Foreign revenue lift for TFG

Acquisitions in UK and Australia set to contribute at least 35% to fashion retailer’s turnover in next financial year

More than a third of TFG’s revenue would come from outside Africa in the next financial year after the group integrated the Hobbs clothing retail business in the UK, said chief financial officer Anthony Thünstrom. TFG said on Tuesday it had agreed to buy the contemporary British womenswear brand from private equity firm 3i Group.

More than a third of TFG’s revenue will come from outside Africa in the next financial year after the group integrates the Hobbs clothing retail business in the UK, says chief financial officer Anthony Thünstrom.

TFG said on Tuesday it had agreed to buy the contemporary British womenswear brand from private equity firm 3i Group for an undisclosed sum.

Earlier in 2017, media reports suggested 3i wanted £80m for Hobbs, though TFG ultimately paid far less than that amount, Thünstrom said.

“There was a competitive process, but we got it at an extremely good price — part of the reason for which is that the other bidders were all private equity firms and the management team was exceptionally keen for a trade buyer,” he said.

Lentus Asset Management portfolio manager Nic NormanSmith said “the environment for acquisitions in the UK is probably quite a good one” since retail sales were under pressure and uncertainty surrounded Brexit negotiations.

Thünstrom said that based on “high-level” estimates and current exchange rates, “probably somewhere between 35% and 40% of group turnover will be from international” operations in 2018, referring to operations in the UK and Australia.

TFG bought Australian menswear firm Retail Apparel Group (RAG) in early 2017, following acquisitions of Phase Eight and Whistles in the UK.

TFG was using the “solid platform” provided by Phase Eight for further bolt-on acquisitions, Thünstrom said.

With Hobbs, TFG would have nearly 900 concessions and physical stores in the UK. This would give each brand better access to concessions with department stores and would improve their ability to secure premises for stand-alone stores “at competitive rentals”.

Thünstrom said TFG would fund the Hobbs takeover with existing banking facilities and would not need to raise additional capital for the deal. However, given that TFG London was now a “£400m turnover business”, the group would consider refinancing the combined UK business in the future.

While the group was being presented with “at least one” acquisition opportunity in the UK and Australia every week, its focus in the UK may shift to bedding down its recent takeovers, Thünstrom said.

“Australia is slightly different – we’ve already got a multibrand business within RAG, which was very stable when we bought it,” he said. G-Star Raw’s management team in Australia would be transferred to RAG by the end of the current financial year.

“And then we’re potentially looking at taking one of our South African brands across to Australia next year [2018]. So we’ve got our hands fairly full with all of that; there are definitely opportunities in the Australian market from an acquisition point of view but it’s not a priority at the moment.”