GROUP ANNUAL RESULTS for the 52 weeks ended June 2015 Agenda - PowerPoint PPT Presentation

GROUP ANNUAL RESULTS for the 52 weeks ended June 2015

Agenda • Business overview • Strategic distinction • Review of the financial period • Credit management • Strategic focus areas • Outlook • Questions 2 2

Business overview

Impact of credit on Truworths in the current economic climate • Truworths targets mass middle income consumers - the market currently under the most financial pressure. • But the credit environment is steadily improving after one of the longest credit contractions in many years. • Truworths credit customer base exceeds 3.2 million customers (2.7 million of which are active credit customers). • We can communicate with approximately 13 million people of which 3.2 million are account customers. • Truworths owns its own aspirational brands and uses credit as ‘an enabler of sales of quality fashion at medium to premium prices’ to its customers. • This exposure to credit means Truworths is susceptible to periodic swings in the credit cycle and will underperform cash retailers in downward cycles, especially in prolonged ones such as the current one, a trend which is likely to reverse as the credit environment improves. • While credit is seen as risky in downward credit cycles the opposite is valid when the credit cycle improves and Truworths is in the ‘sweet spot’ instead of in ‘the eye of the storm’. 4

Improving credit environment Industry: • Credit market is improving. • National credit regulator shows slightly improving book quality across the industry with the credit industry total book sizes growing but new credit granting flat to reducing. • TransUnion’s Consumer Credit Index indicates a very positive improvement in credit health. • Principa’s benchmarking of credit retailers indicates improvement of credit books across the industry (year-on- year). 5 5

Customer Income South African Population Monthly Income Year-on-year growth 2012 2013 2014 Less than R10 000 (1.5%) (1.4%) (1.2%) R10 000 to R25 000 12.3% 4.6% 6.4% R25 000 plus (1.4%) 23.2% 5.5% *South African Advertising Research Foundation AMPS research Current Truworths Group ( Customers South African Population who’s credit limits have changed ) Monthly Income Less than R10 000 73% 83% R10 000 to R25 000 21% 13% R25 000 plus 6% 4% Total 100% 100% 6 6

Industry: TransUnion SA Consumer Credit Index (Source: TransUnion SA Consumer Credit Index) This index measures consumer credit health where 50 is the break-even level between improvement and deterioration. • The clear break above 50 indicates consumer credit health improved in 2015 at its fastest pace since Q1 2012. • Q1 and Q2 2015 are at 54.4 2012 Q1 2014 Q4 7

Industry: Good/Bad balance ratio (Source: Principa) Year-on-year movement Retailer Total Good (0-1)/Total Bad (2+) balance ratio Good = Current or missed one payment, Bad = Consumer overdue for 2+ payments % Improvement slows from Nov 0.25 2010 to Dec 2011 0.2 Improvement from early 2015 0.15 0.1 0.05 0 -0.05 -0.1 Deterioration starts during Jan 2012 -0.15 and slows down from Nov 2014 -0.2 2007-02 2007-05 2007-08 2007-11 2008-02 2008-05 2008-08 2008-11 2009-02 2009-05 2009-08 2009-11 2010-02 2010-05 2010-08 2010-11 2011-02 2011-05 2011-08 2011-11 2012-02 2012-05 2012-08 2012-11 2013-02 2013-05 2013-08 2013-11 2014-02 2014-05 2014-08 2014-11 2015-02 2015-05 8

Growth in national credit granted (Source: National credit regulator statistics, Credit Bureau Monitor, first quarter 2015 statistics) % Slowdown in growth from 80 2011 Q3 to 2013 Q1 60 Growth in credit granted increased from 2015 Q1 40 20 - (20) (40) 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 Credit facilities Unsecured credit 9 9

Industry: Credit facilities book quality (Source: National credit regulator statistics, Credit Bureau Monitor, first quarter 2015 statistics) % Credit facilities: Credit and store cards, bank overdraft 90 82.5 82.0 81.6 81.2 80.0 80.1 78.2 76.4 80 Credit facilities 70 book is improving, more customers 60 are current year- on-year 50 40 30 20 10 - 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 Current 30 Days 31-60 Days 61-90 Days 91-120 Days 120+ Days 10 10

Industry: Unsecured credit book quality (Source: National credit regulator statistics, Credit Bureau Monitor, first quarter 2015 statistics) % Unsecured facilities: Micro-lending and personal loans 90 78.2 76.2 80 73.9 74.0 73.4 72.6 71.1 70.1 70 Unsecured credit book is 60 improving, more customers are current year-on-year 50 40 30 20 10 - 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 Current 30 Days 31-60 Days 61-90 Days 91-120 Days 120+ Days 11 11

Improving credit metrics • Credit metrics in the Truworths book have improved and are now in line with targeted norms and improving faster than the Industry. • Truworths continues to gain share of the balance. • Credit granting criteria in the Identity book has been tightened as the book has deteriorated over the past year and is lagging the Industry. • This brings the Group’s total debtors’ book in line with our targeted norms at the end of the period. (The doubtful debt allowance was reduced from 13% in December 2014 to 12.5% in June 2015.) • If this scenario continues the debtors allowance percentage could be reduced and bad debt could continue to improve during the 2016 financial period. • Group active account base growth of 3%. • Gross trade receivables growth of 11%. • Good expected sales (next 12 months) from new accounts and quality of the book in line with our target. 12 12

Industry compared to the Group’s book (Source: Principa Credit Compass) Total Good (0-1) Total Bad (2+) Balance Ratio % 40 30 20 Truworths 10 Industry - Identity ( 10) ( 20) ( 30) Industry year on year Truworths year on year Identity year on year Industry, Truworths and Identity improving 13

% 4+ Cycle balances (Retail clothing industry benchmark) (Source: Principa Credit Compass) % This shows the percentage of the book balance that is badly (4+) delinquent. Industry is 4+ accounts are 90 days or more behind in payments. 16 getting worse 14 12 Truworths is improving 10 8 6 4 2 - Feb 2007 May 2007 Aug 2007 Nov 2007 Feb 2008 May 2008 Aug 2008 Nov 2008 Feb 2009 May 2009 Aug 2009 Nov 2009 Feb 2010 May 2010 Aug 2010 Nov 2010 Feb 2011 May 2011 Aug 2011 Nov 2011 Feb 2012 May 2012 Aug 2012 Nov 2012 Feb 2013 May 2013 Aug 2013 Nov 2013 Feb 2014 May 2014 Aug 2014 Nov 2014 Feb 2015 May 2015 Industry Truworths Group 14

Share of balance (Clothing retailers) (Source: Total Bureau Solution (TBS)) % Balance is a better indication of 35 Truworths share of balance with its’ sales, as retailers have different customers is growing instalment calculations Truworths 30 25 Retailer 1 20 Retailer 2 Retailer 3 15 10 Retailer 4 5 Retailer 5 Identity Retailer 6 Retailer - 7 and Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar YDE 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 2015 2015 15

Impact of the credit environment . June June June June June 2015 2014 2013 2012 2011 % % % % % Retail sales growth 7 7 13 10 14 Like-for-like sales growth 1 1 8 6 9 Cash sales growth 6 11 16 5 9 Credit sales growth 8 5 9 16 16 Credit sales growth to customers with more than 24 month old account s 9 12 13 10 14 9% Credit sales growth to customers with less than 24 month old accounts 4 (5) 8 23 19 4% Trade receivable growth 11 12 11 14 18 New account growth 7 1 6 10 11 Account acceptance rate 30 26 31 38 38 The above numbers exclude Earthchild and Naartjie 16

Credit sales growth 1 st half compared to 2 nd half Credit sales growth: Credit sales growth: Credit sales growth: all accounts 24 months and older less than 24 months Full period Full period 1 st half 2 nd half Full period 1 st half 2 nd half % % % % % % % June 2015 8 9 9 9 4 (4) 8 June 2014 5 12 12 12 (5) (1) (4) June 2013 9 13 12 13 8 17 (9) June 2012 16 10 11 9 23 21 2 17 17

Trading for the 1 st 7 weeks of 2016 June June 1st 7 weeks 2015 2015 of 2016 2 nd half 1 st half Credit sales growth 17% 11% 5% Cash sales growth 11% 8% 5% Group retail sales growth (excl. Earthchild and Naartjie) 15% 10% 5% Gross profit growth 18% 11% 3% Retail sales for the first 7 weeks of the 2016 period have increased by 15% over the corresponding 7 weeks in the prior period with gross profit increasing 18% due to markdowns decreasing 0.2%. 18 18

Strategic distinction