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THE FOSCHINI GROUP LIMITED - Updated trading statement for the six months ended 30 September 2020

Release Date: 23/10/2020 15:41
Code(s): TFG TFGP     PDF:  
Wrap Text
Updated trading statement for the six months ended 30 September 2020

Reg. No.: 1937/009504/06
Share code: TFG - TFGP
ISIN: ZAE000148466 – ZAE000148516
(“TFG” or “Group”)


TFG wishes to advise shareholders that it is in the process of finalising
its interim results for the six months ended 30 September 2020, which are
due to be published on or about 5 November 2020.

As was announced in the Group’s trading updates on SENS on 15 May 2020, 18
June 2020, 13 July 2020 and 15 September 2020, the Group’s performance to
date, has been negatively impacted by the COVID-19 pandemic, and the
government-enforced lockdowns and measures taken to protect citizens in
each of the Group’s major territories, South Africa, the United Kingdom and

COVID-19 pandemic and store closures

Most of the Group’s 4,083 trading outlets were closed in the month of April
across all our major trading territories.

In TFG Africa, in excess of 2 100 or c.80% of the stores re-opened from 1
May, with all 2 577 stores re-opened from the 1st week of June. While trade
has steadily improved since May, it remains volatile.

In TFG London, the regional store and concession estate gradually re-opened
during May and June (in the United Kingdom from 15 June), albeit with
significantly lower than usual levels of footfall. The re-opening of our
city centre locations was generally held back until October, as footfall in
these locations has been consistently weak, with commuter and tourist
traffic slow to return, especially in central London.

In TFG Australia, the re-opening of stores commenced end April and all 534
stores across Australia and New Zealand were reopened by the end of May. A
strong improvement in trade – relative to April - was seen in the months of
May to July, but overall trade in August and September was again negatively
impacted by Government restrictions responding to the second wave which
resulted in store closures in both New Zealand and Victoria. New Zealand
had 17 stores closed for 2 weeks, however these have subsequently reopened.
Victoria has had 84 stores closed from 2 August. These stores still remain
closed and the Victoria State Government anticipates lifting the lockdown
regulations at the end of October. Despite these government enforced
interruptions, TFG Australia has proved extremely resilient and in July
reported its highest EBITDA in history. Due to immediate actions taken by
management, the business has remained significantly cash positive and has
to date not accessed any of its borrowing facilities.

Further lockdowns have since been announced in certain states of Australia,
as well as in the United Kingdom, which will continue to adversely impact
trade performance in these countries well into the second half of 2020
calendar year.

Online turnover continues to exceed management’s expectation across all our
major territories, except in the United Kingdom where online performance
continues to be negatively impacted by weaker department store online
channels. Online turnover from TFG London’s own sites for the six months
ended September 2020 however increased marginally by 1,6% compared to the
previous comparable period.
Given the strong consumer association of our UK brands with occasion and
formal workwear, it is clear that a recovery in demand for our clothing and
accessories will be closely linked to the timing of a return to social
mixing and in-office attendance. Taking into consideration the recent
tightening of COVID-19 controls in the UK and Europe, it is increasingly
likely that this recovery will be slower than originally anticipated.

Whilst we are very cognisant of the current retail challenges in the UK, we
do believe that our UK brands remain very strong within their specific
categories and we are in the process of further reviewing our cost base and
operating model for TFG London, to ensure that we are well positioned for

Commenting on the current trading environment, Anthony Thunström, CEO of
TFG said:

“Although Group turnover and earnings have clearly been negatively impacted
by the COVID-19 pandemic and in particular the associated store closures,
we are satisfied with both the strategic and tactical steps that our
management teams have successfully undertaken in an unprecedented
environment, and humbled by the continued support of our shareholders, as
evidenced by the substantial oversubscription in respect of the recently
concluded rights offer. Our balance sheet has never been stronger and the
group’s previous and ongoing investments into digital transformation;
product, brand and category diversification and vertical, quick response
supply chain development will continue to benefit the Group in the future,
both during and post COVID. Our strong management teams have responded to
these challenges as evidenced by the trading results we have managed to
achieve under very difficult circumstances, especially in the United
Kingdom. We responded with urgency, showed great resilience and at the same
time took advantage of ‘game changing’ opportunities in the last six
months, such as the Jet acquisition which provides TFG with a strategically
important expansion into the value segment of the South African retail
apparel market. The Group is well positioned to take advantage of any
economic recovery and will continue to invest organically in its brands,
its digital transformation initiatives as well as in its vertical quick
response supply chain capacity, which has the added benefit of creating and
preserving more South African jobs, at a time where every job is precious.
We remain on the lookout for further inorganic growth opportunities that
meet our acquisition criteria”.

Earnings performance

As required in terms of the JSE Listings Requirements and as previously
communicated to shareholders in our trading statement on 15 September, the
Group expected its earnings for the six months ended 30 September 2020, to
be at least 20% lower than those reported for the six months ended 30
September 2019.

The Group further advises that it expects the interim results for the six
months ended 30 September 2020 to fall within the following ranges:

                         6 months
                         ended 30
                        September       6 months ended 30 September 2020
                           Cents          Cents                 %
Basic earnings per             533,4    133,4 - 186,7     -65,0% to -75,0%
ordinary share
Basic headline
earnings per ordinary
share                          526,7   (131,7) – (79,0)   -115,0% to -125,0%
Diluted earnings per
ordinary share                 530,6      132,7 – 185,7     -65,0% to -75,0%
Diluted headline
earnings per ordinary
share                          523,9   (131,0) - (78,6)   -115,0% to -125,0%

Earnings performance has been impacted, inter alia, by the following
   • The impact of the COVID-19 pandemic and store closures as outlined
   • The dilution impact of the successfully concluded rights offer as
      announced on SENS on 11 August 2020;
   • The acquisition of certain commercially viable stores and selected
      assets of JET in South Africa as announced on SENS on 25 September
      2020. The effective date of the acquisition was 25 September 2020 and
      the inclusion of a bargain purchase gain on acquisition will impact
      specifically on basic earnings per ordinary share and diluted
      earnings per ordinary share; and
   • Good cost control, which has been achieved through operational
      discipline and through cost savings initiatives across all our
      operations, including business optimisation initiatives in TFG

Strong balance sheet

We have continued to monitor and responsibly manage cash resources, cash
flow and liquidity and this, together with the successfully concluded
rights offer, will insulate the balance sheet during this time of global
economic uncertainty and allow us to further execute on the company’s
growth strategy and vision for the future. The Group’s net funding position
is much improved from pre-COVID-19 levels and we are confident with the
strength of the Group’s balance sheet.

Interim results announcement

Shareholders are advised that the Group expects to release its interim
financial results for the six months ended 30 September 2020 on SENS on or
about Thursday, 5 November 2020.

A live webcast of the result presentation will be broadcast at 09:00 am
(SAS) on 5 November 2020. A registration link for the webcast will be
available on the Company’s website at The slides for
the interim results presentation will be made available on the Company’s
website prior to the commencement of the webcast. A delayed version of the
webcasts will be available later on the same day.

The forecast financial information on which this trading statement is based
has not been reviewed and reported on by the company’s external auditors.

Cape Town
23 October 2020

UBS South Africa Proprietary Limited

Date: 23-10-2020 03:41:00
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