TFG TFGP
Unaudited interim condensed consolidated results for the half-year ended 30 September 2020
The Foschini Group Limited
Registration number: 1937/009504/06
Share codes: TFG-TFGP
ISIN codes: ZAE000148466 ZAE000148516
SHORT-FORM ANNOUNCEMENT
Unaudited interim condensed consolidated results for the half-year ended 30
September 2020
SALIENT FEATURES
- Group revenue down 25,3% to R13,9 billion
- Group retail turnover down 26,1% to R12,5 billion
- Group online turnover now contributes 14,4% to Group retail turnover
with strong growth for TFG Africa and TFG Australia at 115,8% (ZAR) and
66,8% (AUD) respectively
- Gross margin contracted to 45,2% (Sept 2019: 53,2%) mainly as a result
of dealing with seasonal inventory where clearances were impacted by
the various lockdowns
- Trading expenses decreased by 22,8% to R5,9 billion (Sept 2019: R7,7
billion)
- Basic earnings per share down 69,7% to 161,5 cents per share (Sept
2019: 533,4 cents per share)
- Headline loss per share of 91,0 cents down 117,1% (Sept 2019: headline
earnings per share of 531,2 cents per share)
- Operating profit before acquisition costs, gain on bargain purchase and
finance costs down 88,0% to R279,8 million
- Strong cash generation from operations of R4,9 billion (Sept 2019: R4,0
billion)
- Reduction in net debt from R8,4 billion (March 2020 pre-IFRS 16) to
R2,3 billion (Sept 2020 pre-IFRS 16) as a result of the successful R3,8
billion rights issue and strong cash generation. Debt to equity
improved to 11,2% (pre-IFRS 16)*
- No interim dividend has been declared (Sept 2019: 335,0 cents per
share)
- Acquisition of Jet business in South Africa for a purchase
consideration of R333,2 million
This short-form announcement is the responsibility of the company's
directors. It is a summary of the information in the Group's unaudited
interim condensed consolidated results for the half-year ended 30 September
2020 and does not contain complete information. The full results
announcement is accessible via the JSE link at
https://senspdf.jse.co.za/documents/2020/JSE/isse/TFG/HY2021.pdf and on the
Companys website at http://www.tfglimited.co.za.
Copies of the full announcement may also be requested by contacting the
Company Secretary (company_secretary@tfg.co.za) and are available for
inspection at the Companys registered office at no charge, weekdays during
office hours.
* Pro forma information used to calculate net debt pre-IFRS 16 and the debt
to equity ratio pre-IFRS 16.
COMMENTARY
SUCCESSFUL EXECUTION OF STRATEGIC AND TACTICAL MEASURES SUPPORTS GROUP
PERFORMANCE DURING UNPRECEDENTED COVID-19 PANDEMIC
The first half of financial year 2021 was delivered in unprecedented
circumstances. The COVID-19 pandemic was declared a global emergency on 30
January 2020 and the impact of the pandemic has been felt across all our
operations since the beginning of March 2020 with significant trading
disruptions caused by government-enforced lockdowns and regulations on
social distancing in all three of our major operating territories South
Africa, the United Kingdom (UK) and Australia.
As was announced in the Groups trading statement on SENS on 23 October
2020, most of the Groups 4 083 trading outlets across all our major trading
territories were closed in the month of April. Further lockdowns have since
been announced in certain states of Australia, as well as in the UK and
other international markets, which will continue to adversely impact trade
performance in these countries well into the second half of the 2020
calendar year.
We reacted swiftly to the pandemic and prioritised measures in March and
April to protect our employees, customers and other stakeholders, while
strengthening our business through the preservation of cash resources and
securing enhanced liquidity.
From 1 May, in excess of 2 100 of TFG Africas outlets reopened, with all 2
577 stores reopened from the 1st week of June. While trade has steadily
improved since May, it remains volatile.
In TFG London, the regional store and concession estate gradually reopened
during May and June (in the UK from 15 June), albeit with significantly
lower than usual levels of footfall. The reopening of our city centre
locations was generally held back until October, as footfall in these
locations has been consistently weak, with commuter and tourist traffic slow
to return, especially in central London. A second national lockdown has been
announced in the UK and is expected to last for four weeks from 5 November
to 2 December which will have a significant adverse impact on trade
performance.
In TFG Australia, the reopening of stores commenced end April and all 534
stores across Australia and New Zealand were reopened by the end of May. A
strong improvement in trade relative to April was seen in the months of
May to July, but overall trade in August and September was again negatively
impacted by government restrictions responding to the second wave which
resulted in store closures in both New Zealand and Victoria. New Zealand had
17 stores closed for two weeks, however these have subsequently reopened.
Victoria had 84 stores closed from 2 August to 28 October. Due to immediate
actions taken by management, the business has remained significantly cash
positive and has to date not accessed any of its borrowing facilities.
Financial performance
Against this backdrop, the Groups turnover for the six months ended 30
September 2020 decreased by 26,1% to R12,5 billion. Cash turnover decreased
by 23,0% while credit turnover, which was purposely restricted by stringent
and reduced acceptance criteria, decreased by 34,7%. Cash turnover now
contributes 76,6% to total Group turnover.
Online turnover in TFG Africa and TFG Australia exceeded managements
expectation with strong growth of 115,8% (ZAR) in TFG Africa and 66,8% (AUD)
in TFG Australia for the six months ended 30 September 2020. In the UK
however, online performance continues to be negatively impacted by weaker
department store online channels. Online turnover from TFG Londons own
sites for the six months ended 30 September 2020 increased marginally by
1,6% (GBP) compared to the previous comparable period. For the six months
ended 30 September 2020, online turnover contributed 14,4% to total Group
turnover, up from an 8,5% contribution in the comparative six month period.
Gross margin for the Group decreased by 8,0% to 45,2% due to increased
promotional activity in response to challenging trading conditions, stock
provisions and a change in product mix across all three segments. Additional
stock provisions were taken in all three of our major operating territories
to deal with the impact that the various lockdowns had on the clearance of
seasonal product, to ensure that the Group is well positioned going into the
second half of the year.
A significant effort from management teams across the three segments,
ensured that trading expenses for the six month period ended 30 September
2020, reduced by 22,8% when compared to the same period in the previous
financial year. This was achieved through operational discipline and various
cost savings initiatives, including business optimisation initiatives in TFG
Africa. The Group also benefitted from various government relief measures
related to COVID-19.
Basic earnings per share and headline earnings per share decreased by 69,7%
and 117,1% respectively. Earnings performance was impacted by the COVID-19
pandemic and outlet closures as outlined above as well as by the following
non-comparable events:
The dilution impact of the successfully concluded rights offer as
announced on SENS on 11 August 2020; and
The acquisition of certain commercially viable stores and selected
assets of Jet in South Africa as announced on SENS on 25 September
2020. The effective date of the acquisition was 25 September 2020 and
the inclusion of a purchase gain on acquisition of R694,3 million as
well as acquisition costs of R14,3 million has impacted specifically on
basic earnings per ordinary share and diluted earnings per ordinary
share.
Segmental performance
TFG Africas retail turnover decline (ZAR) when compared to the same period
in the previous financial year in the respective merchandise categories was
as follows:
Merchandise Total Total Total Contribution
category turnover turnover turnover to TFG
decline / decline / decline / Africa
growth Q1 growth Q2 growth H1 turnover for
April to July to April to the 6 months
June 2020 Sept 2020 Sept 2020 to Sept 2020
Clothing (41,4%) (9,5%) (25,7%) 69,1%
Homeware (25,0%) 4,9% (10,0%) 8,4%
Cosmetics (51,5%) (18,7%) (34,3%) 4,1%
Jewellery (70,3%) (15,1%) (41,0%) 5,0%
Cellphones 5,1% 29,6% 17,6% 13,4%
Total TFG Africa (38,4%) (5,8%) (22,1%) 100,0%
Cash turnover, contributing 64,5% of the segments turnover, decreased by
12,9% when compared to the same period in the previous financial year, while
credit turnover decreased by 34,7% when compared to the same period in the
previous financial year. Product deflation for clothing was 3,5%.
TFG Australias turnover, contributing 18,5% to Group turnover, decreased by
26,9% (AUD) when compared to the same period in the previous financial year,
while TFG Londons turnover, contributing 15,5% to Group turnover, decreased
by 56,2% (GBP) when compared to the same period in the previous financial
year.
The retail turnover decline when compared to the same period in the previous
financial year in each of our business divisions was as follows:
Business division Total Total Total Contribution
turnover turnover turnover to Group
decline Q1 decline Q2 decline H1 turnover for
April to July to April to the 6 months
June 2020 Sept 2020 Sept 2020 to Sept 2020
TFG Africa (ZAR) (38,4%) (5,8%) (22,1%) 66,0%
TFG London (GBP) (68,5%) (41,9%) (56,2%) 15,5%
TFG Australia (42,4%) (12,4%) (26,9%) 18,5%
(AUD)
Group (ZAR) (43,0%) (8,7%) (26,1%) 100,0%
Given the strong consumer association of our UK brands with occasion and
formal workwear, it is clear that a recovery in demand for their clothing
and accessories will be closely linked to the timing of a return to social
mixing and in-office attendance. Taking into consideration the recent
tightening of COVID-19 controls in the UK and Europe and the announcement of
a second national lockdown in the UK, it is increasingly likely that this
recovery will be slower than originally anticipated.
Whilst we are very cognisant of the current retail challenges in the UK, we
do believe that our UK brands remain very strong within their specific
categories and we are in the process of further reviewing our cost base and
operating model for TFG London, to ensure that we are well positioned for
recovery.
Acquisition of certain commercially viable assets of Jet
As was announced on SENS on 25 September 2020, TFG concluded an agreement to
acquire certain commercially viable stores and selected assets of Jet in
South Africa.
With effect from 25 September 2020, the Group acquired 382 Jet stores in
South Africa for a consideration of R333,2 million (being the South African
portion of the maximum purchase consideration of R480 million,
proportionally adjusted by the percentage by which the actual stock value at
the effective date was less than the required minimum stock value).
The initial accounting for the acquisition of Jet has only been
provisionally determined at the end of the reporting period and a gain on
purchase of R694,3 million has been recognised in profit or loss in the
current period. Acquisition costs related to the Jet acquisition of R14,3
million have been expensed in the current period in profit or loss.
The contracts for the acquisition of the Jet stores and assets located
within the Republic of Botswana, the Republic of Namibia, the Kingdom of
Lesotho and the Kingdom of eSwatini have been signed on 23 September 2020,
however they remain subject to satisfactory fulfilment or waiver, as the
case may be, of conditions precedent including, inter alia, approval by
regulatory authorities in these jurisdictions. Therefore the purchase price
allocation will only be finalised once these transactions have been
concluded.
Store portfolio
At 30 September 2020, the Group traded out of 4 345 outlets across 31
countries. This includes the acquisition of 382 Jet stores in South Africa
effective 25 September 2020. During the period, 63 outlets were opened and
183 outlets closed, with outlet movement in the respective business segments
as follows:
Outlets TFG Africa TFG TFG Group
London Australia
Opening balance at 2 577 972 534 4 083
April
New outlets 23 37 3 63
Closed outlets (33) (148) (2) (183)
Closing balance before 2 567 861 535 3 963
Jet acquisition
SA Jet stores acquired 382 - - 382
Closing balance at 30 2 949 861 535 4 345
Sept 2020
Credit
A restricted credit appetite was maintained for the six month period ended
30 September 2020, with curtailed marketing during the COVID-19 pandemic
contributing to a decrease in demand for new accounts of 55,0%. Approval
rates have been reduced to less than 10% as a preventative measure. The lack
of new accounts and the hard lockdown during the COVID-19 pandemic have
resulted in credit sales decreasing by 34,7% compared to the same period in
the previous financial year. The retail net debtors book of R6,8 billion
decreased by 9,6% compared to the same period in the previous financial
year. The allowance for impairment as percentage of debtors book increased
to 25,0% (Sept 2019: 19,7%) as the allowance includes an assessment for the
impact of COVID-19 on expected credit losses.
Successfully concluded rights offer
As was announced on SENS on 11 August 2020, TFG implemented a fully
underwritten, renounceable rights offer that raised gross proceeds of R3,95
billion. The rights offer consisted of an offer of 94 270 486 new TFG
ordinary shares at a subscription price of R41,90 per rights offer share.
The net proceeds raised amounted to R3,8 billion.
Strong balance sheet
The Group generated net cash of R2,3 billion excluding the net proceeds of
c.R3,8 billion from the successfully concluded rights offer, and R6,1
billion including the net proceeds from the rights offer. This strong cash
generation, especially from operations (i.e. cash generated of R4,9
billion), is a pleasing result and has supported the reduction in net debt
from R8,4 billion (pre-IFRS 16) at the end of March 2020 to R2,3 billion
(pre-IFRS 16) at the end of September 2020. The Groups debt to equity ratio
has improved to 11,2% (pre-IFRS 16) from 52,4% (pre-IFRS 16) at end March
2020*.
* Pro forma information used to calculate net debt pre-IFRS 16 and the debt
to equity ratio pre-IFRS 16.
Ongoing focus on working capital management has also resulted in the Groups
current ratio improving to 2,0 from 1,5 at year-end, with inventory balances
reducing by R973,9 million since year-end and inventory days reducing by a
further 2 days to 186 days (excluding the inventory acquired as part of the
Jet acquisition).
PRO FORMA INFORMATION
Pro forma information for net debt pre-IFRS 16 and the debt to equity ratio
pre-IFRS 16 were used in this announcement as these are key metrics within
the Groups debt reporting. This pro forma information, because of its
nature, may not be a fair reflection of the Groups results of operations,
financial position, changes in equity or cash flows. There are no events
subsequent to the reporting date which require adjustment to the pro forma
information.
The pro forma net debt pre-IFRS 16 and debt to equity pre-IFRS 16 numbers
were calculated as follows:
Sept 2020 Sept 2019 March 2020
Rm Rm Rm
Total interest-bearing 16 092,6 18 152,0 19 927,3
debt
Less: Cash and cash (4 760,2) (1 159,8) (2 969,1)
equivalents
Net debt 11 332,4 16 992,2 16 958,2
Less: Lease liabilities (9 072,9) (8 495,2) (8 597,8)
Net debt pre-IFRS 16 2 259,5 8 497,0 8 360,4
Equity 20 263,0 14 153,5 15 942,6
% % %
Debt to equity 55,9 120,1 106,4
Debt to equity pre-IFRS 11,2 60,0 52,4
16
The directors are responsible for compiling the pro forma financial
information in accordance with the JSE Limited Listings Requirements and in
compliance with the SAICA Guide on Pro Forma Financial Information. The pro
forma financial information has not been audited or reviewed by the external
auditors. The underlying information used in the preparation of the pro
forma financial information has been prepared using the accounting policies
in place for the year ended 31 March 2020.
Supervisory Board updates
During the period, the following changes took place, as was communicated on
SENS on 29 July 2020:
G H Davin, an independent nonexecutive director, was appointed as the
Lead Independent NonExecutive Director with effect from 1 August 2020;
R Stein, previously categorised as a nonexecutive director, was
classified as an independent nonexecutive director effective 29 July
2020; and
Certain changes were made to the various Board committees effective 1
August 2020.
Outlook
The outlook for trading conditions remain uncertain as consumer confidence
remains under pressure and further lockdowns as a result of the second wave
of COVID-19 infections have already been experienced in TFG Australia and
are currently being experienced in TFG London.
As previously communicated, the impact of the COVID-19 pandemic on our 2021
financial year is expected to be significant across all territories, the
extent of which is difficult to predict with accuracy. Any re-introduction
of significant lockdowns and store closures across our three business
segments would have a further material and negative impact on our business
and results of operations in our 2021 financial year.
We are however confident that the Group is well positioned to take advantage
of any economic recovery and that our continued investment in our brands,
digital transformation initiatives, e-commerce platforms and vertical quick
response supply chain capacity, will continue to benefit the Group.
Results presentation webcast
A live webcast of the results presentation will be broadcast at 09:00 am
(SAST) on 5 November 2020. A registration link for the webcast is available
on the Companys website: http://www.tfglimited.co.za. The interim results
presentation will be made available on the Companys website prior to the
commencement of the webcast.
Interim ordinary dividend announcement
In light of the current subdued economic environment and the heightened
levels of uncertainty posed by COVID-19, the Supervisory Board has decided
that it would be prudent not to declare an interim ordinary dividend at this
period-end (Sept 2019: 335,0 cents per share). Dividends will be resumed
when appropriate to do so.
Preference dividend announcement
Dividend no. 168 of 3,25% (6,5 cents per share) (gross) in respect of the
six months ending 31 March 2021 has been declared from income reserves,
payable on Monday, 15 March 2021 to holders of 6,5% preference shares
recorded in the books of the company at the close of business on Friday, 12
March 2021. The last day to trade (cum the dividend) in order to
participate in the dividend will be Tuesday, 9 March 2021. The Foschini
Group Limited preference shares will commence trading ex the dividend from
the commencement of business on Wednesday, 10 March 2021 and the record
date, as indicated, will be Friday, 12 March 2021.
Preference shareholders should take note that share certificates may not be
dematerialised or rematerialised during the period Wednesday, 10 March 2021
to Friday, 12 March 2021, both dates inclusive.
In terms of paragraph 11.17 of the JSE Listings Requirements, the following
additional information is disclosed in respect of the preference dividend:
1) Local dividend tax rate is 20%;
2) The withholding tax, if applicable at the rate of 20%, will result in a
net cash dividend per share of 5,20000 cents;
3) The issued preference share capital of The Foschini Group Limited is 200
000 shares at 5 November 2020; and
4) The Foschini Group Limiteds tax reference number is 9925/133/71/3P.
Signed on behalf of the Board.
M Lewis A E Thunstrom
Chairman Chief Executive Officer
Cape Town
5 November 2020
Non-executive Directors:
M Lewis (Chairman), Prof. F Abrahams, S E Abrahams, C Coleman, G H Davin, D
Friedland, B L M Makgabo-Fiskerstrand, A D Murray, E Oblowitz, N V Simamane,
R Stein
Executive Directors:
A E Thunstrom, B Ntuli
Company Secretary:
D van Rooyen
Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500, South Africa
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196, South
Africa
Sponsor:
UBS South Africa Proprietary Limited
Visit our website at http://www.tfglimited.co.za
Date: 05-11-2020 08:00:00
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THE FOSCHINI GROUP LIMITED - Unaudited interim condensed consolidated results for the half-year ended 30 September 2020
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