Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2013 Earnings Presentation
46 slides from Foschini's earnings presentation, November 2012
Slide 1: Analyst Presentation for the Half-Year Ended 30 September 2012
ANALYST PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2012 1 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 2: TFG ANALYST PRESENTATION - SEPTEMBER 2012
2 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 3: Agenda
AGENDA • The economy and retail environment Doug Murray • Review of the period Doug Murray • Financial review Ronnie Stein • Divisional review Doug Murray • Financial services Peter Meiring • Outlook Doug Murray • Questions All 3 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 4: Economy & Retail Environment
ECONOMY & RETAIL ENVIRONMENT 4 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 5: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT • The health of the world economy remains a concern, the main issues being • Eurozone debt crisis • Cooling down of the Chinese economy • Sluggish recovery of the USA • Most indicators show that South African economic growth may be cooling down on the back of the i
Slide 6: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT • The health of the world economy remains a concern, the main issues being • Eurozone debt crisis • Cooling down of the Chinese economy • Sluggish recovery of the USA • Most indicators show that South African economic growth may be cooling down on the back of the i
Slide 7: Review of the Period
REVIEW OF THE PERIOD • Our group trades predominantly in the mass-middle market space and our customers have benefited from: • Continued low interest rates • Real wage increases • Increase in government subsidies • Low inflation environment • Continue to benefit from our strategic initiatives: • Sup
Slide 8: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED • Group turnover up 12,6% to R6,1 billion • Headline earnings per share up 17,1% to 400,5 cents • Diluted headline earnings per share up 18,8% to 396,1 cents • Operating margin increased to 23,1% from 22,9% • Interim dividend increased by 24,2% to 236,0 cents per share
Slide 9: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED September September Retail turnover by 2012 2011 % Same store % Growth (2 merchandise category (Rm) (Rm) % Growth growth year CAGR) Clothing 4 174,0 3 695,4 13,0 6,4 16,4 Jewellery 592,5 531,4 11,5 7,0 9,4 Cellphones 534,5 506,8 5,5 2,0 16,8 Cosmetics 383,5 344,3 11,4
Slide 10: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED September September Retail turnover by 2012 2011 % Same store % Growth (2 merchandise category (Rm) (Rm) % Growth growth year CAGR) Clothing 4 174,0 3 695,4 13,0 6,4 16,4 Jewellery 592,5 531,4 11,5 7,0 9,4 Cellphones 534,5 506,8 5,5 2,0 16,8 Cosmetics 383,5 344,3 11,4
Slide 11: Financial Review
FINANCIAL REVIEW 11 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 12: Financial Review: Half-Year Ended September 2012
FINANCIAL REVIEW: HALF-YEAR ENDED SEPTEMBER 2012 September 2012 September 2011 % Income Statement for the period ended (Rm) (Rm) change Retail turnover 6 112,2 5 428,3 12,6 Cost of turnover (3 553,7) (3 156,0) Gross profit 2 558,5 2 272,3 Interest received 966,4 813,0 Dividend income - 5,7 Other rev
Slide 13: Revenue
REVENUE September 2012 September 2011 (Rm) (Rm) % Growth Retail turnover 6 112,2 5 428,3 12,6 Interest received 966,4 813,0 18,9 Dividends received - 5,7 Other revenue 671,3 568,1 18,2 Group total 7 749,9 6 815,1 13,7 • Satisfactory growth in retail turnover • Interest received will be dealt with se
Slide 14: Gross Profit
GROSS PROFIT September 2012 September 2011 (Rm) (Rm) Gross profit (Rm) 2 558,5 2 272,3 Gross margin (%) 41,8 41,8 • Input margin constant • Improved pricing passed on to customers • Gross margin has upward potential for the future, dependent on currency exchange rate as well as competitive product p
Slide 15: Interest Received
INTEREST RECEIVED September 2012 September 2011 (Rm) (Rm) % Growth Trade receivables – retail 478,1 405,5 17,9 Receivables - RCS Group 477,9 400,2 19,4 Sundry 10,4 7,3 42,5 Total 966,4 813,0 18,9 • Due to the impact of the NCA capping formula, interest yields at their lowest • Increase in interest r
Slide 16: Trading Expenses
TRADING EXPENSES % to % to September turnover September turnover % Growth 2012 (Rm) 2012 2011 (Rm) 2011 Depreciation and amortisation (157,7) 2,6 (149,8) 2,8 5,3 Employee costs - normal (963,9) 15,8 (865,2) 15,9 11,4 Employee costs – share-based payments (30,4) 0,5 (39,9) 0,7 (23,8) Occupancy costs
Slide 17: Interest Paid
INTEREST PAID September September 2012 (Rm) 2011 (Rm) % Growth Interest paid 156,0 137,1 13,8 • Finance charges increased due to investment in debtors, stock and capital expenditure 17 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 18: Segmental Analysis
SEGMENTAL ANALYSIS September 2012 September 2011 (Rm) (Rm) % Growth Retail 1 072,5 955,0 12,3 RCS Group 185,6 151,9 22,2 Total profit before tax 1 258,1 1 106,9 13,7 • Retail produced a satisfactory result with 12,3% growth • RCS Group • Good performance – up 22,2% on last year • Contribution to gro
Slide 19: Financial Position
FINANCIAL POSITION • Our group’s balance sheet remains strong • The next few slides deal with key elements of our financial position 19 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 20: Stock and Creditors
STOCK AND CREDITORS September September 2012 (Rm) 2011 (Rm) % Growth Stock of merchandise 1 918,0 1 692,7 13,3 • Ladieswear stock too low – impacted by logistical issues September September 2012 (Rm) 2011 (Rm) % Growth Trade and other payables 1 978,8 1 754,2 12,8 • Stock continues to be funded by c
Slide 21: Trade Receivables
TRADE RECEIVABLES September 2012 September 2011 (Rm) (Rm) % Growth Loan receivables 1 109,9 948,0 17,1 Private label card receivables 2 670,8 2 186,6 22,1 RCS Group 3 780,7 3 134,6 20,6 Trade receivables – retail 4 809,3 4 155,8 15,7 Total receivables 8 590,0 7 290,4 17,8 • Our biggest asset by far
Slide 22: Borrowings and Non-Controlling Interest Loan
BORROWINGS AND NON-CONTROLLING INTEREST LOAN September 2012 September 2011 (Rm) (Rm) Interest-bearing debt and non-controlling interest loan 4 494,7 3 074,6 Less: Preference share investment - (200,0) Less: Cash (875,4) (468,6) Net borrowings 3 619,3 2 406,0 Less: SBSA loan to RCS Group (non-control
Slide 23: Cash Generation and Utilisation
CASH GENERATION AND UTILISATION September 2012 Rm (Rm) Net borrowings at beginning of the period (3 026,8) Cash EBITDA 1 470,2 Increase in creditors 151,8 Other net investing activities (3,9) Cash generated 1 618,1 Taxation paid (386,8) Dividends paid (558,9) Retail & other debtors (465,4) RCS Group
Slide 24: Capex
CAPEX September 2012 September 2011 (Rm) (Rm) Stores 155,6 149,9 RCS Group 4,5 12,7 IT 121,5 92,1 Other 19,1 21,0 Total 300,7 275,7 • The majority of capex relates to opening of new stores, in line with our strategy of growing floor space • Budgeted capex for 2013 year-end will be approximately R600
Slide 25: Divisional Review
DIVISIONAL REVIEW 25 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 26: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL September 2012 Turnover % Same store Number of % Growth (2 (Rm) % Growth growth stores year CAGR) Foschini division 2 191,0 6,0 1,4 532 12,0 Markham 1 081,2 17,5 10,9 270 20,1 Exact 596,7 11,8 8,8 220 18,4 TFG Sports 1 164,9 20,7 10,7 405 19,3 Jewellery division 650,7 9,9
Slide 27: Divisional Review: Overall Continued
DIVISIONAL REVIEW: OVERALL CONTINUED • Foschini division (6% growth; 12,0% 2 year CAGR) • Foschini, Donna-claire & Fashion Express impacted by logistical problems in the supply of ladieswear • Markham (17,5%; 20,1% 2 year CAGR) • Menswear clothing growth was good • Exact (11,8%; 18,4% 2 year CAGR) •
Slide 28: Divisional Review: Supply Chain
DIVISIONAL REVIEW: SUPPLY CHAIN • Significant improvements in the last few years • Have been aggressively driving reduced lead times • Lead times have reduced significantly • Material change management impact as result of reduced lead times • Learnt lessons & affected some internal restructuring to
Slide 29: Divisional Review: Africa Expansion
DIVISIONAL REVIEW: AFRICA EXPANSION • Rest of Africa (excluding South Africa) now 98 stores with turnover of R670 million annualised • All African stores are corporate stores Proposed additions Locations March 2012 2013 2014 2015 Total Namibia 58 5 15 2 80 Botswana 11 5 - 5 21 Zambia 12 - 6 5 23 Swa
Slide 30: TFG Financial Services
TFG FINANCIAL SERVICES 30 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 31: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Performance reflects challenges of credit environment • Selective account expansion remains a key objective • Bad debts remain high, but within the expected range • Net book grows by 15,7% • Interest income rises by 17,9% • 0,5% cut in repo rate reduces inte
Slide 32: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE September 2012 September 2011 (Rm) % Growth (Rm) Interest income 478,1 17,9 405,5 Other income 171,6 14,9 149,4 Total Income 649,7 17,1 554,9 Net bad debt (320,8) 31,8 (243,4) Credit costs (114,4) 16,9 (97,9) EBIT 214,5 0,4 213,6 • Interest income • Bad debt growt
Slide 33: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics September 2012 September 2011 Number of active accounts (‘000) 2 544,0 2 388,8 Credit sales as a % of total retail sales 61,0 63,1 Net debtors’ book (Rm) 4 809,3 4 155,8 • Active accounts growth of 6,5% • Strong growth from Rewards Program assists c
Slide 34: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics September 2012 September 2011 March 2012 Arrear debtors % to debtors’ book 21,5 20,4 21,8 Net bad debt write off as a % of credit transactions 5,4 4,7 4,9 Net bad debt write off as a % of debtors’ book 10,3 9,3 9,4 Doubtful debt provision as a
Slide 35: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK • Active account base growth remains a key focus area (anticipated growth of 6,0% to 7,0% at year-end) • Maintain growth in publishing and insurance by ongoing product innovation • Net bad debt is expected to moderate in the second half • Revised scorecar
Slide 36: RCS Group
RCS GROUP 36 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 37: RCS Group: Overview
RCS GROUP: OVERVIEW PORTFOLIO’s • Strong growth in card portfolios underpinned by: • Further expansion of our merchant network with new national retailers • Growth in private label and co-branded card portfolios • Conservative approach followed to growth in loans advances FINANCIALS • Experienced po
Slide 38: RCS Group: Financial Review – September 2012
RCS GROUP: FINANCIAL REVIEW – SEPTEMBER 2012 September 2012 September 2011 Rm % change Rm Interest income 481,5 19,4 403,3 Other income 251,1 15,0 218,4 Total credit income 732,6 17,8 621,7 Net bad debt (122,7) 20,3 (102,0) Operating costs (311,2) 17,1 (265,8) EBIT 298,7 17,6 253,9 Interest paid (11
Slide 39: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics September 2012 September 2011 Number of active accounts (‘000) 829 704 Net debtors' book (Rm) 3 781 3 135 Arrear debt as percentage of total debt1 9,3% 9,5% Non performing loans as percentage of total debt2 6,4% 6,7% Net bad debt write-off as percentage o
Slide 40: RCS Group: Financial Position & Treasury
RCS GROUP: FINANCIAL POSITION & TREASURY September September Capital Ratios 2012 2011 Return on equity 18,95% 18,80% Debt : Equity1 64,9% 63,2% 1 Debt : Equity - Term Funding/(Shareholders Equity (excl. Minority Interest) + Term Funding) • Balance Sheet • Healthy balance sheet with conservative NPL
Slide 41: RCS Group: Funding Diversity – Drawn Facilities
RCS GROUP: FUNDING DIVERSITY – DRAWN FACILITIES 30-Sep-12 27% 23% 50% 30-Sep-11 23% 4% 25% 48% 30-Sep-10 57% 4% 11% 28% Prior to DMTN 89% 11% 0% 20% 40% 60% 80% 100% Shareholders Banks Commercial Paper Bonds 41 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 42: RCS Group: Strategy and Outlook
RCS GROUP: STRATEGY AND OUTLOOK • Outlook • Positive profit growth expected for the remainder of the year • Sufficient funding and capital in place to deliver business plans • Fund raising efforts to continue in the capital markets • Maintain healthy balance sheet with healthy asset base • Growth •
Slide 43: Outlook
OUTLOOK 43 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 44: Outlook for Second Half of 2013
OUTLOOK FOR SECOND HALF OF 2013 • Customers remain under pressure • Strategic initiatives to continue • Supply chain • CRM • New accounts • Launch of rewards programme to credit customers November 2012 • Space growth - 102 new stores planned for 2nd half – approx 7% space growth for full year • Logi
Slide 45: Thank You
THANK YOU 45 TFG ANALYST PRESENTATION - SEPTEMBER 2012
Slide 46: 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