Truworths International Limited · JSE:TRU
Truworths International — H1 2024 Earnings Presentation
69 slides from Truworths International's earnings presentation, February 2024
Slide 1: Interim Results for the 26 Weeks Ended 31 December 2023
INTERIM RESULTS FOR THE 26 WEEKS ENDED 31 DECEMBER 2023
Slide 2: Agenda
AGENDA 1. INTRODUCTION 2. FINANCIAL REVIEW 3. ACCOUNT MANAGEMENT 4. STRATEGIC INITIATIVES ASPIRATIONAL FASHION SUPPLY CHAIN CUSTOMERS RETAIL PRESENCE 5. ENVIRONMENTAL, SOCIAL AND GOVERNANCE 6. OUTLOOK 7. QUESTIONS
Slide 3: Introduction
1 INTRODUCTION
Slide 4: Group Well Positioned
4 GROUP WELL POSITIONED • We rigorously apply our Business Philosophy to direct our consistent focus on creating long-term value for our stakeholders • Long-term track record of managing costs and margins efficiently • World class margins effectively shelter us from volatility in the economy • Robus
Slide 5: Group Diversification
5 GROUP DIVERSIFICATION Profit contribution Retail sales Cash : Account sales Sales channels GROUP 3% 18% 33% 31% 48% 52% 67% 66% 82% Truworths Africa Office UK South Africa UK Rest of Africa Account Cash Stores Online 3% 4% TRUWORTHS 30% 70% 97% 96% 100% South Africa and rest of Africa South Africa
Slide 6: Truworths Africa: Perseverence in Adversity
6 TRUWORTHS AFRICA: PERSEVERENCE IN ADVERSITY South Africa has faced a number of challenges since the start of 2020 COVID-19 hard Sharp depreciation Disruptive taxi strikes in Significant increase in Shipping delays from lockdown and followed by significant Cape Town, impacting electricity load shed
Slide 7: Truworths Africa: Cautiously Optimistic
7 TRUWORTHS AFRICA: CAUTIOUSLY OPTIMISTIC • Highly regarded portfolio of market-leading, aspirational fashion clothing and footwear brands (mostly owned) that are highly regarded by the majority of South African consumers due to our superior quality and the aspirational nature of our fashion brands
Slide 8: Office UK: Optimistic on Growth Opportunities
8 OFFICE UK: OPTIMISTIC ON GROWTH OPPORTUNITIES • Strategic partner to the world’s most desired fashion footwear brands • Curated selection of the most in-demand fashion footwear in Office and Offspring • Branded fashion footwear is proving resilient in the current challenging macro environment • Pr
Slide 9: Financial Review: Group
2.1 FINANCIAL REVIEW GROUP
Slide 10: Financial Performance
10 FINANCIAL PERFORMANCE GROUP Change on prior period excl. forex losses, net IFRS 16 Change on impairment reversals Dec 2023 Dec 2022 prior period and insurance claims^ % % Sale of merchandise (Rm) 11 774 10 851 9 9 53.6 53.5 Gross margin (%) Profit before finance costs and tax (Rm) 2 887 2 682 8 1
Slide 11: Financial Performance
11 FINANCIAL PERFORMANCE GROUP The decline in ROA is attributed to the investment in capex (new Truworths DC and stores), the ROE is declining due to the growth in right-of-use assets as we accumulation of profits (in conclude new and extend existing retained earnings) since the leases and reverse p
Slide 12: Statement of Financial Position
12 STATEMENT OF FINANCIAL POSITION GROUP Change on Dec 2023 Dec 2022 prior period Rm Rm % Property plant and equipment 2 297 1 866 23 Right-of-use-assets 3 617 2 969 22 Intangible assets 563 549 3 Goodwill 294 294 - Inventories 2 088 2 119 (2) Trade and other receivables 6 011 5 937 1 Cash and cash
Slide 13: Capital Management
13 CAPITAL MANAGEMENT GROUP Dec 2023 Dec 2022 Net (debt)/cash Net (debt)/cash to Net (debt)/cash to equity % Net (debt)/cash equity % Group Rm (124) (1.4) (854) (11.8) Truworths Africa* Rm (1 860) (18.1) (1 691) (17.2) Office UK £m 74.5 90.5 40.6 94.0 Share buy-backs Funding Dividends • Since Januar
Slide 14: Cash Flow Analysis
Net debt at period-end R124 million (Dec 2022: R854 million) 14 CASH FLOW ANALYSIS GROUP (Rm) Operating cash flows Capital allocation 4 000 3 500 11 (221) Includes R200 million 3 000 658 in relation to the new (270) (585) Truworths Africa DC. 2 500 (52) (452) 2 000 (374) 50 1 500 2 943 2 484 (935) 1
Slide 15: Cash Realisation Rate
15 CASH REALISATION RATE GROUP High cash realisation rate mainly due to the reduction in trade receivables since Jun 2019 In the prior period the cash realisation (%) rate was impacted by the growth in trade receivables, higher inventory 140 133 levels, as well as the timing of month- 126 end paymen
Slide 16: Financial Review: Truworths Africa
2.2 FINANCIAL REVIEW TRUWORTHS AFRICA
Slide 17: Financial Performance
17 FINANCIAL PERFORMANCE TRUWORTHS AFRICA Gross margin 56.6% Dec 2022: 56.0% Retail sales - unchanged Trading profit - 9%* EBITDA margin R8 391m R1 339m 32.3% Dec 2022: R8 414m Dec 2022: R1 541m Dec 2022: 32.5% Trading margin* Profit before finance Profit before costs and tax - 1%* tax - 2%* 17.4
Slide 18: Income Statement
18 INCOME STATEMENT TRUWORTHS AFRICA Change on prior Change on period (excluding Dec 2023 Dec 2022 prior period forex losses and Rm Rm % insurance claims*) Sales of merchandise 7 943 7 985 (1) (1) Cost of sales (3 450) (3 515) (2) (2) Gross profit 4 493 4 470 1 1 Other income 223 253 (12) 12 Trading
Slide 19: Divisional Retail Sales
19 DIVISIONAL RETAIL SALES TRUWORTHS AFRICA Change on Dec 2023 Dec 2022 prior period Rm Rm % Truworths ladieswear 2 840 2 888 (2) Truworths menswear 2 028 2 029 - Truworths kids emporium 1 017 1 053 (3) Other# 1 139 1 054 8 Truworths emporium 7 024 7 024 - Identity 1 367 1 390 (2) Truworths retail s
Slide 20: Stores and Trading Space
Total trading space of 392k m2, up 0.9% (Dec 2022: 388k m2) 20 STORES AND TRADING SPACE TRUWORTHS AFRICA Number of Number of Stores Dec 2022 new stores closed stores Dec 2023 Truworths 348 5 - 353 Identity 249 4 - 253 Uzzi 36 - (2) 34 Truworths Man 34 - - 34 Sync 19 4 - 23 Office London 19 2 - 21 YD
Slide 21: Sales Densities Trend
21 SALES DENSITIES TREND TRUWORTHS AFRICA R per m2 45 000 40 037 39 179 39 266 40 000 38 489 36 717 36 418 36 214 35 924 35 230 35 000 33 371 30 000 25 000 20 000 15 000 10 000 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023
Slide 22: Merchandise Inflation Trend
22 MERCHANDISE INFLATION TREND TRUWORTHS AFRICA RSP Inflation (%) 20.0 15.0 10.0 5.7 5.0 - (5.0) (10.0) 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 Winter Summer Winter Summer Winter Summer Winter Summer Winter Summer Winter Summer Winter
Slide 23: Gross Profit Trend
23 GROSS PROFIT TREND TRUWORTHS AFRICA (Rbn)) (%)) 5.5 70 5.0 56.2 56.4 56.0 56.6 60 4.5 54.7 4.0 50 3.5 40 3.0 2.5 30 2.0 1.5 20 1.0 10 0.5 4.2 3.8 4.0 4.5 4.5 0.0 0 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 Gross profit Gross margin
Slide 24: Analysis of Trading Expenses
24 ANALYSIS OF TRADING EXPENSES TRUWORTHS AFRICA Change on Dec 2023 Dec 2022 prior period Rm Rm % Depreciation and amortisation 577 555 4 Employment costs 1 011 935 8 Occupancy costs 342 325 5 Trade receivable costs 873 799 9 Other operating costs 574 568 1 Trading expenses 3 377 3 182 6
Slide 25: Analysis of Trading Expenses
25 ANALYSIS OF TRADING EXPENSES TRUWORTHS AFRICA (CONTINUED) Depreciation and amortisation • PPE and software: Excluding non-comparable stores, depreciation decreased 12% due to assets 4% becoming fully depreciated • Right-of-use assets: Depreciation increased 7% due to: • an increase in the number
Slide 26: Analysis of Trading Expenses
26 ANALYSIS OF TRADING EXPENSES TRUWORTHS AFRICA (CONTINUED) Trade receivable costs • Net bad debt (after debt sold) increased 54%, due to account write-offs for which the Group 9% previously provided in the Expected Credit Loss (ECL) allowance • ECL allowance decreased from 20.6% at June 2023 (Dec
Slide 27: Trade Receivables Cost Overview
27 TRADE RECEIVABLES COST OVERVIEW TRUWORTHS AFRICA Change on Change on Dec 2023 Dec 2022 prior period prior period Rm Rm Rm % Increase reflecting the growth in Gross trade receivables 7 183 7 069 2 written-off accounts in the challenging credit environment. This is a result of the strong credit Gro
Slide 28: Profit Before Finance Costs and Tax
28 PROFIT BEFORE FINANCE COSTS AND TAX TRUWORTHS AFRICA (Rbn)) (%) 3.5 40 37 36 34 33 35 3.0 32 30 28 30 2.5 26 26 25 25 2.0 20 1.5 15 1.0 10 0.5 5 2.1 1.8 2.1 2.0 2.0 - - Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 Profit before finance costs and tax EBITDA margin Operating margin
Slide 29: Capital Expenditure
29 CAPITAL EXPENDITURE TRUWORTHS AFRICA Actual Actual Committed* Change on Dec 2023 Dec 2022 Jun 2024 prior period Rm Rm Rm % Store renovations and 129 185 157 (30) development Computer infrastructure 14 20 46 (30) and software Land, buildings and 1 1 3 - refurbishment Motor vehicles 2 - 1 >100 Dist
Slide 30: Cash Flow Analysis
Net debt at period-end R1.9 billion (Dec 2022: R1.7 billion) 30 CASH FLOW ANALYSIS TRUWORTHS AFRICA (Rm) 2 500 Operating cash flows Capital allocation 11 (202) 2 000 637 Includes R200 million (404) (448) in relation to the new (35) Truworths Africa DC. 1 500 (323) (337) 1 000 2 003 50 1 562 500 952
Slide 31: Financial Review: Office UK
2.3 FINANCIAL REVIEW OFFICE UK
Slide 32: Financial Performance
32 FINANCIAL PERFORMANCE OFFICE UK Gross margin 47.4% Dec 2022: 46.6% (Truworths Africa: 56.6%) Retail sales - 16% EBITDA - 25% EBITDA margin £162.0m £44.4m 27.2% Dec 2022: £140.2m Dec 2022: £35.6m Dec 2022: 25.3% (Truworths Africa: 32.3%) Trading margin* Profit before finance Profit before costs
Slide 33: Income Statement
33 INCOME STATEMENT OFFICE UK Change on Dec 2023 Dec 2022 prior period £m £m % Sale of merchandise 163.4 140.7 16 Cost of sales (85.9) (75.1) 14 Gross profit 77.5 65.6 18 Other income 4.3 6.1 (30) Trading expenses (44.6) (40.4) 10 Depreciation and amortisation (6.0) (4.2) 43 Employment costs (15.7)
Slide 34: Geographic Sales and Number of Stores
34 GEOGRAPHIC SALES AND NUMBER OF STORES OFFICE UK Retail sales Retail sales Change on Number of Number of Dec 2023 Dec 2022 prior period stores* stores* £m £m % Dec 2023 Dec 2022 United Kingdom 155.0 131.3 18 78 76 Republic of Ireland 7.0 5.9 19 7 7 Germany - 3.0 (100) - 5 Total 162.0 140.2 16 85 8
Slide 35: Sales Densities Trend
35 SALES DENSITIES TREND OFFICE UK £ per m2 19 000 17 075 17 000 15 000 13 640 13 328 12 708 13 000 12 449 11 955 10 611 11 000 9 000 7 090 7 000 5 000 Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023
Slide 36: Gross Profit Trend
36 GROSS PROFIT TREND OFFICE UK (£m)) (%)) 80 60 75 46.6 47.4 50 45.7 43.0 42.3 70 40 65 30 60 20 55 10 50 66.6 59.0 56.9 65.6 77.5 45 - Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 Gross profit Gross margin
Slide 37: Analysis of Trading Expenses
37 ANALYSIS OF TRADING EXPENSES OFFICE UK Change on Dec 2023 Dec 2022 prior period £m £m % Depreciation and amortisation 6.0 4.2 43 Employment costs 15.7 13.6 15 Occupancy costs 9.1 9.4 (3) Other operating costs 13.8 13.2 5 Trading expenses 44.6 40.4 10
Slide 38: Analysis of Trading Expenses
38 ANALYSIS OF TRADING EXPENSES OFFICE UK (CONTINUED) 43% Depreciation and amortisation • PPE and software – Increased due to higher capital expenditure, mainly on stores • Right-of-use assets – Increase mainly due to right-of-use asset impairment reversals of £4.0 million recognised in the prior f
Slide 39: Profit Before Finance Costs and Tax
39 PROFIT BEFORE FINANCE COSTS AND TAX OFFICE UK (£m)) (%) 45 35 40 30 27 35 25 24 25 30 22 21 25 18 20 16 20 15 15 10 8 10 10 5 5 5 10.7 5.1 22.5 31.4 38.4 - - Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 Profit before finance costs and tax EBITDA margin Operating margin
Slide 40: Capital Expenditure
40 CAPITAL EXPENDITURE OFFICE UK Actual Actual Committed* Change on Dec 2023 Dec 2022 Jun 2024 prior period £’000 £’000 £’000 % Store renovations and 1 726 230 2 373 >100 development Computer infrastructure 591 702 1 743 (16) and software Total 2 317 932 4 116 >100 *To be incurred in the second half
Slide 41: Cash Flow Analysis
Net cash at period-end £74.5 million (Dec 2022: £40.6 million) 41 CASH FLOW ANALYSIS OFFICE UK (£’000) 50 000 Operating cash flows 45 000 878 (827) 5 831 (5 860) 40 000 (750) (5 544) 35 000 (1 567) 30 000 25 000 20 000 40 122 39 394 32 283 15 000 10 000 5 000 - Cash Working Interest Finance Tax Cape
Slide 42: Account Management
3 ACCOUNT MANAGEMENT
Slide 43: Overview
43 OVERVIEW • Nearly 3 million active account customers (i.e. they are indebted to us) and 3.4% higher number of customers able to shop (i.e. they are not in arrears). • Over 20 million loyalty customers (who have previously shopped and/or wish to retain an ongoing relationship with us) • Expected c
Slide 44: Trade Receivable Statistics
44 TRADE RECEIVABLE STATISTICS TRUWORTHS AFRICA Dec Dec 2023 2022 Number of active accounts (000's) 2 908 2 779 Change in number of active accounts (%) 5 6 Gross trade receivables (before expected credit loss allowance) (Rm) 7 183 7 069 Change in gross trade receivables (before expected credit loss
Slide 45: TransUnion SA Consumer Credit Index
45 TRANSUNION SA CONSUMER CREDIT INDEX . The TransUnion SA Consumer Credit Index (CCI) increased from 39 in 2023 Q2 to 47 in 2023 Q4. The index is increasing for the first time since 2021 Q3. 65 60 55 50 47 45 40 42 39 35 30 200703 200706 200709 200712 200803 200806 200809 200812 200903 200906 20090
Slide 46: Total 4+ Cycle Balances
46 TOTAL 4+ CYCLE BALANCES Truworths Africa and industry total 4+ cycle balances have deteriorated compared to the prior year, but Truworths shows improvement in recent months Deteriorating 4+ Cycle Balances Improving Nov-21 Feb-22 May-22 Aug-22 Nov-22 Feb-23 May-23 Aug-23 Nov-23 Industry Excl. Truw
Slide 47: New Accounts – Applications and Risk-Approved vs Opened Percentage
NEW ACCOUNTS – APPLICATIONS AND RISK-APPROVED 47 VS OPENED PERCENTAGE No of Applications ('000) No of Applications '000 Risk Approved % Opened % 3 000 2 500 2 000 25% 1 500 18% 1 000 500 - Jul-Dec 14 Jul-Dec 15 Jul-Dec 16 Jul-Dec 17 Jul-Dec 18 Jul-Dec 19 Jul-Dec 20 Jul-Dec 21 Jul-Dec 22 Jul-Dec 23 A
Slide 48: Strategic Initiatives: Aspirational Fashion
4.1 STRATEGIC INITIATIVES ASPIRATIONAL FASHION
Slide 49: Aspirational Fashion
49 ASPIRATIONAL FASHION • Continue to review potential merchandise opportunities to increase our share of the market • Address identified opportunities through expansion of current brands, new brands and/or acquisitions • Drive sales growth in key underrepresented categories and product areas where
Slide 50: Strategic Initiatives: Supply Chain
4.2 STRATEGIC INITIATIVES SUPPLY CHAIN
Slide 51: Supply Chain
51 SUPPLY CHAIN • Complete the fit-out of our new Truworths Africa DC and commence the warehouse consolidation process • Construction completed in December 2023 • Equipment installation is in progress, expected to be operational by January 2025 • Additional investment in local design and manufacture
Slide 52: Strategic Initiatives: Customers
4.3 STRATEGIC INITIATIVES CUSTOMERS
Slide 53: Customers: Omni-Channel
53 CUSTOMERS OMNI-CHANNEL Truworths Africa • Continue to grow our online sales (Dec 2023: up 41%) and registered user base (Dec 2023: up 54%) • Reduce costs and improve fulfilment lead times by ensuring stores are able to fulfil e-commerce orders directly • Continued enhancement of website functiona
Slide 54: Customers: Credit
54 CUSTOMERS CREDIT Truworths Africa • Enhance our ability to collect through better data analytics and improved customer engagement • Optimise the customer acquisition process across channels to reduce costs, and to improve efficiency and conversion • Improve the predictive power of our scorecards
Slide 55: Strategic Initiatives: Retail Presence
4.4 STRATEGIC INITIATIVES RETAIL PRESENCE
Slide 56: Retail Presence
56 RETAIL PRESENCE • Review real estate opportunities to rollout new formats in Truworths Africa • Truworths Emporium Re-Imagined • ID Megastore • Kids Emporium • Further rollout of Sync and Fuel brands in SA where opportunities exist • Office UK to expand into new key locations, and continue to exi
Slide 57: Environmental, Social and Governance
5 ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Slide 58: Environmental, Social and Governance
58 ENVIRONMENTAL, SOCIAL AND GOVERNANCE THE GROUP AIMS TO MAKE STEADY AND MEASURABLE PROGRESS IN IMPLEMENTING ITS SUSTAINABILITY GOALS WHILE ENSURING ECONOMIC SUSTAINABILITY AND VALUE CREATION OVER THE LONG TERM • Environment • Continued efforts to minimise emissions, decrease electricity and water
Slide 59: Commitment to the United Nations Sustainable Development Goals
COMMITMENT TO THE UNITED NATIONS 59 SUSTAINABLE DEVELOPMENT GOALS Continued best practice alignment with the United Nations Sustainable Development Goals, specifically: NO GOOD HEALTH QUALITY POVERTY AND WELL-BEING EDUCATION End poverty in all its forms Ensure healthy lives and Ensure inclusive and
Slide 60: Outlook
6 OUTLOOK
Slide 61: Outlook
61 OUTLOOK SALES AND TRADING SPACE • Truworths Africa: Global shipping disruption and SA port congestion has impacted delivery of imported merchandise, resulting in lower than planned new stock deliveries from December (2023) to February (2024) • Office UK: Competed against high promotional activity
Slide 62: Outlook: Truworths Africa
62 OUTLOOK TRUWORTHS AFRICA • Cautiously optimistic on the medium-term prospects for the South African economy • Consumer spending and credit health will benefit from lower inflation and improved economic outlook • Management continues to focus on appeal of the Group’s merchandise and account offeri
Slide 63: Outlook: Truworths Africa (Continued)
63 OUTLOOK TRUWORTHS AFRICA (CONTINUED) • Risks to trading performance in the second half of the year • Sustained pressure on discretionary spending of South Africans • Electricity load shedding • Ongoing port congestion • International shipping disruption • Global shipping disruption affected deliv
Slide 64: Outlook: Office UK
64 OUTLOOK OFFICE UK • Current indicators show that interest rates and inflation are expected to decline in calendar 2024, which should benefit consumer disposable income • Office will continue to capitalise on • the strength of its global brand relationships • loyal customer base and • well-establi
Slide 65: Questions
7 QUESTIONS For any investor relations matters, kindly send an e-mail to: InvestorRelations@truworths.co.za
Slide 66: Disclaimer
66 DISCLAIMER This announcement 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 cir
Slide 67: Appendices
APPENDICES
Slide 68: Condensed Group Statements of Financial Position
CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION ASSETS Non-current assets Property, plant and equipment Right-of-use-assets Intangible assets Goodwill Loans and receivables Assets held at fair value Deferred tax Current assets Inventories Trade and other receivables Derivative financial assets Loan
Slide 69: Condensed Group Statements of Comprehensive Income
CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME 26 weeks 26 weeks 52 weeks to 31 Dec to 1 Jan to2 Jul 2023 2023 2023 Unaudited Unaudited change Audited Note Rm Bm % Bm Revenue 4 42 753 11725 88 21992 Sale of merchandise 4 44774 10851 B85 19894 Cost of sales (6 461) {5 043) (9445) Gross profit 631
Truworths International — H1 2024 Earnings Presentation on 6ix