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FOS FOSP
FOS
Foschini Limited - Unaudited interim profit announcement
Foschini Limited
Registration number: 1937/009504/06
Share codes: FOS-FOSP
ISIN codes: ZAE000031019 - ZAE000031027
The following are the Foschini group results for the half-year ended
September 2006.
This report has not been audited or reviewed by the company"s auditors.
HIGHLIGHTS
* Retail turnover up by 16,6% to R 3,4 billion
* Profit before tax up by 26,4% to R 715,6 million
* Headline earnings per share up by 20,1% to 210,3 cents
* Interim dividend declared increased by 25,0% to 100,0 cents per share
* Sustained strong balance sheet
CONSOLIDATED INCOME STATEMENT
26 weeks ended 53 weeks
ended
30.09.2006 24.09.2005 31.03.2006
Unaudited Unaudited Change Audited
Rm Rm % Rm
Revenue 3 911,3 3 291,4 7 306,7
=========== =========== ==========
Retail turnover 3 370,2 2 890,4 16,6 6 432,1
Cost of turnover 1 982,9 1 693,5 3 707,9
----------- ----------- ----------
Gross profit 1 387,3 1 196,9 2 724,2
Interest received 424,3 286,9 644,1
(note 4)
Dividends received 5,0 6,8 13,4
Net trading expenses (1 070,7) (892,5) (1 814,4)
(note 5)
----------- ----------- ----------
Operating profit 745,9 598,1 1 567,3
before finance 24,7
charges
Interest paid 30,3 31,9 79,1
----------- ----------- ----------- ----------
Profit before tax 715,6 566,2 26,4 1 488,2
Income tax expense 235,7 182,7 479,2
----------- ----------- ----------- ----------
Profit for the period 479,9 383,5 25,1 1 009,0
=========== =========== =========== ==========
=
Attributable to:
Equity holders of 442,4 374,3 986,9
Foschini Limited
Minority interest 37,5 9,2 22,1
----------- ----------- ----------
Profit for the period 479,9 383,5 1 009,0
=========== =========== ==========
RECONCILIATION OF ATTRIBUTABLE PROFIT TO HEADLINE EARNINGS
Profit attributable 442,4 374,3 986,9
to equity holders of
Foschini Limited
----------- ----------- ----------- ----------
Headline earnings 442,4 374,3 18,2 986,9
=========== =========== =========== ==========
EARNINGS PER ORDINARY SHARE (CENTS)
Basic 210,3 175,1 20,1 463,0
Headline 210,3 175,1 20,1 463,0
Diluted (basic) 203,9 172,6 449,6
Diluted (headline) 203,9 172,6 449,6
DIVIDEND PER ORDINARY SHARE (cents)
Interim 100,0 80,0 80,0
Final - - 140,0
----------- ----------- ----------- -----------
Total 100,0 80,0 25,0 220,0
----------- ----------- ----------- -----------
DIVIDEND COVER 2,1 2,2 2,1
(times)
CONSOLIDATED BALANCE SHEET
Sept. 2006 Sept. 2005 March 2006
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 665,5 536,7 600,8
Goodwill 28,6 28,6 28,6
Preference share investment 200,0 200,0 -
Loans 4,7 6,1 4,1
Private label card receivables 130,4 76,6 90,1
Loan receivables 520,2 450,2 497,6
Participation in export 104,0 115,2 108,6
partnerships
Deferred taxation 211,9 206,3 211,9
----------- ---------- -----------
1 865,3 1 619,7 1 541,7
----------- ---------- -----------
Current assets
Inventory (note 6) 1 151,1 1 018,7 1 090,8
Preference share investment - - 200,0
Trade receivables - retail 2 101,2 1 882,3 2 116,6
Private label card receivables 462,2 271,7 390,0
Other receivables and prepayments 165,3 122,4 181,9
Loan receivables 339,8 294,0 319,9
Participation in export 9,3 51,9 8,5
partnerships
Cash 65,8 52,3 62,5
----------- ---------- -----------
4 294,7 3 693,3 4 370,2
----------- ---------- -----------
Total assets 6 160,0 5 313,0 5 911,9
=========== ========== ===========
EQUITY AND LIABILITIES
Equity attributable to equity 3 237,9 2 486,6 3 122,9
holders of Foschini Limited
Minority interest 146,0 22,5 88,9
----------- ---------- -----------
Total equity 3 383,9 2 509,1 3 211,8
----------- ---------- -----------
Non-current liabilities
Interest-bearing debt 862,9 992,8 797,0
Operating lease liability 323,7 307,7 318,1
Deferred taxation 149,6 161,5 153,9
----------- ---------- -----------
1 336,2 1 462,0 1 269,0
----------- ---------- -----------
Current liabilities
Short-term loans 7,5 - 8,0
Trade and other payables 956,2 975,5 982,3
Taxation payable 366,5 263,4 327,9
Employee benefit accruals 109,7 103,0 112,9
----------- ---------- -----------
1 439,9 1 341,9 1 431,1
----------- ---------- -----------
Total liabilities 2 776,1 2 803,9 2 700,1
----------- ---------- -----------
Total equity and liabilities 6 160,0 5 313,0 5 911,9
=========== ========== ===========
Equity Minority Total
holders of interest equity
Foschini
Limited
Rm Rm Rm
Equity at 31 March 2005 2 496,8 16,0 2 512,8
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)
Delivery of shares by share trust 55,3 - 55,3
Shares purchased by share trust (222,3) - (222,3)
Unrealised loss on hedging (6,0) - (6,0)
instruments
----------- ---------- -----------
Equity at 24 September 2005 2 486,6 22,5 2 509,1
Profit for the half-year 612,6 12,9 625,5
Change in degree of control - 74,7 74,7
Profit on dilution of interest in 189,1 - 189,1
subsidiary
Share-based payments reserve 9,0 - 9,0
movements
Dividends paid (167,3) (21,2) (188,5)
Delivery of shares by share trust 24,8 - 24,8
Shares purchased by share trust (34,6) - (34,6)
Unrealised gain on hedging 2,7 - 2,7
instruments
----------- ---------- -----------
Equity at 31 March 2006 3 122,9 88,9 3 211,8
Profit for the half-year 442,4 37,5 479,9
Change in degree of control - 71,2 71,2
Profit on dilution of interest in 112,1 - 112,1
subsidiary
Share-based payments reserve 9,0 - 9,0
movements
Dividends paid (292,9) (51,6) (344,5)
Delivery of shares by share trust 0,4 - 0,4
Shares purchased by share trust (181,8) - (181,8)
Unrealised gain on hedging 25,8 - 25,8
instruments
----------- ---------- -----------
Equity at 30 September 2006 3 237,9 146,0 3 383,9
=========== ========== ===========
Sept. 2006 Sept. 2005 March 2006
Unaudited Unaudited Audited
Net ordinary shares in issue 209,2 212,2 212,6
(millions)
Weighted average ordinary shares 210,4 213,8 213,1
in issue (millions)
Tangible net asset value per 1 534,1 1 147,0 1 455,5
ordinary share (cents)
Sept. 2006 Sept. 2005 March 2006
Unaudited Unaudited Audited
Rm Rm Rm
Cash flows from operating
activities
Operating profit before working 440,8 392,0 1085,9
capital changes
Increase in working capital (52,0) (226,1) (555,4)
----------- ---------- -----------
Cash generated by operations 388,8 165,9 530,5
Increase in private label card (112,5) (56,6) (188,4)
receivables
Increase in loan receivables (42,5) (85,3) (158,6)
Interest received 424,3 286,9 644,1
Interest paid (30,3) (31,9) (79,1)
Taxation paid (201,4) (219,0) (464,2)
Dividends paid (344,5) (224,2) (412,7)
----------- ---------- -----------
Net cash inflows (outflows) from 81,9 (164,2) (128,4)
operating activities
----------- ---------- -----------
Cash flows from investing
activities
Purchase of property, plant and (151,0) (136,6) (282,7)
equipment
Proceeds from sale of property, 1,9 2,5 4,8
plant and equipment
Decrease in participation in 3,8 44,2 94,2
export partnerships
(Increase) decrease in loans (0,6) 0,5 2,5
Shares purchased by share trust (181,8) (222,3) (256,9)
Proceeds on dilution of interest 183,3 - 263,8
in subsidiary
----------- ---------- -----------
Net cash outflows from investing (144,4) (311,7) (174,3)
activities
----------- ---------- -----------
Cash flows from financing
activities
Proceeds on delivery of shares by 0,4 55,3 80,1
share trust
Increase in interest-bearing debt 65,9 439,4 243,6
(Decrease) increase in short-term (0,5) (2,7) 5,3
loans
----------- ---------- -----------
Net cash inflows from financing 65,8 492,0 329,0
activities
----------- ---------- -----------
Net increase in cash and cash 3,3 16,1 26,3
equivalents during the period
Cash and cash equivalents at the 62,5 36,2 36,2
beginning of the period
----------- ---------- -----------
Cash and cash equivalents at the 65,8 52,3 62,5
end of the period
=========== ========== ===========
NOTES
1. The unaudited results for the half-year ended 30 September 2006 have
been prepared in accordance with the group"s accounting policies,
which comply with International Financial Reporting Standards (IFRS)
and have been consistently applied with those adopted for the year
ended 31 March 2006.
2. These financial statements incorporate the financial statements of
the company, all its subsidiaries and all entities over which it has
operational and financial control.
3. Included in share capital are 16,9(2005: 16,9) million shares which
are owned by a subsidiary of the company, and 14,4(2005: 11,4)
million shares which are owned by the share incentive trust. These
have been eliminated on consolidation.
Sept. 2006 Sept. 2005 March 2006
Unaudited Unaudited Audited
Rm Rm Rm
4. INTEREST RECEIVED
Trade receivables - retail 146,8 118,1 253,0
Loan receivables 180,0 136,2 290,9
Private label card receivables 97,5 32,6 100,2
---------- ---------- -----------
424,3 286,9 644,1
---------- ---------- -----------
5. NET TRADING EXPENSES
Depreciation (84,0) (71,6) (148,9)
Employee costs: normal (422,5) (367,3) (813,9)
Employee costs: bonuses - - (51,9)
Employee costs: share-based (9,0) (10,0) (19,0)
payments
Store occupancy costs: normal (245,8) (214,3) (459,6)
Store occupancy costs: lease (5,6) 17,2 6,8
liability adjustment
Net other operating costs (303,8) (246,5) (327,9)
---------- ---------- ------------
(1 070,7) (892,5) (1 814,4)
---------- ---------- ------------
6. INVENTORY
Merchandise and raw materials 1 106,3 980,1 1 065,8
Goods in transit 44,8 38,6 25,0
---------- ---------- ------------
1 151,1 1 018,7 1 090,8
---------- ---------- ------------
SEGMENTAL ANALYSIS
26 weeks ended 30.09.2006
Financial Retail Consolidated
Services
Unaudited Unaudited Unaudited
Rm Rm Rm
REVENUE *
External 312,0 3 599,3 3 911,3
Inter-segment - - -
---------- ---------- -----------
Total revenue 312,0 3 599,3 3 911,3
---------- ---------- -----------
SEGMENT RESULT
Operating profit before finance 208,4 537,5 745,9
charges
---------- ---------- -----------
External (26,7) (3,6) (30,3)
Inter-segment (24,0) 24,0 -
---------- ---------- -----------
Interest (paid) received (50,7) 20,4 (30,3)
Income tax expense (50,7) (185,0) (235,7)
---------- ---------- -----------
Profit for the half-year 107,0 372,9 479,9
---------- ---------- -----------
* includes retail turnover, interest received and other income
SEGMENT ASSETS
Non-current assets 677,0 1 188,3 1 865,3
Current assets 828,0 3 466,7 4 294,7
Inter-segment assets (liabilities) 12,9 (12,9) -
---------- ---------- -----------
Total assets 1 517,9 4 642,1 6 160,0
---------- ---------- -----------
SEGMENT LIABILITIES
Non-current liabilities 362,3 973,9 1 336,2
Current liabilities 106,2 1 333,7 1 439,9
Inter-segment liabilities (assets) 673,1 (673,1) -
---------- ---------- -----------
Total liabilities 1 141,6 1 634,5 2 776,1
---------- ---------- -----------
SEGMENT INFORMATION
Capital expenditure 3,5 147,5 151,0
Depreciation 1,8 82,2 84,0
SEGMENTAL ANALYSIS (cont.)
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 finance 145,9 452,2 598,1
charges
---------- ---------- ------------
External (1,8) (30,1) (31,9)
Inter-segment (30,0) 30,0 -
---------- ---------- ------------
Interest paid (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 (liabilities) 12,9 (12,9) -
---------- ---------- ------------
Total assets 1 130,0 4 183,0 5 313,0
---------- ---------- ------------
SEGMENT LIABILITIES
Non-current liabilities - 1 462,0 1 462,0
Current liabilities 100,4 1 241,5 1 341,9
Inter-segment liabilities (assets) 761,0 (761,0) -
---------- ---------- ------------
Total liabilities 861,4 1 942,5 2 803,9
---------- ---------- ------------
SEGMENT INFORMATION
Capital expenditure 0,6 136,0 136,6
Depreciation 1,4 70,2 71,6
SEGMENTAL ANALYSIS (cont.)
53 weeks ended 31.03.2006
Financial Retail Consolidated
Services
Audited Audited Audited
Rm Rm Rm
REVENUE *
External 494,5 6 812,2 7 306,7
Inter-segment - - -
---------- ---------- ------------
Total revenue 494,5 6 812,2 7 306,7
---------- ---------- ------------
SEGMENT RESULT
Operating profit before finance 317,1 1 250,2 1 567,3
charges
---------- ---------- ------------
External (7,8) (71,3) (79,1)
Inter-segment (56,2) 56,2 -
---------- ---------- ------------
Interest paid (64,0) (15,1) (79,1)
Income tax expense (73,5) (405,7) (479,2)
---------- ---------- ------------
Profit for the year 179,6 829,4 1 009,0
---------- ---------- ------------
* includes retail turnover, interest received and other income
SEGMENT ASSETS
Non-current assets 609,9 931,8 1 541,7
Current assets 747,1 3 623,1 4 370,2
Inter-segment assets (liabilities) 12,9 (12,9) -
---------- ---------- ------------
Total assets 1 369,9 4 542,0 5 911,9
---------- ---------- ------------
SEGMENT LIABILITIES
Non-current liabilities 224,6 1 044,4 1 269,0
Current liabilities 143,2 1 287,9 1 431,1
Inter-segment liabilities (assets) 676,4 (676,4) -
---------- ---------- ------------
Total liabilities 1 044,2 1 655,9 2 700,1
---------- ---------- ------------
SEGMENT INFORMATION
Capital expenditure 3,6 279,1 282,7
Depreciation 1,8 147,1 148,9
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
Our group has once again achieved another period of very good performance,
particularly as the results are coming off an extremely high base created
over the last few years.
Notwithstanding the increase in interest rates, the level of consumer
confidence and spending have remained strong in the first half of this
year. Retail turnover for the first six months increased by 16,6%.
Gross margins for the period were marginally down by 0,2% on the previous
period as a result of a change in the sales mix.
Operating profit increased by 24,7%, while profit after tax increased by
25,1%. After the deduction of the minority interest in RCS Investment
Holdings (Pty) Ltd, the group"s financial services division, attributable
income has increased by 18,2%. Headline earnings per share increased by
20,1% to 210,3 cents per share.
The group"s operating margin for the period increased to 22,1% from 20,7%.
During the period under review 60 new stores were opened whilst 27 stores
were closed across all divisions. At the end of the period the group was
trading out of 1 306 stores with a trading area of 370 079 square metres,
an increase of 4,3% during the current trading period.
The group"s dividend cover has been retained at 2,1 times attributable
headline earnings per share. Accordingly, the interim dividend has been
increased by 25,0% to 100,0 cents per share from 80,0 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, albeit at lower growth levels, having
regard to the very high base. All our divisions performed well, once
again substantially above our product inflation of approximately 4%.
Retail turnover and growths in the various divisions were as follows:
No. of Retail % change
stores turnover Rm
@home 47 188,0 39,3
Exact! 176 312,1 18,3
Foschini 378 1 394,4 13,4
Markham 186 529,6 20,3
Jewellery division 311 441,6 16,4
Sports division 203 485,0 22,0
RJL (discontinued) 5 19,5
---------- ----------- -----------
Total 1 306 3 370,2 16,6
---------- ----------- -----------
Total same store turnover for the period grew by 7,8%, with apparel
growing 5,6%,cosmetics 13,1%, cell phones by 25,3%, jewellery by 9,4% and
homewares by 2,4%.
The Foschini division, despite stock shortages during August and September
which adversely impacted turnover, traded satisfactorily with same store
growth of 4,5%.
The Markham division traded extremely well with same store growth of
13,6%. Its new store design concept continues to be expanded countrywide.
Its RJL brand which has been discontinued, has only five stores remaining
which will be closed in the second half of the year.
The Jewellery division, comprising American Swiss Jewellers, Sterns and
Matrix, continues to be a leader in the retail jewellery market in
southern Africa and traded extremely well. Same store growth was 11,6%.
Exact! continues to go from strength to strength with sales densities
improving. Same store growth was 14,0%.
The Sports division, trading as Sportscene, Totalsports and DueSouth,
traded very well with growth in turnover of 22,0% and comparable same
store growth of 12,5%.
Our @home division continued with substantial growth, increasing its store
base to 47 during the period, and growing its turnover to R188 million, an
increase of 39,3%. Comparable same store growth of only 2,4% is primarily
due to its own cannabalisation as it rolls out additional stores, as well
as an extremely competitive market.
Foschini retail credit - our retail debtors book, which amounts to R2,1
billion, has remained static during the period, whilst credit turnover
grew by 12,3% compared to the previous corresponding period reflecting
positive collections in line with our more aggressive collection strategy.
Cash sales as a percentage of total sales increased from 29,3% to 31,9%.
There is evidence that the credit cycle has entered a new phase where
conditions are not as favourable as they have been in recent years. Net
bad debts as a percentage of credit transactions increased marginally from
2,4% to 2,6% which we expect to be maintained in the second half.
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 to
perform satisfactorily, growing its profit before tax for the period by
38,2%. In terms of the transaction with the Standard Bank of South Africa
Limited (SBSA), our group"s shareholding in this division decreased by a
further 10% to 65% from 1 April 2006.
PROSPECTS
Retail turnover for the first five weeks of the second half remains
buoyant and ahead of budget. The increase in interest rates with the
possibility of further increases, is likely to affect to some degree the
disposable income of consumers. Consumer spending may not be as strong in
the second half of the year.
The second half of the year is always largely dependent on the level of
Christmas trading, and in addition, the second half of this year comprises
one less trading week than the previous second half. Having regard to
these factors, and in the absence of unforeseen circumstances, we remain
confident about trading in the second half, and expect to be able to
produce good growth in earnings for this period.
47 new stores will be opened in the second half of the year.
PREFERENCE DIVIDEND ANNOUNCEMENT
Dividend no. 140 of 3,25% (6,5 cents per share) in respect of the six
months ending 31 March 2007 has been declared, payable on Monday, 26 March
2007 to holders of 6,5% preference shares recorded in the books of the
company at the close of business on Friday, 23 March 2007.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 15 March 2007. Foschini Limited preference
shares will commence trading "ex" the dividend from the commencement of
business on Friday, 16 March 2007 and the record date, as indicated, will
be Friday, 23 March 2007.
Preference shareholders should take note that share certificates may not
be dematerialised or rematerialised during the period Friday, 16 March
2007 to Friday, 23 March 2007, both dates inclusive.
INTERIM ORDINARY DIVIDEND ANNOUNCEMENT
The directors have declared an interim ordinary dividend of 100,0 cents
per ordinary share payable on Monday, 8 January 2007 to ordinary
shareholders recorded in the books of the company at the close of business
on Friday, 5 January 2007.
The last day to trade ("cum" the dividend) in order to participate in the
dividend will be Thursday, 28 December 2006. Foschini Limited ordinary
shares will commence trading "ex" the dividend from the commencement of
business on Friday, 29 December 2006 and the record date, as indicated,
will be Friday, 5 January 2007.
Ordinary shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Friday, 29 December
2006 to Friday, 5 January 2007, 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
Cape Town
2 November 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) Ltd, Ground Floor, 70 Marshall
Street, Johannesburg, 2001
Sponsor:
UBS South Africa (Pty) Ltd
Visit our website at http://www.foschinigroup.com/
Date: 02/11/2006 02:30:21 PM Produced by the JSE SENS Department
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