Truworths International Limited (TRU) Earnings Call Transcript & Summary

Good morning, everybody. It's my pleasure to welcome you to the AGM. This is the 23rd since the company's listing on the stock exchange in May 1998. As a consequence of the impact of the COVID-19 pandemic and the restrictions placed on meetings. The meeting is being held through electronic means as provided for in the stock exchange and the MOI of the company as well as the Companies Act. Any shareholder or appointed proxy represented of attending the meeting is eligible to ask questions. [Operator Instructions] The listing requirements of the Companies Act and the MOI set a quorum of at least 3 members present in person or represented and holding at least 25% of the voting rights. As 5 members are in attendance and as 74.05% of the voting rights is represented, the quorum has been achieved. The number of votes that can be cast at this meeting is 389,591,488, which equals the number of the company issued shares of 430, 811,953 less, 41,220,465, repurchase shares and scheme shares held by the group on the record date for the meeting. The number of votes actually represented at the meeting is at least 288,500,008, representing 74.05% of the total shares (sic) [votes] that can be cast. Included in this number are 286,359,909 votes reflected on proxy forms or letters of representation executed by shareholders in my favor. I am advised by the Secretary that there are no [authorities]. Voting on all resolutions proposed at this meeting will be conducted by way of a poll. I have nominated a representative from Computershare to act as the scrutineers. Please note that only shareholders who are in possession of a valid proxy form, which has been filed in accordance with the notice of the meeting, all shareholders who are reflected on the share register or who are in possession of a written letter of representation are entitled to ask questions and vote at this meeting. Any person not so entitled may, however, place questions after the conclusion of the meeting. I will now open the meeting, the voting on all resolutions. Once the voting has opened, the polling icon will appear on the navigation bar at the bottom of the screen. From here the resolutions and voting choices will be displayed. To vote, simply select your voting direction from the options shown on the screen. To change your vote, simply select another direction. If you wish to cancel your vote, please press so. Voting can be performed at any time during the meeting until I close the voting on the resolutions. At that point, your last chance will be to submit your vote. You will still be able to send messages and view the webcast while the poll is open. I will announce the results of the voting at the end of the meeting. Notice of meeting notice of this meeting was published on our website on the 1st of October 2021 and mailed to shareholders, we have so selected on 5 October 2021. With the group's 2021 report, I therefore propose that it be taken as read as has been published on the Smart AGM as well. It's necessary to note the minutes of the 2009 Annual General Meeting as these meetings have been published on the Smart AGM portal, I propose that we take them as read. I will sign with your permission these minutes as a true record. Item #1 on the agenda is the group's 2021 annual financial statements, including the Independent Auditor's report, Directors' report, the Audit Committee report, which were published on the group's website on 2 September 2021. And the summary was included in both our 2021 Preliminary Report and in our 2021 Integrated Annual Report. They were also set on the smart AGM. Item #1 of the agenda includes the adoption of the annual financial statements. At this stage, can I ask if there are any questions arising from the actual financial statements themselves, one of my Board colleagues will be happy to respond. I do ask at this point in time that questions of a more general nature are asked at the end of the formal business. Are there any questions specifically on the 2021 annual financial statements or in respect of any of the reports which are included in these financial statements? Okay. If there are no questions, we can continue. I propose that the 2021 audited financial statements of the group and the company be adopted. Would you kindly record your votes on Item #1 of the voting platform. [Voting]

Item #2, Mrs. M.S. Mark, A.J. Taylor, and Mesdames C.J. Hess and C.J. Proudfoot retirees directors in accordance with the company's MOI, being eligible, they have offered themselves for reelection. A brief resume is contained in the meeting notice. I propose that by separate resolution, Mrs. Mark, A.J. Taylor, Mesdames Hess and Proudfoot be reelected as directors of the company. Would you kindly record your votes on Items 2.1, 2.2, 2.3 and 2.4 on the voting platform. [Voting]

Mr. EFPM Cristaudo was appointed as a Non-Executive Director by the Board with effect on 1st January 2021, and subsequently, an Executive Director with effect from 1st July 2021. His brief resume is contained in the meeting notice. His appointment needs to be confirmed at this meeting. I propose that Mr. Cristaudo be elected as a Director of the company. Would you kindly record your votes at Item 2.5 on the voting platform. [Voting]

Ms. D. Earp and Mr. T.F. Mosololi were appointed as non-executive directors by the Board with effect from 20 May 2021. Their brief resumes are contained in the meeting notice. Their appointments need to be confirmed at this meeting. I propose that Ms. D. Earp and Mr. T.F. Mosololi be elected as directors of the company. Would you kindly record your votes on Items 2.6 and 2.7 of the voting platform. [Voting]

Item #3 on the agenda intends to grant to the directors a general authority, which shall be limited in aggregate to 5% of the company's shares in issue at 27 June 2021, over both the unissued and the repurchased shares of the company until the following AGM. The limited authority is only for the purposes of allotting or selling such shares in connection with an acquisition or empowerment transaction by the group and for no other purpose. The terms, reasons for and effects of this ordinary resolution are set out in the meeting notice. I propose that the company's directors be granted this authority and note that it is subject to statutory and regulatory conditions as set out in the notice. Would you kindly record your votes on Item 3 on the voting platform. [Voting]

Item #4 on the agenda is in regard to obtaining shareholders' authority by special resolution of the company or its subsidiaries to be able to acquire up to 10% of the company's issued shares in issue at the 27th of June 2021. The terms, reasons for and effects of the special resolution are set out in the notice convening the meeting. I advise that before any transaction can take place in terms of this authority that are -- that the board will perform the work necessary to conclude that the group has sufficient working capital to effect the repurchases and to conclude that the company will satisfy the statutory solvency and liquidity test after such repurchases. I therefore propose that the group be generally authorized to acquire up to 10% of the company's issued shares at 27 June 2021 on the terms of conditions recorded in the notice. Would you kindly record your votes on Item 4 on the voting platform. [Voting]

Agenda Item #5 deals with the election of the company's independent auditors for the 2022 financial year. The terms, reasons for and the effects of this motion are set out in the notice to the meeting. I propose that this resolution be adopted. Would you kindly record your votes on Item 5 of the voting platform. [Voting]

The next item for business is to approve by special resolution, the proposed fees of the non-executive directors for their services as directors and committee involvement for the 12-month period from 1st January 2022 to 31 December 2022. The fees in question are set out in the notice of the Annual General Meeting and Integrated Report published on the group's website and its 2021 Preliminary Report leaflets. I propose that by separate special resolution, the fees in question be adopted. Would you kindly record your votes on Items 6.1 to 6.11 on the voting platform. [Voting]

The next item of business, Item #7 on the agenda is to confirm by separate resolutions, the appointment of the qualifying independent non-executive directors to the company's audit committee for the period until the next Annual General Meeting. The directors in question are Mr. R.J.A. Sparks, Mesdames C.J. Hess, and D. Earp, and details of their experience are given in the company's integrated reports. I propose that by separate resolution, Mr. R.J.A. Sparks and Mesdames C.J. Hess and D. Earp be appointed to the company's Audit Committee. Would you kindly record your votes on Item 7.1, 7.2 and 7.3 on the voting platform. [Voting]

The next item being agenda Item #8 is to approve by way of separate non-binding advisory votes in terms of King IV and the JSE listing requirement, the group's remuneration policy and the implementation report as set out on Pages 38 to 45 of the group's 2021 Integrated Report. I propose that these resolutions be adopted. Would you kindly record your votes at Items 8.1 and 8.2 on the voting platform. [Voting]

Agenda Item #9 is to consider and approve the report of the company's Social and Ethics Report as published on the group's website for the period ended 27 June 2021 and on the Smart AGM portal. I propose that this report be adopted. Would you kindly record your votes at Item #9 on the voting platform. [Voting]

Agenda Item #10 is to confirm the appointment of the various directors with the company's Social and Ethics Committee for the period until the next Annual General Meeting. The directors are Mrs. M.A. Thompson, EFPM Cristaudo and Ms. M. Makanjee. I propose that by separate resolution, the 3 directors be appointed to the company's Social and Ethics Committee. Would you kindly record your votes on Items 10.1, 10.2 and 10.3 of the voting platform. [Voting]

Agenda Item #11 is to confirm by special resolution, the company's intergroup financial assistance by its subsidiaries. The terms and reasons for and the effects of this special solution are set out in the meeting notice. I propose that this resolution be duly adopted. I would ask you, please, just to record your votes on Item 11 on the voting platform. If I could, at this stage, just remind shareholders who have not yet voted, to please cast your votes now. [Voting]

Thank you. Now that we've completed the formal business of the meeting as set out in the notice, is there any other matter that anybody wishes to raise, bearing in mind that no resolutions may be considered under this item? Are there any other matters anybody would like to raise? If there are no questions -- I can't see any questions coming up at this stage. Okay. Thank you. We can move on. We will now present the results of the voting on the resolutions put to the meeting. There will be 3 separate slides that will come up. So we can just look at them one at a time because of the number of slides. Thank you, we can move on to the next one. And the last one. As the votes recorded against resolutions 8.1 and 8.2 exceeded the 25%, the company will publish SENS announcement detailing the date and time, when and manner in which we will engage with those shareholders who have voted against these resolutions, and we'll publish the outcome of such engagements in due course. At this stage, I'd like to hand over to our Chief Executive, who will read a --will read a business update announcement, which has been released on the SENS service. If I can hand over to Mr. Mark.

Good morning, everybody. This release is happening as we speak at 9:50. So it's a business update. Trading conditions in the group's main markets, South Africa and the United Kingdom, continued to be impacted by the COVID-19 pandemic, which, together with international supply chain disruptions, have resulted in stock shortages in certain product ranges. In South Africa, trading has been impacted further by the civil unrest in parts of the country between the 9th and the 17th of July, having a particularly negative impact on sales performance from mid-July to the end of August. A material number of stores were damaged, destroyed or closed preemptively during this period. Ongoing electricity supply issues in South Africa continued throughout the period, also affecting the sales in many of our group stores. In the United Kingdom, trading conditions have benefited from the recent relaxation of lockdown restrictions, although retail footfall continues to be impacted materially by low levels of tourism and hybrid home/office working arrangements. Against this challenging background and a period of rand strengthening, which served to counter good sales growth achieved in the United Kingdom, group retail sales for the first quarter, which is 28 June '21 to 26th September '21 of the 2022 financial period, which is the current period, decreased by 1.2% to ZAR 3.9 billion compared to the first quarter, 29 June 2020 to 27th September 2020 of the 2021 financial period, which is the prior period or 2021. In the current period, the '22 period, account sales comprised 49%, which is the same as the previous year of group retail sales with a constant cash sales decreasing by 0.8% and 1.7%, respectively, relative to the prior period. Truworths Africa. Retail sales for Truworths Africa being the group, excluding the United Kingdom-based office segment and comprising mainly of the Truworths businesses in South Africa, increased sales by 0.2% to ZAR 2.9 billion relative to the prior period. Comparable store retail sales, which, amongst others, adjust for the impact of stores damaged and unable to take as a result of the civil unrest, actually increased by 2.1%, while those stock levels in the current period were negative for sales. Markdowns were lower relative to the prior period, thereby supporting the gross profit margin. Online sales continued to show good growth in the current period, increasing by 44.5% and contributing 3% to the segment's total retail sales. The Identity e-commerce site was launched during the current period on a new e-commerce cloud platform and the existing Truworths' e-commerce sites were migrated to the new platform on the 2nd of November. The new platform provides significantly enhanced functionality and performance and will support future e-commerce sales growth in this segment. In Truworths Africa, account sales comprised 68% of retail sales; in 2021, it was 69%. Trading space decreased by 0.7% relative to the prior period and is expected to remain largely unchanged for the full 2022 financial period. Product deflation averaged 2.2% for the current period. In the previous year, 2021, it was 0.5% inflation. Truworths Africa's gross trade receivables at the end of the current period were unchanged relative to the prior period at ZAR 5.1 billion. The number of active accounts increased by 1.5%. The debtors book continues to show improvement and is in a healthy position as reflected in the percentage of active accounts -- of active account holders able to purchase and overdue balances as a percentage of gross trade receivables, both of which improved and were at 83%, whereas in the last year, it was 81%, which is an improvement. And the overdue balances were 14%, whereas in the previous year, they were 17%, which shows improvement from both aspects. Office in the U.K. Retail sales for the group's U.K.-based office segment increased in sterling terms by 3.1% to GBP 52.7 million relative to the prior period's GBP 51.1 million. In rand terms, however, the retail sales for office decreased by 4.9% to ZAR 1.1 billion, but that's due to a stronger rand to sterling exchange rate in the current period. In line with expectations, office e-commerce sales in sterling decreased by 13% in the current period, and it's now 45.5% of total retail sales as consumers return to stores following the relaxation of lockdown restrictions in July. Office's store sales were, as expected, affected by the planned trading sales decrease of 23.2% compared to the prior period. Such space is expected to decrease by approximately 12% for the full 2022 financial period as the business continues to exit unprofitable stores as leases expire or lease breaks become available. Now I'll update on civil unrest. The civil unrest and rioting in July '21 in South Africa resulted in 57 of the group's South African stores being impacted directly and severely by looting and destruction of property. By the end of August '21, 51 of the 57 affected stores were reopened, while the remaining 6 stores remain closed as they were located in fire-damaged shopping malls. One of these stores is scheduled to reopen in early December '21. The group has submitted insurance claims of ZAR 122 million and is pleased to announce that an initial payment of ZAR 40 million was received in October '21. Further claims are still being finalized and will be submitted as soon as possible. At this stage, management anticipates all claims will be honored. Finally, outlook. The trading environment is expected to remain challenging in light of the COVID-19 pandemic, ongoing electricity load shedding in South Africa and international supply chain challenges. The group is pleased to announce that inventory levels have improved recently and that it is in an improved stock position for the upcoming peak trading season. The group will continue to utilize its extensive experience to manage the risk of fashion through its proven merchandise design and buying processes to manage its inventory optimally and to manage the risk of the book through the consistent application of its account risk management strategies in order to grow and ensure the ongoing health of the whole portfolio. Shareholders are advised that this business update does not constitute an earnings forecast and that the financial information provided herein is the responsibility of the directors and that such information has neither been reviewed nor reported on by the group's external auditors. The group's interim results for 26-week period ending 26 December '21 are scheduled to be released on or about Thursday, 17 February 2022. It's signed and dated for November 2021 in Cape Town. I hand back to the Chairman.

Thank you, Michael. Thank you for that. As we've now attended to all matters, I thank you for your attendance, and I declare the meeting now closed. Thank you.