2019 GROUP ANNUAL RESULTS FOR THE 52 WEEKS ENDED 30 JUNE 2019 1 - PowerPoint PPT Presentation

2019 GROUP ANNUAL RESULTS FOR THE 52 WEEKS ENDED 30 JUNE 2019 1

1. REVIEW OF THE PERIOD 2. FINANCIAL REVIEW 3. TRUWORTHS ACCOUNTS 4. STRATEGIC FOCUS AREAS 5. OUTLOOK 6. QUESTIONS AGENDA 2

REVIEW OF THE PERIOD

SOUTH AFRICA TRADING ENVIRONMENT Difficult trading environment. GDP growth h remained subdued throughout 2018/2019 – South African economy contracted by 3.2% in Q1 of calendar 2019, the biggest quarterly fall since Q1 2009. Higher r fuel and energy prices and volatile Rand. Unemploymen loyment increased in Q2 of calendar 2019 to 29.0 29.0%, a 15-year high. Consumer umer spen endin ding g remains constrained. Consumer umer confi fiden dence e improved marginally in Q2 of calendar 2019, but remains lower than 12 months ago. Business ness confid idence ence at lowest level in two years. Loadshed dsheddin ding g in November/December 2018 and February/March 2019 impacted negatively on trading. 4

UNITED KINGDOM TRADING ENVIRONMENT Consumer umer confi fiden dence has been negative since announcement of Brexit in 2016. Extremely tough retail environment. March 2019 Brexi exit deadli line ne postpon oned ed to end October 2019, uncert ertaint ainty y continu inues es. High street et under r pressure ure as growth in sales mainly contributed by online; textile, clothing and footwear online sales grew 16.8% year-on-year for June 2019. Continuing decline ine in retail il footfall. Nearly 1 000 stores affected by 27 retai ail l failures res for calendar 2019 to July, many more impacted by risin ing g number er of CVAs. UK GDP c contrac racted ted by 0.2% in Q2 of calendar 2019 after 0.5% growth previous quarter and the lowest since last quarter 2012. UK unemplo ploym yment ent rate lowes est since Q4 of calendar 1974. 5

FINANCIAL REVIEW – GROUP

GROUP TRADING OVERVIEW Non-cash impairm rment ent of O Office intangibles – £97 million (R1.7 billion). Improved oved retail il sales es growth (3.7%), second half momentum is encouraging. Gross margin down to 51.6%, led by Office full price versus markdown mix; Truworths unchanged at 55.5%. Trading expenses remain well controlled. Robust ust balance nce sheet et, 6% * growth in net asset value per share. Continued stron ong g cash h generat ration ion – net debt to equity at 7.2% (R663 million). Healthy cash realisation rate of 93%. Negotiations with Office lenders ongoing, expected to be concluded satisfactorily. Bough ght t back 3.75 5 million on shares res at total cost of R266 million. Headline earnings per share down 7% * . Dividend cover maintained at 1.5 times. * On a comparable basis, i.e. excluding the Office impairment. 7

GROUP INTEGRATED REPORTING The Group continues to strive for excell ellence ence in integrat rated ed report orting ng. South African companies are renowned for their high quality of integrated reporting. In a study by Oxford University Business School in March 2019, South Africa was ranked first (scoring 2.85 out of 3) for quality of integrated reporting. Five integrated reports from each of the following countries were assessed: Brazil, France, Germany, Italy, Japan, The Netherlands, South Africa, South Korea, United Kingdom, and the United States. Truworths International’s 2018 integrated report won the JSE Top 40 catego egory ry in the JSE/CSSA Integrated Reporting Awards 2018. The 2018 integrated report was also rated d 10 th th overal rall l (of the JSE top 100 companies) in the EY Excellence in Integrated Reporting Awards. Truworths International has been rated d in the top 10 for 12 consec ecuti tive ve years rs, the only company besides Sasol to be rated in the top 10 for more than ten years. 8

GROUP PERFORMANCE AGAINST TARGETS Jun 2019 019 Jun 2019 019 Jun 2019 Including impai airmen ent Compar arable * Targets Gross margin (%) 51. 1.6 51. 1.6 51 – 55 Operating margin (%) 9.1 19.4 9.4 19 – 24 Return on equity (%) 9 23 23 23 – 28 Return on assets (%) 12 12 23 23 20 – 25 Inventory turn (times) 4.2 4.2 3.5 – 4.5 Asset turnover (times) 1.4 1.2 0.9 – 1.3 * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 9

GROUP FINANCIAL PERFORMANCE Chan ange e on Jun 2019 019 Jun 2019 019 Jun 2018 Change on compar arable Including prior period prior period * impai airmen ent Compar arable * % % Sale of merchandise (Rm) 18 094 4 18 094 17 547 3 3 Gross margin (%) 51. 51.6 51. 1.6 52.4 Trading profit (Rm) 492 92 2 245 2 518 (80) (10) 0) Trading margin (%) 2.7 2.7 12.4 2.4 14.4 Operating profit (Rm) 1 1 653 653 3 512 3 946 (58) (10) 0) Operating margin (%) 9. 9.1 1 19. 9.4 22.5 Diluted HEPS (cents) 560. 0.7 567. 7.2 612.7 (8) (7) Dividend per share (DPS) (cents) 384 384 384 384 420 (9) (9) Cash generated from operations (Rm) 2 664 2 664 3 137 (15) (15) 5) Net asset value per share (cents) 2 2 156 156 2 569 2 421 (11) 6 * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 10

GROUP DPS AND DILUTED HEPS (cents) Office UK acquired Dec 2015 700 666 621 613 592 Compound growth rates: 600 561 561 DPS: 5-year 0% 500 3-year -5% 452 452 420 405 384 384 400 Compound growth rates: Dilut uted d HEPS: 5-year 0% 300 3-year -6% 200 100 - Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 DPS Diluted HEPS 11

GROUP RETURN ON EQUITY (ROE) AND RETURN ON CAPITAL (ROC) (%) Office UK acquired Dec 2015 60 51 Average: 49 50 46 ROE: : 5-year 30%* 40 3-year 27%* 40 35 35 33 33 * Average: 31 30 ROC: : 27 5-year 44%* 23 23 * 3-year 40%* 20 10 - Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 ROE ROC * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 12

GROUP RETURN ON ASSETS AND ASSET TURNOVER Office UK acquired Return on assets Asset turnover Dec 2015 (%) (times) 40 1.7 Average: 35 Return on assets: : 5-year 27%* 30 1.4 3-year 25%* 1.2 * 25 Average: 1.2 20 1.1 Asset turno nover: : 1.1 1.1 5-year 1.1 times* 15 3-year 1.1 times* 1.0 10 0.8 5 38 24 26 25 23 23 * - 0.5 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Return on assets Asset turnover * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 13

GROUP STATEMENTS OF FINANCIAL POSITION Jun Jun 2019 2019 Jun 2019 Jun 2018 Change on Including ing Change on comparab able le impairme rment nt Compara rabl ble * prior period prior period * Rm Rm Rm Rm Rm % % Property plant and equipment 1 780 1 780 1 7 780 1 726 3 3 Goodwill 346 346 1 6 611 1 629 (79) (1) Intangible assets 2 616 2 616 3 1 171 3 227 (19) (2) Other non-current assets 443 443 443 443 322 38 38 38 777 777 777 777 982 (21) (21) Cash and cash equivalents Trade and other receivables 4 4 934 934 4 9 934 5 110 (3) (3) Inventories 2 108 2 108 2 1 108 2 072 2 2 Other current assets 352 352 352 352 423 (17) (17) Total assets ts 13 356 15 176 15 491 (14) (2) Total equity 9 1 175 10 929 10 369 (12) 6 Non-current liabilities 1 7 763 1 8 857 2 363 (25) (21) Current liabilities 2 4 418 2 3 390 2 759 (12) (13) Total equity y and liabil ilitie ities s 13 356 15 176 15 491 (14) (2) * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 14

GROUP CAPITAL MANAGEMENT Net t debt t Net debt Net t debt to equity ty Net debt to equity Jun 2019 019 Jun 2019 019 Jun 2018 Jun 2018 % % Group Rm 663 663 7.2 968 9.3 Truworths Rm 245 245 2.8 605 5.9 9.5 * Office £m 23. 3.5 19. 20.1 10.2 After share buy backs of R266 million * Increase in Office’s net debt to equity ratio mainly due to the impairment of intangible assets. 15

GROUP CAPITAL MANAGEMENT (CONTINUED) Dividend ends Final dividend of 135 135 cents ts per share re (Jun 2018: 159 cents per share). Total dividend per share of 384 384 cents ts per share re (Jun 2018: 420 cents per share). Financial ncial positi tion on Financial position remains strong with net asset et value e per share re up 6% * to to 2 5 569 cents. Spent R266 6 million n on repurc rchas hasing ng 3.75 5 million on shares res during the period. Since the inception of the general share buy-back programme in 2002, 99.5 million shares have been repurchased at a total cost of R3.2 billion at an average price of R33 per share. * On a comparable basis, i.e. excluding the Office impairment and reclassification of interest in terms of IFRS 9 in the current period, as well as foreign exchange gains and losses in both periods. 16

GROUP TRADING SPACE Change on Jun 2019 019 Jun 2018 prior period ‘000 m 2 ‘000 m 2 % Truworths 388 388 381 2 Office 15 15 16 (5) Total tal 403 403 397 2 17