Truworths International Limited (TRU) Earnings Call Transcript & Summary

It is my pleasure to welcome you to this AGM being the 24th since the listing of the company on the Johannesburg Stock Exchange in May 1998. [Audio Gap] meeting was published on our website and mailed to shareholders who have so elected on the 29th of September 2023 in conjunction with the publication of the 2023 Summarized Audited Group Annual Results on the group's website. The notice has also been published on the Lumi Connect platform in the documents folder. If everybody is happy with that, we'll take that as read. It is necessary to note that the minutes of the 2022 annual meeting as these minutes have been published on the platform in the folder, I suppose that we take these as read. If everybody is happy with that, I will sign those minutes as a true record. We can now move on to agenda item #1, the group 2023 audited financial statements, including the independent [Audio Gap] were published on the group's website on 31 August 2023. A summary was included in both our 2023 integrated report posted on our website on 29th September 2023 and our 2023 summarize audited group annual results, which were posted to shareholders at that time. The annual financial statements have also been included in the folder attached. Item 1 on the agenda covers the adoption of these financial statements. If there are any questions arising therefrom, I or one of my Board colleagues will be happy to respond. Could I ask that questions of a general nature be asked at the end of the formal business, and that any questions we take at this stage are related to the group's financial statements. Are there any questions?

No questions, Chair.

Okay. If there are no questions, I propose that the 2023 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]

Thank you. At this point, I would like to hand over the chairmanship of the meeting to Mr. [indiscernible] for agenda items #2.1 to 2.3.

Thank you, Chair. The election and reelection of directors. Mr. Saven, Mr. Mark, Dawn Earp and Maya Makanjee retire as Directors in accordance with the company's memorandum of incorporation. Being eligible, they have, except for Maya Makanjee, who is retiring from the Board, offered themselves up for reelection. Their brief resumes are contained in the meeting notice. Are there any questions?

There are no questions.

I propose that by way of separate resolutions. Mr. Saven, Mr. Mark and Dawn Earp be reelected as directors of the company. Kindly record your votes on items 2.1, 2.2 and 2.3 on the voting platform. [Voting]

I hereby wish then to hand over the chairmanship back to Mr. Saven.

Thank you. Ms. D. Motsepe and Mr. Muller were appointed as Nonexecutive Directors of the Board with effect from 1st August 2023. Their brief resumes are contained in the meeting notice. Their appointments need to be confirmed at this meeting. I propose that Ms. Motsepe and Mr. Muller be elected as directors of the company. Would you kindly record your votes at items 2.4 and 2.5 on the voting platform. [Voting]

Item #3 on the agenda intends to grant the directors a general authority, which shall be limited in aggregate to 5% of the company's shares in issue at 2nd July 2023 over both the unissued shares of the company and the treasury shares held by the group until the following annual general meeting. This limited authority is only for the purpose of allotting or selling such shares in connection with an acquisition or empowerment transaction or share incentive scheme award by the group and for no other purpose. The terms, reasons and the 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 as set out in the meeting notice. Would you kindly record your votes at item 3 on the voting platform. [Voting]

Item #4 on the agenda proposes to obtain shareholder approval by special resolution for the company or its subsidiaries to be able to acquire up to 10% of the company's shares in issue at 2 July 2023. The terms, reasons for and effects of this special resolution are set out in the meeting notice. I advise that before any transaction can take place in terms of the authority, the directors will perform the work necessary to conclude that the group has sufficient working capital to effect the repurchase contemplated and to conclude that the company will satisfy the statutory solvency and liquidity tests after such repurchases. I propose that the group be generally authorized to acquire up to 10% of the company's shares in issue at 2 July 2023 on the terms and conditions recorded in the meeting notice. Would you kindly record your votes on item 4 on the voting platform. [Voting]

Item 5 on the agenda deals with the election of Deloitte as the company's independent auditors for the 2024 financial year. I propose that this resolution be adopted. Would you kindly record your votes at item 5 on the voting platform. [Voting]

The next item of business is to approve by special resolution the proposed fees of the nonexecutive directors for their services as directors for the 12-month period, 1 January 2024 to 31 December 2024. The fees in question are set out in the meeting notice published on the group website and in its 2023 Summarized Audited Group Annual Results. I propose that by way of special -- separate special resolution the fees in question be duly adopted. Would you kindly record your votes at items 6.1 to 6.12 on the voting platform. [Voting]

The next item of business, which is item #7 on the agenda is to confirm by separate special resolution the appointment of the qualifying independent nonexecutive directors to the company's Audit Committee for the period until the next Annual General Meeting, subject where necessary to their reappointment as directors of the company. The directors in question are Mr. Sparks, Ms. Earp and Ms. Mokgabudi. And the details, their expertise, qualifications and financial literacy are given in the company's integrated and corporate reports. I propose that by way of separate resolutions, Mr. Sparks, Ms. Earp and Ms. Mokgabudi are appointed to the company's Audit Committee. Would you kindly record your votes on item 7.1, 7.2 and 7.3 of the voting platform. [Voting]

Item #8 on the agenda is to approve by way of separate nonbinding advisory votes in terms of King V (sic) [ King IV ] principles and the JSE Listing Requirements the group's remuneration policy and implementation report as set out on Pages 46 to 56 of the company's 2023 Integrated Report, which has been made available on the platform in the folder attached. I propose that these resolutions be adopted. Would you kindly record your votes on items 8.1 and 8.2 of the voting platform. [Voting]

For information, I advise that if votes recorded against either of these resolutions were to equal or exceed 25%, the obligation of the company will be to publish a SENS announcement detailing the date, time and manner by which it will engage with those shareholders who voted against the resolution and will publish the outcomes of such engagement in due course. Next item on the agenda is to consider and approve the report of the company's Social and Ethics Committee has published on the group's website for the period ended 2 July 2023. The report has been made available on the platform in the folder. I propose that this report be adopted. Would you kindly record your votes on item 9 on the voting platform. [Voting]

At this point in time, I would like once again to hand over the chairmanship of the meeting to Mr. [indiscernible] for agenda items 10.1 to 10.3.

Thank you, Chair. Agenda item 10, to confirm the appointment of qualifying directors to the Social and Ethics Committee for the period until the next annual general Meeting. The next item of the business is to confirm the appointment of the qualifying directors for the period until next annual general meeting. The directors are Messrs. Mosololi, Saven and Cristaudo. I propose that by way of special and separate resolutions, Messrs. Mosololi, Saven and Cristaudo be appointed to the company's Social and Ethics Committee. Kindly record your votes on items 10.1, 10.2 and 10.3 on the voting platform. [Voting]

I hand back the chairmanship to Mr. Saven.

Thank you. We move on to agenda item #10, which is to confirm the appointment of the qualifying directors to the company's Social and Ethics Committee for the period until the next annual general meeting, subject when necessary to their reappointment as directors of the company. The directors are Messrs. Mosololi, Saven and Mr. Cristaudo. Sorry. Sorry, I beg your pardon. I'm on the wrong item. I need to move on to item #11. I beg your pardon. The next item on the agenda is agenda item #11, is to confirm by special resolution the provision of the intra-group financial assistance by the company to its subsidiaries. The terms, reasons for and effects of the special resolution are set out in the meeting notice. I propose that this resolution be duly adopted. Would you kindly record your votes on item 11 on the voting platform. [Voting]

At this stage, I would like to remind shareholders who have not voted yet to please cast their votes at this point in time. [Voting]

Now that we have completed the formal business of the meeting as set out in the meeting notice, are there any other matters that anyone wishes to raise, bearing in mind that no resolutions can be considered under this item.

So we have a few questions I can see that have been posted. The first one is a trading update will follow the formal part of the meeting. The second question, if we can just read it. I think the succession issue has been dealt with fully within the integrated report, and I think shareholders will appreciate the fact that we have appointed a significant number of new directors over the last number of years. And the succession policy has, in fact, introduced a number of these directors into the subcommittees. And we feel that a blend of experienced directors and new directors are in the interest of the company. In terms of the next question, in terms of resolution 8.1 and 8.2, the policy and implementation report continues to receive high levels of shareholder dissent. I'd like to assure you that RemCo and various members of the Board have met regularly with shareholders to address any concerns that they may well have in relation to the remuneration policy. We've met with a number of our largest shareholders and we continue to do so and monitor trends within the industry. If there's anything that, Michael, if you would like to add anything on this, I'm happy for you to add anything.

Mr. Chair, is this on the question of the RemCo?

Yes. Yes. Yes.

Yes, I think the question doesn't relate to what we actually responded to in the Integrated Report where we clearly are attentive to shareholder concerns. So I think the question is -- doesn't address that issue. In other words, we completely clearly laid out exactly what the shareholders' concerns were and our response to them. So I don't relate to the question of why they're not attentive because I believe RemCo was attentive and we went to the -- as far as I am concerned because I wasn't involved in all the interaction, it was a RemCo [ commission ], the RemCo met with a large specific shareholder and actually consulted with them in great detail and tried their very best to deal with all the issues. So that's the best I can offer. And Mr. Chair, the next question is about electricity strategy. With your permission, I have to respond to it.

Yes, yes. Please, if you would.

Besides alternative energy, what efforts have been done to reducing energy consumption in the manufacturing and distribution of clothing as this is critical to lowering the carbon footprint of the fashion industry? Again, I think the question is sort of focusing on the wrong thing. Yes, of course, it is critical to lower the carbon footprint of the industry. And of course, we are aware of that. And our new -- for example, our new DC that we're building is carbon-friendly and we even have managed to classify it as a carbon-friendly energy-efficient facility. When it comes to the manufacturing and distribution of clothing, particularly the manufacturing and particularly in the Western Cape, that issue is primarily and more importantly relating to how do we make sure the flow of our merchandise continues to come through to our source adequately without disruption and how can we keep employment. We don't want the factories to have to put people on part-time and close down and all the issues relating to local employment. So we do a lot of work in supporting the local manufacturing industry, those factories that are exclusive to us or work predominantly with us. We have financed some generators. We are trying to facilitate as much as possible whatever we can due to the complications of load shedding. So we focus as much as we can more on keeping the factories going. And they do use diesel, which is not carbon-friendly. But our priority is to keep the factories running. Our DC, as I say, is carbon-friendly and economic with latest ESG. So Mr. Chairman, I hand back to you.

Thank you. Thank you very much. Are there any other questions that anybody would like to pose at this point?

Currently, no more questions, Chair.

All right. Thank you very much. We will now present the results of the voting on the resolutions put to the meeting. If you would kindly just display the results when they are ready. Thank you very much. So I'm going to run through the results fairly quickly. Item #1 has been passed, 99.95%. Item 2.1 passed, 73.8%. Item #2.2 passed, 99.4%. 2.3 passed, 99.28%. Item 2.4, 99.05%. Item 2.5, 99.54%. Item 3, 92.46%. Item 4, 99.78%. Item 5, 99.20%. 6.1, 99.62%. 6.2, 99.55%. Item 6.3, 99.58%. Item 6.4, 99.64%. Item 6.5, 99.51%. Item 6.6, 99.64%. 6.7, 99.64%. 6.8, 99.64%. 6.9, 99.51%. 6.10, 99.64%. 6.11, 99.51%. 6.12, 99.48%. Item 7.1, 64.07%. Item #7.2, 99.48%. Item #7.3. 98.93%. Item #8.1, 70.71%. 8.2, 66.94%. Item #9 with greater than, 99.99%. Item 10.1, 99.16%. Item 10.2, 79.95%. Item 10.3, 99.37%. Item 11, 99.73%. I declare that these are the formal results of the voting on the resolutions put to the meeting. Our CEO will now read the business update, which has been released on SENS a few minutes ago. So Mr. Mark, if I could just ask you to read out that update.

Thank you, Mr. Chairman. So this announcement that I'm reading now was released on SENS about 10 minutes ago. Truworths International Group retail sales for the first 17 weeks from 3 July '23 to 29 October '23 of the 2024 financial period increased by 10.9% to ZAR 6.6 billion compared to the first 17 weeks, which ended on 30th of October 2022 of the 2023 financial period. Accounts sales comprised 47%, last year it was 52% of group retail sales with account and cash sales increasing by 0.1% and 22.5%, respectively, relative to the prior period. Truworths Africa. Retail sales for Truworths Africa, comprising mainly of the Truworths business in South Africa, increased by 1% to ZAR 4.4 billion relative to the prior period. Account sales comprised 70% of retail sales. Last year was also 70%. Comparable store retail sales decreased by 2.2% relative to the prior period. Trading space increased by 1.1% relative to the prior period and is expected to increase between 1% and 2% for the current financial period. Merchandise, that's at retail selling price, inflation averaged 9% for the current period. October '22, last year, was 12% inflation. Online sales continued to show good growth in the current period, increasing by 41% and contributing now to 4.7% of Truworths Africa total retail sales. At the end of first quarter ended 1 October '23, Truworths Africa gross trade receivables were 7.9% higher at ZAR 6.2 billion relative to ZAR 5.8 billion at the prior comparable quarter end of 2nd October '22. The number of active accounts increased by 5.1%. Active account holders able to purchase and overdue balances as a percentage of gross trade receivables were 82%, last year was 83%; and 15%, last year was 14%, respectively. The group continues to consistently apply its conservative credit-granting criteria. Office. U.K. retail sales for the United Kingdom-based Office increased in sterling terms by 18.9% to GBP 91.3 million relative to the same period last year of GBP 76.8 million. In rand terms, retail sales for Office increased by 38.8% to ZAR 2.1 billion. E-commerce sales for the current period comprised approximately 45% of total retail sales, increasing from a contribution of 41% in the prior period. Office's trading space decreased by 5.5% compared to the prior period due to the segment exiting all 7 of its stores in Germany and is expected to increase by approximately 9% for the 2024 period as new stores are opened, and existing stores are remodeled. When it comes to the outlook, while the group is pleased with the positive sales momentum in Office U.K., South African consumers are expected to remain under pressure as electricity through load shedding, fuel, food, borrowing and general cost of living increases continue to weigh on consumer disposable income. The group remains cautiously optimistic about the medium-term outlook for the South African economy. Household spending will benefit as inflation moderates with the potential for interest rate relief while a sustained reduction in load shedding and a stable post-election environment could stimulate consumer confidence and economic activity. The group will continue its focus on the strategic initiatives outlined in its 2023 Annual Results and Integrated Report. In Truworths Africa, these initiatives include launching new retail concepts, expanding its integrated in-house design capability and improving speed to market and investing in technology, including the omnichannel experience. In the constrained spending environment, Truworths aims to sustain growth by capitalizing on the strength of its account portfolio, its expanding the customer base and the appeal of its quality, aspirational pressure, supported by the group's strong balance sheet and robust cash flows. Office's growth will be driven by introducing and growing new brands, new store openings and the remodeling and extension of existing stores in strategically important locations, supported by the strength of its relationships with the world's leading footwear brands as well as the planned investment in technology and customer relationship management capabilities. Shareholders are advised that this business update does not constitute an earnings forecast, 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 the 26-week period ending 31 December 2023 are scheduled to be released on or about Thursday, the 29th February 2024. Signed in Cape Town on the 9th November 2023. With that, I hand back to the Chairman.

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