| Thu 19 Feb 2004, 16:13 | | results for six months ended 31 Dec 03 |
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Truworths International Limited Interim Report For The 26 Week Period Ended 31
Release Date: 19/02/2004 15:06:18 Code(s): TRU
Truworths International Limited Interim Report for the 26 week period ended 31
December 2003
TRUWORTHS INTERNATIONAL LIMITED
INTERIM REPORT for the 26 week period ended 31 December 2003
* INTERIM DIVIDEND UP 61.5%
* ATTRIBUTABLE PROFIT UP 41.1%
* OPERATING PROFITS UP 33.7%
* HEADLINE EARNINGS PER SHARE UP 31.9%
* MERCHANDISE SALES UP 15.2%
BALANCE SHEETS
Unaudited Audited
at 31 December at 30 June
2003 2002 2003
Note Rm Rm Rm
ASSETS
Non-current assets 424.9 419.3 409.3
Property, fixtures, vehicles, plant, equipment
and software 274.1 277.4 277.9
Investments 108.6 118.1 109.5
Loans 42.2 23.8 21.9
Current assets 1 689.3 1 328.0 1 430.9
Inventories 210.3 161.1 169.2
Trade and other receivables 920.9 779.8 796.2
Prepayments 1.3 0.8 20.4
Cash and cash equivalents 556.8 386.3 445.1
Total assets 2 114.2 1 747.3 1 840.2
EQUITY AND LIABILITIES
Capital and reserves
Share capital 0.1 0.1 0.1
Share premium 171.9 142.6 153.2
Retained profit 1 420.5 1 112.9 1 262.7
1 592.5 1 255.6 1 416.0
Treasury shares (112.0) (69.7) (81.0)
Total shareholders" equity 1 480.5 1 185.9 1 335.0
Non-current liabilities 116.0 139.2 121.3
Deferred taxation 78.0 107.3 86.0
Retirement benefit obligation 38.0 31.9 35.3
Current liabilities 517.7 422.2 383.9
Trade and other payables 381.1 334.6 269.9
Provisions 2.6 6.0 6.0
Taxation 134.0 81.6 108.0
Total equity and liabilities 2 114.2 1 747.3 1 840.2
Number of shares in issue (adjusted for
treasury shares) (millions) 461.3 459.2 460.4
Net asset value per share (cents) 320.9 258.3 290.0
INCOME STATEMENTS
Unaudited Audited
26 weeks 52 weeks
to 31 December to 30 June
2003 2002 Change 2003
Rm Rm % Rm
Revenue 3 1 458.3 1 259.8 15.8 2 460.2
Sale of merchandise 1 376.1 1 194.9 15.2 2 306.0
Cost of sales (654.8) (600.9) (1 140.5)
Gross profit 721.3 594.0 21.4 1 165.5
Expenses 4 (437.0) (385.4) 13.4 (759.3)
Trading profit 284.3 208.6 36.3 406.2
Dividends received 1.7 0.2 1.7
Interest received 5 75.6 61.6 142.4
Profit before finance costs,
exceptional items and
taxation 361.6 270.4 33.7 550.3
Finance costs (0.2) - (0.5)
Profit before exceptional items and
taxation 361.4 270.4 33.7 549.8
Exceptional items 6 13.4 0.8 (1.3)
Profit before taxation 374.8 271.2 38.2 548.5
Taxation (120.2) (90.8) (158.1)
South African, foreign and deferred
taxation (108.4) (83.5) (163.0)
Secondary taxation on companies (11.8) (7.3) (13.8)
Transfer pricing taxation - - 18.7
Net profit attributable to shareholders 254.6 180.4 41.1 390.4
Cents per share:
Dividends declared for the period 21.0 13.0 61.5 34.0
Headline earnings 52.5 39.8 31.9 86.0
Basic earnings 55.4 39.9 38.8 85.7
Fully diluted headline earnings 51.2 38.8 32.0 84.3
Fully diluted basic earnings 54.1 39.0 38.7 84.1
Weighted average number of shares
in issue (millions) 459.4 451.6 455.6
CASH FLOW STATEMENTS
Unaudited Audited
26 weeks 52 weeks
to 31 December to 30 June
2003 2002 Change 2003
Rm Rm % Rm
Cash flow from operating activities
Cash flow from trading 318.5 246.8 479.1
Dividends received 1.7 0.2 1.7
Cash EBITDA 320.2 247.0 29.6 480.8
Working capital movements (32.6) 52.6 (53.1)
Cash generated from operations 287.6 299.6 427.7
Finance costs (0.2) - (0.5)
Interest received 75.6 61.6 142.4
Taxation paid (102.2) (60.7) (123.0)
Cash inflow from operations 260.8 300.5 446.6
Dividends paid (96.8) (58.6) (118.2)
Net cash retained 164.0 241.9 328.4
Cash flow from investing activities
Investment to maintain and expand
operations (31.1) (27.3) (62.8)
Proceeds on disposal of property,
fixtures, vehicles, plant, equipment
and software 0.5 0.4 0.9
Loans (20.3) (3.9) (2.0)
Investments 0.9 0.1 6.7
Net cash outflow from investing
activities (50.0) (30.7) (57.2)
Cash flow from financing activities
Proceeds on share issue 18.7 17.7 27.9
Odd lot shares repurchased and
cancelled - (0.1) (0.1)
Shares repurchased by subsidiary (30.8) - (13.4)
Shares held by share trust (0.2) 22.9 25.0
Net cash outflow/(inflow) from
financing activities (12.3) 40.5 39.4
Net increase in cash and cash
equivalents 101.7 251.7 310.6
Net cash inflow from discontinued
operations 10.0 0.8 0.7
Cash and cash equivalents for the
period 111.7 252.5 311.3
Cash and cash equivalents at the
beginning of the period 445.1 133.8 133.8
Cash and cash equivalents at the
end of the period 556.8 386.3 445.1
Cash flow per share (cents) 56.8 66.5 98.0
Cash equivalent earnings per
share (cents) 61.1 48.4 97.4
STATEMENTS OF CHANGES IN EQUITY
Share capital Retained Treasury
and premium profit shares Total
Rm Rm Rm Rm
Total shareholders" equity at
30 June 2003 153.3 1 262.7 (81.0) 1 335.0
Net profit attributable to
shareholders - 254.6 - 254.6
Dividends paid - (96.8) - (96.8)
Shares issued 18.8 - - 18.8
Share issue expenses written off (0.1) - - (0.1)
Shares held by share trust - - (0.2) (0.2)
Shares repurchased - - (30.8) (30.8)
Total shareholders" equity
at 31 December 2003 172.0 1 420.5 (112.0) 1 480.5
Total shareholders" equity at
30 June 2002 125.5 998.9 (92.6) 1 031.8
AC133: Financial instruments
adjustment - (8.2) - (8.2)
Restated total shareholders"
equity at 30 June 2002 125.5 990.7 (92.6) 1 023.6
Net profit attributable to
shareholders - 180.4 - 180.4
Dividends paid - (58.6) - (58.6)
Shares issued 17.4 - - 17.4
Odd lot shares repurchased
and cancelled (0.1) - - (0.1)
Share issue expenses written off (0.1) - - (0.1)
Sale of shares by the share trust - 0.4 - 0.4
Shares held by share trust - - 22.9 22.9
Total shareholders" equity at
31 December 2002 142.7 1 112.9 (69.7) 1 185.9
NOTES
1. Basis of preparation
This report complies with the requirements of AC127, the South African Statement
of Generally Accepted Accounting Practice governing interim financial reporting,
as well as with part IV of Schedule 4 of the South African Companies Act and
paragraph 8.58 of the Listings Requirements of the JSE Securities Exchange South
Africa. The information presented in this report has neither been audited nor
reviewed by the external auditors.
2. Accounting policies
This report has been prepared on the historical cost basis and in accordance
with the accounting policies which were applied in the preparation of the
group"s annual financial statements for the period ended 30 June 2003, except
for the adoption during the period under review of AC131, Business Combinations,
in so far as it requires a share purchase trust which meets the definition of a
subsidiary to be consolidated.
Unaudited Audited
26 weeks 52 weeks
to 31 December to 30 June
2003 2002 Change 2003
Rm Rm % Rm
3. Revenue
Sale of merchandise 1 376.1 1 194.9 15.2 2 306.0
Dividends received 1.7 0.2 1.7
Interest received 75.6 61.6 142.4
Rental income received 3.4 1.6 7.2
Warehousing and management fees
received 1.5 1.5 2.9
1 458.3 1 259.8 15.8 2 460.2
4. Expenses
Depreciation 34.5 32.2 66.8
Occupancy costs 97.9 85.0 176.9
Employment costs 181.6 156.8 304.1
Other operating costs 123.0 111.4 211.5
437.0 385.4 13.4 759.3
5. Interest received
Investments 20.7 15.3 36.3
Trade receivables 54.9 46.3 106.1
75.6 61.6 22.7 142.4
6. Exceptional items
Distributions from discontinued
operations 10.0 0.8 0.7
Part release of provision:
discontinued operations 3.4 - -
Impairment in value of Zimbabwe
listed investment - - (2.0)
13.4 0.8 (1.3)
7. Headline earnings
Headline earnings have been
calculated in terms of SAICA Circular
7/2002 as follows:
Net profit attributable to
shareholders 254.6 180.4 41.1 390.4
Exceptional items (13.4) (0.8) 1.3
Net surplus on asset realisation
after taxation (0.1) - (0.1)
Headline earnings 241.1 179.6 34.2 391.6
8. Segment reporting
Segmental information is not
disclosed as the group is regarded
as having only a single material
southern African retailing segment.
9. Future capital expenditure
Capital expenditure authorised but
not contracted:
Computer equipment and software 15.5 14.2 20.3
Fixtures, fittings, plant and
equipment 23.8 18.5 49.5
39.3 32.7 69.8
10. Leases
The group rents all its trading
premises in terms of operating
leases, wheareas other operating
assets including the head office
building and distribution centre
are generally owned. Leases on
trading premises are contracted for
periods of between three and fifteen
years, with renewal options for a
further three or five years. Some
of these leases provide for minimum
annual rental payments together
with additional amounts determined
on the basis of sale of merchandise.
At 31 December 2003, the future
minimum property operating lease
commitments due were as follows: 916.6 1 007.0 953.6
Within one year 168.4 151.8 157.4
Between one and five years 543.5 535.5 530.0
Between five and ten years 170.2 259.1 209.8
Between ten and fifteen years 34.5 60.6 56.4
11. Seasonality
There is no material seasonal
variation in trading between the
first and second periods of the
full financial period.
12. Comparative figures
To ensure consistency with the
disclosures at June 2003 and meet
the requirement of AC131, Business
Combinations to consolidate the
group"s share purchase trust which
meets the definition of a
subsidiary, certain non-material
changes to comparative information
at December 2002 and June 2003
have been made.
13. Contingent liability
Export partnership participation
Recorded under Investments is the
group"s participation in
partnerships, which exported dry
containers in prior periods. The
South African Revenue Service (SARS)
is continuing its investigation
into the taxation treatment by
certain other companies participating
in these partnerships with financial
periods 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 export partnership
participation with financial periods
ending after 1 March 1996 (excluding
interest and penalties) 79.9 88.3 82.6
14. Events subsequent to the period end
No event, material to the
understanding of this interim report,
has occurred between the end of the
interim financial period and the date
of approval of this report.
INTERIM DIVIDEND
The directors have resolved to declare a dividend in respect of the six months
ended 31 December 2003 in the amount of 21.0 (2002: 13.0) cents per share to
holders of the company"s shares reflected in the company"s register on the
record date, being Friday 12 March 2004.
The last day to trade in the company"s shares cum dividend is Friday 5 March
2004. Trading in the company"s shares ex dividend will commence on Monday 8
March 2004. The dividend will be paid in South African Rand on Monday 15 March
2004.
Consequently no dematerialisation or rematerialisation of the company"s shares
may take place over the period from Monday 8 March 2004 to Friday 12 March 2004,
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 Cape Town
Company Secretary 19 February 2004
Truworths International Limited is a JSE Securities Exchange South Africa listed
investment holding company with trading subsidiaries engaged either directly or
through franchises in the retailing of fashion apparel and related merchandise.
The group operates primarily in southern Africa.
Group results
As anticipated in the trading statement of 20 January 2004, the group achieved a
further substantial advance in earnings and headline earnings in the 26 weeks to
31 December 2003. Profit before finance costs, exceptional items and taxation
increased by 33.7% to R361.6 million from R270.4 million.
Net profit attributable to shareholders rose by 41.1% from R180.4 million to
R254.6 million. Headline earnings improved by 34.2% to R241.1 million from
R179.6 million and headline earnings per share increased by 31.9% from 39.8
cents to 52.5 cents.
An interim dividend of 21 cents per share has been declared; this is an increase
of 61.5% on the 13 cents declared in respect of the first half of the 2003
financial period.
Sales and operations
Buoyant trading and sales which underpinned a successful 2003 financial period,
continued through the period under review. Improved consumer spending in the
wake of interest rate cuts and reduced inflation saw merchandise sales,
including franchise sales, increase to R1 376.1 million, 15.2% more than at the
interim stage in the prior period when sales grew 23.5%. All merchandise
departments exceeded expectations, with particularly encouraging performances
from Truworths Man, Daniel Hechter, LTD, Identity and Elements, as customers
responded to the strategy of offering enhanced quality in the lower-inflation
environment.
Sales growth, including comparable store sales growth of 11.1%, was ahead of the
estimated average of 8.9% for the clothing, footwear and textiles sector.
Product inflation in the group, excluding Identity, averaged 6.0%.
Trading space increased according to plan by 4.2% from June 2003, with the
opening of three Truworths stores and 14 Identity stores as well as other format
and store expansions.
The improved trading activity, further increases in market share, productivity
gains in terms of sales per square metre and per full-time employee, improvement
in gross margin, higher interest received and a continued focus on operating
costs resulted in growth in the operating margin from 22.6% to 26.3%.
Exceptional items
During the period under review, group subsidiaries received R10 million in
distributions made to creditors of the former Australian subsidiary, Sportsgirl.
This has been recorded as an exceptional item. A final distribution is expected
in March 2004. In addition, R3.4 million of the provision established for costs
of final closure of the discontinued operations of Sportsgirl has been released
and reflected as an exceptional item.
Credit services
In the period under review, the group"s debtor book increased by 18.8% to R939.2
million on a credit sales growth of 17.3% relative to December 2002.
Improvements in the state of the debtor book are reflected in a lower percentage
of arrear accounts, a marginal reduction in net bad debts as a percentage of
credit sales when compared to June 2003 and improved collections. The group
continued to write off trade receivables in accordance with a strict ageing
policy. A doubtful debt provision has been calculated on a basis consistent with
that of the prior period. Credit sales represented 72.8% of total retail sales
compared to 71.7% in the prior period. The group"s conservative credit granting
policies have been maintained.
Cash flows and financial position
Cash earnings before interest, depreciation and amortisation ("EBITDA") at
R320.2 million reflected an increase of 29.6% over the prior period. There were
larger working capital requirements and increased tax payments due to better
earnings and increased dividend payments during the period. Despite these
factors, the group remains in a strong financial position, as evidenced by the
increase in cash and cash equivalents of R111.7 million to R556.8 million, since
June 2003. The group is cautiously examining opportunities for aquisitions on an
ongoing basis.
Share repurchases
During the period 3.9 million shares were repurchased at an average price of
R7.85 for a total of R30.8 million. As a result 19.7 million shares have been
repurchased over a two and a half year period, for R111 million. The repurchase
of shares did not have a material effect on either headline earnings or net
asset value per share in the current period.
Business acquisition
The group has concluded an agreement to purchase a 75% interest in the fashion
retailing chain known as Young Designers Emporium ("YDE") with effect from 1
December 2003. The agreement is inter alia conditional upon satisfactory
findings during a due diligence investigation and the approval of the
competition commission.
As these conditions had not been met at 31 December 2003, effective control of
YDE had not been transferred to the group at that date and therefore YDE"s
assets and results have not been consolidated in these interim results.
The intended acquisition, which will broaden the group"s talent base in fashion
design and retail, will be financed from the group"s cash resources and is not
expected to have a significant effect on the group"s headline earnings, or net
asset value, per share for the period to 30 June 2004.
Outlook
Sales growth for the first seven weeks since 31 December 2003 has been pleasing
and comfortably ahead of budget. Given the success of the strategy to offer even
better quality merchandise, together with further planned expansion of trading
space and a continued ability to predict fashion trends correctly, management is
positive about trading prospects for the remainder of the second half of the
financial period. It is anticipated that reasonable growth in headline earnings
will be achieved for the full 52-week period, notwithstanding the refund of
R18.7 million relating to the transfer pricing taxation that was received in the
second half of the 2003 financial period. The headline earnings per share
achieved during the 2003 financial period (excluding the transfer pricing
refund) were 81.8 cents per share.
Approval
This interim report was approved by the directors on 19 February 2004, and is
signed on their behalf by:
MS Mark AJ Taylor
Chairman and chief executive officer Executive director
Truworths International Limited:
(Registration number 1944/017491/06)
JSE 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: HSBC Investment Services (Africa) (Pty) Ltd
Auditors: Ernst & Young
Transfer secretaries: Computershare Limited, 70 Marshall Street, Marshalltown,
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#*, H Saven#*,
AJ Taylor* and WM van der Merwe* *Executive #Non-executive *Independent
These results are available on our website at www.truworths.co.za
