RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017
RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 AGENDA Doug Murray Anthony Thunstr ӧ m Jane Fisher Chief Executive Officer Chief Financial Officer Group Director − Economy and retail environment Doug Murray − Business overview & review of the year Doug Murray − Financial review Anthony Thunström − TFG Financial Services Jane Fisher − RAG acquisition Doug Murray − Growth and outlook Doug Murray 2 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 1 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
ECONOMY AND RETAIL ENVIRONMENT – SOUTH AFRICA GDP INTEREST CPI (Dec 2016) RATE 6,1% 0,3% 10,5% (March 2016: (Dec 2015: (March 2016: 6,3%) 1,3%) 10,5%) − Impact of political uncertainty and corruption on the South African economy remains of deep concern − South Africa’s credit rating under further threat − Consumer spending remains under pressure and impacted by difficult credit conditions (Affordability Regulations impact), unemployment, low consumer confidence − Rand remains volatile • Depreciated around 10% in two weeks post recent cabinet reshuffle − Outlook for SA economy: • Consumer spending growth forecast at 1,1% for 2017 (BER) • Interest rate expected to remain flat • Inflation outlook remains at upper end of target range (around 6%) • GDP growth revised downward to 0,6% for 2017 (BER) – previously 1,1% 3 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 ECONOMY AND RETAIL ENVIRONMENT – UK GDP INTEREST CPI RATE (Dec 2016) 2,3% 0,25% 1,8% (March 2016: (March 2016: (Dec 2015: 0,5%) 0,5%) 2,2%) − Political and economic uncertainty relating to outcome of Brexit negotiations remains − Rising inflation − Interest rate outlook uncertain • Likely to remain flat in the short term but higher inflation could result in a rate hike − Pound remains weak and volatile compared to pre-Brexit levels 4 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 2 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
BUSINESS OVERVIEW & REVIEW OF THE YEAR BUSINESS OVERVIEW TFG GROUP − Diverse group with a successful portfolio of 22 leading fashion retail brands across various lifestyle and merchandise categories − Broad product offering across various merchandise categories: • Clothing, jewellery, homeware & furniture, cellphones and cosmetics − Diversification through: • Cash and credit sales • Geography – 3 328 outlets in 34 countries • Online product offering in addition to traditional store and concession product offering • Portfolio of brands 6 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 3 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
REVIEW OF THE YEAR CHANGES IN GROUP STRUCTURE − Phase Eight: fully comparable (12 months’ trading included in both current and prior financial year) • Damsel in a Dress: 2 months’ trading included in current year (acquired 3 February 2017) − Whistles: 12 months’ trading included in current year (acquired March 2016) − G-Star Australia: no trading included in current year as effective date was 3 April 2017 CHANGES IN E-COMMERCE − Launched online selling of Foschini cosmetics, Markham and Fabiani brands CHANGES IN INTEREST RATE ENVIRONMENT − TFG Africa: • Current year: no changes to interest rates • Prior year: repo rate increases in South Africa in July 2015 (25 bps), November 2015 (25 bps), January 2016 (50 bps) and March 2016 (25 bps) − TFG International: − Interest rate in UK reduced from 0,5% to 0,25% on 4 August 2016 7 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 TURNOVER BY MERCHANDISE CATEGORY TFG TFG TFG TFG % same GROUP AFRICA GROUP AFRICA % % store March March March March change change growth Retail turnover by 2017 2017 2016 2016 TFG TFG TFG merchandise category (Rm) (Rm) (Rm) (Rm) GROUP AFRICA AFRICA Clothing 17 578,7 12 942,8 15 517,8 11 914,7 13,3 8,6 3,0 Jewellery 1 490,5 1 490,5 1 470,5 1 470,5 1,4 1,4 (0,8) Cellphones 1 927,7 1 927,7 1 672,2 1 672,2 15,3 15,3 11,4 Homeware & furniture 1 434,0 1 434,0 1 354,0 1 354,0 5,9 5,9 (3,2) Cosmetics 1 117,8 1 117,8 1 093,0 1 093,0 2,3 2,3 - Total 23 548,7 18 912,8 21 107,5 17 504,4 11,6 8,0 2,8 − Growth in constant currency would have been 14,3% (vs 11,6% above) − Clothing: strong performance in a tough market both in TFG Africa and TFG International − Jewellery: continues to be a difficult retail area but still with positive turnover growth − Cellphones: strong growth based on good product range − Homeware & furniture: impacted by discounting within the market − Cosmetics: also impacted by heavy discounting within the market 8 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 4 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
TURNOVER: MERCHANDISE CATEGORY CONTRIBUTION 4,8% 6,1% Cosmetics Homeware & − A strength of the Group is the furniture Clothing & diversification across different footwear - Sport 8,2% merchandise categories with further 20,4% Cellphones diversification within clothing • No major dependency on any particular category 6,3% Jewellery − Merchandise category turnover split broadly in line with prior financial year 74,6% Clothing & footwear – • Increase in contribution of Clothing and footwear International Clothing & cellphones (2016: 7,9%),and Sport division footwear - Value 19,7% (2016: 18,8%) and International 10,4% Division (2016: 17,1%) clothing & footwear Clothing & footwear – Fashion 24,1% 9 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 TURNOVER: GEOGRAPHIC CONTRIBUTION 100% 17.1% 17.1% 90% 19.7% 22.4% − Increase in contribution from TFG International 80% • Phase Eight: acquired January 70% 2015 • Whistles: acquired March 2016 60% − In constant currency, the March 2017 contribution would have been 21,6% 50% − Further acquisitions will lead to an 82.9% 82.9% 40% 80.3% increase in the international 77.6% contribution 30% • Damsel in a Dress • G-Star Australia 20% • RAG Group 10% 0% Sep-15 Mar-16 Sep-16 Mar-17 TFG Africa TFG International 10 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 5 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
TURNOVER: CASH VS CREDIT TURNOVER TFG TFG TFG TFG GROUP AFRICA GROUP AFRICA March March March March % change % change 2017 2017 2016 2016 TFG TFG Retail turnover (Rm) (Rm) (Rm) (Rm) GROUP AFRICA Cash sales 14 294,3 9 658,4 12 065,3 8 462,2 18,5 14,1 Credit sales 9 254,4 9 254,4 9 042,2 9 042,2 2,3 2,3 Total 23 548,7 18 912,8 21 107,5 17 504,4 11,6 8,0 − Cash turnover • Represents 60,7% (TFG Africa: 51,1%) of total turnover (March 2016: TFG Group 57,2%, TFG Africa 48,3%) • Strong growth at 18,5% (TFG Africa: 14,1%) − Credit turnover • Growth impacted by the reduction in new accounts as a result of the Affordability Regulations (SA) 11 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 CASH VS CREDIT TURNOVER GROWTH (TFG AFRICA) 2017 − H2 2017 growth slower than H1 19.0% 20% 2017 14.1% 15% • Shift of Easter weekend and 10.3% 9.5% school terms 8.0% 10% 6.8% • Slow January & February 5% 3.3% 2.3% 1.4% 0% H1 2017 H2 2017 FY 2017 2016 25% 20.6% 18.4% 20% 15.8% 15% 12.3% 11.6% 10.8% 10% 6.8% 5.9% 5.1% 5% 0% H1 2016 H2 2016 FY 2016 12 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 6 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
MARCH 2017: SALIENT FEATURES Headline earnings growth (total) +10,1% (constant currency = 11,7%) Headline earnings growth excluding acquisition costs +6,8% (constant currency = 8,3%) HEPS (cents) 1 099,2 HEPS growth (excl acquisition costs) +4,1% (constant currency = 5,7%) Final dividend (cents per share) 400,0 Growth in total distribution +4,2% 13 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 MARCH 2017: SALIENT FEATURES CONTINUED TFG GROUP TFG GROUP March 2017 March 2016 Net bad debt / closing debtors’ book (TFG Africa) 11,3% 12,3% Debt / equity - recourse 53,6% 55,6% Debt / equity - total 65,3% 73,5% 14 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 7 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
FINANCIAL REVIEW FINANCIAL REVIEW: INCOME STATEMENT HIGHLIGHTS TFG TFG TFG TFG % % GROUP AFRICA GROUP AFRICA change change March March March March TFG TFG 2017 2017 2016 2016 GROUP AFRICA Revenue (Rm) 26 413,6 21 776,7 23 746,4 20 143,3 11,2 8,1 Retail turnover (Rm) 23 548,7 18 912,8 21 107,5 17 504,4 11,6 8,0 Gross margin (%) 49,7 46,4 49,7 46,9 Total trading expenses (Rm) 10 757,2 8 263,3 9 537,2 7 661,0 12,8 7,9 Net bad debt (Rm) 896,1 896,1 947,7 947,7 (5,4) (5,4) Operating margin (%) 16,2 17,9 17,0 18,2 HEPS (excluding acquisition costs) 1 099,2 1 055,8 4,1% (cents) 16 TFG RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2017 8 TFG RESULTS PRESENTATION 2017 www.tfglimited.co.za
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