| Thu 3 Nov 2005, 14:30 | | 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
2005.
This report has not been audited or reviewed by the company"s auditors.
HIGHLIGHTS
* Turnover up by 20,8% to R 2,9 billion
* Profit before tax up by 30,9% to R 566,2 million
* Headline earnings per share up by 28,8% to 175,1 cents
* Interim dividend declared increased by 29,0% to 80 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
26 weeks ended year ended
24.09.2005 25.09.2004 31.03.2005
Unaudited Unaudited Change Audited
Rm Rm % Rm
Revenue 3 291,4 2 723,5 5 994,4
======= ======= =======
Retail turnover 2 890,4 2 393,6 20,8 5 279,3
Cost of turnover 1 693,5 1 386,1 2 999,5
---------- ---------- ----------
Gross profit 1 196,9 1 007,5 2 279,8
Interest received 286,9 233,4 488,9
(note 5)
Dividends received 6,8 7,3 14,3
Trading expenses (892,5) (791,6) (1 578,2)
(note 6)
---------- ---------- ----------
Operating profit 598,1 456,6 1 204,8
before finance 31,0
charges
Net finance charges 31,9 24,0 58,4
---------- ---------- ------ ----------
Profit before tax 566,2 432,6 30,9 1 146,4
Income tax expense 182,7 135,8 368,6
---------- ---------- ------ ----------
Profit for the period 383,5 296,8 29,2 777,8
======== ======== ===== =======
Attributable to:
Equity holders of 374,3 291,7 767,0
Foschini
Minority interest 9,2 5,1 10,8
-------- ------- -------
Profit for the period 383,5 296,8 777,8
========== ========== ====== ==========
RECONCILIATION OF ATTRIBUTABLE INCOME TO HEADLINE EARNINGS
Profit attributable 374,3 291,7 767,0
to equity holders of
Foschini
-------- -------- --------
Headline earnings 374,3 291,7 767,0
======== ======== ========
EARNINGS PER ORDINARY SHARE (CENTS)
Basic 175,1 135,9 28,8 359,6
Headline 175,1 135,9 28,8 359,6
Diluted (basic) 172,6 134,9 351,1
Diluted (headline) 172,6 134,9 351,1
DIVIDEND PER ORDINARY 80,0 62,0 29,0 164,0
SHARE (cents)
DIVIDEND COVER 2,2 2,2 2,2
(times)
CONSOLIDATED BALANCE SHEET
Sept. 2005 Sept. 2004 March 2005
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 536,7 413,8 473,4
Goodwill 28,6 28,6 28,6
Preference share investment 200,0 200,0 200,0
Loans 6,1 7,9 6,6
Private label card 76,6 50,1 60,1
receivables
Loan receivables 450,2 246,7 398,6
Participation in export 115,2 196,2 120,7
partnerships
Deferred taxation 206,3 181,9 209,3
---------- ---------- ----------
1 619,7 1 325,2 1 497,3
---------- ---------- ----------
Current assets
Inventory 980,1 722,9 912,1
Trade receivables - retail 1 882,3 1 557,8 1 744,3
Private label card 271,7 192,9 231,6
receivables
Other receivables and 161,0 149,5 147,0
prepayments
Loan receivables 294,0 362,4 260,3
Participation in export 51,9 17,4 90,6
partnerships
Cash 52,3 30,1 36,2
---------- ---------- ----------
3 693,3 3 033,0 3 422,1
---------- ---------- ----------
Total assets 5 313,0 4 358,2 4 919,4
========== ========== ==========
EQUITY AND LIABILITIES
Equity attributable to equity 2 462,6 2 150,9 2 472,8
holders of Foschini
Minority interest 22,5 10,3 16,0
-------- ------- -------
Total equity 2 485,1 2 161,2 2 488,8
------- ------- -------
Non-current liabilities
Interest bearing debt 992,8 478,2 553,4
Operating lease accrual 307,7 337,8 324,9
Deferred taxation 163,7 255,0 161,9
---------- ---------- ----------
1 464,2 1 071,0 1 040,2
---------- ---------- ----------
Current liabilities
Short term loans - - 2,7
Trade and other payables 975,5 845,1 952,5
Taxation payable 285,2 174,4 326,3
Provisions 103,0 106,5 108,9
---------- ---------- ----------
1 363,7 1 126,0 1 390,4
---------- ---------- ----------
Total equity and liabilities 5 313,0 4 358,2 4 919,4
========== ========== ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity Minority Total
holders of interest equity
Foschini
Rm Rm Rm
Equity at 31 March 2004 as 2 291,4 10,1 2 301,5
previously stated
IFRS transitional adjustment:
- Property: fair value used 75,7 - 75,7
as deemed cost
Change in accounting for (246,3) - (246,3)
operating leases
-------- -------- --------
Equity at 31 March 2004 after 2 120,8 10,1 2 130,9
IFRS and other adjustments
Restated profit 291,7 5,1 296,8
------- ------- -------
Profit for the half year as 292,5 5,1 297,6
previously stated
IFRS adjustments: (1,1) - (1,1)
- Property depreciation
- Share options (6,2) - (6,2)
Change in accounting for 6,5 - 6,5
operating leases
------- ------- -------
Share based payments reserve 6,2 - 6,2
movements
Change in degree of control - (3,3) (3,3)
Dividends paid (132,3) (1,6) (133,9)
Sale of shares by share trust 9,3 - 9,3
Shares purchased by share (151,4) - (151,4)
trust
Unrealised gain on hedging 6,6 - 6,6
instruments
---------- ---------- ----------
Equity at 25 September 2004 2 150,9 10,3 2 161,2
restated
Restated profit 475,3 5,7 481,0
------- ------- -------
Profit for the half year as 474,8 5,7 480,5
previously stated
IFRS adjustments: (1,1) - (1,1)
- Property depreciation
- Share options (7,5) - (7,5)
Change in accounting for 9,1 - 9,1
operating leases
------- ------- -------
Share based payments reserve 7,5 - 7,5
movements
Dividends paid (131,5) - (131,5)
Sale of shares by share trust 3,3 - 3,3
Shares purchased by share (31,8) - (31,8)
trust
Unrealised loss on hedging (0,9) - (0,9)
instruments
-------- -------- --------
Equity at 31 March 2005 2 472,8 16,0 2 488,8
restated
Profit for the half year 374,3 9,2 383,5
Share based payments reserve 10,0 - 10,0
movements
Dividends paid (221,5) (2,7) (224,2)
Sale of shares by share trust 55,3 - 55,3
Shares purchased by share (222,3) - (222,3)
trust
Unrealised loss on hedging (6,0) - (6,0)
instruments
---------- ---------- ----------
Equity at 24 September 2005 2 462,6 22,5 2 485,1
========== ========== ==========
SUPPLEMENTARY INFORMATION
Net ordinary shares in issue 212,2 211,6 211,9
(millions)
Weighted average ordinary 213,8 214,6 213,3
shares in issue (millions)
Tangible net asset value per 1 157,5 1 007,8 1 161,2
ordinary share (cents)
CONSOLIDATED CASH FLOW STATEMENT
Sept. 2005 Sept. 2004 March 2005
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before 392,0 287,0 835,3
working capital changes
Increase in working capital (226,1) (78,5) (340,0)
---------- ---------- ----------
Cash generated by operations 165,9 208,5 495,3
Increase in private label (56,6) (47,7) (96,4)
card receivables
Increase in loan receivables (85,3) (72,0) (121,8)
Interest received 286,9 233,4 488,9
Net finance charges (31,9) (24,0) (58,4)
Taxation paid (219,0) (138,6) (333,7)
Dividends paid (224,2) (133,9) (265,4)
---------- ---------- ----------
Net cash (outflows) inflows (164,2) 25,7 108,5
from operating activities
---------- ---------- ----------
Cash flows from investing
activities
Purchase of property, plant (136,6) (52,7) (184,3)
and equipment
Proceeds from sale of 2,5 3,5 5,4
property, plant and equipment
Decrease in participation in 44,2 18,3 20,6
export partnerships
Decrease in loans 0,5 0,9 2,2
Shares purchased by share (222,3) (151,4) (183,2)
trust
Acquisition of additional - (9,6) (9,6)
interest in subsidiary
---------- ---------- ----------
Net cash outflows from (311,7) (191,0) (348,9)
investing activities
---------- ---------- ----------
Cash flows from financing
activities
Proceeds from sale of 55,3 9,3 12,6
treasury shares by share
trust
Increase in interest bearing 439,4 157,8 233,0
debt
(Decrease) increase in short- (2,7) (0,9) 1,8
term loans
---------- ---------- ----------
Net cash inflows from 492,0 166,2 247,4
financing activities
---------- ---------- ----------
Net increase in cash and cash 16,1 0,9 7,0
equivalents during the period
Cash and cash equivalents at 36,2 29,2 29,2
the beginning of the period
---------- ---------- ----------
Cash and cash equivalents at 52,3 30,1 36,2
the end of the period
========== ========== ==========
NOTES
1. The group is reporting for the first time under the IFRS standards for the
year ending 31 March 2006 and accordingly, comparative figures have been
restated. The unaudited results for the half-year ended 24 September 2005 have
been prepared in accordance with the group"s accounting policies, which comply
with International Financial Reporting Standards (IFRS). The disclosures
required in terms of IFRS1 (First Time Adoption of International Reporting
Standards) concerning the transition from South African Statements of Generally
Accepted Accounting Practice (SA GAAP) and the requisite changes in accounting
policies are set out in a separate section of this announcement.
The effects disclosed are net of deferred tax, where applicable, at the rates
prevailing during the relevant periods.
2.In addition to the above changes, the accounting treatment of lease rentals
has been modified to accord with the international interpretation of the
requirements of IAS17 (Leases), namely, escalations in operating lease rentals
are no longer recognised in the periods they are actually incurred, but are now
charged in the income statement on a straight-line basis over the term of the
leases.
3. These financial statements incorporate the financial statements of the
company, all its subsidiaries and all entities over which it has operational and
financial control.
4. Included in share capital are 16,9(2004: 16,9) million shares, which were
purchased by a subsidiary of the company, and 11,4(2004: 12,0) million shares,
which are owned by the share incentive trust. These have been eliminated on
consolidation.
Sept. 2005 Sept. 2004 March 2005
Unaudited Unaudited Audited
Rm Rm Rm
5. INTEREST RECEIVED
Trade receivables - retail 118,1 103,9 211,2
Loan receivables 136,2 106,4 227,7
Private label card 32,6 23,1 50,0
receivables
------- ------- -------
286,9 233,4 488,9
------- ------- -------
6. TRADING EXPENSES
Depreciation (70,0) (57,5) (121,1)
Employee costs: normal (367,3) (323,7) (709,8)
Employee costs: bonuses - - (48,6)
Store occupancy costs (214,3) (189,7) (403,2)
Net other operating costs (240,9) (220,7) (295,5)
---------- ---------- ----------
(892,5) (791,6) (1 578,2)
---------- ------------ ----------
SEGMENTAL ANALYSIS
26 weeks ended 24.09.2005
Financial Retail Consolidated
Services
Unaudited Unaudited Unaudited
Rm Rm Rm
Revenue *
External 228,5 3 062,9 3 291,4
Inter-segment - - -
-------- -------- --------
Total revenue 228,5 3 062,9 3 291,4
-------- -------- --------
Segment result
Operating profit before 145,9 452,2 598,1
finance charges
-------- -------- --------
External (1,8) (30,1) (31,9)
Inter-segment (30,0) 30,0 -
-------- -------- --------
Net finance charges (31,8) (0,1) (31,9)
Income tax expense (33,9) (148,8) (182,7)
--------- -------- --------
Profit for the half year 80,2 303,3 383,5
-------- -------- --------
* includes retail turnover, interest received and other income
Segment assets
Non-current assets 543,9 1 075,8 1 619,7
Current assets 573,2 3 120,1 3 693,3
Inter-segment assets 12,9 (12,9) -
-------- -------- --------
Total assets 1 130,0 4 183,0 5 313,0
-------- -------- --------
Segment liabilities
Non-current liabilities - 1 464,2 1 464,2
Current liabilities 100,4 1 263,3 1 363,7
Inter-segment liabilities 761,0 (761,0) -
-------- -------- --------
Total liabilities 861,4 1 966,5 2 827,9
-------- -------- --------
Segment information
Capital expenditure 0,6 136,0 136,6
Depreciation 1,4 70,2 71,6
SEGMENTAL ANALYSIS (cont.)
26 weeks ended 25.09.2004
Financial Retail Consolidated
Services
Unaudited Unaudited Unaudited
Rm Rm Rm
Revenue *
External 178,3 2 545,2 2 723,5
Inter-segment - - -
-------- -------- --------
Total revenue 178,3 2 545,2 2 723,5
-------- -------- --------
Segment result
Operating profit before 114,8 341,8 456,6
finance charges
-------- -------- --------
External (3,3) (20,7) (24,0)
Inter-segment (24,5) 24,5 -
-------- -------- --------
Net finance (charges) income (27,8) 3,8 (24,0)
Income tax expense (23,6) (112,2) (135,8)
--------- -------- --------
Profit for the half year 63,4 233,4 296,8
-------- -------- --------
Segment assets
Non-current assets 262,5 1 062,7 1 325,2
Current assets 623,3 2 409,7 3 033,0
Inter-segment assets (440,6) 440,6 -
-------- -------- --------
Total assets 445,2 3 913,0 4 358,2
-------- -------- --------
Segment liabilities
Non-current (assets) (15,1) 1 086,1 1 071,0
liabilities
Current liabilities 87,5 1 038,5 1 126,0
Inter-segment liabilities 211,3 (211,3) -
-------- -------- --------
Total liabilities 283,7 1 913,3 2 197,0
-------- -------- --------
Segment information
Capital expenditure 0,6 52,1 52,7
Depreciation 1,6 57,5 59,1
Amortisation - - -
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% in headline earnings
per share achieved over the past 3 years, our group has once again achieved
another period of very good performance.
The group is reporting for the first time under the International Financial
Reporting Standards (IFRS) for the year ending 31 March 2006. The changes made
to our accounting policies resulting from the adoption of IFRS are reflected in
a separate section of this announcement.
The lower interest rate environment and buoyant economy continued to benefit
consumer confidence and consumer spending has remained strong in the first half
of this year. Turnover for the first 6 months increased by 20,8%, which is all
the more pleasing having been achieved on an increased trading area of only
3,8%. Gross margins for the period were marginally down by 0,7% on the previous
period as a result of a change in the sales mix.
Operating profit increased by 31,0% whilst headline earnings per share increased
by 28,8% from 135,9 cents to 175,1 cents per share. The group"s operating margin
increased to 20,7% from 19,1%.
During the period under review 9 new stores were opened whilst 15 stores were
closed across all divisions. At the end of the period the group was trading out
of 1 227 stores with a trading area of 336 156 square metres, an increase of
3,8% compared to the corresponding trading period last year.
In terms of the group"s agreement with the Standard Bank of South Africa Limited
referred to below, the group will receive cash proceeds of approximately R440
million once this transaction becomes unconditional, which we expect to be
towards the end of November 2005. In anticipation of receiving these funds the
group has advanced R222,3 million during the period under review to the group"s
share trust in order to purchase Foschini Limited shares.
The group"s dividend cover has been retained at 2,2 times attributable headline
earnings per share. Accordingly, the interim dividend has been increased by 29%
to 80 cents per share from 62 cents in the corresponding period.
TRADING DIVISIONS
The buoyant trading conditions experienced in the past few years continued into
the first half of this year and all our divisions performed well, and greatly
exceeded our product inflation of approximately 3%.
Sales and sales growths in the various divisions were as follows:
No. of Sales Rm % change
stores
@home 34 135,0 30,8
Exact! 169 263,8 21,0
Foschini 337 1 229,3 18,2
Markham 205 485,2 21,6
Jewellery division 302 379,5 19,3
Sports division 180 397,6 26,3
-------- -------- --------
Total 1 227 2 890,4 20,8
-------- -------- --------
Total same store sales for the period grew by 15,5%, with apparel growing
16,3%,cosmetics 33,7%, cell phones by 65,9%, jewellery by 17,2% and homewares by
7,5%.
The Foschini division traded well with same store growth of 12,9%. This division
will be launching its Luella stores during November, offering a range of ladies
footwear, handbags and accessories aimed at the middle to upper market, with its
first 6 new stores being opened in major shopping centres.
The Markham division, which under-performed our other clothing divisions in the
first half of last year, continues with its much improved trading with total
growth of 21,6% and same store growth of 18,7%. Its new store design concept
continues to be expanded countrywide with good results.
Our Jewellery division, comprising American Swiss Jewellers, Matrix and Sterns,
continues to dominate the retail jewellery market in southern Africa. Sales
growth of 19,3% achieved by this division was extremely pleasing. Same store
growth was 17,2%.
Exact! continued with its strong performance and growth since its rebranding.
Same store growth was 21,3% as it continues to improve its sales densities.
The Sports division, trading as Sportscene, Totalsports and DueSouth, continues
to outperform its market, with a growth in turnover of 26,3%. Same store growth
was 16%.
Our @home division continued with substantial growth, maintaining its store base
at 34 during the period, and growing its turnover to R135 million from R103,2
million in the previous corresponding period, an increase of 30,8%. Same store
growth was 7,5%. Its first new lifestyle store, branded as @homelivingspace,
offering a full range of contemporary furniture in addition to our current @home
offering, opened in October 2005, with its second new store opening in November
2005.
Our retail debtors book, which amounts to R1,882 billion, increased by 7,9%
during the period, whilst credit turnover grew by 19,6% compared to the previous
corresponding period. The debtors book remains fairly valued, with continued
improvements reflected in a lower percentage of arrear accounts, reduction in
net bad debt and improved collections. Cash sales as a percentage of total sales
increased from 28,7% to 29,3%.
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 good
performance, growing its profit after tax for the period by 26,5%. Bad debts
continue to be well managed, and the net bad debt experienced remained at
acceptable levels.
RCS INVESTMENT HOLDINGS (RCSIH) AGREEMENT WITH THE STANDARD BANK OF SOUTH AFRICA
LIMITED (SBSA)
As we announced on SENS on 29 August 2005 our group has entered into an
agreement with SBSA, subject to the fulfilment of certain conditions precedent,
whereby SBSA will acquire an initial 25% of RCSIH with options to acquire an
additional 20% in the future. This transaction is currently at the South African
Competition Authority, which is expected to rule on the matter by the end of
November 2005.
PROSPECTS
Turnover for the first 5 weeks of the second half remains buoyant and well ahead
of budget, as customers continue to benefit from the favourable consumer
environment. Whilst the second half of the year is always heavily dependent on
the level of Christmas trading, we remain confident about the second half, which
this year comprises 27 weeks, and expect to be able to produce continued strong
growth in earnings for this period.
75 new stores will be opened in the second half of the year.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 138 of 3,25% (6,5 cents per share) in respect of the six months
ending 31 March 2006 has been declared, payable on Monday 27 March 2006 to
holders of 6,5% preference shares recorded in the books of the company at the
close of business on Friday, 24 March 2006.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 16 March 2006. Foschini Ltd preference shares will
commence trading "ex" the dividend from the commencement of business on Friday,
17 March 2006 and the record date, as indicated, will be Friday, 24 March 2006.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 17 March 2006 to
Friday, 24 March 2006, both dates inclusive.
INTERIM ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared an interim ordinary dividend of 80 cents per
ordinary share payable on Monday, 9 January 2006 to ordinary shareholders
recorded in the books of the company at the close of business on Friday, 6
January 2006.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 29 December 2005. Foschini Ltd ordinary shares will
commence trading "ex" the dividend from the commencement of business on Friday,
30 December 2005 and the record date, as indicated, will be Friday, 6 January
2006.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 30 December 2005 to
Friday, 6 January 2006, 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.
COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
In order to comply with IFRS the group has adopted the following accounting
policies. All comparative information has been adjusted accordingly.
1. The group elected to utilise the exemption in terms of IFRS - First time
adoption. The fair value of buildings at the transition date was adopted as the
deemed cost and the applicable depreciation adjusted accordingly. In order to
determine depreciation, the useful lives and residual values of properties will
be reviewed on an annual basis.
2. Share options (share based payments) granted to employees after November 2002
are valued using a binomial valuation model and this value is charged to the
income statement over the expected life of the option. The liability raised at
the transition date amounted to R 9 million.
3. Goodwill is no longer amortised and is now stated at its carrying value as at
1 April 2004. This carrying value is reviewed annually for impairment.
FUTURE DEVELOPMENTS UNDER IFRS
These financial statements have been prepared on the group"s expectation of
standards that will be applicable on 31 March 2006, being the first time that
the group will prepare financial statements under IFRS. Changes to the
information presented in this report may be required due to one or more of the
following reasons:
- Further standards and interpretations may be issued that could be applicable
to the financial year ending 31 March 2006.
- Interpretations may differ as practice develops; and
-Tax legislation and tax related interpretation might develop further.
Signed on behalf of the Board
E Osrin, Chairman D M Polak, Managing Director
Cape Town
3 November 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) Ltd, Ground Floor, 70 Marshall
Street, Johannesburg, 2001.
SPONSOR:
UBS South Africa (Pty) Ltd.
Visit our website at http://www.foschinigroup.com/
Date: 03/11/2005 02:30:24 PM Produced by the JSE SENS Department
