2018 - prototype-vavo1.co.za · 3 RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2018 ... • Improved outlook for consumer spending – growth forecast at 2,3% for 2018. • Interest

RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH

2018

TFG Results presentation 2018 www.tfglimited.co.za 1

RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2018

AGENDA

OPERATING CONTEXT Doug Murray BUSINESS OVERVIEW Doug Murray

FINANCIAL REVIEW Anthony Thunström TFG FINANCIAL SERVICES Jane Fisher TFG LONDON Ben Barnett TFG AUSTRALIA Gary Novis OUTLOOK Anthony Thunström

Doug Murray Chief Executive Officer

Anthony Thunström Chief Financial Officer

Jane Fisher Group Director

Gary Novis TFG Australia

Ben Barnett TFG London

2


TFG Results presentation 2018 www.tfglimited.co.za2


GEOGRAPHIC TURNOVER CONTRIBUTION

TFG Africa 70,3%

TFG London 18,7%

TFG Australia 11,0%

CASH VS CREDIT TURNOVER CONTRIBUTION

ONLINE TURNOVER CONTRIBUTION

Credit turnover

contribution 34,1%

Cash turnover

contribution 65,9%

Outlet turnover

contribution 93,5%

Online turnover contribution

6,5%

OUR OPERATING CONTEXT

4

OPERATING CONTEXT



− Political and economic uncertainty relating to outcome of Brexit negotiations continues. − Economic growth slowed during 2017 as growth in consumer spending moderated and consumer price

inflation increased. − UK growth rated slowest of G7 countries in 2017, and had the weakest consumer confidence of

major EU countries − The interest rate increased to 0,5% from 0,25% in November 2017, the first increase in more than a

decade, with further increases likely in 2018. − The Pound remains weak and volatile compared to its pre-Brexit levels, particularly against the Euro. − UK retailers face increasing headwinds as a number of high street brands fall into administration (e.g.

Jacques Vert, EAST, Jones the Bootmaker, Agent Provocateur, Jaeger) as well as increased threats of store closures from larger retailers (New Look, Mothercare, Carpetright, Homebase etc).

OPERATING CONTEXT – UK

Latest period

Comparative period

CPI % 2,5 2,3 GDP 1,8 1,9 GfK Consumer Sentiment -7 -6 CBI Business Optimism -4 1

Source: Office for National Statistics, GfK, Tradingeconomics.com

6


− Political uncertainty in South Africa continued to impact the economy for most of the financial year. Outlook has however improved with the inauguration of President Ramaphosa mid February 2018.

− Foreign and local credit ratings affirmed – outlook revised from negative to stable (Moody). − Rand remained volatile for most of the year, strengthening in early 2018. − Outlook for SA economy:

• Improved outlook for consumer spending – growth forecast at 2,3% for 2018. • Interest rate expected to remain flat. • Inflation outlook stable averaging just below 5% for 2018. • GDP forecast 1,9% for 2018 and 2% for 2019.

OPERATING CONTEXT – SOUTH AFRICA

Latest period

Comparative period

CPI % 3,8 6,1 GDP 1,3 0,6 Consumer Confidence Index +26 -5 Business Confidence Index 45 40

Source: Stats SA, BER

5


BUSINESS OVERVIEW


− Consumer confidence in Australia is slightly more optimistic. − The level of unemployment remains low and unchanged. − Within the retail sector, declining traffic in shopping centres partially attributable to changes in consumer

behaviour as customers shift to online sales channels. − Recent retail results indicate tough trading conditions in Australia.

OPERATING CONTEXT – AUSTRALIA

Latest period

Comparative period

CPI % 1,9 2,1 GDP 2,1 2,8 Consumer Sentiment 3,2 0,6 Business Confidence 7 6

Source: Australian Bureau of Statistics, Westpac-Melbourne Institute, Tradingeconomics.com, National Australia Bank, Reserve Bank of Australia

7



SIGNIFICANT CHANGES DURING THE YEAR

CHANGES IN GROUP STRUCTURE − TFG London

• Phase Eight: buy-out of c.15% minority interest completed December 2017 • Hobbs: 4 months‘ trading included in current year, no trading included in prior

year (effective date 25 November 2017) − TFG Australia

• Retail Apparel Group: 8 months‘ trading included in current year, no trading included in prior year (effective date 24 July 2017)

CAPITAL RAISE − R2,5 billion accelerated bookbuild launched 31 July 2017 to fund acquisition of RAG

• 17,2 million ordinary shares issued at R145 per share • Shares issued at 0,9% premium to 30-day VWAP • Offer 3 times oversubscribed

10


BUSINESS OVERVIEW: TFG

− Diverse group with a successful portfolio of 28 leading fashion retail brands

− Diversification through:

• Cash and credit turnover

• Geography – 4 034 outlets in 32 countries on 5 continents

• Full OMNI offering – brick and mortar, concessions and online

• Broad product offering across various merchandise categories:

• Clothing, jewellery, homeware & furniture, cellphones and cosmetics

9



FY 2018: SALIENT FEATURES

Headline earnings growth (excl acquisition costs) + 9,6% (constant currency = +10,2%)

HEPS growth (excl acquisition costs) + 3,4% (constant currency = +4,0%)

HEPS (cents) (excl acquisition costs) 1 136,5

Interim dividend (cents per share) 325,0

Final dividend (cents per share) 420,0

Growth in final dividend +5,0%

Total dividend (cents per share) 745,0

Growth in total dividend +3,5%

12


SIGNIFICANT CHANGES DURING THE YEAR (CONTINUED)

CHANGES IN E-COMMERCE

− Launched online selling of @homelivingspace, Exact, Foschini and SODA Bloc brands • 20 of our 28 brands now trade online

CHANGES IN INTEREST RATE ENVIRONMENT

− TFG Africa: • Current financial year: repo rate in South Africa reduced by 0,25% to 6,75% in

July 2017 with a further 0,25% reduction in March 2018 • Prior financial year: no changes to repo rate

− TFG London: • Current financial year: Interest rate in UK increased to 0,5% in November 2017 • Prior financial year: Interest rate in UK reduced from 0,5% to 0,25% in August 2016

− TFG Australia: • Unchanged at 1,5%

11



− Turnover growth pleasing in difficult trading environment − Gross margin improvement – good performance in a deflationary product price environment and high levels of discounting

in market − Focus on cost control continued, although increased marketing and promotional spend was required to drive turnover in

tough retail market − Space growth of 3,5%

• 4,9% new space added • 2,3% space closed • Balance – enlargements and relocations

SEGMENTAL PERFORMANCE: TFG AFRICA

TFG AFRICA March 2018


TFG AFRICA % change

Retail turnover (Rm) 20 111,7 18 912,8 6,3

Gross margin (%) 47,8 46,4

EBITDA excl acquisition costs (Rm) 4 074,9 3 823,0 6,6

New outlets 146 206

Closed outlets 83 79

Total outlets at end of year 2 652 2 589

14


FY 2018: SALIENT FEATURES (CONTINUED)

GROUP March 2018

GROUP March 2017

Net bad debt as a % of debtors‘ book (TFG Africa) 10,0 11,3

Free cash flow (Rm) 1 880,6 1 298,8

Debt / equity – recourse (%) 54,6 53,6

Debt / equity – total (%) 61,4 65,3

13



− 8 months‘ trading of RAG and 12 months‘ trading of G-Star included − Turnover growth in AUD 8 month comparative period c.14% − Gross margin and EBITDA ahead of expectation − Strong performance despite pressure on consumer spend and increased competitive behaviour in Australian

market

SEGMENTAL PERFORMANCE: TFG AUSTRALIA

TFG AUSTRALIA March 2018

Retail turnover (AUDm) 312,1

Gross margin (%) 65,5

EBITDA excl acquisition costs (AUDm) 39,6

New outlets 44

Closed outlets 11

Total outlets at end of year 447

16


− Inclusion of Hobbs for four months in current financial year

− As expected, tough trading conditions continued during 2018 driven by the shift in consumer spend from offline to online

− Gross margin slightly down, reflective of trading conditions as well as shift to online

− Phase Eight concession partners online sales negatively impacted in H1 by system platform changes in the UK and adverse weather in February of H2

− Underlying EBITDA: • As reported at interim, adverse forex impact in 2018 (loss of £0,7m) compared to 2017 gain (£1,4m) due to Brexit exchange

rate movements • Proactively managing the store estate given the shift in consumer spend (March 2018: £2,5m and March 2017: £0,3m)

SEGMENTAL PERFORMANCE: TFG LONDON

TFG LONDON

March 2018

TFG LONDON

March 2017

TFG LONDON

% change

Retail turnover (GBPm) 310,9 251,8 23,5 Gross margin (%) 61,9 63,0 EBITDA excl acquisition costs (GBPm) 24,8 28,9 (14,2) Underlying EBITDA (GBPm) 28,0 27,8 0,7 New outlets 91 125 Closed outlets 83 49 Total outlets at end of year 935* 739

* Includes 188 outlets acquired with Hobbs

15



− TFG London and TFG Australia – cash turnover only − TFG Africa cash turnover growth coming off a high base (March 2017: 14,1%) − Credit turnover growth driven in part by growth in active account base

TURNOVER: TENDER TYPE CONTRIBUTION

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA % change

ZAR

Cash turnover 18 848,8 14 294,3 31,9 7,3

Credit turnover 9 744,2 9 254,4 5,3 5,3

Total 28 593,0 23 548,7 21,4 6,3

GROUP

March 2018 GROUP

March 2017 TFG AFRICA March 2018


Cash turnover contribution 65,9% 60,7% 51,5% 51,1%

Credit turnover contribution 34,1% 39,3% 48,5% 48,9%

18


− Pleasing H1 turnover growth followed by strong H2 performance − Clothing: strong turnover growth in difficult trading environments − Jewellery, a discretionary product sensitive to economic conditions and consumer confidence levels,

continues to gain market share in a tough environment − Cellphones: turnover growth coming off a high base (March 2017: 15,3%) and impacted by product

price deflation and availability − Homeware & furniture and cosmetics both impacted by significant discounting in the market

TURNOVER: MERCHANDISE CATEGORY CONTRIBUTION

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA % change

ZAR

TFG AFRICA % same

store growth

Clothing 22 642,7 17 578,7 28,8 9,4 4,8 Jewellery 1 499,4 1 490,5 0,6 0,6 (1,7) Cellphones 1 923,8 1 927,7 (0,2) (0,2) (3,2) Homeware & furniture 1 436,1 1 434,0 0,1 0,1 (2,3) Cosmetics 1 091,0 1 117,8 (2,4) (2,4) (3,8) Total 28 593,0 23 548,7 21,4 6,3 2,2

17



FY 2018: FINANCIAL HIGHLIGHTS

Strong H2 performance

Further improvement in free cash

flow

Like-for-like expense control

• Strong 2nd half performance across the Group

• Acquisitions are performing ahead of management‘s expectation

• Positive contribution to current year bottom line earnings

• 17% contribution to Group EBITDA

• Like for like expense control 5,1%

Positive performance

from acquisitions

• Free cash flow increased by 44,8% - 77,2% of profit for the year

• TFG Africa stock growth contained to 3,3%

Turnover growth H1 H2

TFG Africa (ZAR) 5,0% 7,6%

TFG London (GBP) (excl Hobbs acquisition) 4,1% 4,4%

20

FINANCIAL REVIEW



− Retail turnover +21,4% – refer previous slides − Interest income

• Two interest rate cuts in South Africa during the current financial year (July 2017 and March 2018) – no interest rate movements in prior financial year

• Gross book growth of 5,5% (March 2017: +2,9%) − Other revenue

• Growth of 5,3% (March 2017: + 2,0%) despite tough economic environment and Affordability Regulations constraining new account growth

REVENUE

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA

% change ZAR

Retail turnover 28 593,0 23 548,7 21,4 6,3

Interest income 1 755,8 1 736,9 1,1 1,1

Other revenue 1 187,7 1 128,0 5,3 5,3

Total 31 536,5 26 413,6 19,4 5,9

22


INCOME STATEMENT HIGHLIGHTS

GROUP March 2018

GROUP March 2017

GROUP % change

Revenue (Rm) 31 536,5 26 413,6 19,4

Retail turnover (Rm) 28 593,0 23 548,7 21,4


Total trading expenses (Rm) 13 779,0 10 757,2 28,1

Net bad debt (Rm) 837,5 896,1 (6,5)

Operating margin (%) 14,6 16,2

Headline earnings growth (excl acquisition costs) (%) 9,6 6,8

HEPS (excl acquisition costs) (cents) 1 136,5 1 099,2 3,4

21



TRADING EXPENSES

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA % change

ZAR

Depreciation and amortisation (745,5) (540,3) 38,0 16,6 Employee costs (4 948,0) (3 669,8) 34,8 10,3 Occupancy costs (3 411,5) (2 431,8) 40,3 11,3 Other net operating costs (3 836,5) (3 219,2) 19,2 9,4 Trading expenses before net bad debt (12 941,5) (9 861,1) 31,2 10,7 Net bad debt (837,5) (896,1) (6,5) (6,5) Total trading expenses (13 779,0) (10 757,2) 28,1 8,8

− Group includes non-comparable TFG Australia and TFG London (Hobbs) expenses

− Depreciation and amortisation: 3,1% movement excluding impact of useful life change in FY 2016

TFG AFRICA

− Occupancy costs • Normal lease escalations on renewals average 5,8%

(prev 7,2%) – Rent reversion average -2,5% (March 2017: +4,0%)

• 5,5% non-comp enlargements and net new stores

− Employee costs • Annual salary and promotional increase approx 7,5% • Continued investment in e-commerce, analytics and

forensics

TFG AFRICA continued

− Employee costs continued • Minimum ZAR increase for Bargaining Unit employees

resulted in an increase of just under 10% for many of our lower paid employees which drove the above inflationary increase

− Other costs – focus on cost control continued

• Branch level comp expense growth well contained at 4,2% (March 2017: 5,6%)

• Increased marketing and promotional spend including Black Friday required to drive turnover in tough retail market

• Excluding additional marketing investment and non-comparable stores – expense growth of 5,1%

24


− Improved performance of Group gross margin at 52,5% (March 2017: 49,7%) − TFG Africa

• Gross margin increased to 47,8% (March 2017: 46,4%) • Improved gross margin across all merchandise categories with the exception of cosmetics • Merchandise price deflation of 3,5% (clothing merchandise price deflation of 3,8%)

− TFG London • Gross margin 61,9% (March 2017: 63,0%)

– Slightly down, reflective of trading conditions as well as shift to online

− TFG Australia • Gross margin 65,5%

GROSS PROFIT

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA

% change ZAR

Gross profit (Rm) 15 001,1 11 703,5 28,2 9,5


23



− Overall improvement in Group gearing due to capital raise and strong cash generation − TFG London net debt down due to repayment − Consolidated level of finance cost remain within management‘s expectation

BORROWINGS

GROUP March 2018

(Rm)

GROUP March 2017

(Rm)

Interest-bearing debt 9 350,6 7 749,2

Less: cash (1 206,1) (878,5)

Net borrowings Group 8 144,5 6 870,7

Less: TFG Australia net borrowings (non-recourse) (99,0) 130,5

Less: TFG London net borrowings (non-recourse) (800,4) (1 368,2)

TFG Africa borrowings 7 245,1 5 633,0

TFG Africa (recourse debt) gearing 54,6% 53,6%

Group gearing 61,4% 65,3%

26


− Strong credit turnover growth of 5,3% (March 2017: +2,3%) supported growth in net debtors‘ book of 8,2% (March 2017: +4,6%)

− Stock levels well controlled

WORKING CAPITAL MANAGEMENT

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

TFG AFRICA

% change ZAR

Trade receivables 7 573,8 7 000,7 8,2 8,2

Other receivables 1 118,6 1 017,1 10,0 3,7

Stock 6 773,6 5 511,2 22,9 3,3

15 466,0 13 529,0 14,3 6,1

Trade and other payables (3 608,2) (2 751,3) 31,1 9,2

11 857,8 10 777,7 10,0 5,4

25



− Excluding non-comparable TFG Australia, capex down by 12,2% − Store capex:

• 146 new TFG Africa outlets vs 206 new outlets in the prior year • Mall expansion / revamp such as Mall of Africa, Eastgate, Menlyn in the base • Tight control over build rates

− IT capex cyclical based on major developments − Other:

• Prior period included costs related to Caledon factory • Capex of R5,0 million invested in sustainable water-saving and water-efficiency initiatives

CAPEX

GROUP March 2018

(Rm)

GROUP March 2017

(Rm)

TFG Africa 652,8 742,7 - Stores 389,7 438,9 - IT 196,9 222,8 - Other 66,2 81,0 TFG London 122,6 140,8 TFG Australia 121,2

896,6 883,5

28


− Free cash flow increased by 44,8% • 77,2% of profit for the year

FREE CASH FLOW

GROUP March 2018

(Rm)

GROUP March 2017

(Rm) GROUP

% change

Operating profit before acquisition costs and finance costs (EBIT) 4 165,6 3 811,2

Add back: depreciation and amortisation 745,5 540,3 EBITDA 4 911,1 4 351,5 12,9 Less: taxation* (1 157,6) (1 012,7) Operating profit before depreciation and amortisation after taxation 3 753,5 3 338,8

Less: capex (896,6) (883 5) Less: working capital cash movement (976,3) (1 156,5) (15,6) Free cash flow 1 880,6 1 298,8 44,8

* Effective tax rate used

27



TFG FINANCIAL SERVICES: INDUSTRY REVIEW

- The TransUnion SA Consumer Credit Index (CCI) declined marginally in the fourth quarter 2017 to 53,4 from 53,7 in the third quarter 2017

- Credit health has improved since 2016 mainly due to tighter lending standards, relatively soft inflation and stable-to-lower interest rates

- Household cash flow declined by 0,8% year on year in Q4 2017

- Tax increases, such as the increase in the rate of VAT and the fuel levy, will place added pressure on households, but relief comes in the form of lower food price inflation, rand appreciation and potential interest rate cuts by the Reserve Bank

30

TFG FINANCIAL SERVICES



− Active accounts increase by 1,1% (March 2017: -5,4%) due to an increase in new accounts activated as a result of higher demand and improved accept rates

− Positive active account growth resulted in an increase in credit turnover growth to 5,3% (March 2017: +2,3%) • 1st half growth: 6,2% (1st half March 2017 financial year: +1,4%) • 2nd half growth: 4,5% (2nd half March 2017 financial year: +3,3%)

− Credit turnover as a % of total turnover in line with strategic objectives

TFG FINANCIAL SERVICES: CREDIT BOOK

Key indicators TFG AFRICA March 2018


TFG AFRICA % change

Number of active accounts (‗000) 2 450,0 2 422,8 1,1

Credit turnover (Rm) 9 744,2 9 254.4 5,3 Credit turnover as a % of total retail turnover (TFG Africa only) 48,5 48,9

32


− Income growth of 1,8% (March 2017: +11,7%) • Flat rate environment during the 2017 FY, but 25 bps repo rate cuts during July 2017 and March 2018 • Recovery of credit turnover has resulted in gross book growth of 5,5% (March 2017: +2,9%)

− Net bad debt decreased further by 6,5% (March 2017: -5,4%) • Growth in bad debt write off slows to 2,9% (March 2017: +10,2%) • Strong recoveries growth at 10,6% (March 2017: +18,7%) • Improved book construct necessitates a lower impairment charge

− Credit costs increased by only 2,0% (March 2017: +2,2%) whilst increasing analytical investment and in spite of additional costs to comply with Affordability Regulations • Collection costs reduced by a further 9,6% (March 2017: -9,2%) • Mailing costs reduced by 5,6% (March 2017: -16,7%) due to increased use of electronic media

TFG FINANCIAL SERVICES: CREDIT PERFORMANCE


(Rm)


(Rm) TFG AFRICA

% change

Income 2 072,0 2 035,3 1,8

Net bad debt (837,5) (896,1) (6,5)

Credit costs (578,4) (567,3) 2,0

EBIT 656,1 571,9 14,7

31



TFG FINANCIAL SERVICES: VALUE ADDED SERVICES


(Rm)


(Rm) TFG AFRICA

% change

Insurance net income 212,5 196,0 8,4

Publishing net income 181,0 180,6 0,2

Mobile one2one airtime net income 66,2 67,4 (1,8)

EBIT 459,7 444,0 3,5

Number of new product / service launches 3 4

− Insurance income • Expansion of existing products to include spouse and family options has strengthened our customer propositions • Optimisation of resource allocation in our sales channels delivering good returns

− Publishing income • TFG remains the largest monthly magazine publisher in South Africa • Increased the number of titles sold in selected retail stores • Value Magazine was successfully launched increasing total publications to 16

− One2one • Fierce market competition, coupled with low margins has made the environment challenging

34


− Strong turnover growth and improved provision level results in net debtors‘ book growth for the year improving to 8,2% (March 2017: +4,6%)

− Overdue values as a % to debtors book continue to decline reflecting improved book quality

− Increased ratio of customers able to purchase reflect improved delinquencies

− Net bad debt write off and net bad debt as % of debtors‘ book improve as bad debt growth decrease below book growth, coupled with strong recovery yields requires a lower level of provisioning

TFG FINANCIAL SERVICES: CREDIT STATISTICS

Key debtors statistics TFG AFRICA March 2018


Net debtors‘ book 7 573,8 7 000,7 Overdue values % to debtors‘ book 12,4 13,9 % able to purchase 83,0 81,8 Net bad debt write off as a % of credit transactions 7,9 8,2 Net bad debt write off as a % of debtors‘ book 13,2 13,9 Net bad debt as a % of debtors‘ book 10,0 11,3 Doubtful debt provision as a % of debtors‘ book 9,5 11,8

33



FOCUS APPROACH

Customer acquisition − Increase in active account base through acquisition and targeted reactivation strategies

− Continual focus on growth of cash rewards base in order to increase the % of trackable transactions

− Increase the number of new-to-group customers to our e-commerce sites

Leverage data science to improve customer experience

− Collect Data : Further optimisation of the TFG Rewards program will enable us to collect valuable customer data in order to deepen our customer insights

− Connect Data : Single view of customer project well underway to ensure all customer information is able to be leveraged across all consumer touchpoints

− Use Data : Personalised and relevant customer engagement strategies will help us to attract, grow and retain customers in line with each brand strategy

− Analyse Data : Deep analysis of customer behaviour to assist Retail Divisions

Accounting and reporting − Preparatory work for the implementation of IFRS 9 well advanced

− Impact of Debt Intervention legislation on provision requirements to be assessed

TFG FINANCIAL SERVICES: STRATEGY

36


TFG FINANCIAL SERVICES: REGULATION

REGULATION UPDATE

Affordability Court Case

− The favourable court ruling on the 16th of March removed the onerous requirement for credit applicants to provide documented proof of income when applying for credit

− The NCR have recently released Affordability Guidelines requesting that credit providers collect documented proof of income. Credit Providers are asked to submit comments on these Guidelines by 31st May

Debt Intervention

− Expectations are that the Debt Intervention legislation will be finalised imminently and no clarification provided if it will be circulated for public comment

− Difficult to assess the impact of this legislation until it is published

35



TFG LONDON IS BUILDING A PORTFOLIO OF HIGH QUALITY BRANDS

• British contemporary fashion brand. • Loved for its confident, modern attitude to

style and its curated edit of both casual and occasionwear.

• Great designs that are modern, effortless and accessible.

• Affordable luxury brand with impeccable British heritage in tailoring and smart daywear.

• Provides wardrobe solutions to smart and busy women with a focus on luxurious fabrics and quality craftsmanship.

• Delivers collections with timeless style.

Concessions

Stores

Online

Wholesale / Other

Concessions

Stores

Online

Wholesale / Other

Concessions Stores

Online

Wholesale / Other

• Premium British brand with a global following. • Dedicated to dressing women of all ages, for

all occasions, in high quality and versatile clothing.

• Well-known for modern florals, exclusive designs and contemporary details.

UK

Europe

Europe

Europe

ROW

SALES BY CHANNEL SALES BY REGION

UK

ROW

ROW

UK

38

TFG LONDON



INTERNATIONAL AN INCREASINGLY MATERIAL CONTRIBUTOR TO SALES

Note: 1. Refers to actual numbers per financial year 2. January year end until FY 15, 14 mth period to March 2016, and March year ends thereafter

International has been and will continue to be a key engine of growth for TFG London as we leverage deep existing international Phase Eight department store relationships

SALES EVOLUTION¹ (GBPm)

• Opened Hong Kong IFC pop-up

• Entered Mexico with 4 concessions in El Palacio del Hierro

• Launched in Singapore • Launched further

concessions in Netherlands and Germany

• Launched wholesale in US • Grew Mexico to 12

concessions • Further rollout in Hong

Kong and Singapore • Whistles acquired with

nascent US department store business

SPLIT BETWEEN EUROPE AND REST OF WORLD…

• Entered Japan • Launched in Spain with El

Corte Ingles • Further rollout in Germany

across multiple fascias • Launched Whistles in

Hong Kong

• Hobbs acquisition and expansion of US presence

• Launch with Hudson Bay in Canada

• Wholesale entry to Russia • Launch of Whistles in

Middle East and SE Asia • Further rollout in USA,

Germany and Japan

20 24 29 34 10

15 21

29

30 39

50

63

2015 2016 2017 2018

ROW

Europe

40


TFG LONDON IS FOCUSED ON DELIVERING THE ONLINE OPPORTUNITY

Note: 1. Refers to actual numbers per financial year 2. Partner websites include House of Fraser, John Lewis Partnership, Debenhams, Next and Amazon 3. January year end until FY 15, 14 mth period to March 2016, and March year ends thereafter

SALES EVOLUTION¹ (GBPm)

• Collect from store introduced • Launch of Inno, Manor, De

Bijenkorf and Breuninger

• Single stock pool project completed • Bloomingdales online launched • Studio 8 launched online in the UK,

Germany and the Netherlands • Whistles acquired (Mar‘16)

SPLIT BETWEEN OWN SITE AND OTHER/MARKETPLACE SITES…

• Current Director of Marketing & Online Trading appointed

• Launched segmented e-mail marketing to online database via Adobe Campaign Manager

• Launched personal styling online booking

• Hobbs acquired • Hudson Bay: partner launch • Focus on database growth through

e-receipt capture • New shipping options launched

(e.g. weekend delivery)

11 19 29

45 16 23

44

58

27

42

73

103

2015 2016 2017 2018

Partner websites

Own Sites

E-commerce has scaled in recent years to form a key part of TFG London’s multi-channel strategy

39



TFG LONDON IS WELL POSITIONED FOR SUSTAINABLE GROWTH (CONTINUED)

• TFG London has developed a strong track record in the identification, acquisition and management of new brands › TFG London is confident of successfully embedding its operating model and strategic relationships into both Whistles and Hobbs

• Our focus is on leveraging central functions to deliver sustainable and scalable profitability and to build the TFG London platform › Consolidated back office functions including Finance, Logistics, Legal, Property and Procurement in place by YE 2019

BRAND DEVELOPMENT /

ACQUISITION

• Market conditions continue to be challenging in the UK, which creates opportunity for market share growth › Jacques Vert Group and EAST entered administration in April/May 2018

• Landlords and department store partners are actively proposing new stores and concessions on favourable terms › The Group are trialling mat extensions in selected locations to drive share of floor spend

MARKET SHARE GROWTH

42


TFG LONDON IS WELL POSITIONED FOR SUSTAINABLE GROWTH

• TFG London operates a retail model focused on sustainable growth where costs are substantially flexed with sales

› Retail sales are predominantly generated Online (33%) and through turnover rent based concessions (35%)

› Staffing costs increasingly flexed with sales, and further enhanced through the introduction of Shared Staffing

› Physical store estate benefits from short average lease lengths

› Clothing and accessories sourced on a ‗test and repeat‘ model, with c.45% near sourcing in Europe and Turkey

• Incumbent management have a strong track record, and have been retained in the business since acquisition in January 2015

TRADING MODEL & MANAGEMENT

• TFG London’s brands are outperforming the broader market through the delivery of a true omni-channel proposition

› Online represents 33% of TFG London brand sales, versus 17% on the acquisition of Phase Eight in January 2015

› Delivery of OneStock project has provided ‗full enterprise‘ availability to online and offline channels

• The focus remains on delivering sustainable growth across own and third party channels to market

› New online partners and marketplace launches

› Increased focus on international online sales (+250% since January 2015)

E-COMMERCE

• The market potential remains significant for our brand portfolio, building on the profitable platform that has been established › International grown by 112% since January 2015 (59% excluding acquired brands)

› Focus is now on growing Key Markets where we can achieve scale through our brand portfolio

› TFG London‘s international model mimics the successful retail approach designed in the UK

› International operating profitability continues to grow across all brands at limited capex risk

› Significant growth opportunity for Hobbs and Whistles

INTERNATIONAL

41



#1

CONTENT

Business Overview

Current Performance

Strategic Focus & Next Steps

#2

#3

44

TFG AUSTRALIA



RAG IS 5 SPECIALTY BRANDS

Differentiated value, on-trend women’s

athleisurewear

A leading mid-market,

on-trend menswear brand

One of the fastest growing value,

on-trend menswear brands

The only known mono

brand mid-market, on-trend big and tall

menswear retailer

A leading mid-market, fashionable menswear

brand

46


RAG IS AMONGST AUSTRALIA‘S BEST PERFORMING RETAILERS

Sales +14%(8 mths)

Stores 431

Omni-Channel

5 Specialty Brands +10 years

of continuous growth

Targeted Product strategy

45



Typical customer: — He wants to look smart and up to date without standing out from

the crowd — He is often shopping for dressy attire or an occasion — 18-35 year old males

Product positioning: Smart casual, on-trend sharp designs

Stores (Mar-18) 116

Price point Mid-market

48


Fashion

Price

Zara

Cotton On

Just Jeans

Ed Harry

Lowes GAZMAN Rodd & Gunn

Ben Sherman

Oxford

Calibre Politix

Saba

GAP

Topshop H&M

Menswear Only Menswear and Womenswear

Factorie

Discount department stores

Department stores

Country Road

Jeans West

Jay Jays

Marcs

Trenery

MJ Bale Herringbone

Sportscraft Witchery

Uniqlo

Fletcher Jones

Ron Bennett

FOCUSED ON FASHIONABLE ―MID-MARKET‖ & ―VALUE‖ SEGMENTS

47



Stores (Mar-18) 145

Price point Value

Typical customer:

— He wants to look good when going out and he appreciates value — Average Australian 18-40 year old males

Product positioning: Affordable on-trend menswear

50


`

Stores (Mar-18) 100


Typical customer:

— He has an urban, fast-paced lifestyle and is usually shopping for a night out or an occasion where he likes to stand out

— Fashion conscious 14-27 year old males

Product positioning: Fashionable mid-market menswear for going out

49



Stores (Mar-18) 32

Price point Value

Typical customer: — She wears fashionable, high performance athleisurewear at

a great price

— Active 18-40 year old females

Product positioning: Athleisure with a focus on value but with high performance technical fabrics

52


Stores (Mar-18) 38


Typical customer: — He is the previously underserved bigger, broader, and taller man

who wants to look good when he goes out — He is willing to spend more per unit and buys more units per

transaction — 18-45 year old males requiring large sizes

Product positioning: One-stop-shop for the big and tall Australian male

51



CONTINUED… PHYSICAL STORE ROLLOUT STRATEGY

0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Note: 1. Store numbers pre 2004 are indicative 2. Store numbers exclude online stores , temporary stores and Rockwear stores identified for closure on acquisition

Created

Founded

First store opens

Acquired

Acquired

Founded

Founded

1 2 3 4 6 7 9 10 11 13 16 18 21 24 21 24 27 41

57 74

86

177

230

209

248

274

325 302

342

362

400

50

100

150

200

250

300

350

400

Stor

e N

umbe

rs

431

2018: 31 Net New stores

10 expansions 431 stores

54


#1

CONTENT

Business Overview

Current Performance


#2

#3

53



ACQUISITION REVIEW…

Information above is based on management accounts.

56


DRIVEN INVESTMENT IN… ―DIGITAL‖ CHANNELS

April May June July August September October November December January February MarchSales 8,724,597 9,070,146 9,420,309 10,026,152 10,263,402 10,774,575 11,319,731 11,889,293 12,462,912 13,104,144 13,698,310 14,243,761% of RAG 2.4% 2.5% 2.5% 2.6% 2.7% 2.8% 2.9% 3.0% 3.1% 3.2% 3.3% 3.4%

2.0%

2.2%

2.4%

2.6%

2.8%

3.0%

3.2%

3.4%

3.6%

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

E Commerce - Sales as % of Total RAG

+65% growth in Digital revenues Steady growth as a % of Group Sales

55



#1

CONTENT

Business Overview

Current Performance


#2

#3

57


ACQUISITION REVIEW…

Information above is based on management accounts.

56



STORE FOOTPRINT…. STRATEGIC GROWTH TARGETS

700+

Target stores

~110

220+

80+

~120

100+

100+

Tarocash yd. Connor Johnny Bigg Rockwear

117

99

157

53

37

463

Store roll-out

114 116

98 100

137 145

38 25 26

32

400

431

FY2017 FY2018 FY2019B

TFG Africa brand

59


RAG – LONG TERM STRATEGIC GOALS

BRANDS Continue to add Growth Brands to the portfolio

LEVERAGE Shared Services – managed as a strategically efficient – standardisation

OPTIMUM Store Optimisation – testing of the optimal store

GR

OW

TH

CO

STS

STORES Maximise store portfolio in Australia & New Zealand

CUSTOMER Uniqueness of Brands maintained at all times – Target unique markets

STORES Increase store sizes as opportunity evolves

CHURN Churn low profitability stores

INVEST Invest for scalability and leverage

COSTS Cost Management – key metrics maintained – % wages % rent % Mkt %

DIGITAL Double % Growth and investment in Digital Channels

58



TFG AFRICA

− Cautiously positive around SA outlook − Credit – outlook more positive given recent court ruling however uncertainty around future

legislation − Gross margin to be maintained

• Product price deflation anticipated at similar levels to last year − Ongoing focus on our existing key strategic initiatives

• Superior customer experiences • Cost control • Working capital management • Capital optimisation

− Additional focus - strategic investment in digital transformation

TFG LONDON

− Continuing uncertainty around Brexit − Building TFG London platform − Back office integration − Continued implementation of business model into Whistles and Hobbs

OUTLOOK

61

OUTLOOK


THANK YOU


TFG AUSTRALIA

− Outlook remains stable − Continued strong growth − Test launch TFG Africa brand − Continuing store roll out of existing brands

GROUP

− Gross margin to be expanded − Retail turnover for first 7 weeks:

• TFG Australia and TFG London ahead of management expectation. • TFG Africa experienced volatile trading in first 7 weeks largely driven by move of Easter, shift in

school holidays and introduction of VAT increase. Despite these factors, turnover is in line with management‘s expectation.

OUTLOOK (CONTINUED)

62


APPENDICES


THIS ANNOUNCEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITH RESPECT TO THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE FOSCHINI GROUP LIMITED AND ITS SUBSIDIARIES, WHICH BY THEIR NATURE INVOLVE RISK AND UNCERTAINTY BECAUSE THEY RELATE TO EVENTS AND DEPEND ON CIRCUMSTANCES THAT MAY OCCUR IN THE FUTURE.

DISCLAIMER

64


RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2018 68

TFG MISSION AND VALUES

MISSION To be the leading fashion lifestyle retailer in Africa whilst growing our international footprint by providing innovative products, creative customer experiences and by leveraging our portfolio of diverse brands to differentiate our offering. Our talented and engaged people will always be guided by our values, social conscience and customer-centric mindset.

VALUES TFG believes that teamwork coupled with professionalism in all aspects of retailing will continue to be the foundation for the future. PASSIONATE ABOUT SERVICE We passionately and truly believe that the customer comes first RESILIENCE We have the courage of our convictions and the boldness to constructively challenge INTEGRITY Our word is our honour, we are honest and ethical DIGNITY AND RESPECT We treat everyone the way we want to be treated EMPOWERMENT We embrace diversity and create equal opportunity for all in a supportive environment EXCELLENT PERFORMANCE We are accountable and drive performance in a creative and innovative way

67


ECONOMIC SOURCES

Operating context – South Africa Latest period

Comparative period

CPI % y-o-y (March 2018 vs March 2017) 3,8 6,1 GDP (2017 y-o-y growth vs 2016 y-o-y growth) 1,3 0,6 FNB/BER Consumer Confidence Index (Q1 2018 vs Q1 2017) +26 -5 RMB/BER Business Confidence Index (Q1 2018 vs Q1 2017) 45 40 Source: Stats SA, BER

Operating context – United Kingdom

CPI % y-o-y (March 2018 vs March 2017) 2,5 2,3 GDP (2017 y-o-y growth vs 2016 y-o-y growth) 1,8 1,9 GfK Consumer Sentiment Barometer (March 2018 vs March 2017) -7 -6 CBI Business Optimism Indicator (Q2 2018 vs Q2 2017) -4 1 Source: Office for National Statistics, GfK, Tradingeconomics.com

Operating context - Australia

CPI % y-o-y (March 2018 vs March 2017) 1,9 2,1 GDP (2017 y-o-y growth vs 2016 y-o-y growth) 2,1 2,8 Westpac Melbourne Institute Index of Consumer Sentiment (y-o-y March 2018 vs March 2017) 3,2 0,6

NAB Business Confidence (March 2018 vs March 2017) 7 6 Source: Australian Bureau of Statistics, Westpac-Melbourne Institute, Tradingeconomics.com, National Australia Bank, Reserve Bank of Australia

66



FOOTPRINT: TFG AFRICA

2 458 12

104 22

35

04

05

441 211

96

153 282

199 743

190

143

12

69


− TFG Africa: 8 countries • South Africa: 2 458 outlets • Rest of Africa: 194 outlets in 7 countries

4 034 OUTLETS IN 32 COUNTRIES:

− TFG International: 24 countries • TFG London: 935 outlets • TFG Australia: 447 outlets

GROUP FOOTPRINT

68



− Diversification across different merchandise categories strengthens the Group

− TFG International contribution increased to 29,7% (March 2017: 19,7%)

− Turnover contributions across other merchandise in comparison to prior year: • Clothing & footwear 79,3% vs 74,6% • Cellphones 6,7% vs 8,2% • Jewellery 5,2% vs 6,3% • Homeware & furniture 5,0% vs 6,1% • Cosmetics 3,8% vs 4,8%

Clothing & footwear - Fashion 21,0%

Clothing & footwear - Sport

19,6%

Clothing & footwear – TFG International

29,7%

Clothing & footwear - Value 9,0%

Cellphones 6,7%

Jewellery 5,2%

Homeware & furniture 5,0%

Cosmetics 3,8%

79,3% Clothing & footwear

TURNOVER: MERCHANDISE CATEGORY CONTRIBUTION

71


Stores Concessions Total outlets

Europe

Germany 2

65 67

Switzerland

11

31 42

Sweden 1

12 13

Netherlands -

7 7

Belgium -

4 4

Latvia -

2 2

Estonia -

1 1

Spain -

17 17

UK & Ireland

206

467 673

Middle East

Kuwait -

2 2

United Arab Emirates

-

8 8

Bahrain -

2 2

Qatar -

3 3

Saudi Arabia -

6 6

North America

USA 2

35 37

Mexico -

13 13

Australia

432

15 447

New Zealand

15

- 15

Australasia

FOOTPRINT: TFG LONDON AND TFG AUSTRALIA

Singapore -

5 5

Japan -

5 5

Hong Kong 8

2 10

Malaysia -

1 1

Macau -

2 2

Asia

70


March 2018Reviewed

Rm

March 2017Audited

Rm

ASSETSNon-current assetsProperty, plant and equipment 2 861,9 2 469,0Goodwill and intangible assets 7 667,2 4 675,9Deferred taxation asset 620,6 483,6

11 149,7 7 628,5

Current assetsInventory 6 773,6 5 511,2Trade receivables – retail 7 573,8 7 000,7Other receivables and prepayments 821,8 771,0Concession receivables 296,8 246,1Cash and cash equivalents 1 206,1 878,5

16 672,1 14 407,5Total assets 27 821,8 22 036,0

EQUITY AND LIABILITIESEquity attributable to equity holders of The Foschini Group Limited 13 267,8 10 515,3Non-controlling interest 4,5 4,2Total equity 13 272,3 10 519,5

LIABILITIESNon-current liabilitiesInterest-bearing debt 4 825,7 4 442,2Put option liability 72,7 74,7Cash-settled share incentive scheme – 6,8Operating lease liability 335,1 255,7Deferred taxation liability 829,4 337,9Post-retirement defined benefit plan 215,8 233,1

6 278,7 5 350,4

Current liabilitiesInterest-bearing debt 4 524,9 3 307,0Trade and other payables 3 608,2 2 751,3Operating lease liability 30,7 15,2Taxation payable 107,0 92,6

8 270,8 6 166,1Total liabilities 14 549,5 11 516,5Total equity and liabilities 27 821,8 22 036,0

Condensed consolidated statement of financial position


Year ended 31 March

2018Reviewed

Rm

Year ended 31 March

2017Audited

Rm%

change

Revenue 31 536,5 26 413,6Retail turnover 28 593,0 23 548,7 21,4Cost of turnover (13 591,9) (11 845,2)Gross profit 15 001,1 11 703,5Interest income 1 755,8 1 736,9Other income 1 187,7 1 128,0Trading expenses (13 779,0) (10 757,2)Operating profit before acquisition costs and finance costs 4 165,6 3 811,2 9,3Acquisition costs (79,4) –Finance costs (696,6) (607,4)Profit before tax 3 389,6 3 203,8Income tax expense (953,5) (851,3)Profit for the year 2 436,1 2 352,5

Attributable to:Equity holders of The Foschini Group Limited 2 434,8 2 351,4Non-controlling interest 1,3 1,1Profit for the year 2 436,1 2 352,5

Earnings per ordinary share (cents)TotalBasic 1 082,6 1 108,0 (2,3)Diluted (basic) 1 072,3 1 098,6 (2,4)

Earnings per ordinary share (excluding acquisition costs) (cents) Headline 1 136,5 1 099,2 3,4Diluted (headline) 1 125,7 1 089,9 3,3

Condensed consolidated income statement

GREYMATTER & FINCH # 12303


Documents

2018 - prototype-vavo1.co.za · 3 RESULTS PRESENTATION FOR THE YEAR ENDED 31 MARCH 2018 ... • Improved outlook for consumer spending – growth forecast at 2,3% for 2018. • Interest