| Thu 22 Aug 2002, 0:00 | | Truworths International Limited - Audited Group Re |
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TRUWORTHS INTERNATIONAL LIMITED - AUDITED GROUP RESULTS FOR THE 53 WEEKS ENDED
30 JUNE 2002
TRUWORTHS INTERNATIONAL LIMITED
AUDITED GROUP RESULTS
for the 53 weeks ended 30 june 2002
- sales up 24% to R1 984 million
- TRADING PROFIT INCREASED BY 65%
- operating profits increased by 53%
- headline earnings up 43%
- annual dividendS increased by 52%
GROUP INCOME STATEMENT
for the period ended 30 June
Audited Audited
53 weeks 52 weeks
2002 2001 Change
Note Rm Rm %
Revenue 3 2 075.9 1 676.4 23.8
Turnover 3 1 985.9 1 599.7 24.1
Cost of sales (949.2) (759.6)
Gross profit 1 036.7 840.1
Expenses (674.0) (620.7) 8.6
Trading profit 362.7 219.4 65.3
Dividends received 5.8 8.3
Interest received 84.2 68.4
Operating profit before exceptional item,
finance costs and taxation 452.7 296.1 52.9
Finance costs (0.2) (0.1)
Operating profit before exceptional item and
taxation 452.5 296.0
Exceptional item 4 5.3 15.0
Profit before taxation 457.8 311.0 47.2
Taxation (163.0) (91.8)
Normal (135.9) (86.8)
STC (8.4) (5.0)
Transfer pricing (18.7) -
Profit after taxation 294.8 219.2 34.5
Outside shareholders` interest in profit - (0.1)
Net profit attributable to shareholders 294.8 219.1 34.6
Dividends per share (cents) 22.0 14.5 51.7
Headline earnings per share (cents) 5 63.5 44.2 43.7
Earnings per share (cents) 64.5 47.7 35.2
Number of shares in issue after
shares repurchased (000`s) 453 991 461 289
Weighted average number of shares (000`s) 457 139 459 092
GROUP BALANCE SHEET
at 30 June
Audited Audited
2002 2001
Rm Rm
ASSETS
Non-current assets 459.0 306.3
Property, fixtures, vehicles, plant and equipment 282.7 135.1
Investments 126.4 136.5
Loans 49.9 34.7
Current assets 961.3 1 016.8
Inventories 155.5 146.5
Trade and other receivables 658.1 537.3
Prepayments 18.1 22.0
Cash and cash equivalents 129.6 311.0
Total assets 1 420.3 1 323.1
EQUITY AND LIABILITIES
Capital and reserves
Share capital 0.1 0.1
Share premium 125.4 105.1
Retained profit 998.9 780.3
1 124.4 885.5
Shares repurchased (66.8) -
Total shareholders` equity 1 057.6 885.5
Non-current liabilities 135.8 148.5
Deferred taxation 107.2 123.0
Retirement benefit obligation 28.6 25.5
Current liabilities 226.9 289.1
Trade and other payables 169.3 218.4
Provisions 6.0 6.4
Taxation 51.6 64.3
Total equity and liabilities 1 420.3 1 323.1
Net asset value per share (cents) 233.0 192.0
GROUP CASH FLOW STATEMENT
for the period ended 30 June
Audited Audited
53 weeks 52 weeks
2002 2001
Rm Rm
Cash flow from operating activities
Cash flow from trading 424.6 266.9
Dividends received 5.8 8.3
Cash EBITDA 430.4 275.2
Working capital movements (175.5) (21.9)
Cash generated from operations 254.9 253.3
Finance costs (0.2) (0.1)
Interest received 84.2 68.4
Taxation paid (191.5) (92.1)
Cash generated by operations 147.4 229.5
Dividends paid (76.2) (54.1)
Cash retained from operations 71.2 175.4
Cash flow from investing activities
Investment to maintain and expand operations (207.9) (62.3)
Disposal of property, fixtures, vehicles, plant
and equipment 1.5 2.2
Loans (15.2) 9.6
Investments 10.2 14.6
Net cash outflow from investing activities (211.4) (35.9)
Cash flow from financing activities
Proceeds on share issue 20.3 4.4
Decrease in outside shareholders` interest - (0.7)
Shares repurchased (66.8) -
Net cash (outflow)/inflow from financing
activities (46.5) 3.7
Net (decrease)/increase in cash and cash
equivalents (186.7) 143.2
Net cash inflow from discontinuing operations 5.3 15.0
Cash and cash equivalents for the period (181.4) 158.2
Cash and cash equivalents at beginning of
the period 311.0 152.8
Cash and cash equivalents at end of the period 129.6 311.0
GROUP STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2002
Share Capital Retained Share Audited
& Premium Profit Repurchase Total
Rm Rm Rm Rm
Shareholders` equity at
1 July 2001 105.2 780.3 - 885.5
Net profit attributable to
shareholders - 294.8 - 294.8
Dividends paid - (76.2) - (76.2)
Shares issued 20.3 - - 20.3
Shares repurchased - - (66.8) (66.8)
Shareholders` equity at
30 June 2002 125.5 998.9 (66.8) 1 057.6
NOTES
Audited Audited
53 weeks 52 weeks
2002 2001 Change
Rm Rm %
1. Basis of preparation
These results have been extracted from the group`s June 2002 audited annual
financial statements, which have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice.
2. Accounting policies
The accounting policies adopted in the preparation of the group`s June 2002
annual financial statements are consistent with those applied in the prior year.
3. Revenue
Turnover 1 985.9 1 599.7 24.1
Sale of merchandise 1 984.0 1 595.0 24.4
Management and administrative fees 1.9 4.7
Dividends received 5.8 8.3
Interest received 84.2 68.4
2 075.9 1 676.4 23.8
4. Exceptional item
Distribution from discontinuing operations 5.3 15.0
5. Headline earnings
Headline earnings are calculated as follows:
Net profit attributable to shareholders 294.8 219.1 34.6
Exceptional item arising from discontinuing
operations (5.3) (15.0)
Net deficit/(surplus) on asset realisation
after taxation 0.8 (1.0)
Headline earnings 290.3 203.1 42.9
6. Contingent liability
Participation in export partnerships
The South African Revenue Service (SARS) is investigating the tax treatment by
certain other companies participating in export partnerships
with financial years ending after 1 March 1996. Trencor Limited has materially
warranted certain important aspects of the partners` participation, including
any exposure that might arise in the event that SARS were to raise assessments
in respect of this participation. Deferred taxation liability in respect of the
group`s participation in export partnerships with financial years ending after 1
March 1996 (excluding interest and penalties) 88.3 95.5
DIVIDEND
The directors have resolved to declare a dividend in respect of the six months
ended 30 June 2002 in the amount of 13.0 (2001: 7.5) cents per share to holders
of the company`s shares reflected in the company`s register on the record date,
Friday, 13 September 2002.
The last day to trade in the company`s shares cum dividend is Friday, 6
September 2002. Trading in the company`s shares ex dividend will commence on
Monday, 9 September 2002 and the dividend will be paid in South African rand on
Monday, 16 September 2002.
Consequently no dematerialisation or rematerialisation of the company`s shares
may take place over the period from Monday, 9 September to Friday, 13 September
2002, both days inclusive.
In accordance with the company`s articles of association, the directors have
determined that dividends amounting to 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, but aggregated with other such amounts and
donated to a registered charity to be nominated by the directors.
By order of the board
C Durham Cape Town
Company Secretary 22 August 2002
Financial performance
Successful implementation of key strategic initiatives over past years laid the
foundation for one of the best trading periods in the group`s history.
Against a history of continued success in the accurate reading of fashion
trends, further significant gains were made in market share. Sales of
merchandise in the 53 weeks to 30 June 2002 grew by 24.4% from R1 595 million in
2001 to R1 984 million. Sales for a comparable 52-week period showed an
improvement of 21.7% over 2001, with like-for-like sales growth of 12.8%. This
result was particularly pleasing, as strong trading in the equivalent 2001
period and previous years had created a challenging base from which to further
grow the business.
The key strategic initiatives were supported by:
- improved productivity in terms of annualised sales per square metre which
increased by 16.1%;
- an increase of 19.7% in sales per full time equivalent employee; and
- ongoing successful management of expenses.
These resulted in an improvement in operating margins to 22.8% compared to 18.6%
in the previous year. Operating profit before finance costs, taxation and
exceptional items increased by 52.9% to R453 million.
There was a 34.6% increase in net profit attributable to shareholders from R219
million to R295 million. Headline earnings improved by 42.9% from R203 million
to R290 million and headline earnings per share increased by 43.7% from 44.2
cents to 63.5 cents. The growth in headline earnings per share was after a
deduction of R18, 7 million for transfer pricing taxation relating to the 1996
to 1999 years. A large portion of the R18.7 million was offset by the
incremental profits arising from the 53rd week of trading, where sales of R42
million were achieved.
A final dividend of 13.0 cents per share has been declared. This, together with
the interim dividend of 9.0 cents, represents a 51.7% increase compared to 2001.
Dividend cover represents 2.9 times cover compared to 3.3 times in 2001.
Operations
The key strategic initiatives over the past years include:
- the location of stores in the best centres and high street locations around
the country with retail space allocated broadly according to national and
regional income spend;
- the opening of large emporium stores in major centres;
- a focus on own brands to deliver growth;
- investment in best of breed systems for merchandise, debtors and financial
control; and
- material investment in people including talented merchants who understand the
group`s unique business philosophy.
Most merchandise departments performed at levels exceeding expectations. In
particular, Truworths Ladies increased sales by 21.2% to R1 190.5 million,
Daniel Hechter grew sales by 19.7% to R184 million, and Truworths Man achieved
sales of R311 million, a 23.9% improvement. Identity grew by 85.2% to R74
million, Elements (the Cosmetics division) at R145 million was 43.7% ahead of
last year, and LTD increased sales to R62 million, a 16.0% improvement. The
Franchise division increased sales to R17.5 million, a 25.5% increase.
Continued emphasis on inventory management and loss control led to the mark-down
and shrinkage increases being well below the sales increase. Ongoing management
of expenses resulted in total operating costs being up 8.6% on last year. Credit
sales as a percentage of total sales decreased from 75% at June 2001 to 72%,
reflecting the effect of the group`s conservative credit granting policies.
Continuous improvement in the book is reflected in a lower percentage of
customers in arrears resulting in 87% of customers being entitled to buy versus
85% in the previous year. Net bad debt, as a percentage of credit sales improved
from 3.7% to 2.2% in the year under review. A doubtful debt provision calculated
on a consistent basis, at 5.6% of gross trade receivables, has been maintained
despite further improvement in the health of the book and the lower incidence of
bad debt experienced by the group. Management has, however, taken cognisance of
the higher bad debt levels within the credit granting industry by ensuring the
group has sufficient provision, were there to be a deterioration in the group`s
experience relating to its book.
Improved asset utilisation, in particular the use of store space together with
staff development and deployment, as well as control of inventory and trade
receivables continued to be a focus of management.
Cash position
At the end of the period under review, cash balances totalled R129.6 million, a
decrease of R181.4 million relative to end June 2001. The ability to generate
healthy cash flows enabled the business to fund "abnormal" cash payments of
approximately R409.0 million during the year. These comprised an increased
investment in SRG House of R142.5 million, additional taxation and creditor
payments of R181.0 million as a result of payments made in the 53rd week,
transfer pricing taxation payment of R18.7 million, and a general share
repurchase of R66.8 million. Excluding the effects of these payments, cash and
cash equivalents would have reflected an increase of R227.6 million.
Transfer pricing taxation
As stated in the interim report, 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. Treating the
payment as an expense is considered prudent by management. Management`s view,
however, remains that the objections are technically sound.
Distributions from subsidiary
During the period under review, a group subsidiary received R5.3 million in
distributions made to creditors by the administrators of the former Australian
subsidiary, Sportsgirl. This has been recorded as an exceptional item. A final
distribution is expected during the latter part of the calendar year.
General share repurchase
In keeping with the intention to utilise cash balances effectively, a general
repurchase of shares was effected through a subsidiary in December 2001 and
April 2002. The repurchase comprised 13 612 454 shares, representing 2.9% of the
total in issue, at a cost of R66.8 million, but had little impact on financial
results for the year. Had the shares all been repurchased on 1 July 2001,
earnings for the year would have been 64.1 cents per share, compared with 63.1
cents per share had none been repurchased. The transaction resulted in a 3.3%
decline in net asset value per share to 233.0 cents from 240.7 cents per share
had it not taken place.
Wooltru unbundling
A general meeting of shareholders of Wooltru Limited on 10 June 2002 passed the
special resolution required to give effect to the distribution of its entire
holding of shares in Truworths International Ltd to Wooltru shareholders. This
unbundling distribution took place on 26 June 2002, from which date onwards the
holding/subsidiary company relationship came to an end.
Prospects
The group will drive sales and earnings growth into the future by the continual
recreation of the core business and by development of successful new
"greenfield" formats.
This focus on organic growth reduces the risks normally associated with
acquisitions. Consequently, management will seriously contemplate an acquisition
only after careful review of its impact on the existing business and of the
capital risk involved. At present there are no acquisition opportunities that
warrant further consideration.
The group has demonstrated a unique ability to re-invent its core retail formats
on an ongoing basis, whilst at the same time creating new concepts which enhance
the overall business and have significant growth potential. Further
opportunities will continue to be tested as part of the process of format
development.
Management is optimistic about prospects for substantial future growth through
existing and new formats which it expects will offer superior returns. Trading
prospects for the 2003 financial year are exciting. The business continues to
perform particularly well, with sales growth for the 7 week period to 18 August
2002 above plan.
Audit opinion
The auditors` unqualified audit opinion on the June 2002 annual financial
statements is available for inspection at the company`s registered office.
Approval
These audited group results were approved by the directors on 22 August 2002,
and are signed on their behalf by:
MS Mark
Chairman and chief executive officer
Truworths International Limited: (Registration number 1944/017491/06)
JSE code: TRU ISIN: ZAE000028296
Registered office: SRG House, 1 Mostert Street, Cape Town 8001. PO Box 600, Cape
Town 8000, South Africa
Sponsor: HSBC Investment Services (Africa) (Pty) Ltd
Auditors: Ernst & Young
Transfer secretaries: Computershare Investor Services Limited, 10th Floor, 11
Diagonal Street, Johannesburg 2001
PO Box 7184, Johannesburg 2000, 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: MS Mark (Chairman and CEO)*, RG Dow#+, BD Lapin#+, CT Ndlovu#+, AE
Parfett#, LA Tager#+ and
AJ Taylor* *Executive #Non-executive +Independent
These results are available on our website at www.truworths.co.za
Date: 22/08/2002 03:00:00 PM Produced by the JSE SENS Department
