INTEGRATED REPORT 2023

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PERFORMANCE REVIEW

SUMMARISED GROUP FINANCIAL STATEMENTS

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SUMMARISED GROUP STATEMENTS OF FINANCIAL POSITION

at 
2 Jul 
2023 
Rm 
at 
3 Jul 
2022 
Rm 
   ASSETS 
   Non-current assets  6 716  5 520 
Property, plant and equipment  2 069  1 685 

Total additions of R698 million in the current year consisting mainly of plant, equipment, furniture and fittings (R524 million) and buildings (R145 million) mainly relating to the construction of the new Truworths Africa distribution centre (DC).

 
Right-of-use assets  3 329  2 594 

Right-of-use assets increased by R735 million due to new leases concluded (including the 99-year lease in respect of land for the new distribution centre), lease renewals and lease modifications since the prior period and a net impairment reversal of R65 million in the current period.

 
Intangible assets  590  539 

R40 million invested in computer software.

 
   Goodwill  294  294 
   Other non-current assets  113  69 
   Deferred tax  321  339 
   Current assets  9 417  7 971 
Inventories  2 244  1 819 

Inventory turn decreased to 4.2 times (2022: 4.6 times). Truworths Africa's gross finished goods inventory increased 9.9% and inventory turn increased to 4.5 times (2022: 4.4 times). Office's gross inventory increased 27.5% and inventory turn (measured in Sterling) decreased to 4.2 times (2022: 4.8 times). Prior period inventory levels were low, having been impacted by unusual supply chain disruption.

 
Trade and other receivables  5 546  4 908 

Gross trade receivables in respect of the Truworths Africa accounts portfolio increased by 11.7% to R6.6 billion. The expected credit loss (ECL) allowance decreased from 20.9% to 20.6% of gross trade receivables.

 
   Derivative financial assets  28  29 
   Other current assets  137  147 
   Cash and cash equivalents  1 462  1 068 
   Total assets  16 133  13 491 
   EQUITY AND LIABILITIES 
   Total equity  7 654  6 106 
   Non-current liabilities  3 237  2 628 
Lease liabilities  2 827  2 464 
Interest-bearing borrowings  169  – 

Utilised R169 million of the new green term loan entered into in December 2022 for purposes of construction of the new Truworths Africa DC.

 
   Provisions  166  112 
   Other non-current liabilities  75  52 
   Current liabilities  5 242  4 757 
Trade and other payables  1 591  1 678 
   Lease liabilities  1 019  979 
Interest-bearing borrowings  1 208  702 

Interest-bearing borrowings increased to R1.2 billion (2022: R702 million), as a result of increased utilisation of the revolving credit facility in Truworths Africa to fund working capital requirements. All covenants related to the Group's borrowings, which include gearing and debt serviceability ratios, have been met throughout the period and show significant headroom on an actual and forecast basis.

 
   Bank overdraft  935  930 
   Provisions  267  259 
   Other current liabilities  222  209 
   Total liabilities  8 479  7 385 
   Total equity and liabilities  16 133  13 491 
   Number of shares in issue (net of treasury shares) (millions) 369.3  368.3 
   Net asset value per share   (cents) 2 073  1 658 
  Key ratios 
Return on equity  (%) 48  50 

All medium-term targets published by the Group have been achieved or exceeded. Refer to the Chief Financial Officer's report.

 
Return on capital  (%) 69  72 

All medium-term targets published by the Group have been achieved or exceeded. Refer to the Chief Financial Officer's report.

 
Return on assets  (%) 30  33 

All medium-term targets published by the Group have been achieved or exceeded. Refer to the Chief Financial Officer's report.

 
Inventory turn  (times) 4.2  4.6 

All medium-term targets published by the Group have been achieved or exceeded. Refer to the Chief Financial Officer's report.

 
Asset turnover  (times) 1.2  1.3 

All medium-term targets published by the Group have been achieved or exceeded. Refer to the Chief Financial Officer's report.

 
Net debt to equity  (%) (11.1) (9.2)

Group net debt (excluding IFRS 16 liabilities) increased to R850 million compared to R564 million at the end of the prior period.

 
Net debt to EBITDA  (times) (0.1) (0.1)

Group net debt (excluding IFRS 16 liabilities) increased to R850 million compared to R564 million at the end of the prior period.

 

SUMMARISED GROUP STATEMENTS OF COMPREHENSIVE INCOME

52 weeks 
to 2 Jul 
2023 
Rm 
53 weeks 
to 3 Jul 
2022 
Rm 
   Revenue  21 992  19 340 
Sale of merchandise  19 894  17 886 

Group sale of merchandise, which comprises Group retail sales, together with wholesale sales and delivery fee income, less variable consideration adjustments, increased by 11.2% to R19.9 billion. Retail sales in Truworths Africa and Office increased by 7.3% and 16.9%, respectively.

 
   Cost of sales  (9 445) (8 316)
   Gross profit  10 449  9 570 
Other income  939  655 

Other income benefited from the impact of the indirect tax matter settlement (R254 million). Excluding this, other income increased by 4.6%.

 
Trading expenses  (7 772) (6 607)

Trading expenses for the current period increased by 17.6% to R7.8 billion, comprising 39.1% (2022: 36.9%) of sale of merchandise. Excluding trade receivable costs, trading expenses increased 12.7% as a result of the expense base normalising in a post-COVID-19 environment, together with relatively high levels of cost inflation in the Group's main markets. Trade receivable costs increased by 50.8% to R1.3 billion (2022: R851 million) as a result of higher net bad debt and related costs as well as the growth in gross trade receivables.

 
   Trading profit  3 616  3 618 
Interest income  1 143  789 

Interest income increased 44.9% to R1.1 billion as a consequence of the growth in gross trade receivables and higher interest rates.

 
   Dividend income  16  10 
Profit before finance costs and tax  4 775  4 417 

On a pro forma basis, profit before finance costs and tax increased by 6% (refer to note 19 of the Summarised Audited Group Annual Results for further information).

 
Finance costs  (378) (235)

Finance costs increased by 60.9% to R378 million (2022: R235 million) primarily due to higher borrowing levels in Truworths to fund working capital requirements.

 
   Profit before tax  4 397  4 182 
   Tax expense  (1 109) (1 115)
   Profit for the period  3 288  3 067 
   Attributable to: 
   Equity holders of the company  3 275  3 051 
   Holders of the non-controlling interest  13  16 
   Profit for the period  3 288  3 067 
Basic earnings per share  (cents) 888.5  794.1 

Headline earnings per share (HEPS) and diluted HEPS increased 12.0% and 11.8%, respectively. On a pro forma basis, HEPS and DHEPS increased by 9.0% and 8.7%, respectively (refer to note 19 of the Summarised Audited Group Annual Results for further information).

 
Headline earnings per share  (cents) 873.3  779.8 

Headline earnings per share (HEPS) and diluted HEPS increased 12.0% and 11.8%, respectively. On a pro forma basis, HEPS and DHEPS increased by 9.0% and 8.7%, respectively (refer to note 19 of the Summarised Audited Group Annual Results for further information).

 
Diluted basic earnings per share  (cents) 876.4  784.9 

Headline earnings per share (HEPS) and diluted HEPS increased 12.0% and 11.8%, respectively. On a pro forma basis, HEPS and DHEPS increased by 9.0% and 8.7%, respectively (refer to note 19 of the Summarised Audited Group Annual Results for further information).

 
Diluted headline earnings per share  (cents) 861.4  770.8 

Headline earnings per share (HEPS) and diluted HEPS increased 12.0% and 11.8%, respectively. On a pro forma basis, HEPS and DHEPS increased by 9.0% and 8.7%, respectively (refer to note 19 of the Summarised Audited Group Annual Results for further information).

 
Gross margin  (%) 52.5  53.5 

Truworths Africa's gross margin decreased to 55.4% (2022: 56.7%), mainly due to higher levels of sales promotion activity relative to the prior period while the gross margin in Office increased to 45.2% (2022: 44.2%), driven by improved distribution efficiencies.

 
   Trading expenses to sale of merchandise  (%) 39.1  36.9 
   Trading margin  (%) 18.2  20.2 
Operating margin  (%) 24.0  24.7 

The Group recorded profit before tax of R4.4 billion in the current period, while the operating margin decreased to 24.0%.

 
  Reconciliation of headline earnings per share:    Cents  Cents 
   Basic earnings per share  888.5  794.1 
  Insurance recoveries in respect of plant and equipment    (9.4)
  Net impairment reversal of right-of-use assets    (13.8) (6.7)
  Loss on write-off or disposal of plant and equipment    1.6  2.1 
   Reversal of impairment of property, plant and equipment  (3.0) (0.3)
   Headline earnings per share  873.3  779.8 
   Reconciliation of diluted weighted average number of shares:  Millions  Millions 
   Weighted average number of shares  368.6  384.2 
   Add: Dilutive effect of share options, unvested restricted shares and share appreciation rights  5.1  4.5 
   Diluted weighted average number of shares  373.7  388.7 

SUMMARISED GROUP STATEMENTS OF CHANGES IN EQUITY

2 Jul 
2023 
Rm 
3 Jul 
2022 
Rm 
   Balance at the beginning of the period attributable to equity holders of the company  6 106  6 191 
   Total comprehensive income for the period  3 486  3 056 
   Profit for the period  3 288  3 067 
Other comprehensive income/(loss) for the period  198  (11)

Other comprehensive income/(loss) comprises the movement in the foreign currency translation reserve, the fair value adjustment in respect of financial assets held at fair value through other comprehensive income and gains on defined benefit plans.

 
   Dividends declared  (1 990) (1 646)
   Shares repurchased  (28) (1 588)
Share-based payments  137  107 

Repurchased 0.6 million shares during the period at an average price per share of R49.85. These shares were cancelled against share capital and retained earnings.

 
   Acquisition of non-controlling interest  (46) – 
Movement in put option liability  (11) (14)

Increase in the present value of the amount payable on the future exercise of the put options granted to the noncontrolling management shareholders in Office as a result of the increase in the Office segment's profitability.

 
   Balance at the reporting date attributable to equity holders of the company  7 654  6 106 
   Comprising 
Share capital and premium*  –  – 

Repurchased 0.6 million shares during the period at an average price per share of R49.85. These shares were cancelled against share capital and retained earnings.

 
   Treasury shares  (2 066) (2 186)
   Retained earnings  9 393  8 144 
   Non-distributable reserves  327  148 
   Total equity attributable to equity holders of the company  7 654  6 106 
   Dividends (cents per share)
   Cash final - paid September  245  205 
   Cash interim - paid March  320  300 
Total  565  505 

Annual dividend per share increased by 12% to 565 cents. Dividend cover maintained at 1.5 times.

  * Zero due to rounding 

SUMMARISED GROUP STATEMENTS OF CASH FLOWS

52 weeks 
to 2 Jul 
2023 
Rm 
53 weeks 
to 3 Jul 
2022 
Rm 
   CASH FLOWS FROM OPERATING ACTIVITIES 
   Cash flow from profit before tax  5 038  4 838 
Working capital movements  (1 227) (946)

Net outflow in respect of working capital mainly due to the growth in inventories (as Office's supply chain normalised compared to stock shortages in the prior year) and trade and other receivables.

 
   Cash generated from operations  3 811  3 892 
   Interest and dividends received  1 155  801 
   Interest paid  (370) (236)
   Capitalised finance costs paid  (6)
   Tax paid  (1 068) (909)
Cash inflow from operations  3 522  3 548 

The cash inflow from operations of R3.5 billion was utilised to fund dividend payments (R2.0 billion) and capital expenditure (R717 million).

 
Dividends paid  (1 989) (1 646)

The cash inflow from operations of R3.5 billion was utilised to fund dividend payments (R2.0 billion) and capital expenditure (R717 million).

 
   Net cash from operating activities  1 533  1 902 
   CASH FLOWS FROM INVESTING ACTIVITIES 
Acquisition of property, plant, equipment and computer software  (717) (340)

The cash inflow from operations of R3.5 billion was utilised to fund dividend payments (R2.0 billion) and capital expenditure (R717 million).

 
   Other investing activities  (10) 44 
   Net cash used in investing activities  (727) (296)
   CASH FLOWS FROM FINANCING ACTIVITIES 
   Shares repurchased by the company  (28) (1 588)
   Net borrowings incurred  669  353 
   Lease liability payments  (1 254) (1 134)
   Acquisition of non-controlling interests  (46)
   Net cash used in financing activities  (659) (2 369)
   Net increase/(decrease) in cash and cash equivalents  147  (763)
   Cash and cash equivalents at the beginning of the period  138  923 
   Net foreign exchange difference  242  (22)
NET CASH AND CASH EQUIVALENTS AT THE REPORTING DATE  527  138 

Net cash and cash equivalents of R527 million (representing cash and cash equivalents of R1.5 billion net of overdraft of R935 million).

 
   Key ratios 
   Cash flow per share  (cents) 956  923 
   Cash equivalent earnings per share  (cents) 1 286  1 155 
Cash realisation rate  (%) 74  80 

The cash realisation rate has averaged 98% over the past five years. The cash realisation rate was 74% for the current period (2022: 80%), mainly due to the growth in trade receivables.

 

 

INTEGRATED REPORT 2023