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.

Finweek English Edition - - ON THE MONEY -

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.”

Credit sales

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.”

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