| Thu 26 May 2005, 14:16 | | REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2005 |
|
Foschini Limited - Reviewed results for the year ended 31 March 2005
Foschini Limited
Registration number 1937/009504/06
Share codes: FOS-FOSP
ISIN codes: ZAE000031019 - ZAE000031027
REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2005
The following consolidated results of the Foschini Group for the year ended 31
March 2005 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 19,7% to R5,3 billion
* Profit before tax up by 51,6% to R1 141,3 million
* Headline earnings per share up by 51,7% to 359,8 cents
* Final dividend declared increased by 64,5% to 102,0 cents per share
* Total dividend for the year increased by 74,5% to 164,0 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
2005 2004 Change
Reviewed Audited
Rm Rm %
Retail turnover 5 279,3 4 410,0 19,7
Cost of turnover 2 999,5 2 554,2
-------- --------
Gross profit 2 279,8 1 855,8
Interest received (note 2) 488,9 444,0
Dividends received 14,3 16,7
Trading expenses (note 3) (1 583,3) (1 501,9)
-------- --------
Trading profit 1 199,7 814,6 47,3
Goodwill amortised - 6,5
-------- --------
Operating profit before financing costs 1 199,7 808,1
Net finance charges 58,4 55,5
-------- --------
Profit before tax 1 141,3 752,6 51,6
Income tax expense 363,2 228,8
-------- --------
Profit for the year 778,1 523,8 48,5
======== ========
Attributable to:
Equity holders of Foschini 767,3 516,9 48,4
Minority interests 10,8 6,9
-------- --------
Profit for the year 778,1 523,8
======== ========
RECONCILIATION OF ATTRIBUTABLE PROFIT TO HEADLINE EARNINGS
Profit attributable to equity holders of 767,3 516,9
Foschini
Goodwill amortised - 6,5
-------- --------
Headline earnings 767,3 523,4 46,6
======== ========
EARNINGS PER ORDINARY SHARE (cents)
- Basic 359,8 234,2 53,6
- Headline 359,8 237,1 51,7
- Diluted (basic) 340,6 225,3
- Diluted (headline) 340,6 228,2
DIVIDEND PER ORDINARY SHARE (cents)
- Interim 62,0 32,0 93,7
- Final 102,0 62,0 64,5
------ ------ ------
- Total 164,0 94,0 74,5
------ ------ ------
Dividend cover (times) 2,2 2,5
CONSOLIDATED BALANCE SHEET
2005 2004
Reviewed Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 370,0 315,6
Goodwill 28,6 22,3
Preference share investment 200,0 200,0
Loans 6,6 8,8
Private label card debtors 60,1 40,5
Loan debtors 398,6 213,8
Participation in export partnerships (note 7) 75,6 202,7
Deferred taxation 114,1 83,5
-------- --------
1 253,6 1 087,2
-------- --------
Current assets
Inventory (note 4) 912,1 699,1
Trade receivables - retail 1 744,3 1 494,4
Private label card debtors 231,6 154,8
Other debtors and prepayments 192,1 82,9
Loan debtors 260,3 323,3
Participation in export partnerships (note 7) 90,6 19,8
Cash 36,2 29,2
-------- --------
3 467,2 2 803,5
-------- --------
Total assets 4 720,8 3 890,7
======== ========
EQUITY AND LIABILITIES
Equity attributable to equity holders of Foschini 2 630,0 2 291,4
Minority interest 16,0 10,1
------- -------
Total equity 2 646,0 2 301,5
Non-current liabilities
Interest bearing debt 553,4 320,4
Deferred taxation 131,0 234,1
-------- --------
684,4 554,5
-------- --------
Current liabilities
Short term loans 2,7 0,9
Accounts payable 952,5 769,2
Taxation 326,3 163,1
Provisions 108,9 101,5
-------- --------
1 390,4 1 034,7
-------- --------
Total equity and liabilities 4 720,8 3 890,7
======== ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity Minority Total
holders of interest equity
Foschini
Rm Rm Rm
Equity at 31 March 2003 2 077,0 5,1 2 082,1
AC133: Financial instruments adjustment (6,9) - (6,9)
-------- -------- --------
Restated equity at 31 March 2003 2 070,1 5,1 2 075,2
Change in degree of control - (0,9) (0,9)
Profit for the year 516,9 6,9 523,8
Dividends paid (142,4) (1,0) (143,4)
Acquisition of shares from the share (83,7) - (83,7)
trust
Sale of shares by share trust 42,9 - 42,9
Shares purchased by subsidiary (108,0) - (108,0)
Unrealised loss on hedging instruments (4,4) - (4,4)
-------- -------- --------
Equity at 31 March 2004 2 291,4 10,1 2 301,5
Change in degree of control - (3,3) (3,3)
Profit for the year 767,3 10,8 778,1
Dividends paid (263,8) (1,6) (265,4)
Sale of shares by share trust 12,6 - 12,6
Shares purchased by subsidiary (183,2) - (183,2)
Unrealised gain on hedging instruments 5,7 - 5,7
------- ------- -------
Equity at 31 March 2005 2 630,0 16,0 2 646,0
======= ======= =======
SUPPLEMENTARY INFORMATION
Net ordinary shares in issue (millions) 211,8 218,4
Weighted average ordinary shares in issue (millions) 213,3 220,7
Tangible net asset value per ordinary share (cents) 1 235,4 1 043,7
Lease expenses (Rm) 435,7 384,7
CONSOLIDATED CASH FLOW STATEMENT
2005 2004
Reviewed Audited
Rm Rm
Cash flows from operating activities
Operating profit before working capital changes 835,3 487,9
Increase in working capital (375,7) (41,2)
------- --------
Cash generated by operations 459,6 446,7
Increase in private label card debtors (96,4) (87,4)
Increase in loan debtors (121,8) (109,1)
Interest received 488,9 444,0
Net finance charges (58,4) (55,5)
Taxation (333,7) (209,1)
Dividend paid (265,4) (143,4)
------- --------
Net cash inflows from operating activities 72,8 286,2
------- --------
Cash flows from investing activities
Purchase of fixed assets (184,3) (151,9)
Proceeds from sale of fixed assets 5,4 5,0
Net increase in preference share investment - (50,0)
Decrease in participation in export partnerships 56,3 14,0
Decrease in loans 2,2 4,4
Shares purchased by subsidiary (183,2) (108,0)
Acquisition of trademark - (1,6)
Acquisition of additional interest in subsidiary (9,6) (3,5)
------- --------
Net cash outflows from investing activities (313,2) (291,6)
------- --------
Cash flows from financing activities
Proceeds from sale of treasury shares by share trust 12,6 42,9
Increase (decrease) in interest bearing debt 233,0 (27,0)
Increase (decrease) in short-term loans 1,8 (8,5)
------- --------
Net cash inflows from financing activities 247,4 7,4
------- --------
Net increase in cash and cash equivalents during the 7,0 2,0
year
Cash and cash equivalents at the beginning of the year 29,2 27,2
------- --------
Cash and cash equivalents at the end of the year 36,2 29,2
======= ========
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 2004, have been consistently applied
throughout the year under review, except for Business combinations. During the
current year IFRS3 (Business combinations) became effective. This statement no
longer permits the amortisation of goodwill, and no goodwill has therefore been
amortised during the current year, nor have comparatives been restated.
2005 2004
Rm Rm
2. Interest received
Trade receivables - retail 211,2 235,5
Loan debtors 227,7 170,9
Private label card debtors 50,0 37,6
-------- --------
488,9 444,0
======== ========
3. Trading expenses
Depreciation (121,1) (116,0)
Employee costs: normal (709,8) (652,3)
Employee costs: bonuses (48,6) (32,2)
Occupancy costs (403,2) (362,8)
Net other operating costs (300,6) (338,6)
--------- ---------
(1 583,3) (1 501,9)
--------- ---------
4. Inventory
Merchandise and raw materials 844,4 689,7
Goods in transit 67,7 9,4
-------- --------
912,1 699,1
======== ========
5. These financial statements incorporate the financial statements of the
company, all its subsidiaries and all entities over which it has operational and
financial control.
6. Included in share capital are 16,9 (2004: 16,9) million shares, which were
purchased by a subsidiary of the company, and 11,7 (2004: 5,2) million shares,
which are owned by the share incentive trust. These have been eliminated on
consolidation.
7. The South African Revenue Service (SARS) has been conducting an investigation
into the tax treatment by certain other companies participating in similar
export partnerships with financial periods ended on or after 1 March 1996. SARS
has concluded an agreement with the managing partner and the group has approved
the settlement arrangement. There will be no impact on the income statement as a
deferred tax liability was raised for the payment at inception of the
partnership.
SEGMENTAL ANALYSIS
Financial Financial Retail Retail
Services Services
2005 2004 2005 2004
Reviewed Audited Reviewed Audited
Rm Rm Rm Rm
REVENUE *
External 277,7 208,5 5 716,7 4 830,1
Inter-segment - - - -
----- ----- ------- -------
Total revenue 277,7 208,5 5 716,7 4 830,1
----- ----- ------- -------
SEGMENT RESULT
----- ----- ----- -----
Operating profit 248,8 147,4 950,9 660,7
----- ----- ----- -----
External (5,8) (2,9) (52,6) (52,6)
Inter-segment (48,9) (61,0) 48,9 61,0
------ ------ ------ ------
Net finance (income) charges (54,7) (63,9) (3,7) 8,4
Income tax expense (58,7) (25,7) (304,5) (203,1)
----- ----- ---- ----
Profit for the year 135,4 57,8 642,7 466,0
---- ---- ----- ------
* includes retail turnover, interest received, and other income
SEGMENT ASSETS
Non-current assets 461,2 217,4 792,4 869,8
Current assets 508,4 525,3 2 958,8 2 278,2
Inter-segment assets 12,9 (401,1) (12,9) 401,1
----- ----- ------- -------
Total assets 982,5 341,6 3 738,3 3 549,1
----- ----- ------- -------
SEGMENT LIABILITIES
Non-current liabilites (13,7) (3,1) 698,1 557,6
Current liabilities 76,7 63,3 1 313,7 971,4
Inter-segment liabilities 697,7 182,0 (697,7) (182,0)
---- ---- ------- -------
Total liabilities 760,7 242,2 1 314,1 1 347,0
---- ---- ------- -------
SEGMENT INFORMATION
Capital expenditure 1,8 1,8 182,5 150,1
Depreciation 1,9 2,9 119,2 113,1
Amortisation - 3,3 - 3,2
SEGMENTAL ANALYSIS (continued)
Consol- Consol-
idated idated
2005 2004
Reviewed Audited
Rm Rm
REVENUE
External 5 994,4 5 038,6
Inter-segment - -
------- -------
Total revenue 5 994,4 5 038,6
------- -------
SEGMENT RESULT
------- -----
Operating profit 1 199,7 808,1
------- -----
External (58,4) (55,5)
Inter-segment - -
------ ------
Net finance charges (58,4) (55,5)
Income tax expense (363,2) (228,8)
----- -----
Profit for the year 778,1 523,8
----- -----
SEGMENT ASSETS
Non-current assets 1 253,6 1 087,2
Current assets 3 467,2 2 803,5
Inter-segment assets - -
------- -------
Total assets 4 720,8 3 890,7
------- -------
SEGMENT LIABILITIES
Non-current liabilites 684,4 554,5
Current liabilities 1 390,4 1 034,7
Inter-segment liabilities - -
------- -------
Total liabilities 2 074,8 1 589,2
------- -------
SEGMENT INFORMATION
Capital expenditure 184,3 151,9
Depreciation 121,1 116,0
Amortisation - 6,5
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
Following on the substantial compounded growth rate of 60% per annum over the
last 3 years in headline earnings per share, our group has once again achieved
another year of superb performance.
The buoyant trading conditions resulting from the lower inflation and the lower
interest rate environment experienced in the first half of the financial year
continued to benefit consumer confidence in the second half of the year.
Turnover increased by 19,7%, which is extremely pleasing having been achieved on
an increased trading area of only 3,4 %. This, together with improved gross
margins and good expense control, resulted in profit before tax increasing by
51,6%. For the first time the group`s profit before tax has comfortably exceeded
the R1 billion mark. Headline earnings per ordinary share increased by 51,7%
from 237,1 cents per share to 359,8 cents, whilst the group`s operating margin
increased from 18,3% to 22,7%.
The increase in profit before tax of 51,6% is very gratifying, and reflects the
continued efficiencies being achieved by the group. Cash generated by operations
for the year amounted to R459,6 million. Notwithstanding that the group has
advanced R183,2 million to a subsidiary to purchase shares, and the increased
interim dividend paid, the group`s net gearing ratio remains at a very low level
of 12,1%. Having regard to the group`s trading performance, cash generation and
future prospects, the group`s dividend cover for the year has been reduced to
2,2 times attributable earnings per share from 2,5 times. Accordingly, the final
dividend has been increased by 64,5% to 102 cents per share. Dividends
distributed in respect of the full year increased by 74,5%.
During the year under review 68 new stores were opened across all divisions
whilst 32 stores were closed. At the end of the year the group was trading out
of 1 233 stores, with a trading area of 334 662 square metres, an increase of
only 3,4% compared to the corresponding trading period last year.
TRADING DIVISIONS
The buoyant trading conditions experienced in the first half of the financial
year continued into the second half and all our divisions performed beyond
expectations, and well above our product inflation rate of approximately 3%.
Sales and sales growths in the various divisions were as follows:
No. of stores Sales Rm % Change
@home 34 245,0 38,8
Exact! 170 479,4 17,2
Foschini Stores 335 2 231,7 21,9
Markham 215 869,0 12,9
Jewellery Division 302 744,5 16,2
Sports Division 168 695,9 19,3
DueSouth 9 13,8 N/a
-------- -------- --------
Total 1 233 5 279,3 19,7
-------- -------- --------
Total same store sales for the year grew by 16,1% with apparel growing 15,9%,
cosmetics by 19,9%, cell phones by 24,1%, jewellery by 13,5% and homewares by
10,1%.
The Foschini division traded exceptionally well with same store growth of 19,7%.
The restructuring decisions made over the past few years are very evident in
this division`s good performance, which is expected to continue into the future.
The footprint of the Foschini brand has been significantly increased in most
major shopping centres and Donna Claire has been aggressively rolled out. This
expansion on the one side has been offset by the closure of 70 unprofitable
locations over the last five years. This strategy has resulted in little total
trading space gains over the last five years and significant density and profit
improvements.
The Markham division, which in the first half under-performed our other clothing
divisions, had a very much improved summer season, with second half growth of
15,7%. Its new store design concept continues to be expanded countrywide with
pleasing results, which should continue into the future as the new store design
concept continues to be rolled out. Same store growth for the year was 10,3%.
Exact! continues with its strong performance and growth since its rebranding and
has substantial growth potential for the future as its sales densities continue
to improve in line with its brand awareness. Same store growth for the year was
16,8%. The performance of this division is showing good success in catering to
the needs of the critical mass of middle-income consumers.
The Sports division, trading as Sportscene, Totalsports and DueSouth, continued
to outperform its market with a growth in turnover of 21,7% following on a
strong 15% growth in the previous financial year. Same store growth was 15,8%.
Totalsports has been the `top of mind` sportswear destination in the country,
while our Sportscene brand caters for the street-wise active youth. Our new
DueSouth brand was opened in October 2004 and has been trading above its
viabilities. Nine stores have opened thus far and this should at least double in
the next few years.
Our jewellery division, comprising American Swiss Jewellers, Matrix and Sterns
dominates the retail jewellery market in Southern Africa. Sales growth of 16,2%
achieved by this division was extremely pleasing following its previous year`s
growth of 13,4%. Same store growth for the year was 15,3%. Its strategy of
rationalising its store portfolio has resulted in trading densities improving by
71% over the last 5 years.
Our @home division continued with substantial growth, increasing its store base
from 24 to 34 during the year and growing its turnover to R245,0 million from
R176,5 million in the previous year, an increase of 38,8%. Same store growth for
the year was 10,1%. Further aggressive store expansion will continue with 8 new
stores planned for next year as well as 2 new lifestyle stores which will be
opening in November 2005, offering a full range of contemporary furniture in
addition to our current @home offering. Whilst competition in the homewares
market continues to increase, @home with its outstanding market acceptance and
new store roll out is expected to continue to grow its market share.
Our retail debtors book, which amounts to R1,74 billion increased by 16,7% on
credit turnover growth of 17,4% and remains conservatively valued, with
continued improvements reflected in a lower percentage of arrear accounts,
reduction in net bad debts and improved collections. Notwithstanding the buoyant
consumer market, the group`s conservative credit granting policies continue to
be applied. The favourable economic conditions drove not only sales, but also
payments from customers, ensuring once again that we finished the year with a
receivables book in record health. Cash sales as a percentage of total sales
increased from 28,8% to 30,2%.
FINANCIAL SERVICES
Our financial services division comprises RCS Personal Finance, our group`s
personal loans business, and RCS Cards, which offers credit to customers of
merchants outside of the group. This division continued with its impressive
performance achieved in the first half of the year with substantial growth in
profit before tax of 132,4% over last year. Bad debts continue to be well
managed and the net bad debt experienced remained low.
This division currently represents 17,0% of our group`s profit before tax, up
from 11,1% last year. It is anticipated that this will grow in the years ahead
to stabilise at 20%.
PROSPECTS
We anticipate opening more than 70 new stores in the year ahead.
The low inflation and the lower interest rate environment, as well as the
buoyant economy, continue to benefit consumer confidence, and turnover for the
first 8 weeks of the new financial year has remained strong across all divisions
and well ahead of budget.
In the absence of unforeseen circumstances we remain confident about the year
ahead and expect to be able to produce another year of good growth.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 137 of 3,25% (6,5 cents per share) in respect of the six months
ending 30 September 2005 has been declared, payable on Monday 26 September 2005
to holders of 6,5% preference shares recorded in the books of the company at the
close of business on Friday, 23 September 2005.
The last day to trade (`cum` the dividend) in order to participate in the
dividend will be Friday, 16 September 2005. Foschini Ltd preference shares will
commence trading `ex` the dividend from the commencement of business on Monday,
19 September 2005 and the record date, as indicated, will be Friday, 23
September 2005.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Monday, 19 September 2005 to
Friday, 23 September 2005, both dates inclusive.
FINAL ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared a final ordinary dividend of 102 cents per ordinary
share payable on Monday, 18 July 2005 to ordinary shareholders recorded in the
books of the company at the close of business on Friday, 15 July 2005.
The last day to trade (`cum` the dividend) in order to participate in the
dividend will be Friday, 8 July 2005. Foschini Ltd ordinary shares will
commence trading `ex` the dividend from the commencement of business on Monday,
11 July 2005 and the record date, as indicated, will be Friday, 15 July 2005.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Monday, 11 July 2005 to
Friday, 15 July 2005, 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
26 May 2005
Non-executive 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.
Executive directors:
D M Polak, R Stein
Registered Office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall
Street, Johannesburg, 2001.
SPONSOR:
UBS South Africa (Pty) Ltd
Visit our website at http://www.foschinigroup.com/
Date: 26/05/2005 02:00:33 PM
Produced by the JSE SENS Department
