Slide 1: Analyst Presentation for the Year Ended 31 March 2011
ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH 2011 TFG ANALYST PRESENTATION - MAY 2011
Slide 2: Agenda
AGENDA OVERVIEW OF THE ECONOMY & RETAIL ENVIRONMENT DOUG MURRAY REVIEW OF THE YEAR DOUG MURRAY FINANCIAL REVIEW RONNIE STEIN DIVISIONAL REVIEW DOUG MURRAY TFG FINANCIAL SERVICES RONNIE STEIN RCS GROUP SCHALK VAN DER MERWE SUPPLY CHAIN MARTIN MENDELSOHN OUTLOOK DOUG MURRAY QUESTIONS ALL TFG ANALYST P
Slide 3: Overview of the Economy and Retail Environment
OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT TFG ANALYST PRESENTATION - MAY 2011 2
Slide 4: Overview of the Economy & Retail Environment
OVERVIEW OF THE ECONOMY & RETAIL ENVIRONMENT Global economic recovery, while facing some headwinds, continues to improve, although the downside risks have increased The South African economy continues to strengthen The BER projects GDP growth of 3,7% in 2011 and 3,8% for 2012 Real wage increases awa
Slide 5: Review of the Year
REVIEW OF THE YEAR TFG ANALYST PRESENTATION - MAY 2011 4
Slide 6: Review of the Year
REVIEW OF THE YEAR Our group trades in the mass middle market space and our customers have benefited from the more positive consumer sentiment driven by real wage increases, lower inflation, and lower interest rates Supply chain initiatives beginning to bear fruit CRM initiatives resulting in substa
Slide 7: Review of the Year
REVIEW OF THE YEAR Group turnover: up 15,5% to R9,9 billion 2nd half group turnover up 18,1% Headline earnings per share up 21,3% to 632,3 cents Operating margin increased to 23,2% Dividend final dividend increased by 24,7% to 212,0 cents per share total dividend for year increased 21,5% to 350,0 ce
Slide 8: Retail Turnover by Merchandise Category
RETAIL TURNOVER BY MERCHANDISE CATEGORY 1st half 2nd half 2011 FY 2011 2010 1st half 2nd half 2011 FY same store same store same store (Rm) (Rm) growth growth growth growth growth growth Clothing 6 550,9 5 660,2 11,7% 19,5% 15,7% 7,6% 14,0% 10,8% Jewellery 1 134,2 1 025,6 10,4% 10,7% 10,6% 7,3% 6,3%
Slide 9: Financial Review
FINANCIAL REVIEW TFG ANALYST PRESENTATION - MAY 2011 8
Slide 10: Financial Performance: Last 10 Years
FINANCIAL PERFORMANCE: LAST 10 YEARS Years ended 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Retail turnover (Rm) 3 289,9 3 880,6 4 410,0 5 279,3 6 432,1 7 230,0 7 668,7 8 089,6 8 605,2 9 936,5 Retail turnover growth % 10,4 18,0 13,6 19,7 21,8 12,4 6,1 5,5 6,4 15,5 Compound retail turnover gro
Slide 11: Financial Review: 2011
FINANCIAL REVIEW: 2011 Income Statement for the year ended 31 March 2011 (Rm) 2010 (Rm) % change Retail turnover 9 936,5 8 605,2 15,5 Cost of turnover (5 768,1) (5 005,8) Gross profit 4 168,4 3 599,4 Interest received 1 486,2 1 443,7 Dividends received 12,1 13,8 Other revenue 935,8 717,6 Trading exp
Slide 12: Financial Review 1st Half vs 2nd Half
FINANCIAL REVIEW 1ST HALF VS 2ND HALF 1st half 2nd half 2011 Income Statement for the year ended 31 March growth growth growth Retail turnover 12,5% 18,1% 15,5% Operating profit before finance charges 13,2% 19,5% 16,7% Profit before tax 17,4% 21,8% 19,9% Profit after tax 17,0% 21,4% 19,5% Attributab
Slide 13: Revenue
REVENUE 2011 (Rm) 2010 (Rm) % growth Retail turnover 9 936,5 8 605,2 15,5 Interest received 1 486,2 1 443,7 2,9 Dividends received - retail 12,1 13,8 (12,3) Other revenue 935,8 717,6 30,4 Total 12 370,6 10 780,3 14,8 More positive consumer sentiment evident in retail turnover growth, especially in 2
Slide 14: Gross Profit
GROSS PROFIT 2011 2010 Gross profit (Rm) 4 168,4 3 599,4 Gross margin (%) 42,0 41,8 Input margin marginally up Improved pricing passed on to customers with focus on top-line growth Mark downs well controlled TFG ANALYST PRESENTATION - MAY 2011 13
Slide 15: Gross Profit Historic View
GROSS PROFIT HISTORIC VIEW 50,00% 45,00% 40,00% 35,00% 30,00% 25,00% Margin % 20,00% 15,00% 10,00% 5,00% 0,00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 TFG ANALYST PRESENTATION - MAY 2011 14
Slide 16: Interest Received
INTEREST RECEIVED 2011 (Rm) 2010 (Rm) % growth Trade receivables – retail 705,2 636,4 10,8 RCS Group – loan receivables 290,1 355,4 (18,4) RCS Group – private label card receivables 474,1 440,3 7,7 Sundry - retail 8,9 8,9 - Sundry – RCS Group 7,9 2,7 192,6 Total 1 486,2 1 443,7 2,9 Due to the impact
Slide 17: Trading Expenses
TRADING EXPENSES % to % to 2011 turnover 2010 turnover (Rm) 2011 (Rm) 2010 % growth Depreciation and amortisation (282,7) 2,8 (264,2) 3,1 7,0 Goodwill impairment (5,8) 0,1 - - Employee costs (1 656,1) 16,7 (1 376,9) 16,0 20,3 Retail occupancy costs (902,3) 9,1 (797,1) 9,3 13,2 Other occupancy costs
Slide 18: Employee Costs
EMPLOYEE COSTS 2011 (Rm) 2010 (Rm) % growth Employee costs: normal - retail 1 387,1 1 207,8 14,9 Employee costs: performance bonuses 67,8 2,4 Employee costs: share-based payments 55,9 34,3 63,0 Total employee costs – retail 1 510,8 1 244,5 21,4 Employee costs: normal – RCS Group 145,3 132,4 9,7 Tota
Slide 19: Interest Paid
INTEREST PAID 2011 (Rm) 2010 (Rm) % growth Interest paid 250,1 261,5 (4,4) Decrease due to lower interest rates Fixed facilities only start unwinding during the course of the next financial year The majority of the interest paid relates to funding of RCS Group TFG ANALYST PRESENTATION - MAY 2011 18
Slide 20: Segmental Analysis
SEGMENTAL ANALYSIS 2011 (Rm) 2010 (Rm) % change Retail 1 775,5 1 485,2 19,5 RCS Group 275,6 225,9 22,0 Total profit before tax 2 051,1 1 711,1 19,9 Retail produced an encouraging result with 19,5% growth RCS Group Performed satisfactorily - up 22,0% on last year contribution to PBT (before minoritie
Slide 21: Balance Sheet
BALANCE SHEET Our group‟s balance sheet remains strong R453,8 million share buy-backs undertaken by share trust The next few slides deal with key elements of our balance sheet TFG ANALYST PRESENTATION - MAY 2011 20
Slide 22: Stock & Creditors
STOCK & CREDITORS 2011 (Rm) 2010 (Rm) % growth Stock 1 804,7 1 493,8 20,8 Stock elevated at year-end due to stock brought in early because of Chinese New Year and movement of Easter Continue to see benefits from supply chain 2011 (Rm) 2010 (Rm) % growth Trade and other payables 1 710,7 1 293,8 32,2
Slide 23: Trade Receivables
TRADE RECEIVABLES 2011 (Rm) 2010 (Rm) % growth Loan receivables 858,4 857,3 0,1 Private label card receivables 2 030,2 1 773,5 14,5 RCS Group 2 888,6 2 630,8 9,8 Trade receivables - retail 3 823,0 3 169,3 20,6 Total receivables 6 711,6 5 800,1 15,7 Total receivables on balance sheet amount to R6,7 b
Slide 24: Borrowings & Non-Controlling Interest Loans
BORROWINGS & NON-CONTROLLING INTEREST LOANS 2011 (Rm) 2010 (Rm) % growth Interest-bearing debt and non-controlling interest loans 2 561,9 1 969,5 30,1 Less: Preference share investment (200,0) (200,0) Less: Cash (338,5) (284,0) Net borrowings 2 023,4 1 485,5 36,2 Less: SBSA loan to RCS Group (non-co
Slide 25: Cash Generation & Utilisation
CASH GENERATION & UTILISATION Rm Total Rm Net borrowings at beginning of year (1 485,5) Cash EBITDA 2 409,1 Increase in creditors 416,9 Other investing activities 13,8 Sale of shares by share trust 134,8 Cash generated 2 974,6 Taxation paid (769,0) Dividends paid (665,9) Retail and other debtors (67
Slide 26: Capex
CAPEX 2011 (Rm) 2010 (Rm) % growth Stores 239,3 171,3 39,7 RCS Group 15,4 6,5 136,9 IT 72,9 76,1 (4,2) Other 55,2 35,7 54,6 Total 382,8 289,6 32,2 The majority of capex relates to opening of new stores, in line with our strategy of growing floor space IT spend in line with prior years R10 million sp
Slide 27: Divisional Review
DIVISIONAL REVIEW TFG ANALYST PRESENTATION - MAY 2011 26
Slide 28: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL 2nd half 2011 1st half same store % FY same Turnover 1st half 2nd half % FY same store growth store Number of (Rm) growth % growth % growth growth % % growth stores Foschini division 3 719,0 7,2 17,7 12,5 3,8 12,7 8,3 484 Markham 1 634,7 16,4 23,7 20,2 13,2 20,3 16,9 247 E
Slide 29: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL Foschini division All brands traded particularly well in the 2nd half Much better performance from Foschini and Donna-Claire Clothing and footwear 1st half growth 2nd half growth 1st half same 2nd half same % FY same store only % % % FY Ggrowth store growth % store growth
Slide 30: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL Sports division Traded well, assisted in the 1st half by the 2010 FIFA World Cup™ % FY growth % FY same store growth Totalsports 20,0 11,3 Sportscene 10,5 5,8 Duesouth 22,8 16,3 Total 16,9 9,9 Jewellery division Remains dominant one and two player in mass-middle market jew
Slide 31: Financial Services
FINANCIAL SERVICES TFG ANALYST PRESENTATION - MAY 2011 30
Slide 32: Financial Services Agenda
FINANCIAL SERVICES AGENDA Financial Services Overview Structure TFG Financial Services Period overview Performance Book Statistics Strategy & outlook RCS Group Structure Overview Financial review Performance Balance sheet and funding Strategy & outlook TFG ANALYST PRESENTATION - MAY 2011 31
Slide 33: TFG Financial Services Overview: Structure
TFG FINANCIAL SERVICES OVERVIEW: STRUCTURE INTERNAL 100% Holding 55% Holding EXTERNAL TFG Financial Services RCS Group TRANSACTIONAL FIXED TERM OTHER FINANCE FINANCE INVESTMENTS 65% Holding GENERAL PRIVATE STORE PERSONAL EFFECTIVE CLUB INSURANCE CELLULAR PURPOSE LABEL CARDS LOANS INTELLIGENCE CARDS
Slide 34: TFG Financial Services
TFG FINANCIAL SERVICES TFG ANALYST PRESENTATION - MAY 2011 33
Slide 35: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW Profit contribution increase of 32,9% Bad Debt remains on a downward trend Health of the book improves, arrears reduce to 20,7% (LY 22,1%) Strong growth in active account base 590 000 new accounts opened TFG ANALYST PRESENTATION - MAY 2011 34
Slide 36: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE 2011 2010 Rm % change Rm Interest income 705,2 10,8 636,4 Net bad debt (401,7) 11,9 (359,1) 303,4 9,4 277,3 Credit costs (248,1) 4,8 (236,7) Other income 285,5 32,2 215,9 Profit before tax 340,9 32,9 256,5 Interest growth Bad debt growth of 11,9% Average NCA rate
Slide 37: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics March 2011 March 2010 Number of active accounts with debit balances („000) 2 278 2 062,0 Credit sales as a % of total retail sales 61,5 62,6 Net debtors‟ book (Rm) 3 823,0 3 169,3 Active accounts grow by 10,5% Growth in cash sales outperforms increa
Slide 38: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics March 2011 March 2010 Arrear debtors % to debtors‟ book1 20,7 22,1 Net bad debt write-off as a % of credit transactions 4,7 4,8 Net bad debt write-off as a % of debtors‟ book 9,2 9,9 Doubtful debt provision as a % of debtors‟ book 8,7 8,8 % ab
Slide 39: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK Continued focus on growing active account base Drive repeat sales from cash customers Evaluate opportunity to expand cellular and other related products Grow income from other financial services TFG ANALYST PRESENTATION - MAY 2011 38
Slide 40: RCS Group
RCS GROUP TFG ANALYST PRESENTATION - MAY 2011 39
Slide 41: RCS Group Structure
RCS GROUP STRUCTURE RCS Group Transactional Fixed Term Effective Finance Finance Intelligence (EI) – 65% holding RCS Personal RCS Cards( Pty) Ltd Finance (Pty) Ltd General Purpose Card Loans Private Label Insurance Queenspark Private Label Mass Discount Div (MDD) TFG ANALYST PRESENTATION - MAY 2011
Slide 42: RCS Group: Overview
RCS GROUP: OVERVIEW Further improvements compared to half-year results (profit before tax and balance sheet health) Expanded private label and co-branded opportunities New distribution channel capabilities Interest margin compression counterbalanced by: Increased non-interest revenue and growth in i
Slide 43: RCS Group: Financial Review – 2011
RCS GROUP: FINANCIAL REVIEW – 2011 FINANCIAL YEAR 2011 2010 Rm % change Rm Interest income 772,1 (3,3) 798,4 Other income 383,3 11,5 343,8 Total credit income 1 155.4 1,2 1 142,2 Net bad debt (231,1) (34,4) (352,4) Operating costs (448,6) 17,0 (383,5) EBIT 475,7 17,1 406,3 Interest paid (180,5) (2,6
Slide 44: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics 2011 2010 Number of active accounts („000) 665 643 Net debtors' book (Rm) 2 889 2 628 Arrear debt as percentage of total debt1 11,1% 14,4% Non-performing loans as percentage of total debt2 7,3% 10,1% Net bad debt write-off as percentage of turnover (cards
Slide 45: RCS Group: Balance Sheet & Funding
RCS GROUP: BALANCE SHEET & FUNDING Capital ratios 2011 2010 Return on equity 18,73% 17,11% Debt:Equity1 61.9% 63,5% 1 Debt:Equity - Term Funding/(Shareholders Equity (excl. Minority Interest) + Term Funding) Balance Sheet Low gearing with excess capital (below 70% target ratio) Healthy bad debt prov
Slide 46: RCS Group: Strategy and Outlook
RCS GROUP: STRATEGY AND OUTLOOK Outlook Positive profit growth for the next financial year Healthy balance sheet with adequate funding to deliver business Lower cost of funds Continue capital market activity through periodic fund-raising efforts Maintain asset quality relative to peers and market ex
Slide 47: Supply Chain
SUPPLY CHAIN TFG ANALYST PRESENTATION - MAY 2011 46
Slide 48: Top Retail Industry Predictions for 2011
TOP 10 RETAIL INDUSTRY PREDICTIONS FOR 2011 By consulting firm AlixPartners Cost increases may reduce profits more than expected “Speed to market” accelerates to new levels Winners in 2011 will have the fastest and most responsive supply chains. They will place smaller initial buys and be able to ge
Slide 49: Why the Fast Fashion Model?
WHY THE FAST FASHION MODEL? Speed and Speed flexibility matter! Growth Source: Barnes (2010) TFG ANALYST PRESENTATION - MAY 2011 48
Slide 50: Programme Lifecycle
PROGRAMME LIFECYCLE OBJECTIVES PROJECTS LEAD TIME Reduce Lead Times Enhance Reliability REPLENISHMENT Reduce Waste Guarantee Quality SUPPLIER RELATIONSHIP MANAGEMENT Standard Procedures Appropriate Measures PIPELINE Increase Stock Turn TFG ANALYST PRESENTATION - MAY 2011 49
Slide 51: Programme Lifecycle
PROGRAMME LIFECYCLE OBJECTIVES PROJECTS TRADING DIVISION WITH PROJECTS LEAD TIME Reduce Lead Times TRADING DIVISION Enhance Reliability REPLENISHMENT LEAD TIME Reduce Waste Guarantee Quality REPLENISHMENT SUPPLIER RELATIONSHIP MANAGEMENT Standard Procedures SUPPLIER RELATIONSHIP MANAGEMENT Appropria
Slide 52: Project Progress
PROJECT PROGRESS Logistical Lead Times Lead time for 3 month period ending March 2011 • >30-day reduction in Fabric 30.3 2.8 1 0 0.2 clothing divisions • 12-day reduction in jewellery division Jewellery 2 1 8.3 2.3 1.4 @home 29.2 2.2 4.5 3.5 1.2 Target 44 days for clothing divisions Total Clothing 2
Slide 53: Project Progress
PROJECT PROGRESS Replenishment Replenishment principles agreed & system selected Implementation began January 2011 Tested Hold-back principles Implementation completed by September 2011 TFG ANALYST PRESENTATION - MAY 2011 52
Slide 54: Project Progress
PROJECT PROGRESS Supplier relationship management TFG Merchandise Procurement Division established New supplier sign-on process Audit process in place Supplier scorecard and grading implemented Monthly e-mails & summary reports Delivery conformance scorecard and improvement process in place R4,4m ca
Slide 55: Project Progress
PROJECT PROGRESS Foschini; Exact, TFGA Pipeline Planning & buying processes to support in-season trading TFG Mmanufacturing realigned with trading divisions Refocused CMTs Quick response line piloted and rolled out to selected business areas Procured new system (I-Sync) Delivered 4,5m units LY (18%
Slide 56: Project Progress
PROJECT PROGRESS Direct repeat - updated colours with Mauritian supplier 10 500 units across 4 colours – 10-week response, including shipping Repeat order sold out TFG ANALYST PRESENTATION - MAY 2011 55
Slide 57: Project Progress
PROJECT PROGRESS Repeat 1 Repeat 1 - 5 weeks response - 1 500u cleared 75% 8 weeks Repeat 2 Repeat 2 - 5 weeks response - 1 900u cleared 91% in 8 weeks Both repeats done with strategic fabric stocks TFG ANALYST PRESENTATION - MAY 2011 56
Slide 58: Project Progress
PROJECT PROGRESS Direct repeat 6 weeks response time TFG ANALYST PRESENTATION - MAY 2011 57
Slide 59: Project Progress
PROJECT PROGRESS Direct repeat 5 weeks response time TFG ANALYST PRESENTATION - MAY 2011 58
Slide 60: Fashion Express
FASHION EXPRESS fashion latest trends express high speed into stores for less at low prices TFG ANALYST PRESENTATION - MAY 2011 59
Slide 61: Fashion Express: February 2011 Results
FASHION EXPRESS: FEBRUARY 2011 RESULTS 30% (18 000 units) of our range was turn-on stock in reaction to sales and fashion trends 28% (17 000 units) of the range was repeats from best sellers in summer Close to 60% of our range in Feb was reactionary: 36% sales growth (104% of plan) 36% clearance ver
Slide 62: Objectives
OBJECTIVES Reduce Lead Times Enhance Reliability Reduce Waste Key Measure: Guarantee Quality Standard Procedures Increased Stock Turn Appropriate Measures Increase Stock Turn TFG ANALYST PRESENTATION - MAY 2011 61
Slide 63: Stock Turn – Clothing
STOCK TURN – CLOTHING 12-month rolling 3.9 3.7 3.5 3.3 3.1 2.9 2.7 2.5 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 2010 2011 TFG ANALYST PRESENTATION - MAY 2011 62
Slide 64: Stock Turn – Cellular
STOCK TURN – CELLULAR 12-month rolling 8.5 8.0 7.5 7.0 6.5 6.0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2009 2010 2011 TFG ANALYST PRESENTATION - MAY 2011 63
Slide 65: Stock Turn - Cosmetics, Jewellery, Homewares
STOCK TURN - Cosmetics, Jewellery, Homewares 2.2 2.1 2.0 1.9 1.8 1.7 1.6 1.5 Apr May Jun Jul Aug Se p Oct Nov Dec Jan Fe b Mar 2009 2010 2011 TFG ANALYST PRESENTATION - MAY 2011 64
Slide 66: Why the Fast Fashion Model?
WHY THE FAST FASHION MODEL? TFG Mar 2011 TFG Source: Barnes (2010) TFG ANALYST PRESENTATION - MAY 2011 65
Slide 67: Where to From Here?
WHERE TO FROM HERE? Projects Process, Tools & Learnings Ensure sustainability Maintain cross-division learning Ensure continuous improvement SUPPLY CHAIN REMAINS A BOARD STRATEGIC FOCUS & A KEY OBJECTIVE TFG ANALYST PRESENTATION - MAY 2011 66
Slide 68: Supply Chain Development Programme
SUPPLY CHAIN DEVELOPMENT PROGRAMME SUPPLY CHAIN STEERING COMMITTEE Analytics & Programme Management SUPPLY CHAIN DEVELOPMENT PROGRAMME DIVISION PROGRAMMES 2011 PROJECTS FORUMS QUICK RESPONSE & DEV‟T OF LOCAL INDUSTRY FAST FASHION/ QUICK RESPONSE MARKHAM FABRIC MNGT SPORTS DIV REPLENISHMENT LEAD TIME
Slide 69: Introducing the Foschini Group Fast Fashion Cluster
INTRODUCING THE FOSCHINI GROUP FAST FASHION CLUSTER Clothing and Textiles Competitiveness improvement Programme Cluster Project TFG ANALYST PRESENTATION - MAY 2011 68
Slide 70: How Is the Cluster Structured Institutionally?
HOW IS THE CLUSTER STRUCTURED INSTITUTIONALLY? 75% Fundin TFG Directors g from Trading Division MD‟s DTI CMT Owners Project Managers Section 21 Co. Merchandise Planning and TFGA CMT In-season Optimisation Development trading TFG ANALYST PRESENTATION - MAY 2011 69
Slide 71: What Will the Cluster Do?
WHAT WILL THE CLUSTER DO? Establish a World-class Fast Fashion merchandise planning process within Foschini and Exact Divisions, as well as between Foschini/Exact, TFGA and CMTs: Development of an Open-To-Buy (OTB) merchandising plan to facilitate FF opportunities Development of improved capacity pl
Slide 72: Outlook
OUTLOOK TFG ANALYST PRESENTATION - MAY 2011 71
Slide 73: Outlook
OUTLOOK More positive consumer sentiment with improved consumer spending expected to continue However, mindful of current inflation rate environment and expected interest rate increases Merchandise inflation current winter season approximately 5% Forthcoming summer season approximately 8% Supply cha
Slide 74: Thank You
THANK YOU TFG ANALYST PRESENTATION - MAY 2011 73
Slide 75: 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