GROUP INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 DECEMBER 2018
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SOUTH AFRICA – ECONOMIC ENVIRONMENT • Continued challenging trading environment • GDP growth remained subdued • Disposable income growth under pressure due to relatively higher fuel and energy prices and VAT rate increase • Relatively weaker and highly volatile Rand • Continued high levels of unemployment • Political and consumer uncertainty ahead of 2019 general elections • Power outages to further impact retail sales and consumer confidence 4
UNITED KINGDOM – ECONOMIC ENVIRONMENT • Extremely tough retail environment • Company Voluntary Arrangements in 2018 increased by more than 50% — 125 retail companies went into administration • Over 1 000 fashion retail stores closed • Retail footfall down 2.6% • Growth in sales contributed mainly by online, now accounting for 20% of all UK retail sales • Uncertainty remains ahead of 29 March 2019 EU exit Source: Deloitte Retail Trends 5
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GROUP – TRADING OVERVIEW • Weak top-line growth owing to deteriorating economic conditions • Gross margin steady at 52.3% • Well managed costs across the Group • Headline earnings per share down 5% • Dividend cover maintained at 1.5 times • Strong balance sheet reflected in 9% growth in net asset value per share • Continued strong cash generation • Group in net cash position at Dec 2018 due to timing of creditors and tax payments • IFRS 9 adoption resulted in an increase in the doubtful debt provision 7
GROUP – PERFORMANCE AGAINST TARGETS Dec 2 2018 Jun 2019 Actual Targets Gross margin (%) 52.3 .3 51 – 55 21.7 .7 Operating margin (%) 19 – 24 29 29 Return on equity* (%) 23 – 28 26 26 Return on assets* (%) 20 – 25 4.6 .6 Inventory turn* (times) 3.5 – 4.5 1.2 .2 Asset turnover* (times) 0.9 – 1.3 *Annualised and impacted by seasonality between the first and second half of the financial period 8
GROUP – FINANCIAL PERFORMANCE Change on prior period Dec 2 2018 Dec 2017 % 10 491 Retail sales (Rm) 10 289 2 52.3 .3 Gross margin (%) 52.4 1 6 643 Trading profit (Rm) 1 703 (4) 16.1 .1 Trading margin (%) 16.9 360 360 Diluted HEPS (cents) 379 (5) 249 249 (cents) (5) Dividend per share (DPS) 261 2 6 610 (Rm) Cash generated from operations* 1 837 42 2 6 622 (cents) Net asset value per share 2 416 9 * Dec 2018 positively impacted by timing of creditors and tax payments 9
GROUP – SUMMARISED INCOME STATEMENT Change on Dec 2 2018 Dec 2017 prior period Rm Rm Rm % 10 1 183 Sale of merchandise 10 048 1 (4 (4 8 857) (4 783) 2 Cost of sales 5 3 326 Decrease mainly due to: Gross p profit 5 265 1 Restructuring of Group’s South • 147 147 151 (3) Other income African funding arrangements • Growth in accounts opened post the (3 (3 8 830) Trading expenses (3 713) 3 November 2015 amendments to the 1 6 643 maximum prescribed interest rates Trading p profit 1 703 (4) under the NCA Interest and dividends received 566 566 713 (21) • Adoption of IFRS 9 2 2 209 Operating profit 2 416 (9) Decrease due to restructuring of Group’s (4 (40) (133) (70) Finance costs South African funding arrangements in 2 1 169 June 2018. Profit before tax 2 283 (5) (5 (599) (627) (4) Tax expense 1 5 570 Profit for the p period 1 656 (5) 10 10
GROUP – DPS AND DILUTED HEPS Compound growth rates: Compound growth rates: DHEPS: DPS: (cents) Dec: 5-year 1%, 3-year (4%) Dec: 5-year 3%, 3-year (3%) 450 404 392 379 400 360 360 333 350 300 270 270 261 249 249 236 250 200 150 100 50 - Dec 2014 Dec 2015 Dec 2016 Dec 2017 Dec 2018 DPS DHEPS 11 11
GROUP – RETURN ON EQUITY (ROE) AND RETURN ON CAPITAL (ROC) Average: Average: ROE: ROC: Dec: 5-year 36.4%, 3-year 33.3% Dec: 5-year 51.6%, 3-year 47.7% (%) %) 70 60 60 55 55 48 50 42 40 40 40 38 40 33 29 29 30 20 10 - Dec 2014* Dec 2015* Dec 2016* Dec 2017* Dec 2018* ROE ROC * Annualised 12 12
GROUP – RETURN ON ASSETS AND ASSET TURNOVER Average: Average: Return on assets: Asset turnover: Return on assets Asset turnover (%) %) Dec: 5-year 30.6%, 3-year 28.0% Dec: 5-year 1.2 times, 3-year 1.2 times (times) 50 2.1 45 1.9 40 40 1.7 35 29 29 29 1.5 30 26 26 25 1.3 1.3 20 1.2 1.2 1.1 1.1 1.1 15 0.9 10 0.7 5 - 0.5 Dec 2014* Dec 2015* Dec 2016* Dec 2017* Dec 2018* Return on assets Asset turnover * Annualised 13 13
GROUP – STATEMENTS OF FINANCIAL POSITION Change on Dec 2 2018 Dec 2017 prior period Rm Rm Rm % Property, plant and equipment 1 7 795 1 674 7 1 6 642 Goodwill 1 529 7 3 2 252 Intangible assets 2 976 9 Other non-current assets 398 398 336 18 2 4 416 Cash and cash equivalents 2 297 5 5 3 378 Trade and other receivables 5 697 (6) 2 1 101 Inventories 1 944 8 200 200 Other current assets 169 18 17 1 182 Total a assets 16 622 3 11 2 243 Total equity 10 386 8 2 1 186 3 492 (37) Non-current liabilities 3 7 753 Current liabilities 2 744 37 17 1 182 Total e equity a and l liabilities 16 622 3 14 14
GROUP – CAPITAL MANAGEMENT Dec 2 2018 Dec 2017 Net (c (cash) / ) / debt Net debt Net (c (cash) / ) / debt to e equity % Net debt to equity % Group Rm (1 (1 0 076) (1 (10) 872 8 Group, normalised* Rm 237 2 (1 (1 1 117) (1 (10) Truworths Rm 547 5 2.2 .2 1 Office £m 19.5 10 * Creditors and tax payments were made after the current period-end compared to December 2017 when payments were made before the prior period-end 15 15
GROUP – CAPITAL MANAGEMENT (CONTINUED) • Dividends – Interim dividend per share decreased 5% to 249 cents • Financial position – Financial position remains strong with net asset value per share up 9% to 2 622 cents – Since the inception of the share buy-back programme in 2002, 96 million shares have been repurchased at a total cost of R3 billion at an average price of R31 per share 16 16
GROUP – TRADING SPACE Change on Dec 2 2018 Dec 2017 prior period ‘000 m 2 ‘000 m 2 % 386.2 .2 Truworths 382.5 1.0 15.6 .6 Office 16.0 (2.7) Total 401.8 .8 398.5 0.8 17 17
GROUP – DIVERSIFICATION RETAIL SALES TRUWORTHS OFFICE GROUP R7 620 m R2 871 m R10 491 m South Africa 97% Rest of Africa 3% South Africa 71% UK and Europe 27% Rest of Africa 2% United Kingdom 93% Rest of Europe 7% CASH:ACCOUNT SALES (%) TRUWORTHS OFFICE GROUP R10 491 m R2 871 m R7 620 m Account 51% Cash 49% Cash 100% Account 70% Cash 30% 18 18
GROUP – DIVERSIFICATION (CONTINUED) PRODUCT MIX TRUWORTHS OFFICE GROUP R7 620 m R2 871 m R10 491 m Footwear 100% Clothing and accessories 89% Footwear 10% Homeware 1% Clothing and accessories 65% Footwear 35% STORE LOCATIONS TRUWORTHS OFFICE GROUP 814 stores 153 stores 967 stores United Kingdom 88% Rest of Europe 12% South Africa 95% Rest of Africa 5% South Africa 80% UK and Europe 16% Rest of Africa 4% 19 19
GROUP – CASH FLOW ANALYSIS # Impacted by timing of creditors and tax payments. If creditors and tax were paid before the period-end, the net cash (Rm) increase for the period would have been approx. R400 million. 3 500 (37) (157) (49) 3 000 566 (688) 2 500 667 (212) 18 2 000 (360) 1 500 2 933 2 051 1 000 1 943 1 691 # 500 - Cash EBITDA* Working capital Interest and dividends Finance costs Tax paid Capex maintenance Free cash flow Dividends paid Capex expansion Other Net cash increase Loans repaid Net cash increase for movements received before loan the period repayments * Earnings before interest, tax, depreciation and amortisation 20 20
GROUP – E-COMMERCE 9% of Group retail sales 9% New truworths.c .co.z .za e-commerce website launched Online sales increased 7% 7% • • in February 2018 Comprising nearly 33% 33% of retail sales • Delivery to store (Click & Collect) or to chosen address • • 101 stores are able to fulfil online orders through the • 99%+ %+ order fulfilment rate achieved to date direct despatch channel (December 2017: 82 stores), improving the availability of stock that can be ordered for next day • truworths.co.za is generating the turnover of a medium-sized delivery Truworths store • Latest enhancements includes additions of new wish list, Website profitable within f first year • personalised product recommendations and home pages, geolocation technology and increased availability of inventory • Constant evolution and improvement to the website Sales improved by addition of multi-currency pricing • Brands available online include: • to office.co.uk • Further integration of the store and online channels through launch of ‘in store look up’ functionality on the website 21 21
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TRUWORTHS – TRADING OVERVIEW • Retail sales increased 2% • Gross margin improved marginally to 55.6% (Dec 2017: 55.5%) • Profit before tax decreased 3% • Continued strong cash generation • Inventory turn of 5.8 times (Dec 2017: 5.7 times) • More efficient funding structure implemented in June 2018 • Active account growth benefiting from outcome of affordability court case • Lay-bys and e-commerce sales contributing positively 23 23
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