committed for the 2012 financial
period.
KING III
The 2011 reporting period will be the first time that the Group will issue an
integrated annual report. An integrated annual report is a King III
recommendation and represents a fundamental shift in corporate reporting
practice. King III defines integrated reporting as "a holistic and integrated
representation of the company`s performance in terms of both its finance and its
sustainability".
The purpose of an integrated annual report is to communicate to stakeholders the
strategy, performance and activities of the organisation in a manner that allows
them to assess the ability of the organisation to create and sustain value. The
report should allow the users of the report to determine whether the
organisation`s governing structure has applied its collective mind in
identifying the environmental, social, economic and financial issues that impact
on the organisation, and to assess the extent to which these issues have been
incorporated into the organisation`s strategy.
Explanatory information on how the Group has applied other King III principles,
in relation to IT governance, assurance on internal controls, assessment of the
finance function, stakeholder engagement and shareholder consideration of
remuneration policy is incorporated in the integrated annual report and the
annual financial statements, which are scheduled to be available during the last
week of September 2011.
OUTLOOK
Against a background of uncertain economic growth, retail trading conditions are
expected to continue to be challenging in the months ahead as consumers face
increasing living costs owing to rising utility, food and transport prices.
Inflationary pressures may lead to an increase in interest rates during the 2012
financial period. As the majority of the Group`s credit customers have limited
exposure to asset-based finance, higher interest rates are not expected to have
a material impact on the trade receivables book. However, increasing interest
rates could place further pressure on household disposable income.
Retail sales for the first seven weeks of the 2012 financial period increased by
10.4% over the corresponding period in 2011.
Product inflation is anticipated to be at high single-digit levels in the 2012
financial period and annual growth in trading space is planned at approximately
6%.
The Group will continue to actively manage its capital base to generate
competitive returns to shareholders, while evaluating potential investment and
acquisition opportunities to complement the current merchandise offering.
H Saven MS Mark
Chairman Chief Executive Officer
18 August 2011
FINAL DIVIDEND
The directors have resolved to reduce the dividend cover from 1.9 times to 1.7
times resulting in a final cash dividend from retained earnings in respect of
the period ended 26 June 2011 in the amount of 134 cents (2010: 98 cents) per
share to holders of the company`s shares reflected in the company`s register on
the record date, being Friday, 9 September 2011. The last day to trade in the
company`s shares cum dividend is Friday, 2 September 2011. Trading in the
company`s shares ex dividend will commence on Monday, 5 September 2011. The
dividend will be paid in South African Rand on Monday, 12 September 2011.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday, 5 September 2011 to Friday, 9
September 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
18 August 2011
GROUP STATEMENTS OF FINANCIAL POSITION
at 26 June at 27 June
2011 2010
Audited Audited
Rm Rm
ASSETS
Non-current assets 1 093 997
Property, plant and equipment 724 694
Goodwill 90 90
Intangible assets 77 65
Derivative financial assets 21 20
Available-for-sale asset 1 1
Loans and receivables 141 94
Deferred tax 39 33
Current assets 5 131 4 412
Inventories 530 450
Trade and other receivables 3 033 2 561
Derivative financial assets 28 35
Prepayments 51 48
Cash and cash equivalents 1 489 1 318
Total assets 6 224 5 409
EQUITY AND LIABILITIES
Equity
Share capital and premium 159 79
Treasury shares (1 191) (797)
Retained earnings 6 001 5 026
Non-distributable reserves 77 63
Total equity 5 046 4 371
Non-current liabilities 84 97
Post-retirement medical benefit obligation 41 36
Cash-settled compensation obligation 1 12
Straight-line operating lease obligation 42 49
Current liabilities 1 094 941
Trade and other payables 875 762
Derivative financial liability 1 -
Provisions 73 59
Tax payable 145 120
Total liabilities 1 178 1 038
Total equity and liabilities 6 224 5 409
Number of shares in issue (net of
treasury shares) (millions) 423.4 425.3
Net asset value per share (cents) 1 191.8 1 027.7
Key ratios
Return on equity (%) 41 40
Return on capital (%) 61 60
Return on assets (%) 46 44
Inventory turn (times) 6.4 6.9
Asset turnover (times) 1.3 1.3
GROUP STATEMENTS OF COMPREHENSIVE INCOME
52 weeks 52 weeks
to 26 June to 27 June
2011 2010
Audited % Audited
Note Rm change Rm
Revenue 3 8 684 13 7 659
Sale of merchandise 7 858 13 6 937
Cost of sales (3 403) (3 098)
Gross profit 4 455 16 3 839
Other income 189 162
Trading expenses (2 421) 10 (2 201)
Depreciation and
amortisation (129) (121)
Employment costs (828) (759)
Occupancy costs (652) (582)
Trade receivable costs (390) (385)
Other operating costs (422) (354)
Trading profit 2 223 24 1 800
Interest received 637 560
Profit before tax 2 860 21 2 360
Tax expense (917) (756)
Profit for the period,
fully attributable to
owners of the parent 1 943 21 1 604
Other comprehensive
(loss)/income
Movement in effective
portion of cash flow hedge (12) 2
Deferred tax on movement
in effective portion of
cash flow hedge 3 (1)
Other comprehensive
(loss)/income for the
period, net of tax (9) 1
Total comprehensive income
for the period,
fully attributable to
owners of the parent 1 934 20 1 605
Basic earnings per share (cents) 455.8 21 377.7
Headline earnings per share (cents) 456.0 21 377.9
Fully diluted basic
earnings per share (cents) 447.3 21 370.2
Fully diluted headline
earnings per share (cents) 447.5 21 370.4
Weighted average number of
shares (millions) 426.3 424.7
Key ratios
Gross margin (%) 56.7 55.3
Trading expenses to sale
of merchandise (%) 30.8 31.7
Trading margin (%) 28.3 25.9
Operating margin (%) 36.4 34.0
GROUP STATEMENTS OF CASH FLOWS
52 weeks 52 weeks
to 26 June to 27 June
2011 2010
Audited Audited
Rm Rm
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flow from trading and cash EBITDA* 2 411 1 934
Working capital movements (425) (216)
Cash generated from operations 1 986 1 718
Interest received 637 560
Tax paid (895) (711)
Cash inflow from operations 1 728 1 567
Dividends paid (968) (785)
Net cash from operating activities 760 782
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of plant and equipment to
maintain operations (30) (34)
Acquisition of property, plant and
equipment to expand operations (139) (158)
Acquisition of computer software (17) (24)
Proceeds on disposal of plant and equipment - 1
Acquisition of cash-settled call options (31) -
Loans advanced (63) -
Loans repaid 5 4
Net cash used in investing activities (275) (211)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on shares issued 80 14
Shares repurchased by subsidiaries (394) (34)
Net cash used in financing activities (314) (20)
Net increase in cash and cash equivalents 171 551
Cash and cash equivalents at the
beginning of the period 1 318 767
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 1 489 1 318
Key ratios
Cash flow per share (cents) 405.3 369.0
Cash equivalent earnings per share (cents) 498.9 412.3
Cash realisation rate (%) 81 89
* Earnings before interest received, tax, depreciation and amortisation
GROUP STATEMENTS OF CHANGES IN EQUITY
26 June 27 June
2011 2010
Audited Audited
Rm Rm
Total equity at the beginning of the period 4 371 3 551
Total comprehensive income for the period 1 934 1 605
Profit for the period 1 943 1 604
Other comprehensive (loss)/income for the period (9) 1
Dividends paid (968) (786)
Premium on shares issued 80 14
Shares repurchased (394) (34)
Share-based payment 23 21
Total equity at the end of the period 5 046 4 371
Comprising:
Share capital and premium 159 79
Treasury shares (1 191) (797)
Retained earnings 6 001 5 026
Non-distributable reserves 77 63
Total equity 5 046 4 371
Cents per share:
Dividends 262 200
Final - payable/paid September 134 98
Interim - paid March 128 102
SELECTED EXPLANATORY NOTES
1 BASIS OF PREPARATION
The information in this preliminary report has been extracted from the Group`s
2011 annual financial statements, which have been prepared in compliance with
International Financial Reporting Standards (IFRS), the AC 500 Standards as
issued by the Accounting Practices Board, or its successor and the South African
Companies Act (71 of 2008, as amended). This preliminary report has been
prepared in accordance with IAS 34: Interim Financial Reporting.
The Group`s 2011 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 is available for inspection at the company`s registered office.
The Group`s 2011 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 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 revisions to certain 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 revisions 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.
52 weeks 52 weeks
to 26 June to 27 June
2011 2010
Audited % Audited
Rm change Rm
3 REVENUE
Sale of merchandise 7 858 13 6 937
Retail sales 8 080 7 118
Accounting reclassifications (257) (211)
Franchise sales 35 30
Interest received 637 14 560
Trade receivables interest 543 491
Investment interest 94 69
Other income 189 17 162
Commission 88 78
Display fees 39 34
Financial services income 38 31
Lease rental income 12 10
Other 9 6
Royalties 3 3
Total 8 684 13 7 659
4 RECONCILIATION OF PROFIT FOR THE PERIOD TO
HEADLINE EARNINGS:
Profit for the period, fully attributable
to owners of the parent 1 943 1 604
Adjusted for:
Loss on disposal of fixed assets 1 1
Headline earnings 1 944 21 1 605
5 SEGMENT REPORTING
The Group`s reportable segments have been identified as the Truworths and Young
Designers Emporium (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 revenue and profit before tax.
Con-
solidation
Truworths YDE entries Group
Rm Rm Rm Rm
2011
Total revenue 8 604 95 (15) 8 684
Third party 8 584 95 5 8 684
Inter-segment 20 - (20) -
Depreciation and
amortisation 126 3 - 129
Interest received 632 1 4 637
Profit for the period 1 925 27 (9) 1 943
Profit before tax 2 832 37 (9) 2 860
Tax expense (907) (10) - (917)
Segment assets 8 449 163 (2 388) 6 224
Segment liabilities 1 231 23 (76) 1 178
Capital expenditure 179 7 - 186
Gross margin (%) 56.7 - - 56.7
Trading margin (%) 28.0 38.6 - 28.3
Operating margin (%) 36.0 39.5 - 36.4
Inventory turn (times) 6.4 - - 6.4
Credit:cash sales mix (%) 71:29 24:76 - 71:29
2010
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
Contri- Contri-
bution bution
2011 to revenue 2010 to revenue
Rm % Rm %
Third party revenue
South Africa 8 448 97.3 7 447 97.2
Namibia 142 1.6 127 1.7
Swaziland 59 0.7 55 0.7
Franchise sales 35 0.4 30 0.4
Botswana 15 0.2 15 0.2
Rest of Africa 20 0.2 14 0.2
Middle East - - 1 -
Total third party revenue 8 684 100 7 659 100
2011 2010
Rm Rm
6 CAPITAL COMMITMENTS
Capital expenditure authorised but not contracted:
Store development 154 150
Computer infrastructure 40 38
Distribution facilities 20 14
Head office refurbishments 3 2
Motor vehicles 1 6
Total capital commitments 218 210
The capital commitments will be financed by cash generated from operations and
available cash resources and are expected to be incurred in the 2012 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 of the report.
Truworths International Ltd: 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: One Capital
Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Ltd
Auditors: Ernst & Young Inc.
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107, South Africa, or
Transfer Secretaries (Pty) Ltd, Shop 8, 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
Cape Town
18 August 2011
Date: 18/08/2011 13:58:01 Produced by the JSE SENS Department.
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