Financial Results 2004 Static - ShareDataone factory outlet • Trading has been very good, with...
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Truworths International
Transcript of Financial Results 2004 Static - ShareDataone factory outlet • Trading has been very good, with...
Truworths International
• Review of Final Results• Review of Merchandise and
Inventory• Review of Retail Operations• Review of Debtor Book• Business Initiatives• Outlook
Agenda
Review of Final Results
• Earnings top R500 million• Record sales of R2.7 billion -
up 17.9%• Trading Profit R597.6 million -
up 47.1 %• Annual dividend per share of 48
cents - up 41.2%• Headline earnings per share of 110
cents - up 27.9%• Operating margin reaches 27.6%
Operating Highlights
June 2004
June 2003*
June 2002*
Headline EPS (cents) 110 86 64
Growth in Headline EPS (%) 27.9 34.4 45.5
DPS (cents) 48 34 22
Growth in DPS (%) 41.2 54.5 51.7
Return on Shareholders Equity (%) 36.6 33.0 31.1
Operating Margin (%) 27.4 23.9 22.8
*restated
Financial Highlights
Income Statement
*excluding transfer pricing tax benefit
2004 2003%
Change
Sale of merchandise (Rm’s) 2719 2306 17.9Operating profit (Rm’s) 746 550 35.6Headline earnings (Rm’s) 504 392 28.6HEPS (cents) 110.0 86.0 27.9HEPS* (cents) 110.0 81.8 34.5
Gross margin (%) 52.7 50.5Operating margin (%) 27.4 23.9Dividend (cents) 48.0 34.0 41.2Dividend cover (times) 2.3 2.5
Compound Growth Rate: 3 Year 35.3%;6 Year 21.9%
86.0
64.0
44.4
32.227.3
33.5
110.0
0
20
40
60
80
100
120
2004200320022001200019991998
Headline Earnings Trend
Centsper share
* * *
*restated
Compound Growth Rate: 3 Year: 35.3% • 6 Year: 21.9%
34.0
22.0
14.512.512.5
8.1
48.0
0
10
20
30
40
50
2004200320022001200019991998
Dividends Declared per Share Trend
Centsper share
Compound Growth Rate: 3 Year: 49.0% • 6 Year: 34.5%
2 306
1 984
1 5951 417
1 2471 132
2 719
0
500
1000
1500
2000
2500
3000
2004200320022001200019991998
Sale of Merchandise Trend
Retail Sales (R'000)
* * *
* Truworths Limited
Compound Growth Rate: 3 Year: 19.5% • 6 Year: 15.7%
%
Comparison of Margins
19 20
1619
2324
2324
2022
2627 27
30
0
5
10
15
20
25
30
35
1998 1999 2000 2001 2002 2003 2004
Operating Margin %
EBITDA to Sales %
Basket Operating Margin(ECO,MPC,FOS,WHL)
Margins continue to improve and remain wellabove competitors
%
Gross Profit Margin 2004
Gross Profit Margin 2003
Increase
Due to:
Lower markdowns and other stock adjustments
Improved margin from sales mix change and general improved margins
52.7
50.5
2.2
1.1
1.1
% of Sales
Gross Profit Analysis
550
452
295234247218
746
0
100
200
300
400
500
600
700
800
2004200320022001200019991998
Operating Profit Trend
R Million
* * *
* Truworths Limited
Compound Growth Rate: 3 Year: 36.2% • 6 Year: 22.8%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
1998 1999 2000 2001 2002 2003 2004-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Depreciation costs Employment costs
Occupancy costs Other operating costs
Total costs
Category %
Total%
Expenses as a % ofSale of Merchandise
All expense categories reflecting an improvementas a % of sales
Cash Flow
(R'm)2004
(R'm)2003
Cash EBITDA 674 481
Working capital movements (139) (53)
Cash generated from by operations 535 428
Net interest received 144 142
Tax paid (205) (123)
Cash inflow from operations 474 447
Dividends paid (194) (118)
Net cash from operating activities 280 329
Net cash outflow from investing activities (88) (57)
Net cash (used in)/from financing activities (193) 39
Net (decrease)/increase in cash & cash equivalents (1) 311
*restated
*
Cash Flow Information
(R'm)2004
(R'm)2003
Depreciation 69 67
Capital expenditure 61 63
Share Repurchases 195 13
cents
32 3643
50
32
98
33 29
48
65
104
86
-3
113
-25
-5
15
35
55
75
95
115
1998 1999 2000 2001 2002 2003 2004
Cash flow per share Earnings per share
Write off of Sportsgirl
investment
Timing of creditors payment, increased tax payments and
payment of transfer pricing tax
Cash Flow vs.Earnings Per Share
High quality of earnings reflected by cash flow per share
Balance Sheet
R'm2004
R'm2003
%Change
Non current assets 449 409Cash and cash equivalents 454 445Trade and other receivable 986 817 20.7Inventories 198 169 17.2Total assets 2 087 1 840
Total shareholders' equity 1500 1335Non-current liabilities 94 121Current liabilities 493 384Total equity and liabilities 2 087 1 840
2004 2003%
Change
Total liabilities to shareholders' equity (%) 39.1 37.8
Net cash to shareholders equity (%) 30.3 33.3
NAV per share (cents) 336.1 290.0 15.9ROE (%) 36.6 33.0
ROC (%) 52.6 46.5
Balance Sheet
3331
282626
37
-4
-10
0
10
20
30
40
50
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ROE % Trend
%
Write off of Sportsgirl
investment
* * *
* Truworths Limited
Review of Merchandise & Inventory
Review of Merchandise & Inventory
46%
1%1%
18%17%
3%3%10%9%
6%6%6%5%
8%8%2%2%
48%
1%1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20042003
Franchise (-18.2%)
Cellular (8%)
Elements (15.8%)
Identity (53.1%)
Inw ear (14%)
Daniel Hechter (20.5%)
LTD (19.2%)
Truw orths Man (24.3%)
Fine Jew ellery (27.6%)
Truw orths Womensw ear(13.2%)Sa
les
cont
ribut
ion
by D
epar
tmen
t
(% Sales growth from 2003)
• Inventories increase 17.2% to R198 million
• Inventory turn of 6.5 times• Level of markdowns lower than
last year • Average product inflation, excluding
Identity, was approximately 5%• LFL sales growth 13.5%
Review of Merchandise & Inventory
Review of Retail Operations
• 4 new Truworths stores opened and 1 closed
• 1 new Truworths Man store opened
• 20 new Identity stores opened and one Identity store closed
• 13 stores enlarged and/or renovated
• Total trading area increased by
8 116m2 (6.4%). Average trading area
growth p.a. since 1998 5.4%*
Review of Retail Operations
* Excludes YDE and Franchise
TruworthsTruworths ManDaniel HechterInwearLTDIdentity
TOTAL
Total trading area (000m2)
2004Actual
2005Plan
2003Actual
21115532
55
291
135
20914532
36
269
127
Review of Retail Operations Truworths Stores
* Excludes YDE
22117532
71
319
152
• Currently operates out of 11 stores and one factory outlet
• Trading has been very good, with significant increase in profits forecast for 2005; Sales of more than R180 million are estimated for the next financial year
• Full integration of systems and administrative structures finalised
• Introduction of YDEcredit in September 2004
• Expanded store concept planned in 2005
Review of Retail OperationsYDE
• 55 Stores at June 2004
• Sales in 2004 increased by 53.1%to R 173 million
• ID stores located in large shopping malls, CBD’s, value malls and smaller rural towns
• New ID concept working very well and is being rolled out to new and some existing stores
• Street CREDit to be introduced in September 2004
Review of Retail OperationsIdentity (ID)
5,000
7,000
9,000
11,000
13,000
15,000
17,000
19,000
21,000
23,000
1997 1998 1999 2000 2001 2002 2003 2004
4.3% 6.4% 4.1%9.3%
9.5%
14.6%10.3%
R
Review of Retail Operations Sales Densities Trend
11.7%
Annual growth
* * *
* Truworths Limited
Compound Growth Rate: 3 Year: 12.2% • 6 Year: 9.9%
100
200
300
400
500
600
700
800
1998 1999 2000 2001 2002 2003 2004
9.5% 4.1%
19.2%10.0%
19.7%14.2%
Review of Retail Operations Sales per FTE
Productivity of staff reflects a year on year increase
R’000
11.7%
Annual growth
• Major developments for 2005 include:• New Truworths stores at:
- Festival Mall (Kempton Park)- Clearwater (Northern suburbs of
Johannesburg)- Woodhill (Pretoria)- Cape Gate Shopping Centre (Cape Town)
• Major Extensions to existing stores:- Westville Pavilion- Centurion
• 16 Identity stores
Review of Retail Operations2005 Plans
• Major developments for 2005 include (continued):• New specialty emporium/s• Experimental concepts - shoes, Living,
Peep, FJ• New store design Clearwater including
new specialty concepts• Capital expenditure on store
development of R70 million (2003: R39 million)
Review of Retail Operations2005 Plans
Review of Debtors Book
Average Usury rate (%)Number of active accounts (000)Credit sales as a % of total salesQualifying payment %Collections achieved vs. those due (%)
Debtors book (Rm’s)% of book that can purchase(at period end)
Net bad debt write-off to credit sales (%)Net bad debt as a % of debtors book (%)Doubtful debt provision as % of debtorsApplications granted credit %
28.3780
729093
80288
2.55.15.950
2003Key debtor statistics
23.3857
739097
97388
2.24.35.947
2004
Review of Debtors Book
% change
9.9
Interest from customersFinancial services
Collection costsNet bad debt and change inprovision
Cost of credit
107.77.3
115.0
(74.9)(51.2)
(126.1)
11.1
106.16.5
112.6
(63.0)(52.2)
(115.2)
2.6
2004 2003Cost of Credit (Rm’s)
Review of Debtors Book
% change
1.5
18.8
2.22.52.2
3.74.7 4.3
5.14.7
8.0
10.0
0
2
4
6
8
10
12
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Net bad debts as a % of credit sale of merchandise
Net bad debts as a % of gross debtors book
Review of Debtors BookBad Debt Trend
%
Business Initiatives
• Chairman and chief executive roles separated
• Independent non-executive director appointed as chairman
• Additional independent non-executive director appointed, Mike Thompson
• Risk management process further bolstered
• Financial disclosure and reporting enhanced
• Non-executive committee working as support of Board independently chaired
• Audit committee composition reviewed
Corporate Governance
• "Golden goose" employee incentive based on group results
• Employee share options based on service and rating
• Management incentives based on group results and individual goals
• Executive incentives based on "stretch" targets and performance indicators
• Management and executive share options based on grades and contribution
Remuneration Philosophy
• Executive led transformation committee has been constituted under chairmanship of Deputy MD
• New Value System will be launched during the year to stay in touch with our changing environment.
• Employment equity targets largely met, except at executive levels
• 66% of store managers are from previously disadvantaged communities
• Broad-based participation in group share option scheme
• Extensive broad-based trainee buyer programme• Renewed focus on skills development and
training • Strong supporter of local manufacturing industry• Empowerment credentials of suppliers
increasingly important
Transformation Initiatives
• Dividend up 41.2%, representinga 49% compound growth over 3 years and a 34.5% compound growth over 6 years
• Dividend payments up fromR53 million in 2001 to R194 million in 2004
• Cover improved from 3.3 in 2001 to 2.3 in 2004
• Ongoing evaluation of cover
Cash Utilisation - Dividends
• 20.4 million shares repurchased in 2004 for R194.6 million (Average R9.52)
• Repurchased shares held as treasury stock and represents 7.5% of issued shares
• Over last 3 years 36.2 million shares repurchased for R274.8 million
• Average price of all repurchases R7.59
Cash Utilisation -Share Repurchases
• YDE acquisition - 75% share • Continuously evaluating other
acquisition opportunities• Strategy is to target retail
opportunities that have synergisticfit to Truworths
• Objective is to easily integrate onto systems, management structures, and supply chain processes
Cash Utilisation -Acquisitions
• Introduction of credit in YDE and Identity will increase working capital requirements by about R50 million in 2005
• Capital expenditure of R103 million planned for 2005 (2004: R61 million). Depreciation planned at R74 million
• Improved earnings and dividend cover will result in higher tax and dividend payments in 2005
Cash Utilisation -Operational Requirements
Outlook
Our strategy for 2005 is to focus on further development of new initiatives and formats and continued reinvigoration of the core business
Outlook
Macro economic environment positive:-Usury rates down -Prime interest rate down-Household debt levels close to 10 year lows-Household interest burden at 10 year lows-Real wage increases-Large tax breaks
Outlook
• Increase trading space by an estimated 13%
• Empowering Truworths people to grow and deliver in the challenging retail arena
• Sales growth in excess of 20% for the first seven weeks of the new financial period, as against 14.4% for the same period in 2004
• Management remains positive about trading prospects into 2005
Outlook
Questions
