Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2022 Earnings Presentation
60 slides from Foschini's earnings presentation, November 2021
Slide 1: Results presentation for the half-year ended 30 September 2021
The Foschini Group Limited Results presentation for the half-year ended 30 September 2021 WE INSPIRE OUR CUSTOMERS TO THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2021 LIVE THEIR BEST LIVES 0
Slide 2: Agenda
AGENDA 01 Overview and strategy update 02 Financial performance 03 Segmental performance 04 Outlook THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2021 1
Slide 3: Overview and strategy update
01 OVERVIEW AND STRATEGY UPDATE
Slide 4: Salient features
SALIENT FEATURES Strong recovery in all three territories, despite lost trading hours of: › TFG Africa – 270 000 (7%) +51,8% Turnover growth › TFG London – 104 000 (9%) › TFG Australia – 1 million (25%) +64,0% Gross profit Rands TFG Labs launched Local sourcing Jet set to meet expansion expectations
Slide 5: Our operating context
OUR OPERATING CONTEXT Challenges Our responses • Record unemployment in SA • Diversified store footprint • Unrest, riots and taxi violence in SA • Strong specialty brands • Consumer spend under pressure • Globally diversified • Further lockdowns in Australia • Local sourcing and vertical integration
Slide 6: TFG Africa: market-leading performance
TFG AFRICA: Strong recovery MARKET-LEADING PERFORMANCE post COVID TFG Africa turnover growth outperforms market: 63% Market 35% share gains 26% 27% support strong turnover Stats SA RLC TFG Africa excl Jet TFG Africa incl Jet growth Apr’21-Aug’21, the latest period for which Stats SA data is availabl
Slide 7: Increased online following driving profitability
INCREASED ONLINE FOLLOWING DRIVING PROFITABILITY Strong recovery post COVID Strength of combined speciality brands: Social media following leading the market 15 million TFG by numbers TFG Africa brands Total social media Yuppiechef followers Zando Woolworths Truworths +13% +16% Takealot Group TFG Af
Slide 8: Robust strategy and agility enables a strong recovery
ROBUST STRATEGY AND AGILITY ENABLES A STRONG RECOVERY Continued investment Strategic in our 3 key investments strategic pillars in 3 key areas GROWTH supported strong performance despite unprecedented trading conditions THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 202
Slide 9: Investment in our three strategic pillars
INVESTMENT IN OUR THREE STRATEGIC PILLARS STRATEGIC PRIORITIES Investment Investment in Investment in technology local sourcing in brands PROGRESS MADE IN H1 • Launched TFG Labs • Acqui-hire of Flat Circle team to develop new mobile app • Partnership with TymeBank SUPPORTING OUR STRONG PERFORMANCE D
Slide 10: TFGLabs – transformation into a tech-led retailer has begun
TFGLABS – TRANSFORMATION INTO A TECH-LED Investment RETAILER HAS BEGUN in technology Why we are investing Our strategic ambition Short-term growth in omnichannel: by FY26: ambitions: R1bn • Digital adoption in SA • Largest, most reliable & • >10% e-commerce contribution doubled in past 2 years most
Slide 11: Investment in customer-led technology and back-office support
INVESTMENT IN CUSTOMER-LED TECHNOLOGY Investment AND BACK-OFFICE SUPPORT in technology Customer- Investment facing in back-office investments enablers Future-fitting our business • RFID • Yoobic • OneStock • Workforce management • E-commerce enhancements • Customer conversion • OneX • TFGLearn • CDP
Slide 12: TymeBank partnership
TYMEBANK PARTNERSHIP Investment in technology Integrates end-to-end Complimentary Exclusive financial services in-store to our existing and via our digital platforms: retail fashion • Kiosk-enabled in-store debit cards financial products but unlocks partnership • BNPL – 'MoreTyme' • Personal loans n
Slide 13: Investment in our three strategic pillars
INVESTMENT IN OUR THREE STRATEGIC PILLARS STRATEGIC PRIORITIES Investment Investment in Investment in technology local sourcing in brands PROGRESS MADE IN H1 • House of Monatic, TCI, Radeen & Playtex • Prestige Epping, Durban & Johannesburg • Acquired the Cotton Trader’s manufacturing facility SUPPO
Slide 14: Game-changing local manufacturing capability
GAME-CHANGING LOCAL MANUFACTURING CAPABILITY Investment in local sourcing Why we are investing in local sourcing: Our strategic ambition by FY26: • Proven benefits of our QR (quick response) model • Manufacturing 30 million units per year R340m • Disruptions to global supply networks • 100% QR manuf
Slide 15: Investment in our three strategic pillars
INVESTMENT IN OUR THREE STRATEGIC PILLARS STRATEGIC PRIORITIES Investment Investment in Investment in technology local sourcing in brands PROGRESS MADE IN H1 • Rebuilt and reopened 145 of the 198 looted stores • Opened 183 new stores in H1'22 • Acquired the Granny Goose brand & retail stores SUPPORT
Slide 16: Continued investment in brands for growth
CONTINUED INVESTMENT IN BRANDS FOR GROWTH Investment in brands >12,500 JOBS CREATED R11bn turnover FY22-FY25 FY17-FY21 FY12-FY16 c. R1,2bn R1,6bn invested in store capex Targeting R2bn invested in store capex brand growth invested in store capex +>1 000 +981 new stores added +865 new stores added
Slide 17: Continued progress in our focus on our ESG strategy
CONTINUED PROGRESS IN OUR FOCUS ON OUR ESG STRATEGY ESG LOCALISATION PEOPLE AND ENVIRONMENTAL PRODUCT STEWARDSHIP AND JOB CREATION COMMUNITIES EFFICIENCY AND SUPPLY CHAIN Local manufacturing 475 young people employed On track New product stewardship saved >850 jobs through the Youth Employment to ac
Slide 18: Financial performance
02 FINANCIAL PERFORMANCE
Slide 19: Key metrics: group income statement
KEY METRICS Strong recovery GROUP INCOME STATEMENT post COVID STRONG RECOVERY post COVID lockdowns Retail Gross profit EBITDA NPAT Headline turnover (Rands) (pre-IFRS 16)* earnings Progress made in H1 R19,0bn R9,3bn R2,0bn R1,0bn R1,3bn 1,2x +51,8% +64,0% +431,5% +147,8% +641,2% Excl riots impact R1
Slide 20: Strong headline earnings recovery
STRONG HEADLINE EARNINGS RECOVERY UP 641,2% ON H1’21 AND UP 3,4% ON H1’20 PAT to Headline Earnings (R’m) 189 49 1270 960 72 1032 Headline Earnings of R1,3bn +641,2% H1’21: (R0,2bn) HEPS of 393,4cps PAT before Riot BI* PAT Write-offs UK Headline +572,2% riot accrual accrual IT and stores deferred tax
Slide 21: Group revenue breakdown
GROUP REVENUE BREAKDOWN H1’22 Total revenue H1’22 Performance Retail turnover 59.5 49.5 on H1’21 Growth (ZAR) 26.1 +51,8% Retail turnover of R19,0bn +12,2% Africa London Australia 93% Interest income 3% Impacted by: R20,4bn -16,1% 4% Interest income of R0,6bn • Reduction in interest rates of 275bps
Slide 22: Cash sales now represent almost 80% of group sales
CASH SALES NOW REPRESENT ALMOST 80% OF GROUP SALES Tender growth (%) Merchandise category growth (%) 56.8 57,1 48,8 5% 2% 38,5 3% 7% 35.3 23,5 22,5 83% Cash Credit Contribution CashGrowth vs H1’21Credit Clothing Homeware Cosmetics Jewellery Cellphones Channel growth (%) 21% 58,4 11% 12,5 79% 89% Con
Slide 23: Gross profit rands banked up 64,0% on H1'21
GROSS PROFIT Gross profit RANDS BANKED UP 64,0% ON H1’21 & 2,9% ON H1’20 recovery Gross margin % growth: • Selling price improvements H1’22 R9,3bn • Margins for some brands H1’21 R5,7bn Group recovered to year 2020 H1’20 R9,0bn H1’22 R5,7bn (43,4%) TFG Gross margin variance attributable to: H1’21 R3
Slide 24: Comparative decline in trading expenses of 6% on H1'20
COMPARATIVE DECLINE IN TRADING EXPENSES OF 6% ON H1’20 Business optimisation c. R400m Growth / investments -6% 234,2 8 304,9 785,1 25,0 7 695,7 (84,8) (142,8) (207,5) 7 260,6 H1'20 Occupancy Employment Other operating Base '22 Jet E-comm IT write-offs H1'22 Expenses 45,4% 43,2% 43,7% of turnover of
Slide 25: Summary of group operating metrics (H1'22 vs H1'21)
SUMMARY OF GROUP OPERATING METRICS (H1’22 VS H1’21) METRIC (R’m) H1 2022 H1 2021 % change H1 2020 % change Turnover 19 022 12 530 51,8 16 955 12,2 GP 9 290 5 664 64,0 9 027 2,9 EBITDA (pre-IFRS 16)* Rands 1 994 375 431,5 2 459 (18,9) EBIT (pre-IFRS 16) Rands 1 578 (55) 2 985,7 2 048 (22,9) EPS 319,5
Slide 26: Strong financial position
STRONG FINANCIAL POSITION H1’22 Net debt Inventory Debtors’ Cash (pre-IFRS 16) book on hand R0,8bn R8,5bn R6,5bn R5,7bn March 2021 March 2021 March 2021 March 2021 R1,3bn R8,3bn R6,6bn R4,8bn THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2021 25
Slide 27: Improved debt to equity ratio
IMPROVED DEBT TO EQUITY RATIO Net debt (pre-IFRS 16) Covenants at 30 September 2021* Debt to equity ratio pre-IFRS 16 9,5 65,3% 62,0% 57,7% 52,4% >3,0 <2,5 0,7 7,6% 4,3% Interest Leverage Covenant September 2021 actual FY'17 FY'18 FY'19 FY'20 FY'21 H1'22 Total facilities of R11,4 bn Debt continued t
Slide 28: Strong trading with fresh inventory
STRONG TRADING WITH FRESH INVENTORY Tight inventory management Net inventory R8,5bn Group stock up only 2,5% on March 2021 • Provisions at 11,7% of stock • Africa stock up 10,2% as trade recovers and ahead of Black Friday, provisions remain conservative • Australia inventory up 11,4%, additional pro
Slide 29: Net cash improvement almost R1bn since start of financial year
NET CASH IMPROVEMENT ALMOST R1BN Cash SINCE START OF FINANCIAL YEAR on hand R5,7bn Cash flow – YTD net movement (R’m) 3,947.6 172.2 (1,676.1) (255.6) (535.0) 5,743.7 4,843.2 (752.6) Cash Operating Lease Inventory Trade Other* Net PPE Cash March 2021 profit payments investment receivables investment
Slide 30: Profitable growth drives capex spend
PROFITABLE GROWTH DRIVES CAPEX SPEND R744,8m Stores H1’22 actual: R438m H1’21 actual: R92m Expand 60% R197,4m Factories H1’22 actual: R121m H1’21 actual: R5m Maintain Expand 40% 69% H1’22 Technology H1’22 actual: R164m Maintain H1’21 actual: R94m H1’21 31% • Space growth of 3% in Africa to 1,2 milli
Slide 31: Segmental performance: TFG Africa
03 SEGMENTAL PERFORMANCE: TFG AFRICA
Slide 32: TFG Africa – key highlights
TFG AFRICA – KEY HIGHLIGHTS +59,5% 43,4% +163,7% -2 days vs H1’21 (H1’21: 41,1%) vs H1’21 vs FY’21 Turnover Gross profit EBITDA* Stock R13,2bn R5,7bn R1,5bn R6,4bn EBITDA margin 11,4% Performance Strong trade Gross margin EBITDA Stock • Jet continues to outperform improvements • Business optimisatio
Slide 33: Jet
JET 2022 Plan Performance in line with expectation, barring TURNOVER LOST due to the RIOTS and GLOBAL SUPPLY >R5,5bn c.40% 13% DISRUPTIONS within cellular Turnover GP Trading margin Continuous focus on COST SAVINGS, 20 36 stores in total were R40m new Jet stores (home and apparel) looted during the
Slide 34: Going into the second half
GOING INTO THE SECOND HALF • Improved cost of doing business • Margin expansion • Disciplined working capital management • Low debt levels
Slide 35: Segmental performance: TFG Africa credit
03 SEGMENTAL PERFORMANCE: TFG AFRICA CREDIT
Slide 36: Significant recovery in demand for credit
SIGNIFICANT RECOVERY IN DEMAND FOR CREDIT New accounts volume 1,500 60% 1,000 40% 500 20% 0 0% H1 H2 H1 H2 H1 H2 H1 2019 2020 2021 2022 Number applications (‘000) (LHS) Accept rates (RHS) +55% c.25% 2,5 million vs H2’21 Applications Approval rates Account base THE FOSCHINI GROUP RESULTS PRESENTATION
Slide 37: Credit quality continues to improve
CREDIT QUALITY CONTINUES TO IMPROVE Cash collected in FY22 250% 150% 16% Buying position Overdue 12% 100% 8% 50% 4% 79% 14% (H1’21: 77%) (H1’21: 18%) 0% 0% Apr May Jun Jul Aug Sep Cash collected % of LY (LHS) Impairment NBD 2022 payments on active book as % of opening book balance (RHS) 2021 pay
Slide 38: Credit EBIT summary
CREDIT EBIT SUMMARY R72m (R91m) R355m H1’22 H1’21 H1’20 EBIT EBIT EBIT Performance EBIT R283m Interest rates 325bps 100bps in rates vs H1’20 over last 2 years = c.R110m income THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2021 37
Slide 39: TymeBank & TFG partnership
TYMEBANK & TFG PARTNERSHIP • Co-branded debit card printed Buy now pay later REAL TIME in store • Personal LOANS • Comprehensive DIGITAL offerings THE FOSCHINI GROUP RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2021 38
Slide 40: Segmental performance: TFG London
SEGMENTAL PERFORMANCE: TFG LONDON
Slide 41: TFG London – key highlights
TFG LONDON – KEY HIGHLIGHTS +65,6% 58,6% +147,3% vs H1’21 (H1’21: 44,1%) vs H1’21 Turnover Gross profit EBITDA* £145,7m £85,4m £9,1m EBITDA margin 6,2% Positive Market conditions Margin & cost improvement profit UK retail market TFG London • Performance continues to exceed and • Consumer confidence
Slide 42: UK outlook
UK OUTLOOK Above expectation trade • UK adults almost fully vaccinated – booster programme commenced • Gradual return to offices & reopening of leisure and hospitality driving improved performance in key wear-to-work and occasion categories Market share gains Well placed • A number of competitors ce
Slide 43: Segmental performance: TFG Australia
SEGMENTAL PERFORMANCE: TFG AUSTRALIA
Slide 44: TFG Australia – key highlights
TFG AUSTRALIA – KEY HIGHLIGHTS +39,2% 63,6% +48,3% vs H1’21 (H1’21: 60,7%) vs H1’21 Turnover Gross profit EBITDA* $270,2m $171,8m $28,6m EBITDA margin 10,6% Improving performance Improved performance Roadmap to market recovery but • COVID disruptions › Strong Q1 offset by a substantially COVID-disru
Slide 45: H2'22: Outlook, opportunities
H2’22: OUTLOOK, OPPORTUNITIES Opportunities Continued investment • NSW and Victoria have since reopened and trading above expectation Digital • Centre of excellence • A clear roadmap for opening the rest of the business hub • Improved processes and depth of talent • Grow store network and store size
Slide 46: Outlook
04 OUTLOOK
Slide 47: Our strategy has continued to deliver exceptional growth since 2015
OUR STRATEGY HAS CONTINUED TO DELIVER EXCEPTIONAL GROWTH SINCE 2015 +15 new brands 72% +14 163 +3 levels local sourcing employees B-BBEE level moved from 8* to 5 26 million +22 +1 560 MyTFGrewards customers increase in TFG brands selling online new outlets +105% +243% +3 532% turnover growth cash tu
Slide 48: Our strategy remains relevant and strategic focus areas will be enhanced
OUR STRATEGY REMAINS RELEVANT AND OUR STRATEGIC FOCUS AREAS WILL CONTINUE TO BE ENHANCED & REFRESHED Execution/enablers Outcomes Build out diversified, B high brand-equity businesses Grow turnover and margins Optimise sourcing mix O and supply chain efficiency Improve margins Leverage our asse
Slide 49: TFG's new purpose, vision & values
WITH A DRAMATICALLY DIFFERENT OPERATING CONTEXT, TFG HAS TAKEN THE OPPORTUNITY TO DEFINE A NEW PURPOSE, VISION & VALUES PURPOSE VISION VALUES “We inspire To create the most remarkable We put our CUSTOMERS first our customers to OMNICHANNEL EXPERIENCES We work SMART and FAST TFG’s new LIVE THEIR BEST
Slide 50: Outlook for H2
OUTLOOK FOR H2 The Group Trading conditions and consumer confidence continues to demonstrate remain under pressure its resilience and agility Post-COVID-19 Strategic investments in technology, local sourcing, recovery Strong balance sheet new stores & brands will continue to be prioritised to capita
Slide 51: 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
Slide 52: Appendices
APPENDICES
Slide 53: Summary group income statement
SUMMARY GROUP INCOME STATEMENT Sep 2021 Sep 2020 Rm % change Rm Retail turnover 19 022,1 51,8 12 530,0 Gross profit 9 289,7 64,0 5 664,0 Interest income 603,3 (16,1) 718,9 Other income 765,4 24,9 612,9 Net bad debt (496,2) (36,3) (778,4) Trading expenses (8 304,9) 39,9 (5 937,6) Operational EBIT 1 8
Slide 54: Summary TFG Africa income statement
SUMMARY TFG AFRICA INCOME STATEMENT Sep 2021 Sep 2020 Rm % change Rm Retail turnover 13 195,3 59,5 8 271,2 Gross profit 5 728,5 68,4 3 402,3 Interest income 603,3 (16,1) 718,9 Other income 765,4 24,9 612,9 Net bad debt (496,2) (36,3) (778,4) Trading expenses (5 240,2) 51,8 (3 453,0) Operational EBIT
Slide 55: Summary TFG London income statement
SUMMARY TFG LONDON INCOME STATEMENT Sep 2021 Sep 2020 £m % change £m Retail turnover 145,7 65,6 88,0 Gross profit 85,4 120,1 38,8 Trading expenses (75,5) 28,8 (58,6) EBIT 9,9 150,0 (19,8) EBITDA (post IFRS16) excl net gain on bargain purchase 16,8 400,0 (5,6) EBITDA (pre IFRS16) excl net gain on bar
Slide 56: Summary TFG Australia income statement
SUMMARY TFG AUSTRALIA INCOME STATEMENT Sep 2021 Sep 2020 $m % change $m Retail turnover 270,2 39,2 194,1 Gross profit 171,8 46,0 117,7 Trading expenses (144,1) 44,5 (99,7) EBIT 27,7 53,9 18,0 EBITDA (post IFRS16) excl net gain on bargain purchase 71,6 17,6 60,9 EBITDA (pre IFRS16) excl net gain on b
Slide 57: Group statement of financial position
GROUP STATEMENT OF FINANCIAL POSITION UNAUDITED AUDITED Sep 2021 Mar 2021 Rm % change Rm Non-current assets 18 070,7 (0,1) 18 087,9 Current assets 22 990,2 8,5 21 185,6 Inventory 8 538,3 2,5 8 331,5 Trade receivables – retail 6 464,6 (2,6) 6 636,9 Other receivables and prepayments 2 091,9 57,1 1 331
Slide 58: Credit: additional information
CREDIT: ADDITIONAL INFORMATION TFG Africa TFG Africa TFG Africa Sep 2021 Sep 2020 % change Mar 2021 Income (Rm) 848,5 927,4 (8,5) 1 797,1 Net bad debt (Rm) (496,2) 778,4 (36,3) (1 222,4) Credit costs (Rm) (280,3) (239,7) 16,9 (529,1) EBIT (Rm) 72,0 (90,7) 179,4 45,6 Number of applications 1 187 082
Slide 59: TFG footprint continuous expansion
TFG FOOTPRINT CONTINUOUS EXPANSION TFG Africa TFG London 801 32 125 3,001 718 2,929 (53) (115) Opening balance New Closures Closing balance Opening balance New Closures Closing balance Increase Decrease Total Increase Decrease Total TFG Australia TFG Group 26 575 4,284 183 4,294 554 (5) (173) Openin
Slide 60: Thank you
THANK YOU