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THE FOSCHINI GROUP LIMITED - Trading statement and trading update for Q4 FY2021 and the twelve months ended 31 march 2021

Release Date: 14/05/2021 14:30
Code(s): TFG TFGP     PDF:  
Wrap Text
THE FOSCHINI GROUP LIMITED
Reg. No.: 1937/009504/06
Share code: TFG - TFGP
ISIN: ZAE000148466 ? ZAE000148516
(?TFG?)


TRADING STATEMENT AND TRADING UPDATE FOR Q4 FY2021 AND THE TWELVE MONTHS ENDED 31 MARCH 2021 TRADING UPDATE SALIENT FEATURES:
- Strong recovery in Q4 FY2021 with Group turnover growth
of 21,0% (excluding Jet +6,0%)* compared to Q4 FY2020;
- Solid performance from TFG Africa with turnover growth of 37,3% in Q4 FY2021 (excluding Jet +13,2%)*;
- Encouraging like-for-like turnover growth for TFG Africa of 11,6% for Q4 FY2021;
- Strong cash turnover growth for TFG Africa of 63,8% for
Q4 FY2021 and 19,0% for the 12 months ended 31 March
2021, which is indicative of continued customer demand
for our brands and products and further market share
gains. Cash turnover now contributes 69,3% to total TFG Africa turnover;
- Continued resilient performance from TFG Australia with turnover growth of 30,4% (AUD) in Q4 FY2021;
- Group online turnover growth of 33,4% for the 12 months
ended 31 March 2021, contributing 12,0% (prior year: 8,4%) to total Group turnover;
- TFG Africa online turnover growth of 132,4% for the period 1 May 2020 to 31 March 2021; - Reset the cost base going forward;
- Reduction in net debt from R8,4 billion (March 2020 pre-
IFRS 16) to R1,3 billion (March 2021 pre-IFRS 16)**; and
- R2,7 billion after tax non-cash impairment of the
carrying values of TFG London?s goodwill and intangible
assets on the back of the impact the COVID-19 pandemic has had on the trading environment.
* Pro forma management account numbers used to calculate an indicative turnover growth
** Pro forma information used to calculate net debt pre-IFRS 16 BACKGROUND
As a result of the COVID-19 pandemic, the past financial year
was characterised by unprecedented global economic, political
and social turmoil. Consumer sentiment, although in the
process of recovering, has remained muted and spend remains suppressed.
While all three of our main territories, South Africa, the
United Kingdom (UK) and Australia, continue to be impacted by
COVID-19, TFG Africa and TFG Australia continued to trade strongly in Q4 FY2021.
The UK continues to be the hardest hit with no stores
operating during Q4 FY2021. As previously advised, the third
UK national lockdown (announced on 4 January 2021) was in
place for the full fourth quarter of the financial year, with
non-essential retail only reopening on 12 April 2021. In
total, the UK lost approximately 50% of its available store
trading hours during the past financial year and experienced
severely depressed footfall and consumer confidence for most
of the remainder of the year. Following the review of the
carrying value of the investment in the fourth quarter, the
impacts of the above-mentioned uncontrollable circumstances,
coupled with the significant deterioration in Weighted Average
Cost of Capital (WACC) rates used, due to an increase in the
business risk rates applied and confirmation of the closure of
a number of department store concessions through which we had previously traded, a decision was taken to impair
approximately 56% of the carrying values of TFG London?s goodwill and intangible assets.
Despite the challenges described above, the Group, in line
with its strategic intents, continues to invest for the long-
term and to further strengthen its digital and local supply
chain and manufacturing capabilities. Now that the UK has
reopened for trading, most of our brands are currently trading
above expectations as consumers start to return to stores. TFG AFRICA PERFORMANCE UPDATE
TFG Africa?s performance in Q4 FY2021 was very encouraging,
with turnover growth of 37,3%, aided by the significant
contribution of the recently acquired Jet business. Excluding
Jet, turnover for the quarter grew by 13,2%* compared to the
same period in the previous financial year. All merchandise
categories grew turnover during Q4 FY2021 compared to the
corresponding period in the prior year, with the exception of cosmetics, which was marginally down.
* Pro forma management account numbers used to calculate an indicative turnover growth
TFG Africa?s like-for-like turnover growth (which by
definition excludes Jet) has been particularly pleasing with growth of 11,6% in Q4 FY2021.
The growth / (decline) in TFG Africa?s turnover compared to
the same periods in the previous financial year in the respective merchandise categories were as follow: Q1
April Q2 July Q3 Oct Q4 Jan
to June to Sept to Dec to March
Merchandise category 2020 2020 2020 2021
Clothing (41,4%) (9,5%) 16,0% 41,6%
Homeware (25,0%) 4,9% 16,3% 28,1%
Cosmetics (51,5%) (18,7%) (4,3%) (2,5%)
Jewellery (70,3%) (15,1%) (13,0%) 4,5%
Cellphones 5,1% 29,6% 39,0% 58,8%
Total TFG Africa (38,4%) (5,8%) 14,7% 37,3%
FY 2021
Contribu
H1 H2 Oct tion to
April 2020 to TFG
to Sept March Africa
Merchandise category 2020 2021 FY 2021 turnover
Clothing (25,7%) 24,4% 0,8% 71,8%
Homeware (10,0%) 21,3% 6,5% 7,6%
Cosmetics (34,3%) (3,6%) (18,2%) 3,9%
Jewellery (41,0%) (6,4%) (22,0%) 5,2%
Cellphones 17,6% 48,2% 33,5% 11,5%
Total TFG Africa (22,1%) 22,7% 1,6% 100,0%
Cash turnover for the year, contributing 69,3% to TFG Africa?s
turnover, grew by 19,0% compared to the previous financial
year. Particularly encouraging was the growth experienced in Q4 FY2021 of 63,8%.
Credit turnover for the year was purposely restricted by the
imposition of more stringent and reduced acceptance criteria.
Compared to the same period in the previous financial year,
credit turnover declined by 23,6% for the full year.
Online turnover for the period 1 May 2020 to 31 March 2021
grew by 132,4%. April has been excluded from this growth as
we were not permitted to fulfill any online deliveries during
the South African government-enforced lockdown in April 2020.
Online turnover for TFG Africa for the year contributed 3,5% to total segment turnover (FY 2020: 1,6%).
Despite the challenging trading conditions experienced during
the year, TFG Africa opened 55 new stores. In total, 128 stores were closed during the year. TFG AUSTRALIA PERFORMANCE UPDATE
TFG Australia continued to exceed expectation with turnover
growth of 30,4% (AUD) in Q4 FY2021 and 11,8% (AUD) in H2
FY2021 compared to the same period in the previous financial
year. This performance was achieved despite intermittent
lockdowns and restrictions in different states and regions,
depending on the number of positive COVID-19 cases.
For the full year, TFG Australia?s turnover declined by 7,1%.
Online turnover for the full year, however, grew by 58,1%, now
contributing 9,0% to total TFG Australia turnover (FY 2020: 5,3%).
The growth / (decline) in TFG Australia?s turnover compared to
the same periods in the previous financial year was as follow:
Q1 April Q2 July Q3 Oct Q4 Jan
to June to Sept to Dec to March
2020 2020 2020 2021 Retail turnover movement ? AUD
denominated (42,4%) (12,4%) 0,4% 30,4% H2 Oct H1 April 2020 to to Sept March 2020 2021 FY 2021 Retail turnover movement ? AUD denominated (26,9%) 11,8% (7,1%)
During the past year, TFG Australia opened 28 new outlets,
including eight concessions, while eight outlets were closed.
At the year-end, TFG Australia was trading from 554 outlets. TFG LONDON PERFORMANCE UPDATE
As indicated above, TFG London was the hardest hit by
stringent government-enforced lockdowns during the past
financial year, with turnover for the 12-month period
contracting by 49,7% on the previous year, as a result of
mandatory store closures. In total, the UK lost approximately
50% of its available store trading hours during the past financial year.
The Phase Eight and Hobbs brands were particularly hard-hit by
the pandemic, as these brands predominantly serve the occasion
wear and formal workwear segments. These segments experienced
reduced customer demand as socializing and in-office attendance remained largely prohibited.
In the lead up to the outbreak of the pandemic, TFG London was
a strong and fast-growing business. In the report on the
Global Powers of Luxury Goods 2020, Deloitte identified TFG
London as the third fastest growing brand portfolio in the
world, behind Richard Mille SA and Canada Goose Holdings Inc.,
with a three-year Cumulative Annual Growth Rate (CAGR) of 33% between 2016 and 2019.
The pandemic has not only directly impacted trading over the
last financial year, but it has also had significant long-term
ramifications on TFG London?s department store partners,
reducing TFG London?s projected future cash flows. The
increase in the level of uncertainties in the trading
environment and the impact on our future projected cash flows
has negatively impacted the discount rates applied in
assessing the carrying values. After re-assessing the carrying
values of the goodwill and intangible assets related to TFG
London, a non-cash impairment of R2,7 billion after tax has been recognized.
Despite this re-assessment, we consider the TFG London brands
to have retained their brand equity during this period, and we
are encouraged by current trade exceeding expectations since
the reopening of non-essential retail in the UK on 12 April
2021, albeit with fewer physical store and concession routes
to market. We however continue to explore alternative routes
to market. In addition, following completion of the final
phase of portfolio integration to the single TFG London
operating platform, the conclusion of the associated head
office restructuring and the closure of 230 non-profitable
stores and concessions, we are able to take the business
forward with a more efficient infrastructure and an appropriately reduced cost base in place.
The turnover performance of TFG London compared to the same
periods in the previous financial year was as follow:
Q1 April Q2 July Q3 Oct Q4 Jan
to June to Sept to Dec to March
2020 2020 2020 2021 Retail turnover movement ? GBP
denominated (68,5%) (41,9%) (41,4%) (45,0%) H1 April H2 Oct to Sept 2020 to 2020 March FY 2021 2021 Retail turnover movement ? GBP denominated (56,2%) (42,8%) (49,7%)
Online turnover performance from TFG London?s own sites was
particularly strong with growth of 9,1% (GBP) for the year,
compared to growth in department store channels for the same
period of -9,5% (GBP). The contribution of online turnover to
TFG London?s total turnover for the year was 62,5% (FY 2020: 31,4%). GROUP PERFORMANCE UPDATE
Overall, the Group delivered a strong performance during Q4
FY2021 with Group turnover growth of 21,0% compared to the
same period in the previous financial year. Excluding Jet,
turnover for the quarter grew by 6,0%* compared to the same period in the previous financial year.
Online turnover for the Group continued to excel with growth
of 49,5% for Q4 FY2021 compared to the same period in the previous financial year.
For the 12 months to 31 March 2021, total Group turnover
declined by 6,7% compared to the same period in the previous
financial year (excluding Jet: -13,0%*) due to the impact of
lockdowns in April and May in all countries of operation, and
subsequent periods of lockdowns in the UK and Australia as
previously reported. Group cash turnover declined by 0,8%
compared to the same period in the previous financial year,
contributing 78,7% (comparable prior period: 73,9%) to total Group turnover for the 12 months to 31 March 2021.
* Pro forma management account numbers used to calculate an indicative turnover growth
Group online turnover grew by 33,4% (comparable prior period:
-1,9%) for the 12-month period, contributing 12,0% (comparable prior period: 8,4%) to total Group turnover.
We continue to focus on enhanced cost control and prudent
working capital management and from an inventory perspective,
we are adequately provisioned leading into the new financial year.
The Group continues to reduce net debt owing to strong cash
generation, working capital optimization, deliberate paying
down of debt and the successful rights offer concluded in July 2020. UPDATE ON JET
As announced on SENS on 25 September 2020, 5 November
2020 and 19 January 2021, the Group acquired certain
commercially viable stores and selected assets of Jet in South
Africa (effective 25 September 2020) and in Botswana, the
Kingdom of Eswatini, Lesotho and Namibia (effective on various
dates in December 2020 and January 2021). The integration of
these 425 Jet stores and the other key back-office integration
workstreams have all been satisfactorily completed within planned budgets and timeframes. OUTLOOK
Macroeconomic conditions in all territories in which we
operate are likely to remain constrained, and changing
customer needs will continue to disrupt traditional business models and accelerate digitalisation.
The impact of lockdown measures has further caused a
structural shift in the way we conduct business and how our
customers interact with us. This will determine in the future
how we operate, where we invest and what, strategically, we prioritise.
However, the past year has also demonstrated that TFG remains
resilient under extremely difficult and unprecedented circumstances.
We remain committed to the prioritisation of our strategic
investments in digital transformation and localised quick
response manufacturing. We are satisfied with the manner in
which we have de-geared our balance sheet, both as a result of
the successful rights offer as well as from strong trading
conditions since the reopening of the various economies in
which we trade. We will continue with our strong focus on expense control and capital management.
We are well positioned to benefit from the expected recovery
in the UK, which will be aided to a large extent by the extensive vaccine roll-out.
Trade since the year-end has been encouraging across all three
of our trading territories. For the trading month of April
2021, TFG Africa had turnover growth of 25,7% (excluding Jet
+3,0%*) and TFG Australia turnover growth of 41,6% (AUD), both
compared to April 2019. As previously announced, since most of
the Group?s trading outlets across all our major trading
territories were closed in the month of April 2020, turnover
growth for April 2021 has been calculated on April 2019. TFG
London?s turnover decreased by 42,0% (GBP), considering that
non-essential retail only re-commenced on 12 April 2021 (19 days), versus a full trading month in April 2019.
* Pro forma management account numbers used to calculate an indicative turnover growth
TRADING STATEMENT FOR THE TWELVE MONTHS ENDED 31 MARCH 2021 As per paragraph 3.4(b)of the JSE Limited Listings
Requirements, shareholders are advised that the Group?s basic
and diluted headline earnings per share for the year ended 31
March 2021, which by definition excludes the impact of the
non-cash impairment of the carrying values of TFG London?s
goodwill and intangible assets, are expected to fall within the following ranges:
Reported Expected Year ended 31 March 2020
Restated^ Year ended 31 March 2021
Cents Cents % Basic headline earnings per
ordinary share 1 029,3 154,4 to 257,3 -75,0% to ?85,0% Diluted headline earnings per
ordinary share 1 024,6 153,7 to 256,2 -75,0% to ?85,0%
However, basic and diluted earnings per share, which includes
the impact of the non-cash impairment of the carrying values
of TFG London?s goodwill and intangible assets, are expected to fall within the following ranges:
Reported Expected Year ended 31 March 2020
Restated^ Year ended 31 March 2021
Cents Cents % Basic earnings per ordinary
share 925,7 -648,0 to -555,4 -160,0% to ?170,0% Diluted earnings per ordinary
share 921,4 -645,0 to -552,8 -160,0% to ?170,0% ^ As required by IAS 33, the prior year basic and diluted
weighted average number of shares has been adjusted
retrospectively to account for the bonus element arising from the rights issue.
Other than the R2,7 billion after tax non-cash impairment of
the carrying values of TFG London?s goodwill and intangible
assets, earnings performance has also been impacted, inter alia, by the following factors:
- The impact of the COVID-19 pandemic and store closures as reported previously and as outlined above;
- The dilution impact of the successfully concluded rights
offer, as announced on SENS on 11 August 2020;
- The acquisition of certain commercially viable stores and
selected assets of Jet. The inclusion of a bargain
purchase gain on acquisition will impact specifically on
basic earnings per ordinary share and diluted earnings per ordinary share; and
- Responsible cost control, which has been achieved through
enhanced operational discipline and through cost savings
initiatives across all our operations, including specific
business optimisation initiatives in TFG Africa. ANNUAL FINANCIAL RESULTS
Shareholders are advised that the Group expects to release its
annual financial results for the 12 months ended 31 March 2021 on SENS on Thursday, 10 June 2021.
A live webcast of the result presentation will be broadcast at
10:00 am (SAS) on 10 June 2021. A registration link for the
webcast will be available on the Company?s website at
www.tfglimited.co.za. The slides for the annual results
presentation will be made available on the Company?s
website prior to the commencement of the webcast. A delayed
version of the webcasts will be available later on the same day.
The forecast financial information on which this trading
statement is based has not been reviewed and reported on by the company?s external auditors. PRO FORMA INFORMATION
Pro forma management account information for Jet was used in
this announcement for illustrative purposes only to provide an
indicative turnover growth for the Group and for TFG Africa excluding the acquired Jet stores.
Jet turnover for the period 25 September 2020 to 31 March 2021
relating to the acquired Jet stores were removed as if the acquisition did not take place.
Pro forma information for net debt pre-IFRS 16 was also used
in this announcement as this is a key metric within the Group?s debt reporting.
This pro forma information, because of its nature, may not be
a fair reflection of the Group's results of operations,
financial position, changes in equity or cash flows. There are
no events subsequent to the reporting date which require adjustment to the pro forma information.
The pro forma management account turnover numbers used were:
TFG Africa Q4 Jan to Q4 Jan to Growth March 2021 March 2020
Rm Rm % TFG Africa turnover
including Jet 5 764,8 4 198,8 37,3% Less: Jet turnover# 1 012,7 TFG Africa turnover
excluding Jet 4 752,1 4 198,8 13,2%
Group Q4 Jan to Q4 Jan to Growth March 2021 March 2020
Rm Rm % Group turnover
including Jet 8 174,1 6 757,2 21,0% Less: Jet turnover# 1 012,7 Group turnover
excluding Jet 7 161,4 6 757,2 6,0%
TFG Africa FY 2021 FY 2020 Growth
Rm Rm % TFG Africa turnover
including Jet 22 885,8 22 531,8 1,6% Less: Jet turnover# 2 228,0 TFG Africa turnover
excluding Jet 20 657,8 22 531,8 (8,3%)
Group FY 2021 FY 2020 Growth
Rm Rm % Group turnover
including Jet 32 950,3 35 323,3 (6,7%) Less: Jet turnover# 2 228,0 Group turnover
excluding Jet 30 722,3 35 323,3 (13,0%)
TFG Africa Trading month Trading month Growth April 2021 April 2019
Rm Rm % TFG Africa turnover
including Jet 2 520,5 2 005,9 25,7% Less: Jet turnover# 455,0 TFG Africa turnover
excluding Jet 2 065,5 2 005,9 3,0% #
The adjustment is based on management accounts. The Group is
satisfied with the quality of these management accounts which are unaudited.
The pro forma net debt pre-IFRS 16 numbers were calculated as follows:
March 2021 March 2020
Rm Rm Total interest-
bearing debt 14 344,6 19 927,3 Less: Cash and cash
equivalents 4 843,2 2 969,1
Net debt 9 501,4 16 958,2 Less: Lease
liabilities 8 186,9 8 597,8
Net debt pre-IFRS 16 1 314,5 8 360,4
The directors are responsible for compiling the pro forma
financial information in accordance with the JSE Limited
Listings Requirements and in compliance with the SAICA Guide
on Pro Forma Financial Information. The underlying information
used in the preparation of the pro forma financial information
has been prepared using the accounting policies in place for the year ended 31 March 2021.
Shareholders are advised that the financial information on
which this trading update and trading statement is based has
not been reviewed or reported on by the Company's external auditors. Cape Town 14 May 2021 Sponsor: UBS South Africa Proprietary Limited Date: 14-05-2021 02:30:00
Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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