| Thu 25 May 2006, 14:00 | | Foschini Ltd - Reviewed Results for the Year Ended 31 March 2006 |
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FOS FOSP
FOS
Foschini Ltd - Reviewed Results for the Year Ended 31 March 2006
Foschini Ltd
Registration number 1937/009504/06
Share codes: FOS-FOSP
ISIN codes: ZAE000031019 - ZAE000031027
The following consolidated results of the Foschini Group for the year ended 31
March 2006 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 21,8% to R6,4 billion
* Profit before tax up 29,8% to R1,49 billion
* Profit after tax exceeds R1 billion for the first time
* Operating margin increased to 24,3%
* Headline earnings per share up 28,8% to 463,0 cents
* Final dividend declared increased by 37,3% to 140,0 cents per share
* Total dividend for the year increased by 34,1% to 220,0 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
2006 2005 Change
Reviewed Audited
Revenue 7 306,7 5 994,4
Rm Rm %
Retail turnover 6 432,1 5 279,3 21,8
Cost of turnover 3 707,9 2 999,5
Gross profit 2 724,2 2 279,8
Interest received (note 5) 644,1 488,9
Dividends received 13,4 14,3
Trading expenses (note 6) (1 814,4) (1 578,2)
Operating profit before finance 1 567,3 1 204,8
charges
Interest paid 79,1 58,4
Profit before tax 1 488,2 1 146,4 29,8
Income tax expense 479,2 368,6
Profit for the year 1 009,0 777,8
Attributable to:
Equity holders of Foschini 986,9 767,0 28,7
Minority interest 22,1 10,8
Profit for the year 1 009,0 777,8
RECONCILIATION OF ATTRIBUTABLE PROFIT TO HEADLINE EARNINGS
Profit attributable to equity 986,9 767,0
holders of Foschini
-
Headline earnings 986,9 767,0 28,7
EARNINGS PER ORDINARY SHARE (cents)
- Basic 463,0 359,6 28,8
- Headline 463,0 359,6 28,8
- Diluted (basic) 449,6 351,1 28,1
- Diluted (headline) 449,6 351,1 28,1
DIVIDEND PER ORDINARY SHARE (cents)
- Interim 80,0 62,0 29,0
- Final 140,0 102,0 37,3
------ ------ ------
- Total 220,0 164,0 34,1
------ ------ ------
Dividend cover (times) 2,1 2,2
CONSOLIDATED BALANCE SHEET
2006 2005
Reviewed Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 600,8 473,4
Goodwill 28,6 28,6
Preference share investment - 200,0
Loans 4,1 6,6
Private label card receivables 90,1 60,1
Loan receivables 497,6 398,6
Participation in export partnerships 108,6 120,7
Deferred taxation 211,9 209,9
1 541,7 1 497,9
Current assets
Inventory (note 7) 1 090,8 912,1
Preference share investment 200,0 -
Trade receivables - retail 2 116,6 1 744,3
Private label card receivables 390,0 231,6
Other receivables and prepayments 181,9 147,0
Loan receivables 319,9 260,3
Participation in export partnerships 8,5 90,6
Cash 62,5 36,2
4 370,2 3 422,1
Total assets 5 911,9 4 920,0
EQUITY AND LIABILITIES
Equity attributable to equity holders of 3 122,9 2 496,8
Foschini
Minority interest 88,9 16,0
Total equity 3 211,8 2 512,8
Non-current liabilities
Interest bearing debt 797,0 553,4
Operating lease accrual 318,1 324,9
Deferred taxation 153,9 160,3
1 269,0 1 038,6
Current liabilities
Short term loans 8,0 2,7
Trade and other payables 982,3 952,5
Taxation payable 327,9 304,5
Provisions 112,9 108,9
1 431,1 1 368,6
Total equity and liabilities 5 911,9 4 920,0
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity Minority Total equity
holders of interest
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 77,1 - 77,1
as deemed cost
Change in accounting for (245,5) - (245,5)
operating leases
Equity at 31 March 2004 after 2 123,0 10,1 2 133,1
IFRS and other adjustments
Restated profit 767,0 10,8 777,8
Profit for the year as 767,3 10,8 778,1
previously stated
IFRS adjustments: (2,2) - (2,2)
- Property depreciation
- Share-based payments (13,7) - (13,7)
Change in accounting for 15,6 - 15,6
operating leases
Share based payments reserve 13,7 - 13,7
movements
Change in degree of control - (3,3) (3,3)
Dividends paid (263,8) (1,6) (265,4)
Delivery of shares by share 34,4 - 34,4
trust
Shares purchased by share (183,2) - (183,2)
trust
Unrealised gain on hedging 5,7 - 5,7
instruments
Equity at 31 March 2005 2 496,8 16,0 2 512,8
restated
Profit for the year 986,9 22,1 1 009,0
Change in degree of control - 74,7 74,7
Profit on dilution of interest 189,1 - 189,1
in subsidiary
Share based payments reserve 19,0 - 19,0
movements
Dividends paid (388,8) (23,9) (412,7)
Delivery of shares by share 80,1 - 80,1
trust
Shares purchased by share (256,9) - (256,9)
trust
Unrealised loss on hedging (3,3) - (3,3)
instruments
Equity at 31 March 2006 3 122,9 88,9 3 211,8
SUPPLEMENTARY INFORMATION
2006 2005
Net ordinary shares in issue (millions) 212,6 211,9
Weighted average ordinary shares in issue 213,1 213,3
(millions)
Tangible net asset value per ordinary share 1 497,5 1 172,5
(cents)
CONSOLIDATED CASH FLOW STATEMENT
2006 2005
Reviewed Audited
Rm Rm
Cash flows from operating activities
Operating profit before working capital 1 085,9 835,3
changes
Increase in working capital (555,4) (340,0)
Cash generated by operations 530,5 495,3
Increase in private label card receivables (188,4) (96,4)
Increase in loan receivables (158,6) (121,8)
Interest received 644,1 488,9
Interest paid (79,1) (58,4)
Taxation paid (464,2) (355,5)
Dividends paid (412,7) (265,4)
Net cash (outflows) inflows from operating (128,4) 86,7
activities
Cash flows from investing activities
Purchase of property, plant and equipment (282,7) (184,3)
Proceeds from sale of property, plant and 4,8 5,4
equipment
Decrease in participation in export 94,2 20,6
partnerships
Decrease in loans 2,5 2,2
Shares purchased by share trust (256,9) (183,2)
Acquisition of additional interest in - (9,6)
subsidiary
Proceeds on dilution of interest in subsidiary 263,8 -
Net cash outflows from investing activities (174,3) (348,9)
Cash flows from financing activities
Proceeds on delivery of shares by share trust 80,1 34,4
Increase in interest bearing debt 243,6 233,0
Increase in short-term loans 5,3 1,8
Net cash inflows from financing activities 329,0 269,2
Net increase in cash and cash equivalents 26,3 7,0
during the year
Cash and cash equivalents at the beginning of 36,2 29,2
the year
Cash and cash equivalents at the end of the 62,5 36,2
year
NOTES
1. The group is reporting for the first time under International Financial
Reporting Standards (IFRS) for the year ended 31 March 2006 and accordingly,
comparative figures have been restated. The reviewed results for the year ended
31 March 2006 have been prepared in accordance with the group"s accounting
policies, which comply with IFRS. The disclosures required in terms of IFRS1
(First Time Adoption of International Financial 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.
In addition, certain comparative figures have been restated due to a
reclassification between equity and current liabilities.
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 (2005: 16,9) million shares, which are
owned by a subsidiary of the company, and 11,0 (2005: 11,8) million shares,
which are owned by the share incentive trust. These have been eliminated on
consolidation.
2006 2005
Rm Rm
5. Interest received
Trade receivables - retail 253,0 211,2
Loan receivables 290,9 227,7
Private label card receivables 100,2 50,0
644,1 488,9
6. Trading expenses
Depreciation (148,9) (124,3)
Employee costs: normal (813,9) (709,8)
Employee costs: bonuses (51,9) (48,6)
Employee costs: share option expense (19,0) (13,7)
Store occupancy costs: normal (459,6) (403,2)
Store occupancy costs: lease accrual 6,8 22,0
adjustment
Net other operating costs (327,9) (300,6)
(1814,4) (1578,2)
7. Inventory
Merchandise and raw materials 1065,8 844,4
Goods in transit 25,0 67,7
1090,8 912,1
SEGMENTAL ANALYSIS
Financial Financial Retail Retail
Services Services
2006 2005 2006 2005
Reviewed Audited Reviewed Audited
Rm Rm Rm Rm
REVENUE *
External 494,5 380,0 6 812,2 5 614,4
Inter-segment - - - -
Total revenue 494,5 380,0 6 812,2 5 614,4
SEGMENT RESULT
Operating profit 317,1 248,8 1 250,2 956,0
before finance charges
External (7,8) (5,8) (71,3) (52,6)
Inter-segment (56,2) (48,9) 56,2 48,9
Interest paid (64,0) (54,7) (15,1) (3,7)
Income tax expense (73,5) (58,7) (405,7) (309,9)
Profit for the year 179,6 135,4 829,4 642,4
* includes retail turnover, interest received, and other income
SEGMENT ASSETS
Non-current assets 609,6 461,2 931,8 1 036,7
Current assets 747,1 508,4 3 623,1 2 913,7
Inter-segment assets 12,9 12,9 (12,9) (12,9)
Total assets 1 369,9 982,5 4 542,0 3 937,5
SEGMENT LIABILITIES
Non-current 224,6 (13,7) 1 044,4 1 052,3
liabilites (assets)
Current liabilities 143,2 76,7 1 287,9 1 291,9
Inter-segment 676,4 697,7 (676,4) (697,7)
liabilities
Total liabilities 1 044,2 760,7 1 655,9 1 646,5
SEGMENT INFORMATION
Capital expenditure 3,6 1,8 279,1 182,5
Depreciation 1,8 1,9 147,1 122,4
SEGMENTAL ANALYSIS
(continued)
Consol- Consol-
idated idated
2006 2005
Reviewed Audited
Rm Rm
REVENUE *
External 7 306,7 5 994,4
Inter-segment - -
Total revenue 7 306,7 5 994,4
SEGMENT RESULT
Operating profit 1 567,3 1 204,8
before finance
charges
External (79,1) (58,4)
Inter-segment - -
Interest paid (79,1) (58,4)
Income tax expense (479,2) (368,6)
Profit for the year 1 009,0 777,8
* includes retail turnover, interest received, and other income
SEGMENT ASSETS
Non-current assets 1 541,7 1 497,9
Current assets 4 370,2 3 422,1
Inter-segment - -
assets
Total assets 5 911,9 4 920,0
SEGMENT LIABILITIES
Non-current 1 269,0 1 038,6
liabilites
Current liabilities 1 431,1 1 368,6
Inter-segment - -
liabilities
Total liabilities 2 700,1 2 407,2
SEGMENT INFORMATION
Capital expenditure 282,7 184,3
Depreciation 148,9 124,3
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
Following on the very substantial compounded growth in headline earnings per
share of 63,7% over the last four years, our group has this year once again
achieved another year of very good performance.
The group is reporting this financial year for the first time under
International Financial Reporting Standards (IFRS). 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 experienced in the first
half of the financial year continued into the second half. Turnover for the
first time exceeded the R6 billion mark for the 53 weeks, which is an increase
of 21,8% compared to the 52 weeks in the previous year. This is extremely
pleasing, having been achieved on an increased trading area of 7,1%, most of
which came on stream towards the end of the financial year. Comparable turnover
growth for the 52 weeks was 19,1%. Gross margins for the period were marginally
down by 0,8% on the previous year, primarily as a result of a change in the
sales mix. Headline earnings per ordinary share increased by 28,8% to 463,0c
from 359,6c, whilst the group"s operating margin increased to 24,3% from 22,8%.
Comparable headline earnings per share increased by 25,4%. Cash generated by
operations for the year amounted to R530,5 million.
The dividend cover has been reduced to 2,1 from 2,2 times attributable headline
earnings per share. Accordingly the final dividend has increased by 37,3% to
140c per share. Dividends distributed in respect of the full year of 220c have
increased by 34,1%.
Due to the group"s strong performance over the past few years, resulting in
substantially higher trading volumes and an increase in units, two much needed
new distribution centres were commissioned during the year at a cost of R90
million.
In terms of the group"s agreement with the Standard Bank of South Africa (SBSA),
referred to below, Standard Bank has acquired a further 10% in RCS Investment
Holdings with effect from 1 April 2006, increasing its holding in that company
to 35%. Subsequent to the year end, the group has received cash proceeds of
R220 million in respect of the purchase price of this additional 10%, as well as
SBSA"s pro-rata contribution to loan funding.
During the year under review the group opened 81 new stores across all
divisions, whilst 30 stores were closed. At the end of the year the group was
trading out of 1267 stores with a trading area of 353 833 square metres, an
increase of 7,1% compared to the previous year.
TRADING DIVISIONS
The buoyant trading conditions experienced in the first half of the financial
year continued into the second half. All our divisions performed well, once
again substantially 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 41 326,3 33,2
Exact! 170 592,4 23,6
Foschini Stores 356 2660,6 19,2
Markham 208 1054,7 21,4
Jewellery Division 308 893,4 20,0
Sports Division 184 904,7 27,5
Total 1267 6432,1 21,8
Total comparable same store sales for the year grew by 14,9% with apparel
growing 12,4%, cosmetics 24,0%, cell phones 32,6%, jewellery 14,9% and homewares
5,7%.
The Foschini division traded above budget with comparable same store growth of
11,2%. The new Luella stores launched during November, offering a range of
ladies footwear, handbags and accessories, aimed at the middle to upper market,
traded positively and will be further expanded.
The Markham division, which under-performed our other clothing divisions in the
first half of last year, continues with its greatly improved trading with
comparable same store growth at 19,4%. Its new store design concept that has
been very well received by the market place, continues to be expanded
countrywide. Its RJL brand - its unisex fashion chain is competing head-on with
our Sportscene and Foschini junior divisions and although profitable, will be
phased out during the next financial year. Its real estate will be converted,
in the main, into Luella stores which have a much greater roll-out potential and
trade at a higher gross margin.
The jewellery division, comprising American Swiss Jewellers, Sterns and Matrix
continues to be a leader in the retail jewellery market in southern Africa.
Total sales growth of 20,0% achieved by this division is extremely pleasing.
Comparable same store growth was 15,7%.
Exact! continues to go from strength to strength. Sales densities continue to
improve and a very strong sales growth of 23,6% was achieved with comparable
same store growth of 19,7%.
The sports division, trading as Sportscene, Totalsports and DueSouth, continues
to outperform its market with growth in turnover of 27,5% and comparable same
store growth of 15,7%.
Our @home division continued with substantial growth, increasing its store base
to 41 during the year and achieving turnover of R326,3 million. Comparable same
store growth of only 5,7% is primarily due to its own cannibalisation as it
rolls out additional stores. Its first two lifestyle stores, branded as
@homelivingspace which opened in October and November 2005 have been extremely
well received in the market place.
Foschini retail credit - Our retail debtors book which amounts to R2,1 billion
increased by 21,3% during the year, while credit turnover grew by 20,7%. Cash
sales as a percentage of total sales increased from 30,2% to 30,8%. Whilst
there have been continued improvements in our debtors book, reflected in a
reduction in net bad debts and improved collections, there are signs that these
performance indicators have plateaued, albeit at extremely good levels.
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 before tax by 30,4% which currently represents
17,0% of our group"s profit before tax. It is anticipated that this will grow
in the years ahead to around 20%. As a result of the transaction with SBSA, our
group"s shareholding in this division is 65% as from 1 April 2006.
RCS INVESTMENT HOLDINGS (RCSIH) AGREEMENT WITH THE STANDARD BANK OF SOUTH AFRICA
LIMITED (SBSA)
As we announced on SENS on 29 August 2005, SBSA acquired an initial 25% of RCSIH
with options to acquire an additional 20% in the future, half of which was
exercised on 1 April 2006. The agreement was subject to the fulfillment of
certain conditions that have subsequently been met. This transaction was
approved by the South African Competition Authority on 30 November 2005.
PROSPECTS
We anticipate opening in excess of 80 new stores across all divisions in the
year ahead. The continued low inflation and lower interest rate environment,
together with the favourable economy continue to benefit consumer confidence.
Turnover for the first seven weeks of the new financial year has remained strong
across all divisions and is well above budget. In the absence of unforeseen
circumstances, though mindful of recent turbulence in financial markets, we
remain confident about trading in the year ahead and expect to be able to
produce another year of good growth.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 139 of 3,25% (6,5 cents per share) in respect of the six months
ending 30 September 2006 has been declared, payable on Monday 2 October 2006 to
holders of 6,5% preference shares recorded in the books of the company at the
close of business on Friday, 29 September 2006.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 21 September 2006. Foschini Ltd preference shares
will commence trading "ex" the dividend from the commencement of business on
Friday, 22 September 2006 and the record date, as indicated, will be Friday, 29
September 2006.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 22 September 2006 to
Friday, 29 September 2006, both dates inclusive.
FINAL ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared a final ordinary dividend of 140,0 cents per
ordinary share payable on Monday, 17 July 2006 to ordinary shareholders recorded
in the books of the company at the close of business on Friday, 14 July 2006.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Friday, 7 July 2006. Foschini Ltd ordinary shares will
commence trading "ex" the dividend from the commencement of business on Monday,
10 July 2006 and the record date, as indicated, will be Friday, 14 July 2006.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Monday, 10 July 2006 to
Friday, 14 July 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.
The group elected to utilise the following 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.
Share options (share-based payments) granted to employees after 7 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 R9 million.
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.
These financial statements have been prepared on the standards that were
applicable on 31 March 2006, being the first time that the group has prepared
financial statements under IFRS.
Signed on behalf of the Board
E Osrin, Chairman D M Polak, Managing Director
25 May 2006
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.co.za/
Date: 25/05/2006 02:00:32 PM Produced by the JSE SENS Department
