The Foschini Group Limited (TFG) Earnings Call Transcript & Summary

Good morning, everybody. A very warm welcome to our TFG FY '20 Year-End Results Presentation. I must admit it does feel quite strange doing this remotely. I really do look forward to a time that we can all be back together again. Hopefully, that's not in the too distant future and if all things work out well, hopefully, for our half-year results in November later this year. In addition to all the shareholders and investment analysts that we've invited to join this presentation remotely today, we've also invited all of our various head office and regional office staff to join as well. And I think before getting into the meat of the presentation, I'd just like to acknowledge all of our nearly 30,000 staff, both in our South African and African operations as well as our international operations, for their extraordinary efforts in what can really only be described, I guess, as an extraordinary period in TFG's history. I'm extremely grateful for all of your hard work and the efforts over the last couple of months. As you would have seen on the agenda, we do have quite a packed agenda. We're trying to give a very comprehensive overview of the year in all of our operations. I'll be joined later in the presentation by our Group CFO, Bongiwe Ntuli; by Head of Credit, Jane Fisher; by Ben Barnett, the CEO of TFG London; and then by Gary Novis, the CEO of TFG Australia. To give some context to the year, it's almost, I guess, been a year of 2 halves. The first half was very much 11 months up until the end of February. Up until then, we've had, I think, a very resilient performance, probably above our own expectations. We've come off a very strong Black Friday in November, a very strong Christmas season. We then went into January and February, and there was a lot of promotional activity in the market, particularly in South Africa. And again, I think we traded above our own expectation to that point. We then moved into the COVID period, which was really the start, I guess, in the second half of our year, beginning of March. We had to take some very decisive action very quickly. And suddenly, we had no stores open anymore. We had no cash coming in through our doors, and it was extremely difficult to get our debtors to -- or our account holders into the stores to make the payments that they traditionally did. What we really had to do is we had to turn off the taps in terms of any cash outflows because of the lack of any cash coming in. And equally, we had to engage very quickly and proactively with our funders and lenders to ensure that we had adequate liquidity going forward. In the next couple of slides, I'll talk about some of the steps we had to do to stop cash outflows. In terms of our lenders, we really have got 2 sources of funding for the group. The first are institutional lenders, and the second is our banking syndicate. In terms of our banking syndicate, we reached out proactively to all of them really, from Chairman and CEO level downwards, ultimately interacting a lot with their credit committees, really with 3 objectives. What we wanted to do first and foremost was make sure that our existing banking facilities remained intact despite all the uncertainty and fears around retail. Secondly, we needed to negotiate out of the waving or resetting of our banking covenants. And thirdly, we needed to engage with our banks to ensure that we could access additional facilities over and above our existing facilities that we went into the crisis with. As you can appreciate, there was a huge amount of work involved in that process and a lot of backwards and forwards, a lot of information required. But ultimately, we were successful in all 3 respects. Our current facilities remain intact. Our covenants for the half year, which is our next measurement period in September, have been waived, and we've reset our covenants across all of our banks for the full year to the end of March next year. Bongiwe will give some more color to that in her presentation. And in respect of the institutional funders, they had their own cash needs. And equally, we're in a position where I think they had -- or some of them had some very nervous views around retail. And over the same period that we were securing additional facilities from our banks, we ended up with cash outflows in respect to some of those institutions totaling nearly ZAR 2 billion, not a comfortable time for the group. We then moved into May, and that's when we already started, I guess, to see light at the end of the tunnel, and there's nothing that makes a retailer happier than seeing the tills start to ring and money come in. From the 1st of May under the lockdown regulations, we were able to open 80% of our stores in South Africa. So that was pretty much all of our stores, excluding jewelry. And then as the lockdown regulations were revised, we were open -- able to open all of our stores, including jewelry, from the 1st of June, or roughly 2,500 stores. We had seen strong online trading throughout the year, and I'll give some flavor to that later in the presentation, that we saw a marked increase in online demand really from the time that lockdown started. And that really hasn't abated, it continues to today. It's a structural shift, which we'll go into in some detail. We're now in June, and our focus is very much on the future. It's looking to make sure that we position TFG to come out of this COVID period however long it lasts even more strongly than we went into it. In order to do that, we do need to insulate our balance sheet. We don't have a crystal ball. We don't know how long this crisis is going to last, how deep the economic impact is going to be. The only thing that we're fairly certain about is that the next 12 and 24 months are likely to be tougher than the last 12. So first priority, absolutely looking after our balance sheet. The second priority is we've been very clear around the strategic initiatives that have driven our success over the last couple of years, and they, again, very evident over the past 12 months. We need to ensure that we continue to invest throughout the cycle and on those specific platforms to make sure that we do get the full benefits of our organic growth opportunities. In order to make sure that we can really be successful both in terms of shoring up the balance sheet and be in a position to continue to invest in our own business, we announced on SENS this morning our intention to pursue a fully underwritten rights issue, targeting just under ZAR 4 billion. I mentioned in my introduction that we had to take some pretty bold actions, and certainly scenario came for some pretty downside -- or pretty big downside when lockdown hit South Africa, just to give some sense of what that actually meant for us. We immediately had a look at our cash flow forecast for the next 12 months. And depending on what scenarios you assumed around sales demand, we were targeting taking out a total of ZAR 6 billion in cash outflows for the business over the next 12 months, predominantly in the areas of stock purchases. And that clearly has to flex with demand, but equally for all nonessential CapEx. And I'll give a bit more detail on that later on as well. In addition to that, we also targeted operating expense savings of up to ZAR 1 billion over the next 18 to 24 months. We already had spoken in quite a lot of detail in the past around the various business optimization programs that we've got running across all 3 of our businesses. Those were well advanced. We already had a road map to take those to completion over the next 2.5 to 3 years. The crisis really got us to rethink those timelines, and we're pushing ahead with all of those programs on an accelerated basis at the moment. A big part of the indirect spend for the group is clearly rentals. We proactively engaged with all of our landlords as soon as lockdown started, really, to try to reach an agreement around what can best be described as fair rentals during a period that we either couldn't trade or could only trade on a very restrained basis. Those negotiations and discussions have generally progressed very well. I think there's a realization from both retail and from property owners that we need to find a win-win solution to ensure that there's a place both for landlords and retail in the future, but it will take some time to settle that in its entirety. In our South African business, for example, we have over 1,000 landlords. So just engaging with each one of them does take a lot of time. But as I said, the initial reaction has been very positive. We've had some landlords come to us proactively and offer us, for example, 3 months or 4 months of no rental whatsoever. So we're, again, working towards fair rentals. Just going back to inventory and our supply base, I think there's a couple of very important points here. We went into winter well-stocked. We'd already brought a lot of heavy winter product into the country in advance of lockdown. We wanted to avoid any logistical issues over Chinese New Year. That tends to get blamed every year for late shipments or late production. So we were very fortunate that when lockdown hit, we had stock in our DCs and in many cases already in the stores that were closed up. But what we did have to do is immediately engage with our supply base, both domestically and internationally, to either delay, postpone or cancel pretty much all of our orders because at that stage, we had absolutely no idea when we'd be able to reopen and trade again. And all of those discussions were done again on a one-on-one basis. I think testimony to the strength of the relationships we have with our suppliers, it was actually a message that whilst clearly difficult for the suppliers themselves, they fully understood. It was handled sensitively. And I think the proof of the pudding is now that we've reopened and gone back to the very same suppliers that we had to cancel or postpone orders, every single one of them has come back and undertaken to meet whatever orders we placed, whether they be at the full quantity or to reduce quantity. And that's obviously critically important for the business going forward. I mentioned that we also relooked at CapEx. Really, our discretionary CapEx or expansionary CapEx is generally spent in 2 areas: one is either refurbishing or opening stores, new stores; and the other is really in terms of digital transformation in e-commerce. Our immediate reaction, again, when we didn't know when we were going to reopen, was to prioritize just over 60% of our CapEx that we felt we could pull back on. Essentially, we're very well invested as a business. There's absolutely no reason for us to be opening a lot of new stores this year. And really, the only stores that we're now planning on opening for the balance of this year were stores that were already in construction at the time we went into the lockdown. So that's really very minimal. On the IT CapEx, again, we've landed a number of our big projects just before the beginning of this year, and we're going to capitalize on the output of those projects in this year and in future years. However, given the surge in e-commerce and how important that's going to become, whilst it's an area we could pull back on if we didn't have the balance sheet and funding to pursue it, it wouldn't be wise. And we fully intend to follow through on those IT and e-commerce investments. And then just touching again on restoring our operations, I've already covered our South African reopenings. Just in summary, our Australian stores started to reopen en masse from the 11th of May and our U.K. stores from Monday this week, and I'll give a bit of flavor around how everybody is traded in my outlook slides. Moving to where we are at the moment. Absolute focus is now on the balance sheet. And as I mentioned, we announced this morning a proposed rights issue about to just under ZAR 4 billion. The intention really is to put us in a position to insulate the balance sheet against any shocks. Again, there's a lot of uncertainty going forward. We're confident that in the sizing of this capital raise, it covers us for pretty much anything that is foreseeable in our scenario planning. We equally want to be able to continue to invest organically in our business. The particular areas are clearly e-commerce, but equally in our own local manufacturing and vertical integration. That's been another key success driver for the group, and I'll give some sense in terms of how we progressed in that area in the later slides. We also want to be in a position where we've got dry powder should we come across attractive acquisition opportunities over the next 12 or 24 months. If you go back to TFG's history, roughly 50% of our brands have come through acquisitions. It's very much in our DNA. At the same time, we've got very strict and, I guess, very high bars around our investment criteria. If anything, those are probably only tougher and higher now. So there is no rush off to go and acquire anything. And just to end any speculation, there's been a lot of market rumor that TFG is poised to buy either Edgars, Jet or the whole of Edcon. I just want to address that upfront. We have no interest in any of those businesses. They don't fit strategically with us. And there's no truth to that in case anybody is believing it. And then finally, we do want to be in a position where we are able to resume paying dividends when appropriate. That clearly depends on where the economy is and what our balance sheet looks like and our outlook looks like at that point in time. We did announce again in our SENS this morning that we wouldn't be paying a dividend at the end of this year. And I think that's clearly the prudent thing to do given the levels of uncertainty. What we want to see coming out of this, we want to see a robust balance sheet. We want to come out with a strong investment-grade credit rating, and we're targeting a net debt-to-EBITDA of between 1 and 1.5x by the end of FY '22. And our rights issue puts us in a position where we can achieve all 3 of those. Just to give a sense then of our operational performance, I've mentioned in the introductory slide that we really had had a very resilient and successful year, both prior to COVID and actually, frankly, even post-COVID up to the end of March. Our group turnover grew 3.6% to ZAR 35 billion. Our gross margin remained largely intact at 52.7%. It was slightly down from last year, but that was largely as a result of some COVID provisioning that we took at the end of the year to deal with the stock that we haven't sold in the last couple of weeks. Our headline earnings per share ended almost flat at minus 1.1%. If you add back the lost sales over the COVID period together with the additional provisions we took for stock and IFRS 9 provisions for debtors, our HEPS growth would have ended actually very close to double digits, which would have been an absolute record for the year and well ahead of our expectations. We've spoken a lot in previous investor presentations and one-on-one interactions about our focus on working capital, particularly inventory and, ultimately, on free cash flow. It's an area that became a focus for the group a couple of years ago. It's something that I've asked Bongiwe, our CFO, to focus on even more closely going forward. I'm very pleased that given that focus, we achieved a 92.2% free cash flow conversion out of net profit after tax, again, a record for the group, ZAR 2.3 billion. And we ended the year just from a net debt perspective with net debt of ZAR 8.4 billion. To give a sense of just how punitive the shutdown towards -- well, during the month of March was for the group, if we look at the top of the slide, you can see the 3.6% group turnover for the full 12 months that I referenced. But then really to unpack that, the group was actually up 5.5% after 11 months, which, again, given the prevailing headwinds that we've probably all forgotten about was actually quite amazing. We were facing load shedding in South Africa. We were all worried about the economy even at that stage. Australia was still struggling with the tragic and massive bush fires, and the U.K. was still feeding the after-effects of a very uncertain Brexit takeout. So to be up 5.5% for the 11 months was extremely pleasing. Much less so, we dropped nearly 23%, and that was both the stores closed in some countries. Even before the stores closed, people, just out of safety concerns, health concerns, stayed away from shops and particularly from high-density shopping malls. The bar chart below that just unpacks the 11 months versus the month of March for each of our territories, the purple block showing the 11 months. And very easy to see, again, just how punitive the shutdown of a couple of weeks was in the green blocks. On the right-hand side of the slide, really just unpacking our strategy and our evolution in terms of cash and credit within the group. If you went back 15-odd years ago, you could have almost converted those graphs. We would have been well over 70% credit. It's very pleasing to see that at the end of this year, we ended up at 74% cash sales for the group, 26% credit. So moving in the direction that we've already signaled. And then just looking at the February and March numbers to show how that evolved into the lockdown period, credit turnover was already running negative in February, minus 1.4%, March even more so at minus 2.5%. Jane will pick up on that in her presentation. But it is not a signal in any way that there's a lack of appetite for credit or our credit offering. A matter of fact, to the country, there's never been higher demand. That negative credit turnover growth is really a reflection of the reduced risk appetite that we've taken, and we've significantly reduced our accept rates on new accounts, which Jane will talk about in more detail. So heading absolutely where we wanted it to be. And then cash turnover remained incredibly strong. We've always said that's really the signal as to how the consumer responds to our brands. It's noncapital spend. They can spend it at any retailer. We're running most of the year actually in double digits in South Africa, or very close to double digits for most months. February, we were still strong at 8.2%. And then March, despite the looming shutdown and the shutdown towards the end of the month, still very strong at 5.9%. Just, again, to summarize, so everyone understands the dates of the closures. United Kingdom closed effectively on the 23rd of March some of the international operations before then, and then reopened en masse in the U.K. itself from the 15th of June, with some European openings in the week or 2 before that. Ben will cover that in his presentation. South Africa, we closed on the 26th of March. And I said earlier on, we reopened the majority of our stores on the 1st of May, with the balance from the 1st of June. And then Australia effectively closed on the 27th of March. They started opening a couple of stores on a trial basis from the 1st of May, but really en masse from the 11th of May, and Gary will cover that in his presentation. Just to recap on not our entire business strategy, but I think the parts that are becoming more and more apparent as being critical for the current crisis and for retail going forward and when we emerge from this crisis, you'll be familiar with the circle and the blocks in the middle. I'm really just going to talk to the 3 blocks on the outside of the slide, starting clockwise with the -- really just reflecting on how important it's been to have had the depth of talent and leadership, particularly within our brands and trading divisions and within our credit division. We've often spoken about the depth of talent and the level of experience within our retail brands and credit in the past. It's never been more important than it has been at the moment. When I spoke about the ability to get out of orders with suppliers and do it in an appropriate manner such that you can get straight back into them without a damaged relationship, that comes through having the right people, holding those discussions, having the right relationships and having the experience and history. And when you look at Jane's credit metrics and what she's achieved during the lockdown period, again, the experience that we've got in the credit division is gratifying. We've got huge succession built into the group. It's something that we focus on all the time. And coming out the other side, I think that's going to be critically important as we take the group forward. Moving around clockwise to the bottom block, local manufacturing. We've stressed the economic benefits in terms of gross margins, sell-through rates, et cetera. I'll share some more updated stats on that in the slides later on. But equally, I think just from a strategic point of view, it's going to be a long time if ever that any retailer wants to be reliant on a single source like China going forward. I think once bitten, twice shy. Fortunately, with no view of COVID coming, we had already started to derisk China over the last couple of years. So it is a much smaller proportion of our total sales than it used to be and a lot less than a number of our competitors. Our local manufacturing and vertical integration are going to become the name of the game going forward and it's very much part of our strategy. And then in terms of digital transformation and e-commerce, I've already mentioned that we've seen an absolute spike and surge on -- in e-commerce demand. Again, to state the point, I don't think that, that's temporary. We've always said that once the person shops online, once they've realized that the logistics actually work, that their credit card details or payment mechanism is safe, and if the goods actually do arrive and they can return them, that's very, very difficult to wean yourself off it. But I'll give some more thoughts on that later on as well. In terms of digital transformation in our half year results presentation, we actually gave quite a lot of detail around a number of the projects that we were investing behind. This slide just gives a sense in terms of how far advanced we are on those key projects. And without going through all of them, I just want to stress some of the absolutely practical benefits that we've obtained from investing in these projects over the last couple of months, particularly since the lockdown period. So we've spoken about previously rolling out RFID across all of our stores. By the time we got to the end of February, we've rolled that out across all of our apparel stores in South Africa. That's why it shows at 80%. We've still got to do jewelry and homewares, but the major benefit really is for apparel. And to remind everyone what RFID does give us is virtually 100% stock accuracy at a store level, which, without RFID, globally runs somewhere between, at best, 60% and 70% accuracy. We also rolled out 1 stock at the last time we met with an investor presentation. It was still very much in a trial phase. I think we had 20-odd stores at that point on 1 stock. And what that really allows is for online deliveries to be sourced either from an online DC or, alternatively, from a store that has the stock. And the implication of that is you can supply customers from locations much closer to them with lower logistics costs, and it also means that your stock availability is much higher because, typically, online DCs don't carry enough stock. And we've got to a point now where we've got over 400 stores on 1 stock. It's been unbelievably successful. And when you put the RFID and 1 stock together, we've taken our online turnover that was running at about 1.4%, 1.5% for the 11 months to between 4% and 5% over the last 2 months. So very clear evidence of a return that will be important for now but even more important in the future based on those 2 investments. We need to invest further in both of them, but that's for next year and beyond. And then just in terms of actually getting our stores reopened and reopened safely, our best estimate is that we reopen the majority of our stores 2 to 3 days ahead of our major competitors in the country. And again, that was mainly enabled through technology and our digital transformation drive. We launched 2 apps for our staff during the year, TFG Learn and TFG on the go, both feature reverse billing, which means that a store staff member doesn't have to have data or spend their own money. We pick up the tab for that, providing they're using the app for the intended purpose. And in essence, again, 2 practical applications, with TFG Learn, we were able to train all of our staff across the country, circa 18,000 store staff, on all the health and safety protocols to make sure that when we opened, our staff were safe, our customers were safe and that equally, we weren't going to be shut down by the SAP or any health inspectors. And that all happened during the lockdown period without anyone having to actually come to the store to be trained. Equally, and you've probably forgotten about it already by now, but in order to travel, we had to have permits, a letter from the CPIC, together with a letter from your company to enable you to travel and not get stopped at the roadblock. We rolled that out electronically with our TFG on the go app so that every one of our store staff were able to get to the stores on day 1 without having to wait to receive those letters through any other means. Just in terms of e-commerce and what we've seen over the recent past. When we started this year, roughly 60% of our online turnover was by mobile devices as opposed to your desktop, and that's evolving very quickly as we anticipated. It's now over 75% mobile traffic. And if you look at our e-commerce in total, it was sitting at about 0.4%, under 0.5% in 2016. It moved up to just under 1.6% for the full year. But since the lockdown, as I mentioned, has been trending between 4% and 5%. That's a 53% 4-year CAGR. It is accelerating as I've said, and I'll probably repeat it a couple more times. We do see this as a quantum shift. My best estimate is that we probably advance 2 to 3 years in terms of online demand because of COVID. And if you take a look what that means for our outlook, I think our conservative target in the past was that we would have got to about 5% of South African turnover by 2025. The most I can get our e-commerce guys to commit to at the moment is 10%. I think it's going to be more than that. And again, we've got the advantage of seeing what's happened in our international operations. Once you start hitting that exponential growth curve, both in Australia and even more so in the U.K., things start to grow very quickly. If you're growing at 50% to 100% per year, you can kind of see how you get to beyond 10% very quickly indeed. Just in terms of our share of customer traffic, so this includes both web and on apps, we've been tracking this internally for a while. It's progressed very strongly over the course of this year, again, because a lot of those investments that I spoke to. And we're now sitting at 28% of the total web traffic against our traditional bricks and mortar retail rivals. By far, the leader and, by far, the most visited lifestyle destination online in South Africa. We're going to be doing some large investments around apps going forward. Those will be launched to the market in the next couple of months. I would expect that 28% to grow even further and faster. Then just in terms of local manufacturing, really, we've embarked on local manufacturing, really, for 3 purposes: margin advantage due to lower markdowns; better trend relevance, because we can make those fashion calls much closer to season as opposed to long lead times from offshore manufacturers; and equally, because it gives us some balance sheet advantages. To share some of the metrics behind those, from a sales clearance perspective, typically, our quick response manufactured product has a clearance, about 4%, greater than any of our other product. Our average lead time for quick response is under 48 days. And from a balance sheet and working capital perspective, there's roughly a 59-day advantage. Taking a look at the actual increase in units that we produced on the top left-hand side, 34% of our total apparel units last year were likely manufactured. It's increased marginally to 35%. But what's really important is the number of all the contribution from quick response. That's moved from 15% to 21% over the course of 1 year, and that's really been on the back of a number of investments we've continued to make on our own manufacturing. We invested ZAR 50 million in local supply development, ZAR 21 million in quick response advanced manufacturing equipment, and then another ZAR 10 million in management information systems to allow better clarity around the supply chain of our own factories back into retail. All of that has given us a 57% increase in our quick response capacity over the last 12 months. And I think, very importantly, from a South African socioeconomic perspective, we increased our employment in our factories by 8%. This really is, I think, only the start of our journey here. We've still got a long way to go, but the advantages are clear. And again, this is an area we will invest behind. I'm going to hand over to Bongiwe to take us through the highlights of our financial performance in a bit more detail than I covered them and equally, to give some more detail around the rights issue. Thank you.

Thank you, Anthony, for that very great presentation. And you have actually made my job easier as you have touched on a number of our key performance metrics in terms of -- in finance. And then it allows me to go through my slides much quicker and, hopefully, allow some time at the end for questions from our audience. Good morning to our staff locally, regionally and at our international businesses. Our Operating and Supervisory Board, I know they're listening in, and the investment committee as a whole are listening to our full year March 2020 presentation. 2020 financial year now seems a long distant memory as the impact of COVID has superseded all our expectation and has taken over all else. However, 2020 also was not an easy year, what is set to be a great year of performance for TFG, especially following on from a very strong Black Friday in November, another record Black Friday, and strong trade actually all the way to Christmas. And I think in our 9 months to December trading updates that we issued, we showed growth in excess of 6% on turnover. Much hit us and, obviously, the impact of COVID had a great impact, not only when the lockdowns is underneath in one of these slides, top 2, but even long before then, we started seeing footfall decrease in large centers, especially because of the fear around COVID. Anyway, despite all of that, we still managed to close the year at 4% growth on turnover, reporting group revenue of about ZAR 39 billion and retail revenue of ZAR 35 billion, which is an excellent performance. Gross margins for the year, I think Anthony spoke into this, was stable, flat on last year in a very difficult environment and with a lot of provisioning that we have taken, some related to COVID and all the uncertainty that arose in March. EBITDA margins, we're tracking well ahead of last year. You can see 25.4% in February. And that's because of all the optimization work that we have embarked on and have announced previously. We're running head office business optimization with our team here forecasting on 5 work streams. There's also been a lot of work done by our property teams on achieving negative rental reversions year-on-year and curtailing some of our rental increases year-on-year and, again, in an attempt or effort to achieve what we deem as fair rentals in the prevailing market conditions. EBITDA margins closed at 24.1% for the year. And then EBIT margin, the 13.3%. Again, if you look at February 2020, we're tracking well ahead of 2020 at 15%, which, obviously, again, shows the impact of all the work that we have done in terms of our cost base. Our cost expense ratios reduced over the year, I think, to 20 -- to 44% from a previous 46%. On the right-hand side, the financial position block, I just want to focus on 1 or 2 key metrics there. The rest, I'll give some color as I go along. Our net debt-to-EBITDA at the end of the year, it was 1.99. We're well within our covenants with our banks. Our covenants run asset and aligned with all banks at 2.5x EBITDA. Just a slide on revenue breakdown. Yes, we've got revenue coming from largely -- 92% still comes from obviously retail, but then there's other services, whether it's [ VES ] or credit, where, again, income grew to 10.4%, which is pleasing in a very difficult year. Some of our key performance drivers or turnover drivers, I don't want all -- talk to all the numbers. In terms of geography, you can see the contribution from London and from Australia. And I know that Ben and Gary, my colleagues, will talk to that when they present their sections or their areas. But great performance is there in a very, very difficult market, especially in the U.K., where we saw a lot of our competition actually either close down or going to administration during the year. Revenue from cash sales continue to increase. I think Anthony has already spoken to that. Ten months -- we're tracking at about 10 months -- at 10% over the 11 months to February 2020. And at the end of the year, we reported an 8% growth in cash sales. In terms of our merchandise categories, very pleasing that our categories or the growth in all our categories was recorded by all our businesses during the year. Again, I mean I don't want to highlight homeware and jewelry, which, in a very difficult market, subdued economic environment, I mean I think we all know you buy jewelry and change home furnishings. We're not feeling confident, but well done to those teams and recorded growth of 5.2% and 3% on last year. Clothing as well, I mean, in a highly competitive space, where probably our supply way exceeds demand. We still managed to grow 4% on last year. You'll see the comparable metrics of how we're tracking for the 11 months to February. Excellent performance by teams in retail and the retail directors. I won't focus on this slide, but maybe only on Africa, as Ben and Gary will take you through the rest of the other international businesses. Turnover for Africa, still our largest revenue generator and still our biggest region, up 3% on last year. Margins held that after even having taken some provisions on stock, I think we took about 200 additional stock write-down at the end of the year, again, being conservative and taking into account the impact of COVID. We know the April period would have allowed us to clear a lot of our summer stock and a lot of our probably mid-season stock into winter. And then we decided to probably take conservative there and take a stock write-down. If we look at our balance sheet, then inventory. I think we've spoken a lot about that in the past through a project called [ Wind ], where we have worked as a team and with the retail teams to actually improve and optimize our supply chains, ensure that lead times are shortened, and we can see the daily incline in the inventory days over the past few years. The group inventory grew to ZAR 8.4 billion. However, the days reduced, showing that a lot of our stock obviously was current and due to the curtailed performance in March, we settled a higher balance at year-end. However, most of it quite current, evidenced by the stock days there that reduced by another 10 days from last year. Trade receivables grew to ZAR 7.8 billion, up 4% on last year. Jane will speak on credit, but this is in line with the growth in our gross debtors' book, which actually has continued to grow ahead of our income in credit -- credit income. So again, a pleasing performance there. Current ratio is stable at 1.5%, which we are quite comfortable with. On the right-hand side, I just want to highlight probably the ROCE for Africa on a pre-IFRS 16 basis. Our long-term target is stated in any of our financial reportings at around 23% to 25%. We'll continue to drive towards that, and pleased that we achieved 22% in 2020 financial year. On the debt side, we've spoken to this, which -- our debt dropped to 52.4% again last year from a previously reported 58%. You'll remember, prior to this, our debt levels, we're running -- debt-to-equity levels, we're running at about 67%, 68%. So a great improvement and a steady decline, as you'll see with the graph on the right-hand side. And then on the bottom section, I just wanted to highlight there our debt repayment profile as of the end of March 2020. We said with -- as I said, gross debt of close to ZAR 10 billion, of which a lot of it, ZAR 6 billion of it was maturing within the next 12 months, which was always a concern probably from the investor community when they spoke to us. We managed to renegotiate a lot of that and push it out to 2022. The ZAR 4.1 billion of that is now repayable in 2022. So that's just at the end of the year, but we've managed to renegotiate that to push it out to 2022, working with our banks and our funding partners. And at the same time, we then managed to secure new facilities, fresh money with our banks, working with our banks and our funders of ZAR 3.3 billion. And at the end of May, due to a very strong trade in May, I think we closed with cash and liquidity of -- in excess of ZAR 6 billion, ZAR 6.5 billion. We also managed to achieve covenant waivers and working with our banks as well. I think I mentioned about covenant levels that we had in the past and some reset at the end of 2021 financial year to 3.5 EBITDA metric. And then we've spoken to the dividend. So great support there, and a great sign of confidence from our funders or our banks. Cash flow generation, we've spoken again to that. I just want to highlight the bottom right-hand side of this slide. Our free cash flow has evolved over the years. And that, despite having spent at least ZAR 5 billion in CapEx, a large part of that CapEx actually on expansionary type CapEx in the past 5 years and largely focused on store customer-centric digital platforms and obviously the way we work in our back offices and investment in systems and automation. So I mean for full year 2016, our free cash flow generation was at 30%, and that has more than tripled to 92% in 2020, which, again, I think is a record performance by TFG. CapEx, which I spoke to earlier on, by nature, a large portion of it, 70% of it was expansionary. And even within that, a large portion of that was digital and less on stores. I think we opened a few contact big stores in our regional centers last year. It was mostly the investment in stores, and the rest was just on maintenance. But on the digital transformation, I think Anthony has spoken to a lot of CapEx spend, whether it was RFID, Yoobic and all that he mentioned earlier on, which was expansionary. Again, a lot of this, we can turn on and turn off as and when the economic conditions prevail. But obviously, our ambition and our drive is to continue on this investment trajectory and maintain our competitive advantage. Maybe if I can then touch on the rights issue that Anthony has spoken to. Yes, we've managed to raise funding. Yes, our balance sheet is very much quite comfortably at ZAR 6.5 billion cash, as I said, at the end of -- cash and facilities as at the end of May 2020. However, we're facing a very uncertain period. So we have approached our key shareholders over the past few days to work across them and to get their support for us to be able to raise gross profits of up to 9.5 -- ZAR 3.95 billion. And I think we've mentioned how we would apply these proceeds but largely as well to settle part of the debt and also to continue investing in our business, as we've mentioned. And how we see this pan out is that probably we'll call an EGM and set that process in motion, engage some of our international shareholders, and by mid-July 2020, next month, hold an EGM and then publish the results of that EGM on our SENS. Then immediately after that, depending on how things go, launch the proposed rights issue, hopefully, with cash in the bank by mid-August, 15th of August. And I think it's all informed the quantum, the size and the timing is all informed by this scenario planning that we did, which I think you'll see the detail indicated in the appendices -- in Page 66 of the appendices. So thank you very much also to our shareholders that we've spoken to thus far. Not mentioning all of them, but the PIC, OMIG, [indiscernible], Coronation, STANLIB have all been highly supportive, and we appreciate it with that in the form of irrevocables or in the form of letters of intent, appreciated. What I also did mention was that the whole equity rate is fully underwritten by our banks, 3 syndicates of 3 banks, RMB, Standard Bank and Absa. And they also exist, our transaction advisers, and we appreciate the work done thus far. If I just move on to TFG Africa then in closing, I think I've spoken a bit on TFG Africa. Retail turnover continued to grow at 3%. A large proportion of that growth was from cash sales. Our EBITDA margins, if you look at -- in February 2020, we're up 29.1% of system metrics on our key expenses, whether it's rentals, whether it's depreciation, whether it's store staff, all of them, and we're reducing, and it's all in the appendices. And Africa, despite all the COVID-related provision that we took, still maintained their gross margin at 48%. And I think on the other side as well, we give the details of our store portfolio in the appendices. Thank you very much. In closing, I'd like to also thank our finance teams, South Africa, Australia, London, for all the work that they've done in a very difficult period to work virtually, or to work remotely doing operational staff is difficult, let alone trying to complete a month-end, a year-end and audit and also beginning to work on the equity raise. So I really appreciate all the support from our teams. The support also from our fincom and our audit committee has been enormous, and risk committee in this period has been enormous, and that I'm very truly thankful from. Thank you very much. I'd like to then hand over to Jane, my colleague, who will take us to the credit section.

Hello, everybody. I hope you're all staying safe. It's certainly very different presenting to an audience that you can't see. All I can see are the camera technical crew in front of me, but they're smiling. So everything must be okay. Well, how are the credit numbers looking? Well, before COVID even hit South Africa this year, the industry was already showing stress with regards to the Consumer Credit Index. TU came out with their results for quarter 1 this year, and it dropped below that all important 50. Customers were actually using more of their credit cards and more of their overdraft in quarter 1 this year compared to last year, which meant there was more distressed borrowing in the industry. Obviously, we then had COVID hit us well. Now our application levels in this financial year normalized at 12%, and that was off the back of a 70% increase last year when we won that proof of income court case. We've been keeping our accept rates purposely constrained at the 37% as we've been tightening up well ahead of the market with some of the conditions that were happening. As a result, our new accounts are down 9%, and we have seen a slight decline in credit sales. Now given that we run all of those new accounts last financial year, the year before financial year 2020, we've actually now seen those accounts come through and have been written off in this financial year. So it's no surprise that the write-off grew to 22% because accounts now reached their peak write-off 18 months after being written. Those write-offs are now through our portfolio, and all things being normal, we would have expected our write-off growth of the new financial year to be in single digits. The good news, though, is that our delinquency levels for our new business that we have wrote in the last financial year were better than the previous year, and they were actually even better than the year before. And how we measure delinquency is by looking at accounts 3 months after they've been opened and what are their delinquency levels, and that's looking good. So our new accounts are all looking very, very good. Now our impairments as a percentage of our debtors book would have decreased to 18.4% before COVID hit. And the reason for that is that we've got the peak write-off through, new accounts are looking much better, which means going forward, we would have expected our impairments to be lower. And it should have dropped to 18.4%. But of course, we did raise extra provisions for COVID, and that has now increased its ratio up to 20.4%. And we also have a debt intervention bill. Now of course, things that's been signed into legislation that has caused some nervousness there out in the market. And we have had some debt sale purchases just not wanting to give us the prices that we would have expected. And if we don't get the prices we impact -- we expect, that does hurt us, and we actually haven't sold some of the debt and that's hurt us in 2 ways. We haven't got the revenue we would have expected, and it also impacts the amount of provisions. And we have estimated that's impacted us around about ZAR 106 million for this financial year. And then, of course, COVID hits us. What we immediately did was we limited our exposure. We immediately cut down our credit granting even further, and our accept rates now are down to less than 15%. Now given that our customers normally pay in stores and 90% of all our payments are in-store, when we were in level 5 lockdown, our consumers couldn't pay us. What we had to do immediately was launch a lot of new payment channels, PayU, Ozow, EasyPay, and consumers could now go into Checkers or Shoprite and make payments on their accounts, but we had to do that very, very fast. Now obviously, trying to get your entire customer base to convert to a different way of paying is difficult, and that's not easy for anybody. So what we did do is we gave out -- we ran a number of campaigns where we gave out over ZAR 3 million worth in food vouchers just as a way to say thank you. This hasn't been easy, and thank you. What we also had to do was we had to move our entire call center to at home, so within a 48-hour time frame, we actually managed to move 200 agents right before level 5 lockdown came to have our call center up and running from home so that we can answer all the customer queries and help our customers with how could they pay accounts. And since then, we've been increasing the number to work from home, and we've actually moved more and more agents to work from home. Even with the new payment options, even with the call centers, some customers just still couldn't pay us either because they didn't know how to use the payment options or they physically couldn't. And we have given like a number of other credit providers payment holidays for April and May for those that couldn't pay us. And like I said, we also did increase provisions for COVID to our end of our financial year. We've actually increased the amount of provision we have specifically for COVID. So a summary of our credit numbers, you will see we've shown you pre -- the table on the right-hand side shows you pre-COVID and post-COVID. Obviously, the income doesn't change because of increase in COVID provisions. Our income was 6.2%. Our net bad debt should have only grown by 9.4%. This was going to be a really good year for us. However, we did have to include COVID provision, and that has increased our net bad debt up to 28.5%. Our credit costs continue to be well-managed and well within management's expectations. And there, you can see our overall EBIT numbers. So pre-COVID, I should have been saying to you guys, EBIT is 2% increase. Instead, unfortunately, I'm telling you, it's down 24.5%. Thank you. And I'm going to now hand across to London.

Good morning, everyone. For those I haven't yet met, I'm Ben Barnett, and I head up the London-based brands within TFG. This morning, I'm going to talk you through a short summary of our results for the financial year followed by a walk-through of the impact COVID-19 has had on our brand portfolio, our immediate steps to mitigate and our longer-term pathway towards recovering the lost sales and profitability. So in relation to TFG London's performance, the brands entered the COVID crisis in strong financial health, with 11-month sales to end February holding firm on the prior year and the shortfall at gross margin level being significantly mitigated within our cost base, particularly through an increased proportion of negotiated turnover-based rents, a topic we'll return to later, a sharp reduction in department store sales commissions and a step reduction in central cost base following the completion of our single platform consolidation. As you'll see on my next slide, however, the steady progress of COVID-19 through our international markets and into the U.K. caused unprecedented fall in turnover through March 2020, including a single week of negative absolute sales, bringing our full year outcome to a turnover figure of GBP 390 million or a deduction of 4.5% on the prior year. The impact of the sales shortfall on stock aging and expected stock obsolescence clearly required further provision, reducing our reported annual gross margin by a full percentage point during the period, therefore, ending the year at 59.3% versus 61.4% in the prior year. At an EBITDA level, strong cost control ensured that we entered the final month of the financial year within 2% of our prior year figure. But that single month of sharply reduced turnover, increased margin adjustments and a continuing cost base drove a monthly loss, which reduced our full year EBITDA to GBP 44 million, a reduction of 18.4% on the prior year. In relation to COVID-19, whilst the impact accelerated across all our markets by the end of March, as the chart above shows, we began to witness the impact on footfall in selected Asian markets, principally Hong Kong and Japan, at the end of January 2020. A combination of WHO and press commentary gradually caused ripples across our global estate before driving sharp reductions in U.K. mall footfall and then U.K. High Street footfall through the course of March. As a result, and in line with government guidance, we closed all the stores in our brand portfolio with effect from the 23rd. Now this clearly necessitated a broad and immediate trading response across all aspects of our business. Firstly, having worked with our warehouse and logistics providers to put in place the appropriate safety measures, we were able to continue to operate our online channels for direct sales to consumers, which, as you know, accounted for around 1/3 of our sales in the last financial year. Secondly, within our supply chain, we collaborated with our partners to manage our forward commitments. Products in late-stage production were accepted for delivery in return for the cancellation or deferral to a proportion of our preproduction orders and the extension of payment terms to reflect the greater-than-expected holding period. Significant work was also undertaken to reforecast autumn/winter '20 and reprioritize Dubai. Thirdly, with our teams, we agreed 20% pay reductions across April and May for all store staff, all head office staff and all senior management, achieving strong levels of buy-in to our partnership approach. Finally, we confirmed our eligibility and registered for the appropriate government-based support schemes, both in the U.K. and in the international markets in which we trade. During the course of the current financial year, these grants and cost reductions are expected to exceed GBP 20 million, comprising not just payroll support across multiple markets, including U.K.'s furlough schemes, but also property support, such as the removal of business rates or property rental grants. In addition to the ongoing ad hoc renegotiation of lease terms that continues to take place with our private landlords, it's really the combination of these 4 factors that has enabled us to both maintain a proportionate trade through the U.K. 3-month lockdown of clothing retailers and to reposition ourselves under the gradual reopening that took place earlier this week. Looking forward, the initial impact of COVID-19 has clearly been significant on the wider sector within which we trade. Liquidation, administration or CVA processes have been reported on a broad range of peers, including Oasis, Warehouse, AllSaints, Monsoon Accessorize, Laura Ashley, Cath Kidston, Quiz Clothing and Debenhams, whilst we're aware of, indeed, many more in preparation. As it felt on my first slide, whilst the TFG London brand portfolio was demonstrably outperforming its peer group entering this crisis, it's not been immune to the wider sector challenges posed by the virus. The impact of 3 months of lockdown has clearly been severe, with our store and concession estate closed and the strong focus of our brands on work and on occasion, not necessarily fully aligned with a consumer those online requirements through lockdown have principally been focused on loungewear, activewear and nonfashion. This said, following the lockdown of our core U.K. market, the team prepared a detailed forecast working through sales, stock and cash liquidity. And it's pleasing to confirm that to-date, we've met these forecasts as [ trade in our ] channels is gradually rebuilt and our markets have gradually reopened, culminating in our first U.K. stores returning on the 15th of June. Looking forward, whilst the path to recovery is clearly uncertain, we have a number of significant factors in our favor that should enable us to continue to outperform what's expected to be a torrid U.K. retail market. We have a strong multichannel offering, including multiple direct and third-party routes to market; a broad international footprint that should provide us with exposure to a global recovery; short store leases with increasing flexibility, so 76% of a break within the next 3 years; a solid local balance sheet supported by stable long-term supplier and stakeholder relationships; our consumer demographic is better-placed to weather the economic storm; and finally, we have a government in the U.K. that is increasingly supportive of our sector and crucially, a supportive group of key stakeholders, including our suppliers, lenders and senior team. So I very much look forward to answering your questions. Thank you.

Good day from Sydney. I would love to be in Cape Town right now with all of you, talking through what I believe are very good results, but also happy to be here in the office in Sydney with our CFO, Dean Zanapalis. We are both safe and well, and we trust all of you are too. RAG was absolutely flying at the end of February. And while March was incredibly tough, we still managed to have our best year ever. Today, I'll briefly talk to 3 main areas: our TFG Australia performance, COVID-19 impact and our response and strategically, how we are moving going forward. So looking at our performance, sales for the financial year were up 9.6% on last year and were up almost 12% at the end of February. Like-for-like sales, including online, was up 4.1% versus last year. But at the end of February, we were up 7.1%. So you can see how tough March actually was. EBITDA was up 15% on prior year, and [ its gradual ] EBITDA growth faster than our sales growth. And year-end, we have 509 freestanding stores. That's 32 more than last year, and we also have 25 concessions in the department store, Myer. If not for COVID-19, we would have absolutely smashed the lights out, but I'm still very happy with our above-market performance. COVID impact -- COVID-19 impact and our response. So COVID-19 hit Australia hard. In mid-March, our Prime Minister encouraged us to shop for essential items only. Foot traffic started to plunge. Sales dropped massively and our stores became loss-making. RAG acted quickly. We closed all our stores on the 27th of March. And on the 1st of April, we stood down all team members temporarily without pay. We actually went into hibernation mode, and we massively reduced our cost of doing business. Online remained open and sales tripled versus last year, with great results and cash started to come in. At about the same time, our government really stood up and introduced a range of policies that are extremely beneficial for retailers. These included JobKeeper. JobKeeper is a safety net for employees of businesses whose turnover dropped a certain percentage versus last year and RAG qualifies. And this entitles all our full-time team members as well as some of our part-time team members to $3,000 a month paid by the government up to the end of September, and this money does not need to be refunded. In addition, they introduced a code of conduct for retailers and landlords to use as a guide. We're negotiating rents for the shutdown period as well as the period to the end of September for rental negotiations. So we had strong online sales. We had subsidized wages. We had reduced rents and great relationships with our suppliers. Indeed, managed our cash flow brilliantly, and we have not needed to extend our existing facility with our bank. Australians were allowed to exercise outdoors, and we absolutely embraced this. Our online Rockwear business was flying, and we decided to trial opening 2 stores on the 18th of April. This was a big success. Following this, we started trying and opening a small number of stores in our other brands as well as rolling out the openings of our Rockwear stores as quickly as we could, subject to COVID-19 restrictions. Sales were encouraging, and we could staff the stores with government subsidized wages. And on the 11th of May, we started meaningfully opening stores. And by May 25, all RAG stores were open and trading. Sales are tracking above expectation, and we are very pleased with how we are progressing to our revised forecast. So where are we now? Our business is in good shape. We acted quickly, and we preserved cash. Online sales grew exponentially, and we continue to invest in this very important channel. Our relationships with our bank and our merchandise suppliers is excellent. So strategically going forward, we will continue to grow our online business and invest further in digitalization. We see enormous potential post-COVID-19 to roll out new stores, and we believe there will be acquisition opportunities. And I really look forward to being in Cape Town next year to stand in person and talk about our financial year '21 results. Thank you.

Hi, everyone. Now for perhaps the most difficult part of the presentation. I'm trying to give some sense of the outlook. I think dealing with the outlook at the best of times, given the volatility of retail is difficult. I think at the moment, it's best said extremely difficult unless you've got an absolutely perfect crystal ball. I think the only outlook at the macro level that I can really share is that looking ahead, almost regardless of how COVID plays out and the economic impact plays out in the next 12 and 24 months, by definition, have to be tougher than the last 12 months. It's really a question of how much. So very difficult to provide guidance in terms of absolute direction. But what I can talk to is there really have been, I think, 3 structural trends in retail that have been accelerated during this lockdown period or during the COVID crisis. These 3 trends, I don't think are going to change in terms of the new trajectory, certainly not anytime soon, if not ever. And I think on the back of those, we are very strongly positioned as TFG to capitalize on those opportunities based on where we're positioned and on some of the investments we've made to date. In terms of those 3 trends, I've already mentioned the very strong shift in online shopping or the shift towards online shopping. As I said earlier, once you become online shopper, you tend not to go backwards. If you look around the world at pretty much any market, once you hit critical mass, and you're growing at 50% to 100% per year, which is what you should be doing if you're serious about online, it becomes a very meaningful number very quickly. I think the second big trend, and it probably applies to, frankly, most of the people even on this video conference today is the shift away from smartwear towards more casualwear. We've seen that again, both internationally and locally. Very simply put, people aren't going to the office. As a matter of fact, a lot of people probably won't go back to offices before the end of this year at the earliest. People are staying at home. They're dressing casually. There aren't a lot of events to go to. And again, I think that is going to be the situation, maybe not permanently, but at least for some time to come. And then the third big trend that we're seeing, again, internationally, and no doubt will play out in South Africa is people relooking at their supply chains, trying to derisk them, bringing them onshore and localize them to the maximum extent possible. We've already quite far down that track. But again, I don't see that going away perhaps ever. In terms of why I believe we're very well positioned to capitalize in terms of those trends. First of all, we've got a very diversified product mix and customer base with very strong brands that support our growth. Why that is really important is if you look at the proportion of smartwear, particularly in our South African business, that has come down dramatically over the last 10 years. Really, smartwear for men's within our group was predominantly a very small portion, probably 5% to 7% of our Markham offering. And then lady smartwear is predominantly a portion of the Foschini business. Foschini itself has become a much smaller part of our overall business as other brands, particularly the casual ones have accelerated. And even within Foschini, the smartwear component has come down from roughly 85% of the assortment to about the mid- 50s. So we've certainly deemphasized smartwear and we're well invested in casual wear, young youth fashion. If you think about brands like The FIX, sportscene, Exact, et cetera. We also are geographically diversified across 32 countries. Clearly, COVID is going to have a bigger impact in some countries than others. So far, South Africa seems to be being spared the worst of it. Again, it's the benefit of diversification. Geographically, hopefully, that will stand us in good stead as well. I've mentioned the structural shift in e-commerce. We are very well positioned already. I've spoken to the growth that we've had, some of the investments we've made. We're able to learn a lot from, particularly our U.K. business and to not quite the same extent, but increasingly saw our Australian business do well ahead in terms of e-commerce penetration in their markets. We've got some definite rollout plans and a road map in terms of how we take e-commerce and omnichannel forward. And it really is around continuing to invest on the platforms and the technology that we've embarked on over the last 12 and 24 months. I mentioned localization and onshoring. We've shown the increase in our own local contribution, particularly the quick response portion of that. That will continue as we invest behind our local manufacturing. It's the right thing to do for our business. Economically, it's the right thing to do from a risk perspective. And equally, we believe it's the right thing to do from a socioeconomic perspective in South Africa because it really does create more jobs in most other industries. And then ultimately, I spoke about the importance of talent, particularly in the retail and credit spaces. We've got a solid history of management execution and a track record of delivering on most of what we set out to do, particularly in terms of quality earnings. So we go into this crisis with all of that. The actions coming out of it very succinctly are to fast track e-commerce and digital transformation even further. To continue to invest throughout the cycle, the logical forward pattern often goes, cut back CapEx when times are tough. The success that we have today is because we've been countercyclical, and we've had the courage to invest throughout the cycles. Now is the time to continue doing that. We've positioned and are in the process of further positioning our balance sheet to allow us to invest in those critical areas. And when you add all of that up, it gives us every opportunity for both organic growth and opportunistic M&A, really, in aggregate to capture market share going forward. Then to deal with the outlook as best we can, I guess it does come with a caveat written across the bottom of that slide. There's no doubt that COVID-19 will have a significant impact on our FY '21 results across all of our territories. The reality is, at this point, we actually cannot predict how severe that impact will be. What I can share is the trade that we've experienced since reopening. Normally, we wouldn't share this amount of granular detail because it's -- frankly, it's too short a time period, I believe, to take a view on. Having said that, I do realize that everybody is looking for a signal in terms of what trade has been like since we've reopened in the various territories. So I think under the circumstances, this year, we feel obliged to share this. In our South African business, from the beginning of May, if we compare our 2,000 stores that were allowed to be opened to those same 2,000 stores in the previous year -- so in other words, on a pretty much a like-for-like basis, our turnover was up circa 7% for the month. It started off more strongly. There was clearly a lot of pent-up retail demand at the beginning of the month. It did taper off a bit towards the end of the month, but that was expected. But as I said, in aggregate, 7% from the 1st of June. I was again a bit slower. That was when alcohol sales resumed and other retail opened up, so very difficult to extrapolate it. But any way you cut it, I think 7% would have been certainly ahead of our expectations. For TFG Australia, they started a couple of their store openings early May. They already opened en masse from mid-May. They've traded initially fairly -- on a fairly subdued basis, but that's growing stronger and stronger every week. And over the last week, they've got back to in excess of 90% of where they would have been last year. And if they continue that trajectory, we'd expect them to be back to last year's numbers, hopefully, fairly quickly. The U.K. genuinely is too early to call. As I said, the U.K. -- or the actual U.K. outlets only open for Monday. Very mixed responses in the center of London, well done. And in department stores, well done. However, some fairly substantial growth numbers in smaller towns and cities across the United Kingdom. So I think that, really, that's a reflection of people feeling comfortable to go back into big stores or into city centers. We'll have to see how it plays out. That really does bring to conclusion our presentation for today. I'd like to thank everybody for taking the time to join us, and to our shareholders, thank you for your continued support. And in particular, for the support that many of you have already pledged for the rights issue. That feels very humbling and gratifying to feel that support where we are at the moment. Equally, a big thank you to our bankers and advisers who stood by us at a -- clearly, a very uncertain time over the last couple of months when we couldn't trade. And then finally, a big thank you to our President of South Africa and the South African government, who've really done everything they can, I believe, to steer South Africa through an unprecedented crisis. And in particular, a nod of acknowledgment to the DTI, who we've worked very closely with as a retail group to get retail opened as quickly as possible. The speed at which retail actually reopened, given the COVID outbreak, I think, is remarkable and the same would apply, I guess, in Australia and the U.K. as well. With that, it brings the end to the formal presentation. We're going to take a 3-minute comfort break and then come back to answer the questions that you've sent through via e-mail so far. Again, thank you very much. [Break]

Hi, everyone. Welcome back. I hope you had a -- you had your comfort break. Really going to run through the questions that have come through as quite a few of them are repetitive. So I'll try and summarize them as best I can. We're not going to be able to answer all of the detail on the webcast today. So to the extent we can't, please feel free to e-mail those into Bongiwe, Jane or myself. And we'll try and get back to as soon as possible. The first question, Bongiwe, I think I'll direct this to you is, can you provide some further detail on the underwritten rights issue in terms of when that detail will be available to the market?

Sure. Thank you, Anthony. And because of JSE processes and some legal processes, we can only issue a very comprehensive right of a circular post the AGM. So I think it's futile. You'll have a lot of detail on the company and the details of our rights offer and the details of our performance, but only post the AGM. So probably after the 16th of July and it's actually because of how the JSE is regulated that collates the processes.

Perfect. Thanks, Bongiwe. So a lot more detail to come out in the circular, guys. Next question is, how your high-end brands performing versus value brands versus athleisure. Again, a very good question. So I think my starting point would be what I referenced as a trend in the conclusion around smartwear. Smartwear is definitely under pressure in all of our businesses. Fortunately, in our main business in South Africa, as I said, it's a very small proportion, kind of 5% to 7% of Markham and a smaller than ever proportion of the Foschini ladies brand. From a high-end brand point of view versus value, we've actually seen strong growth right across the LSMs. So initially, we had some very strong growth in the value brands. Your Exact and your FIX, for example. At the same time, we've had phenomenal growth in G-Star and Fabiani, which would be right at the top end. So I think it comes down to, to be honest, not so much the LSMs so much. I think it comes down more to the brand positioning and the brand equity. We've -- I had to almost talk to our entire retail model. We're very much a specialty retailer. We invest a lot behind the brand equity of our different brands. I guess to answer it from our perspective, in a time when if you assume sales could be down, whatever number, 5%, 10%, 15%, 20% from last year, what you want is you want your brands to be #1 or 2 in terms of brand equity. You don't want to be #4 or 5. If you're #1 or 2, people are going to buy your brand to whatever extent the market is buying. If you kind of feel rate is #4 or 5, you're probably not going to get the spend at all. And then there was also a question around athleisure. Athleisure has continued quite strongly. Again, that's a global mega trend, but equally, I think as people sit at home being in a comfortable pair of sneakers, a jacket, et cetera, is how people are dressing. So that's really where that's playing out at the moment. Then another question, which I'll take. Given the expectations for online growth, how do you anticipate the physical closure of stores in the long term to evolve? I think it's a good question. There will always be room for physical stores. Even in countries like the U.K. where online can be 34%, 35% of total turnover. People are going to stores, they do act as a showroom for the product to an extent. So it's not that we're running away from stores. However, I think it becomes much more a rental business, turnover debate. As online grows, and we've seen this in most markets around the world, stores become less and less viable over time, certainly your tail-end stores. And ultimately, that ends up as a negotiation between a retailer and the landlord. And if you can come down to right rental, the right percentage of sales, whatever that sales is, then it's actually worthwhile keeping the store open. If you can't, then it's -- you're better off closing. So I think we are -- in the long term, I think we'll probably end up with less stores than we have at the moment. If I look ahead over the next 12 months, we've got over -- as a group in South Africa, over 500 leases coming up for renewal. A lot of those stores, if you kind of forecast your kind of best guess, the turnover may become marginal. So those are stores where we're going to have to negotiate rentals with landlords or we'll close them. And if we have to close them, then so be it. I think that deals with that question. Sorry, one other rental question, I'll deal with it at the same time. What rentals have -- what fair rentals have you agreed for April and May? For the month of April, we ended up agreeing that we would pay landlords an all-in amount of 25% of the rental. Bearing in mind, we weren't able to trade. So that was really to cover the operating costs and any storage of our goods. If anything, I think that was probably something on the generous side. Once we started trading in May, it depends very much on the individual brand. The brands that we weren't able to trade, for example, jewelry, a very similar position to April. Brands where we're trading and trading well, we've paid normal rental and some brands where only portion of the merchandise could be sold, we've adjusted our rental to those sorts of levels in our negotiations. As I said, we've got over 1,000 landlords in South Africa alone. And so that's going to take quite some time to settle. Okay. Bongiwe, I'll pass this one on to you. Is the business currently operating at free cash flow breakeven? And what was the debt as at the end of May?

Sure. Thanks, Anthony. Great question. I mean, currently, definitely cash flow breakeven and above. I mean we're generating strong cash flow, especially because we won't pay the dividend this year following the decision by the Board. And our net debt position due to the very strong trade, obviously, April was not turnover. But in May, because of pent-up demand and several factors, we generated cash, whether it was in terms of cash sales or cash collections right until probably last week to the tune of ZAR 3.3 billion. Very strong cash there, which then gives us headroom of about ZAR 6.5 billion if you combine our facilities plus the cash that we generated. And our debt levels actually have dropped, bank debt is now sitting at about ZAR 6.6 billion, but then we do have some institutional funding, which obviously has long-term maturities.

Perfect, Bongiwe. Thanks very much. Jane, I'm going to pass the next couple of questions to you. There are a few that are really of a similar theme. I guess, in essence, what is the outlook for provisioning and, I guess, for credit losses and credit extension, given the impact of COVID?

So to control bad debt in this financial year, we have taken a number of actions. So first of all, we have restricted the number of new accounts that we're going to open. So our accept rates are to less than 15%. We've also increased the number of payment channels that our consumers compare us by. So we're making it easier for our consumers to be able to pay their accounts, and we have implemented 2 payment holidays. And that's as well as raising a provision for COVID, taking our ratio up to 20.4%. So we do believe we're adequately provided, and we've built a reduction of payment behavior into our models in order to calculate what we think we need for the provisions. However, monetary payments over the course of the next few months is crucial because we need to understand how do our consumers react once the lockdown starts to ease and what is the impact on the economy and our consumers during the course of the next few months. But to conclude, it's difficult to predict exactly how much provisions we should need. We have stress tested our models. And we believe we're adequately provided, given the information we have at this moment in time.

Thanks, Jane. That's probably the best answer we can give at the moment. And if possible, could we cut across to Gary in Australia, please? I'll read out the question. And this is actually a very good question. TFG Australia has done very well, partly as a result of Australian home prices being unaffordable for young consumers. We are then inclined to spend proportionately more on clothing, et cetera. With residential property prices in Australia now crashing, is this dynamic likely to change? If we can cut across, Gary, to you.

Thanks, Anthony. I think I'm going to give Dean a chance to talk. I think that's [ kind of an area that he’s okay ].

Thanks, Gary. This is Dean, CFO. The [indiscernible] residential prices are down and then there are a few [indiscernible]. The reality is that the less confidence that we've got in the market, the younger guy is just as outgoing out there to risk investing in such a big [indiscernible]. So banking [ perils ] are hard right now, particularly because of the volatility in the property market and confidence is low. So we don't actually see that this will really change the behavior. If anything, it will probably encourage people to go back to the habits they already had and certainly buy that shirt to go out on Friday night.

Yes, Gary here. I mean our guy doesn't have a mortgage. He doesn't own a home, he's a young guy. He's a young customer. So it doesn't really have an impact. Property prices do not have an impact on our business.

Thanks very much, guys. And I think that's answered the question. And so far, that's the only Australian question, and so we'll come back to South Africa. Trying to find a question that's different. Okay. Here's one. Was there much discounting in South Africa in May and June? I think the market has been heavily discounted, actually, since kind of the end of January. As a matter of fact, even into the back end of last year, what a lot of retailers didn't sell in black -- or over Black Friday in December was very much in stores. January, February, March. That has continued. If you walk through any malls at the moment, you can kind of see red for sale signs in most stores. We've managed not to follow with heavy discounting across our brands. Again, it goes back, I think, to the earlier point around brand equity of our brands. The majority of our sales growth at the moment or sales are coming from full price sales. Yes, impossible to predict how much discounting there'll be during the rest of the year. But at the moment, I think we're managing to just be tactical as opposed to having to join what is a pretty heavily discounted market at the moment. Then there's a question around how much of the ZAR 1 billion cost savings comes from rental savings. That ZAR 1 billion, just to be clear, was a target that we've set ourselves. All we've built into those rental savings are the rentals that described having pulled back in our first month of operations in South Africa. In other words, in April, together with the negative rental revisions that we've already negotiated. So those are kind of pretty much in the bank in terms of leases that we would have renewed towards the end of the year. And then there's a question on the emergence of online shopping, how do we ensure that we continue to offer good customer service? Again, an absolutely important question. I think anybody who's ordering online at the moment, there's a fair chance you've been disappointed in terms of delivery times because of the backlog in online orders. I spoke in my presentation on e-commerce and digitization around our OneStock system. And I mentioned very briefly that, that allows us now to fulfill from store. In most cases, with 400 stores already on OneStock, we can fulfill from much closer to where a person lives or works than we would have in the past. And certainly, we want to take those 400-plus stores across a much wider proportion of our South African store base, which I think will assist in terms of further ensuring that we do continue with good customer service. I'm trying to see if there is anything else. There's a general question around COVID-19 has forced remote working for many people. How are we experiencing this at TFG? And could this be a new norm and ways of work? Again, I think that actually goes -- so I can describe it from a TFG perspective, but I'm sure it's the same for most of us. We've only got absolutely essential staff in our head office. I think that is -- and everyone else is working remotely on Microsoft Teams from home. I think that is going to be the way of working for quite some time. Many people I've spoken to have literally been told that they are unlikely to go back to their head office for the rest of this year. And I think that goes to people wanting to wear casual clothing as opposed to smart clothing that I mentioned earlier on. Guys, the rest of the questions that have come through -- sorry, there's one other one, which is different. Why are we not interested in acquiring Edgars or Jet? I think for a couple of reasons. One, the Edgars business itself is ultimately a department store. It's absolutely the opposite of our model. We've been saying for years that department stores, really, are not the future. They're the biggest losers in terms of the shift to online. And as we've described that shift to structural and has accelerated. And you can look at department stores around the world to see the same trend. So I think that deals with the Edgars side of the business. The Jet side of the business is probably the most attractive part of the Edcon Group. It does represent the value end. The reality though is both Edgars and Jet are tied together in a head office in Johannesburg with the common IT, common infrastructure, common logistics, et cetera. They're not profitable to spend a lot of time trying to untangle a business in Johannesburg when we're a Cape Town-based business and take that on and return it to profitability, given everything else that is already in our strategic plan. It doesn't seem to be a sensible risk to take or a good investment of our own time and effort. So unfortunately, we're not interested as a buyer. Then are you confident with your inventory position? Or will there be a situation in which you require further deeper discounting? And will Edcon likely flood stock into the market? So I guess on the first part of the question, we -- again, going back to supply chain flexibility, that's why I made the comment that localization becomes critical. Nobody can really forecast what their sales in spring/summer are going to be with 100% accuracy or with the kind of accuracy that they might have been able to do in the past. What you want to be able to do is get in and out of stock with the shortest lead times possible. The most effective way to do that generally is to onshore. So we're managing that on a weekly basis. We actually sit as -- in retail terms, we term that an open to buy committee. You don't want to end up with too little stock because then you've got nothing to sell. At the same time, you don't want too much, so it's a fine line. But that's where the retail experience, I guess, comes in. And then the question around Edcon causing a flood of stock into the market. I think, clearly, that depends as to whether there's a buyer for Edcon or not. If there is a buyer, then it's unlikely there will be a flood. It will probably continue as it has been. If they're in an unfortunate event that there isn't a buyer, and it can -- really does start to wind down, yes, I think there will be a flood of stock into the market. But a lot of that stock has actually been in the Edgars stores for over 1 year. It's not new. It's just a case of marking it down further and further. Will it disrupt the market for a short period of time? Absolutely. I think you're probably in for 1 month or 2 very heavy sales that you're up against. But again, it comes down to ultimately, I think, your brand equity in terms of whether people want to shop with you or not. Again, as I said, at the moment, we're having a lot of full price sales despite the rest of the market being on very heavy markdown. So -- and then there's a question on, is the rights issue purely for the balance sheet? Or is it to fund an acquisition for the group? I think I've covered that already. We don't have any retail brand acquisitions in our sights at the moment, but we would anticipate that they, in all likelihood, will be. As I said, we have a very strict criteria that we've applied to all of our acquisitions in the past, and we would apply a similar criteria, but probably even more strictly, given the uncertainty about outlook at the moment. Guys, that is, I think, pretty much -- sorry, one more for Australia guys. It's just come through. Gary, if you're still there. How has COVID-19 changed your space strategy or space growth strategy in Australia? You've had an aggressive rollout up until now, is this realistic going forward?

Absolutely realistic going forward. It's a very important part of our strategy and will remain so. We've got a two-pronged strategy. It's growing online, but also growing our store footprint. And the further we open, the more stores that we open, we tend to increase our online business as well. We sign up new customers. People get to know us in new towns and cities, where we will continue on that expansion. I think the positive for us in that I believe the rental metrics has changed and probably shifting in the favor of the retailer. And so I think we will continue to open as many stores as we can.

Thanks very much, Gary. And then guys, I think there's just one other question that's come through and that is how have we looked at impairment testing at year-end? In other words, the value of intangibles, goodwill, et cetera. Obviously, that was a -- in any retail operation at the moment, that's a key question. I guess I'll probably, Bongiwe, pass it on to you. But I think, in essence, just to say it was something that was a key audit area and it can only really be judged at a point in time.

Yes, exactly. I mean that's spot on, Anthony. We've played various scenarios and looked at all our assets, whether in Australia or the U.K. and in terms of our balance sheet. And we applied several WACC rates based on the guidance and advice we received from our banks and also based on the prevailing WACC rate in those countries. And then, all our testing at that point in time, I think, at the end of March, even end of April showed no need for impairment of any of our assets in the balance sheet. And in terms of stock, I think I mentioned when I spoke earlier, in Africa, we took some stock provision. And I think also in other areas of operation, we took some stock provisions.

Super, thanks very much. Guys, I think that most other questions fall pretty much into the categories that I've already answered or alternatively are kind of questions of detail that would be best responded to by e-mail. Again, thank you very much for joining us today. Thank you for the questions and the interaction. And I'm sure we'll pick up further questions over the next couple of days. Enjoy the rest of the day and stay safe. Thank you.