Truworths International Limited · JSE:TRU
Truworths International — FY2011 Earnings Presentation
52 slides from Truworths International's earnings presentation, August 2011
Slide 1: Final Group Results for the 52 weeks ended 26 June 2011
FINAL GROUP RESULTS for the 52 weeks ended 26 June 2011
Slide 2: Agenda
Agenda • Overview of the retail environment and economy • Review of the financial period • Trading and operating performance • Credit management • Capital management • Delivering on our objectives for 2011 • Africa expansion • Achievements • Outlook • Questions 2
Slide 3: Overview of the retail environment and economy
Overview of the retail environment and economy
Slide 4: Economic Indicators
Economic Indicators Impact GDP increased for the first quarter of 2011 by 4.8% on last quarter of 2010. Rand continued to strengthen during the period (average for 2011: R6.99 and 2010: R7.56 to the US Dollar). CPI rose to 5% in June 2011. (December 2010: 3.5% and June 2010: 4.2%) CPI remains within
Slide 5: National Credit Regulator statistics
National Credit Regulator statistics (Source: Credit Bureau Monitor first quarter statistics) Millions % 9 48 46.9 46.5 46.4 47 46.0 45.3 46 45 8 44.1 44 42.4 43 41.6 42 7 41 40 39 7.3 7.5 7.9 8.2 8.4 8.6 8.6 8.6 6 38 Dec 08 Mar 09 Jun 09 Dec 09 Mar 10 Jun 10 Dec 10 Mar 11 No. of consumers with impa
Slide 6: Review of the financial period
Review of the financial period
Slide 7: Financial highlights
Financial highlights Sale of merchandise of R 7.9 billion up 13% Trading profit of R 2.2 billion up 24% Operating profit of R 2.9 billion up 21% Headline earnings of R 1.9 billion up 21% Headline earnings per share (HEPS) of 456.0 cents up 21% Annual dividend per share (DPS) of 262 cents up 31% 7
Slide 8: Financial targets
Financial targets June June June 2011 2011 2010 Actual Target Actual Gross margin (%) 56.7 54-55 55.3 Operating margin (%) 36.4 32-34 34.0 Return on equity (ROE) (%) 41 35-40 40 Return on assets (ROA) (%) 46 40-45 44 Inventory turn (times) 6.4 6.0-6.5 6.9 Asset turnover (times) 1.3 1.2-1.5 1.3 8
Slide 9: Key financial ratios
Key financial ratios June June 2011 2010 Trading margin (%) 28 26 Profit before interest, tax, depreciation (%) 38 36 and amortisation (EBITDA) margin Total liabilities to total equity (%) 23 24 Cash and cash equivalents to total (%) 30 30 equity Return on capital (ROC) (%) 61 60 Net asset value per
Slide 10: Financial performance over 10 years
Financial performance over 10 years Rbn Compound growth rates: Compound growth rates: Rbn Sale of merchandise: Profit after tax: 1.9 2 8 3 year 12%, 10 year 17% 3 year 15%, 10 year 25% 7 1.6 1.4 6 1.3 5 1.1 1 4 0.8 0.7 3 0.5 0.4 2 0.3 1 2.0 2.3 2.7 3.1 3.8 4.9 5.7 6.2 6.9 7.9 - - Jun 2002 Jun 2003 J
Slide 11: Gross profit trend
Gross profit trend Average: Compound growth rates: Rbn % Gross margin: Gross profit: 5 3 year 56%, 10 year 54% 3 year 13%, 10Profit after tax: year 18% 60 Jun 2010 3 year 15%, 9 year 25% 57 55 55 55 55 53 54 54 50 4 52 51 40 3 30 2 20 1 10 1.0 1.2 1.4 1.7 2.1 2.7 3.1 3.4 3.8 4.5 - - Jun 2002 Jun 200
Slide 12: Analysis of trading expenses
Analysis of trading expenses trading trading expenses expenses change to sale of to sale of June June on prior merchandise merchandise 2011 2010 period 2011 2010 Rm Rm % % % Depreciation and amortisation 129 121 7 2 2 Employment costs 828 759 9 11 11 Occupancy costs 652 582 12 8 8 Trade receivable c
Slide 13: Analysis of trading expenses (continued)
Analysis of trading expenses (continued) • Trading expenses increased 10% compared to the prior period as follows: Depreciation and amortisation (7% growth): • Impact of current period capital expenditure of R 186 million as well as prior period capital expenditure now being depreciated for the full
Slide 14: Analysis of trading expenses (continued)
Analysis of trading expenses (continued) Trade receivable costs (1% increase): • Net bad debt and doubtful debt allowance decreased to 6.8% and 10.1% of gross trade receivables respectively (2010: 9.8% and 10.7%) due to the improved quality of the debtors’ book. • The interest income earned on the d
Slide 15: Trading expenses as a % of sale of merchandise
Trading expenses as a % of sale of merchandise Average: Compound growth rates: Trading expenses as a % of sale of % Trading expenses: merchandise: 40 3 year 9%, 10 year 15% 3 year 32%, 10 year 32% 34 33 35 33 33 32 32 32 31 31 31 30 25 20 * 15 10 5 9 13 10 18 20 31 21 11 6 10 - Jun 2002 Jun 2003 Jun
Slide 16: Trading profit performance over 10 years
Trading profit performance over 10 years Compound growth rates: Average: Rbn Trading profit: Trading profit margin: % 3 year 18%, 10 year 26% 3 year 26%, 10 year 24% 3 28 30 26 26 25 24 24 24 25 22 2 18 18 20 15 1 10 5 0.4 0.4 0.6 0.7 1.0 1.3 1.4 1.5 1.8 2.2 - - Jun 2002 Jun 2003 Jun 2004 Jun 2005 J
Slide 17: Operating profit trend over 10 years
Operating profit trend over 10 years Compound growth rates: Average: Average: Rbn Operating profit: Operating profit margin: EBITDA margin: % 3 year 15%, 10 year 26% 3 year 35%, 10 year 31% 3 year 37%, 10 year 33% 3 45 38 40 36 36 35 35 35 34 35 36 30 34 34 2 33 33 33 30 27 26 31 27 25 24 23 20 1 15
Slide 18: Headline earnings and dividends per share trend
Headline earnings and dividends per share trend Compound growth rates: Compound growth rates: Cents HEPS: DPS: 3 year 15%, 10 year 26% 3 year 22%, 10 year 33% 500 456 450 400 378 350 338 296 300 262 249 250 200 200 186 171 145 144 150 120 110 100 86 89 63 69 48 50 34 22 - Jun 2002 Jun 2003 Jun 2004
Slide 19: Cash flows for the period
Cash flows for the period Rm 2 500 637 425 895 2 000 30 1 500 2 411 968 1 000 1 698 156 500 394 9 171 - EBITDA Working Interest Tax paid CAPEX Free cash Dividends CAPEX Share buy- Other Net cash capital received maintenance flow expansion backs flow movement 19
Slide 20: Cash generated from operating activities
Cash generated from operating activities Rm Rm 216 220 208 800 198 186 200 700 Purchased head New DC 180 166 office building 156 600 160 140 Additional tax 500 outflows as a 120 107 result of 102 changes in tax 400 legislation 100 Additional tax 80 outflows as a 300 63 61 result of higher STC and ea
Slide 21: Statements of financial position
Statements of financial position June 2011 June Rm 2010 Rm % Change Non-current assets 1 093 997 10 Prepayments and derivative financial instruments 79 83 (5) Cash and cash equivalents 1 489 1 318 13 Trade and other receivables 3 033 2 561 18 Inventories 530 450 18 Total assets 6 224 5 409 15 Total
Slide 22: ROE and ROC
ROE and ROC Average: Average: ROE: ROC: % 3 year 42%, 10 year 41% 3 year 62%, 10 year 61% 80 75 71 70 66 65 60 61 59 60 54 49 50 50 48 48 44 44 40 41 38 39 40 34 32 30 20 10 - Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 ROE ROC 22
Slide 23: ROIC and WACC
Return on invested capital (ROIC) and weighted average cost of capital (WACC) Average: Average: % ROIC: WACC: 3 year 27%, 10 year 26% 3 year 13%, 10 year 14% 35 31 30 28 28 27 27 27 26 25 25 22 21 20 17 16 15 15 14 13 13 13 13 13 13 10 5 - Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 20
Slide 24: Trading and operating performance
Trading and operating performance
Slide 25: Sale of merchandise
Sale of merchandise June June change Divisional sales 2011 2010 % Rm Rm Truworths ladieswear 3 068 2 727 13 Truworths menswear 1 581 1 372 15 Identity 1 127 966 17 Daniel Hechter 972 871 12 Elements 403 385 5 Inwear 386 355 9 LTD 312 247 26 Other* 231 195 18 Retail sales 8 080 7 118 14 Franchise sal
Slide 26: Retail sales growth analysis
Retail sales growth analysis Unit growth: Unit Retail Retail sales LFL store Product Comparable growth: sales growth growth Inflation stores New stores Rm % % % % % June 2011 (52 wks) 8 080 14 9 4 5 5 June 2010 (52 wks) 7 118 11 4 4 - 7 June 2009 (52 wks) 6 441 12 5 10 (5) 7 June 2008 (53 wks) 5 863
Slide 27: Sales densities trend
Sales densities trend % R per m2 30 32 979 35 000 29 965 30 462 28 802 29 307 25 30 000 24 719 20 25 000 22 335 20 481 15 18 120 20 000 16 428 10 15 000 5 10 000 15 10 13 9 11 17 4 (2) 4 8 - 5 000 Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 -5 - Sales de
Slide 28: Inventory turn
Inventory turn Average: Times Inventory turn: 3 year 6.5 times, 10 year 6.3 times 7 6.7 6.9 6.5 6.5 6.4 6 6.1 6.1 6.1 6.1 5.6 5 4 3 2 1 - Jun 2002 Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 28
Slide 29: Group stores
Group stores June 2011 June 2010 Truworths 270 263 Identity 164 153 Uzzi 56 53 Truworths Man 29 29 YDE 19 19 Daniel Hechter 3 4 LTD 2 2 Total 543 523 Trading area (m2 000) Truworths 202 192 Identity 44 41 Uzzi 4 4 Total (excl YDE) 250 237 YDE 6 6 Total 256 243 Growth (%) 5 6 29
Slide 30: Credit management
Credit management
Slide 31: Key trade receivable statistics
Key trade receivable statistics June June June 2011 2010 2009 Number of active accounts (000's) 2 194 1 975 1 856 Growth in number of active accounts (%) 11 6 3 Trade receivables (before doubtful debt allowance) (Rm) 3 333 2 835 2 550 Growth in trade receivables (before doubtful debt allowance) (%)
Slide 32: Trade receivable costs vs. interest received
Trade receivable costs vs. interest received Rm 000's 2 194 600 1 975 2 100 1 856 1 799 500 1 689 1 800 400 1 371 1 500 1 074 1 200 300 857 780 900 200 600 100 300 106 79 108 81 192 107 257 156 318 280 488 464 549 432 491 385 543 390 - - Jun 2003 Jun 2004 Jun 2005 Jun 2006 Jun 2007 Jun 2008 Jun 2009
Slide 33: Capital management
Capital management
Slide 34: Capital management
Capital management • The board will, where appropriate, continue to return excess capital to shareholders by • reducing dividend cover and • executing share buy-backs • Dividends: • Dividend cover reduced to 1.7 times from 1.9 times. • Total dividends per share declared in respect of the period amou
Slide 35: Share buy-backs
Share buy- buy-backs • Since 2002, a total of 80 million shares (R 1.7 billion) have been repurchased at an average cost of R20.83. • 43.4 million shares (R 475 million) at an average cost of R10.95 have been cancelled. • The balance of 36.6 million shares (8% of total shares in issue) are held as t
Slide 36: Capital utilisation
Capital utilisation Rm Rm 2 000 1728 1 750 1 750 1567 171 1 500 1 500 1300 1252 394 551 1 250 1 250 317 234 186 1 000 1 000 34 813 65 159 216 183 33 198 750 750 167 166 500 156 500 968 785 683 575 250 250 456 - - Jun 2007 Jun 2008 Jun 2009 Jun 2010 Jun 2011 Dividends Capex Share buy-backs Acquisitio
Slide 37: Planned capital expenditure for 2012
Planned capital expenditure for 2012 Planned spend for June 2012 June 2011 June 2010 Rm Rm Rm Store development 154 120 101 Computer infrastructure 40 31 36 Land _ 16 _ Distribution facilities 20 14 67 Motor vehicles 1 4 10 Head office refurbishment 3 1 2 Total 218 186 216 37
Slide 38: Delivering on our objectives for 2011
Delivering on our objectives for 2011
Slide 39: Objectives for 2011
Objectives for 2011 Objectives for 2011 Status Fashion: • Continued organic growth through • Ladieswear RLC market share increased to 22.3% extension of existing ranges and (2010: 21.9%). new concepts. • Menswear RLC market share increased to 22.1% • Ongoing focus on the processes to (2010: 21.9%).
Slide 40: Objectives for 2011
Objectives for 2011 Objectives for 2011 Status Credit: • Net bad debt to trade receivables decreased to Continued investment in credit 6.8% (2010: 9.8%). systems to manage the risk of credit. • The doubtful debt allowance to trade receivables decreased to 10.1% (2010:10.7%). Stores: • Continued expa
Slide 41: Objectives for 2011
Objectives for 2011 Objectives for 2011 Status Customers: • Continued acquisition of new • Number of active accounts grew 11% (2010:6%) customer accounts. to 2.2 million accounts. Growth: • Investigating appropriate • Considering potential investment and investment opportunities. acquisition opportu
Slide 42: Objectives for 2011
Objectives for 2011 Objectives for 2011 Status Financial: • Improvement in efficiency ratios • Trading margin increased to 28% (2010: 26%). throughout the business. • Operating margin increased to 36% (2010: 34%). • Ongoing tight expense control. • Trading expenses as a % of sale of merchandise • En
Slide 43: Africa expansion
Africa expansion
Slide 44: Africa expansion
Africa expansion • Rest of African (excluding South Africa) footprint now 35 stores (excluding Zimbabwe) generating R229 million in sales. • 17 corporate stores with sale of merchandise of R194 million - Namibia (12 stores) and Swaziland (5 stores). • 18 franchise stores with franchise sales of R35
Slide 45: Achievements
Achievements
Slide 46: Achievements
Achievements • Winner of the World’s Emerging Market Retailer of the Year at the 2010 Oracle World Retail Awards. • 3rd consecutive year of inclusion in the JSE Socially Responsible Investment (SRI) Index. • Recognised as one of the top performing companies in the medium environment impact category
Slide 47: Outlook
Outlook
Slide 48: Outlook
Outlook • Against a background of uncertain economic growth, retail trading conditions are expected to continue to be challenging in the months ahead as consumers face increasing living costs owing to rising utility, food and transport prices. • Inflationary pressures may lead to an increase in inte
Slide 49: Outlook
Outlook • Retail sales for the first seven weeks of the 2012 financial period increased by 10.4% over the corresponding period in 2011. • Product inflation is anticipated to be at high single- digit levels in the 2012 financial period and annual growth in trading space is planned at approximately 6%
Slide 50: Questions
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Slide 51: Disclaimer
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Slide 52: Disclaimer
Disclaimer This presentation contains certain forward-looking statements with respect to the financial position and results of operations of Truworths International Limited and its group companies, which by their nature involve risk and uncertainty because they relate to events and depend on circums
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