Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2011 Earnings Presentation
46 slides from Foschini's earnings presentation, November 2010
Slide 1: Analyst Presentation for the Half-Year Ended 30 September 2010
ANALYST PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2010 TFG ANALYST PRESENTATION NOVEMBER 2010 1
Slide 2: 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 TFG ANALYST PRESENTATION NOVEMBER 2010 2
Slide 3: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT TFG ANALYST PRESENTATION NOVEMBER 2010 3
Slide 4: The economy and retail environment
The economy and retail environment • Global economic recovery, while facing some headwinds, continued in second and third quarter of 2010 • The South African economy exited recession in 2009 q3, and continues to strengthen • The BER projects GDP growth of 3,1% in 2010 and 3,3% in 2011 • BER projects
Slide 5: Review of the Period
REVIEW OF THE PERIOD TFG ANALYST PRESENTATION NOVEMBER 2010 5
Slide 6: Review of the period
Review of the period • Our group trades in the mass-middle market space and our customers • h have bbenefited fi d ffrom the h more positive i i consumer sentiment i d driven i b by reall wage increases and lower inflation • continue to be effected by job losses • Gross margins maintained • RCS Grou
Slide 7: Review of the period continued
Review of the period continued • Group turnover up 12,5% to R4,6 billion • Profit before tax of R885,9 million: up 17,4% • Headline earnings per share up 16,9% to 272,3 cents g • Weighted average g ordinary y shares: 208,0 million, up from 207,7 million • Operating margin increased to 22,0% • Interi
Slide 8: Review of the period continued
Review of the period continued September 2010 September 2009 % Same store Retail turnover by merchandise category (Rm) (Rm) % Growth growth Clothing 3 081,9 2 758,0 11,7 7,6 Jewellery 494,8 448,3 10,4 7,3 Cellphones 391,6 312,0 25,5 22,0 Cosmetics 309 9 309,9 292 6 292,6 59 5,9 30 3,0 Homeware & fur
Slide 9: Financial Review
FINANCIAL REVIEW TFG ANALYST PRESENTATION NOVEMBER 2010 9
Slide 10: Financial review: half-year to September 2010
Financial review: half-year to September 2010 September 2010 September 2009 Income Statement for the period ended (Rm) (Rm) % change Retail turnover 4 581,6 4 072,7 12,5 Cost of turnover (2 674,0) (2 392,9) Gross profit 1 907,6 1 679,8 Interest received 736 3 736,3 721 9 721,9 Dividends received 6,3
Slide 11: Revenue
Revenue September 2010 September 2009 (Rm) (Rm) % Growth Retail turnover 4 581,6 4 072,7 12,5 Interest received 736,3 721,9 2,0 Dividends received 6,3 7,2 (12,5) Other revenue 434 7 434,7 343 3 343,3 26 6 26,6 Group total 5 758,9 5 145,1 11,9 • More positive consumer sentiment evident in retail turn
Slide 12: Gross profit
Gross profit September 2010 September 2009 Gross profit (Rm) 1 907,6 1 679,8 Gross margin (%) 41,6 41,3 • Input margin constant • Improved pricing passed on to customers • Markdowns well controlled TFG ANALYST PRESENTATION NOVEMBER 2010 12
Slide 13: Interest received
Interest received September 2010 September 2009 (Rm) (Rm) % growth Trade receivables – retail 344,4 309,7 11,2 RCS Group loan receivables 147,1 185,2 (20,6) RCS Group private label card receivables 238,1 219,7 8,4 Sundry – retail 42 4,2 43 4,3 (2 3) (2,3) Sundry – RCS Group 2,5 3,0 (16,7) Total 736,
Slide 14: Trading expenses
Trading expenses % to September 2010 September 2009 turnover % (Rm) % to turnover 2010 (Rm) 2009 growth Depreciation and amortisation (137,1) 3,0 (128,3) 3,2 6,9 Employee costs (761,0) 16,6 (640,6) 15,7 18,8 Store occupancy costs (430,3) 9,4 (381,8) 9,4 12,7 Other occupancy costs (8 7) (8,7) 02 0,2
Slide 15: Employee costs
Employee costs September 2010 September 2009 % growth Employee costs: normal – retail (Rm) 639,6 572,2 11,8 Employee costs: share-based payments (IFRS 2) - retail (Rm) 19,0 7,0 Employee costs: bonuses - retail (Rm) 25,8 1,6 Total employee costs – retail (Rm) 684 4 684,4 580 8 580,8 17 8 17,8 Employe
Slide 16: Interest paid
Interest paid September 2010 September 2009 (Rm) (Rm) % growth Interest paid 122,0 135,6 (10,0) • Decrease due to reduced borrowing levels and lower interest rates • Savings on our R800 million fixed facilities will only be of benefit in the next financial year • The majority of the interest paid re
Slide 17: Segmental analysis
Segmental analysis September 2010 September 2009 (Rm) (Rm) % change Retail 764,1 648,6 17,8 RCS Group 121,8 106,0 14,9 Total profit before tax 885,9 754,6 17,4 • Retail produced an encouraging result with 17,8% growth • RCS Group • Performed P f d satisfactorily i f il – up 14,9% 14 9% on llast year
Slide 18: Balance sheet
Balance sheet • Our group’s balance sheet remains strong • R297,8 million share buy-backs undertaken by share trust • The next few slides deal with keyy elements of our balance sheet TFG ANALYST PRESENTATION NOVEMBER 2010 18
Slide 19: Stock and creditors
Stock and creditors September 2010 September 2009 Rm Rm % growth Stock of merchandise 1 310,6 1 367,7 (4,2) • Stock down 4,2% • Continue C ti tto see b benefits fit ffrom supply l chain h i project j t September 2010 September 2009 Rm Rm % growth Trade and other payables 1 499,5 1 215,6 23,4 • Stock
Slide 20: Trade receivables
Trade receivables September 2010 September 2009 Rm Rm % growth Loan receivables 801,0 1 052,5 (23,9) Private label card receivables 1 905,1 1 527,3 24,7 RCS Group 2 706,1 2 579,8 4,9 Trade receivables – retail 3 388,5 2 923,0 15,9 Total receivables 6 094,6 5 502,8 10,8 • Total receivables on balance
Slide 21: Borrowings and non-controlling interest loan
Borrowings and non-controlling interest loan September 2010 September 2009 % growth Interest-bearing debt and non-controlling interest loan 2 134,7 2 227,9 (4,2) Less: Preference share investment (200,0) (200,0) Less: Cash (296,9) (215,8) 37,6 Net borrowings 1 637 637,8 8 1 812 812,1 1 (9 6) (9,6) L
Slide 22: Cash generation and utilisation
Cash generation and utilisation Rm Total Rm Net borrowings at the beginning of the period (1 485,5) Cash EBITDA 1 036,7 Increase in creditors 205,7 Inventory reduction 86 4 86,4 Other investing activities 6,5 Cash generated 1 335,3 Taxation paid (365,8) Dividends paid (366,0) Retail and other debtor
Slide 23: Capex
Capex September 2010 September 2009 % growth Stores 83,2 112,5 (26,0) RCS Group 3,9 2,7 44,4 IT 34,8 46,0 (24,3) Other 26 5 26,5 13 9 13,9 90 7 90,7 Total 148,4 175,1 (15,2) • 56,1% of capex relates to opening of new stores, in line with our strategy of growing our floor space • Budgeted capex for y
Slide 24: Divisional Review
DIVISIONAL REVIEW TFG ANALYST PRESENTATION NOVEMBER 2010 24
Slide 25: Divisional review: Overall
Divisional review: Overall September 2010 % Same store Turnover (Rm) % Growth growth Number of stores Foschini division 1 745,7 7,2 3,8 463 Markham 750,1 16,4 13,2 239 Exact 426,0 20,2 16,8 203 Sports division 819 1 819,1 17 1 17,1 11 6 11,6 303 Jewellery division 537,3 10,9 7,8 369 @home 303,4 16,1
Slide 26: Divisional review: Overall
Divisional review: Overall • Foschini • Clothing turnover growth of 5,7% against a high base (+13,2% in corresponding period) • Stock mix between smart and casual corrected for this summer • Initial indication of summer merchandise promising • Markham • Traded well • Grew clothing g turnover by y 13
Slide 27: Financial Services
FINANCIAL SERVICES TFG ANALYST PRESENTATION NOVEMBER 2010 27
Slide 28: Financial services: Agenda
Financial services: Agenda • Financial Services Overview • Credit Landscape • Structure • TFG Financial Services • Period overview • Performance • Book • Statistics • Strategy & outlook • RCS Group • Structure St t • Overview • Financial review • Performance • Strategy & outlook TFG ANALYST PRESENTA
Slide 29: Financial services overview: Credit landscape last 6 months
Financial services overview: Credit landscape last 6 months • Unemployment remains a cause for concern • Wage W increases i outstrip t t i inflation i fl ti • Bad debt trend improving • Volume and value of accounts going under debt review stabilising and cash flows from debt review matters improving
Slide 30: Financial services overview: Structure
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 CARD
Slide 31: TFG Financial Services
TFG FINANCIAL SERVICES TFG ANALYST PRESENTATION NOVEMBER 2010 31
Slide 32: TFG financial services: Period overview
TFG financial services: Period overview • Debt Review matters move to R91,1m from R76,8m in March 2010 • Performance P f off book b k remainsi good d • Focus on new accounts generated a growth of 11,9% year on year • Financial services initiatives increase other net income by 43,8% • Interest income
Slide 33: TFG financial services: Performance
TFG financial services: Performance September 2010 September 2009 Rm % change Rm Interest income 344,4 11,2 309,7 Net bad debt (186,9) 8,1 (172,9) Net credit costs (105,8) (2,5) (108,5) Net risk risk-adjusted adjusted income 51 7 51,7 82 7 82,7 28 3 28,3 Other net income 139,4 43,7 97,0 Profit befor
Slide 34: TFG financial services: Book
TFG financial services: Book Key debtor statistics September 2010 September 2009 Number of active accounts with debit balances (‘000) 2 121,7 2 003,1 Credit sales as a % of total retail sales 61,8 63,7 Net debtors’ book (Rm) 3 388,5 2 923,0 • Active accounts growth by 5,9% • Growth in cash sales out
Slide 35: TFG financial services: Statistics
TFG financial services: Statistics Key debtor statistics September 2010 March 2010 Arrear debtors % to debtors book 21,6 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 95 9,5 99 9,9 Doubtful debt provision as a % of debtors book 9,0 8,
Slide 36: TFG financial services: Strategy and outlook
TFG financial services: Strategy and outlook • Active account base growth remains a key focus area • Maintain double digit growth in publishing, insurance and O2O • Explore diversified mobile offering • Investment in CRM platform is expected to generate further cross selling opportunities TFG ANALYS
Slide 37: RCS Group
RCS GROUP TFG ANALYST PRESENTATION NOVEMBER 2010 37
Slide 38: RCS Group: Structure
RCS Group: Structure RCS Group Transactional Fixed Term Investments Finance Finance General purpose Effective Personal loans RCS Card Intelligence (60%) Private labels Queenspark Insurance Game, Dion Wired Co-branded cards AD Spitz Cape Union Mart Shared services (HR, ICT,risk analytics, collections
Slide 39: RCS Group: Overview
RCS Group: Overview • Improvements in half year results (profit before tax and balance sheet health) • Interest margin compression counter balanced by • Increased non-interest revenue • Better asset quality resulting in lower net bad debt • Continued C ti d success iin th the capital it l markets k
Slide 40: RCS Group: Financial review – 2010 half-year
RCS Group: Financial review – 2010 half-year September 2010 September 2009 Rm % change Rm Interest income 387,7 (4,9) 407,9 Other income 193,0 10,8 174,2 Total credit income 580,7 (0,2) 582,1 Net bad debt (137 0) (137,0) (21 6) (21,6) (174 8) (174,8) Operating costs (230,1) 12,4 (204,7) EBIT 213,6 5
Slide 41: RCS Group: Performance
RCS Group: Performance Key debtor statistics September 2010 September 2009 Number of active accounts (‘000) 646 660 Net debtors' book (Rm) 2 706 2 580 Arrear debt as percentage of total debt1 12,4% 16,1% Non performing loans as percentage of total debt2 Non-performing 9 0% 9,0% 11 2% 11,2% Net bad d
Slide 42: RCS Group: Strategy and outlook
RCS Group: Strategy and outlook • Outlook • Maintain positive profit trend for the remainder of the year • Adequate funding facilities in place to deliver business plans • Funding strategy aimed at: • lowering the weighted average cost of funds • and diversifying the funding pool • Maintain gains in
Slide 43: Outlook
OUTLOOK TFG ANALYST PRESENTATION NOVEMBER 2010 43
Slide 44: Outlook for the second half of 2011
Outlook for the second half of 2011 • Continued unemployment in the economy remains a potential risk • Cautiously optimistic regarding trading in the second half of this year • Focus on managing delivery challenges • Continued focus on cost and inventory management • 76 stores t planned l d ffor sec
Slide 45: Thank You
THANK YOU TFG ANALYST PRESENTATION NOVEMBER 2010 45
Slide 46: Disclaimer
Disclaimer This announcement contains certain forward-looking 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 e e ts a and