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THE FOSCHINI GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/009504/06)
Share code: TFG
ISIN: ZAE000148466
Preference share code: TFGP
ISIN: ZAE000148516
(“TFG” or “the Company” and together with its affiliates "the Group")
SUMMARY OF THE UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE HALF-
YEAR ENDED 30 SEPTEMBER 2022, ORDINARY AND PREFERENCE DIVIDENDS DECLARATIONS
HIGHLIGHTS
- Group revenue up 23,0% to R25,1 billion
- Group retail turnover up 23,5% to R23,5 billion
- Group online retail turnover up 2,6% to R2,1 billion, contributing
8,9% to total Group retail turnover, as consumers returned to stores
during the period
- Strong cash retail turnover growth of 25,5%, contributing 80,4% to
total Group retail turnover
- Gross profit up 24,8% to R11,6 billion
- Operating profit before finance costs up 40,7% to R2,6 billion
- Headline earnings up 17,9% to R1,5 billion
- Basic earnings per share up 44,5% to 461,6 cents per share (Sept
2021: 319,5 cents per share)
- Headline earnings per share up 18,1% to 464,6 cents per share (Sept
2021: 393,4 cents per share)
- Cash generated from operations of R1,5 billion used to fund growth
and acquisitions
- Interim dividend declared of 170,0 cents per share (Sept 2021: 170,0
cents per share)
COMMENTARY
STRONG PERFORMANCE DESPITE SIGNIFICANT HEADWINDS WHICH WAS ENABLED BY A
ROBUST BUSINESS MODEL AND CONTINUED INVESTMENT THROUGHOUT THE CYCLE
The Group delivered a strong performance during the six months ended 30
September 2022 (‘current period’ or ‘H1’2023’) despite tough trading
conditions and a stronger post-COVID-19 comparative in the six months ended
30 September 2021 (‘prior period’ or ‘H1’2022’). The prior period was also
impacted by the KZN civil unrest in July 2021.
H1’2023 performance was achieved despite continued disruptions during the
current period, including increased levels of load shedding in South
Africa, flooding in parts of South Africa and Australia, and double digit
UK inflation.
Group retail turnover grew by 23,5%, supported by the continued expansion
of our footprint and brand portfolio; and further growth in online retail
turnover.
The strong trade, along with our continued focus on resetting the cost
base, enabled growth of 17,9% in headline earnings and 18,1% in headline
earnings per share.
OPERATING CONTEXT
TFG AFRICA
In TFG Africa, the post-pandemic economic recovery remained robust, showing
resilience in consumer spending during the period, despite the reported
unemployment rates, reduced consumer confidence and spend; and increased
levels of Eskom load shedding.
During the current period we have seen a spike in load shedding which has
resulted in c.132,000 lost trading hours during H1’2023. This impacted all
provinces in South Africa and was 2,6 times greater than the lost trading
hours from load shedding absorbed during the prior period.
Initiatives are being put in place to mitigate the lost trading hours due
to load shedding by investing in a number of battery backup power
solutions, installed in priority stores throughout South Africa. Along with
the backup solutions, TFG Africa has deployed mobile point of sale devices
across a number of stores to enable trade during load shedding. These
initiatives will protect approximately 68% of South Africa turnover.
With effect from 1 August 2022, TFG acquired 100% of the issued share
capital of Tapestry Home Brands Proprietary Limited (‘Tapestry’) for a cash
equivalent purchase consideration of R2,2 billion. The acquisition seeks to
provide the Group with exposure to new and diverse products and categories
as well as gaining new customers to complement the current TFG customer
base in existing categories. The transaction is in line with TFG’s stated
strategy of vertical integration in key product categories and the
continued development of its quick response local manufacturing capability.
TFG AUSTRALIA
In TFG Australia, the retail environment continued its strong recovery post
the COVID-19 restrictions. The prior period was adversely impacted by
COVID-19 related closures and restrictions, with approximately 50% of
stores closed in August and September 2021. With customers now returning to
stores, TFG Australia’s outlet turnover grew 56,3% (AUD). TFG Australia
continues to successfully navigate global supply chain issues, a tight
domestic labour market and above average inflation.
TFG London
In TFG London, inflation has accelerated to the highest levels since the
early 1980’s and reached double digit growth on goods for the first time in
April 2022 (12,4%, Office National Statistics, UK). Inflation is expected
to remain high for some time despite the successive raises in interest
rates by the Bank of England (from 0,1% to 3,0% currently). Against this
backdrop, TFG London performed relatively well during the first quarter as
consumers caught up on long delayed family celebrations and events; and
employees began to return to normal working patterns. Retail outlet
turnover growth (excluding online) of 64,0% (GBP) in the first quarter was
delivered with stores being open for the entire trading period versus
phased openings in the prior period. The second quarter saw more modest
growth (Q2’2023 retail growth of 4.4% (GBP), H1’2023 of 21.2% (GBP)) with a
focus on protecting margin through reduced promotional days. The Queen’s
passing and subsequent period of mourning, together with the uncertainty
caused by the successive changes in Prime Minister, have been distracting
for the UK consumer. There are many variables at play within the UK market
however we remain optimistic.
FINANCIAL PERFORMANCE
The Group achieved retail turnover of R23,5 billion, enabled by above
expectation performance across all retail segments.
Cash retail turnover increased by 25,5% compared to the prior period and
now contributes 80,4% to total Group retail turnover. Credit retail
turnover continues to be purposefully restricted by stringent acceptance
criteria in line with current constrained economic conditions, and grew by
15,8% over the same period.
Online retail turnover from a high base in the prior period, as customers
returned to stores, increased by 2,6% and now contributes 8,9% to total
Group retail turnover. Our continued strategic focus on diversification of
brands and omnichannel retailing resulted in outlet retail turnover growth
of 26,0% over the same period.
Growth in the various merchandise categories was as follows:
H1’2023
H1’2023 Contribution
retail to total
turnover retail
Merchandise category growth turnover
Clothing 24,7% 83,2%
Homeware 56,9% 6,4%
Cosmetics 5,8% 1,9%
Jewellery 4,8% 2,7%
Cellphones 0,2% 5,8%
Total Group 23,5% 100,0%
The Group increased gross profit by 24,8% to R11,6 billion. This result is
particularly pleasing considering significant cost inflation absorbed as a
result of global dynamics which have affected the South African business.
Continued focus on our cost control initiatives and the reduction of our
cost base continued during the current period, with tangible savings being
realised through our ongoing business optimisation projects. While trading
expenses increased by 19,6% compared to the prior period, this was largely
due to strategic investment and store expansions. Trading expenses as a
percentage of Group retail turnover improved to 42,3% in the current period
from 43,7% in the prior period.
Basic earnings per ordinary share and headline earnings per ordinary share
increased by 44,5% and 18,1%, respectively, achieved through a solid
performance across all divisions.
An interim dividend of 170,0 cents per share has been declared, which is
the same as the prior period.
FINANCIAL POSITION
The Group generated R1,5 billion in cash from operations which was used to
fund strategic investments and growth. The Group is well positioned to
capitalise on future opportunities.
SEGMENTAL PERFORMANCE
All segments performed well despite a number of external factors and the
challenging retail environment.
The retail turnover growth when compared to the same period in the previous
financial year in each of our business segments in local currency was as
follows:
H1’2023 H1’2023
growth in Contribution to
retail Group retail
turnover turnover
Business segment (LC) (ZAR)
TFG Africa (ZAR) 16,9% 65,6%
TFG London (GBP) 21,2% 14,9%
TFG Australia (AUD) 48,7% 19,5%
Group (ZAR) 23,5% 100,0%
Our online and outlet channels contributed to the continued progress in all
three territories, with the respective growths and contributions as
follows:
Business H1’2023 H1’2023 H1’2023 H1’2023
segment Online retail Online Outlet retail Contribution
turnover contribution turnover to segment
growth to segment growth retail
retail turnover
turnover
TFG Africa
(ZAR) 18,8% 3,1% 16,9% 96,9%
TFG London
(GBP) 1,0% 37,6% 37,9% 62,4%
TFG Australia
(AUD) (12,4%) 6,5% 56,3% 93,5%
Group (ZAR) 2,6% 8,9% 26,0% 91,1%
CREDIT
The average new account acceptance rates for the six months ended 30
September 2022 of 20,9% (H1’2022: 23,9%) were purposefully restricted due
to the constrained economic conditions. The demand for store credit
however, increased by over 90% in the current period, resulting in credit
retail turnover growth of 15,8% compared to H1’2022.
The retail net debtors’ book of R7,1 billion increased by 1,8% compared to
March 2022. Robust payment behaviour contributed to the cash collected for
the current period exceeding that of the prior period. The allowance for
impairment as a percentage of the debtors’ book increased to 20,1% (March
2022: 19,1%) due to new account growth.
STORE PORTFOLIO
At 30 September 2022, the Group traded out of 4 399 outlets across 24
countries. Expansion of outlets continued during the current period with
the opening of 159 outlets, while 111 outlets were closed, which includes
41 concessions in TFG London.
The outlet movement in the respective business segments was as follows:
Outlets TFG Africa TFG London TFG Group
Australia
Opening balance at 1 3 087 688 576 4 351
April 2022
New outlets 136 12 11 159
Closed outlets (35) (68) (8) (111)
Closing balance at 30 3 188 632 579 4 399
September 2022
SUPERVISORY BOARD UPDATES
As was announced on SENS on 30 June 2022, the following changes were made
to the Audit Committee with effect from 1 July 2022:
• Ronnie Stein, an independent non-executive director, stepped down as
a member of the Audit Committee; and
• Graham Davin, an independent non-executive director was appointed as
a member of the Audit Committee.
OUTLOOK
The Group continues to demonstrate its resilience and agility and is well
positioned to navigate through tough economic conditions and stretched
consumer wallets in all territories in which we operate. Trading conditions
and consumer confidence are likely to remain under pressure, exacerbated by
lost footfall due to load shedding in South Africa.
The Group continues to invest in its key strategic initiatives to further
strengthen its differentiated business model. It has made progress on its
key strategic objectives and its speciality brand business portfolio which
remains very well positioned for further organic and inorganic growth. A
specific focus will be the continued integration of the Tapestry business
to extract the maximum value from our investment.
As always, the second half of the Group’s financial year is heavily
dependent on Black Friday and Christmas trade, which will largely determine
performance for the full year.
RESULTS PRESENTATION WEBCAST
A live webcast of the interim results presentation will be broadcast at
10:00 am (SAST) on Friday, 11 November 2022. A registration link for the
webcast will be available on the Company’s website at www.tfglimited.co.za.
The slides for the interim results presentation will be made available on
the Company’s website prior to the commencement of the webcast. A delayed
version of the webcast will be available later on the same day.
INTERIM ORDINARY CASH DIVIDEND DECLARATION
Notice is hereby given that the directors have declared an interim gross
cash dividend of 170,0 cents (136,00000 cents net of dividend withholding
tax) per ordinary share for the six-month period ended 30 September 2022.
The dividend has been declared from income reserves.
A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.
The issued share capital at the declaration date is 331 027 300 ordinary
shares.
The salient dates for the dividend will be as follows:
Publication of declaration data Friday, 11 November 2022
Last day of trade to receive a dividend Tuesday, 3 January 2023
Shares commence trading “ex” dividend Wednesday, 4 January 2023
Record date Friday, 6 January 2023
Payment date Monday, 9 January 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday, 4 January 2023 and Friday, 6 January 2023, both days inclusive.
PREFERENCE DIVIDEND DECLARATION
Notice is hereby given that the directors have declared a gross preference
dividend (no. 172) of 3,25% or 6,5 cents per share (5,20000 cents net of
dividend withholding tax) per preference share for the six-month period
ending 31 March 2023.
The dividend has been declared from income reserves.
A dividend withholding tax of 20% will be applicable to all shareholders
who are not exempt.
The issued share capital at the declaration date is 200 000 preference
shares.
The salient dates for the dividend will be as follows:
Publication of declaration data Friday, 11 November 2022
Last day of trade to receive a dividend Tuesday, 7 March 2023
Shares commence trading “ex” dividend Wednesday, 8 March 2023
Record date Friday, 10 March 2023
Payment date Monday, 13 March 2023
Share certificates may not be dematerialised or rematerialised between
Wednesday, 8 March 2023 and Friday, 10 March 2023, both days inclusive.
Signed on behalf of the Supervisory Board.
M Lewis A E Thunström
Chairman Chief Executive Officer
Cape Town
11 November 2022
ABOUT THIS ANNOUNCEMENT
Statement and availability
This short form announcement is the responsibility of the Company’s
directors and is only a summary of the information in the full
announcement. The unaudited interim condensed consolidated results were
approved by the Board of Directors on 11 November 2022 and the information
in this announcement has been correctly extracted from the unaudited
interim condensed consolidated results. Any investment decisions by
investors and/or shareholders should be based on consideration of the full
announcement, which has been published on SENS and is available at:
https://senspdf.jse.co.za/documents/2022/JSE/ISSE/TFG/Int2022.pdf and on
the Company's website at: https://tfglimited.co.za/investor-
information/financial-reports-and-presentations/.
An electronic copy of the full announcement may be requested and obtained,
at no charge, from the Company Secretary at company_secretary@tfg.co.za.
DIRECTORATE AND STATUTORY INFORMATION
Non-executive Directors:
M Lewis (Chairman), Prof. F 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 Thunström, B Ntuli
Company Secretary:
D van Rooyen
Registration number:
1937/009504/06
Tax reference number:
9925/133/71/3P
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:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Visit our website at http://www.tfglimited.co.za
