THE FOSCHINI GROUP LIMITED - Condensed consolidated financial statements for the year ended 31 March 2021
10 June 2021 9:15

Condensed consolidated financial statements for the year ended 31 March 2021

THE FOSCHINI GROUP LIMITED
Reg. No.: 1937/009504/06
Share code: TFG - TFGP
ISIN: ZAE000148466 – ZAE000148516
(“TFG”)

SHORT-FORM ANNOUNCEMENT
Condensed consolidated financial statements for the year ended
31 March 2021

SALIENT FEATURES:
   - Group revenue down 7,5% to R35,6 billion;
   - Group retail turnover down 6,7% (excluding Jet -13,0%)*
     to R33,0 billion, but a strong recovery in H2 FY2021 with
     Group retail turnover growth of 11,2% (excluding Jet -
     0,8%)* compared to H2 FY2020;
   - Group online retail turnover now contributes 12,0% to
     Group retail turnover with strong growth for TFG Africa
     and TFG Australia at 132,4%^ (ZAR) and 58,1% (AUD)
     respectively;
   - Gross margin contracted to 45,5% (March 2020: 52,7%)
     mainly as a result of dealing with seasonal inventory
     where clearances were impacted by the various lockdowns;
   - Headline earnings per share of 197,9 cents down 80,8%
     (March 2020: 1 029,3 cents per share);
   - Basic earnings per share down 166,3% to a loss of 614,0
     cents per share (March 2020: basic earnings per share of
     925,7 cents per share);
   - Operating loss before finance costs of R719,2 million
     (March 2020: Operating profit before finance costs of
     R4,7 billion);
   - Strong cash generation from operations of R9,4 billion
     (March 2020: R8,3 billion);
   - Reduction in net debt from R8,4 billion (March 2020 pre-
     IFRS 16) to R1,3 billion (March 2021 pre-IFRS 16)**;
   - 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;
   - The Supervisory Board has decided that it would be
     prudent not to declare a final dividend at this year-end,
     but plans to resume dividends in the 2022 financial year
     (March 2020: 335,0 cents per share for the full year);
     and
   - Acquisition of the Jet business for a purchase
     consideration of R385,3 million which resulted in the
     recognition of a bargain purchase gain of R709,0 million.

* Pro forma management account numbers used to calculate an
indicative retail turnover growth.
^ Online retail turnover for the period 1 May 2020 to 31 March
2021. April has been excluded from this growth as we were not
permitted to fulfil any online deliveries during the South
African government-enforced lockdown in April 2020*.

** Pro forma information used to calculate net debt pre-IFRS
16.

This short-form announcement is the responsibility of the
company's directors. It is a summary of the information in the
Group's reviewed provisional condensed consolidated financial
statements for the year ended 31 March 2021 and does not
contain complete information. The full results announcement is
accessible via the JSE link at
https://senspdf.jse.co.za/documents/2021/JSE/isse/TFG/FY2021.pdf
and on the Company’s website at
https://tfglimited.co.za/investor-information/financial-
reports-and-presentations/.

Copies of the full announcement may also be requested by
contacting the Company Secretary (company_secretary@tfg.co.za)
and are available for inspection at the Company’s registered
office at no charge, weekdays during office hours.

This announcement has not been reviewed or reported on by the
Group’s external auditors. The Group’s auditors, Deloitte &
Touche, have reviewed the full announcement and expressed an
unmodified conclusion thereon.

COMMENTARY

SUCCESSFUL EXECUTION OF STRATEGIC MEASURES SUPPORTS GROUP
PERFORMANCE DURING UNPRECEDENTED COVID-19 PANDEMIC – A PIVOTAL
YEAR IN TFG’S STRATEGIC TRANSFORMATION

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.

As previously announced, most of the Group’s 4 083 trading
outlets across all our major trading territories – South
Africa, the United Kingdom (UK) and Australia - were closed in
the first month of our financial year (April 2020). In South
Africa, 447 jewellery stores remained closed during the month
of May 2020 due to the prevailing lockdown restrictions.
Further lockdowns were experienced in certain states of
Australia, in the UK and other international markets, which
continued to adversely impact trade performance in these
countries throughout our 2021 financial year.
While all three of our main territories 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 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 the 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 intent, 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.

FINANCIAL PERFORMANCE

Against this backdrop, the Group’s retail turnover for the
year ended 31 March 2021 decreased by 6,7% to R33,0 billion.
Excluding the recently acquired Jet business, retail turnover
for the year decreased by 13,0%*. Particularly encouraging,
however, was the strong recovery in H2 FY2021 with Group
retail turnover growth of 11,2% (excluding Jet -0,8%)*
compared to H2 FY2020.

* Pro forma management account numbers used to calculate an
indicative retail turnover growth.

Cash retail turnover for the year ended 31 March 2021
decreased by 0,8% while credit retail turnover, which was
purposely restricted by stringent and reduced acceptance
criteria, decreased by 23,6%. Cash retail turnover now
contributes 78,7% to total Group retail turnover.
Online retail turnover in TFG Africa and TFG Australia
exceeded management’s expectation with strong growth of
132,4%^ (ZAR) in TFG Africa and 58,1% (AUD) in TFG Australia
for the year ended 31 March 2021. In the UK, however, online
performance continues to be negatively impacted by weaker
department store online channels. Online retail turnover from
TFG London’s own sites for the year ended 31 March 2021
increased by 9,1% (GBP) compared to the previous comparable
period. For the year ended 31 March 2021, online retail
turnover contributed 12,0% to total Group retail turnover, up
from an 8,4% contribution in the comparative 12-month period.

^ Online retail turnover for the period 1 May 2020 to 31 March
2021. April has been excluded from this growth as we were not
permitted to fulfil any online deliveries during the South
African government-enforced lockdown in April 2020*.

* Pro forma management account numbers used to calculate an
indicative retail turnover growth.

Gross margin for the Group decreased by 7,2% to 45,5% due to
increased promotional activity in response to challenging
trading conditions, stock provisions and a change in product
mix across all three segments. Additional stock provisions
were taken in all three of our operating territories to deal
with the impact that the various lockdowns had on the
clearance of seasonal product, to ensure that the Group is
well positioned going into the new financial year.

A significant effort from management teams across the three
segments ensured that trading expenses for the year ended 31
March 2021 were curtailed. This was achieved through
operational discipline and various cost savings initiatives,
including business optimisation initiatives in TFG Africa and
TFG London. The Group also benefited from various government
relief measures related to COVID-19.

Headline earnings per share and basic earnings per share
decreased by 80,8% and 166,3% respectively. Earnings
performance was impacted by the COVID-19 pandemic and outlet
closures as outlined previously, as well as, inter alia, by
the following non-comparable events:
   - The acquisition of 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 inclusion of a
     bargain purchase gain on acquisition of R709,0 million as
     well as acquisition costs of R16,8 million has impacted
     specifically on basic earnings per ordinary share and
     diluted earnings per ordinary share; and
  -   The R2,7 billion after tax non-cash impairment of the
      carrying values of TFG London’s goodwill and intangible
      assets which has impacted specifically on basic earnings
      per ordinary share and diluted earnings per ordinary
      share.

STRONG STATEMENT OF FINANCIAL POSITION

The Group generated cash from operations of R9,4 billion for
the year ended 31 March 2021, which is a very pleasing result.
This was achieved through the focused preservation of cash
resources and the responsible optimisation of working capital.
This, together with the R3,8 billion successful rights offer,
has supported the reduction in net debt from R8,4 billion
(pre-IFRS 16)** at the end of March 2020 to R1,3 billion (pre-
IFRS 16)** at the end of March 2021.

** Pro forma information used to calculate net debt pre-IFRS
16.

Ongoing focus on working capital management has also resulted
in the Group’s current ratio improving to 1,8 from 1,5 at
year-end, with inventory balances reducing by c.R100,0 million
since 31 March 2020 and inventory days reducing by 15 days to
169 days, notwithstanding the acquisition of Jet during the
financial year.

SEGMENTAL PERFORMANCE UPDATE

TFG Africa’s retail turnover growth/(decline) (ZAR) when
compared to the same period in the previous financial year in
the respective merchandise categories was as follows:

                                                       FY2021
                                                     Contribu
                            H1                        tion to
                         April    H2 Oct                  TFG
                       2020 to   2020 to               Africa
                          Sept     March               retail
Merchandise category      2020      2021    FY2021   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 retail turnover, contributing 69,3% of TFG Africa’s total
retail turnover, grew by 19,0% when compared to the same
period in the previous financial year, while credit retail
turnover decreased by 23,6% when compared to the same period
in the previous financial year. Product deflation for TFG
Africa was -2,2%.

TFG Australia’s retail turnover, contributing 17,9% to Group
retail turnover, decreased by 7,1% (AUD) when compared to the
same period in the previous financial year, while TFG London’s
retail turnover, contributing 12,7% to Group retail turnover,
decreased by 49,7% (GBP) when compared to the same period in
the previous financial year.

The retail turnover growth/(decline) when compared to the same
period in the previous financial year in each of our business
segments was as follows:

                                                     FY 2021
                           H1                       Contribu
                        April    H2 Oct              tion to
                      2020 to   2020 to                Group
                         Sept     March               retail
Business segment         2020      2021   FY 2021   turnover
TFG Africa (ZAR)      (22,1%)     22,7%      1,6%      69,4%
TFG London (GBP)      (56,2%)   (42,8%)   (49,7%)      12,7%
TFG Australia (AUD)   (26,9%)     11,8%    (7,1%)      17,9%
Group (ZAR)           (26,1%)     11,2%    (6,7%)     100,0%

As was announced in the Group’s trading statement on the Stock
Exchange News Service (SENS) on 14 May 2021, TFG London was
the hardest hit by stringent government-enforced lockdowns
during the past financial year, with retail 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 socialising 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 Compound 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 future projected cash flows has
negatively impacted the discount rates applied in assessing
the carrying values. After reassessing 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
recognised.

Despite this reassessment, 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 stores 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.

STORE PORTFOLIO

At 31 March 2021, the Group traded out of 4 284 outlets across
26 countries. During the year, 142 outlets were opened and 366
outlets closed, with outlet movement in the respective
business segments as follows:

Outlets                TFG Africa     TFG       TFG       Group
                                    London   Australia
Opening balance at 1        2 577        972        534    4 083
April 2020
New outlets                    55        59         28       142
Jet acquisition               425         -          -       425
Closed outlets              (128)     (230)        (8)     (366)
Closing balance at          2 929       801        554     4 284
31 March 2021

The Group continued its focus on space rationalisation and the
renegotiation of rentals. In TFG London the shift to turnover-
based rentals and shorter lease terms continued.

CREDIT

The impact of the COVID-19 pandemic on trading activity and
the decrease in new account initiatives, contributed to demand
for new accounts decreasing by 41,9% year-on-year. Approval
rates at 14,9% on average for the financial year reflect the
conservative new account strategy. Demand did however improve
by 50,1% in the second half of the financial year compared to
the first half, as marketing activities were resumed and the
level of government intervention to curb the spread of the
COVID-19 pandemic was less severe. The average approval rate
for the second half of the year increased to 19,0% (H2 2020:
9,1%) to stimulate responsible credit retail turnover and
debtors’ book growth.

The muted new account growth and the impact of the lockdown on
store activity, resulted in credit sales decreasing by 23,6%
year-on-year for the financial year. Credit sales now
contribute 30,7% (March 2020: 40,9%) of total TFG Africa
retail turnover.

The retail net debtors’ book of R6,6 billion decreased by
14,5% year-on-year. The allowance for impairment as a
percentage of the debtors’ book remained stable at 20,7%
(March 2020: 20,4%). As the COVID-19 pandemic is still
ongoing, an overlay to account for the potential effects of
the pandemic on credit losses was retained in the allowance
for impairment.

PRO FORMA INFORMATION

Pro forma management account information for Jet was used in
this announcement for illustrative purposes only to provide an
indicative retail turnover growth for the Group and for TFG
Africa excluding the acquired Jet stores.

Jet retail 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 management account information for online retail
turnover was also used in this announcement for illustrative
purposes only to provide an indicative online retail turnover
growth for TFG Africa excluding the month of April.

April has been excluded from this growth as we were not
permitted to fulfil any online deliveries during the South
African government-enforced lockdown in April 2020.

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, which is prepared for illustrative
purposes and 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 retail turnover numbers used were:

Pro forma Group retail turnover, excluding Jet retail
turnover:

Group              FY2021              FY2020            Growth
                     Rm                  Rm                 %
Group retail
turnover
including Jet       32 950,3^          35 323,3^^               (6,7%)
Less: Jet
retail
turnover#                2 228,0
Group retail
turnover
excluding Jet           30 722,3         35 323,3              (13,0%)

^ Reviewed.

^^ Audited.

Pro forma Group retail turnover, excluding Jet for H2 October
to March 2021:

Group                        H2 Oct 2020        H2 Oct 2019    Growth
                               to March           to March
                                2021***           2020****
                                   Rm                Rm           %
Full year Group retail
turnover

                                   32 950,3^     35 323,3^^ (6,7%)
Less: H1 Unaudited
results previously
published                           12 530,0        16 955,2
H2 October to March
including Jet                      20 420 ,3        18 368,1     11,2%
Less: Jet retail
turnover#                            2 205,9
Group retail turnover
excluding Jet                       18 214,4        18 368,1 (0,8%)

^ Reviewed.

^^ Audited.
*** H2 October 2020 to March 2021 numbers are unaudited and
derived from deducting the unaudited half-year results
previously published from the full-year published results of
31 March 2021.

**** H2 October 2019 to March 2020 numbers are unaudited and
derived from deducting the unaudited half-year results
previously published from the full-year published results of
31 March 2020.
#
  The adjustment is based on management accounts. The Group is
satisfied with the quality of these management accounts which
are unaudited.

Pro forma TFG Africa online retail turnover:

TFG Africa         FY2021          FY2020          Growth
                     Rm              Rm               %
TFG Africa
online retail
turnover for
the period 1
April to 31
March##                 798,3           366,4          117,9%
Less: TFG
Africa online
retail
turnover in
April#                      9,9             27,1
TFG Africa
online retail
turnover for
the period 1
May 2020 to 31
March 2021              788,4           339,3          132,4%
#
  The adjustment is based on management accounts. The Group is
satisfied with the quality of these management accounts which
are unaudited.
##
  These numbers are unaudited and obtained from management
accounts.

The pro forma net debt pre-IFRS 16 numbers were calculated
using reviewed numbers from current and audited numbers from
previously published results 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

^ Reviewed.

^^ Audited.

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.

Deloitte & Touche has issued an unmodified reporting
accountants’ report on the pro forma financial information,
which is available for inspection at the Company’s registered
office and on the Company’s website at
https://tfglimited.co.za/investor-information/financial-
reports-and-presentations/.

SUPERVISORY BOARD UPDATES

As was announced on SENS previously, the following changes
took place during the year.
   - G H Davin, an independent non-executive director, was
     appointed as the Lead Independent Non-Executive Director
     with effect from 1 August 2020;
   - R Stein, previously categorised as a non-executive
     director, was classified as an independent non-executive
     director effective 29 July 2020; and
   - Certain changes were made to the various Board committees
     effective 1 August 2020.

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 how we operate
and engage with our customers in future, 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 statement of financial position,
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 programme.

The Supervisory Board would like to take this opportunity to
thank the management teams and employees of each of the
business units for leading the Group through the pandemic and
the challenging economic environments within which TFG
operates.

RESULTS PRESENTATION WEBCAST

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 webcast will be available later on the same
day.

FINAL ORDINARY DIVIDEND ANNOUNEMENT

The Supervisory Board has decided that it would be prudent not
to declare a final dividend at this year-end (March 2020: No
final dividend). As previously communicated, the Supervisory
Board had guided that dividends would only be resumed when
appropriate to do so. Given the better than expected recent
trade performance across the Group as well as the Group’s
strong statement of financial position, the Supervisory Board
anticipates resuming dividend payments during the 2022
financial year, with a higher planned dividend cover of 2x
(with reference to headline earnings per share). This remains
subject to potential acquisition/organic growth opportunities.
PREFERENCE DIVIDEND ANNOUNCEMENT

Dividend no. 169 of 3,25% (6,5 cents per share) (gross) in
respect of the six months ending 30 September 2021 has been
declared from income reserves, payable on Monday, 20 September
2021 to holders of 6,5% preference shares recorded in the
books of the company at the close of business on Friday, 17
September 2021. The last day to trade (“cum” the dividend) in
order to participate in the dividend will be Tuesday, 14
September 2021. The Foschini Group Limited preference shares
will commence trading “ex” the dividend from the commencement
of business on Wednesday, 15 September 2021 and the record
date, as indicated, will be Friday, 17 September 2021.

Preference shareholders should take note that share
certificates may not be dematerialised or rematerialised
during the period Wednesday, 15 September 2021 to Friday, 17
September 2021, both dates inclusive.

In terms of paragraph 11.17 of the JSE Listings Requirements,
the following additional information is disclosed:
1) Local dividend tax rate is 20%;
2) The withholding tax, if applicable at the rate of 20%, will
result in a net cash dividend per share of 5,20000 cents;
3) The issued preference share capital of The Foschini Group
Limited is 200 000 shares at 10 June 2021; and
4) The Foschini Group Limited’s tax reference number is
9925/133/71/3P.

Signed on behalf of the Supervisory Board.

M Lewis                       A E Thunström
Chairman                      Chief Executive Officer

Cape Town
10 June 2021

Non-executive Directors:
M Lewis (Chairman), Prof. F Abrahams, S E Abrahams, C Coleman,
G H Davin, D Friedland, B L M Makgabo-Fiskerstrand, A D
Murray, E Oblowitz, N V Simamane, R Stein

Executive Directors:
A E Thunström, B Ntuli

Company Secretary:
D van Rooyen

Registered office:
Stanley Lewis Centre, 340 Voortrekker Road, Parow East, 7500,
South Africa
Transfer secretaries:
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg,
2196, South Africa

Sponsor:
UBS South Africa Proprietary Limited

Visit our website at http://www.tfglimited.co.za

Date: 10-06-2021 09:15:00
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