Wrap Text
Unaudited interim results for the half-year ended 30 September 2023, ordinary and preference dividends declarations
THE FOSCHINI GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/009504/06)
Share code: TFG
ISIN: ZAE000148466
Preference share code: TFGP
ISIN: ZAE000148516
("TFG" or "the Company" and together with its affiliates "the Group")
SUMMARY OF THE UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE HALF-
YEAR ENDED 30 SEPTEMBER 2023, ORDINARY AND PREFERENCE DIVIDENDS DECLARATIONS
HIGHLIGHTS
- Record Group revenue up 12,9% to R28,4 billion
- Group retail turnover up 12,4% to R26,4 billion
- TFG Africa retail turnover up 17,3% (11,9% excluding Tapestry*)
- Group online retail turnover up 23,9% to R2,6 billion, contributing
9,8% to total Group retail turnover, the growth largely attributable
to strong growth in South Africa
- Strong cash retail turnover growth of 14,6%, contributing 82,0% to
total Group retail turnover
- Gross profit up 7,7% to R12,5 billion
- Operating profit before finance costs up 0,8% to R2,6 billion
- Headline earnings down 14,9% to R1,3 billion
- Basic earnings per share down 16,2% to 386,8 cents per share (Sept
2022: 461,6 cents per share)
- Headline earnings per share down 15,3% to 393,6 cents per share (Sept
2022: 464,6 cents per share)
- Cash generated from operations of R4,3 billion
- Interim dividend declared of 150,0 cents per share (Sept 2022: 170,0
cents per share)
COMMENTARY
EFFECTIVE INVENTORY MANAGEMENT AND COST CONTROL ACROSS THE GROUP
The Group delivered a pleasing operational performance during the six months
ended 30 September 2023 ('current period' or 'H1'2024') despite tough trading
conditions and a comparative high base for the six months ended 30 September
2022 ('prior period' or 'H1'2023').
Performance in the current period was impacted by challenging trading
conditions in all three territories, occasioned by rising interest rates,
high inflation and, in South Africa specifically, taxi strikes and flooding
in the Western Cape, as well as sustained levels of load shedding across all
provinces.
Group retail turnover grew by 12,4%, supported by the continued expansion of
our footprint and brand portfolio, and further growth in online retail
turnover in South Africa.
The strong trade during the current period, along with continued focus on
resetting the cost base, enabled growth of 0,8% in operating profit before
finance costs. This mitigated the Group's headline earnings per share decline
to 15,3% when compared to the prior period (being at the lower end of the
expected 15,0% to 25,0% range in our trading statement guidance released on
SENS on 5 September 2023).
OPERATING CONTEXT
TFG AFRICA
In TFG Africa our performance showed resilience despite higher unemployment
rates, reduced consumer confidence and increased levels of load shedding,
which resulted in c. 287 000 lost trading hours during H1'2024.
Retail turnover growth of 17,3% was driven largely by the clothing and
homeware merchandise categories, with jewellery and cosmetics lower due to
the discretionary nature of these merchandise categories. Excluding Tapestry,
which was acquired with effect from 1 August 2022, the segment grew 11.9%*
on H1'2023.
As previously announced on SENS on 5 September 2023 in our trading update
for the 22 weeks ended 26 August 2023, the increased frequency and extent of
load shedding since December 2022 required significant inventory clearance
throughout H1'2024, impacting gross margin, but positioning the brands well
going into H2'2024.
INTERNATIONAL OPERATIONS
TFG London and TFG Australia's performance in the current period is set
against an unsustainable prior period due to the buoyant sales experienced
in the post COVID-19 trading period. As a result of higher inflation and
interest rates, consumers in both Australia and the United Kingdom remain
under pressure which has adversely impacted both demand and consumer
confidence in their respective core operating markets.
Consequently, and in line with previously communicated expectations, both
the TFG London and TFG Australia business segments traded in the current
period below prior period retail turnover levels. At a gross margin level,
TFG London managed to maintain margins at prior period levels, whereas TFG
Australia traded below prior period levels due to additional promotional
activity.
FINANCIAL PERFORMANCE
The Group achieved record retail turnover of R26,4 billion, which was 12,4%
ahead of the prior period, despite tough trading conditions across all three
business segments.
Cash retail turnover increased by 14,6% compared to the prior period and now
contributes 82,0% to total Group retail turnover. Credit retail turnover
grew by 3,5% with credit extension still subject to stringent acceptance
criteria.
Online retail turnover increased by 23,9% and now contributes 9,8% to total
Group retail turnover. Our continued focus on diversification of brands and
omnichannel retailing resulted in outlet retail turnover growth of 11,3%
over the same period.
Growth in each of the merchandise categories was as follows:
H1'2024
H1'2024 contribution
retail to total
turnover retail
Merchandise category growth turnover
Clothing 9,5% 81,0%
Homeware 62,8% 9,3%
Cosmetics 4,5% 1,8%
Jewellery 1,8% 2,5%
Cellphones 5,1% 5,4%
Total Group 12,4% 100,0%
The Group increased gross profit by 7,7% to R12,5 billion despite having had
to deal with increased inventory purchased for growth in all territories and
consequent increased promotional activity. Further, due to the continued
consumer pressure, especially in Africa, the Group chose to absorb cost
inflation and undertook additional promotional activity to successfully
manage inventory and increase market share gains.
The focus on cost control initiatives and the reduction of the cost base
continued during the current period, with savings realised across a number
of ongoing business optimisation projects. Consequently, trading expenses as
a percentage of Group retail turnover improved to 41,9% from 42,3% in the
prior period.
Finance costs for the current period increased to R0,9 billion, driven by
heightened interest rates in South Africa and the United Kingdom.
Basic earnings per ordinary share and headline earnings per ordinary share
decreased by 16,2% and 15,3%, respectively.
An interim dividend of 150,0 cents per share has been declared (Sept 2022:
170,0 cents per share).
FINANCIAL POSITION
The Group generated R4,3 billion in cash from operations which was used to
fund strategic investments and growth and to pay down interest-bearing debt.
SEGMENTAL PERFORMANCE
Retail turnover growth, when compared to the prior period, in each of our
business segments in local currency was as follows:
H1'2024 H1'2024
growth in contribution to
retail Group retail
turnover turnover
Business segment (LC) (ZAR)
TFG Africa (ZAR) 17,3% 68,5%
TFG London (GBP) -10,5% 14,1%
TFG Australia (AUD) -7,2% 17,4%
Group (ZAR) 12,4% 100,0%
Segmental retail turnover growth and contributions for our online and outlet
channels were as follows:
Business H1'2024 H1'2024 H1'2024
segment Online retail H1'2024 Outlet retail Outlet
turnover Online turnover contribution
growth contribution growth to segment
to segment retail
retail turnover
turnover
TFG Africa
(ZAR) 56,5% 4,1% 16,0% 95,9%
TFG London
(GBP) -2,8% 40,8% -15,2% 59,2%
TFG Australia
(AUD) 0,1% 7,0% -7,7% 93,0%
Group (ZAR) 23,9% 9,8% 11,3% 90,2%
CREDIT
The average new account acceptance rates for the current period of 17,4%
were stable when compared to the second half of the prior financial year and
will remain conservative under the prevailing constrained economic
conditions. As a result, credit retail turnover year on year growth for
H1'2024 was 3,5% compared to 15,8% for H1'2023.
The retail net debtors' book increased by 1,7% from 31 March 2023 to R7,9
billion as at 30 September 2023. The allowance for impairment as a percentage
of the debtors' book reduced to 19,3% (March 2023: 20,0%) due to the
improvement in the quality of the book.
This position was supported by robust payment behaviour as cash collected
for the current period exceeded that of the prior period.
STORE PORTFOLIO
At 30 September 2023, the Group traded out of 4 805 outlets across 23
countries. Expansion of outlets continued during the current period with the
opening of 199 outlets, while 91 outlets were closed, which includes 30
concessions in TFG London.
The outlet movement in the respective business segments was as follows:
Outlets TFG Africa TFG London TFG Group
Australia
Opening balance at 1 3 524 589 584 4 697
April 2023
New outlets 168 12 19 199
Closed outlets (48) (37) (6) (91)
Closing balance at 30 3 644 564 597 4 805
September 2023
ACQUISITION OF STREET FEVER
As announced on SENS on 23 January 2023 (and further on 10 May 2023 and 9
June 2023), the Group, through its value athletic and leisure footwear
retail brand, Sneaker Factory, acquired Street Fever, an independent
retailer of affordable branded footwear and apparel, with effect from 26
April 2023. The integration of the 91 Street Fever outlets into Sneaker
Factory has been seamless and this has allowed us to quickly scale our
Sneaker Factory business to 219 stores.
OUTLOOK
The Group continues to demonstrate its operating and financial strengths and
agility and is well positioned to navigate through tough economic conditions
and stretched consumer wallets in all territories in which we operate.
Trading conditions and consumer confidence are likely to remain under
pressure, exacerbated by the sustained high interest rates and inflation
across the three territories and ongoing load shedding in South Africa.
As previously communicated, the Group has, in response to the muted growth
environment, adopted a conservative approach to its organic growth plans
with less store openings expected in H2 FY2024 when compared to H2 FY2023.
The Group will continue to focus on the consolidation of its world class
assets to further improve its balance sheet strength and, consequently, the
return to shareholders.
Retail turnover in H2 FY2024 is expected to grow on that achieved in H2
FY2023, especially in Q4 FY2024, as it will be against the softer base of Q4
FY2023. Further, gross margins in H2 FY2024 are expected to improve in Africa.
The outlook remains cautious, especially in the UK, with possible further
softening in the coming months as many industries battle persistent
inflation, higher energy costs and higher interest rates, which may have a
negative impact on jobs and consumer confidence. It is expected that
customers will continue to seek value, which could drive further promotional
activity as the cost of living pressures continue throughout 2023.
We are cautiously optimistic that TFG Australia's consumer will remain
resilient.
Consistent with prior years, the second half of the Group's financial year
is heavily dependent on Black Friday and Christmas trade, which will largely
determine performance for the full year.
Any forecast financial information contained herein has not been reviewed or
reported on by the Group's external auditors.
* Pro forma management account numbers used to calculate an indicative retail
turnover growth.
PRO FORMA FINANCIAL INFORMATION
Pro forma management account information for Tapestry is used in this
announcement, for illustrative purposes only, to provide an indicative
retail turnover growth for TFG Africa excluding the acquired Tapestry
business.
Tapestry retail turnover for the period since acquisition on 1 August 2022
to 30 September 2023 was removed as if the acquisition did not take place.
This pro forma financial information, because of its nature, may not be a
fair reflection of the Group's results of operations, financial position,
changes in equity or cash flows. There are no material events subsequent to
the reporting date which require adjustment to the pro forma financial
information.
The pro forma management account retail turnover numbers used were:
6 months ended 6 months ended Growth
30 September 30 September
2023 2022
Rm Rm %
TFG Africa
retail turnover
including
Tapestry 18 092,1 15 427,2 17,3
Less: Tapestry
retail turnover# (1 282,3) (408,9) 213,6
TFG Africa
retail turnover
excluding
Tapestry 16 809,8 15 018,3 11,9
# The adjustment is based on management accounts. The Group is satisfied
with the quality and completeness of these management accounts which are
unaudited.
The directors are responsible for compiling the pro forma financial
information in accordance with the JSE Limited Listings Requirements and in
compliance with the SAICA Guide on Pro Forma Financial Information. The
underlying information used in the preparation of the pro forma financial
information has been prepared applying consistently the accounting policies
in place for the year ended 31 March 2023.
RESULTS PRESENTATION WEBCAST
A live webcast of the interim results presentation will be broadcast at
10:00 am (SAST) on Friday, 10 November 2023. A registration link for the
webcast will be available on the Company's website at www.tfglimited.co.za.
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 webcast will be available later on the same day.
INTERIM ORDINARY CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an interim gross
cash dividend of 150,0 cents (120,00000 cents net of dividend withholding
tax) per ordinary share for the six-month period ended 30 September 2023.
The dividend has been declared from income reserves.
A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt. The issued ordinary share capital at the declaration
date is 331 027 300 ordinary shares.
The salient dates for the dividend will be as follows:
Publication of declaration data Friday, 10 November 2023
Last day of trade to receive a dividend Tuesday, 2 January 2024
Shares commence trading "ex" dividend Wednesday, 3 January 2024
Record date Friday, 5 January 2024
Payment date Monday, 8 January 2024
Share certificates may not be dematerialised or rematerialised between
Wednesday, 3 January 2024 and Friday, 5 January 2024, both days inclusive.
PREFERENCE CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a gross preference
dividend (no. 174) of 3,25% or 6,5 cents per share (5,20000 cents net of
dividend withholding tax) per preference share for the six-month period
ending 31 March 2024.
The dividend has been declared from income reserves.
A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.
The issued preference share capital at the declaration date is 200 000
preference shares.
The salient dates for the dividend will be as follows:
Publication of declaration data Friday, 10 November 2023
Last day of trade to receive a dividend Tuesday, 5 March 2024
Shares commence trading "ex" dividend Wednesday, 6 March 2024
Record date Friday, 8 March 2024
Payment date Monday, 11 March 2024
Share certificates may not be dematerialised or rematerialised between
Wednesday, 6 March 2024 and Friday, 8 March 2024, both days inclusive.
Signed on behalf of the Supervisory Board.
M Lewis A E Thunström
Chairman Chief Executive Officer
Cape Town
10 November 2023
ABOUT THIS ANNOUNCEMENT
Statement and availability
This results announcement is the responsibility of the Company's directors
and is only a summary of the information contained in the full unaudited
interim condensed consolidated results. The unaudited interim condensed
consolidated results were approved by the Board of Directors on 10 November
2023 and the information in this announcement has been correctly extracted
from the unaudited interim condensed consolidated results. As this
announcement does not contain full details, any investment decisions by
investors and/or shareholders should be based on consideration of the
unaudited interim condensed consolidated results, which are available
through the JSE cloudlink:
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/TFG/Int2023.pdf and on
the Company's website at: https://tfglimited.co.za/investor-
information/financial-reports-and-presentations/.
DIRECTORATE AND STATUTORY INFORMATION
Non-executive Directors:
M Lewis (Chairman), Prof. F Abrahams, C Coleman, G H Davin, D Friedland, B
L M Makgabo-Fiskerstrand, A D Murray, E Oblowitz, J N Potgieter, N V
Simamane, R Stein
Executive Directors:
A E Thunström, B Ntuli
Company Secretary:
D van Rooyen
Registration number:
1937/009504/06
Tax reference number:
9925/133/71/3P
Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500, South Africa
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, South
Africa
Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Visit our website at http://www.tfglimited.co.za
Date: 10-11-2023 09:00:00
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