Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — FY2012 Earnings Presentation
50 slides from Foschini's earnings presentation, March 2012
Slide 1: Analyst Presentation for the Year Ended 31 March 2012
ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH 2012 1 | TFG ANALYST PRESENTATION MARCH 2012
Slide 2: Agenda
AGENDA • Overview of the economy and retail environment Doug Murray • Review of the year Doug Murray • Financial review Ronnie Stein • Divisional review Doug Murray • Financial services Peter Meiring • Outlook Doug Murray • Questions All 2 | TFG ANALYST PRESENTATION MARCH 2012
Slide 3: Overview of the Economy and Retail Environment
OVERVIEW OF THE OVERVIEW OF THE ECONOMY ECONOMY AND RETAIL AND RETAIL ENVIRONMENT ENVIRONMENT 3 | TFG ANALYST PRESENTATION MARCH 2012
Slide 4: Overview of the Economy and Retail Environment
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT • The outlook for the global economy remains highly uncertain. After improving in the early stages of 2012, more recent events in Europe have created greater uncertainty. • South Africa, with its open economy, is not escaping the uncomfortable internati
Slide 5: Review of the Year
REVIEW OF THE YEAR 5 | TFG ANALYST PRESENTATION MARCH 2012
Slide 6: Review of the Year
REVIEW OF THE YEAR • Our group trades predominantly in the mass-middle market space and our customers have benefited from an environment driven by • Continued low interest rates • Real wage increases • Low inflation environment, albeit rising • Continue to reap benefits of our strategic initiatives:
Slide 7: Review of the Year cont.
REVIEW OF THE YEAR CONT. • New brands / acquisitions: • Upmarket luxury menswear brand Fabiani acquired effective 1 October 2011 • As a consequence thereof, the 2 G-Star franchise stores in South Africa were acquired with effect from April 2012, with rights to roll out further stores • As part of th
Slide 8: Review of the Year
REVIEW OF THE YEAR CONT. • Group turnover up 17,0% to R11,6 billion • Headline earnings per share up 22,1% to 772,0 cents • Diluted headline earnings per share up 23,6% to 766,1 cents • Operating margin increased to 24,0% from 23,2% • Dividend • final dividend increased by 25,0% to 265,0 cents per s
Slide 9: Review of the Year: Retail Turnover by Merchandise Category
REVIEW OF THE YEAR: RETAIL TURNOVER BY MERCHANDISE CATEGORY 2012 2011 2012 same store (Rm) (Rm) 2012 growth growth Clothing 7 747,9 6 550,9 18,3% 11,3% Jewellery 1 224,3 1 134,2 7,9% 2,6% Cellphones 1 109,1 894,8 23,9% 18,5% Cosmetics 747,7 677,6 10,3% 5,6% Homeware & furniture 801,5 679,0 18,0% 13,
Slide 10: Review of the Year: RLC Comparison
REVIEW OF THE YEAR: RLC COMPARISON TFG vs RLC moving average clothing turnover growth TFG 25.0 RLC 20.0 15.0 10.0 5.0 0.0 Apr-11 Sep-10 May-11 Oct-10 Jun-11 Nov-10 Jul-11 Dec-10 Aug-11 Jan-11Sep-11 Oct-11 Mar-11 Feb-11 Nov-11 Apr-11 Dec-11 Jan-12 May-11 Feb-12 Jun-11 Mar-12 Jul-11 Aug-11 Apr-11 Mar-
Slide 11: Financial Review
FINANCIAL REVIEW 11 | TFG ANALYST PRESENTATION MARCH 2012
Slide 12: Financial Performance Since 2002
FINANCIAL PERFORMANCE SINCE 2002 Years ended 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Retail turnover (Rm) 3 289,9 3 880,6 4 410,0 5 279,3 6 432,1 7 230,0 7 668,7 8 089,6 8 605,2 9 936,5 11 630,5 Retail turnover growth % 10,4 18,0 13,6 19,7 21,8 12,4 6,1 5,5 6,4 15,5 17,0 Compound reta
Slide 13: Financial Review: 2012
FINANCIAL REVIEW: 2012 Income Statement for the year ended 31 March 2012 (Rm) 2011 (Rm) % change Retail turnover 11 630,5 9 936,5 17,0 Cost of turnover (6 750,1) (5 768,1) Gross profit 4 880,4 4 168,4 Interest income 1 712,1 1 486,2 Dividend income 9,9 12,1 Other revenue 1 178,3 935,8 Trading expens
Slide 14: Revenue
REVENUE 2012 (Rm) 2011 (Rm) % growth Retail turnover 11 630,5 9 936,5 17,0 Interest income 1 712,1 1 486,2 15,2 Dividend income 9,9 12,1 (18,2) Other revenue 1 178,3 935,8 25,9 Total 14 530,8 12 370,6 17,5 • Good growth in retail turnover • Interest received will be dealt with separately • Retail bo
Slide 15: Gross Profit
GROSS PROFIT 2012 2011 Gross profit (Rm) 4 880,4 4 168,4 Gross margin (%) 42,0 42,0 • Input margin constant • Improved pricing passed on to customers with focus on top-line growth • Mark downs well controlled 15 | TFG ANALYST PRESENTATION MARCH 2012
Slide 16: Interest Received
INTEREST RECEIVED 2012 (Rm) 2011 (Rm) % growth Trade receivables – retail 853,7 705,2 21,1 Receivables – RCS Group 842,4 764,2 10,2 Sundry 16,0 16,8 Total 1 712,1 1 486,2 15,2 • Due to the impact of NCA capping formula, interest yields at their lowest • Increase in interest received driven by higher
Slide 17: Trading Expenses
TRADING EXPENSES % to % to 2012 turnover 2011 turnover % (Rm) 2012 (Rm) 2011 growth Depreciation and amortisation (311,6) 2,7 (282,7) 2,8 10,2 Goodwill impairment - - (5,8) 0,1 Employee costs (1 929,6) 16,6 (1 656,1) 16,7 16,5 Occupancy costs - normal (1 041,9) 9,0 (912,7) 9,2 14,2 Occupancy costs –
Slide 18: Interest Paid
INTEREST PAID 2012 (Rm) 2011 (Rm) % growth Interest paid 284,9 250,1 13,9 • Finance charges increased due to investment in debtors, stock and capital expenditure 18 | TFG ANALYST PRESENTATION MARCH 2012
Slide 19: Segmental Analysis
SEGMENTAL ANALYSIS 2012 (Rm) 2011 (Rm) % change Retail 2 156,4 1 775,5 21,5 RCS Group 345,2 275,6 25,3 Total profit before tax 2 501,6 2 051,1 22,0 • Retail produced a good result with 21,5% growth • RCS Group • Good performance - up 25,3% on last year • Contribution to PBT (before minorities) = 13,
Slide 20: Balance Sheet
BALANCE SHEET • Our group‟s balance sheet remains strong • The next few slides deal with key elements of our balance sheet 20 | TFG ANALYST PRESENTATION MARCH 2012
Slide 21: Stock & Creditors
STOCK & CREDITORS 2012 (Rm) 2011 (Rm) % growth Stock 2 155,0 1 804,7 19,4 • Stock increased 19,4%, in respect of new stores and expected levels of trading • Easter earlier • Chinese New Year 2012 (Rm) 2011 (Rm) % growth Trade and other payables 1 827,0 1 710,7 6,8 • Creditors‟ terms remain unchanged
Slide 22: Trade Receivables
TRADE RECEIVABLES 2012 (Rm) 2011 (Rm) % growth Loan receivables 1 067,6 858,4 24,4 Private label card receivables 2 382,9 2 030,2 17,4 RCS Group 3 450,5 2 888,6 19,5 Trade receivables - retail 4 569,9 3 823,0 19,5 Total receivables 8 020,4 6 711,6 19,5 • Total receivables on balance sheet amount to
Slide 23: Borrowings & Non-controlling Interest Loans
BORROWINGS & NON-CONTROLLING INTEREST LOANS 2012 (Rm) 2011 (Rm) % growth Interest-bearing debt and non-controlling interest loans 3 737,7 2 561,9 45,9 Less: Preference share investment - (200,0) Less: Cash (710,9) (338,5) Net borrowings 3 026,8 2 023,4 49,6 Less: SBSA loan to RCS Group (non-controll
Slide 24: Cash Generation & Utilisation
CASH GENERATION & UTILISATION March 2012 Rm Total Rm Net borrowings at beginning of year (2 023,4) Cash EBITDA 2 921,5 Increase in creditors 109,9 Other investing activities 19,8 Sale of shares by share trust 54,4 Cash generated 3 105,6 Taxation paid (880,9) Dividends paid (849,0) Retail and other d
Slide 25: Capex
CAPEX 2012 (Rm) 2011 (Rm) % growth Stores 361,3 239,3 51,0 RCS Group 21,7 15,4 40,9 IT 125,0 72,9 71,5 Other (including assets acquired through acquisitions) 39,4 55,2 (28,6) Total 547,4 382,8 43,0 • The majority of capex relates to opening of new stores, in line with our strategy of growing floor s
Slide 26: Divisional Review
DIVISIONAL REVIEW 26 | TFG ANALYST PRESENTATION MARCH 2012
Slide 27: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL 2012 Turnover % same store Number of (Rm) % growth growth stores Foschini division 4 254,3 14,3 8,9 516 Markham division 1 991,1 21,7 15,4 266 Exact 1 118,1 19,9 16,4 215 TFG Sports division 2 130.8 21,8 10,8 377 Jewellery division 1 334,4 9,2 4,1 395 @home 801,8 18,0 13,5
Slide 28: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL • Foschini division • All brands traded satisfactorily % growth % same store growth Foschini 15,4 9,3 Fashion Express 25,8 6,2 Donna-Claire 8,2 5,3 Luella 16,3 9,1 Total 14,3 8,9 • Markham • Excellent result • Clothing turnover grew by 22,1% with clothing same store turnov
Slide 29: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL • Sports division • Traded well • Excluding the base effect of the World Cup, same store clothing growth up 12,2% % growth % same store growth Totalsports 20,2 9,6 Sportscene 24,0 11,6 Duesouth 24,8 16,5 Total 21,8 10,8 • Jewellery division • Performed satisfactorily, in a
Slide 30: New Acquisitions
NEW ACQUISITIONS • Charles & Keith • Fashion-forward ladies footwear and accessories brand • International presence with over 200 stores in 28 countries • Our first store opened in Canal Walk in August 2011 • Performing better than viability • Fabiani • Luxury menswear brand • Gives our group an ent
Slide 31: New Acquisitions
NEW ACQUISITIONS • Prestige • As part of our supply chain initiatives, Prestige Clothing acquired with effect from 1 March 2012 • Has been a supplier to our group for over 20 years • Will enable our group to meet the increased demands for seasonal fast-fashion merchandise 31 | TFG ANALYST PRESENTATI
Slide 32: Divisional Review: Africa Expansion
DIVISIONAL REVIEW: AFRICA EXPANSION • Rest of Africa (excluding South Africa) now 87 stores with turnover of R500 million annualised • All African stores are corporate stores Proposed additions Locations 2012 2013 2014 2015 Total Namibia 58 4 17 - 79 Botswana 11 5 - 5 21 Zambia 12 - 6 - 18 Swaziland
Slide 33: TFG Financial Services
TFG FINANCIAL SERVICES 33 | TFG ANALYST PRESENTATION MARCH 2012
Slide 34: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Account expansion remained a key objective • 581 580 (LY 590 000) new accounts opened • Active account base increased by 8,2% (LY 10,5%) • Bad debt increase reflects the impact of three year‟s of the new account expansion strategy • Successful launch of cash
Slide 35: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE 2012 (Rm) % change 2011 (Rm) Interest income 853,7 21,1 705,2 Net bad debt (522,0) 29,9 (401,7) 331,7 9,3 303,5 Credit costs (249,1) 0,4 (248,1) Other income 312,8 22,3 255,8* Profit before tax 395,4 27,0 311,2 * 2011 restated to exclude O2O • Interest: • Bad debt
Slide 36: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics March 2012 March 2011 Number of active accounts („000) 2 464,5 2 278,0 Credit sales as a % of total retail sales 61,0 61,5 Net debtors‟ book (Rm) 4 569,9 3 823,0 • Active accounts grow by 8,2% (LY 10,5%) • Despite a 16,1% increase in credit sales, c
Slide 37: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics March 2012 March 2011 Arrear debtors % to debtors‟ book1 21,8 20,7 Net bad debt write-off as a % of credit transactions 4,9 4,7 Net bad debt write-off as a % of debtors‟ book 9,4 9,2 Doubtful debt provision as a % of debtors‟ book 9,3 8,7 % ab
Slide 38: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK • Expect net bad debt to trend upwards • Update scorecards to improve the prediction of retail credit behaviour • Continue to selectively expand account base • Continue to build the cash rewards programme database to 1 million customers • Extend rewards p
Slide 39: RCS Group
RCS GROUP 39 | TFG ANALYST PRESENTATION MARCH 2012
Slide 40: RCS Group: Overview
RCS GROUP: OVERVIEW • Significant card growth fueled by: • Expansion of our merchant network with new national retailers • Growth in private label and co-branded card portfolios • Strong loan advance growth continues momentum from first half of the year • Launch of new insurance business partnership
Slide 41: RCS Group: Financial Review – 2012
RCS GROUP: FINANCIAL REVIEW – 2012 FINANCIAL YEAR 2012 (Rm) % change 2011 (Rm) Interest income 848,4 9,9 772,1 Other income 454,8 18,7 383,3 Total credit income 1 303,2 12,8 1 155,4 Net bad debt (199,0) (13,9) (231,1) Operating costs (550,5) 17,6 (468,2) EBIT 553,7 21,4 456,1 Interest paid (208,5) 1
Slide 42: RCS Group: Profit Before Taxation
RCS GROUP: PROFIT BEFORE TAXATION Profit before taxation (Rm) R 400 30% R 350 25% R 300 R 250 20% R 200 15% 345 R 150 276 10% R 100 226 R 50 203 5% R- 0% 2009 2010 2011 2012 Profit before taxation Percentage growth 42 | TFG ANALYST PRESENTATION MARCH 2012
Slide 43: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics March 2012 March 2011 Number of active accounts („000) 757 665 Net debtors' book (Rm) 3 451 2 889 Arrear debt as percentage of total debt1 10,1% 11,1% Non-performing loans as percentage of total debt2 6,3% 7,3% Net bad debt write-off as percentage of aver
Slide 44: RCS Group: Financial Position & Treasury
RCS GROUP: FINANCIAL POSITION & TREASURY Capital Ratios March 2012 March 2011 Return on equity 18,8% 18,7% Debt : Equity1 64,2% 61,9% 1 Debt : Equity = Term Funding/(Shareholders Equity (excl. Minority Interest) + Term Funding) • Balance Sheet • Healthy balance sheet with conservative NPL cover comp
Slide 45: RCS Group: Funding Diversity – Drawn Facilities
RCS GROUP: FUNDING DIVERSITY – DRAWN FACILITIES Funding Diversification Mar-12 23% 17% 19% 41% Mar-11 49% 4% 22% 25% Mar-10 77% 4% 7% 12% Prior to DMTN 89% 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Shareholders Banks Commercial Paper Bonds 45 | TFG ANALYST PRESENTATION MARCH 2012
Slide 46: RCS Group: Strategy and Outlook
RCS GROUP: STRATEGY AND OUTLOOK • Outlook • Expectation of positive profit growth for the new financial year • Adequate funding facilities in place to deliver business plans • Maintain a conservative approach to treasury • Continue capital markets activity through periodic fundraising efforts • Main
Slide 47: Outlook
OUTLOOK 47 | TFG ANALYST PRESENTATION MARCH 2012
Slide 48: Outlook
OUTLOOK • Although real wage increases are still evident, rising food, fuel and electricity prices are eroding consumers‟ purchasing power • Caution is warranted given the fragile financial environment in Europe • Strategic initiatives to continue • Supply chain • CRM – new accounts and rewards prog
Slide 49: Thank You
THANK YOU 49 | TFG ANALYST PRESENTATION MARCH 2012
Slide 50: Disclaimer
DISCLAIMER This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of The Foschini Group Limited and its subsidiaries, which by their nature involve risk and uncertainty because they relate to events and depend on circumstances