REVIEW OF 2022 AND OUTLOOK FOR 2023
- In South Africa, the normalising of the economy post the COVID-19 pandemic was favourable for consumer sentiment and retail spending. However, trading was adversely impacted by the civil unrest in KwaZulu-Natal and Gauteng in July 2021 and the floods in KwaZulu-Natal in April 2022.
- Office’s turnaround gained good momentum, with the footwear chain reporting a strong recovery in retail sales, margin expansion and significantly improved profitability.
- In the UK, trading conditions for Office improved significantly post the pandemic. The war in Ukraine negatively impacted trading and sentiment, with consumer disposable income under significant pressure in an environment of high inflation and rising energy costs.
- Cash generated from operations totalled R3.9 billion, with R3.2 billion returned to shareholders through dividend payments and share buy-backs.
- Global supply chains were severely disrupted by the pandemic, with lower manufacturing output, port congestion, container shortages and significantly increased freight costs, and this disruption has been compounded by the war in Ukraine.
- Executive succession planning continued with the appointments of a new Group Chief Financial Officer, who was subsequently also appointed as Group Chief Operating Officer, and appointment of a new Managing Director of Office.
- Strong all-round operational and financial performance for the period, supported by a robust balance sheet, with the Group achieving all its board-approved medium-term financial targets.
- The Group again qualified for inclusion in the FTSE4Good Index, recognising its leading environmental, social and governance practices.
- Truworths emerged from COVID-19 with a better-quality account portfolio and improved collections ratios, in line with historical norms.
- Truworths International’s 2021 Integrated Report was ranked 8th in the Ernst & Young 2022 Excellence in Integrated Reporting Awards. The Group has been ranked in the top 10 of these awards for 15 successive years, the only company on the JSE to achieve this distinction.
TRUWORTHS
The trading environment is expected to remain constrained as consumers face escalating fuel, electricity and food prices, together with steadily rising interest rates. Severe electricity load shedding and high unemployment will continue to weigh heavily on the prospects for the economy and the retail sector.
Truworths aims to sustain retail sales growth by increasing market share in key merchandise categories, utilising credit and the strength of the book, launching expanded retail store concepts and brands, focusing on supply chain and speed to market, and continuing to invest in technology, including the omni-channel experience.
The Group’s robust balance sheet, strong cash generation and ability to manage margins and costs effectively will provide some protection and resilience in the current environment of constrained consumer spending.
GROUP FINANCIAL PERFORMANCE
RETAIL SALES
UP 9.0% TO R18.5 billion
(pro forma 52 weeks: up 6.6%)
(2021: R17.0 billion)
PROFIT BEFORE
FINANCE COSTS AND TAX
UP 45.4% TO R4.4 billion
(2021: R3.0 billion)
CASH GENERATED FROM OPERATIONS
R3.9 billion
(2021: R4.1 billion)
STRONG GROSS MARGIN PERFORMANCE
AT 53.5%
(2021: 51.0%)
OPERATING MARGIN
UP TO 24.7%
(pro forma 52 weeks: up at 24.1%)
(2021: 18.5%)
SHARE BUY-BACKS OF
R1.6 billion
(29.4 million shares)
TRADING EXPENSE GROWTH CONTAINED
TO 2.4%
(pro forma 52 weeks: up 2.1%)
DILUTED HEADLINE EARNINGS PER SHARE
UP 49.2%
(pro forma 52 weeks: up 41.7%)
NET DEBT TO EQUITY
AT 9.2%
(2021: net cash to equity at 9.3%)
EXPECTED CREDIT LOSS ALLOWANCE
TO TRADE RECEIVABLES IMPROVED
TO 20.9%
(2021: 23.4%)
RETURN ON ASSETS
UP AT 33%
(2021: 24%)
ANNUAL DIVIDEND PER SHARE
UP 44% TO 505 cents
(2021: 350 cents)
OFFICE
Office aims to sustain its recent turnaround in performance through cautious stock management, stabilisation of the store portfolio and strengthening brand relationships through the chain’s positioning as a full-price retailer.
The United Kingdom (UK) retail sector is facing headwinds from the deteriorating consumer spending environment as rapidly rising fuel and energy costs have driven the annual inflation rate to its highest level in four decades.
Inflationary pressures are expected to intensify in the months ahead, compounded by rising interest rates and an anticipated slowing of the UK economy.
Termination of COVID-19 government assistance will put pressure on trading expenses and profitability compared to previous years.
