TFG flags an 85% fall in annual profit, hurt by R2.7bn UK impairment
RETAILER The Foschini Group has warned that its full-year earnings are likely to fall by 85 percent, hurt by a R2.7 billion tax non-cash impairment of its TFG London stores, which were knocked by Covid-19 lockdowns.
The group, which has operations in South Africa, Australia and the UK, said on Friday that it expected its basic headline earnings per share (Heps) for the year to end of March to decline by between 75 and 85 percent to between 154.4 cents a share and 257.3c, down from 1 029.3c reported last year.
Its earnings per share (Eps) was likely to fall by between 160 and 170 percent, which would result in the group reporting a loss of between 555.4c and 648c compared to earnings of 925.7c reported a year earlier.
The huge fall in Eps is a result of a R2.7 billion after-tax non-cash impairment of the carrying values of TFG London’s goodwill and intangible assets.
The group said its earnings had also been impacted by the Covid-19 pandemic and store closures, the dilution impact of the successfully concluded rights offer and the acquisition of certain commercially viable stores and selected assets of Jet.
“The pandemic has not only directly impacted trading over the last financial year, but it has also had significant long-term ramifications on TFG London’s department store partners, reducing TFG London’s projected future cash flows,” the group said.
TFG said the UK continued to be the hardest hit with no stores operating during the fourth quarter as the third UK national lockdown, announced on January 4, 2021, was in place for the full fourth quarter of the financial year, with non-essential retail only reopening on April 12.
“In total, the UK lost approximately 50 percent of its available store trading hours during the past financial year and experienced severely depressed footfall and consumer confidence for most of the remainder of the year,” the group said.
Group turnover declined by 6.7 percent, due to the impact of lockdowns in April and May in all countries of operation, and subsequent periods of lockdowns in the UK and Australia.
The group said, excluding Jet, turnover fell by 13 percent.
TFG showed a strong recovery in the last quarter of the financial year, with turnover up by 21 percent during the fourth quarter, but was up by 6 percent excluding Jet.
TFG acquired 371 commercially viable Jet stores from Edcon for R480 million last year.
TFG Africa reported a 37.3 percent growth in the fourth quarter, boosted by the contribution of the recently acquired Jet business.
The group said TFG Australia continued to exceed expectations with turnover increasing by 30.4 percent.
Looking ahead, the group said the macroeconomic conditions in all territories were likely to remain constrained, and changing customer needs will continue to disrupt traditional business models and accelerate digitalisation.
“The impact of lockdown measures has further caused a structural shift in the way we conduct business and how our customers interact with us.
“This will determine in the future how we operate, where we invest and what, strategically, we prioritise,” the group said.
The share price of TFG on Friday rose 1.51 percent to R117.75 on the JSE.