| Thu 21 Feb 2002, 0:00 | | Truworths International Limited - Interim Results |
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December 2001
Truworths International Limited
(Registration number 1944/017491/06)
JSE code: TRU ISIN: ZAE000028296
Interim results
For the 26 weeks ended 31 December 2001
Financial highlights
- Growth in sales of 17,6%
- Operating profit increased by 31,7%
- Headline earnings per share up 27,4%
- Interim Dividend increased by 28,6%
Comment
Group results
Further growth in sales and earnings was achieved by Truworths International
Limited (Truworths) in the 26 weeks to 31 December 2001. Sales increased to
R967,9 million - a 17,6% improvement on the R823,3 million for the
corresponding period in 2000.
Higher retail activity, further gains in market share, improved productivity
in terms of sales per square metre and per full time employee, and a
continued focus on costs impacted favourably on operating margins and
resulted in an improvement to 20,4% compared to 18,2% in the previous year.
Operating profits before finance costs, taxation and exceptional items
reflected a 31,7% increase to R197,3 million (2000: R149,8 million).
There was a 20,3% increase in net profit attributable to shareholders from
R110,7 million to R133,2 million. Headline earnings improved by 28,4% to
R132,8 million from R103,4 million and headline earnings per share increased
by 27,4% from 22,6 cents to 28,8 cents. An interim dividend of 9 cents per
share has been declared. This is 28,6% more than the dividend for the first
half of the 2001 financial year.
The positive trend in sales, commented on at the time of the company's year-
end results announcement in August, continued through the period and trading
was ahead of plan. The increase in sales of 17,6% included like-for-like
sales growth of 10,6%.
The fashion emporiums in Menlyn Park, Pretoria, and Canal Walk, Cape Town,
continued to enjoy good customer reaction and the new emporium at Gateway
Theatre of Shopping, Umhlanga, which opened in October 2001, traded in line
with expectations. The Identity cash chain, which offers a focused, well-
priced and youthful range of menswear and womanswear in 25 stores, continued
its promising performance. Plans to expand to 30 stores by the end of the
financial year are on schedule.
Credit sales as a percentage of total sales decreased from 75% at June 2001
to 73%, reflecting the impact of the group's conservative credit granting
policies. The charging of interest on 30-day arrear accounts resulted in
higher income from trade receivables. The continuous improvement in the book
is reflected in a lower percentage of arrear accounts compared to June 2001
and a further reduction in net bad debt, as a percentage of credit sales.
The marginal decline in the gross margin compared to last year resulted
mainly from the higher contribution to sales by the lower margin Identity
and cosmetics concepts. Operating costs were tightly controlled and were
9,3% up on last year.
At the end of the period under review, cash balances totalled R206,2
million, a decrease of R101,7 million relative to June 2001. Cash outflows
totalling R190,8 million arose from the termination of the head office
lease, an increased investment in this building, the payment of transfer
pricing taxation and a repurchase of shares. The ability to generate healthy
cash flows from operations remains a significant strength.
The termination of the head office lease was effected by a lump sum payment
of R133,9 million, which will be amortized over the next 13 years. Headline
earnings and net asset value per share for the period ending June 2002 will
not be materially affected by this payment, which has significant net
present value benefits.
The transfer pricing taxation payment of R18,6 million, including interest
and STC, has been recorded as a prepayment, given that formal objections to
the revised assessments issued by the South African Revenue Service (SARS)
were submitted in September 2001. The objections are supported by
independent legal opinion and relate to transfer pricing adjustments in
respect of funds allegedly provided on a non-arm's length basis to offshore
subsidiaries in the 1996 to 1999 years. No response to these objections has
yet been received from SARS.
During the period under review, group subsidiaries received R0,3 million in
distributions made to creditors of the former Australian subsidiary,
Sportsgirl. This has been recorded as an exceptional item. A further
distribution of approximately R4,2 million was received in February and a
final distribution is expected during the latter part of the calendar year.
Cash utilisation
In keeping with the intention to utilise cash balances effectively, a
general repurchase of Truworths shares was effected by a subsidiary in
December 2001 prior to the commencement of the group's closed period. The
repurchase comprised 5 893 608 shares, representing 1,3% of total issued
share capital, at a cost of R29,6 million. The shares will be held as
treasury stock. The further implementation of our strategy to deal with the
group's positive cash flow will continue over the forthcoming months.
Wooltru unbundling
Truworths' listed parent company Wooltru Limited recently announced that all
commercial issues relating to the proposed unbundling to its shareholders of
its holdings of listed shares, which include those of Truworths, had been
resolved. It further announced that as soon as the full impact of the
unbundling legislation promulgated in December 2001 had been determined, it
would announce the details and timetable of the unbundling.
Prospects
Management's outlook for the remainder of the financial year is cautious
given the current economic environment. Notwithstanding challenging market
conditions, the positive trend in sales has continued in both January and
February with sales growth ahead of plan. In the coming months management's
strategy will be to continue to read the fashion market accurately, grow
market share and contain costs.
Approval
This interim report was approved by the directors on 21 February 2002 and is
signed on their behalf by
MS Mark AJ Taylor
Chairman and Director
Chief executive officer
SRG House, 1 Mostert Street, Cape Town 8001
PO Box 600, Cape Town 8000
Auditors: Ernst & Young
Directors: MS Mark (Chairman and CEO), RG Dow*, BD Lapin*, CT Ndlovu*,
AE Parfett*, LA Tager* and AJ Taylor * Non-executive
Company secretary: C Durham
Transfer secretaries:
Mercantile Registrars Limited
10th Floor, 11 Diagonal Street, Johannesburg 2001 PO Box 7184, Johannesburg
2000 (South Africa)
Transfer Secretaries (Pty) Limited
Shop 12, Kaiserkrone Centre, Post Street Mall, Windhoek
PO Box 2401, Windhoek (Namibia)
This interim report will be available on our website at www.truworths.co.za
Abridged balance sheet
Unaudited Audited
26 weeks 52 weeks
ended 31 Dec ended 30 Jun
2001 2000 Change 2001
Note Rm Rm % Rm
ASSETS
Non-current assets 448,7 326,1 306,4
Property, plant and
Equipment 278,9 132,8 135,1
Investments and loans 169,8 193,3 171,3
Current assets 991,1 904,0 1 013,0
Inventories 137,3 126,1 146,5
Trade and other
Receivables 647,6 561,0 558,6
Cash and cash equivalents 206,2 216,9 307,9
Total assets 1 439,8 1 230,1 1 319,4
EQUITY AND LIABILITIES
Equity
Ordinary shareholders'
Equity 954,5 806,0 885,5
Interest-free liabilities 485,3 424,1 433,9
Non current 153,4 160,9 148,6
Current 331,9 263,2 285,3
Total equity and liabilities 1 439,8 1 230,1 1 319,4
Number of shares in
issue (millions) 455,4 459,8 461,3
Net asset value per
share (cents) 209,6 175,3 192,0
Abridged income statement
Unaudited Audited
26 weeks 52 weeks
ended 31 Dec ended 30 Jun
2001 2000 Change 2001
Note Rm Rm % Rm
Revenue 3 1 012,2 857,6 18,0 1 676,3
Cost of sales (481,9) (403,2) (759,6)
Gross profit 530,3 454,4 916,7
Total operating expenses (333,0) (304,6) 9,3 (620,7)
Depreciation (27,4) (22,6) (48,6)
Occupancy costs (78,0) (68,4) (146,4)
Employment costs (140,5) (123,5) (240,1)
Other operating costs (87,1) (90,1) (185,6)
Operating profit before
finance costs and taxation 197,3 149,8 31,7 296,0
Finance costs - (0,1) (0,1)
Operating profit before
exceptional items 197,3 149,7 31,8 295,9
Exceptional items 4 0,3 7,2 15,0
Profit before taxation 197,6 156,9 310,9
Taxation (64,4) (46,2) (91,8)
Net profit attributable to
ordinary shareholders 133,2 110,7 20,3 219,1
Headline earnings per
share (cents) 28,8 22,6 27,4 44,2
Diluted headline
earnings per share (cents) 28,2 22,3 26,5 43,4
Earnings per share (cents) 28,9 24,2 19,4 47,7
Diluted earnings per
share (cents) 28,2 23,9 18,0 46,8
Dividends declared per
share (cents) 9,0 7,0 28,6 14,5
Weighted average
number of shares
in issue (millions) 461,2 458,1 459,1
Abridged statement of changes in equity
Unaudited Audited
26 weeks 52 weeks
ended 31 Dec ended 30 Jun
2001 2000 Change 2001
Note Rm Rm % Rm
Ordinary shareholders' equity
at beginning of year 885,5 716,5 716,5
Net profit attributable to
ordinary shareholders 133,2 110,7 219,1
Dividends paid (34,6) (22,0) (54,2)
Losses on transactions with
outside shareholders - - (0,4)
Transfer to non-distributable
Reserves - (0,5) -
Share capital and share
premium movements (29,6) 1,3 4,5
Ordinary shareholders'
equity at end of period 954,5 806,0 885,5
Abridged cash flow statement
Unaudited Audited
26 weeks 52 weeks
ended 31 Dec ended 30 Jun
2001 2000 Change 2001
Rm Rm % Rm
Cash generated from
Operations 155,1 167,4 243,6
Net interest received 39,5 27,7 68,4
Dividends received 3,5 3,8 8,3
Taxation paid (66,1) (88,3) (92,1)
Cash generated by
Operations 132,0 110,6 228,2
Dividends paid (34,6) (22,0) (54,2)
Cash inflow from
Operations 97,4 88,6 174,0
Cash flow from investing
activities
Net acquisition of property,
plant and equipment (171,3) (32,5) (60,0)
Loans and other investment
Movements 1,5 2,1 24,2
Net cash outflow from
investing activities (169,8) (30,4) (35,8)
Net cash (outflow)/inflow
from financing activities (29,6) 0,6 3,8
Net (decrease)/increase in
cash and cash equivalents (102,0) 58,8 142,0
Net cash inflow from
discontinuing operations 0,3 7,2 15,0
(Decrease)/increase in cash
and cash equivalents for
the period (101,7) 66,0 157,0
Cash and cash equivalents at
beginning of the period 307,9 150,9 150,9
Cash and cash equivalents
at end of the period 206,2 216,9 307,9
1. Basis of preparation
The information contained in this announcement constitutes an extract of
salient information contained in the group's interim report for the period
to 31 December 2001. The said interim report, which complies with the
requirements of AC 127, the South African Statement of Generally Accepted
Accounting Practice on interim financial reporting, is about to be mailed to
shareholders.
2. Accounting policies
The interim report on which this announcement has been based was prepared on
the historical cost basis and in accordance with the accounting policies
which were applied in the preparation of the group's latest annual financial
statements for the year ended 30 June 2001.
Change
Rm Rm % Rm
3. Revenue
Sale of merchandise 967,9 823,3 17,6 1 594,9
Interest received 39,5 27,7 68,4
Investments 7,3 5,5 12,8
Accounts receivable 32,2 22,2 55,6
Dividends receivable 3,5 3,8 8,3
Royalties and management fees 1,3 2,8 4,7
1 012,2 857,6 18,0 1 676,3
4. Reconciliation of
headline earnings
Net profit attributable to
ordinary shareholders 133,2 110,7 20,3 219,1
Exceptional items (0,3) (7,2) (15,0)
Profit on sale of fixed assets (0,1) (0,1) (1,0)
Headline earnings 132,8 103,4 28,4 203,1
5. Contingent liability
Participation in export partnerships
The South African Revenue Service (SARS) is making enquiries regarding the
tax treatment of the participation by other companies in export partnerships
with financial years ending after 1 March 1996. Trencor Limited has
materially warranted certain important aspects of our group's participation,
including any exposure that might arise in the event that SARS were to raise
additional assessments against the group.
Participation in export partnerships
with financial years ending after
1 March 1996 92,4 104,2 95,5
Interim dividend
The directors have resolved to declare a dividend in respect of the six
months ended 31 December 2001 in the amount of 9,0 (2000: 7,0) cents per
share to holders of the company's shares reflected in the company's register
on the record date Friday, 15 March 2002.
The last day to trade in the company's shares cum dividend is Friday, 8
March 2002, trading ex dividend will commence on Monday, 11 March 2002 and
the dividend will be paid in South African rand on Monday, 18 March 2002.
Consequently no de-materialisation or re-materialisation of the company's
shares may take place between Monday, 4 March 2002 and Friday, 15 March
2002, both days inclusive.
In accordance with the company's articles of association, the directors have
determined that dividend amounts of less than 900 cents due to any one
holder of the company's shares held in certificated form will not be paid,
unless otherwise requested in writing by such holder, but aggregated with
other such amounts and donated to a registered charity to be nominated by
the directors.
