TFG navigates bumps with aplomb
Despite a tough operating environment, TFG has been on an expansion drive. We spoke to the group’s CEO, Doug Murray, and chief financial officer, Anthony Thunström, about future plans, debt levels and the influx of international clothing brands.
it should come as no surprise that TFG’s CEO Doug Murray is keen to acquire or start new businesses. The group bought UK-based business Phase Eight last year, and announced in March that it bought another UK brand, Whistles (through Phase Eight).
The impact of its recent acquisitions is telling. The group’s turnover for the financial year to 31 March 2016, excluding Phase Eight, was up by 11.6%. When Phase Eight is included, it is up by 31.2% (to R21.2bn).
“At the moment we have a business [Phase Eight] we acquired 16 months ago and we had the opportunity to acquire Whistles, probably earlier than what we would have liked to. But it’s such a great business,” says Murray.
While they are keen to grow the group, Murray and TFG chief financial officer Anthony Thunström say they first want to allow time for Whistles to be integrated into the TFG business before looking for more opportunities. “There’s no shortage of opportunities, but at the end of the day, there are limited [human] resources to effectively run these businesses,” says Murray.
The group does not currently see any opportunity to acquire any significantly sized assets in South Africa. Rumours that TFG might be interested in acquiring Edcon are unfounded, they say.
“We are not just building a portfolio of brands – everything we do is carefully thought through. And for the offshore business, the acquisition of Phase Eight had very clear criteria, as did Whistles,” Murray says. “Time and effort need to go into the bedding down of those businesses.”
Thunström agrees: “We’ve just bedded down Phase Eight. I think we’ve got some work to do to bed down Whistles. It will probably take six to eight months to start to realise the synergies, the cost savings [and] the uplift in revenues.”
Many of TFG’s markets, including SA and the rest of Africa, proved challenging environments in which to operate over the past 12 months, says Thunström. One of the reasons for this is stricter affordability assessment regulations on credit agreements in SA, which came into effect in September 2015.
The new rules, which include a requirement for three months’ bank statements or payslips, led to a decline in credit approvals for most retailers, including TFG, which derives more than 40% of its total sales from credit purchases.
Thunström says a large chunk of the population works in the informal sector
“We are not just building a portfolio of brands – everything we do is carefully thought through.”