Foschini Group Limited · JSE:TFG
Foschini — The Foschini Group — H1 2014 Earnings Presentation
45 slides from Foschini's earnings presentation, Sep 30, 2013
Slide 1: Analyst Presentation for the Half-Year Ended 30 September 2013
ANALYST PRESENTATION FOR THE HALF-YEAR ENDED 30 SEPTEMBER 2013 1 TFG / 2013 ANALYST PRESENTATION
Slide 2: Economy & Retail Environment
ECONOMY & RETAIL ENVIRONMENT ECONOMY & Doug Murray RETAIL ENVIRONMENT 2 Doug Murray TFG / 2013 ANALYST PRESENTATION
Slide 3: The Economy and Retail Environment
THE ECONOMY AND RETAIL ENVIRONMENT • News on the global economy remains mixed • Signs of healing in Eurozone • Chinese slowdown • Tapering of quantitative easing • Outlook for SA economy has deteriorated • Domestic labour issues • Global concerns • As a result, projected GDP growth is at 1,9% for 20
Slide 4: Trading Environment
TRADING ENVIRONMENT 4 TFG / 2013 ANALYST PRESENTATION
Slide 5: Trading Environment
TRADING ENVIRONMENT 5 TFG / 2013 ANALYST PRESENTATION
Slide 6: Review of the Period
REVIEW OF THE PERIOD 6 Doug Murray TFG / 2013 ANALYST PRESENTATION
Slide 7: Review of the Period
REVIEW OF THE PERIOD • Consumers remain under pressure: • Dramatic slow down in unsecured lending resulting in a weak consumer credit environment • Credit sales under pressure • Cash sales strong • Gross margins within merchandise categories maintained • Like-for-like expense growth – well controlle
Slide 8: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED RETAIL TURNOVER – R6,7 billion DILUTED HEPS – 411,2 cents +9,0% +3,8% HEPS – 413,0 cents OPERATING MARGIN – 22,5% +3,1% -0,6% INTERIM DIVIDEND – 243,0 cents ROE – 26,3% +3,0% ROE retail – 28,1% ROE RCS Group – 18,9% CONTINUED GROWTH IN ACTIVE ACCOUNTS 8 TFG / 2013 ANAL
Slide 9: Cash vs Credit Turnover Growth
CASH VS CREDIT TURNOVER GROWTH 9 TFG / 2013 ANALYST PRESENTATION
Slide 10: Review of the Period Continued
REVIEW OF THE PERIOD CONTINUED % Same Retail turnover by September 2013 September 2012 % Growth store merchandise category (Rm) (Rm) growth Clothing 4 521,0 4 174,0 8,3 2,7 Jewellery 622,3 592,5 5,0 1,8 Cellphones 603,4 534,5 12,9 7,2 Cosmetics 426,2 383,5 11,1 7,4 Homeware & furniture 488,0 427,7 1
Slide 11: Cash vs Credit Turnover Growth per Merchandise Category (%)
CASH VS CREDIT TURNOVER GROWTH PER MERCHANDISE CATEGORY (%) 11 TFG / 2013 ANALYST PRESENTATION
Slide 12: Divisional Review: Overall
DIVISIONAL REVIEW: OVERALL September 2013 Turnover Number of (Rm) % Growth stores Foschini division 1 939,3 4,5 357 Fashion Express 377,1 12,4 202 Markham 1 181,7 9,3 294 Exact 638,8 7,1 235 TFG Sports 1 348,4 15,8 454 Jewellery division 687,6 5,7 414 @home 488,0 14,1 94 Group total 6 660,9 9,0 2 05
Slide 13: Divisional Review: Africa Expansion
DIVISIONAL REVIEW: AFRICA EXPANSION TFG currently operates in the following countries: • All Africa stores corporate stores • Rest of Africa now 116 stores • 25% turnover growth • 12 new stores were opened in the last 6 months • Further expansion: • Ghana • Angola • Mozambique • 300 stores targeted
Slide 14: Financial Review
FINANCIAL REVIEW 14 Ronnie Stein TFG / 2013 ANALYST PRESENTATION
Slide 15: Financial Review: Half-Year Ended September 2013
FINANCIAL REVIEW: HALF-YEAR ENDED SEPTEMBER 2013 September September Income Statement for the period ended 2013 (Rm) 2012 (Rm) % change Retail turnover 6 660,9 6 112,2 9,0 Cost of turnover (3 882,9) (3 553,7) Gross profit 2 778,0 2 558,5 Interest income 1 089,7 966,4 Other revenue 841,0 671,3 Tradin
Slide 16: TFG – Earnings and Distribution
TFG – EARNINGS AND DISTRIBUTION 16 TFG / 2013 ANALYST PRESENTATION
Slide 17: Revenue
REVENUE September 2013 September 2012 (Rm) (Rm) % Growth Retail turnover 6 660,9 6 112,2 9,0 Interest income 1 089,7 966,4 12,8 Other revenue 841,0 671,3 25,3 Group total 8 591,6 7 749,9 10,9 • Satisfactory growth in retail turnover in tough credit environment • Interest income will be dealt with se
Slide 18: Gross Profit
GROSS PROFIT September 2013 September 2012 (Rm) (Rm) Gross profit (Rm) 2 778,0 2 558,5 Gross margin (%) 41,7 41,8 • Gross margins in all merchandise categories maintained • Clothing gross margin has upward potential for the future, dependent on currency exchange rate as well as competitive product p
Slide 19: Interest Income
INTEREST INCOME September 2013 September 2012 (Rm) (Rm) % Growth Trade receivables – retail 540,4 478,1 13,0 Receivables - RCS Group 535,6 477,9 12,1 Sundry 13,7 10,4 31,7 Total interest income 1 089,7 966,4 12,8 • Due to the impact of the NCA capping formula, interest yields at their lowest • Incre
Slide 20: Trading Expenses
TRADING EXPENSES % to September 2013 % to turnover September turnover (Rm) 2013 2012 (Rm) 2012 % Growth Depreciation and amortisation (181,4) 2,7 (157,7) 2,6 15,0 Employee costs - normal (1 022,4) 15,3 (963,9) 15,8 6,1 Employee costs – share-based payments (43,8) 0,7 (30,4) 0,5 44,1 Occupancy costs
Slide 21: Finance Costs
FINANCE COSTS September 2013 September 2012 (Rm) (Rm) % Growth Finance costs - retail (66,3) (50,7) 30,8 Finance costs – RCS Group (126,2) (105,3) 19,8 Total finance costs (192,5) (156,0) 23,4 • Finance charges mainly relate to RCS Group • Retail interest impacted by share buy-backs 21 TFG / 2013 AN
Slide 22: Segmental Analysis
SEGMENTAL ANALYSIS September 2013 September 2012 (Rm) (Rm) % Growth Retail 1 097,6 1 072,5 2,3 RCS Group 207,2 185,6 11,6 Total profit before tax 1 304,8 1 258,1 3,7 • Retail produced growth of 2,3% in a difficult period • RCS Group • Good performance – up 11,6% on last year • Contribution to group
Slide 23: Stock and Creditors
STOCK AND CREDITORS September 2013 September 2012 (Rm) (Rm) % Growth Stock of merchandise 2 459,6 2 006,5 22,6 • Last year stock at this period was too low caused by logistical issues • Impact of new stores 7% – 8% • Quantum of merchandise stock is appropriate for expected levels of trading Septembe
Slide 24: Trade Receivables
TRADE RECEIVABLES September 2013 March 2013 (Rm) (Rm) % Growth Loan receivables 1 043,1 1 104,3 (5,5) Card receivables 3 423,2 3 106,4 10,2 RCS Group 4 466,3 4 210,7 6,1 Trade receivables – retail 5 502,0 5 207,7 5,7 Total receivables 9 968,3 9 418,4 5,8 • Our biggest asset by far • Total receivable
Slide 25: Borrowings and Non-Controlling Interest Loan
BORROWINGS AND NON-CONTROLLING INTEREST LOAN September 2013 September 2012 (Rm) (Rm) Interest-bearing debt and non-controlling interest loan 6 032,6 4 494,7 Less: Cash (1 165,0) (875,4) Net borrowings 4 867,6 3 619,3 Less: SBSA loan to RCS Group (non-controlling interest loan) - (51,8) 4 867,6 3 567
Slide 26: Cash Generation and Utilisation
CASH GENERATION AND UTILISATION September 2013 (Rm) (Rm) Net borrowings at beginning of the period (3 979,5) Cash EBITDA 1 554,2 Increase in creditors 60,8 Other net investing activities 11,5 Cash generated 1 626,5 Taxation paid (432,7) Dividends paid (566,0) Retail & other debtors (319,7) RCS Group
Slide 27: Capex
CAPEX September 2013 September 2012 (Rm) (Rm) Stores 155,7 155,6 RCS Group 15,2 4,5 IT 87,6 121,5 Other 12,9 19,1 Total 271,4 300,7 • The majority of capex relates to opening of new stores, in line with our strategy of growing floor space • Projected capex for 2014 year-end will be approximately R60
Slide 28: TFG Financial Services
TFG FINANCIAL SERVICES TFGMeiring Peter FINANCIAL SERVICES 28 Peter Meiring TFG / 2013 ANALYST PRESENTATION
Slide 29: TFG Financial Services: Industry Review
TFG FINANCIAL SERVICES: INDUSTRY REVIEW • Since November 2012 a marked deterioration in consumer liquidity • Caused by an over extension of credit to vulnerable sectors • Characterised by “inability to pay” as opposed to “unwillingness to pay” • Impacting older stable portfolios • Further exacerbate
Slide 30: TFG Financial Services: Period Overview
TFG FINANCIAL SERVICES: PERIOD OVERVIEW • Higher delinquency levels due to a marked increase in short payments • Collection and recovery yields trend downward • Arrears increase to 22,2% from 21,5% LY • Fewer customers in a buying position putting credit sales under pressure Mitigated by: • New scor
Slide 31: TFG Financial Services: Rewards
TFG FINANCIAL SERVICES: REWARDS • Rewards reaches 4 million customer mark (2,2m account customers and 1,8m cash customers) • The program is unique: • Provides instant rewards, • Based on customer purchases and preferences • Spend on transactions with a reward redemption are typically 20% higher than
Slide 32: TFG Financial Services: Performance
TFG FINANCIAL SERVICES: PERFORMANCE September 2013 September 2012 (Rm) % Growth (Rm) Interest income 540,4 13,0 478,1 Other income 198,3 15,6 171,6 Total income 738,7 13,7 649,7 Net bad debt (441,3) 37,6 (320,8) Credit costs (94,8) (17,1) (114,4) EBIT 202,6 (5,5) 214,5 • Interest increases by 13,0%:
Slide 33: TFG Financial Services: Book
TFG FINANCIAL SERVICES: BOOK Key debtor statistics September 2013 September 2012 Number of active accounts (‘000) 2 652,5 2 544,0 Credit sales as a % of total retail sales 59,7 61,0 Net debtors’ book (Rm) 5 502,0 4 809,3 • Active account base grows by 4,3% (March 2013: 6,0%) • Credit turnover growth
Slide 34: TFG Financial Services: Statistics
TFG FINANCIAL SERVICES: STATISTICS Key debtor statistics September 2013 March 2013 September 2012 Arrear debtors % to debtors’ book 22,2 22,4 21,5 Net bad debt write off as a % of credit transactions 6,4 5,7 5,4 Net bad debt write off as a % of debtors’ book 11,4 10,5 10,3 Doubtful debt provision as
Slide 35: TFG Financial Services: Strategy and Outlook
TFG FINANCIAL SERVICES: STRATEGY AND OUTLOOK • Weak consumer credit outlook likely to persist: • Continue to apply prudent credit risk management policy • Source new customers from groups less impacted by over extension • Increase the pool of cash customers through Rewards • Credit regulatory enviro
Slide 36: RCS Group
RCS GROUP Peter Meiring 36 TFG / 2013 ANALYST PRESENTATION
Slide 37: RCS Group: Overview
RCS GROUP: OVERVIEW Performance • Increase in cards market share: • Good growth in customer numbers • Expanded merchant network with new national retailers • Stable unsecured lending portfolio • High repeat business with consistent term and loan values • Despite higher bad debt levels, solid profit
Slide 38: RCS Group: Financial Review – September 2013
RCS GROUP: FINANCIAL REVIEW – SEPTEMBER 2013 September 2013 September 2012 (Rm) % change (Rm) Interest income 541,5 12,5 481,5 Other income 302,4 20,4 251,1 Total credit income 843,9 15,2 732,6 Net bad debt (166,4) 35,6 (122,7) Operating costs (342,0) 9,9 (311,2) EBIT 335,5 12,3 298,7 Finance costs
Slide 39: RCS Group: Performance
RCS GROUP: PERFORMANCE Key debtor statistics September 2013 September 2012 Number of active accounts (‘000) 968 829 Net debtors' book (Rm) 4 466 3 781 Arrear debt as percentage of total debt1 11,0 9,3 2 Non performing loans as percentage of total debt 7,9 6,4 Net bad debt write-off as percentage of
Slide 40: RCS Group: Financial Position & Treasury
RCS GROUP: FINANCIAL POSITION & TREASURY September September Capital Ratios 2013 2012 Return on equity1 18,9% 19,0% Debt : Equity2 65,1% 64,9% 1 Return on equity – Profit after taxation / Average Shareholders Equity 2 Debt : Equity - Term Funding/(Shareholders Equity (excl. Minority Interest) + Term
Slide 41: RCS Group: Outlook
RCS GROUP: OUTLOOK • Outlook • Muted economic growth and a tougher consumer environment • Positive trends in book and profit growth but at a lower level than in previous years • Adequate funding facilities in place to deliver business plans • Continue capital markets activity through periodic fund r
Slide 42: Outlook & Guidance
OUTLOOK Doug Murray OUTLOOK & GUIDANCE 42 Doug Murray TFG / 2013 ANALYST PRESENTATION
Slide 43: Outlook and Guidance for Second Half of 2014
OUTLOOK AND GUIDANCE FOR SECOND HALF OF 2014 • Difficult credit environment is unlikely to improve in second half of the year due to high level of customer indebtedness • Net bad debt to book projecting approximately 12% • Space growth - 92 new stores planned for 2nd half – approx 6% space growth fo
Slide 44: Thank You
THANK YOU THANK YOU 44 TFG / 2013 ANALYST PRESENTATION
Slide 45: 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