INTEGRATED REPORT 2023

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OVERVIEW

REVIEW OF 2023

GROUP FINANCIAL PERFORMANCE

RETAIL SALES

UP 11.4% TO

R20.6 billion

(pro forma 52 weeks: up 13.2%) (2022: R18.5 billion)

GROSS MARGIN AT

52.5%

(2022: 53.5%)

EXPECTED CREDIT LOSS ALLOWANCE TO TRADE RECEIVABLES IMPROVED TO

20.6%

(2022: 20.9%)

OPERATING MARGIN AT

24.0%

(pro forma 52 weeks: 22.7%) (2022: 24.7%)

HEADLINE EARNINGS PER SHARE UP

12.0%

(pro forma 52 weeks: up 9.0%)

NET ASSET VALUE PER SHARE

UP 25.0% TO

2 073 cents

(2022: 1 658 cents)

CASH GENERATED FROM OPERATIONS

R3.8 billion

(2022: R3.9 billion)

RETURN ON EQUITY

48%

(2022: 50%)

RETURN ON ASSETS

30%

(2022: 33%)

NET DEBT TO EQUITY AT

11.1%

(2022: 9.2%)

ANNUAL DIVIDEND PER SHARE

UP 12% TO

565 cents

(2022: 505 cents)

GROUP

Group retail sales exceeded R20 billion for the first time.

Cash generated from operations totalled R3.8 billion, with R2 billion returned to shareholders through dividends.

All medium-term financial targets were met or exceeded, and the Group’s metrics remain among the highest in the world.

Return on invested capital (ROIC) has been at least double the weighted average cost of capital (WACC) for a third consecutive year.

Executive succession planning continued with the appointments of Sarah Proudfoot and Emanuel Cristaudo as the Group’s Joint Deputy Chief Executive Officers from October 2022

Truworths International’s 2022 Integrated Report was ranked 8th in the Ernst & Young 2023 Excellence in Integrated Reporting Awards, the 16th successive year that the Group has been ranked in the top 10 of these awards.

TRUWORTHS – SOUTH AFRICA

Trading impacted by pressure on consumer disposable income and discretionary spending in the low growth and high-inflationary environment.

Challenging macro environment in South Africa was further impacted by the energy crisis, with record levels of electricity load shedding. Limited the impact of load shedding on trading by spending a further R40 million on backup power solutions, with 87% of sales protected by alternative power at the end of the period.

Expanded the store footprint with the opening of a number of recently launched concepts, including the new Truworths Emporium Re-imagined which opened shortly after year end in the V&A Waterfront, Cape Town.

Attracted over 5 million account applications, highlighting the affinity for the brand and strong customer demand for Truworths’ quality, aspirational merchandise, with 15% of these applicants being granted credit.

Acquired ladieswear apparel design centre Bonwit and incorporated the business alongside the Truworths and Barrie Cline design departments to create a powerful local design division. This, together with the support of strategic manufacturers and CMT partners, has improved Truworths’ quick response capability.

Commenced the construction phase of the new Truworths distribution centre which will consolidate four warehouses into a single modern facility allowing for more productive replenishment of merchandise. The facility is expected to be fully operational by January 2025 and will be built at an investment of approximately R1 billion.

(Refer to the Retail trading environment)

OFFICE – UNITED KINGDOM

Office traded well in-store and online throughout the year as trading conditions in the UK improved as tourism rebounded and the workforce returned to offices.

The first new stores in three years were opened in Cardiff (Wales) and Battersea Power Station (London) while two flagship London stores in Carnaby Street and King’s Road were modernised with a new store design. A total of 13 marginal and unprofitable stores were closed which supported Office’s profitability.

Strengthened relationships with key global suppliers and introduced a number of new brands into Office and Offspring.

The benefits of consolidating the two distribution centres into a single facility contributed to improved efficiency and further cost savings.

Office continued to entrench Truworths’ proven retail practices which enhanced productivity and margins.

(Refer to the Retail trading environment)

OUTLOOK FOR 2024

TRUWORTHS

The Group is cautiously optimistic about the medium-term outlook for the domestic economy. Household spending will benefit as inflation moderates, with the potential for interest rate relief, while a sustained reduction in load shedding and a stable post-election environment could stimulate consumer confidence and economic activity.

Truworths plans to continue to launch new retail store concepts and brands, focus on expanding its integrated in-house design capability and improving speed to market, and invest in technology, including the omni-channel experience.

In the constrained spending environment, Truworths aims to sustain growth by capitalising on the strength of its account portfolio, its expanding customer base and the appeal of its quality, aspirational fashion, supported by the Group’s strong balance sheet and robust cash flows.

Consumer disposable income is expected to remain under pressure as South Africans contend with electricity, fuel, food, borrowing and general cost of living increases. According to the TransUnion Credit Index (H12023) consumer credit health in South Africa is at its lowest point and further interest rate increases remain a possibility.

Retail trading conditions could be further impacted by the weak labour market, sporadic civil disruption and heightened social and political uncertainty in the build-up to the national elections in 2024.

OFFICE

The Group is optimistic about the robust demand for Office’s product offering in-store and online, despite headwinds in the trading environment, with inflation expected to continue to moderate.

Office’s growth will be driven by introducing and growing new brands, new store openings, and the remodelling and extension of existing stores in strategically important locations, supported by the strength of its relationships with the world’s leading footwear brands and the planned investment in technology and customer relationship management capabilities.

INTEGRATED REPORT 2023