Truworths International Limited · JSE:TRU
Truworths International — FY2013 Earnings Presentation
57 slides from Truworths International's earnings presentation, 2013
Slide 1: Final Group Results
FINAL GROUP RESULTS for the 52 weeks ended 30 June 2013
Slide 2: Agenda
Agenda • Retail and economic environment • Our business philosophy • Our key differentiators • Review of the financial period • Trading and operating performance • Credit management • Capital management • Outlook • Questions 2
Slide 3: Retail and economic environment
Retail and economic environment Outlook for domestic economic growth weakened. SA Reserve Bank reduced GDP forecast for 2013 from 2.4% to 2.0%. The year-on-year increase in the headline CPI for July 2013 was 6.3%, well up from 5.5% in June 2013 and breaching the upper end of the target range for the
Slide 4: Our Business Philosophy
Our Business Philosophy The Truworths business philosophy is core to the success of our business. It drives our business model and strategy. The Group’s track record of sustained growth can largely be attributed to the continued application of this business philosophy. By harnessing the energy and p
Slide 5: Our Purpose
Our Purpose The youthful, fashionable South African wants to look attractive and successful and feel enthused with confidence. To this end, Truworths entices them into the most exciting and visually appealing real and virtual retail environments where they can shop effortlessly for an innovative and
Slide 6: Our Vision
Our Vision Our vision recognises the different needs and requirements of the three key stakeholders in our business: our customers, our shareholders and our employees. VISION FOR OUR CUSTOMERS ‘Truworths will be the first place I go when I want quality fashion that makes me look attractive and succe
Slide 7: Our key differentiators
Our key differentiators • Business philosophy that resonates throughout the business. • Focus on “One customer type” – Youthful fashionable. • Exclusive brands almost all are owned by Truworths. • Emporium concept. • Centre of the fashion court in most of SA’s leading malls. • Tried and tested merch
Slide 8: Review of the financial period
Review of the financial period
Slide 9: Financial highlights
Financial highlights Change on Change on prior period prior period 53 weeks 52 weeks Sale of merchandise of R 9.8 billion 11% 13% Trading profit of R 2.5 billion 4% 8% Operating profit of R 3.4 billion 6% 9% Headline earnings of R 2.4 billion 8% 12% Headline earnings per share (HEPS) of 570.8 cents
Slide 10: Financial targets
Financial targets Jun 2013 Jun 2013 Jun 2012 Actual Target Actual Gross margin (%) 56.6 54 - 57 56.7 Operating margin (%) 34.5 33 - 36 36.1 Return on equity (%) 39 40 - 45 40 Return on assets (%) 46 44 - 48 46 Inventory turn (times) 5.4 6.0 - 6.5 5.7 Asset turnover (times) 1.3 1.2 - 1.5 1.3 10
Slide 11: First half vs. second half performance
First half vs. second half performance Full year 2nd Half 1st Half change to change to change to prior period prior period prior period 52 weeks 26 weeks 26 weeks Sale of merchandise 13% 11% 14% Gross profit 13% 10% 15% Trading expenses 16% 15% 17% Trading profit 8% 3% 12% Operating profit 9% 4% 13%
Slide 12: Sale of merchandise and profit after tax
Sale of merchandise and profit after tax Compound growth rates: Compound growth rates: Sale of Profit after Sale of merchandise: Profit after tax: merchandise tax (Rbn) Jun 10 year 16%, 5 year 12% Jun 10 year 20%, 5 year 13% (Rbn) 10 2.4 2.4 9 2.1 2.2 8 1.8 1.9 7 1.5 1.6 6 1.4 5 1.2 1.3 4 0.9 1.1 3
Slide 13: Gross profit trend
Gross profit trend Compound growth rates: Average: Gross profit: Gross margin: Gross profit Jun 10 year 17%, 5 year 12% Jun 10 year 55.2%, 5 year 56.2% Gross margin (Rbn) (%) 57 57 57 6 55 60 54 55 55 55 54 53 5 50 4 40 3 30 2 20 1 10 1.4 1.7 2.1 2.7 3.1 3.4 3.8 4.5 5.0 5.5 - - Jun 2004 Jun 2005 Jun
Slide 14: Analysis of trading expenses
Analysis of trading expenses trading trading expenses to expenses to change sale of sale of on prior merchandise merchandise Jun 2013 Jun 2012 period 2013 2012 Rm Rm % % % Depreciation and 160 138 16 2 2 amortisation Employment costs 986 890 11 10 10 Occupancy costs 843 746 13 9 8 Trade receivable c
Slide 15: Analysis of trading expenses (continued)
Analysis of trading expenses (continued) Trading expenses increased 16% compared to the prior period as follows: • Depreciation and amortisation (16% growth): – Increase in the number of new stores. – Capital expenditure of R 270 million in the period. • Employment costs (11% growth): – Excluding no
Slide 16: Analysis of trading expenses (continued)
Analysis of trading expenses (continued) • Trade receivable costs (39% growth): – Net bad debt as a percentage of gross trade receivables increased to 10.4% (2012: 7.9%). – The doubtful debt allowance increased to 12.0% of gross trade receivables (2012: 10.6%). – The interest income earned (includin
Slide 17: Trading expenses
Trading expenses Expense Trading expenses to growth Compound growth rates: Average: sale of merchandise (%) Expense growth: Trading expenses to sales: (%) Jun 10 year 15%, 5 year 11% Jun 10 year 31.9%, 5 year 32.0% 35 50 30 Acquisition of Uzzi (30 45 stores), 38 new stores and higher trade receivabl
Slide 18: Trading profit performance
Trading profit performance Compound growth rates: Average: Trading profit Trading margin Trading profit: Trading margin: (Rbn) (%) Jun 10 year 20%, 5 year 13% Jun 10 year 25.3%, 5 year 26.5% 3.0 50 45 2.5 40 2.0 35 1.5 28 28 30 26 26 26 25 24 24 24 25 22 1.0 20 0.5 15 0.6 0.7 1.0 1.3 1.4 1.5 1.8 2.2
Slide 19: Operating profit performance
Operating profit performance Compound growth rates: Average: Average: Operating profit Operating profit: EBITDA margin: Operating profit margin: Margins (Rbn) Jun 10 year 20%, 5 year 12% Jun 10 year 35.3%, 5 year 36.8% Jun 10 year 33.2%, 5 year 35.0% (%) 4.0 38 38 40 36 36 36 35 35 35 34 3.5 35 35 3
Slide 20: HEPS, DPS and dividend cover
HEPS, DPS and dividend cover Dividend HEPS/DPS Compound growth rates: Compound growth rates: cover (cents) (times) HEPS: DPS: Jun 10 year 21%, 5 year 14% Jun 10 year 27%, 5 year 20% 600 2.5 2.29 2.10 2.09 2.07 2.05 500 1.97 1.89 2.0 1.74 1.62 400 1.58 1.5 300 1.0 200 0.5 100 48 110 69 145 89 186 120
Slide 21: Statements of financial position
Statements of financial position change on prior Jun 2013 Jun 2012 period Rm Rm % Non-current assets 1 280 1 197 7 Cash and cash equivalents 1 325 1 560 (15) Trade and other receivables 3 766 3 421 10 Inventories 787 670 17 Other current assets 113 69 64 Total assets 7 271 6 917 5 Total equity 6 219
Slide 22: Inventory turn
Inventory turn Inventory turn average: Inventory Goods in turn Jun 10 year 6.1 times, 5 year 6.1 times transit (times) (Rm) 8 80 7 67 70 6 60 5 50 45 39 4 40 33 3 30 20 19 20 2 16 16 20 1 5 10 6.5 5.6 6.1 6.1 6.5 6.1 6.9 6.4 5.7 5.4 - - Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010
Slide 23: Inventory turn - merchandising
Inventory turn - merchandising Inventory turn average: times Jun 9 year 5.2 times, 5 year 5.2 times 7 6 5 4 3 2 1 4.9 5.3 5.6 5.3 5.1 5.4 5.3 5.1 5.2 - Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 23
Slide 24: ROIC and WACC
Return on invested capital (ROIC) and Weighted average cost of capital (WACC) Average: Average: ROIC: WACC: % Jun 10 year 27.0%, 5 year 26.6% Jun 10 year 13.5%, 5 year 13.0% 35 31 30 28 28 27 27 27 26 26 25 25 25 22 21 20 20 20 19 18 18 17 17 16 16 16 15 15 14 13 13 13 13 13 13 13 13 10 5 - Jun Jun
Slide 25: Return on equity (ROE) and Return on capital (ROC)
Return on equity (ROE) and Return on capital (ROC) Average: Average: ROE: ROC: % Jun 10 year 42.3%, 5 year 40.8% Jun 10 year 62.4%, 5 year 59.8% 80 75 71 70 66 65 60 61 59 58 60 54 55 50 50 48 44 44 40 41 40 38 39 39 40 30 20 10 - Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 20
Slide 26: Return on total assets and Asset turnover
Return on total assets and Asset turnover Average: Average: Asset Return on Return on assets: Asset turnover: turnover assets Jun 10 year 44.5%, 5 year 45.8% Jun 10 year 1.4 times, 5 year 1.3 times (times) (%) 50 48 48 2 47 47 46 46 46 45 44 1.9 40 1.8 37 36 35 1.7 30 1.6 1.5 1.5 1.5 25 1.5 1.4 20 1
Slide 27: Cash flows for the period
Cash flows for the period Rm 3 500 4 3 000 814 (988) 2 500 (352) (50) 2 000 1 500 2 720 (1 526) 1 000 2 148 500 (220) - (691) (234) 55 ( 500) (1 000) EBITDA* Working Interest Dividends Tax paid Capex Free cash Dividends Capex Share buy- Other ** Net cash capital received received maintenance flow ex
Slide 28: Cash flow return on operating assets
Cash flow return on operating assets Average: CFROI: Jun 10 year 32.5%, 5 year 33.0% % 5 0 4 3 4 5 4 0 3 5 3 5 3 4 3 4 3 3 3 5 3 0 2 9 2 7 3 0 2 5 2 5 2 0 Lower working Higher working capital outflows 1 5 capital outflows due due to the timing to the timing of the of the 53rd week. 53rd week. 1 0 5
Slide 29: Trading and operating performance
Trading and operating performance
Slide 30: Sale of merchandise
Sale of merchandise change on change on prior prior 52 Weeks 53 Weeks period 53 period 52 Jun 2013 Jun 2012 weeks weeks Rm Rm % % Truworths ladieswear 3 661 3 361 9 11 Truworths menswear 1 987 1 757 13 16 Identity 1 586 1 407 13 15 Daniel Hechter 1 206 1 091 11 13 Elements 480 454 6 8 Inwear 451 409
Slide 31: Retail divisional sales contribution
Retail divisional sales contribution June 2013 June 2012 3% 4% 4% 3% 4% 4% 5% 5% 36% 37% 12% 12% 16% 16% 20% 19% Truworths ladieswear Truworths menswear Identity Daniel Hechter Elements Inwear LTD Other 31
Slide 32: Retail sales growth analysis
Retail sales growth analysis Retail LFL Unit growth: Unit Retail sales store Product comparable growth: sales growth growth inflation stores new stores Rm % % % % % Jun 2013 10 074 13 8 2 6 5 Jun 2012 8 921 10 6 8 (2) 4 Jun 2011 8 080 14 9 4 5 5 Jun 2010 7 118 11 4 4 - 7 Jun 2009 6 441 12 5 10 (5) 7
Slide 33: Sales densities trend
Sales densities trend Compound growth rates: Sales density R per m2 Jun 10 year 7%, 5 year 4% 35 656 36 000 34 849 34 000 32 979 32 000 30 462 29 965 30 000 29 307 28 802 28 000 26 000 24 719 24 000 22 335 22 000 20 481 20 000 18 000 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun
Slide 34: Rest of Africa sale of merchandise
Rest of Africa sale of merchandise Sale of Sale of Sale of merchandise merchandise No. of stores merchandise No. of stores contribution Jun 2013 Jun 2013 Jun 2012 Jun 2012 % Rm Rm Namibia 1.7 166 12 154 12 Swaziland 0.5 50 5 52 5 Botswana 0.5 49 8 18 8 Nigeria 0.2 16 4 3 2 Zambia 0.2 16 3 - - Ghana
Slide 35: Group stores and trading space
Group stores and trading space Number of stores Jun 2013 Jun 2012 Truworths 298 281 Identity 195 176 Uzzi 55 57 Truworths Man 32 30 YDE 18 19 Daniel Hechter 4 4 LTD 2 2 Total 604 569 Jun 2013 Jun 2012 Trading m2 m2 000 m2 000 Truworths 230 214 Identity 54 48 Uzzi 4 4 Total (excl YDE) 288 266 YDE 6 6
Slide 36: Credit management
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Slide 37: SA Challenging credit environment
SA Challenging credit environment National Credit Regulator statistics (Source: Credit Bureau Monitor, first quarter 2013 statistics) Millions % 9.8 46.9 47.0 47.5 50 46.3 46.5 46.4 46.7 46.2 46.2 46.4 47.0 46.8 9.6 45 9.4 40 9.2 35 9.0 30 8.8 25 8.6 20 8.4 15 8.2 10 8.0 5 8.6 8.5 8.6 8.6 8.8 8.8 8.
Slide 38: SA Unsecured credit extension
SA Unsecured credit extension (Source: Consumer Credit Market Report Report,, first quarter 2013 statistics) % 70 60 50 40 30 20 10 - Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar ( 10) 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 201
Slide 39: Key trade receivable statistics
Key trade receivable statistics Jun Jun 2013 2012 Number of active accounts (000's) 2 554 2 411 Growth in active accounts (%) 6 10 Gross trade receivables (before doubtful debt allowance) (Rm) 4 221 3 794 Growth in gross trade receivables (before doubtful debt allowance) (%) 11 14 Credit sales as a
Slide 40: Key trade receivable statistics (continued)
Key trade receivable statistics (continued) Jun Jun 2013 2012 Active account holders able to purchase at period-end (%) 82 84 Overdue values as a % of gross trade receivables (%) 15 13 Net bad debt as a % of credit sales (%) 6.1 4.5 Net bad debt as a % of gross trade receivables (%) 10.4 7.9 Doubtfu
Slide 41: Trade receivable costs vs. interest received
Trade receivable costs vs. interest received Rm 800 700 600 500 400 300 200 100 108 81 192 107 257 156 318 280 488 464 549 432 491 385 543 390 630 533 724 739 - Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Jun 2012 Jun 2013 Trade receivable interest (Rm) Trade receivable c
Slide 42: Active account growth vs. acceptance rate
Active account growth vs. acceptance rate No. of Acceptance active d h C t t o m p o u n g o r w r a e s : rate accounts (%) (‘000) b f i N t t u m e r o a c v e a c oc u n s : % % J 1 0 1 3 5 7 u n y e a r y e a r 70 3 000 , 2 554 65 2 411 2 500 2 194 60 1 975 1 799 1 856 2 000 55 1 689 1 371 50 48
Slide 43: Managing the risk of credit
Managing the risk of credit • The Group has extensive experience in managing credit risk in tough market conditions and will apply strategies to ensure the continued health of the debtors’ book and profitability of the business. • While macro trends in the credit environment and changes in affordabi
Slide 44: Credit vs. cash sales
1 1 2 3 5 9 6 7 8 4 0 0 0 0 0 0 0 0 0 0 - 0 (%) - Sales mix u J n 2 7 2 3 7 0 0 4 u J n 2 7 2 6 4 0 0 a C 5 s h a s e l u J s u J ( C o C n a 2 7 % n 2 s ) 6 4 m h 0 1 o p 0 y 0 s a 6 l e u e n a s : g d r 1 o r 6 u J , % r C w e n t 5 y 7 2 h 2 3 i d 7 r 0 e t a 0 a e t a s r 7 e l s 1 : 1 s % ( %
Slide 45: Active account holders able to purchase
Active account holders able to purchase % 100 90 80 70 60 82 85 83 84 85 84 87 87 86 50 40 30 20 10 18 15 17 16 15 16 13 13 14 - June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 Non-shoppable Shoppable 45
Slide 46: Ageing of debtors book
Ageing of debtors book % 100 6 7 7 8 11 8 10 8 9 11 90 80 70 60 50 87 86 85 83 80 80 83 84 83 80 40 30 20 10 - June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 < 30 days 30 - 59 days 60 - 89 days 90 > days 46
Slide 47: Interest bearing plans vs. interest bearing book
Interest bearing plans vs. interest bearing book Percentage of book on interest bearing plans Percentage of the book generating interest % % 7 9 4 80 8 0 7 6 0 . . 7 4 2 72.5 . 7 2 1 . 69.2 70 67.3 7 0 64.3 60 6 0 50 5 0 40 4 0 3 0 30 2 0 20 Jun 2010 Jun 2011 Jun 2012 Jun 2013 J 2 0 1 0 J 2 0 1 1 J
Slide 48: Year-on-year active account growth vs. industry
Year--on- Year on-year active account growth vs. industry (Source: Principa) % 16 14 12 10 8 6 4 2 - (2) May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May Aug Nov Feb May 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 Industry year on year movement (%) Truwort
Slide 49: Capital management
Capital management
Slide 50: Capital management
Capital management • Dividends: – Dividend payments of R 1 526 million during the period. – Final dividend per share declared of 158 cents, with total annual dividend increasing 11%. – Dividend cover reduced to 1.58 times from 1.62 times. • Share buy-backs: – During the current period the Group repu
Slide 51: Capital expenditure
Capital expenditure Planned Actual Actual spend for spend for spend for Jun 2014 Jun 2013 Jun 2012 Rm Rm Rm Store development 259 215 162 Distribution 60 4 5 Computer infrastructure 59 42 38 Motor vehicles 6 4 1 Head office 4 5 2 Land and buildings - - 18 Total 388 270 226 51
Slide 52: Outlook
Outlook
Slide 53: Outlook
Outlook • Predictions are that the economy and consequently the credit environment are unlikely to improve in the 2014 financial period and restrictive credit granting criteria will limit account acquisition and credit sales. The Group has extensive experience in managing credit risk in tough market
Slide 54: Outlook
Outlook • Trading space is anticipated to increase by approximately 8% during the 2014 financial period. • Capital expenditure of R388 million has been committed for the 2014 financial period and will be used primarily for new stores and expansion and refurbishment of existing stores (R259 million),
Slide 55: Questions
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Slide 56: Disclaimer
Disclaimer
Slide 57: Disclaimer
Disclaimer This presentation contains certain forward-looking statements with respect to the financial condition and results of operations of Truworths International Limited and its group companies, which by their nature involve risk and uncertainty because they relate to events and depend on circum
Truworths International — FY2013 Earnings Presentation on 6ix