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Foschini Ltd - Reviewed Results For The Year Ended 31 March 2004
Release Date: 27/05/2004 17:00:02 Code(s): FOS FOSP
FOSCHINI LTD - REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2004
Foschini Limited
Registration number 1937/009504/06
Share codes: FOS-FOSP
ISIN codes: ZAE000031019 - ZAE000031027
REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2004
The following consolidated results of the Foschini Group for the years ended 31
March have been reviewed by the company`s auditors, KPMG Inc. Their unqualified
report is available for inspection at the company`s registered office.
HIGHLIGHTS
* Turnover up by 13,6% to R4,41 billion
* Income before taxation up by 46,6% to R752,6 million
* Headline earnings per share up by 46,2% to 237,1 cents
* Final dividend declared increased by 93,8% to 62 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
2004 2003 Change
Reviewed Audited
Rm Rm %
Retail turnover 4 410,0 3 880,6 13,6
Cost of turnover 2 554,2 2 282,6
-------- --------
Gross profit 1 855,8 1 598,0
Interest received (note 6) 208,5 149,4
Trading expenses (note 7) (1 266,4) (1 184,3)
-------- --------
Trading income 797,9 563,1 41,7
Dividends received 16,7 18,9
Goodwill written off (6,5) (5,3)
-------- --------
Operating income 808,1 576,7
Net finance charges 55,5 63,5
-------- --------
Income before taxation 752,6 513,2 46,6
Taxation 228,8 148,2
-------- --------
Income after taxation 523,8 365,0
Minority interest 6,9 5,5
-------- --------
Income attributable to ordinary 516,9 359,5 43,8
shareholders
======== ========
RECONCILIATION OF ATTRIBUTABLE INCOME TO HEADLINE EARNINGS
Income attributable to ordinary 516,9 359,5
shareholders
Goodwill written off 6,5 5,3
-------- --------
Headline earnings 523,4 364,8 43,5
======== ========
EARNINGS PER ORDINARY SHARE (CENTS)
- Basic 234,2 159,8 46,6
- Headline 237,1 162,2 46,2
- Diluted(basic) 225,3 157,7
- Diluted(headline) 228,2 160,0
DIVIDEND PER ORDINARY SHARE (CENTS)
- Interim 32,0 24,0 33,3
- Final 62,0 32,0 93,8
------ ------ ------
- Total 94,0 56,0 67,9
------ ------ ------
Dividend cover (times) 2,5 2,7
CONSOLIDATED BALANCE SHEET
2004 2003
Reviewed Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 315,6 286,0
Goodwill and trademarks 22,3 24,6
Preference share investment 200,0 150,0
Loans 8,8 79,9
Loan debtors 213,8 117,8
Participation in export partnerships 222,5 246,4
-------- --------
983,0 904,7
-------- --------
Current assets
Inventory 689,7 599,3
Trade receivables - retail 1 494,4 1 318,0
Trade receivables - private label cards 195,3 107,9
Other debtors and prepayments 92,3 118,0
Loan debtors 323,3 310,2
Cash 29,2 27,2
-------- --------
2 824,2 2 480,6
-------- --------
Total assets 3 807,2 3 385,3
======== ========
EQUITY AND LIABILITIES
Capital and reserves 2 291,4 2 077,0
Minority interest 10,1 5,1
Non-current liabilities
Interest bearing debt 320,4 347,4
Deferred taxation 150,6 167,3
-------- --------
471,0 514,7
-------- --------
Current liabilities
Short term loans 0,9 9,4
Accounts payable 769,2 560,4
Taxation 163,1 129,7
Provisions 101,5 89,0
-------- --------
1 034,7 788,5
-------- --------
Total equity and liabilities 3 807,2 3 385,3
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2004 2003
Reviewed Audited
Rm Rm
Equity at the beginning of the year 2 077,0 1 830,1
AC133: Financial instruments adjustment (6,9) -
-------- --------
Restated equity at the beginning of the year 2 070,1 1 830,1
Acquisition of shares from the share trust (83,7) -
Earnings for the period 516,9 359,5
Dividends paid (142,4) (88,5)
Sale of shares by share trust 42,9 -
Shares purchased by subsidiary (108,0) (24,5)
Unrealised (loss) gain on hedging instruments (4,4) 0,4
-------- --------
Equity at the end of the year 2 291,4 2 077,0
======== ========
SUPPLEMENTARY INFORMATION
Net ordinary shares in issue (millions) 218,4 223,6
Weighted average ordinary shares in issue 220,7 224,9
(millions)
Tangible net asset value per ordinary share 1 038,9 917,6
(cents)
Lease expenses (Rm) 384,7 344,0
CONSOLIDATED CASH FLOW STATEMENT
2004 2003
Reviewed Audited
Rm Rm
Cash flows from operating activities
Operating profit before working capital 723,4 551,3
changes
Increase in working capital (128,6) (117,5)
-------- --------
Cash generated by operations 594,8 433,8
Increase in loan debtors (109,1) (40,0)
Interest received 208,5 149,4
Net finance charges (55,5) (63,5)
Taxation (209,1) (101,3)
Dividend paid (143,4) (90,1)
-------- --------
Net cash inflows from operating activities 286,2 288,3
-------- --------
Cash flows from investing activities
Purchase of fixed assets (151,9) (137,5)
Proceeds from sale of fixed assets 5,0 4,6
Net increase in preference share investment (50,0) -
Decrease in participation in export 14,0 14,0
partnerships
Decrease in loans 4,4 12,9
Shares purchased by subsidiary (108,0) (24,5)
Acquisition of trademark (1,6) -
Acquisition of additional interest in (3,5) (24,6)
subsidiary
-------- --------
Net cash outflows from investing activities (291,6) (155,1)
-------- --------
Cash flows from financing activities
Proceeds from sale of shares by share trust 42,9 -
Decrease in interest bearing debt (27,0) (84,4)
Decrease in short-term loans (8,5) (48,4)
-------- --------
Net cash inflows (outflows)from financing 7,4 (132,8)
activities
-------- --------
Net increase in cash and cash equivalents 2,0 0,4
during the year
Cash and cash equivalents at the beginning of 27,2 26,8
the year
-------- --------
Cash and cash equivalents at the end of the 29,2 27,2
year
======== ========
NOTES
1. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with South
African Statements 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 year
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 year 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 year and no adjustment has been made to prior year
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 (2003: 16,9) million shares, which were
purchased by a subsidiary of the company, and 5,2 (2003: 7,1) million
shares, which are owned by the share incentive trust. These have been
eliminated on consolidation.
2004 2003
Rm Rm
6. Interest received 208,5 149,4
This comprises interest received on RCS
Personal Finance loan debtors and private
label card debtors.
7 Trading expenses
Depreciation (116,0) (116,8)
Employee costs (657,3) (601,3)
Occupancy costs (362,8) (319,9)
Restraint of trade payments - (37,1)
Other operating costs/income (130,3) (109,2)
--------- ---------
(1 266,4) (1 184,3)
--------- ----------
SEGMENTAL ANALYSIS
Financial Financial Retail Retail
Services Services
2004 2003 2004 2003
Reviewed Audited Reviewed Audited
Rm Rm Rm Rm
REVENUE
External 208,5 149,4 4 410,0 3 880,6
Inter-segment - - - -
----- ----- ------- -------
Total revenue 208,5 149,4 4 410,0 3 880,6
----- ----- ------- -------
SEGMENT RESULT
----- ----- ----- -----
Operating profit 147,4 102,9 660,7 473,8
----- ----- ----- -----
External (2,9) 3,5 (52,6) (67,0)
Inter-segment (61,0) (51,7) 61,0 51,7
------ ------ ------ ------
Net finance charges (63.9) (48,2) 8,4 (15,3)
------ ------ ------ ------
Taxation (25,7) (17,1) (203,1) (131,1)
Minority interest (6,9) (5,5) - -
----- ----- ---- ----
Attributable income 50,9 32,1 466,0 327,4
---- ---- ----- ------
SEGMENT ASSETS
Non-current assets 217,4 122,0 765,6 782,7
Current assets 525,3 415,8 2 298,9 2 064,8
Inter-segment (401,1) (355,2) 401,1 355,2
assets
----- ----- ------- -------
Total assets 341,6 182,6 3 465,6 3 202,7
----- ----- ------- -------
SEGMENT LIABILITIES
Non-current (3,1) (3,0) 474,1 517,7
liabilites
Current liabilities 63,3 28,1 971,4 760,4
Inter-segment 182,0 - (182,0) -
liabilities
---- ---- ------- -------
Total liabilities 242,2 25,1 1 263,5 1 278,1
---- ---- ------- -------
SEGMENT INFORMATION
Capital expenditure 1,8 1,9 150,1 135,6
Depreciation 2,9 1,8 113,1 115,0
Amortisation 3,3 2,2 3,2 3,1
SEGMENTAL ANALYSIS
(continued)
Consolidated Consolidated
2004 2003
Reviewed Audited
Rm Rm
REVENUE
External 4 618,5 4 030,0
Inter-segment - -
------- -------
Total revenue 4 618,5 4 030,0
------- -------
SEGMENT RESULT
----- -----
Operating profit 808,1 576,7
----- -----
External (55,5) (63,5)
Inter-segment - -
------ ------
Net finance charges (55,5) (63,5)
------ ------
Taxation (228,8) (148,2)
Minority interest (6,9) (5,5)
----- -----
Attributable income 516,9 359,5
----- -----
SEGMENT ASSETS
Non-current assets 983,0 904,7
Current assets 2 824,2 2 480,6
Inter-segment - -
assets
------- -------
Total assets 3 807,2 3 385,3
------- -------
SEGMENT LIABILITIES
Non-current 471,0 514,7
liabilites
Current liabilities 1 034,7 788,5
Inter-segment - -
liabilities
------- -------
Total liabilities 1 505,7 1 303,2
------- -------
SEGMENT INFORMATION
Capital expenditure 151,9 137,5
Depreciation 116,0 116,8
Amortisation 6,5 5,3
All retail 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
On the back of substantial growth in headline earnings per share over the last 2
years of 75,4% in 2002 and 84,5% in 2003, our group has this year achieved
another year of excellent performance.
Sales increased by 13,6%, which together with improved gross margins and tight
control of expenses, resulted in income before taxation increasing by 46,6%.
Headline earnings per ordinary share increased by 46,2% to 237,1 cents per share
from 162,2 cents.
The group`s trading margin increased once again from 14,5% to 18,1%.
Due to the group`s strong cash generation its already strong balance sheet has
strengthened further, with the gearing ratio reducing to 4,0% from last year`s
8,6%.
Cash generated by operating activities for the year amounted to R594,8 million,
which resulted in group total net borrowings at the end of the year being
reduced by R87,5 million.
Having regard to the group`s trading performance and cash generation the group`s
dividend cover has been reduced to 2,5 times attributable earnings per share.
Accordingly, the final dividend has been increased by 93,8% to 62 cents per
share. Dividends declared in respect of the full financial year were accordingly
94 cents per share, an increase of 67,9% over the prior year.
TRADING DIVISIONS
Following on the more challenging trading experienced in the first half of the
year, the tempo of trade increased in the second half and all our divisions
performed beyond expectations, and well above the rate of inflation in our
industry.
Sales and sales growths in the various divisions were as follows:
No. of stores Sales Rm % Change
@home 24 176,5 48,1
Exact! 169 408,9 14,4
Foschini Stores 334 1 830,8 11,5
Markhams 210 770,0 11,0
Jewellery Division 298 640,6 13,4
Sports Division 162 583,2 15,8
-------- -------- --------
Total 1 197 4 410,0 13,6
-------- -------- --------
Total same-store sales for the year grew by 9,8% with apparel growing 8,5%,
cosmetics 23,2%, cell phones by 24,0%, jewellery by 12,9% and homewares by
11,7%. During the year the group`s trading area grew by 1,9% with 45 new stores
being opened, whilst 36 stores were closed across all divisions.
The Foschini division, after experiencing a difficult winter season in the first
half of the year, traded exceptionally well in the second half, with second half
turnover growth of 17,4%, compared to first half growth of 5,2%. Same store
growth for the year was 7,1%.
The Markhams division, trading against its historically higher base, continued
with its pleasing performance with same-store growth of 9%.
Exact! had a very strong performance, achieving total same-store growth of
14,5%. Its relocation strategy to shopping centres and better high street
locations continues.
The sports division, trading as Sport Scene and Totalsports, continued to
outperform its market by growing turnover by 15,8% following on a strong 22,8%
growth in the last financial year. Same store growth was 10,2%.
Our jewellery division, comprising American Swiss Jewellers and Sterns,
continued to please with its strong performance, and again grew its market share
with turnover growth of 13,4 %. Same store growth for the year was 12,9%. This
division is continuing with its strategy of rationalising its store portfolio in
order to further improve sales densities.
Our @home division continued with substantial growth, increasing its store base
from 15 to 24 during the year and growing its turnover to R176,5 million from
R119,1 million in the previous year. Further store expansion will continue
aggressively, with 10 new stores planned for next year. Competition in the
homewares market is on the increase, but with its exciting merchandise and
outstanding acceptance in the market place, @home is expected to continue to
grow its market share. Same store growth for the year was 12,2%.
Our retail debtors book, which amounts to R1494 million, increased by 13,4% on a
credit turnover growth of 14,4%. Continued improvements in the debtors book are
reflected in a lower percentage of arrear accounts, a reduction in net bad debts
and improved collections. The group`s conservative credit granting policies
continue to be applied. Cash sales as a percentage of total sales reduced from
29,3% to 28,8%.
FINANCIAL SERVICES
Our financial services division, which is disclosed as a separate segment this
year, comprises RCS Personal Loans, our group`s personal loans business, and RCS
Cards, which offers credit to customers of merchants outside of the group. This
division had an impressive year with substantial growth in attributable income
before tax of 56% over last year.
Bad debts are well managed and the net bad debt experienced remained low.
Whilst this division currently represents 9,8% of our group`s income after
taxation, it is anticipated that this will increase in the years ahead.
PROSPECTS
Turnover for the first 8 weeks of the new financial year has been extremely
buoyant and well ahead of budget. The lower interest rate environment continues
to benefit consumer confidence.
In the absence of unforeseen circumstances, we remain confident about the year
ahead and expect to increase our earnings well above the rate of inflation.
Whilst focussing on improved densities in all divisions, we anticipate opening
in excess of 60 new stores in the year ahead.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 135 of 3,25% (6,5 cents per share) in respect of the six months
ending 30 September 2004 has been declared, payable on Monday 27 September 2004
to holders of 6,5% preference shares recorded in the books of the company at the
close of business on Thursday, 23 September 2004.
The last day to trade (`cum` the dividend) in order to participate in the
dividend will be Thursday, 16 September 2004. Foschini Ltd preference shares
will commence trading `ex` the dividend from the commencement of business on
Friday, 17 September 2004 and the record date, as indicated, will be Thursday,
23 September 2004.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 17 September 2004 to
Thursday, 23 September 2004, both dates inclusive.
FINAL ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared a final ordinary dividend of 62 cents per ordinary
share payable on Monday, 19 July 2004 to ordinary shareholders recorded in the
books of the company at the close of business on Friday, 16 July 2004.
The last day to trade (`cum` the dividend) in order to participate in the
dividend will be Friday, 9 July 2004. Foschini Ltd ordinary shares will
commence trading `ex` the dividend from the commencement of business on Monday,
12 July 2004 and the record date, as indicated, will be Friday, 16 July 2004.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Monday, 12 July 2004 to
Friday, 16 July 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, D M Polak,
Chairman Managing Director
27 May 2004
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 (*Independent non-Executive)
Registered Office:
Stanley Lewis Centre,
340 Voortrekker Road,
Parow East, 7500
Transfer Secretaries:
Computershare Limited,
Ground Floor,
70 Marshall Street,
Johannesburg, 2001.
SPONSOR:
UBS Corporate Finance South Africa (Pty) Ltd
Visit our website at http://www.foschinigroup.com/
Date: 27/05/2004 05:00:15 PM Produced by the JSE SENS Department
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