| Thu 6 Nov 2003, 17:15 | | Foschini Limited - Unaudited Interim Profit Announcement |
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Foschini Limited - Unaudited Interim Profit Announcement
Foschini Limited
Registration number 1937/009504/06
Share codes: FOS-FOSP
ISIN"s: ZAE000031019 - ZAE000031027
The following are the Foschini group results for the half-year ended September
2003.
This report has not been audited or reviewed by the company"s auditors.
HIGHLIGHTS
* Turnover up by 9,9%
* Net operating income up by 34,8%
* Headline earnings per share up by 37,4%
* Interim dividend per share increased by 33,3%
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
26 weeks ended year ended
27.09.2003 28.09.2002 31.03.2003
Unaudited Unaudited Change Audited
Rm Rm % Rm
Retail turnover 1 994,9 1 815,5 9,9 3 880,6
Cost of turnover 1 165,2 1 061,9 2 282,6
---------- ---------- ----------
Gross profit 829,7 753,6 1 598,0
Interest received 77,5 60,5 127,8
(note 6)
Trading expenses (588,2) (568,1) (1 162,7)
(note 7)
---------- ---------- ----------
Trading income 319,0 246,0 29,7 563,1
Dividends received 9,2 7,7 18,9
---------- ---------- ------ ----------
Operating income 328,2 253,7 582,0
Net finance charges 28,6 31,5 63,5
---------- ---------- ------ ----------
Net operating income 299,6 222,2 34,8 518,5
Goodwill written off* 3,2 2,4 5,3
---------- ---------- ------ ----------
Income before 296,4 219,8 34,8 513,2
taxation
Taxation 88,7 63,3 148,2
---------- ---------- ------ ----------
Income after taxation 207,7 156,5 365,0
Minority interest 2,5 2,7 5,5
---------- ---------- ------ ----------
Income attributable 205,2 153,8 359,5
to ordinary
shareholders
========== ========== ====== ==========
RECONCILIATION OF ATTRIBUTABLE INCOME TO HEADLINE EARNINGS
Income attributable 205,2 153,8 359,5
to ordinary
shareholders
Goodwill written off* 3,2 2,4 5,3
-------- -------- --------
Headline earnings 208,4 156,2 33,4 364,8
======== ======== ========
RECONCILIATION OF EARNINGS PER SHARE TO HEADLINE EARNINGS PER SHARE
Earnings per ordinary 93,6 68,1 159,8
share (cents)
Goodwill written off 1,5 1,1 2,4
per ordinary share
(cents)
---------- ---------- ------ ----------
Headline earnings per 95,1 69,2 37,4 162,2
ordinary share
(cents)
============ ========== ====== ===========
Diluted earnings per 89,8 67,3 157,7
ordinary share
(cents)
Diluted headline 91,2 68,3 160,0
earnings per ordinary
share (cents)
Dividend per ordinary 32,0 24,0 33,3 56,0
share (cents)
Dividend cover 2,7 2,7 2,7
(times)
CONSOLIDATED BALANCE SHEET
Sept. 2003 Sept. 2002 March 2003
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 297,6 265,4 286,0
Goodwill 24,0 19,8 24,6
Preference share investment 200,0 - -
Loans 10,4 87,9 79,9
Loan debtors 167,4 184,4 117,8
Participation in export 229,1 252,1 246,4
partnerships
---------- ---------- ----------
928,5 809,6 754,7
---------- ---------- ----------
Current assets
Inventory 603,7 608,2 599,3
Accounts receivable 1 633,7 1 371,5 1 543,9
Preference share investment - 150,0 150,0
Loan debtors 311,1 228,7 310,2
Cash 25,2 31,3 27,2
---------- ---------- ----------
2 573,7 2 389,7 2 630,6
---------- ---------- ----------
Total assets 3 502,2 3 199,3 3 385,3
========== ========== ==========
EQUITY AND LIABILITIES
Capital and reserves 2 131,6 1 935,7 2 077,0
Minority interest 5,7 5,9 5,1
Non-current liabilities
Interest bearing debt 257,4 372,0 347,4
Deferred taxation 158,4 185,1 167,3
---------- ---------- ----------
415,8 557,1 514,7
---------- ---------- ----------
Current liabilities
Short term loans 0,3 - 9,4
Accounts payable 679,9 522,0 560,4
Taxation 174,9 104,9 129,7
Provisions 94,0 73,7 89,0
---------- ---------- ----------
949,1 700,6 788,5
---------- ---------- ----------
Total equity and liabilities 3 502,2 3 199,3 3 385,3
========== ========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
26 weeks ended year ended
27.09.2003 28.09.2002 31.03.2003
Unaudited Unaudited Audited
Rm Rm Rm
Equity at the beginning of 2 077,0 1 830,1 1 830,1
the period
AC133: Financial instruments (9,9) - -
adjustment
---------- ---------- ----------
Restated equity at the 2 067,1 1 830,1 1 830,1
beginning of the period
Acquisition of treasury (83,7) - -
shares from share trust
Earnings for the period 205,2 153,8 359,5
Dividends paid (70,8) (35,2) (88,5)
Sale of treasury shares by 28,5 - -
share trust
Shares purchased by - (13,0) (24,5)
subsidiary
Unrealised (loss) gain on (14,7) - 0,4
hedging instruments
---------- ---------- ----------
Equity at the end of the 2 131,6 1 935,7 2 077,0
period
========== ========== ==========
SUPPLEMENTARY INFORMATION
Net ordinary shares in issue 221,3 224,8 223,6
(millions)
Weighted average ordinary 219,2 225,8 224,9
shares in issue (millions)
Tangible net asset value per 952,1 852,1 917,6
ordinary share (cents)
Lease expenses 173,7 160,2 344,0
CONSOLIDATED CASH FLOW STATEMENT
Sept. 2003 Sept. 2002 March 2003
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before 306,8 250,9 572,9
working capital changes
Increase in working capital (1,4) (7,7) (117,5)
---------- ---------- ----------
Cash generated by operations 305,4 243,2 455,4
Increase in loan debtors (50,5) (25,1) (40,0)
Interest received 77,5 60,5 127,8
Net finance charges (28,6) (31,5) (63,5)
Taxation (52,4) (23,5) (101,3)
Dividend paid (71,8) (37,3) (90,1)
---------- ---------- ----------
Net cash inflows from 179,6 186,3 288,3
operating activities
---------- ---------- ----------
Cash flows from investing
activities
Purchase of fixed assets (70,6) (54,1) (137,5)
Proceeds from sale of fixed 2,9 2,8 4,6
assets
Decrease in participation in 7,4 8,3 14,0
export partnerships
Decrease in loans 2,8 4,9 12,9
Shares purchased by - (13,0) (24,5)
subsidiary
Acquisition of additional (3,5) (13,1) (24,6)
interest in subsidiary
---------- ---------- ----------
Net cash outflows from (61,0) (64,2) (155,1)
investing activities
---------- ---------- ----------
Cash flows from financing
activities
Proceeds from sale of 28,5 - -
treasury shares by share
trust
Decrease in interest bearing (90,0) (59,8) (84,4)
debt
Decrease in short-term loans (9,1) (57,8) (48,4)
---------- ---------- ----------
Net cash outflows from (70,6) (117,6) (132,8)
financing activities
---------- ---------- ----------
Net increase in cash and cash 48,0 4,5 0,4
equivalents during the period
Cash and cash equivalents at 177,2 176,8 176,8
the beginning of the period
---------- ---------- ----------
Cash and cash equivalents at 225,2 181,3 177,2
the end of the period
========== ========== ==========
NOTES
1. ACCOUNTING POLICIES - These financial statements have been prepared in
accordance with South African Standards of Generally Accepted Accounting
Practice. The principal accounting policies, as set out in the group"s annual
report for the year ended 31 March 2003, have been consistently applied
throughout the six months under review, with the exception of:
* The effect of the adoption of AC133, and
* The consolidation of The Foschini Share Incentive Trust.
2. ADOPTION OF AC133 - During the period under review the group changed its
accounting policy in respect of its financial instruments to comply with AC 133
Financial Instruments: Recognition and measurement. In accordance with the
adoption provisions of AC 133 an adjustment has been made to the group"s
reserves at the beginning of the period and no adjustment has been made to prior
period figures. In order to comply with AC 133 the group has changed the
valuation of its participation in export partnerships from a cost basis to
amortised cost using the effective interest rate method.
Gains and losses on effective cash flow hedging instruments in respect of firm
commitments of forecast transactions are recognised directly in equity. Other
than the above, the adoption of this statement has had no other material impact
on the current earnings of the group.
3. CONSOLIDATION OF THE SHARE INCENTIVE TRUST - The group also changed its
accounting policy in respect of the Share Incentive Trust. The change was
effected in order to provide more appropriate presentation. The group now
consolidates the share incentive trust and the shares owned by the trust are
accounted for as treasury shares.
4. These financial statements incorporate the financial statements of the
company, all its subsidiaries and all entities over which it has operational and
financial control.
5. Included in share capital are 16,9 (2002: 15,7) million shares, which were
purchased by a subsidiary of the company, and 2,3 million shares, which are
owned by the share incentive trust. These have been eliminated on consolidation.
Sept. 2003 Sept. 2002 March 2003
Unaudited Unaudited Audited
Rm Rm Rm
6. INTEREST RECEIVED 77,5 60,5 127,8
This comprises interest
received on RCS Personal
Finance loan debtors.
7. TRADING EXPENSES
Depreciation (57,7) (59,4) (116,8)
Employee costs (294,9) (271,4) (601,3)
Occupancy costs (170,4) (154,4) (319,9)
Restraint of trade payments - (22,0) (37,1)
Other operating costs/income (65,2) (60,9) (87,6)
---------- ------------ ----------
(588,2) (568,1) (1 162,7)
---------- ------------ ----------
SEGMENTAL ANALYSIS
Sept. 2003 Sept. 2002 March 2003
Unaudited Unaudited Audited
Rm Rm Rm
Contribution to income after
taxation
Retail 188,2 144,6 333,3
RCS Personal Finance 19,5 11,9 31,7
---------- ---------- ----------
Total 207,7 156,5 365,0
---------- ---------- ----------
Total segment assets
Retail 3 015,0 2 780,3 2 955,5
RCS Personal Finance 487,2 419,0 429,8
---------- ---------- ----------
Total 3 502,2 3 199,3 3 385,3
---------- ---------- ----------
Total segment liabilities
Retail 933,5 947,9 920,7
RCS Personal Finance 431,4 309,8 382,5
---------- ---------- ----------
Total 1 364,9 1 257,7 1 303,2
---------- ---------- ----------
Segmental reporting has been limited to Retail and RCS Personal Finance as, in
the opinion of the directors, all divisions within the group operate in an
established retail market and are therefore considered to be subject to similar
risks and rewards.
COMMENT
GROUP OVERVIEW
As anticipated, compared to the previous year, trading for the first 6 months of
this financial year was subdued, being achieved on the back of substantial
growth in headline earnings per share of the last 2 years of 72,2% in 2002 and
84,5% in 2003.
For the first 6 months sales increased by 9,9% which, together with improved
gross margins and tight control of expenses, resulted in net operating income
increasing by 34,8%.
Headline earnings per share increased by 37,4% from 69,2 cents per share to
95,1 cents per share. The group"s trading margin increased from 13,5% to 16,0%.
The group has continued to cover its dividend 2,7 times at the interim stage,
and a dividend of 32 cents per share has been declared, an increase of 33,3%.
During this period the group opened 27 new stores across all divisions whilst at
the same time closing 26. At the end of the period the group was trading out of
1 189 stores with a trading area of 321 434 square metres, an increase of 1,3%
compared to the end of the last financial year.
Due to the group"s strong cash generation, its already strong balance sheet has
strengthened even further, with gearing reducing to 1,5% from last year"s 9,9%.
Cash generated by operating activities for the half-year amounted to R305,4
million, which resulted in group total borrowings at the end of the period being
reduced by R147,1 million.
TRADING DIVISIONS
Following on the strong sales growth achieved in the previous year, trading was,
as expected, more challenging. Nonetheless, all divisions achieved their
budgets. In the last few months of the winter period the tempo of business
improved, and this improvement has continued into October.
Sales and sales growths in the various divisions were as follows:
No. of Sales Rm % change
stores
@home 23 72,4 61,2
Exact! 169 189,4 13,1
Foschini 335 832,2 5,2
Markhams 208 363,9 9,0
Jewellery division 294 276,1 10,2
Sports division 160 260,9 14,5
-------- -------- --------
Total 1 189 1 994,9 9,9
-------- -------- --------
The Foschini division, although achieving budget, experienced a more difficult
winter season, trading against an extremely buoyant winter in 2002, where
substantial full-price unit growth was achieved. The restructuring of this
division continues to progress and trading for the second half of the year,
being up against a lower prior year"s base, should be at increased levels.
The Markhams division, trading against its historical higher base continued its
pleasing performance.
Exact! continued with its very encouraging performance, whilst it continues with
its relocation strategy into better shopping environments.
The Sports division, trading as Sport Scene and Totalsports, continued its
impressive performance by growing its turnover 14,5% following on a strong 25,5%
growth in the prior period.
Our Jewellery division, comprising American Swiss Jewellers and Sterns,
performed beyond expectations with turnover growth of 10,2%. This division will
continue to rationalise its store portfolio to further improve sales densities
in the future.
Our @home division continued with its excellent performance, increasing its
store base from 15 to 23 during this period and growing its turnover to R72,4
million from R44,9 million in the corresponding period. Further store expansion
will continue aggressively and this division will be grown to approximately 45
stores as soon as possible.
CREDIT AND FINANCIAL SERVICES
Our retail debtors book, which amounts to R1 344,9 million increased by 11,0% on
credit turnover growth of 10,93%, and remains conservatively valued. Cash sales
as a percentage of total sales reduced from 28% to 27%.
RCS Personal Finance, our group"s personal loans business, which selectively
advances pre-approved loans in the main to qualifying customers of the group,
continued with its growth in profitability and contributed a net surplus, after
tax and minority interest, of R17,0 million compared to last year"s R9,0
million. During the period under review, the group increased its shareholding in
this division to 87,5%. Adequate provisions continue to be made on all loans
advanced.
The RCS Cards Division, which offers credit to customers of merchants outside of
the group, also performed well during the period under review. This division
will become a more meaningful contributor to group profits in the future. The
RCS card debtors book at the mid-year amounted to R153,4 million.
PROSPECTS
Turnover for the first 5 weeks of the second half is above budget, and at higher
growth rates than in the first half. The lowering of interest rates, together
with declining inflation, is already benefiting consumer confidence and should
boost spending patterns in the latter part of our financial year.
The second half of the year is always heavily dependent on the level of
Christmas trading, but we remain confident about this important trading period,
and expect strong growth in the group"s earnings for the full year.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 134 of 3,25% (6,5 cents per share) in respect of the six months
ending 31 March 2004 has been declared, payable on 31 March 2004 to holders of
6,5% preference shares recorded in the books of the company at the close of
business on Friday, 26 March 2004.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 18 March 2004. Foschini Ltd preference shares will
commence trading "ex" the dividend from the commencement of business on Friday,
19 March 2004 and the record date, as indicated, will be Friday, 26 March 2004.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 19 March 2004 to
Friday, 26 March 2004, both dates inclusive.
INTERIM ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared an interim ordinary dividend of 32 cents per
ordinary share payable on Monday, 5 January 2004 to ordinary shareholders
recorded in the books of the company at the close of business on Friday, 2
January 2004.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Tuesday, 23 December 2003. Foschini Ltd ordinary shares will
commence trading "ex" the dividend from the commencement of business on
Wednesday, 24 December 2003 and the record date, as indicated, will be Friday, 2
January 2004.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Wednesday, 24 December 2003
to Friday, 2 January 2004, both dates inclusive.
Certificated ordinary shareholders are reminded that all entitlements to
dividends with a value less than R5,00 per certificated shareholder will be
aggregated and the proceeds donated to a registered charity of the directors"
choice, in terms of the articles of association of the company.
-------------------------------------------------------------------
Signed on behalf of the Board
E Osrin, Chairman D M Polak, Managing Director
6 November 2003
Directors:
E Osrin (Chairman)*, D M Nurek (Deputy Chairman)*, Prof. F Abrahams*, S E
Abrahams*, L F Bergman (Austrian)*, W V Cuba*, N H Goodwin*, M Lewis*, D M
Polak, R Stein (*Non-Executive)
Registered Office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500.
Transfer Secretaries:
Computershare Ltd, Ground Floor, 70 Marshall Street, Johannesburg, 2001.
SPONSOR:
UBS Corporate Finance South Africa (Pty) Ltd.
Visit our website at http://www.foschinigroup.com/
Date: 06/11/2003 05:06:11 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
