Truworths International Limited (TRU) Earnings Call Transcript & Summary

Good morning, everybody. It's my pleasure to welcome you to this AGM. This is the 21st since the company listed on the stock exchange in May 1998. I'm Hilton Saven. I chair the company and in the room with me today are Michael Mark, our CEO; Hans Hawinkels, the Lead Independent Non-Executive Director. Separately online is Manny Cristaudo, our Joint Deputy CEO, whilst the remainder of the Board is in the boardroom of the company. For the convenience of our shareholders, the meeting is being conducted through electronic as well as provided for by the JSE, as well as the Companies Act and the company's MOI. Any shareholder or appointed proxy or representative attending the meeting is eligible to ask questions. [Operator Instructions] During the Q&A session, verbal questions will be dealt with and will be audible to all of those at the meeting. Alternatively, written questions may be submitted at any time during the meeting up until the close of the Q&A session. [Operator Instructions]. The stock exchange listing requirements, the Companies Act and the company's MOI set a quorum of at least 3 members present in person or represented holding at least 25% of the voting rights. As there are at least 3 members present or represented and more than 25% of voting rights are represented, this quorum has been achieved. As at least 15 business days written notice has been given as required by the company's MOI, the meeting has been constituted. The total number of votes that can be cast at this meeting is 374,945,852, which equals the company's 408,498,899 issued shares, less repurchased shares and shares -- each shares held by the group. The number of votes actually represented at the meeting is at least 299,611,726, representing 79.91% of the total that could be cast. Included in this number are 297,742,651 votes reflected on proxy forms executed by shareholders in my favor. If I can just ask the Secretary, are there any apologies we need to note? Thank you. There are no apologies. Voting on all resolutions will be proposed at this meeting will be conducted by way of a poll. I have nominated a representative from Computershare to act as the scrutineer. Please note that only persons who are in possession of a valid proxy form, which has been filled in accordance with the notice of the meeting. All shareholders who are reflected on the share register or persons who are in possession of a written letter of representation are entitled to ask questions and vote at the meeting. Any person not so entitled may, however, pose questions after the conclusion of the meeting. I will now open the voting on all resolutions. Once voting has been opened, click on the Vote icon at the top of the screen. The resolution and voting options will appear. To vote, simply select your voting direction from the options shown on the screen. A confirmation message will appear to show that your vote has been received. To change your vote, click on the change vote link, select an alternative choice while the voting is open or select cancel if you wish to cancel your vote. Voting can be performed at any time during the meeting until I close the voting on the resolutions. At that point in time, your last choice will be submitted. You will be able to send messages and view the webcast while the poll is open. I will then announce the results of the voting at the end of the meeting. The notice of meeting was published on our website, mailed to shareholders who were elected on the 30 of September 2024 in conjunction with the publication of the 2024 Sunrise Audited Group annual results and on the group's website. I would therefore propose that the notice be taken as read. The notice has also been published on the platform in the folder section. It is necessary to note the minutes of the 2023 Annual General Meeting as these minutes have been published on the platform. I propose that these minutes be taken as read. With your permission, I will sign these minutes as a Tru record. Item #1 on the agenda. The group's 2024 audited annual financial statements, including the independent auditor's report, directors' report and Audit Committee report were published on the group's website on 12 September 2024. A summary was included in both our 2024 integrated report and on our website on the 30th of September 2024 and in our 2024 summarized audited group annual results, which was posted to shareholders on that date. The annual financial statements have also been included in the folder section. Item 1 on the agenda covers the adoption of these annual financial statements. We will take questions on the adoption of the financial statements at this time. For the balance of the resolutions, we will take questions at the end of the meeting when I or one of my Board colleagues will be happy to respond. If you have questions of a more general nature, these can be asked at the end of the formal business. I propose that the 2024 audited annual financial statements of the group be adopted. Would you kindly record your votes on item #1 on the voting platform? Agenda item #2, Mr. RJ A. Sparks, Ms. S.J. Proudfoot, Mr. EFP. Cristaudo and Mr. T. Mosololi and Mr. A.J. Taylor retire as directors in accordance with the company's MOI. Being eligible, they have offered themselves for reelection. Their brief resumes are contained in the notice to the meeting. I propose by a separate resolution in terms of items 2.1 to 2.5 that they be reelected to the Board of the company. Would you please record your votes on items 2.1 to 2.5 on the voting platform? Mr. B.M Deegan was appointed as a Nonexecutive Director by the Board with effect from 1st October 2024. His brief resume is contained in the meeting notice. His appointment needs to be confirmed at this meeting. I propose that Mr. B.M Deegan be elected as a director. Would you kindly record your votes on Item 2.6 of the voting platform? Item 3 on the agenda intends to grant to the Board of Directors general authority, which shall be limited in aggregate to 5% of the company's shares in issue at 30 June 2024, 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 purposes of allotting or selling such shares in conjunction with an acquisition or empowerment transaction or share incentive scheme award by the group and for no other purpose. The terms, reasons for and effects of this ordinary resolution are set out in the notice to the meeting. I propose that the company directors be granted this authority and note that it is subject to statutory and regulatory conditions as set out in the meeting notice. Would you kindly record your votes on item #3 on the voting platform? Item #4 on the agenda proposes to obtain shareholder authority 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 30 June 2024. The terms, reasons for and effects of the special resolution are set out in the meeting notice. I advise that before any transactions could take place in terms of the authority that the directors 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 propose that the group be generally authorized to acquire up to 10% of the company's shares in issue at 30 June 2024 on the terms and conditions recorded in the meeting notice. Would you kindly record your votes on item 4 on the voting platform? Item #5 on the agenda deals with the election of Deloitte & Touche as the company's independent auditor for the 2025 financial year. Deloitte have indicated that Ms. Grace being a partner of that firm and a registered auditor will undertake the directors endorsed the recommendation of the company's Audit Committee that this firm be appointed for the ensuing year, and that the terms of the engagement and fees be determined by such committee. I propose that this resolution be adopted. Would you kindly vote in respect of Item #5 on the voting platform? 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 from 1 January 2025 to 31 December 2025. The fees in question are set out in the meeting notice published on the group's website and its 2024 summarized audited group annual results. I propose that by way of separate resolution, the fees in question be duly adopted. Would you kindly record your votes in respect of items 6.1 to 6.12 on the voting platform? The next item of business is to confirm by separate resolutions, 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 to the Board. I advise that subsequent to the AGM notice having been issued, Mr. Sparks has noted his intent not to stand for reelection as a member of the Audit Committee. And accordingly, Resolution 7.1 has been withdrawn. Ms. D Earp, Ms. AMSS Mokgabudi and Mr. BM Deegan stand for appointment and details of their experience, qualifications and financial literacy are given in the company's integrated report and the notice of the Annual General Meeting. I propose that by way of separate resolutions, the 3 directors be appointed to the company's Audit Committee. Would you kindly record your votes on items 7.2, 7.3 and 7.4? The next item of business is to approve by way of separate nonbinding advisory votes in terms of King 4 principles, the JSE listing requirements, the group's remuneration policy and the implementation report as set out on Pages 44 to 59 of the group's 2024 integrated report, which has been made available in the platform. I propose that these resolutions be adopted. Would you kindly record your votes on Items 8.1 and 8.2 of the voting platform? The next item of business is to consider and approve the report of the company's social and ethics report published on the group's website for the period ended 30 June 2024. The report has been made available within the documents folder. I propose that this report be adopted. Would you kindly record your votes on Item 9 on the voting platform? At this point in time, I would like to hand over the chairmanship of the meeting to Mr. Hawinkels Hans for agenda items 10.1 to 10.3.

Thank you, Chair. Item 10 to confirm the appointment of the qualifying directors to the Social and Ethics Committee for the period until the next annual meeting. The next item of business 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 Mr. Mosololi, Mr. Saven and Mr. Cristaudo. I propose that by way of separate resolutions, Mr. Mosololi, Mr. Saven, Mr. Cristaudo be appointed to the company's Social and Ethics Committee. Kindly record your votes on Items 10.1, 10.2, 10.3 on the voting platform. I now hand over to the Chair, back to Mr. Saven.

Okay. Thank you. The next item of business is to confirm by special resolution the provision of intergroup financial assistance by the company to its subsidiaries. The terms and reasons for the effects of this special resolution are set out in the notice to the meeting. I propose that this resolution be duly adopted. Would you kindly record your votes on Item 11 on the voting platform? We will now, at this stage, take questions from the meeting on matters pertaining to proceedings of the Annual General Meeting. If there are any questions in relation to the resolutions, please feel free. I would also like to remind meeting participants who have not voted yet to please cast their votes. Are there any questions relating to the resolutions? Okay. There doesn't seem to be anything raised in relation to the resolutions themselves. Now that we have completed the formal business of the meeting as set out in the meeting notice, is there any other matter that anyone wishes to raise, bearing in mind that no resolutions may be considered under this item. Are there any questions of a general nature?

There are some. There are no questions on the phone.

Okay. So there are a few written questions that we can see. There's a question from [indiscernible] sorry, is there someone who can read it out for us...

I can read it. I can see it. So the first part of the question is the person commends Truworths on achieving the 2017 medium-term gender diversity target of 30% at Board level, which has been maintained since 2019. Given this achievement, would the Board consider increasing the target to demonstrate further progress and commitment to gender transformation? So I don't know which of you want to answer that, then I'll read the second part.

Yes. I think it's something that we will look at on an ongoing basis. At this particular point in time, as you're aware, and as you pointed out, we do have a 30% target, which has been achieved, but we will obviously reconsider it from time to time.

The next part of the question is, additionally, we note that the race diversity target of 30%, which was set in 2018 has yet to be achieved. Could you elaborate on the specific challenges Truworths has encountered in meeting this goal? What strategies are currently in place to help the company reach the target? I don't know what figure we are on, I think 27...

About 23.

23. So 23 -- so we are on to the 30 – so yes.

So once again, this is something that obviously we review on an ongoing basis. And we do, in fact, have a wish list in terms of nonexecutives. So we continuously evaluate the existing nonexecutives. And obviously, on an ongoing basis, we'll reevaluate. And as the opportunity does arise and we find suitable candidates, we will then appoint them to the Board.

The next question is the same person or shareholder. It's on gender pay gaps. In the remuneration report, we note that Truworths conducts -- someone is changing the -- we note that Truworths conducts annual analysis on minimum wage, race and gender pay gaps using REM channel data analytics. While the company has disclosed details on its minimum wage, including how much it exceeds the national minimum wage requirements, there is limited information on gender pay gaps. Would Truworths consider voluntary disclosing its gender pay gap ratios for its South Africa division as several of your peers in the retail sector have done. That's the [indiscernible].

We do disclose the gender ratios for all employees and management as well as the race details in our annual report. And as you noted, that we do pay significantly higher than the minimum wage at the moment, and we continue to review that as well as what we -- the upper end of the scale. So we manage that pay gap on an ongoing basis.

The next question that we have one of the oldest boards on the JSE with nearly half of the Board members being over the age of 70. I see whoever this person is, doesn't say young 70, but old 70. So while we highly value the skills and experience these directors contribute -- thank you so much -- the King lV Code emphasizes the importance of diversity, not only in skills, but also in age, gender and other perspectives. Given this guidance, we kindly request that the Board consider ways to enhance its diversity to align more closely with best governance practices and reflect a broader range of perspectives. This will be instrumental in ensuring that the Board remains dynamic, forward-looking and well positioned to navigate the evolving business landscape. Thank you for considering this.

I would just like to point out that over the last 6 years, I think we've appointed 8 new nonexecutive directors, and we believe that a mix of the older experienced nonexecutives with the new executives augurs well for the company. And over a period of time, obviously, as the older directors retire, so the new nonexecutive directors will actually take over positions within the subcommittees, but it is an evolving process. And as you can see, there have been a number of appointments over the last number of years. So, thank you for that. Are there any other questions that anybody would like to pose or that have been posed? It doesn't look like it. Okay. Thank you very much. So, I would just like to remind everybody that hasn't voted at this point in time to please do so. And I'll give everybody just a few seconds for that, and then we will close the voting. I will now ask that the polls be closed on the voting platform, and we will then present the results of the voting on the resolutions put to the meeting as soon as possible. Okay. Thank you very much. What I would like to do is to just go through the resolutions. The Resolution #1 was passed with 99.99%, Resolution #2 was passed 65.79%, Resolution #2.2 was passed 99.83%, #2.3 was passed with 99.5%, #2.4 was passed with 99.99%, #2.5 was passed with 69.79 %, #2.6 was passed with 98.55%. Resolution #3 was passed with 88.45%, Resolution #4 was passed with 99.92%, #5 was passed with 98.18%, #6.1 was passed with 78.23%, #6.2 was passed with 78.15%, #6.3 was passed with 78.24%, #6.5 was passed with 72.28%, #6.6 was passed with 78.2%, #6.8 was passed with 78.28%, #6.9 was passed by 78.28%, #6.10 was passed 99.64%, #6.11, 78.2% in favor, #6.12, 99.64%, #7.2, 99.39%, #7.3, 99.99%, #7.4, 98.57%, #8.1 was passed with 76.95%, #8.2 on the information report, I think is indicated is passed, but I don't think that was passed 74.66%. But we have to engage. We couldn't get, it is passed, but we do have to engage. Thank you for that. Item #9 was passed with 99.86%, #10.2, 80.17%, #10.3, 99.72%, #11, 97.88%. Okay. Those are the formal results. At this point in time, I'd like to thank everybody who attended the meeting, and I declare the meeting closed. However, I would like to hand over to our CEO, who will deal with an update, which will be released on SENS news simultaneously. If I can hand over to you, Michael.

Yes. Thank you. I was just looking at -- I think I'm one of the -- I'm promising what a person who is over 70 and I'm a septuagenarian. So as a septuagenarian, which I am, I don't yet have a hearing aid. So, I'm going to continue the session in 72-year-old body. Firstly, I'm not going to read out the announcement because -- it has been published on issued published on SENS at 9:45 about 14 minutes ago, so you can read it there. I'll just summarize on behalf of myself, Manny, who's our Joint Deputy CEO; and Sarah, who's also on the line, our other Joint Deputy CEO. So, the three of us are here. I want to say again, before I just comment on our commentary, which you can read that we have an e-mail panel for Investor Relations that anyone can write any questions to. And Sarah, Manny and I as well as a couple of other of our executives respond very speedily to that. So please don't hesitate to do that. The summary of our business update is that the group retail sales grew for the period of the first 18 weeks until 3 November by 2.8%. The Truworths Africa was disappointing growth at 0.2%. Office U.K. was positive at just under 10%, which made the average of the group be 2.8%. In Truworths Africa, the commentary says that our business and consumer sentiment has improved since the government of National Unity has been formed. Prospects generally are seen to be positive in the next 12 to 18 or even 24 months. And we, in Truworths share that sentiment but it has not yet translated into meaningful improvement on the ground in disposable incomes of South African consumers at this point in time. We do not yet know how we will trade over Black Friday and Christmas, obviously, but we are ready and hoping for a good end to the half year. But the prospects as we see them of a higher GDP, lower inflation, which is in the offing for certain, stabilizing cost of living, and low interest rates are expected to support consumer spending in the next year to 18 months. But we're not sure of the timing. Online sales have continued to be very good in Truworths, 38% growth. Our credit is looking quite healthy which is a good sign. And office, on the other hand, they are still living in the U.K. with a suppressed consumer confidence and caution in the economy. But notwithstanding this office has proved resilient with retail sales growth of just under 10% in sterling. In rand terms, it's about 8% because the rand has got a bit stronger. Online sales have been lower at 3.2%, but they still comprise 43%. Trading space in Office U.K. is expected to increase by about 10% for this financial period. This business update is not an earnings forecast. It's just providing information, which is the responsibility of the directors and it has not been reviewed or reported on by the group's external auditors. Our interim results for the 26-week period, which is the half year ended 29 December this year are scheduled to be released on or about Thursday, 27 February 2025. I yield back to the Chairman, and I note there's some further questions that for the Chairman and Lead Director.

Okay. Can we look at those questions?

I'll read them to you. Gender pay gap response. Chair, Truworths discloses gender pay gap ratios for its U.K. operation. My question was on the gender pay ratios specifically for Truworths Africa as opposed to the U.K.

Hans, do you want to?

Yes. Well, we are required or will be required from next year, I believe, to disclose the detail of these pay gaps. But we do have an analysis internally done on what the race and gender pay gaps are across the group.

And I mean we must consider disclosing it next year.

We'll disclose it next year to comply with the regulation.

Yes, for sure.

The next question is, would we kindly consider an in-person AGM next year instead of the virtual one we're currently doing? So again, I hand that to the Chair.

Well, yes, we've actually canvass shareholders, and I think the vast majority of shareholders prefer the virtual AGM. Just as a matter of interest, we have attending at this particular meeting, we have one shareholder on the line. So we felt it's a lot more expedient and efficient to hold it on a virtual basis, but we will consider the matter for next year.

The next question is the Board in its self-assessment and the person quotes, confirms that all non-exec directors are correctly categorized in the terms of the said definition guidelines as independent. So the person says, while I understand that tenure is like one consideration when assessing independence, it's difficult to understand how a tenure of 22 years for the Chair and 26 years for Mr. Dow can still be classified as independent. There are also concerns about some directors holding external directorships at the same company with overlapping tenures, the Lewis Group as example. Please could the Board explain to shareholders on what basis it thinks it is still appropriate to consider these 2 directors, which is, I guess, it's Mr. Dow and the Chairman. How it considers them to be independent. I think the lead director should respond because it talks to about the Chairman this.

Yes. We put up the relevant people who vote and they were voted back onto the Board. We note the fact that they have a long tenure, but we don't concern ourselves with tenure only. We also concern ourselves with the invaluable contribution they make to the Board. And as earlier mentioned, we are in the process of where older directors will resign. We will be appointing newer directors instead with relevant qualifications.

The next question, your integrated report states that 38% of the Board is experienced in or has expertise in sustainability matters. But no definition is provided as to what is meant by sustainability matters and no evidence is provided to support that claim. All biographies provide a narrative that expresses all skills and experience are heavily weighted in finance and traditional business qualifications. Please provide shareholders with a brief explanation as to what career experience and expertise these directors have that qualifies them as being competent in sustainability issues. And will the Board commit to appointing at least one independent non exec director with significant sustainability-related expertise and experience in the next 12 months to balance the skill set on the Board. Chairman?

Yes. So I think we need to bear in mind that we do have a very strong Social and Ethics Committee. And it's not only the Social and Ethics Committee that would regard itself with sustainability issues, but we do we have outside consultants who are experts in the area and do assist in terms of the sustainability. So we will take on board the comments that have been made. But we feel at this particular point in time, we have sufficient expertise, both internally and externally, as I said, from various consultants who assist us with sustainability issues.

The next question is, please can the Chair of the Nominations Committee, that's the Chair, update shareholders on the succession plan for the current CEO?

Yes. So the Nomination Committee meets on a regular basis. I would just like to add that we have succession plans not only for the CEO, but in fact, for all senior executives within the company, and we revisit those plans on a regular basis. And I can assure all shareholders that the succession planning is something that's viewed as very important from a company point of view and plans are in place, as I said, not only for the CEO, but in fact, for every senior management executive within the group.

I don't think there are any other questions that I can see. And... We have confirmation of that.

Are there any other questions?

There's no further text questions, Chair.

All right. If there are no further questions, thank you very much for your attendance, and I declare the meeting closed. Thank you very much.