| Thu 23 Aug 2001, 0:00 | | Truworths International Limited - Audited Group Re |
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30 JUNE 2001
ISIN: ZAE000028296
Share code: TRU
Truworths international limited
Audited Group Results for the year ended 30 June 2001
All operations headline earnings per share up 37,3%
Continuing operations highlights
Sales increased by 12,6%
Operating profit up 24,7%
20,8% growth in headline earnings per share
Sound cash position significantly improved
Dividends declared per share increased by 16%
Comments
Group results
The board is pleased to report on another year of improved performance
despite highly competitive and challenging market conditions. Growth
strategies which concentrated on expanding the core Truworths business
through market share gains, aggressive store renovation, sensible space
expansion, steady extension of the franchise operation, new format
development and cost containment, all progressed according to plan. Coupled
with careful reading of the fashion market by the Truworths buying and
support teams, these strategies resulted in increases of 12,8% in revenue to
R1,68 billion and 20,8% in group headline earnings per share to 44,2 cents
from continuing operations for the 52-week period ended June 2001.
The increase in group headline earnings per share for all operations was a
significant 37,3% over the comparative period to June 2000. Operating profit
for all operations improved by 32,4% to R296 million.
During the period under review, group subsidiaries received Au$3,2 million
(R15 million) in distributions made to creditors of the former Australian
subsidiary, Sportsgirl. This has been recorded as an exceptional item.
There was further improvement in the group's solid cash position.
A final dividend of 7,5 cents per share has been declared, resulting in
total dividends declared of 14,5 cents per share in respect of the period
ended June 2001, a 16% increase on last year.
Truworths results
Truworths improved sales and operating margins as a result of increased
market share, efficiencies gained from management of operating expenses and
better productivity in terms of sales per square metre and per full time
employee. The business coped with lower inflation, changing patterns in
consumer spending and a tough retail trading environment by concentrating on
core competencies, developing unique retail formulae and implementing
strategies to manage expenses.
Sales of merchandise, including franchise sales, reflected a 12,6%
improvement to R1,59 billion. Franchise sales increased 14,8% to R14,0
million from R12,2 million in 2000. Credit sales, which last year comprised
77% of total sales, accounted for 75% of sales. The increase in sales
includes like for like growth of 5,6%. These figures compare favourably to
Retail Liaison Committee sales growth figures estimated at 5% for the same
period.
Operating profit, before interest, taxation and exceptional items, increased
24,7% to R296 million. Operating margin was 18,6% compared to 16,8% last
year. Headline earnings improved by 22,7% to R203,1 million.
The increase in sales of 12,9% in the six months to June 2001 relative to
the same period in the prior year, was especially noteworthy, given that the
sales growth last year had itself been strong.
Income received from investments and trade receivables increased 17,3% to
R76,7 million. Increase in trade receivable interest was partially due to
the implementation of additional interest bearing payment plans and the
charging of interest on 30-day arrear accounts in line with the practices of
other major retailers.
Total trading space was increased by 5,5%, with sales densities reflecting a
9,5% improvement on a moving annual basis.
The new "millennium" fashion emporiums at Menlyn Park and Canal Walk enjoyed
excellent customer reaction and both made an encouraging contribution. The
new format and store expansion programme included Identity, with 21 stand-
alone stores now successfully offering a focused range of fashionable
menswear and womenswear at extremely good prices, as well as the Elements
cosmetics concept and Truworths Man, which again captured market share.
Cost management measures, including a tougher approach to delinquent credit
proved effective. The reduction in bad debt as a percentage of credit sales
from 4,7% last year to 3,7% and the reduction of arrears as a percentage of
the total book from 18% last year to 15% were particularly pleasing.
A new arrangement is currently being negotiated in respect of SRG House, our
head office building located in Cape Town. The existing arrangement is to be
terminated as its terms are considered unfavourable given current and
predicted market conditions. The new arrangement under consideration is
expected to result in significant net present value and long-term earnings
benefits. Headline earnings and net asset value per share are not expected
to be materially affected for the period ending 30 June 2002.
Prospects
While continued shifts in consumer spending and highly competitive market
conditions are expected in the trading year ahead, the recent easing of
interest rates and further sales growth well above plan in July are
encouraging pointers. Management is confident that by focusing on core
competencies, Truworths will continue to counter prevailing conditions. We
anticipate reasonable growth in earnings in the year ahead.
Dividend
The directors have resolved to declare a dividend in respect of the six
months ended 30 June 2001 in the amount of 7,5 (2000: 6,5) cents per share,
to members registered as such at the close of business on Friday, 7
September 2001.
The dividend will be paid in the currency of the Republic of South Africa on
Friday, 21 September 2001 when dividend cheques will be posted, or
alternatively dividends due will be transferred electronically to the bank
accounts of those members who have requested payment in such manner.
Wooltru unbundling
The board of Wooltru Limited, the controlling shareholder of the company,
announced to its shareholders on 18 June 2001, that the unbundling of its
holdings in listed group subsidiaries is progressing well. Shareholders will
be kept informed of developments.
Strate
The company will be moving into the JSE sponsored electronic share
transaction system STRATE on 22 October 2001. Electronic settlement in the
company's shares will commence on 19 November 2001, from which date share
certificates will no longer be acceptable for delivery. Information in this
regard will accompany the annual report to be distributed to shareholders
during September 2001.
approval
The audited group results were approved by the directors on 23 August 2001.
M S Mark A J Taylor
Chairman and Chief executive officer Director
Group income statement
2001 2000 Change
Notes R'000 R'000 %
Revenue 1 676 358 1 772 888
Continuing operations 3 1 676 358 1 486 811 12,8
Discontinuing operations - 286 077
Cost of sales (759 626) (811 999)
Continuing operations (759 626) (676 036)
Discontinuing operations - (135 963)
Gross profit 916 732 960 889
Continuing operations 916 732 810 775
Discontinuing operations - 150 114
Expenses (620 706) (737 298)
Continuing operations (620 706) (573 448) 8,2
Discontinuing operations - (163 850)
Operating profit/(loss) before
finance costs and taxation 296 026 223 591 32,4
Continuing operations 296 026 237 327 24,7
Discontinuing operations - (13 736)
Finance costs (98) (8 087)
Continuing operations (98) (1 503)
Discontinuing operations - (6 584)
Operating profit/(loss) before
exceptional items 295 928 215 504
Continuing operations 295 928 235 824
Discontinuing operations - (20 320)
Exceptional items 4 14 999 (157 428)
Continuing operations - (11 000)
Discontinuing operations 14 999 (146 428)
Profit/(loss) before taxation 310 927 58 076
Continuing operations 295 928 224 824
Discontinuing operations 14 999 (166 748)
Taxation (91 760) (70 278)
Profit/(loss) after taxation 219 167 (12 202)
Outside shareholders' interest (30) 11
Net profit/(loss) attributable
to ordinary shareholders 219 137 (12 191)
Headline earnings per
share (cents)
All operations 5 44,2 32,2 37,3
Continuing operations 5 44,2 36,6 20,8
Fully diluted headline
earnings per share (cents)
All operations 43,4 31,6 37,3
Continuing operations 43,4 36,0 20,6
Earnings per share (cents)
All operations 47,7 (2,7)
Continuing operations 44,5 34,2
Fully diluted earnings
per share (cents)
All operations 46,8 (2,7)
Continuing operations 43,6 33,6
Dividends declared per share (cents) 14,5 12,5
Weighted average number
of shares ('000) 459 092 451 546
Group cash flow statement
2001 2000
R'000 R'000
Cash flow from operating activities
Cash flow from trading 266 892 208 345
Working capital movements (23 128) 869
Cash generated from operations 243 764 209 214
Interest paid (98) (8 087)
Dividends received 8 284 9 421
Interest received 68 393 55 968
Taxation paid (92 099) (72 344)
Cash generated by operations 228 244 194 172
Dividends paid (54 187) (15 705)
Cash inflow from operations 174 057 178 467
Cash flow from investing activities
Investment to maintain operations (21 453) (4 875)
Investment to expand operations (40 777) (63 973)
Proceeds on disposal of property,
fixtures, vehicles, plant and equipment 2 230 2 074
Loans and other investments 24 180 12 071
Net cash outflow from investing activities (35 820) (54 703)
Cash flow from financing activities
Proceeds on share issue 4 456 1 787
Decrease in outside shareholders' interest (726) (2 412)
Long-term borrowings repaid - (3 984)
Net cash inflow/(outflow) from
financing activities 3 730 (4 609)
Net increase in cash and cash equivalents 141 967 119 155
Net cash inflow/(outflow) on
discontinuance 14 999 (76 893)
Effects of translation changes - (15 497)
Cash and cash equivalents for the period 156 966 26 765
Cash and cash equivalents at
beginning of the period 150 903 124 138
Cash and cash equivalents at end of
the period 307 869 150 903
Group Statement of changes
in equity
Share Non-dis-
capital and tributable Retained
premium reserves profit Total
R'000 R'000 R'000 R'000
Ordinary shareholders'
equity at 30 June 2000 100 730 - 615 813 716 543
Net profit attributable to
ordinary shareholders - - 219 137 219 137
Dividends - - (54 187) (54 187)
Losses on transactions
with outside shareholders - (479) - (479)
Transfer to non-distributable
Reserves - 479 (479) -
Issue of share capital 4 940 - - 4 940
Share issue expenses
written off (484) - - (484)
Ordinary shareholders'
equity at 30 June 2001 105 186 - 780 284 885 470
Group Balance Sheet
2001 2000
R'000 R'000
Assets
Non-current assets 306 355 318 324
Property, fixtures, vehicles,
plant and equipment 135 105 122 894
Loans and other investments 171 250 195 430
Current assets 1 016 732 799 867
Inventories 146 472 123 702
Trade and other receivables 536 675 503 835
Prepayments 21 959 19 350
Bank and cash 311 054 152 853
Amounts owing by group companies 572 127
Total assets 1 323 087 1 118 191
Equity and liabilities
Capital and reserves
Share capital 69 68
Share premium 105 117 100 662
Retained profit 780 284 615 813
Ordinary shareholders' equity 885 470 716 543
Outside shareholders' interest - 219
Total shareholders' equity 885 470 716 762
Non-current liabilities 148 563 160 868
Deferred taxation 123 056 135 116
Retirement benefit obligation 25 507 25 752
Current liabilities 289 054 240 561
Trade and other payables 214 616 175 881
Provisions 6 356 10 000
Taxation 64 325 52 603
Amounts owing to group companies 3 757 2 077
Total equity and liabilities 1 323 087 1 118 191
Notes
2001 2000 Change
R'000 R'000 %
1. Basis of preparation
This announcement has been extracted
from the group's June 2001
audited annual financial statements.
2. Accounting policies
Except for the change explained
in note 6 below, the accounting
policies adopted in the
preparation of the group's
audited annual financial statements
have been consistently applied.
3. Revenue
Sale of merchandise 1 594 970 1 702 426
Continuing operations 1 594 970 1 416 643 12,6
Discontinuing operations - 285 783
Interest received 68 393 55 968
Investments 12 840 11 187
Trade receivables 55 553 44 781
Dividends received 8 284 9 421
Management, royalties and
administrative fees 4 711 5 073
1 676 358 1 772 888
4. Exceptional items
Distributions from discontinuing
Operations 14 999 -
Impairment of investment in
SRG House headlease - (11 000)
Losses on disposal of discontinuing
Operations - (146 428)
14 999 (157 428)
5. Headline earnings
Headline earnings were arrived at
after bringing into account:
Net profit/(loss) attributable to
ordinary shareholders -
all operations 219 137 (12 191)
Net surplus on realisation of
property, plant and equipment (1 024) (66)
Exceptional items (14 999) 157 428
Headline earnings 203 114 145 171 39,9
Continuing operations 203 114 165 491 22,7
Discontinuing operations - (20 320)
6. Change in accounting policy
In 2001 the group changed its accounting policy in respect of post-
retirement benefits to comply with accounting statement 116, employee
benefits.
The effect of the change is as follows:
Net income/(expense) before taxation 245 (3 952)
Taxation (74) 1 186
Net income/(loss) after taxation 171 (2 766)
Effect on headline earnings
and HEPS
Headline earnings before change
- All operations 202 943 147 937
- Continuing operations 202 943 168 257
Headline earnings after the change
- All operations 203 114 145 171
- Continuing operations 203 114 165 491
HEPS before changes (cents)
- All operations 44,2 32,8
- Continuing operations 44,2 37,3
HEPS after changes (cents)
- All operations 44,2 32,2
- Continuing operations 44,2 36,6
Restatement of opening
retained profit
Opening retained profit previously
Reported 633 839 647 644
Net retirement benefits obligation (18 026) (15 260)
Retirement benefits obligation (25 752) (21 800)
Taxation 7 726 6 540
Restated opening retained profit 615 813 632 384
7. Contingent liability
Subsequent to the financial year end, the company received revised
assessments from South African Revenue Service (SARS) in respect of the 1996
to 1999 years, in terms of which the loan elements of the group's former
offshore investments have been subjected to transfer pricing adjustments in
terms of section 31(2) of the Income Tax Act.
The additional liability arising from the assessments amounts to R11,6
million with a further R3,7 million in respect of STC. Management's view,
which is supported by tax opinion is that the loans should not be subjected
to the adjustments, and accordingly an objection to the assessments will
shortly be lodged with SARS.
Truworths International Limited
(Registration number 1944/017491/06)
SRG House, 1 Mostert Street, Cape Town 8001.
PO Box 600, Cape Town 8000
Auditors: Ernst & Young
Directors: M S Mark (Chairman and Chief executive officer), A J Taylor,
R G Dow*, B D Lapin*, C T Ndlovu, A E Parfett*, L A Tager* *Non-executive
Company secretary: C Durham
Transfer secretaries: Mercantile Registrars Limited
10th Floor, 11 Diagonal Street, Johannesburg 2001
PO Box 7184, Johannesburg 2001 (South Africa)
Transfer Secretaries (Pty) Limited. Shop 12,
Kaiserkrone Centre, Post Street Mall, Windhoek
PO Box 2401, Windhoek (Namibia)
This announcement is available on our website: www.truworths.co.za
