ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH

Transcription

1 ANALYST PRESENTATION FOR THE YEAR ENDED 31 MARCH 2010

2 AGENDA OVERVIEW OF THE ECONOMY AND RETAIL ENVIRONMENT REVIEW OF THE YEAR FINANCIAL OVERVIEW FINANCIAL REVIEW DIVISIONAL REVIEW FOSCHINI DIVISION FINANCIAL SERVICES OUTLOOK QUESTIONS DOUG MURRAY DOUG MURRAY DOUG MURRAY RONNIE STEIN DOUG MURRAY ABIGAIL BISOGNO PETER MEIRING DOUG MURRAY ALL 1

3 OVERVIEW OF THE ECONOMY & RETAIL ENVIRONMENT 2

4 OVERVIEW OF THE ECONOMY & RETAIL ENVIRONMENT Consumer remains under significant strain Consumer sentiment driven by job losses, shorter working hours and increase in electricity prices Nearly job losses in 2009, with a further lost jobs in 2010 Q1 a worse outcome than expected SA recovery has been more subdued than in many other parts of the world. The economy officially exited recession in 2009 Q3 when the economy expanded by 0,9% q-o-q (annualised) Household debt to disposable income still close to record highs 3

5 OVERVIEW OF THE ECONOMY & RETAIL ENVIRONMENT On the positive side The global environment is more favourable, notwithstanding difficulties relating to government finances in some European countries The SARB projects GDP growth of 2,7% in 2010 and 3,6% in 2011 Interest rates have reduced by 5,5% since December 2008, repo rate now 6,5% Real wage increases awarded in many sectors Inflation stabilised at below 6% Banks have eased lending criteria Large infrastructure spending programme in place & will continue beyond 2010 FIFA World Cup 2010 improved consumer sentiment 4

6 REVIEW OF THE YEAR 5

7 REVIEW OF THE YEAR Our group trades in the mass-middle market space & our customers are severely impacted by the current economic environment Significantly higher than projected unemployment figures have had a substantial effect on our customers Trading remained volatile with no clear trend in trading pattern Consumer spending worsened during the 2 nd half Gross margins marginally down by 0,2% Foschini stores had a mixed year better growth in 1 st half Jewellery turnover had improved performance in 2 nd half positive indicator Cellphone stock issues improved in 2 nd half Sports division traded well with lead up to World Cup Costs well controlled RCS Group successful in raising R303 million on open market and a further R265m since year-end Healthy retail debtors book Bad debt to book is 9,9% 9% - on downward d trend New account campaigns successful (new account growth +19%) resulting in active debtors book increasing by 4,4% 6

8 FINANCIAL OVERVIEW 7

9 FINANCIAL OVERVIEW st half difficult Conditions deteriorated in 2 nd half, with Christmas at the lower level of management expectations 1 st half nd half 2010 FY 2010 Sales of R8,6b 7,9% 5,0% 6,4% Operating profit of R2b 6,4% (8,9%) (2,6%) HEPS of 521,4c 1,5% (12,6%) (6,8%) Diluted HEPS of 518,2c 1,8% (12,0%) (6,3%) Final dividend maintained at 170,0c 0c per share Dividend in respect of the full year of 288,0c per share, same as previous year 8

10 FINANCIAL REVIEW 9

11 FINANCIAL PERFORMANCE: LAST 9 YEARS Years ended Retail turnover (Rm) 3 289, , , , , , , , ,2 Retail turnover growth % 10,4 18,0 13,6 19,7 21,8 12,4 6,1 5,5 6,4 Compound retail turnover growth % 15,9 14,5 13,7 12,5 Operating profit before finance charges(rm) 348,5 582,0 814, , , , , , ,6 Headline earnings per share (cents) 87,9 162,2 237,1 359,6 463,0 534,2 547,0 559,5 521,4 HEPS % change 75,4 84,5 46,2 51,7 28,8 15,4 2,4 2,3 (6,8) Compound HEPS growth % 48,4 40,7 30,3 29,7 Dividends per share 31,0 56,0 94,0 164,0 220,0 270,0 288,0 288,0 288,0 Upward cycle between 2002 to 2007 Operating profit increased from R349m to R1 887m Now 3 years into a slowdown Operating profit marginal increase to R1 972m 10

12 FINANCIAL REVIEW: 2010 Income Statement for the year ended 31 March 2010 (Rm) 2009 (Rm) % change Retail turnover 8 605, ,6 6,4 Cost of turnover 5 005, ,4 Gross profit 3 599, ,2 Interest received 1 443, ,7 Dividends received 13,8 19,1 Other revenue 717,6 579,5 Trading expenses (3 801,9) (3 269,0) Operating profit before finance charges 1 972, ,5 (2,6) Interest paid (261,5) (249,8) Profit before tax 1 711, ,7 (3,6) Income tax expense (548,6) (564,4) Profit for the year 1 162, ,3 (4,0) Attributable to: Equity holders of Foschini Limited 1 085, ,8 (5,3) Non-controlling interest 76,9 65,5 HEPS (cents) 521,4 559,5 (6,8) Diluted HEPS (cents) 518,2 553,0 (6,3) 11

13 FINANCIAL REVIEW 1 ST HALF VS 2 ND HALF 1 st half 2 nd half 2010 Income Statement for the year ended 31 March growth growth growth Retail turnover 7,9% 5,0% 6,4% Operating profit before finance charges 6,4% (8,9%) (2,6%) Profit before tax 3,7% (8,7%) (3,6%) Profit for the year 4,5% (9,9%) (4,0%) Attributable income 3,0% (11,0%) (5,3%) HEPS 1,5% (12,6%) (6,8%) Diluted HEPS 1,8% (12,0%) (6,3%) Difficult 1 st half Conditions deteriorated in 2 nd half with Christmas at the lower end of management expectation The reduction in the operating profit in the 2nd half results from the substantial gearing effect from poorer turnover 12

14 REVENUE 2010 (Rm) 2009 (Rm) % Growth Retail turnover 8 605, ,6 6,4 Interest received 1 443, ,7 11,0 Dividends received - retail 13,8 19,1 (27,7) Other revenue 717,6 579,5 23,8 Total , ,9 7,9 Tough economic climate for retail turnover Interest received from retail book up 21% Interest received RCS Group up 5,1% - growth limited through lack of funding Other revenue growth 23,8% Retail club income + 13,8% Insurance income up 31,1% - new products added and active program to grow insurance income Cellular l income one2one airtime product up 17,4% In a better economy, these products should have accelerated growth 13

15 RETAIL TURNOVER BY MERCHANDISE CATEGORY 2010 (Rm) 2009 (Rm) 1 st half growth 2 nd half growth % Growth 1 st half 2 nd half 2010 FY same same same store store store growth growth growth Clothing 5 660, ,1 11,2% 5,7% 8,3% 4,6% 0,0% 2,2% Jewellery 1 025, ,6 (3,0%) 0,2% (1,2%) (6,2%) (4,0%) (5,0%) Cellphones 707,6 762,66 (13,4%) (1,6%) (7,2%) (15,9%) (6,4%) (11,0%) Cosmetics 622,7 552,2 16,9% 9,3% 12,8% 12,7% 5,4% 8,7% Homeware & furniture 589,0 509,1 18,9% 13,3% 15,7% (5,3%) (7,1%) (6,3%) Total 8 605, ,6 7,9% 5,0% 6,4% 1,2% (1,2%) (0,1%) Clothing growth in 2 nd half deteriorated because of soft Christmas trade Jewellery turnover slightly improved in 2 nd half leading indicator Cellphone turnover much improved in 2 nd half Stock issues addressed Cosmetics growth slower in 2 nd half indicative of more difficult trading environment Homewares & furniture performed satisfactorily difficult sector Product inflation for the year of approx 6% Doug Murray will deal in more detail with the separate divisions & Abigail Bisogno with the Foschini division 14

16 GROSS PROFIT Gross profit (Rm) 3 599, ,2 Gross margin (%) 41,8 42,0 Input margin constant Christmas trade at lower end of management expectation Markdowns marginally bigger Stock tightly controlled 15

17 GROSS PROFIT HISTORIC VIEW 16

18 INTEREST RECEIVED 2010 (Rm) 2009 (Rm) % growth Trade receivables retail 636,4 526,1 21,0 Loan receivables RCS Group 355,4 307,6 15,5 Private label card receivables RCS Group 440,3 449,2 (2,0) Sundry - retail 8,9 9,6 (7,3) Sundry RCS Group 2,7 8,2 (67,1) Total 1 443, ,7 11,0 The increase in interest received driven by higher average books, with the exception of the RCS private label cards receivable book Take up of 12-month account for new customers increasing the trade receivable yield 71% of balances now attracting interest, up from 68% Peter Meiring will deal with this in more detail in his section 17

19 TRADING EXPENSES 2010 % to turnover 2009 % to turnover % (Rm) 2010 (Rm) 2009 growth Depreciation and amortisation (264,2) 3,1 (231,1) 2,9 14,3 Employee costs (1 376,9) 16,0 (1 222,0) 15,1 12,7 Store occupancy costs (816,4) 9,5 (675,8) 8,4 20,8 Other operating costs (632,9) 7,3 (561,5) 6,9 12,7 (3 090,4) 35,9 (2 690,4) 33,3 14,9 Net bad debts and provision movement - retail (359,1) 4,2 (261,5) 3,2 37,3 Net bad debts and provision movement RCS Group (352,4) 4,1 (317,1) 3,9 11,1 Total trading expenses (3 801,9) (3 269,0) 16,3 Expenses before bad debts well controlled at 14,9%, pushed up by employee and store occupancy costs Employee costs breakdown will be dealt with on the next slide Store occupancy costs: Normal lease escalations average 8% Balance is made up of new stores as well as RCS s acquisition of Massdiscounters credit business Bad debts will be dealt with by Peter Meiring 18

20 EMPLOYEE COSTS 2010 (Rm) 2009 (Rm) % growth Employee costs: normal - retail 1 207, ,7 12,9 Employee costs: normal RCS Group 132,4 110,6 19,7 Employee costs: bonuses (Rm) 1,0 13,6 Employee costs: restraints (Rm) 1,4 2,4 Employee costs: share-based payments (Rm) 34,33 25,7 33,5 Total employee costs 1 376, ,0 12,7 % to retail turnover 16,0 15,1 Staff increases this year were 6%, balance being in respect of new store staff RCS Group employee costs elevated because of the acquisition of the Massdiscounters credit business towards the end of last year Minimal restraints paid 19

21 INTEREST PAID 2010 (Rm) 2009 (Rm) % growth Interest paid 261,5 249,8 4,7 Marginal increase in interest paid As R800m borrowings are fixed, we received no benefit from reducing interest rates R197,9m relates to funding of RCS Group R63,6m relates to funding of retail 20

22 SEGMENTAL ANALYSIS 2010 (Rm) 2009 (Rm) % change Retail 1 485, ,2 (5,6) RCS Group 225,9 202,5 11,5 Total profit before tax 1 711, ,7 (3,6) Retail had a disappointing 2 nd half RCS Group had a good year despite lack of funding during the year contribution to PBT (before minorities) = 13,2% (vs 11,4% in 2009) Has extremely good growth prospects, now that funding in place Peter Meiring will deal with RCS in more detail in his presentation 21

23 BALANCE SHEET Our group s balance sheet remains strong Share buy-backs remain a possibility Advantageous in a tough trading environment The next few slides deal with key elements of our balance sheet 22

24 STOCK & CREDITORS 2010 (Rm) 2009 (Rm) % growth Stock 1 355, ,0 (5,4) Very tight control of stock this year helped substantially by our supply chain project Our DCs currently running with approximately 50% less stock than last year stock flow through Stock at appropriate levels Even with 100 new stores representing floor space growth of 8%, stock down 5,4% 2010 (Rm) 2009 (Rm) %growth Trade and other payables 1 293, ,5 3,3 Creditors terms remain consistent at 30 days from statement 23

25 TRADE RECEIVABLES 2010 (Rm) 2009 (Rm) % growth Loan receivables 857,3 988,2 (13,2) Private label card receivables 1 773, ,4 19,5 RCS Group 2 630, ,6 6,4 Trade receivables - retail 3 169, ,3 15,4 Total receivables 5 800, ,9 11,1 Total receivables amount to R5,8 billion of which R2,6 billion relates to RCS Group All receivables remain on balance sheet no securitisation No intention to divorce our retail receivables from our business RCS Group Still remains our intention at some time in the future to reduce our holding to below 50%, and therefore no need to consolidate Retail trade receivables increased by 15,4% mainly as a result of the movement of new customers to 12-month account remains in good shape Peter Meiring will deal in more detail with our receivables 24

26 BORROWINGS & NON-CONTROLLING INTEREST LOANS 2010 (Rm) 2009 (Rm) % growth Interest-bearing debt and non-controlling interest loans 1 969, ,1 (7,2) Less: Preference share investment (200,0) (200,0) Less: Cash (284,0) (296,2) Net borrowings 1 485, ,9 (8,7) Less: SBSA loan to RCS Group (non-controlling interest loan) (478,3) (783,2) 1 007,2 843,7 Less: RCS Group external funding (commercial paper + bank loan) (372,1) - Recourse debt 635,1 843,7 (24,7) Less: Foschini funding of RCS Group (804,5) (825,0) Retail (cash)/borrowings (169,4) 18,7 Total gearing of 27,1% (2009: 33,5%) Recourse gearing of 11,6% (2009: 17,4%) this is our real gearing No retail gearing at all Our current direct funding of RCS Group is R804,5 million, against our agreed facility of R835 million R800 million of our group s gearing remains fixed for a further year 25

27 CASH GENERATION & UTILISATION Rm Total Rm Net borrowings at beginning of year (1 626,9) Cash EBITDA 1 972,6 Increase in creditors 41,3 Inventory decrease 31,1 Other investing activities 15,5 Sale of shares by share trust 47,2 Cash generated 2 107,7 Taxation paid (487,3) Dividends paid (608,2) Retail debtors (423,0) RCS Group debtors (158,2) Capital expenditure (289,6) Cash utilised (1 966,3) Net borrowings at the end of the year (1 485,5) Cash EBITDA of R1,9 billion remains sound Borrowings decreased by R141 million Total receivables up R581,2m Retail debtors up by R423,0 million RCS debtors up R158,2m Capex at R289,6 million largely due to store openings 26

28 CAPEX 2010 (Rm) 2009 (Rm) % growth Stores 171,3 244,7 (30,0) RCS Group 6,5 19,6 (66.8) IT 76,1 81,0 (6,1) Other 35,7 25,3 41,1 Total 289,6 370,6 (21,8) The majority of capex relates to opening of new stores, in line with our strategy of growing floor space this year and next year IT spend approximately R75m per annum IT store related costs included Budgeted capex for 2011 is R300 million but depends on eventual store openings which are estimated to increase floor space by approximately 7% 27

29 DIVISIONAL REVIEW 28

30 DIVISIONAL REVIEW: OVERALL 2010 Turnover (Rm) 1 st half growth 2 nd half growth % FY Growth 1 st half same store growth 2 nd half same store growth % FY Same store growth Number of stores Foschini 3 306,0 11,0% 2,5% 6,5% 6,2% (2,1%) 1,9% 454 Markham 1 359,6 1,4% 5,7% 3,7% (2,8%) 1,1% (0,8%) 234 exact! 759,8 0,6% 3,7% 2,2% (5,7%) (2,7%) (4,2%) 205 Sports division 1 496,7 18,7% 12,7% 15,4% 7,8% 4,6% 6,1% 291 Jewellery division 1 095,3 (5,0%) (0,8%) (2,7%) (7,6%) (4,9%) (6,1%) 587,8 18,9% 13,1% 15,7% (5,3%) (7,1%) (6,3%) 78 Group 8 605,2 7,9% 5,0% 6,4% 1,2% (1,3%) (0,1%) Cash sales 3 221,7 6,3% 2,3% 4,1 Credit sales 5 383,5 8,8% 6,6% 7,7 Total 8 605,2 7,9% 5,0% 6,4% Consumer environment deteriorated in the 2 nd half resulting in Christmas trade being at the lower end of management expectation 8,1% growth in floor space this year in line with our strategy Floor space growth over the last 2 years will be beneficial to our group when the cycle turns Cash sales for the full year grew 4,1% and credit sales grew 7,7% Credit sales represent 62,6% Sports division was the best performer 29

31 FOSCHINI DIVISION 30

32 FOSCHINI DIVISION 2010 Turnover (Rm) 1 st half growth 2 nd half growth % FY Growth 1 st half same store growth 2 nd half same store growth FY same store growth Number of stores Foschini 2 560,4 11,4 2,4 6,6 7,3 (1,6) 2,6 223 fashionexpress 396,9 14,7 14,0 14,3 4,5 4,2 4,4 126 donna-claire 310,0 0,6 (9,6) (4,8) (5,0) (14,8) (10,0) 88 Luella 38,7 54,2 18,9 36,7 64,0 20,1 41,8 17 Total 3 306,0 11,0 2,5 6,5 6,2 (2,1) 1,9 454 Did not have a good 2 nd half Abigail il Bisogno, the MD of Foschini i division i i will give more detail on this division i i later on 31

33 MARKHAM DIVISION 32

34 MARKHAM DIVISION 2010 Turnover (Rm) 1 st half growth 2 nd half growth % Growth 1 st half same store growth 2 nd half same store growth % FY Same store growth Number of stores Markham 1 359,6 1,4 5,7 3,7 (2,8) 1,1% (0,8%) 234 Coming off a high base Traded satisfactorily in the current climate Clothing growth 4,9% Cellphone turnover 4,8% 12 new stores added during year growing to 234 stores with 15 stores planned for

35 EXACT DIVISION 34

36 EXACT DIVISION st half same 2 nd half same %Same Turnover 1 st half 2 nd half % store store store Number (Rm) growth growth Growth growth growth growth of stores exact! 759,8 0,6 3,7 2,2 (5,7) (2,7) (4,2) 205 Family store servicing lower LSM customer base Recently repositioned by adding more authenticity and detail to their garments - product prices crept upwards Focus on reducing price points which has been successful since implementation in the new year 10 new stores added during the year with 6 stores planned for

37 SPORTS DIVISION 36

38 SPORTS DIVISION 2010 Turnover (Rm) 1 st half growth 2 nd half growth % Growth 1 st half same store growth 2 nd half same store growth FY same store growth Number of stores Sportscene 511,4 17,2 2,0 8,8 6,0 (5,7) (0,4) 114 Totalsports 878,5 21,0 19,5 20,2 10,9 12,0 11,5 148 DueSouth 106,8 5,7 5,6 5,6 (1,6) (4,3) (2,9) 29 Total 1 496,7 18,7 12,7 15,4 7,8 4,6 6,1 291 Best performer with 15,4% growth and 6,1% same store growth Huge expansion opportunity as we continue to capitalise on growth flowing from sporting events Exciting period with the World Cup a few weeks away Experiencing good sales of soccer merchandise in run up to World Cup Preferred partner of Nike, Adidas & Puma for the World Cup Sportscene 2 nd half against exceptionally high base last year (18%) 27 new stores were opened during the year with a further 30 planned for

39 JEWELLERY DIVISION 38

40 JEWELLERY DIVISION 1 st half 2 nd half 2010 same same FY same Turnover 1 st half 2 nd half % store store store Number (Rm) growth growth Growth growth growth growth of stores American Swiss 664,6 (3,0) (0,4) (1,6) (6,2) (4,3) (5,2) 205 Matrix 37,1 (15,5) (2,0) (8,2) (9,8) (9,2) (9,5) 22 Sterns 393,6 (7,3) (1,5) (4,1) (9,6) (5,4) (7,3) 138 Total 1 095,3 (5,0) (0,8) (2,7) (7,6) (4,9) (6,1) 365 Remains dominant 1 and 2 player in mass middle market jewellery sector Acceptable performance in the current difficult climate Jewellery turnover down -3% in 1 st half improving to 0,2% in the 2 nd half positive indicator 17 new stores were added with a further 18 planned for

41 @HOME DIVISION 40

42 @HOME DIVISION st half same 2 nd half same FY same Turnover 1 st half 2 nd half % store store store Number (Rm) growth growth Growth growth growth growth of 587,8 18,9 13,1 15,7 (5,3) (7,1) (6,3) 78 Serves LSM 8-10 market segment Performed adequately in its segment Continues to gain market Now have 12 stores with a further 1 planned for 2011 The plan is now to consolidate and improve efficiencies franchise stores in Dubai with further rollout planned in the region over the next few years 7 stores were opened during the year, 3 of which were the larger stores, with a further 5 stores planned for

43 FOSCHINI DIVISION 42

44 FOSCHINI DIVISION: OVERVIEW Turnover (Rm) 1st half growth 2nd half growth %FY Growth Foschini 2 560,4 11,4% 2,4% 6,6% fashionexpress 396,9 14,7% 14,0% 14,3% donna-claire 310,0 0,6% (9,6%) (4,8%) Luella 38,7 54,2% 18,9% 36,7% Total 3 306,00 11,0% 25% 2,5% 65% 6,5% 43

45 FOSCHINI CLOTHING STRONG FIRST HALF Excellent performance in Winter 2009 and first half of Summer 2009 Managed to stabilise supply base Buying and Planning processes with critical paths all in place Trend toward casualisation started to emerge Clarity of sub-brands giving accurate lifestyle performance i.e. smart vs casual POOR SECOND HALF Turnover started to slow, especially over Christmas Got caught with too much smart/occasion merchandise Too little casual/leisure stock We were able to cut back smart We were unable to react to casual trend in sufficient volume to make an impact on turnover The supply base geared to smarter product (which has traditionally been our strength) 44

46 FOSCHINI CLOTHING: SMART VS CASUAL PERFORMANCE % FY Growth OASIS (8,4%) WWW (2,3%) Smart/Ocassionwear NEWS 11,7% INSTINCT 25,3% Casual/Leisurewear Footwear, childrenswear, lingerie and cosmetics all performed well throughout the year 45

47 FOSCHINI WOMENSWEAR CASUAL VS SMART 46

48 FOSCHINI CLOTHING: QUARTERLY SALES & STOCK 47

49 FOSCHINI CLOTHING MEASURES PUT IN PLACE Reduction of lead time e.g. Summer 2009 approx. 162 days Summer days, therefore later decision making Supply base more aligned to our product requirements (cancelled exclusive contracts t that t restricted buying flexibility) Foschini has absorbed the design and patternmaking facility of our production arm to align buying and design - from November 2009 Have invested in casual designers, graphic designers, technology, upskilled patternmakers and machinists Rationalised Cape Town metro CMTs retaining the most flexible factories to ensure speed to market Quarterly planning puts focus on ensuring change of pace within the season Supply chain has facilitated in-season trading 48

50 DONNA-CLAIRE DONNA-CLAIRE Poor performance, especially second half Smart/casual imbalance mirrored Foschini Same supply base problems as Foschini We have re-positioned the brand Losing market share, even though we own 30% of plus size business, target market too narrow, too old MEASURES PUT IN PLACE Similar smart/casual split as Foschini planned for Summer 2010 Product to be more fashionable to attract the younger customer Re-work all blocks to give a better fit, so as to have broader appeal Quality standards to be maintained Introduce opening price points and better price tiering (Donna is perceived as expensive by customers) Re-vamp programme of stores, windows and mannequins in place 49

51 FASHION EXPRESS FASHION EXPRESS Good performance both first and second half The supply base issues suffered by Foschini & donna-claire do not exist in this division Expansion opportunity has been escalated, especially footwear and plus sizes 50

52 FINANCIAL SERVICES 51

53 FINANCIAL SERVICES AGENDA Financial Services Overview Credit Landscape Structure FG Financial Services Performance Statistics Strategy & outlook RCS Group Structure Overview Financial review Strategy & outlook 52

54 FINANCIAL SERVICES OVERVIEW: CREDIT LANDSCAPE LAST 12 MONTHS Consumer Lenders still reporting increased default rates Repo moves down from 9,5% to 6,5% with commensurate NCA reduction Fuel and Electricity cost increases impact consumers Job losses remain high with many businesses working short time Problems in NCA Debt & Court Review mechanism negatively impact consumer lenders Some indications that consumers are de-leveraging themselves 53

55 FINANCIAL SERVICES OVERVIEW: STRUCTURE INTERNAL 100% Holding 55% Holding EXTERNAL FG Financial Services RCS Group TRANSACTIONAL FINANCE FIXED TERM FINANCE OTHER INVESTMENTS 60% Holding CLUB INSURANCE ONE2ONE STORE CARDS CRM GENERAL PURPOSE CARDS PRIVATE LABEL CARDS PERSONAL LOANS EFFECTIVE INTELLIGENCE 54

56 FG FINANCIAL SERVICES 55

57 PERIOD OVERVIEW Good growth in New Accounts +19% Early stage collections continue to perform well Bad debt up by 37,3% but moderating Formation of Retail Technology area yields benefits in mobile sales New Club / Insurance initiatives give rise to a 31,1% growth Interest Revenue up by 21% despite falling NCA rates 56

58 FG FINANCIAL SERVICES: PERFORMANCE % change Rm Rm Interest income 636,4 21,0 526,1 Other income 215,9 31,1 164,7 852,3 23,4 690,8 Net bad debt (359,1) 37,3 (261,5) Credit costs (236,8) 13,33 (209,0) 0) Profit before tax 256,5 16,4 220,3 INTEREST INCOME - Absorption of Interest Rate reduction (previously not at maximum rate) - Majority of new accounts on interest bearing plan OTHER INCOME - Club now 4 titles with combined subscriber base of over 1,3m - Insurance & One2One products well accepted by customers BAD DEBT - Increase in line with expectations +37,3% moderates from mid year +51,9% - Cash flow on R76m of Debt Review matters now starting to come through - Late stage delinquency still the problem - Recovery yields on older debt reduce CREDIT COSTS - Increase reflects ongoing investment in CRM and Retail Technology 57

59 FG FINANCIAL SERVICES: BOOK Key debtor statistics Number of active accounts with debit balances ( 000) Credit sales as a % of total retail sales 62,6 61,8 Net debtors book (Rm) 3 169, ,3 Active accounts grow by 4,4% 4% - CRM driven New Accounts grow by 19,0% Cash Sales moderate as customers start to turn back toward credit Book growth +15,4% reflects the switch to extended terms Extended Credit Plans now 52% (LY 45%) of all plans 58

60 FG FINANCIAL SERVICES: STATISTICS Key debtor statistics Arrear debtors % to debtors book 22,1 22,4 Net bad debt write off as a % of credit transactions 4,8 4,0 Net bad debt write off as a % of debtors book 9,9 8,7 Doubtful debt provision as a % of debtors book 8,8 8,5 % able to purchase 81,7 81,5 Arrears showing marginal improvement Bad Debt well controlled - Recovery yields are down - Own Recovery unit now receiving 25% of our work Doubtful Debts increase reflects growing level of Debt review matters New account accept rate reflects the economic realities average of 50,8%TY vs 56,8% LY 59

61 FG FINANCIAL SERVICES: STRATEGY & OUTLOOK Continued focus on growing our account base - Aiming for a 10% active account growth Retail Technology Division focus on cellular producing good results - 2nd half cellular sales growth 1,6% vs 1st half -13% - More focus through group planning and purchasing - Vodacom in the mix Expect continued easing in Bad Debts - Consistent payments from Debt Review PDA s expected toward the end of the year Ratcheting effect of NCA formula will give upside as interest rates increase 1 New Insurance product and 2 Club initiatives will create new income streams One2One telemarketing now stabilised and with good growth potential 60

62 RCS GROUP 61

63 RCS GROUP STRUCTURE RCS Group Transactional Finance Fixed Term Finance Effective Intelligence (Ei) RCS Cards Pty Ltd RCS Personal Finance Pty Ltd General Purpose Card Loans Private Label Queenspark Insurance Private Label Mass Discount Div (MDD) 62

64 RCS GROUP: OVERVIEW Positive full year results despite challenging market conditions Improvement on half year results (profit before tax growth and balance sheet health) Continued pressure on interest rate due to leveraged impact on the NCA Capping formula Deliberate strategy to improve asset quality Adverse impact on new customer growth & credit advances Positive overall bad debt trend for the year significant in Cards portfolio Significant MDD new product growth Continued focus on cost control Significant milestones: Rating of the RCS Group The launch of the RCS Domestic Medium Term Note program. Successful first capital markets issue in March 63

65 RCS GROUP FINANCIAL REVIEW 2010 FULL YEAR ROE = PAT / AVE EQUITY 19% (LY 20%) 2010 Rm % change 2009 Rm Interest earned 798,4 4,4 765,0 Credit income 343,8 13,5 302,9 TOTAL CREDIT INCOME 1 142,1 7, ,9 Net bad debt (352,4) 11,2 (317,1) Operating costs (378,5) 7,1 (353,5) EBIT 411,2 3,5 397,3 Interest Paid (185,3) (4,9) (194,8) PROFIT BEFORE TAX 225,9 11,5 202,5 Revenue impacted by: NCA geared formula and cap Good non-interest revenue yields Bad debt Healthy improvement in bad debt Provisions cover NPL s at 91,4% Advances growth Loans advances impacted by funding limitations 3 rd Qtr Limited by muted credit demand on general purpose card Strong growth in private label cards 64

66 RCS GROUP: PERFORMANCE RCS GROUP - Key debtor statistics Number of active accounts ( 000) Net debtors book (Rm) Arrear debtors % to debtors 14,4 17,1 NPL s as % of Debtors 10,1 12,0 Net bad debt write-off as % of credit transactions (cards) 9,3 12,8 Net bad debt write-off as % of debtors book 12,3 12,2 Doubtful debt provision as % of debtors book 9,2 8,9 % Applicants granted credit on cards portfolios 34,4 36,8 Key driver for past year was to improve overall asset quality All key debtors book quality measures show positive trends Despite improving non performing loans (NPL s) provision for doubtful debt increased to improve NPL coverage Decline in active customers predominantly due to more stringent qualification criteria Asset quality key criteria to attract act funding investors s and maintain and improve assigned rating Healthy balance sheet gearing and availability of funding provide opportunities 65

67 RCS GROUP: PERFORMANCE Asset Quality RCS GROUP NPLs to gross advances % 10,1% 12,2% NPL Coverage 91,4% 72,9% Cards NPLs to gross advances % 9,5% 13,6% NPL Coverage 90,7% 64,3% Personal Finance NPLs to gross advances % 11,4% 10,1% 1% NPL Coverage 92,7% 90,2% 66

68 RCS GROUP: STRATEGY & OUTLOOK Expectation of moderate but positive growth for new financial year Adequate funding facilities in place to deliver business plans Maintain gains in asset quality and keep cost control as a priority MDD business model refinement and group synergies Expand Private Label and Co-brand card opportunities Improve quality of RCS cards merchants base with new blue chip retailers offering increased card utility Investigation to extend the transactional finance model to Namibia and Botswana Expand the loans offering to incorporate new channels and new product offerings Grow further non funded revenue avenues Challenges still present Mass middle market consumer still under strain (muted credit demand) Competitive landscape intensifies as pool of available creditworthy customers gradually decline Margin pressure and associated risk trade off considerations due to the NCA capping formula 67

69 OUTLOOK 68

70 OUTLOOK The 2010 World Cup which gets underway in a few weeks is expected to create more positive consumer sentiment Improved consumer spending is therefore expected The low interest rate and inflation environment should assist the economy to start improving in FY 2011 Further unemployment in the economy remains a risk, as do the ongoing problems in international markets The effect of the increase in the cost of electricity on the disposable income of our customers is unknown Merchandise inflation Current winter season approx 5% Forthcoming summer season 0%-5% depending on product Continued focus on costs Improving performance expected from our retail debtors book Supply chain initiative continues Space growth in excess of 100 new stores planned for 2011 approximately 7% floor space growth Upside expected in Foschini stores performance Improved profitability from RCS Group Retail turnover for the 1st 8 weeks of the year has been encouraging noticeable upward shift in consumer spending 69

71 THANK YOU 70

72 DISCLAIMER This announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Foschini 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. 71