INTEGRATED REPORT 2023

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CREATING SUSTAINABLE VALUE

MANAGING STAKEHOLDER RELATIONSHIPS

MANAGEMENT PROACTIVELY RESPONDS TO THE NEEDS, EXPECTATIONS AND CONCERNS OF STAKEHOLDERS, RECOGNISING THAT THEY IMPACT ON THE GROUP’S ABILITY TO CREATE VALUE, OR MINIMISE THE EROSION OF VALUE, OVER THE SHORT, MEDIUM AND LONG TERM.

The stakeholder relationship programme continues to focus primarily on the five stakeholder groups that are most likely to influence the delivery of the Group’s strategy and to impact the material issues within the business, namely:

QUALITY OF RELATIONSHIPS

Management assesses the quality of these relationships on an ongoing basis to ensure the Group understands, considers and responds to the legitimate needs and interests of its stakeholders.

A five-point internal rating scale is applied by management for rating stakeholder relationships:

SHAREHOLDERS

(Rating improved)

Rationale for engaging: Shareholders are the Group’s principal providers of financial capital. Engagement is focused on local and international institutional and private investors as well as fund managers and analysts. The Chief Executive Officer and Chief Financial Officer, together with various directors and senior finance management team members, are responsible for investor relations. The Group has adopted a hybrid investor relations model comprising written communication through a dedicated investor relations email channel followed by one-on-one meetings, where required, supplemented by attendance at investor conferences. This hybrid approach facilitates clear and prompt multi-disciplinary responses to investor questions and enhances the overall efficiency of engagement, with the investor relations team typically responding to written questions within 24 hours.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Impact of load shedding on the Group’s ability to trade and the mitigation plans and related costs to minimise the impact of power outages on store operations.

Growth opportunities and prospects for the Group in the constrained trading environment with consumers facing increasing inflationary pressures and rising interest rates in South Africa.

Opportunities and growth prospects in Office.

Impact of the deteriorating credit environment on the health of the Group’s accounts portfolio and increase in bad debts.

Local versus international sourcing and procurement of merchandise and factors impacting the supply chain.

Management addresses all key engagement issues directly with investors through a range of forums, including interim and annual results presentations, post-results investor meetings, participation in investor conferences, written communication via the Group’s dedicated investor relations email channel, and through one-on-one or other engagement with shareholders and analysts, as well as formal communications on SENS and in the Integrated Report. Based on the materiality or price sensitivity of certain issues, such information is communicated on SENS before it is discussed with any market participants to ensure simultaneous and equal access to the information.

CUSTOMERS

(Rating unchanged)

Rationale for engaging: As the consumers of our merchandise and users of account facilities, customers are the primary source of revenue for Truworths. Engagement covers account and cash customers in South Africa and the rest of southern Africa. Store management and employees, call centre agents and customer relations employees are the main contacts with customers. Engagement takes place in stores, through call centres, social media platforms, e-commerce websites and digital communication channels. Customer satisfaction is monitored on an ongoing basis using the net promoter score as a universally comparable benchmark alongside an internally developed customer service rating scale. Truworths also analyses market share information as a measure of customer response to merchandise ranges, and to identify opportunities to enhance the merchandise offering in line with customer needs and preferences.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Communicating with account holders on the status of their Truworths account and the required payment.

Engagement with account customers is aimed at encouraging them to keep accounts up to date. Customers whose accounts are in arrears are informed of the consequences of non-payment, including possible charge-off and the associated negative credit bureau impact on their ability to obtain future credit.

Customer safety during service delivery protests or events that may affect their welfare.

The safety and welfare of customers and staff is paramount. Truworths adopts a highly cautious approach and stores are closed when service delivery marches and unrest take place in close proximity to stores in high streets or shopping centres.

Alerting customers to the latest fashion styles, trends and key looks for the season as well as sales promotion activity.

Truworths communicates with loyalty and account customers about the latest fashion available in our stores and online, merchandise promotions and sale activity. This is done using personalised emails, SMS, social media and e-commerce websites.

EMPLOYEES

(Rating unchanged)

Rationale for engaging: Employees provide their talent and skills to ensure the business operates in an efficient and sustainable manner. Employees comprise the Group’s human capital and are key custodians of our intellectual capital. Engagement includes all full-time and flexi-time employees, with line management being the key point of engagement, supported by the human resources division. Employee engagement takes place through formal communication issued by the business, formal and informal training, personal interaction with line management, the online platform to engage directly with the CEO, through in-house presentations covering various topics such as business performance, as well as through WhatsApp communication channels.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Entrenchment of the Business Philosophy, including the Purpose, Values and Vision.

Projects were launched to entrench a culture of inclusivity in the workplace. This included the roll-out of the refreshed Values, training on diversity, equity and inclusion, initiatives in support of the progression of black talent in the business, empowerment and advancement of women and advocating against
gender-based violence.

Staff safety during service delivery protests or incidents that may affect their welfare.

The safety of staff is critical and Truworths follows a cautious approach to protect its people and other assets, and stores are closed when incidents take place in close proximity to stores.

Security of information.

In response to the increased use of GPTs (generative pre-trained transformers) such as ChatGPT, a policy was introduced to ensure information and data security through the responsible use of artificial intelligence (AI) to protect against business risks. Ongoing data privacy and cybersecurity training is mandatory for all employees and is followed up with regular awareness campaigns.

Access to wellness services for all employees.

The wellbeing of employees is a priority and Truworths engaged its healthcare provider to reintroduce on-site wellness days at head office and the distribution centre. Employee wellness services include 24/7 psycho-social counselling and trauma support, financial advice, medical support, legal support and family care. The services are available to all employees and their immediate families.

Engagement on performance, incentives and awards to general staff.

Regular feedback is provided to employees on Group performance, strategic objectives, awards and incentives. This is complemented by motivational and training‑related initiatives aimed at driving engagement and enhancing individual and team performance. Individualised development plans are created for all
high-potential employees, with an emphasis on
fast-tracking black and female employees.

SUPPLIERS

(Rating unchanged)

Rationale for engaging: Suppliers are the providers of merchandise and other goods and services to Truworths. They are therefore the Group’s source of manufactured capital, and the breadth and depth of our supply chain is a key measure of the Group’s considerable social and relationship capital. Suppliers include local and international product manufacturers as well as landlords. The primary sources of contact are executives, merchandise buyers and planners, and management. Engagement occurs formally and informally through supplier assessments, merchandise design and order negotiations, account management interaction and supplier development discussions.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

The sustainability of local cut-make-trim (CMT) suppliers is a strategic priority. The financial viability of several CMTs is under threat and this is being compounded by the impact of load shedding on production output.

Truworths works in close collaboration with exclusive design centres and CMT partners and supports these businesses by providing funding as well as technical and specialist skills to improve their operations and maximise efficiency. Financial support has been provided to certain CMTs to purchase generators to ensure factories remain operational during load shedding.

Production planning with CMTs, particularly in dealing with peak demand for specialist product.

The merchandise teams have collaborated with key CMTs to develop production plans to manage large volumes of specialised product across the season and leverage low demand production periods to benefit both parties.

Improved planning and forecasting for key suppliers.

Based on all suppliers’ performance metrics and capabilities, Truworths has determined improved high-level estimates of production requirements.

Broad-Based Black Economic Empowerment (B-BBEE) scorecard of suppliers to ensure that Truworths supports higher rated B-BBEE suppliers.

The Truworths Tender and Capital Expenditure Committee evaluates potential South African based suppliers on a range of criteria, including their commitment to B-BBEE. Where suppliers have a similar score, the supplier with the higher B-BBEE rating will be preferred.

REGULATORS

(Rating improved)

Rationale for engaging: Regulators are the custodians of legislative and regulatory compliance and providers of licences to trade. These include government departments, regulatory bodies and local authorities, with the engagement being managed by the executive directors and finance, legal and account risk executives. Engagement occurs through regulatory filings and submissions, formal and informal discussions regarding key issues, dispute resolution mechanisms and active and extensive engagement through membership of the National Clothing Retail Federation (NCRF). The recognition by regulators of the Group as a good corporate citizen with high levels of legislative compliance that emerges from these engagements is testimony to a history of investment by management in the Group’s social and relationship capital.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Data privacy
An assessment of Truworths’ compliance with the information processing provisions of the Protection of Personal Information Act was conducted by the Information Regulator in South Africa.

Management has considered the regulator’s feedback, and submitted a comprehensive response and action plan during the first quarter of the 2024 financial period.

Combatting money laundering
Following amendments to the Financial Intelligence Centre Act in the 2023 financial period, Truworths, as a registered credit provider, is now classified as an accountable institution and is required to comply with numerous obligations in terms of the Act.

Truworths has registered with the Financial Intelligence Centre, appointed a compliance officer and established a project team to ensure plans are developed and actions taken to comply with the legislation as well as taking legal advice on the applicability of the legislation.

Tax compliance
Truworths is involved in the ongoing resolution of requests for information, audits and disputes with the South African Revenue Services (SARS) and tax authorities in other countries.

Truworths has engaged with revenue authorities in various countries of operation in relation to audits and requests for information in a constructive, transparent and compliant manner, and has sought to render tax payments and returns that are correctly determined and completed in a timeous manner.

Truworths concluded a settlement agreement with SARS that satisfactorily ends a multi-year dispute relating to an indirect tax matter.

Employment equity
Continuation of the compliance review in terms of the Employment Equity Act conducted on Truworths’ employment equity plan for the 2019 to 2024 period by the Director-General of the Department of Employment and Labour (DEL).

Employment equity
Following amendments to the Employment Equity Act, the Minister of Employment and Labour issued draft regulations for public comment proposing employment equity targets for various industry sectors.

In the third quarter of the 2023 financial period Truworths received further correspondence from the DEL, took legal advice and responded comprehensively, confirming that it believed it had met all compliance and reporting obligations under the Act.

Truworths has considered the draft regulations and with the guidance of senior counsel participated in the formulation of the submission on the draft regulations made by the NCRF, of which Truworths is a member.

CUSTOMERS

(Rating unchanged)

Rationale for engaging: Customers are the buyers of merchandise and the primary source of revenue for Office. Engagement focuses on customers in the UK and Republic of Ireland, and both national and international online customers. Engagement occurs in stores and via the e-commerce sites as well as through social media platforms.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Customers who frequently visit stores require access to the latest in-fashion footwear and want to be served by lively and committed staff members.

Office has embarked on a store modernisation programme which improves the shopping environment and has also introduced a store incentive programme to improve customer service.

Customers requesting more immediate notification of new product offers and being advised when product is back in stock.

Office implemented a new customer relationship management tool towards the end of the period. The tool allows for more efficient communication with the customer database, and will provide customers with back-instock notifications and earlier communications on new customer offers.

Existing mobile app has outdated technology and limited functionality.

Office management will consider the redevelopment of the mobile app with added functionality and an updated technology platform in the medium term. This will improve personalisation and customer communication and will enable additional services.

EMPLOYEES

(Rating unchanged)

Rationale for engaging: Employees provide their talent and skills to ensure the business operates in an efficient and sustainable manner. Engagement includes all full-time and flexi-time employees, with line management being the key point of engagement, supported by the human resources division. Employee engagement occurs through formal communication and surveys, formal and informal training, personal interaction with line management and through direct communications with the Managing Director.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Business Philosophy.

The Office Business Philosophy was aligned with that of Truworths, including a refresh of the core values. Engagement with staff commenced during the year with further refresher training planned to entrench the principles of the Business Philosophy in everyday working life.

Flexible working arrangements.

Office continues to offer a flexible working arrangement for head office employees. Office also considers flexible working requests on an individual basis and assesses these based on operational requirements.

National minimum wage increase.

The national minimum wage in the UK for 2023 increased between 9.66% and 10.89%, the highest increase since the introduction of the minimum wage. Office salaries were reviewed in April 2023 and, where applicable, were adjusted in line with the revised minimum wage levels.

SUPPLIERS

(Rating unchanged)

Rationale for engaging: Suppliers are the providers of merchandise and other goods and services, including international suppliers of branded and own-brand merchandise, and landlords. The primary sources of contact are executives, merchandise buyers and management. Engagement occurs formally and informally through the merchandise range selection and development process, order negotiations and account management interaction and through collaboration on mutually beneficial alignment with key brands to launch and showcase product lines. Engagement with landlords is ongoing.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Merchandise suppliers:
Securing stock allocations of the ‘must have’ seasonal styles.

Long-standing relationships with key suppliers has enabled Office to secure larger stock allocations of the latest seasonal styles due to the strategic importance of Office to branded product partners.

Property landlords:
Lease negotiations in the weak retail trading environment.

Negotiations continued with landlords to renew leases, with some resulting in favourable rental reversions. Office’s favourable business performance has also created opportunities to secure new store sites as many landlords seek to secure Office as a tenant.

REGULATORS

(Rating unchanged)

Rationale for engaging: Regulators are the custodians of legislative and regulatory compliance and providers of licences to trade. They include government departments, regulatory bodies and local authorities, with the engagement being managed by the executive directors as well as finance and legal executives. Engagement occurs through regulatory filings and submissions, and formal and informal discussions regarding key issues.

KEY ENGAGEMENT ISSUES
RESPONSE TO ENGAGEMENT ISSUES

Revenue office audits and requests for information.

Office has engaged with revenue authorities, principally in the UK, in relation to audits and requests for information in a constructive, transparent and compliant manner and has sought to render tax payments and returns that are correctly determined and completed in a timeous manner.

INTEGRATED REPORT 2023