Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2015 Earnings Presentation
42 slides from Foschini's earnings presentation, November 2014
Slide 1: Results Presentation for the Half-Year Ended 30 September 2014
RESULTS PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2014
Slide 2: Agenda
AGENDA • Economy & retail environment Doug Murray • Review of the period Doug Murray • Business review Doug Murray • Financial review Ronnie Stein • TFG Financial Services Jane Fisher • Outlook Doug Murray TFG | SEPTEMBER 2014 RESULTS PRESENTATION 2
Slide 3: Economy & Retail Environment
ECONOMY & RETAIL ENVIRONMENT
Slide 4: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT • The global economic outlook remains mixed › Growth for 2014 flat › Advanced economies showing mixed signs of economic momentum – German economy under pressure – Weaker outlook for China • Domestic economy remains vulnerable › Large domestic trade and current acco
Slide 5: Trading Environment
TRADING ENVIRONMENT Source of graphs: BER Economic Snapshot October 2014 TFG | SEPTEMBER 2014 RESULTS PRESENTATION 5
Slide 6: Trading Environment
TRADING ENVIRONMENT Source of graphs: BER Economic Snapshot October 2014 TFG | SEPTEMBER 2014 RESULTS PRESENTATION 6
Slide 7: Review of the Period
REVIEW OF THE PERIOD
Slide 8: Review of the Period
REVIEW OF THE PERIOD • Consumers remain under pressure › Difficult credit cycle › Credit sales constrained • Cash sales buoyant › Indicating desirability of our merchandise to customers • Gross margins in all product categories maintained › Merchandise inflation at approximately 7% • Like-for-like e
Slide 9: September 2014: Salient Features
SEPTEMBER 2014: SALIENT FEATURES RETAIL TURNOVER – R7,3bn GROSS MARGIN – 45,4% +9,7% OPERATING MARGIN RETAIL – HEPS continuing – 403,3 cents 17,1% +8,0% -0,4% DILUTED HEPS continuing – NET BAD DEBT / CLOSING 401,7 cents DEBTORS’ BOOK – 12,9% +8,0% +0,5% HEPS total – 426,5 cents ROE RETAIL – 29,2% +3
Slide 10: Business Review
BUSINESS REVIEW
Slide 11: Business Review: Overview
BUSINESS REVIEW: OVERVIEW • TFG = home of leading retail brands › 17 brands − Primarily own brands – leading household names › Over 2 200 stores − 2 071 in South Africa − 134 rest of Africa • Broad product offering across various merchandise categories • Broad LSM appeal from value to upper end TFG
Slide 12: Business Review: Footprint
BUSINESS REVIEW: FOOTPRINT Total South Brand Africa number of Africa stores @home 77 3 80 @home livingspace 20 - 20 American Swiss 213 16 229 Charles & Keith 10 - 10 Donna Claire 83 4 87 DueSouth 40 4 44 exact! 241 12 253 Fabiani 18 - 18 Fashion Express 209 15 224 Foschini 248 19 267 G-Star Raw 5 -
Slide 13: Business Review: Turnover by Merchandise Category
BUSINESS REVIEW: TURNOVER BY MERCHANDISE CATEGORY September September 2014 2013 % Same Retail turnover by merchandise category (Rm) (Rm) % Change store growth Clothing 4 903,2 4 521,0 8,5 3,3 Jewellery 656,0 622,3 5,4 0,7 Cellphones 729,0 603,4 20,8 16,4 Homeware & furniture 552,3 488,0 13,2 7,2 Cos
Slide 14: Business Review: Merchandise Category Contribution
BUSINESS REVIEW: MERCHANDISE CATEGORY CONTRIBUTION Homeware and furniture 7.6% Cosmetics 6.3% Cellphones 10.0% Jewellery Clothing and footwear 9.0% 67.1% TFG | SEPTEMBER 2014 RESULTS PRESENTATION 14
Slide 15: Business Review: Merchandise Category Contribution
BUSINESS REVIEW: MERCHANDISE CATEGORY CONTRIBUTION Homeware and furniture Sport 7.6% 19.6% Cosmetics 6.3% Cellphones 10.0% Jewellery 9.0% Fashion Value 34.5% 13.0% TFG | SEPTEMBER 2014 RESULTS PRESENTATION 15
Slide 16: Business Review: Cash vs Credit Turnover Growth
BUSINESS REVIEW: CASH VS CREDIT TURNOVER GROWTH 25.0% 20.3% 20.0% Growth in cash sales Growth in credit sales 15.9% Growth in sales (%) 15.0% 13.7% 9.1% 10.0% Growth in credit sales constrained to appropriate level in 5.7% current difficult 5.0% credit cycle 2.5% 0.0% FY 2013 FY 2014 April 2014 - Se
Slide 17: Business Review: Africa
BUSINESS REVIEW: AFRICA • All Africa stores corporate stores • Rest of Africa now 134 stores • 25,9% turnover growth with 16% same store turnover growth • All territories profitable other than Nigeria • 14 stores opened during the year • Further expansion › Ghana (2nd half 2015) › Kenya › Mozambique
Slide 18: Financial Review
FINANCIAL REVIEW
Slide 19: Financial Review: Half-Year Ended September 2014
FINANCIAL REVIEW: HALF-YEAR ENDED 30 SEPTEMBER 2014 September 2014 % Change Revenue (Rm) 8 538,3 10,2 Retail turnover (Rm) 7 305,1 9,7 Gross margin (%) 45,4% Trading expenses excluding net bad debt (Rm) 2 819,8 12,0 Net bad debt (Rm) 485,2 9,9 Operating margin (%) 17,1% Profit from continuing operat
Slide 20: Financial Review: RCS Group Transaction
FINANCIAL REVIEW: RCS GROUP TRANSACTION • RCS Group transaction now completed › Closing date 6 August 2014 › Effective date 30 June 2014 • Results include 3 months trading of RCS Group • TFG share of proceeds R1,4 billion › Currently used to reduce borrowings › Board continues to evaluate all altern
Slide 21: TFG Earnings and Distribution
TFG EARNINGS AND DISTRIBUTION 450 426.5 413.0 400.5 400 350 341.9 Cents 300 272.3 263 236 243 250 232.9 190 200 HEPS DPS 138 150 118 100 50 0 Sept 2009 Sept 2010 Sept 2011 Sept 2012 Sept 2013 Sept 2014 TFG | SEPTEMBER 2014 RESULTS PRESENTATION 21
Slide 22: Revenue
REVENUE September 2014 September 2013* % (Rm) (Rm) Change Retail turnover 7 305,1 6 660,9 9,7 Interest income 663,5 548,2 21,0 Other revenue 569,7 541,6 5,2 Group total 8 538,3 7 750,7 10,2 *2013 restated to reflect RCS Group as discontinued operation • Satisfactory growth in retail turnover in toug
Slide 23: Gross Profit
GROSS PROFIT September 2014 September 2013* Gross profit (Rm) 3 318,8 3 033,2 Gross margin (%) 45,4 45,5 *Cost of sales definition at March 2014 refined to include only costs directly related to the cost of merchandise. Previously included cost of marketing, buying and planning, now treated as a tra
Slide 24: Interest Income
INTEREST INCOME September 2014 September 2013 * (Rm) (Rm) % Change Trade receivables – retail 654,0 540,4 21,0 Sundry 9,5 7,8 21,8 Total interest income 663,5 548,2 21,0 *2013 restated to reflect RCS Group as discontinued operation • Due to the impact of the NCA capping formula, interest yields rema
Slide 25: Trading Expenses
TRADING EXPENSES September 2014 % to turnover September 2013* % to turnover (Rm) Sept 2014 (Rm) Sept 2013 % Growth Depreciation (198,2) 2,7 (173,2) 2,6 14,4 Employee costs (1 056,8) 14,5 (974,0) 14,6 8,5 Occupancy costs (748,7) 10,2 (663,3) 10,0 12,9 Other net operating costs (816,1) 11,2 (707,3) 10
Slide 26: Finance Cost
FINANCE COST September 2014 September 2013* (Rm) (Rm) % Growth Finance cost (85,6) (66,3) 29,1 *2013 restated to reflect RCS Group as discontinued operation • Interest impacted by: › Higher average borrowing levels − Level of debtors’ book and capex − Offset by proceeds from the disposal of the RCS
Slide 27: Stock and Creditors
STOCK AND CREDITORS September 2014 March 2014 (Rm) (Rm) % Growth Inventory 2 846,6 2 775,9 2,6 • March 2014 inflated due to move of Easter • Includes impact of new stores • Quantum of merchandise stock is appropriate for expected levels of trading September 2014 March 2014 (Rm) (Rm) % Growth Trade a
Slide 28: Trade Receivables
TRADE RECEIVABLES September 2014 March 2014 (Rm) (Rm) % Growth Trade receivables - retail 5 971,0 5 796,6 3,0 • Our biggest asset by far • Increased at approximately the same rate as credit turnover • Continues to be well managed in the current climate › Adequate provisioning • Jane Fisher will deal
Slide 29: Cash Generation & Utilisation
CASH GENERATION & UTILISATION September 2014 (Rm) March 2014 (Rm) Interest-bearing debt 1 803,4 2 960,4 Less: Cash (433,1) (301,3) Borrowings 1 370,3 2 659,1 (Rm) September 2014 (Rm) Net borrowings at beginning of the period (2 659,1) Cash EBITDA 1 429,9 Increase in creditors 96,4 Proceeds on dispos
Slide 30: Capex
CAPEX September 2014 September 2013* (Rm) (Rm) Stores 197,9 155,7 IT 95,3 87,6 Other 28,3 12,9 Total 321,5 256,2 *2013 restated to reflect RCS Group as discontinued operation • The majority of capex relates to opening of new stores, in line with our strategy of growing floor space • Projected capex
Slide 31: TFG Financial Services
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Slide 32: TFG Financial Services: Industry Review
TFG FINANCIAL SERVICES: INDUSTRY REVIEW • Index declined marginally this quarter; this is now the 10th consecutive quarter of deteriorating credit health • Household cashflows still very weak • Food, petrol and utilities bills are increasing at a faster rate than household income • Further exacerbat
Slide 33: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Slowdown in growth of delinquency levels, but remains high › Growth in net bad debt dropped from 39,5% (March 2014) to 9,9% (Sept 2014) › Improvements in application scoring leading to better quality accounts › Pre-delinquency strategies showing good results
Slide 34: TFG Financial Services – Credit: Performance
TFG FINANCIAL SERVICES – CREDIT: PERFORMANCE September 2014 September 2013* (Rm) (Rm) % Growth Interest income 654,0 540,4 21,0 Net bad debt (485,2) (441,3) 9,9 Credit costs (97,9) (87,3) 12,1 EBIT 70,9 11,8 * Restated to show credit separately from other customer value added products as per year en
Slide 35: TFG Financial Services - Credit: Book
TFG FINANCIAL SERVICES - CREDIT : BOOK Key debtor statistics September 2014 September 2013 % Growth Number of active accounts (‘000) 2 663,3 2 652,5 0,4% Credit sales as a % of total retail sales 55,8 59,7 Net debtors’ book (Rm) 5 971,0 5 502,0 8,5% • Credit turnover growth rate for the period slows
Slide 36: TFG Financial Services - Credit: Statistics
TFG FINANCIAL SERVICES - CREDIT : STATISTICS Key debtor statistics September 2014 March 2014 September 2013 Arrear debtors % to debtors’ book* 24,2 25,2 22,2 Overdue values % to debtors’ book 15,1 15,3 15,8 Net bad debt write off as a % of credit transactions 7,5 7,1 6,4 Net bad debt write off as a
Slide 37: TFG Financial Services: Customer Value Added Products
TFG FINANCIAL SERVICES : CUSTOMER VALUE ADDED PRODUCTS September 2014 September 2013* (Rm) (Rm) % Growth Publishing net income 88,1 86,6 1,7 Insurance net income 104,1 105,6 (1,4) Mobile one2one airtime net income 36,9 32,1 15,0 EBIT 229,1 224,3 2,1 * Restated to show credit separately from other cu
Slide 38: TFG Financial Services: Strategy & Outlook
TFG FINANCIAL SERVICES: STRATEGY & OUTLOOK • Good first half and a tougher second half of the year to be expected › Account growth likely to stay flat for financial year end › Growth of credit sales expected to remain muted › Book growth is likely to slow in second half of the year • Consumers are s
Slide 39: Outlook
OUTLOOK
Slide 40: Outlook & Guidance for Second Half 2015
OUTLOOK & GUIDANCE FOR SECOND HALF 2015 • We expect to continue to benefit from strong cash sales growth • Credit environment likely to remain challenging although have started to see some improvement › Postal strike having negative impact in the short term • Gross margins to be maintained › Second
Slide 41: Additional Information
ADDITIONAL INFORMATION
Slide 42: 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