Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — FY2013 Earnings Presentation
49 slides from Foschini's earnings presentation, March 2013
Slide 1: Analyst Presentation for the Year Ended 31 March 2013
ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH 2013 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 • Merchandise review Doug Murray • Financial services Peter Meiring • Outlook Doug Murray • Questions All 2 / ANALYSTPRESENTATION | TFG ANALYST PRESENTATIONMARCH MARCH
Slide 3: Overview of the Economy and Retail Environment
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT 3 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 4: Overview of the Economy and Retail Environment
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT • Continued Euro-zone stress is impacting on RSA GDP growth and exaggerating rand volatility • The SA economic outlook remains subdued • Projected GDP growth for 2013 is 2,6% and for 2014 is 3,5% (BER) • The Rand is on the back foot because of the curre
Slide 5: Overview of the Economy and Retail Environment Cont.
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT CONT. • Interest rates likely to remain flat until mid 2014, current market expectations are for moderate increases thereafter • There is some risk that rand driven inflation will force more rapid interest rate hikes • Updated forecast for CPI inflation
Slide 6: Review of the Year
REVIEW OF THE YEAR 6 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 7: Review of the Year
REVIEW OF THE YEAR • Our customers who fall primarily into the 6 – 10 LSM group have benefited from an environment driven by: • Continued low interest rates • Increasing government subsidies • Real wage increases • Low inflation environment • Continued our key strategic initiatives : • Supply chain
Slide 8: Review of the Year Cont.
REVIEW OF THE YEAR CONT. • Trading conditions • Became more challenging in the 2nd half • Credit environment has become increasingly more difficult • Weak festive season covering November & December • Discretionary categories of jewellery & cellphones • Hard hit • Not the items of choice for consume
Slide 9: Review of the Year Cont.
REVIEW OF THE YEAR CONT. • Group turnover up 10,9% to R12,9 billion • Headline earnings per share up 11,2% to 858,6 cents • Diluted headline earnings per share up 11,1% to 851,3 cents • Operating margin marginally down to 23,6% from 24,0% • Total dividend for the year increased by 11,2% to 506,0 cen
Slide 10: Financial Review
FINANCIAL REVIEW 10 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 11: Financial Review: 2013
FINANCIAL REVIEW: 2013 Income statement for the year ended 31 March 2013 (Rm) 2012 (Rm) % growth Retail turnover 12 896,4 11 630,5 10,9 Cost of turnover (7 492,3) (6 750,1) Gross profit 5 404,1 4 880,4 Interest income 1 996,6 1 712,1 Dividend income - 9,9 Other revenue 1 392,0 1 178,3 Trading expens
Slide 12: Revenue
REVENUE 2013 (Rm) 2012 (Rm) % growth Retail turnover 12 896,4 11 630,5 10,9 Interest income 1 996,6 1 712,1 16,6 Dividend income - 9,9 Other revenue 1 392,0 1 178,3 18,1 Total 16 285,0 14 530,8 12,1 • Satisfactory growth in retail turnover • Interest received will be dealt with separately • Retail b
Slide 13: Gross Profit
GROSS PROFIT 2013 (Rm) 2012 (Rm) Gross profit (Rm) 5 404,1 4 880,4 Gross margin (%) 41,9% 42,0% • Maintained margin substantially the same as last year, notwithstanding the festive season and second half trading which was below expectation / ANALYSTPRESENTATION 13 | TFG ANALYST PRESENTATIONMARCH MAR
Slide 14: Interest Income
INTEREST INCOME 2013 (Rm) 2012 (Rm) % growth Trade Receivables - retail 983,6 853,7 15,2% Receivables - RCS Group 990,3 842,4 17,6% Sundry 22,7 16,0 41,9% Total 1 996,6 1 712,1 16,6% • Due to the impact of NCA capping formula, interest yields at their lowest • Increase in interest income driven by h
Slide 15: Trading Expenses
TRADING EXPENSES % to turnover % to turnover 2013 (Rm) 2013 2012 (Rm) 2012 % growth Depreciation and amortisation (335,0) 2,6 (311,6) 2,7 7,5 Employee costs (2 068,0) 16,0 (1 929,6) 16,6 7,2 Occupancy costs – normal (1 205,3) 9,3 (1 041,9) 9,0 15,7 Occupancy costs – lease liability adjustment (24,7)
Slide 16: Interest Paid
INTEREST PAID 2013 (Rm) 2012 (Rm) % growth Interest paid 327,9 284,9 15,1 • Interest paid increase relates entirely to RCS (+22,5%) / ANALYSTPRESENTATION 16 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012
Slide 17: Segmental Analysis
SEGMENTAL ANALYSIS 2013 (Rm) 2012 (Rm) % growth Retail 1 629,8 1 449,9 12,4 RCS Group 296,8 241,9 22,7 Total profit after tax 1 926,6 1 691,8 13,9 • Retail produced a satisfactory result with 12,4% growth • RCS Group • Good performance – up 22,7% on last year • Contribution to PAT (after minorities)
Slide 18: Financial Position
FINANCIAL POSITION • Our group‟s balance sheet remains strong • The next few slides deal with key elements of our financial position / ANALYSTPRESENTATION 18 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012
Slide 19: Stock & Creditors
STOCK & CREDITORS 2013 (Rm) 2012 (Rm) % growth Stock 2 444,0 2 155,0 13,4 • Increase in stock elevated by increased raw material stock which grew by 35% to R137m • Stock of merchandise in line with expected levels of trading 2013 (Rm) 2012 (Rm) % growth Trade and other payables 2 282,5 1 827,0 24,9
Slide 20: Trade Receivables
TRADE RECEIVABLES 2013 (Rm) 2012 (Rm) % growth Loan receivables 1 104,3 1 067,6 3,4 Card receivables 3 106,4 2 382,9 30,4 RCS Group 4 210,7 3 450,5 22,0 Trade receivables – retail 5 207,7 4 569,9 14,0 Total receivables 9 418,4 8 020,4 17,4 • Our biggest asset by far • Total receivables on balance sh
Slide 21: Borrowings & Non-Controlling Interest Loan
BORROWINGS & NON-CONTROLLING INTEREST LOAN 2013 (Rm) 2012 (Rm) % growth Interest-bearing debt and non-controlling interest loan 4 887,6 3 737,7 30,8 Less: Cash (908,1) (710,9) Net borrowings 3 979,5 3 026,8 31,5 Less: SBSA loan to RCS Group (non-controlling interest loan) - (242,4) 3 979,5 2 784,4 L
Slide 22: Cash Generation & Utilisation
CASH GENERATION & UTILISATION Rm Total Rm Net borrowings at beginning of year (3 026,8) Cash EBITDA 3 161,8 Increase in creditors 350,2 Other investing activities 26,4 Sale of shares by share trust 186,6 Cash generated 3 725,0 Taxation paid (808,4) Dividends paid (1 057,4) Retail and other debtors (
Slide 23: Capex
CAPEX 2013 (Rm) 2012 (Rm) Stores 334,7 361,3 RCS Group 17,1 21,7 IT 122,8 125,0 Other (including assets acquired through acquisitions in prior year) 110,1 39,4 Total 584,7 547,4 • The majority of capex relates to opening of new stores, in line with our strategy of growing floor space • Capex for nex
Slide 24: Merchandise Review
MERCHANDISE REVIEW 24 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 25: Retail Turnover by Merchandise Category
RETAIL TURNOVER BY MERCHANDISE CATEGORY 2013 turnover 2012 turnover % same store (Rm) (Rm) % growth growth Clothing 8 658,4 7 747,9 11,8 6,1 Jewellery 1 308,8 1 224,3 6,9 3,7 Cellphones 1 148,6 1 109,1 3,6 (0,5) Cosmetics 835,2 747,7 11,7 8,5 Homewares & furniture 945,4 801,5 18,0 12,0 Total 12 896,
Slide 26: RLC Comparison
RLC COMPARISON • TFG figures include clothing turnover of the following divisions: Foschini, Markham and Exact • Apparel turnover in TFG Sports division is not included • Continued outperformance of the general market / ANALYSTPRESENTATION 26 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012
Slide 27: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL 2013 Turnover % same store Number of (Rm) % growth growth stores Foschini division 4 501,8 5,8 1,7 541 Markham division 2 271,0 14,1 8,6 282 Exact 1 227,5 9,8 6,7 227 Sports division 2 536,5 19,0 10,3 430 Jewellery division 1 414,2 6,0 2,7 408 @home 945,4 18,0 12,0 91 Grou
Slide 28: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL • Foschini division (5,8% growth) • Foschini, DonnaClaire and Fashion Express impacted by problems in the supply of ladies and childrenswear running up to the festive season • Markham division (14,1% growth) • Menswear clothing was good • Exact (9,8% growth) • Ladies and c
Slide 29: Cash and Credit Turnover Growth 2013 vs 2012
CASH AND CREDIT TURNOVER GROWTH 2013 vs 2012 Apr May June July Aug Sept Oct Nov Dec Jan Feb March Cash Sales growth 14,8% 23,2% 26,6% 17,9% 18,8% 13,6% 13,9% 4,5% 10,6% 14,5% 13,7% 13,1% Credit Sales growth 5,4% 8,4% 14,7% 10,6% 6,2% 11,0% 9,5% 6,1% 10,5% 12,8% 13,0% 12,3% • Cash sales • Good growth
Slide 30: Africa Expansion
AFRICA EXPANSION • Rest of Africa (excluding South Africa) now 104 stores with turnover of R600 million annualised • All African stores are corporate stores Proposed additions 2013 2014 2015 2016 Total Namibia 63 8 16 5 92 Botswana 16 - 5 5 26 Zambia 12 6 5 6 29 Angola - - - 6 6 Swaziland 4 - - - 4
Slide 31: TFG Financial Services
TFG FINANCIAL SERVICES 31 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 32: TFG Financial Services: Industry Review
TFG FINANCIAL SERVICES: INDUSTRY REVIEW • Rising prices on energy, fuel and transport • Widespread industrial action • Rapid slowdown in unsecured lending • Manifest signs of stress in affordability seen from October 2012 • Slowdown in receipts relative to balances / ANALYSTPRESENTATION 32 | TFG ANA
Slide 33: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Encouraging performance in first half undermined by events in external credit environment in the second half • External pressures manifested in: • Pressure on impairment and bad debt • Slower growth in active accounts • Pressure on able to spend population •
Slide 34: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE 2013 (Rm) % change 2012 (Rm) Interest income 983,6 15,2 853,7 Net bad debts (670,8) 28,5 (522,0) 312,8 (5,7) 331,7 Credit costs (246,9) (0,9) (249,1) Other income 358,9 14,8 312,8 TFG Financial Services EBIT 424,8 7,4 395,4 • Interest: • July 2012 interest rate re
Slide 35: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics March 2013 March 2012 Number of active accounts („000) 2 611,6 2 464,5 Credit sales as a % of total retail sales 60,0 61,0 Net debtors‟ book (Rm) 5 207,7 4 569,9 • New approved accounts increases to 631,572 (LY 580,685) • Active account base grows b
Slide 36: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics March 2013 March 2012 Arrear debtors % to debtors‟ book1 22,4 21,8 Net bad debt write-off as a % of credit transactions 5,7 4,9 Net bad debt write-off as a % of debtors‟ book 10,5 9,4 Doubtful debt provision as a % of debtors‟ book 10,4 9,3 %
Slide 37: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK • Increased uncertainty in credit regulatory environment: • NCR‟s proposed interventions in consumer lending • Credit amnesty; affordability guidelines; debt review process • Expect consumers to remain under pressure during 2013 • Net bad debt statistics
Slide 38: RCS Group
RCS GROUP 38 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 39: RCS Group: Market Context
RCS GROUP: MARKET CONTEXT RCS RCS Cards Loans 1,9% 0,7% market market share share • Cards gain market share through greater card utility and the expansion of its merchant programs • Small market share in unsecured lending • Stable unsecured lending portfolio • high repeat business • no term extensio
Slide 40: RCS Group: Overview
RCS GROUP: OVERVIEW Performance • Shift to card assets providing greater annuity income and predictability albeit at lower margins • Continued growth in card portfolios through: • Private label and co-branded card portfolios • Expanded merchant network with new national retailers improving card util
Slide 41: RCS Group: Financial Review – 2013 Financial Year
RCS GROUP: FINANCIAL REVIEW – 2013 FINANCIAL YEAR 2013 (Rm) % change 2012 (Rm) Interest income 998,8 17,7 848,4 Other Income 535,6 17,8 454,8 Total credit income 1 534,4 17,7 1 303,2 Net bad debt (269,8) 35,6 (199,0) Operating costs (622,1) 13,0 (550,5) EBIT 642,5 16,0 553,7 Interest paid (227,7) 9,
Slide 42: RCS Group: Profit Before Taxation
RCS GROUP: PROFIT BEFORE TAXATION / ANALYSTPRESENTATION 42 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012
Slide 43: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics March 2013 March 2012 Number of active accounts („000) 898 757 Net debtors' book (Rm) 4 211 3 451 Arrear debt as percentage of total debt1 11,1% 10,1% Non performing loans as percentage of total debt2 6,9% 6,3% Net bad debt write-off as percentage of aver
Slide 44: RCS Group: Financial Position & Treasury
RCS GROUP: FINANCIAL POSITION & TREASURY March 2013 March 2012 Return on equity 18,7% 18,8% Debt : Equity1 65,0% 64,2% 1 Debt : Equity - Term Funding/(Shareholders Equity (excl. Minority Interest) + Term Funding) • Balance sheet • Healthy balance sheet with a strong capital base and well provided as
Slide 45: RCS Group: Funding Diversity – Drawn Facilities
RCS GROUP: FUNDING DIVERSITY – DRAWN FACILITIES / ANALYSTPRESENTATION 45 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012
Slide 46: RCS Group: Strategy and Outlook
RCS GROUP: STRATEGY AND OUTLOOK • Outlook • Backdrop of muted economic growth and a tougher consumer environment • Positive trends in book and profit growth but at a lower level than in previous years • Adequate funding facilities in place to deliver business plans • Continue capital markets activit
Slide 47: Outlook
OUTLOOK 47 | TFG / ANALYST PRESENTATION MARCH 2012
Slide 48: Outlook
OUTLOOK • Customers remain under pressure • Economic conditions will remain difficult • Credit environment is likely to deteriorate further due to current levels of consumer indebtedness – significant attention is being given to this area • Strategic initiatives to continue • Supply chain • CRM – ne
Slide 49: Thank you
Thank you / ANALYSTPRESENTATION 49 | TFG ANALYST PRESENTATIONMARCH MARCH2013 2012