UNAUDITED GROUP INTERIM REPORT

Transcription

1 UNAUDITED GROUP INTERIM REPORT for the ended 31 December

2 COMMENTARY KEY FEATURES Retail sales up at R10.3 billion Gross margin 52.4% Operating margin 24.0% Headline and diluted headline earnings per share down 3% Net asset value per share up 10% Interim dividend per share 261 cents GROUP PROFILE Truworths International Ltd (the company) is an investment holding and management company listed on the JSE and the Namibian Stock Exchange. Its principal trading entities, Truworths Ltd and Office Holdings Ltd, are engaged either directly or through subsidiaries, concessions, agencies or franchises, in the cash and account retailing of fashion clothing, footwear, related merchandise and homeware. The company and its subsidiaries (the Group) operate primarily in South Africa and the United Kingdom, and have an emerging presence in Germany, the Republic of Ireland and other sub-saharan African countries. TRADING AND FINANCIAL PERFORMANCE In South Africa low economic growth, unemployment at its highest level in 13 years, soft real growth in household incomes and political uncertainty have all contributed to the challenging trading conditions experienced by the Group during the 26-week period ended 31 December (the period or the current period). Against this backdrop, Group retail sales for the period increased to R10.3 billion relative to the R10.2 billion reported for the 26-week period ended 25 December 2016 (the prior period). However, compared to the directly corresponding 26-week period of the financial period (i.e. 4 July 2016 to 1 January ) (the comparable prior period) (refer to note 14), retail sales for the period increased by 1%. Account sales comprised 50% (2016: 50%) of Group retail sales for the period, with cash sales growing by 1% and account sales unchanged. Retail sales for Truworths (being the Group, excluding the UKbased Office segment), increased by 1% to R7.4 billion, with cash sales growing by 3% and account sales unchanged relative to the prior period. Account sales comprised 69% of these retail sales (2016: 69%). Relative to the comparable prior period, Truworths retail sales for the current period increased by 2%. Like-for-like store retail sales decreased by 3%, while product deflation averaged 2% (2016: 16% inflation). Retail sales for the UK-based Office segment increased in Sterling terms by 1% to 162 million relative to the prior period s 159 million, but on translation decreased to R2.8 billion from the prior period s R2.9 billion because of Rand strengthening. Relative to the comparable prior period, Office retail sales for the current period decreased by 1% in Sterling terms. Product inflation averaged 4% (2016: 2%). Group sale of merchandise, which comprises Group retail sales, together with wholesale and franchise sales and delivery fee income, less accounting adjustments, was unchanged at R10.0 billion. During the period a net 25 stores were opened across all brands while the retail footprint was boosted by the acquisition of Loads of Living, which added a further 13 stores. This resulted in an increase in trading space of 5% (Truworths 5% and Office 1%). At the end of the period the Group had 977 stores (including 39 concession outlets) (2016: 939 stores, including 40 concession outlets).

3 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 1 Divisional sales to 31 Dec to 25 Dec 2016 (as reported) to 1 Jan (comparable Change on prior 26-week period to 25 Dec 2016 % Change on prior 26-week period to 1 Jan % Office~ (3) Truworths ladieswear (4) (1) Truworths menswear Identity Truworths designer emporium* (1) Truworths kids emporium # Other^ Group retail sales Wholesale and franchise sales and delivery fee income (13) (13) Accounting adjustments (note 4) (295) (272) (272) 8 8 Sale of merchandise YDE agency sales Divisional sales for the comparable prior period (i.e. 4 July 2016 to 1 January ) (refer to note 14). ~ The current period Office sales include Boxing Day trading, whereas this fell into the second half of the financial period. Truworths Man, Uzzi, Daniel Hechter Mens and LTD Mens. * Daniel Hechter Ladies, Ginger Mary, Glamour, LTD Ladies and Earthaddict. # LTD Kids, Earthchild and Naartjie. ^ Cellular, Truworths Jewellery, Cosmetics, Office London and Loads of Living. The Group s gross margin was stable at 52.4% (2016: 52.6%). Excluding Office, the Group s gross margin increased to 55.5% (2016: 55.0%). Trading expenses increased 1% to R3.7 billion (2016: R3.7 billion) and constituted 37.0% of sale of merchandise (2016: 36.5%), which reflects the positive impact of management s costcutting initiatives over the past six months. The increases in occupancy costs and other operating costs were partially offset by a decrease in trade receivable costs. Refer to Account Management below for further details on trade receivable costs. Trading expenses are not being compared to the comparable prior period as they are incurred monthly rather than weekly. Interest received decreased 1% to R713 million (2016: R718 million) due to the decline in gross trade receivables from R6.4 billion to R6.3 billion as well as a 25 basis points decrease in the South African repo rate since July. Operating profit decreased 3% to R2.4 billion while the operating margin decreased to 24.0% from 24.9% owing to the fact that the gross profit remained unchanged, while trading expenses increased marginally. Excluding Office, the operating margin decreased to 29.7% (2016: 30.0%). Finance costs have decreased by 8% compared to the prior period mainly due to the settlement of a portion of the Group s long-term borrowings. Headline earnings per share (HEPS) and diluted HEPS decreased 3% to cents and cents respectively compared to the prior period s HEPS of cents and diluted HEPS of cents. Relative to the comparable prior period (refer to note 14), HEPS and diluted HEPS decreased 2%. An interim dividend of 261 cents per share has been declared (2016: 270 cents per share), maintaining the dividend cover at 1.5 times. FINANCIAL POSITION The Group s financial position remains strong, with net asset value per share increasing by 10% to cents since the prior period-end (2016: cents). Inventories decreased to R1.9 billion at the end of the period (2016: R2.1 billion) and inventory turn increased to 4.9 times (2016: 4.6 times). This is largely as a result of improved stock management in both Truworths and Office. Excluding the inventory of Office, gross inventory decreased 6% and inventory turn increased to 5.7 times (2016: 5.4 times). Interest-bearing borrowings at the period-end decreased to R3.2 billion from R4.1 billion at the comparable period-end (June : R3.8 billion), mainly as a result of scheduled and additional loan repayments during the period. Trade and other payables decreased to R1.8 billion at the end of the period (2016: R2.5 billion) because creditor payments for December were made before the period-end compared to December 2016 when payments were made after the period-end.

4 / 2 COMMENTARY (CONTINUED) CAPITAL MANAGEMENT During the period the Group generated R1.8 billion in cash from operations and this funded dividend payments (R790 million), capital expenditure (R226 million) and loan repayments (R597 million). Scheduled and additional loan repayments, cash dividend payments (no scrip dividend alternative offered) and higher tax payments resulted in cash and cash equivalents decreasing 30% to R2.3 billion at the end of the period. The cash realisation rate, which is a measure of how profits are converted into cash, was 100% for the period (2016: 137%). The average rate for the last five full financial years is 88%. Net debt to equity remained at 8% compared to the prior periodend (June : 18%). ACCOUNT MANAGEMENT Gross trade receivables in respect of the debtors book (Truworths, Identity and YDE) declined to R6.3 billion from R6.4 billion at the prior period-end. The decline in the book is mainly attributable to the improved collections experience since the prior period-end. The percentage of active account holders able to purchase at the end of the period increased to 87% compared to 85% at the prior period-end and 82% at June, while overdue balances as a percentage of gross trade receivables improved to 10% from 11% at the prior period-end. The doubtful debt allowance as a percentage of gross trade receivables has decreased from 12.9% in the prior period to 12.4% as a result of an improvement in the quality of the book. Trade receivable costs decreased 9% to R653 million (2016: R721 million), resulting from increases of 1% in each of net bad debts and collection and other trade receivable costs, off-set by the decrease in the allowance for doubtful debts referred to above. Opened accounts as a percentage of applications increased to 24% compared to the prior period s 22%, while the Group s active account base declined 1% to 2.6 million accounts. This continued decline is a consequence of the onerous administrative burden introduced by the credit affordability assessment regulations which came into force in South Africa in September 2015, requiring customers to produce documentary evidence of income. Over the last two years the Group has implemented various account granting strategies, updated its information systems and added efficiencies to its processes in an attempt to mitigate the impact of these regulations. The Group refines these strategies on an ongoing basis to better manage the effects of these regulations. The Group, together with two other major JSE-listed retailers, initiated legal action in June 2016 against the National Credit Regulator and the Department of Trade and Industry to have these regulations reviewed. The court case was heard during August with judgment pending. The Group uses accounts as an enabler of sales to customers in the mainstream middle-income market, as opposed to operating a financial services business. No fees are charged to customers, such as initiation fees, club fees, collection fees or magazine fees, except for an annual account service fee of R28. Financial service income (refer to note 4) only constitutes 0.3% of sale of merchandise. UPDATE ON THE LOADS OF LIVING ACQUISITION The Group announced at its annual results presentation on 18 August that it had acquired Loads of Living, a South African homeware chain, subject to Competition Commission approval. The Competition Commission approved the transaction unconditionally on 14 November. In terms of the purchase agreement the Group therefore acquired the business and consolidated its results with effect from 31 October. BOARD APPOINTMENTS Mr Hans Hawinkels and Ms Maya Makanjee have been appointed as independent non-executive directors of the company with effect from 22 February Mr Hawinkels has degrees in engineering, commerce and business administration and has cross-industry experience in senior operational, executive and C-suite roles over more than 40 years. He is currently a consultant to a major South African liquor production and distribution business. Ms Makanjee has Bachelor s degrees in commerce and fine arts and a Master s degree in business leadership, and has had involvement at executive and director level in a number of major corporates in South Africa over the past 25 years, including roles in strategic planning, human resources, corporate affairs and transformation. Most recently she was the executive director of corporate affairs at a major mobile telecommunications company. Currently she is a non-executive director of Mpact Ltd, Tiger Brands Ltd and AIG Ltd. CHANGES TO BOARD COMMITTEE COMPOSITION During the period the following changes to the board committees took place: Audit committee: Mr Roddy Sparks, an independent nonexecutive director of the company, has assumed the position as chairman, replacing Mr Mike Thompson, who remains a member of this committee, together with Mr Rob Dow. Remuneration committee: Mr Tony Taylor, an independent nonexecutive director, has been appointed as an additional member of this committee. Risk committee: In line with King IV recommendations, Messrs Roddy Sparks and Hilton Saven, both independent nonexecutive directors of the company, have been appointed to this committee.

5 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 3 OUTLOOK South Africa: Truworths Economic prospects in South Africa are looking favourable, partially due to the recent political changes. However, the recessionary environment continues to put pressure on the disposable income of consumers, exacerbated by the increase in the VAT rate to 15% with effect from 1 April Furthermore, Truworths has experienced product deflation and an improvement in the performance of the debtors book, and has focused on cost containment. Retail sales growth for the second half of the 2018 financial period will benefit from the lower base recorded in the second half of the financial period. No product inflation is anticipated in the second half. Truworths retail sales for the first seven weeks of the second half of the 2018 financial period are unchanged compared to the directly corresponding seven-week period in the financial period (i.e. 2 January to 19 February ). United Kingdom: Office The trading environment in the United Kingdom remains tough, with inflationary pressure, interest rates expected to rise and a degree of political uncertainty. Office retail sales for the first seven weeks of the second half of the 2018 financial period decreased by 4% in Sterling compared to the directly corresponding seven-week period in the financial period (i.e. 2 January to 19 February ). Group: Trading space The board remains committed to investing for longer-term growth, with trading space planned to increase by approximately 2.7% for the 2018 financial period (comprising 2.8% in Truworths (excluding the trading space of the recently acquired Loads of Living), and 1.7% in Office), and by approximately 2% to 3% in the 2019 financial period (Truworths 2% to 3% and Office 2%). H Saven Chairman MS Mark Chief Executive Officer INTERIM DIVIDEND The directors of the company have resolved to declare a gross cash dividend from retained earnings in respect of the 26-week period ended 31 December in the amount of 261 South African cents (2016: 270 South African cents) per ordinary share to shareholders reflected in the company s register on the record date, being Friday, 16 March The last day to trade in the company s shares cum dividend is Tuesday, 13 March Consequently no dematerialisation or rematerialisation of the company s shares may take place over the period from Wednesday, 14 March 2018 to Friday, 16 March 2018, both days inclusive. Trading in the company s shares ex dividend will commence on Wednesday, 14 March The dividend is scheduled to be paid in South African Rand (ZAR) on Monday, 19 March Dividends will be paid net of dividends tax (currently 20%), to be withheld and paid to the South African Revenue Service. Such tax must be withheld unless beneficial owners of the dividend have provided the necessary documentary proof to the relevant regulated intermediary (being a broker, CSD participant, nominee company or the company s transfer secretaries Computershare Investor Services (Pty) Ltd, PO Box 61051, Marshalltown, 2107, South Africa) that they are exempt therefrom, or entitled to a reduced rate, as a result of a double taxation agreement between South Africa and the country of tax domicile of such owner. The withholding tax, if applicable at the rate of 20%, will result in a net cash dividend per share of South African cents. The company has ordinary shares in issue on 22 February In accordance with the company s memorandum of incorporation the dividend will only be paid by electronic funds transfer, and no cheque payments will be made. Accordingly, shareholders who have not yet provided their bank account details should do so to the company s transfer secretaries. The directors have determined that gross dividends amounting to less than South African cents, due to any one shareholder of the company s shares held in certificated form, will not be paid, unless otherwise requested in writing, but the net amount thereof will be aggregated with other such net amounts and donated to a charity to be nominated by the directors. By order of the board C Durham Company Secretary Cape Town 22 February 2018 One Capital JSE Sponsor Merchantec Capital Namibia NSX Sponsor

6 CONDENSED GROUP STATEMENTS OF FINANCIAL POSITION / 4 Note at 31 Dec at 25 Dec 2016 at 2 Jul Audited ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Derivative financial assets Available-for-sale assets Loans and receivables Deferred tax Current assets Inventories Trade and other receivables Prepayments Cash and cash equivalents Tax receivable 15 Total assets EQUITY AND LIABILITIES Total equity Share capital and premium Treasury shares 6 (901) (961) (939) Retained earnings Non-distributable reserves (473) (529) (529) Non-current liabilities Interest-bearing borrowings Deferred tax Put option liability Straight-line operating lease obligation Post-retirement medical benefit obligation Leave pay obligation Current liabilities Trade and other payables Interest-bearing borrowings Provisions Contingent consideration obligation Derivative financial liabilities Tax payable Total liabilities Total equity and liabilities Number of shares in issue (net of treasury shares) (millions) Net asset value per share (cents) Key ratios Return on equity* (%) Return on capital* (%) Return on assets* (%) Inventory turn* (times) Asset turnover* (times) Net debt to equity (%) Net debt to EBITDA* (times) * Ratios for December have been annualised.

7 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 5 CONDENSED GROUP STATEMENTS OF COMPREHENSIVE INCOME Note to 31 Dec to 25 Dec 2016 % change 53 weeks to 2 Jul Audited Revenue Sale of merchandise Cost of sales (4 783) (4 758) (8 562) Gross profit Other income Trading expenses (3 713) (3 665) 1 (7 086) Depreciation and amortisation (192) (199) (389) Employment costs (1 068) (1 062) (2 094) Occupancy costs (1 135) (1 079) (2 155) Trade receivable costs (653) (721) (1 209) Other operating costs (665) (604) (1 239) Trading profit (4) Interest received (1) Dividends received Operating profit (3) Finance costs (133) (145) (295) Profit before tax (3) Tax expense (627) (645) (1 049) Profit for the period (3) Attributable to: Equity holders of the company Holders of the non-controlling interest Profit for the period Other comprehensive losses to be reclassified to profit or loss in subsequent periods (71) (632) (652) Movement in foreign currency translation reserve (71) (633) (649) Fair value adjustment on available-for-sale financial instruments 1 (3) Other comprehensive income not to be reclassified to profit or loss in subsequent periods 9 Re-measurement gains on defined benefit plans 9 Other comprehensive losses for the period, net of tax (71) (632) (643) Attributable to: Equity holders of the company (62) (560) (569) Holders of the non-controlling interest (9) (72) (74) Other comprehensive losses for the period, net of tax (71) (632) (643) Total comprehensive income for the period Attributable to: Equity holders of the company Holders of the non-controlling interest 15 (43) (35) Total comprehensive income for the period Basic earnings per share (cents) (3) Headline earnings per share (cents) (3) Diluted basic earnings per share (cents) (3) Diluted headline earnings per share (cents) (3) Weighted average number of shares (millions) Diluted weighted average number of shares (millions) Key ratios Gross margin (%) Trading expenses to sale of merchandise (%) Trading margin (%) Operating margin (%)

8 CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY / 6 Share capital and premium Treasury shares Retained earnings Nondistributable reserves Equity holders of the company Holders of the noncontrolling interest Total equity Balance at the beginning of the period 706 (939) (529) Total comprehensive income for the period (62) Profit for the period Other comprehensive losses for the period (62) (62) (9) (71) Cash dividends (790) (790) (790) Utilisation of treasury shares in respect of the exercise of options in terms of the 1998 share option scheme 19 (11) 8 8 Premium on shares vested in terms of the 2012 restricted share scheme 19 (19) Share-based payments Acquisition of non-controlling interest 1 1 (2) (1) Movement in put option liability (13) 96 Balance at 31 December 706 (901) (473) Balance at the beginning of the period 706 (882) (102) Total comprehensive income for the period (560) (43) Profit for the period Other comprehensive losses for the period (560) (560) (72) (632) Cash dividends (357) (357) (357) Shares repurchased (101) (101) (101) Premium on shares vested in terms of the 2012 restricted share scheme 22 (22) Share-based payments Movement in put option liability Balance at 25 December (961) (529) Cents per share: 2016 Cash dividend declared in respect of the period

9 CONDENSED GROUP STATEMENTS OF CASH FLOWS Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 7 Note to 31 Dec to 25 Dec weeks to 2 Jul Audited CASH FLOWS FROM OPERATING ACTIVITIES Cash flow from trading and cash EBITDA* Working capital movements (156) 211 (151) Cash generated from operations Interest received Dividends received Finance costs (129) (158) (292) Tax paid (486) (209) (1 256) Cash inflow from operations Cash dividends paid (790) (357) (1 527) Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of plant and equipment to expand operations (171) (174) (341) Acquisition of plant and equipment to maintain operations (41) (70) (90) Acquisition of computer software (14) (17) (37) Proceeds on disposal of shares 8 8 Net acquisition of business (8) Premiums paid to insurance cell (12) Amounts received from insurance cell Loans and receivables repaid Loans advanced (2) Acquisition of non-controlling interest (1) Payment of contingent consideration obligation (62) (42) (42) Net cash used in investing activities (287) (288) (497) CASH FLOWS FROM FINANCING ACTIVITIES Shares repurchased by subsidiaries (101) (101) Borrowings repaid 7 (597) (62) (324) Contributions to post-retirement medical benefit plan asset (3) Net cash used in financing activities (597) (163) (428) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Net foreign exchange difference (16) (74) (72) CASH AND CASH EQUIVALENTS AT THE REPORTING DATE Key ratios Cash flow per share (cents) Cash equivalent earnings per share (cents) Cash realisation rate (%) * Earnings before interest received, finance costs, tax, depreciation and amortisation.

10 SELECTED EXPLANATORY NOTES / 8 1 STATEMENT OF COMPLIANCE The condensed Group interim financial statements for the 26-week period ended 31 December (interim report) have been prepared in compliance with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, IAS 34: Interim Financial Reporting, the Companies Act (71 of 2008, as amended) of South Africa and the Listings Requirements of the JSE. The interim report does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements as at 2 July. The information contained in the interim report has neither been audited nor reviewed by the Group s external auditors. The interim report has been prepared under the supervision of Mr DB Pfaff CA(SA), the Chief Financial Officer of the Group. 2 BASIS OF PREPARATION The interim report has been prepared in accordance with the going concern and historical cost bases, unless otherwise indicated. The accounting policies are applied consistently throughout the Group. The presentation and functional currency used in the preparation of the interim report is the South African Rand (ZAR or Rand) and all amounts are rounded to the nearest million, unless otherwise indicated. 3 ACCOUNTING POLICIES AND METHODS OF COMPUTATION 3.1 The accounting policies and methods of computation applied in the preparation of the interim report are in terms of IFRS and consistent with those applied in the preparation of the Group s annual financial statements for the period ended 2 July, with the exception of the amendment to IAS 7: Statement of Cash Flows Disclosure, which is effective from the current reporting period and requires disclosures that enable investors to evaluate changes in liabilities arising from financing activities, including changes arising from cash flows and non-cash changes. Other IFRS, amendments and International Financial Reporting Interpretations Committee (IFRIC) interpretations not applicable to Group activities Various other new and amended IFRS and IFRIC interpretations have been issued and are effective, however they are not applicable to the Group s activities during the period. 3.2 IFRS, amendments and IFRIC interpretations issued but not yet effective The following IFRS and amendments, that are relevant to the Group, have been issued but are not effective for the period under review. The Group will adopt these no later than their effective dates, to the extent that they are applicable to its activities: Amendments to IFRS 2: Share-based Payments Classification and Measurement Effective for annual periods beginning on or after 1 January 2018 The amendments contain requirements on the accounting for cash-settled share-based payment transactions that include a performance condition, classification of share-based payment transactions with net settlement features and accounting for modifications of share-based payment transactions from cash-settled to equity-settled. The impact of these amendments has been considered and will not be material to the Group. IFRS 9: Financial Instruments Recognition and Measurement Effective for annual periods beginning on or after 1 January 2018 Classification of the Group s financial assets and liabilities has been undertaken in accordance with IFRS 9, however the quantitative impact of the expected credit loss model on the financial statements is under consideration by the Group. The Group will adopt the standard on 2 July 2018, being the commencement date of its next financial period, and it will be applied prospectively. IFRS 15: Revenue Recognition Effective for annual periods beginning on or after 1 January 2018 The impact of this standard has been considered and the only expected impact relates to the recognition of the sales returns provision. Currently a net adjustment is made to sale of merchandise for the gross profit impact of sales expected to be returned. IFRS 15 requires sale of merchandise to be adjusted for the selling price of the expected returns and cost of sales to be adjusted for the cost of such returns. The changes resulting from the adoption of this standard are not expected to have any impact on profits. IFRS 16: Leases Recognition and Measurement Effective for annual periods beginning on or after 1 January 2019 The Group has numerous leases that will, in terms of the new standard, be recognised in the statement of financial position. The standard is effective for the financial period commencing on 1 July The quantitative impact is under consideration by the Group and the Group is investigating whether it will transition using the full retrospective approach or the modified retrospective approach. 3.3 Basis of consolidation of financial results The condensed Group interim financial statements comprise the interim financial statements of the company and its subsidiaries, and are prepared using uniform accounting policies for like transactions and other events in similar circumstances.

11 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 9 to 31 Dec to 25 Dec 2016 % change 53 weeks to 2 Jul Audited 4 REVENUE Sale of merchandise Retail sales Accounting adjustments* (295) (272) (518) Delivery fee income Wholesale sales Franchise sales Interest received (1) Trade receivables interest Investment interest Other income (3) 291 Commission Financial services income Display fees Lease rental income Insurance recoveries Other Royalties Dividends received from insurance business arrangements Total revenue * Accounting adjustments made in terms of IFRS and generally accepted accounting practice relating to promotional vouchers, staff discounts on merchandise purchased, cellular retail sales, notional interest on non-interest-bearing trade receivables and the sales returns provision. to 31 Dec to 25 Dec weeks to 2 Jul Audited 5 RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS Profit for the period, attributable to equity holders of the company Adjusted for: Impairment of fixed and financial assets 9 Headline earnings TREASURY SHARES Opening balance Shares repurchased in accordance with the general repurchase programme Utilisation of treasury shares in respect of the exercise of options in terms of the 1998 share option scheme (19) (15) Premium on shares vested under the 2012 restricted share scheme (19) (22) (29) Closing balance

12 / 10 SELECTED EXPLANATORY NOTES (CONTINUED) to 31 Dec to 25 Dec weeks to 2 Jul Audited 7 INTEREST-BEARING BORROWINGS Opening balance, comprising: Non-current portion of interest-bearing borrowings Current portion of interest-bearing borrowings Borrowings repaid (597) (62) (324) Foreign exchange movements (23) (290) (314) Amortisation of arrangement fees Finance charges accrued 3 Closing balance, comprising: Non-current portion of interest-bearing borrowings Current portion of interest-bearing borrowings BUSINESS COMBINATIONS Acquisition of Loads of Living With effect from 31 October the Group acquired Loads of Living, a linen and houseware retailer with 13 stores in South Africa, as a going concern. The purchase consideration was provisionally allocated to the identifiable assets and liabilities of the business. Due to the short period between the acquisition date and reporting date, the Group has applied provisional accounting in respect of all assets acquired and liabilities assumed. The purchase price allocation is subject to further review for a period of up to one year from the acquisition date. Additional identifiable assets (including trademarks) and liabilities will be recognised upon completion of the purchase price allocation and the process of valuing these assets and liabilities, with a corresponding reduction or increase in goodwill. A qualitative description of the factors comprising goodwill will be disclosed once the purchase price allocation is complete. 9 SEGMENT REPORTING The Group s reportable segments have been identified as the Truworths and Office business units. The Truworths business unit comprises all the retailing activities conducted by the Group in Africa through which the Group retails fashion apparel comprising clothing, footwear and other fashion products as well as homeware. Included in the Truworths business unit is the YDE business unit which comprises the agency activities through which the Group retails clothing, footwear and related products on behalf of emerging South African designers, as well as the Loads of Living business unit which retails homeware. The Office business unit comprises the footwear retail activities conducted by the Group through stores, concession outlets and an e-commerce channel in the United Kingdom, Germany and the Republic of Ireland. Management monitors the operating results of the business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Segment performance is reported on an IFRS basis and evaluated based on revenue and profit before tax.

13 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 11 Truworths Office Consolidation entries Group Total third party revenue (5) Third party Inter-segment 4 1 (5) Trading expenses (4) Depreciation and amortisation Employment costs Occupancy costs Trade receivable costs Other operating costs (4) 665 Interest received Finance costs Profit for the period Profit before tax Tax expense (569) (58) (627) Segment assets (3 460)* Segment liabilities Capital expenditure Other segmental information Gross margin (%) Trading margin (%) Operating margin (%) Inventory turn # (times) Account:cash sales mix (%) 69:31 0:100 50: Total third party revenue (1) Third party Inter-segment 1 (1) Trading expenses (1) Depreciation and amortisation Employment costs Occupancy costs Trade receivable costs Other operating costs (1) 604 Interest received Finance costs Profit for the period Profit before tax Tax expense (574) (71) (645) Segment assets (3 460)* Segment liabilities Capital expenditure Other segmental information Gross margin (%) Trading margin (%) Operating margin (%) Inventory turn # (times) Account:cash sales mix (%) 69:31 0:100 50:50 * Elimination of investment in Office. # Annualised.

14 / Contribution to revenue % Contribution to revenue % Third party revenue South Africa United Kingdom Germany Namibia Republic of Ireland Botswana Swaziland Zambia Rest of Europe Mauritius Lesotho United States Ghana Kenya 6 * 5 * Middle East and Asia 3 * Australia 3 * 5 * Franchise sales Kenya 3 * Total third party revenue * Zero due to rounding. 31 Dec 25 Dec Jul Audited 10 CAPITAL COMMITMENTS Capital expenditure authorised but not contracted: Store renovation and development Computer software and infrastructure Buildings Head office refurbishment Distribution facilities Motor vehicles Total capital commitments The capital commitments will be financed from cash generated from operations and available cash resources and are expected to be incurred in the remainder of the 2018 reporting period.

15 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / EVENTS AFTER THE END OF THE REPORTING PERIOD No event, material to the understanding of this interim report, has occurred between the end of the interim period and the date of approval. 12 SEASONALITY Historically retail sales in the first half of the financial period have exceeded those of the second half, because of the inclusion in the former of Black Friday and the Christmas trading period. For the financial period, the Group s first half retail sales was 57% of annual retail sales on a 52-week basis. This percentage is based on only one year of Group retail sales, as Office has only been consolidated for one full reporting period. 13 RELATED PARTY TRANSACTIONS Related party transactions similar to those disclosed in the Group s annual financial statements for the period ended 2 July took place during the interim period. 14 IMPACT OF THE 53rd WEEK IN ON 2018 INTERIM FINANCIAL REPORTING In line with the practice generally prevailing in the South African retail industry, the Group manages its internal accounting and retail operations in accordance with a retail calendar, which treats each financial year as an exact 52-week period. This treatment effectively results in the loss of a day (or two in a leap year) per calendar year. These days are brought to account every four to seven years by including a 53rd week in the financial reporting calendar. Due to the inclusion of a 53rd week in the financial period, the first of the current period are not comparable to the first of the prior period in terms of dates, and in the case of the Truworths business unit (being the Group, excluding Office), also the timing of the end-of-winter-season sale. Although the Group has reported comparative financial results for the to 25 December 2016, it is useful and good governance to also report information for the directly corresponding 26-week prior period ended 1 January, in order to facilitate comparisons against such comparable prior period results. These adjustments are not expected to have a continuing effect as they will only occur in every 53-week period. The preparation of the unaudited, comparable 26-week prior period financial information is the responsibility of the directors. The tables on pages 14 and 15 illustrates how the current period results compare to the directly corresponding 26-week prior period (i.e. 4 July 2016 to 1 January ), by excluding the results of week 1 and including those of week 27 of the prior period. The unaudited, comparable 26-week prior period information for the period ended 1 January has been prepared for illustrative purposes only, to indicate how the actual unaudited interim results of the Group for the current period compare to such information and, because of its nature, may not fairly represent the Group s financial position, changes in equity, results of operations or cash flows of the prior period.

16 / 14 Statements of comprehensive income to 31 Dec to 25 Dec 2016 (As reported) 1st week adjustments 27th week adjustments to 1 Jan comparable weeks Change on prior period reported % Change on prior period comparable % Sale of merchandise (486) Retail sales (refer to page 15) (486) Accounting adjustments/other sales (241) (210) (210) Cost of sales (4 783) (4 758) 227 (208) (4 739) 1 1 Gross profit (259) Other income (3) (3) Trading expenses (3 713) (3 665) (3 665) 1 1 Depreciation and amortisation (192) (199) (199) (4) (4) Employment costs (1 068) (1 062) (1 062) 1 1 Occupancy costs (1 135) (1 079) (1 079) 5 5 Trade receivable costs (653) (721) (721) (9) (9) Other operating costs (665) (604) (604) Trading profit (259) (4) (2) Interest received (1) (1) Dividends received (100) (100) Operating profit (259) (3) (2) Finance costs (133) (145) (145) (8) (8) Profit before tax (259) (3) (1) Tax expense (627) (645) 70 (57) (632) (3) (1) Profit for the period (189) (3) (2) Attributable to: Equity holders of the company (185) (3) (1) Holders of the non-controlling interest (4) 7 32 (17) (25) Profit for the period (189) (3) (2) Basic and headline earnings per share (cents) (43.3) (3) (2) Diluted basic and headline earnings per share (cents) (43.2) (3) (2) Weighted average number of shares in issue (millions) Diluted weighted average number of shares in issue (millions)

17 Truworths International UNAUDITED GROUP INTERIM REPORT for the ended 31 December / 15 Statements of comprehensive income to 31 Dec to 25 Dec 2016 (As reported) 1st week adjustments 27th week adjustments to 1 Jan comparable weeks Key ratios Gross margin (%) Trading expenses to sale of merchandise (%) Trading margin (%) Operating margin (%) Change on prior period reported % Change on prior period comparable % Retail sales Truworths () (381) Truworths ladieswear () (129) (4) (1) Truworths menswear () (104) Identity () (62) Truworths designer emporium () (39) (1) Truworths kids emporium () (24) Other () (23) Office () (105) (3) Group retail sales () (486) Office ( m) (6) (1) Notes: 1 The accounting policies and methods of computation applied in preparing the unaudited results for the ended 31 December, which results have been prepared in terms of IFRS, have been used in preparing the unaudited information for the comparable ended 1 January. 2 The information contained in the to 31 Dec and to 25 Dec 2016 columns have been extracted without adjustment from the published, unaudited results for the respective 26-week periods. 3 The amounts in the 1st week adjustments and 27th week adjustments columns relate to retail sales, the related cost of sales (calculated with reference to the gross profit margin for the 26-week period ended 25 December 2016), and tax expense (calculated with reference to the actual tax rate for the 26-week period ended 25 December 2016) for the one-week periods from 27 June 2016 to 3 July 2016 and 26 December 2016 to 1 January respectively, together with the resultant gross profit, trading profit, operating profit, profit before tax and profit for the said one-week periods. The trading expenses have not been adjusted, as these are typically incurred on a monthly basis, and it was therefore assumed that the expenses for the one-week periods from 27 June 2016 to 3 July 2016 and 26 December 2016 to 1 January respectively are similar, notwithstanding that these periods are six months apart. 4 The relevant amounts for the one-week periods from 27 June 2016 to 3 July 2016 and 26 December 2016 to 1 January have been extracted from the Group s unaudited accounting records. 5 The 1st week adjustments and 27th week adjustments columns, in the opinion of the directors, fairly reflect the results of the one-week periods from 27 June 2016 to 3 July 2016 and 26 December 2016 to 1 January respectively. 6 The calculation of earnings per share and headline earnings per share for the comparable 26-week prior period is based on the weighted average number of shares in issue over that period. 7 The comparable 26-week prior period information has neither been reviewed nor reported on by the Group s external auditor.

18 ADMINISTRATION Truworths International Ltd Registration number 1944/017491/06 Tax reference number 9875/145/71/7 JSE code: TRU NSX code: TRW ISIN: ZAE Company secretary Chris Durham, FCIS, PG Dip. Adv. Co Law (UCT) Registered office No. 1 Mostert Street, Cape Town, 8001, South Africa Postal address PO Box 600, Cape Town, 8000, South Africa Contact details Tel: +27 (21) Telefax: +27 (21) Principal bankers The Standard Bank of South Africa Ltd Lloyds Bank plc Auditors Ernst & Young Inc. Attorneys Bernadt Vukic Potash and Getz Edward Nathan Sonnenbergs Spoor & Fisher Webber Wentzel Bowman Gilfillan Shoosmiths Sponsor in South Africa One Capital Sponsor Services (Pty) Ltd Sponsor in Namibia Merchantec Capital Namibia (Pty) Ltd Transfer secretaries In South Africa Computershare Investor Services (Pty) Ltd Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, South Africa PO Box 61051, Marshalltown, 2107, South Africa Tel: +27 (11) Telefax: +27 (11) In Namibia Transfer Secretaries (Pty) Ltd Robert Mugabe Avenue No. 4 Windhoek, Namibia PO Box 2401, Windhoek, Namibia Tel: +264 (61) Telefax: +264 (61) Investor relations David Pfaff (CFO) Tel: +27 (21) Graeme Lillie (Tier 1 Investor Relations) Tel: +27 (21) Directors H Saven (Chairman), MS Mark (CEO)*, DB Pfaff (CFO)*, DN Dare*, RG Dow, JHW Hawinkels, M Makanjee, CT Ndlovu, RJA Sparks, AJ Taylor and MA Thompson * Executive Non-executive Independent