Half Year 2018 Foschini Group Ltd Earnings Presentation
Nov 02, 2017 AM EDT
TFG.J - Foschini Group Ltd
Half Year 2018 Foschini Group Ltd Earnings Presentation
Nov 02, 2017 / 03:00PM GMT
==============================
Corporate Participants
==============================
* Alexander Douglas Murray
The Foschini Group Limited - CEO, Member of Operating Board & Executive Director
* Anthony E. Thunström
The Foschini Group Limited - CFO, Member of Operating Board & Executive Director
* Jane Fisher
==============================
Conference Call Participants
==============================
* Stephen J. Carrott
JP Morgan Chase & Co, Research Division - South African Retail Analyst
==============================
Presentation
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [1]
------------------------------
Right, we'll -- I'll give some background on the economy and retail environment. There's really very few surprises in there. I think everybody knows what we'll be dealing with in our business overview.
Anthony will pick up the financial review and go into a little bit more detail on the financial numbers behind the results. Jane will take us through the financial services. And then I'll finish off with -- on outlook slide.
Right, we'll split this into the 3 territories in which we trade South Africa, TFG London, TFG Australia. I'm stating absolute, obvious, when I say political and economic uncertainty continues to constrain the South African economy and the South African consumer, I mean, those are completely lack of confidence. More from the political side, I would say, than the economic side. And we are under the threat of a downgrade as everybody knows.
If we look at the actual growth of the economy, we were 0.3% last year and if you look at the projections, 0.6%. But they move around sort of 0.3%, 0.6%, 0.7%, either way you look at, it is not very strong. And these are the quarter-on-quarter GDP growth. They can be a bit misleading. I think these are, probably, more relevant in terms of the reality for the year.
If we look at the inflation outlook, the average that we're looking at, it's about 5.3% for this year, 5.1% for next year. And you can see that for the latest period it's sitting at 5.1% and a year ago it was at 6.1%.
Consumer confidence, negative; and business confidence, also very low. We don't expect any interest rate movements in the short term, but there can be shocks to the system, and that could change.
If we look at the U.K., it's not dissimilar, it's quite interesting. We start with political and economic uncertainty. It's exactly the same as South Africa, but it's very different to South Africa as well. I mean, actually driven by the Brexit negotiations, what's going to happen there. We have a weaker government in the U.K. following the summer elections. And there's a lot of nervousness amongst, I think, business and consumers. And that does impact on spending. The pound remains weak, particularly, against the euro.
If we look at the actual GDP, as well, it's not great. Last year it was 1.8%. It's projected at 1.6%. Again, these are the quarter-on-quarter figures that can be, as I said, misleading. What is happening, though, is inflation is rising, it's up at 2.8%, unemployment is low. And as a result, there's an expectation of tightening in monetary policy in the U.K.
If we look at Australia, again, the annual GDP for the most recent year from July to June was around 1.8%. The calendar year last year was 2.4%. And they are looking for GDP projected to be between 2% and 3% for calendar year 2017.
The CPI is quite low -- rates of inflation 1.8%. For the latest period, it is 1.3%, a year ago. But it's still very low. And consumer sentiment remains subdued and business confidence isn't exactly stellar either.
What is important for us and the business we have over there is more of this, unemployment remains under 6%, it's stable. And that's a positive for us. That is a better indicator for the businesses that we own over there as to the strength of the consumer.
This is a slide you have seen before. It's -- and it's in the pack, I won't spend a lot of time on it. Just to say that, we have added in the RAG business we've Rockwear, the athleisure business in Connor. There are value businesses, Tarocash and yd. sit in the mass middle markets. And so everybody, I think, knows that mid-market in Australia is huge. And Johnny Bigg, who has quite a unique offering and really transcends mid and upper market because it's just nothing in the upper markets that caters for the rather large gentleman. I'm not even sure anybody in this room would shop at Johnny Bigg, they go to 8XL. So if you could just imagine that it's quite scary.
We now have 27 brands. And of course, we keep talking about the diversification of the group. We have cash and credit sales. We operate in 32 countries. We've got over 3,800 outlets. We have a full omni-offering across bricks and mortar, concessions and online. And of course, we have a variety of merchandise categories, which you've been used to seeing, we will talk about it later.
Just to list some of the significant changes that have taken place during the period. And I think just starting on the group structure. If you look at TFG London, Phase Eight and Whistles are now fully comparable. And TFG -- Whistles wasn't last year. And that's why we say that make that statement. TFG Australia, we have G-Star, which has traded for 6 months in this current period. But it was nothing in the prior period. And the effective date of the acquisition was 3 April this year. And we have the Retail Apparel Group, RAG, where we have 2 months included into this period and of course, nothing in the previous period. And the effective date there was July 24, 2017.
We had a capital raise at the end of July. It was ZAR 2.5 billion accelerated bookbuild, essentially to fund the acquisition of RAG. And 17.2 million ordinary shares were issued at a share price of ZAR 145. The shares were issued at a 0.9% premium to the 30-day VWAP. And the offer was 3x oversubscribed. So it was a very, very positive raise and a positive signal for the group.
In e-commerce, we have launched 2 more businesses in this period with the at home living space and exact going online. So we now have 17 of those 27 brands now trade online.
And in terms of the interest rate environment, in South Africa, as you know, in July, we had a 0.25% drop in the repo rate, prior year there was no changes. And in London, we just had the one reduction last year from 0.5% to 0.25% in August last year. And Australia remains unchanged at 1.5%.
Right. The key numbers. If we look at the headline earnings growth, excluding acquisition costs, as we always look at it, was up 5.6%. And for the purposes of trying to make this, I think, more significant, we have put in constant-currency. Because the GDP number, the pounds number that was in for the period last year was converted a rate of ZAR 20 to the pound. And the rate that is used this year is ZAR 17.09. So it's a 15% difference. So if we were just to go on constant currency, so we just -- essentially use last year rate, the -- which gives a better view of the, sort of, underlying trade and that would have been 7.9%.
The HEPS growth, also excluding acquisition cost, was up 1.6%. And the difference, obviously, being driven by the number of shares in issues since the capital raise. And if we've done that, also, at constant currency it would have been plus 3.9%. In cents that's ZAR 0.5049, the interim dividend is ZAR 0.325, it was ZAR 0.320 for the same period last year and the growth is 1.6%.
Just looking at some of the key ratios. The net bad debt as a percentage of the debtors' book is ZAR 10.9%. It's on a very nice trend there. Jane will give you a lot more color around the credit numbers in her presentation. And the debt/equity recourse is at 46%, again, coming down and obviously, the capital raise played a role in that. And total debt/equity also on the way down. And I'm beginning to move to levels where we are a lot more comfortable and I think, to levels that we had indicated we will get to. Anthony will, obviously, deal with that in a little bit more detail.
In terms of segmental performance, I will also do this in terms of Africa, TFG London and Australia. Kicking off with Africa, the retail turnover for the period is 5% up. And that's against the same period last year, which was 9.5%. This is why we do talk about the base that we have is quite significant for us relative to a number of our competitors. And what's really pleasing is the move in the margin -- the gross margin from 45.5% to 46.7%. And of course, that's indicative of a whole -- and a whole story around keeping the stocks tight, ensuring that we're not having to take excessive markdown. And that was part of the approach where we were very cautious over the winter season in terms of the levels of stock we put in. We've got -- not had to go into -- compete on distress markdown in anyway at all. And as you'll see, later in Anthony's number, our stock levels in Africa are essentially flat or I think 0.3% down actually. So we are very happy at margin extension there. Certainly, when you're not having to promote or markdown aggressively, there is potential that we know that we have may have lost some turnover in market share through that period. But we'll be much happier with 5% growth on a 9.5% last year, and extending our gross margin, quite frankly, than having this up and dropping that.
The EBITDA, excluding acquisition cost, is up 8.7%, it's against 7.1% growth last year. Our operating margin has also gone up. And I think cost-saving initiatives, which again, Anthony will talk more about, obviously, assist in that. We've opened 74 outlets, closed 30. And we're now trading just over 2,600 in Africa.
If we look at TFG London, the -- this is in pounds by the way, in sterling. And the turnover growth is at 4.1%. We're very happy with that. There is a small gross margin decline from 63.9% to 63.6%, it's marginal. And there was, obviously, inflationary pressures through Brexit, most of that has been passed on to the customer successfully. And -- but there is a small margin erosion there, which was almost to be expected.
The EBITDA number looks strange, down 9%. But there's a good reason for that it's -- there is a foreign exchange movement from last year to this year, which has -- had an impact on that. So what we prefer, and Anthony will talk more about that as well. But if you take out that foreign exchange movement, the actual underlying EBITDA is actually up 3.4% and the underlying operating margin is just marginally down and driven more by the gross margin. We've got 46 more outlets, closed 39. And we trade now in 746 outlets.
The turnover growth here is really driven by the online channels. Clearly, shoppers are less in the high street, less in bricks and mortar. And we are really having very successful online business. Phase Eight, in fact, and this is despite having some problems with 2 of our partners in this past 6 months. And I'll come to that. And there -- just in the U.K. Phase Eight, the contribution from online is now in excess of 30%. It's very high.
The problems we've had in London are really around House of Fraser. They've put in a new online platform. I think most of you probably read about it and the problems that they have had. It has impacted us. We got a letter from them, this week, apologizing for the problems that they've been causing their partners and the actions that they have taken to try and resolve it. But even though that is the case, and we had some problems with John Lewis on their new warehouse system. The total online contribution from TFG London is still 28.3% and the growth was still over 20%. So it could have been better, it could have been higher. But that was really outside of the management team's control.
If you look at Australia, we've got RAG here, which is just in for the 2 months. That's the -- and this is Aussie dollars. Margin 64.6%, that's the turnover. And the EBITDA, excluding the acquisition cost, is at 10.7%. And operating margin is at 10.5%. They've got 22 new outlets. They've closed 8. And they are trading out of 414 outlets at the end of September. It's fair to say that both the top line and the EBITDA number and margin is ahead of our expectations. And they are trading very strongly. Top line double-digit growth and the GP is also running ahead of that. So we're really pleased with that.
G-Star, where we have just number of stores that we're in for the 6 months. And they didn't have a great half, slightly down. We were expecting to breakeven, but they had some stock availability problems in terms of the winter delivery of jackets and winter product, which just didn't arrive from Amsterdam, which was very disappointing. And we believe, we have resolved those problems. And I think to -- we are putting this business operationally under the RAG team. And that will certainly assist on getting that information back to the buying teams and planning teams and back to Amsterdam at a much faster rate.
If you look at this now by merchandise categories, I was talking about earlier. I think what's pleasing for us is that the turnover at 9.2% is coming off a high base 16.9%. Remember, the 9.2% in the current -- constant currency was 12.6%. So that's pleasing in this environment. And there is no doubt it's tough out there, but still we're happy with it.
If I look at the clothing, I mean, these numbers are very strong. I mean, if you look at Africa, we're up 7.4%, same-store sales are up 2.8%, I've just spoken about the TFG London turnover at 4.1%. And -- but it's very encouraging that we are getting that sort of growth in Africa from our clothing businesses, particularly when that number last year at the same time was 9.5%.
Jewelry has been very tough, it's discretionary spend. So we've got a consumer who is lacking confidence at the moment. And it's a very tough market. Obviously, we would prefer stronger growth than this. It is a high-margin business, we still make good profit. We maintain the margins there. They're slightly up, which is encouraging. And I think that what we've also seen is probably our major competitor reported results a couple of weeks ago, for almost the same period, and they were 15% down. So what's that telling us is that we are -- despite that still gaining quite a significant chunk of market share through this period.
On the cellphones. We're coming off a very high base, 20.3%. And we had some stock availability and getting the right phones in at the right price. It's been a lot of work done on that. We believe, we've got that in a better position going into Christmas. And we're looking forward to a better second half.
Homewares & Furniture, I mean, it's very similar to cosmetics. Both of those categories, there's been a lot of discounting in the market. And we have not got sucked into that, that's been our strategy. On the Homeware & Furniture side, in fact, we have been reestablishing the mix of product that actually goes into the range there. And I'm getting a better range out from the top end all the way down. And that's with a view to really differentiating us from our opposition. They are the only business, actually, that's really had any, sort of, significant inflation in their numbers. It's not because of like-for-like product, it's driven by a change in mix. And therefore, also, had an expanding margin because they haven't got drawn into the discounting that's going on in the market. That's made it tough in terms of top line. But what is encouraging is that there's a margin expansion.
On Cosmetics, and it's been on a trend, which has been disappointing to us for some time now. Lot of -- a lot of discounting in the markets. And we're going to look at -- we've got a number of initiatives, which we're looking at introducing in the cosmetics area. We're going to reverse that trend.
If we look at now by geographic contribution, I mean, for the period, it's 75-25. It's obviously, growing internationally. As we've always said, strategically that was what we were looking at doing. If we look at that in constant currency, it's 27.7%. If we annualize it, fast-forward to March, and look at an annual period with RAG on board for 12 months, this is certainly going to be over 30%. So to be -- certainly, just under 17%, probably, just over 30%.
What is interesting is the total e-commerce turnover contribution in the group now is at 6%. It is driven more by the U.K. And in South Africa it's probably still just on -- just under 1%. In Australia it's actually 2.5%. But again, we haven't got a full year in there, a full 6 months in there. And the U.K., as I said earlier, it's about 28%. But it is interesting, when you consider the whole of America the online sales make up 8.5%. So we have got a massive focus on online, whether it be in the U.K., where we, obviously, do very well and have a lot of experience, also, in the -- in Australia and, obviously, here in South Africa.
If you look at the cash and credit turnover. Cash now is at 62.5% in the group. It's marginally up on last year, mainly driven by bringing RAG into those numbers. The actual cash sales number is only up 3.8%, coming off a massive base from 19% for the same period last year.
I've got another -- the next slide shows a bar chart over a period of time. And you'll just see how strong that has actually been.
When we look at credit, it's up 6.2%. So the credits are, obviously, the balance between the 62.5%, 37.5%. Credit turnover, we expect it to be stronger. We have got in the base the affordability regulations. Jane will talk quite a bit about that. So it's up 6.2%. However, it is coming off quite a soft base with only 1.4% growth in the previous period. This is a chart I was talking about. And you can see going back, the dark purple here, that's how strong the cash sales have been for a considerable period of time. In fact, over 10 years, the CAGR is at 13.6% for the cash sales. And then you see the effect of the Affordability Regulations here. And that's what we're fighting here. And obviously, we are up at 6.2% against that soft number. On the CAGR for credit turnover over that 10-year period is 7%.
Right. I will now hand over to Anthony.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [2]
------------------------------
Thanks, Doug. It's a lovely picture, but there's obviously a story behind it. So Doug told me that every single time I get up here, I overcomplicate the numbers, I confuse everybody. He said, "Bear in mind that you got to be able to explain that to people like that, if you can do that then you've got grants." I'll put it up to inspire myself. You guys tell me afterwards whether it worked. Although it is more complex, I mean Australia, U.K., Africa but, Doug, I'll try my best.
Okay. And some of these numbers Doug's covered, some of them, move through them, quite quickly. I think just at a high level, very happy with a 9.2% overall growth in retail turnover, obviously, that includes Australia now. Australia, the 2 months of RAG, the 6 months of G-Stars contributed nearly ZAR 900 million and significant impact in a short period, great when it annualizes. Probably the -- for me the best news story on this page is really this improvement in gross margin, particularly, I'll break it down in the further slides across the categories in TFG Africa. I think that's very much against the trend, almost every retailer in Africa and in the U.K. and frankly, in Australia is under margin pressure. So to do that's very much against the direction of travel.
We've had a very close focus on expenses at 12.3%. It doesn't really tell the story. That's, obviously, got the Australian expenses in for the first time. So it's noncomp. I'll show you a separate slide that shows Australia stripped out, where we look at Africa and London, and I think that will demonstrate what I'm trying to say.
Great outcome from credit to Jane and her team, a negative 4.3% on net bad debt and that's after similar result in the previous period. Operating margin had a group level of slight deterioration, I guess, that's to be expected. We now have Australia in there. We all know that international retailers operates at significantly lower operating margins compared to South Africa over time. As we grow the international component of our business, we will see some erosion there. But at the end of the day, we are looking at profits not necessarily just, sort of, percentage there. So that's not an issue.
Headline earnings, up 5.6%. A bit higher in constant currency. But I think, quite pleasing from where we sit. And then the headline earnings per share at 1.6%, obviously, impacted by the Accelerated Bookbuild equity issue that we undertook effectively to finance the RAG acquisition.
Just looking back over the last 5 comparable periods It kind of really just demonstrates that we've had a fairly consistent growth in headline earnings per share. It's obviously slowed down a bit over in this last comparative period. But I think under the circumstances in this retail environment that's still a pleasing outcome. And then just looking at the dividends per share, I think, this does demonstrates that we've kept the growth and dividends very much in line with earnings growth. And we've rewarded shareholders, I think, quite nicely over the 5-year period.
Breaking down the revenue into its component parts. If you look at the retail turnover and the 9.2% you saw in the previous page, 5% turnover growth in South Africa; 4.1% in pounds in London. I think, both well ahead of most of our peers in the U.K. market and in -- and certainly in South Africa, Africa. Interest income Jane will deal with in more detail. But it's good to see it up 2.3%, and that's against the backdrop of the decrease in interest rates. So it makes it just that much harder to achieve. And then I think very pleasingly, the last time we spoke at this time of the year, we were actually going backwards in value-added products revenue. And that's on -- publishing, our insurance and our mobile airtime, very linked to growth in account customers. And we've seen a stabilization on the book, which Jane will talk to you. We also mentioned a number of new products, new initiatives that were being launched at this time last year. Those have started to come through and great to see that up 7.5%.
Just looking at gross margins. And we've already seen the improvement in the group gross margin, very, very happy with the improvement in the Africa gross margin 45.5% up to 46.7%. And across all the categories excepting for cosmetic, as Doug mentioned, the discounting and the pressure in the cosmetics market, that's against the backdrop where we've actually had deflation for the first time, I think, in a very long time in South Africa.
Overall, across all of our categories deflation of 0.7% for the period, across clothing deflation of 1.8%. We get a lot of questions and some have already come through on the email now around what the output for the rest of the year is. I suppose it really depends on what the exchange rate does. That's good to be in a position where we've actually had deflation, means, you've got to sell a lot more in terms of volumes, we've managed to that by and large to date.
The U.K. gross margin, slight deterioration, as Doug's has earlier spoken about, most of the inflation really as a result of the depreciation of the pound versus dollar, which is -- where most of merchandise purchases take place. They passed on some of that to consumers to the extent that you can in the U.K. market. U.K. consumer is not hugely mad about inflation. They haven't had that in the past. And the balances lead to a slight deterioration in the gross margin.
And then just totally coincidentally. If you look at that gross margin in TFG London, it came out at 63.6% and Australia, lo and behold, 63.6% as well, pure coincidence, just quite interesting.
This is a very busy slide. On this -- what I'm trying to do on this slide is really unpack the expense growth. You can, I think, almost ignore these group numbers here, those in RAG and G-Star, which, as I said, are totally noncomparative.
If you look at African and London. And I think starting with the end demand. For the previous 6-month period, we had growth in total trading expenses perform net bad debt of 11.9%, that's being reined in to 8.3%. If you take into account the benefit we get of the reduction on net bad debt and look at total trading expenses, the reduction is still there from 9.7% to 6.8% growth.
I think if you just take a step back and look at some -- all the numbers on this page, the number that obviously jumps out and doesn't look right, again, is the growth and depreciation and amortization, 19% for Africa; maybe 21% in the U.K. That's not real growth in depreciation, we've spoken about this previously. We had to do an IFRS adjustment in terms of useful lives in the prior period to get more in line with reality. This is the after effect of that. It's going to flow through for the next couple of years. If you strip that IFRS adjustment out, the real underlying growth in depreciation was at 4.7%. That we've got up on the slide here, so 4.7% up.
Just looking at the other major categories for Africa. Employee costs up 6.3%. And I think that's a number that's quite important in our world. We've got average salary inflation when you take into account promotions running at about 7.5% within TFG. And the fact that we've managed to rein that in to 6.3%. We've had a headcount freeze at head office now for over a year. And the only areas where we've actually filled vacancies have been in really business critical areas like IT, security; places that you just can't afford not to have the skills. But in pretty much every other area we've held the line and rather reallocated work or asked people to delay hiring. And, yes, it's what you, kind of, have to do, I think, when the environment is constrained.
The occupancy costs grew 12.4%, down on 13.8% in the previous period. You've got a break that 12.4% down to get a bit of an understanding of it. We had space growth for the 0.5 year, 2.5%. Now we're then at 3% noncomp enlargements. And by that I mean in the previous 6 months, we had some expensive new stores that were in, but not in for the full 6 months. They might have been in for 2 or 3 months. And in the current 6-month period, they've been there for the full 6 months. So you get a noncomp boost in expenses there. Probably the most important number here, though, in terms of occupancy costs is the reduction that we have seen in average lease escalation. And in the previous period it was running at just over 7%, that's come down to 6.3%. And if you go back 2 years, the 7.1% was running at about 8%. So it's a big focus in trying to bring those down. It's a constant arm wrestle with the landlords. But I think, it's heading in the right direction.
Other net operating costs also down in terms of growth, 8.1% in the previous period, down to 5% now. And that is despite continuing to invest in the number of areas that we believe are really important for the business going forward, areas like e-commerce. Again, we've got a massive problem with robberies and burglaries, we've had to invest quite heavily on forensics. And then Jane in her area, will talk about the investments, and that's been ongoing now for a couple of years. And we're continuing with -- in terms of analytics right across the group. These are things that are going to be important in the future.
Looking at the U.K. cost growth, employee costs, I think, very well contained at 1.8%, despite it being a low-inflation environment. The U.K. team has been very focused on optimizing store staff models. They model it this way and that way in order to really get some optimal mix and keep the cost down. So that's really contained in the cost quite well.
The occupancy cost of 9.7% growth in the U.K. looks high, that's not driven by rentals though. That's predominantly rates increases in the U.K. every 5 years. Like in most countries they do a revaluation of property for rate purposes that happens to have come through in the current year. But I guess, going forward, that's not pretty much in the base.
Other near-term operating costs are up 9.8%, Doug spoke about the almost disproportionate growth in online and e-commerce in the U.K. and Phase Eight being over 30% online in the U.K. now.
Growing that fast on online comes with costs. You've got online marketing costs, search engine optimization, investing in online people, technology and equally as you sell-through third-party department store online, which is part of their mix. You're now paying commissions on that as well. So all of those costs have ended up in the 9.8%. But if you want to be a serious online player, which certainly, the U.K. guys believe you have to be and that's right. You're going to incur some costs to get there.
Looking at our finance costs, certainly, the 14.2% increase within TFG Africa is driven almost exclusively by the RAG acquisition. And our friends at RMB gave us current bridge loan before we did the equity raise that came with interest costs. That's pretty much -- once off it's -- off the system now, and very pleasing to see the decrease in U.K. financing costs. The reason for that very simply is that U.K. business is very cash generative, that managed to be pay down some of the bank debt ahead of schedule that had 2 effects; one is, obviously, your capital balance is lower; but equally as they pay their debt down and the effective interest rate declines in line with that as well. So that's come through quite strongly in the period.
From a working capital point of view, and again, the group numbers are quite distorted with Australia in here. Just looking at Africa and the U.K., in particular, trade receivables growing marginally at 1.7%. I think, the numbers that are probably the most rewarding for us, given the focus we've had on inventory, has been a slight decrease in overall inventory levels in Africa down 0.3% and 7.7% down in the U.K. in sterling. And I think the U.K. is -- we've now fully integrated Whistles into the Phase Eight model. It's fair to say they were a bit chubby in terms of stock levels at the time we took them over. Phase Eight have applied their models to Whistles. And we've seen a nice reining of the stock levels there. And the stock as a result is pretty much squeaky clean.
The only other number that I think that really stands out here for me is this 25% reduction in trade payables in the U.K., that's also part of bringing Whistles on board. When we bought Whistles, it was very much a turnaround. And they frankly, didn't have the money to pay their creditors on time. And the result of that is they weren't able to take benefit of trade discounts, settlement discounts. We injected some working capital as part of the transaction that allowed them to pay their creditors on time. They've benefited from the discounts. And that's almost, I guess, a normalization going forward, again, in the base.
The net effect overall for TFG Africa is working capital on the net base is down 0.5%.
Looking at our borrowings. And again, I'll break this down between group and Africa and international. And the single biggest swing that influence all of this, again, is the RAG acquisition. It's very much what I said around the finance costs. If you take a look at our net group borrowings that are effectively up, just under ZAR 1 billion. And if you look at Australia, the component parts of that, Australia, we have ZAR 130 million parked in Australia at the end of March last year, that was anticipated -- in anticipation of us concluding the G-Star deal. We've to have the money there in advance. We paid that away in early April. So that money is gone and paid away for the acquisition. As part of buying RAG, we secured a facility in Australia against their balance sheet, the net drawdown on that at the moment is effectively $26-odd million. So I think that's an efficient use of their balance sheets, but it has put some debt there. And if you look at TFG Africa borrowings, effectively we're up about ZAR 0.5 billion there, of that ZAR 0.5 billion, ZAR 250 million is the portion of the RAG purchase price that we haven't funded through the equity raise. We only took ZAR 2.5 billion in terms of equity, the purchase price was ZAR 3 billion. So that was really the remaining portion.
Doug's mentioned the decrease in gearing levels. A part of the reason that we undertook the capital raise was we really weren't particularly comfortable with gearing at those kind of levels. And firstly, and I think in a relatively uncertain world, you don't want to be that heavily geared as a retailer. Secondly, at those levels if we got opportunities to do further bolt-ons, frankly, I think, we would have had our hands constrained, and I'm not sure we could have done much. And we've managed to reduce our recourse debt gearing down to 46%. We've always set our target is in the low 40%. And if I just look at our normal cash flow forecasts over the next year to 2 years that comes down quite nicely. And then group gearing down to 58% when you take the foreign debt into account.
From a free cash flow perspective. I think starting at the bottom at ZAR 1.2 billion of free cash flow conversions up 58%, if you look what's really driven that 8.7% improvement in EBITDA.
CapEx, which I'll talk about next -- on the next slide down 14.6%. We've taken some really, I think, quite exciting steps there in terms of store CapEx, which I'll talk to you. And then working capital cash absorption down 72%.
In terms of our CapEx, particularly, around store CapEx, we've reduced store CapEx down from ZAR 218 million to a ZAR 178 million, that's a reduction of 18.3%. There's some base effect in terms of the big expensive shops we opened in the prior period that I mentioned earlier on. But we've had a big focus on procurements in the store CapEx area. We've managed to reduce our average build rates by some 13% compared to the prior 6-month period. We've rationalized suppliers. We've negotiated harder. We've made sure that when we order for new stores, we order exactly enough and you don't order a couple of extra rails just in case of couple of extra shelves just in case. You do that consistently over 200 stores in a year, and it adds up to a lot of money. So -- and I think that's very much heading in the right direction from a store CapEx perspective.
The RT CapEx drop is probably a bit more cyclical, that really depends on when we're running big RT projects. We've -- that's going to be vary year-to-year. But good to have it right reined in at the moment. The TFG London CapEx, pretty consistent with where we were in the previous period. This does include nearly ZAR 23 million worth of CapEx for Australia. And then the other CapEx is down. Your member that when we spoke last time that ZAR 59 million really related to commissioning the new Caledon factory, which is now up and running. The net effect is, as I said, all of that is the CapEx is down 14.6% nearly 15%, despite including Australia in there. So guys that were -- those were the financial slides, hopefully, somewhat simplified. We'll take questions afterwards but Jane of to -- over to you.
------------------------------
Jane Fisher, [3]
------------------------------
Okay, financial services. So before I show you the TFG numbers, I always show you the industry backdrop. And the way that we do this is, of course, is by looking at the TransUnion Consumer Credit Index.
We only have up here the data as at the end of quarter 2, because quarter 3 hasn't yet been released. And you can see there's been a slight improvement in the Index, but that really maybe isn't a big surprise. I mean, the Index is made up of 3 main levers. Basically the growth of accounts that are in -- going into default has slowed down dramatically. You've seen household cash flow improve slightly and debt servicing costs have also improved. If you had to ask me where I think quarter 3 is going to end up when it gets released in the next week or 2, I think you'll see another small improvement as well in that Index. And of course, you've also seen the repo rate was reduced in July this year by 25 basis points, and that's the first time that has happened in 5 years.
So how have we done, how has TFG done? Well, first of all, we have -- we showed you the EBIT numbers, the bottom line is exactly the same, but I've restated income. What I've done there is previously, it used to show interest income only. Now I have put the fees in there as well. And the fees of recovering debt used to be in the credit cost line. This now aligns to your segmental reporting, okay, so there is no change in the information that you see, but it aligns better to how we show segmental reporting. So what you can see here is our EBIT number has improved by 13.4% and given in today's environment, that's a great number to have. It's easy to grow EBIT when your income is growing at a faster rate than your costs. You can see here that our income has grown by 1.2%. So it's still under pressure here, but given that my book has grown 4.4%, you might say, "Well, where's the rest of the money? Why don't I have a higher growth in your income?" Three main reasons here. In that book growth of 4.4%, there's a component to that is lay-bys. That's about ZAR 250 million. Lay-bys, of course, don't earn me any money. I don't get any interest or any fees on lay-bys. The other reason, of course, is when I had the repo rate cut in July, that 25 basis points cost me roughly on average about ZAR 3 million a month, okay. So I've got 2 months of that cut in there as well. But the biggest reason why that income line is only 1.2% is because the number of accounts that are entering collections has significantly reduced. So when I have less accounts in the collections, I get less collection fees, which is part of that income line. So that's great, as long as your net bad debt line is also improving. And it is, it's contracting by 4.3%. So I would much rather have a reduced income line due to less collections fees and a much better net bad debt line. You can see here I've reduced it by 4.3%. Same time last year, that was 4.2%. So that's a great result. We're continuing to improve our net bad debt figure. My write-off growth has slowed down to 0.7%. When I stood here this time last year, it was 13.7%. So we've had a significant slowdown in the growth of new accounts. But my recoveries growth is still at 13.3%. So even though the inflow into recoveries has slowed down dramatically, I'm still managing to get great yields in that recoveries space. When you've got a better collections, you've got a better recovery, you've got a better portfolio. Of course, it means you've got a -- you don't have to have as much impairments. And all of that is wrapped up into my net bad debt line.
The credit cost I've managed to largely keep flat. So even though I've had reduced volumes into the collections, which means I don't need to spend as much on my collections workforce. I've taken that money and I have put it into new accounts and validations, as well as invest in things like e-commerce, call centers, the 2 new brands have gone live, that cost money. And I've also been putting that money into group analytics, but I've kept the costs largely flat.
So how's the book looking? Well, the number -- I mean, the Affordability Regulations are now comp, okay? So my approved and activated accounts for this period are up about 43%, okay? And we have done a number of things there. We have improved our processes on proof of income, how to get those documents, things like digital application system. It means I have less accounts with missing information. So we've put a whole lot of process improvements on how to get more new accounts through the door. I have not changed any of my risk mandate, whatsoever. And I have not reduced any of that risk, and you can see here now that those approved and activated accounts are translated into the number of active accounts now and have managed to stabilize it. A slight growth, 0.6%. Hopefully, by the year-end, I'll be coming back to you to say an even higher figure. That's what we're aiming for. So if you're approving and activating more accounts, you've got a stable active account base, you should have a better credit sales growth, and we do. We are up 6.2%. And I know it's off a softer base, okay, but we still put a lot of initiative behind that, to try and get that 6.2% growth. And of course, now you can see the split, credit turnover and cash. I mean, credit turnover, it's around that 50 [mark], that's our strategic objective and we're trying to keep it around that.
So how's the book looking? The net debtors' book has grown by 6.8%. If you've got improved collections performance, you should have less accounts that are overdue, and I do. I reduced it from 13.9% down to 12.5%. The percent that are able to purchase is up to 84.3%. That is the highest-ever figure that I have ever seen for the number of accounts that are in a position of able to buy. The net bad debt write-offs as a percentage of credit transactions, 8.1%; net bad debt write-off as a percentage of debtors' book is 14%. You might say, "Hang on a minute. You've just told me that your write-off growth has slowed down dramatically, great recoveries. Why is that net bad debt percentage not lower than 14%?" The reason for that is that I've moved some of my debt sales strategy, okay? This time last year, I did more debt sales in H1. I have moved them into H2 because I can get a better price by moving them into H2. If I had done the same level of debt sales, that figure would be 13.7%. Come year-end, okay, I expect to beat 13.7%, the way we're going. Net bad debt as a percent of debtors' book -- of course, in this one here, that's your P&L, so that's your write-off, recoveries and provision movement in there. As a percent of debtors' book, it is down to 10.9% and the provisioning has further improved to 11%, both of which are great numbers. There are no changes to re-ages or policy, no changes to write-off, no changes to provisioning, genuine results, okay? And that really does reflect the quality of our portfolio.
Value-added products. Value-added products typically sell into the credit portfolio. We have launched onto the cash rewards database and it's still largely in testing, okay, and we're still rolling that out. It still predominantly depends on the credit account base. The fact that I'm approving and activating more accounts gives lifeblood through to the value-added products, and you should start to see growth for those people that are dependent on that, and you do. Publishing, insurance are both showing great EBIT increases.
One2one. Of course, it's a hugely competitive market in terms of pricing out there and we're looking at ways of how do we improve that, and how do we improve that growth for year-end. But overall, this division has got an EBIT increase of 9.5%. Still a great result.
Regulation. One day, I hope that I don't have to stand up here and talk about regulation and legislation, but it is the new world, that's what we operate in. The Affordability Regulations. You'll know that we went to court, first week in August, with 2 other retailers. The matter was heard at the High Court and we're still awaiting a ruling. We were hoping to try and get an answer out before court goes into recess for Christmas, but who knows. We don't know when we are going to get an answer about that. I think win or lose, there are benefits for TFG by going to court on the Affordability Regulations. The biggest piece of legislation right now that we are worrying about and that we are thinking about is the debt relief forgiveness policy. It's currently being debated in Parliament, as we speak. There is not a bill that has been published for public comment yet, okay. So it's not yet available. We are attending Parliament, we are listening and we are hearing to what they are suggesting. And they are talking about having a debt forgiveness program for people who have been retrenched. Well, that sounds great, but who's going to pay for it? Somebody has to pay for that, is it going to be government, is it going to be credit providers? Who's going to actually police it, how will this actually work in principle? Until that bill is published, there's not a lot I can do about it right now. The NCR powers, they talked about having them extended. That's gone a little bit quiet recently. I've kept it on the watch list because I'm sure it will come back soon, so I've kept it right on there as something to watch. And then, of course, you'll know that the NCR has reported TFG to the Tribunal regarding our Club fees. We believe our product is compliant. We have legal counsel to back that opinion up.
So what's our strategy? Three things. I showed you these at year-end, they remain the same. The customer. What is the credit product and the features that we need? We're looking to launch a new product during 2018, looking at high install pay purchase for things like @home and jewelry. It's still under wraps right now, but that is something we're looking at, about how do we diversify our credit products. And how do we increase our account acquisitions? We've put a lot more focus around this. I mean, this is the lifeblood for the credit division. So what do we need to do? We're looking at things like testing different vouchers, different strategies, how do we talk to you, how do we market, how personal is it. We've been trying lots of different tests and some of those have been really successful. I mean, that's why we're getting that approved and activated right up there. How do we look at using -- improving our scorecards? Right now, we are dependent on one bureau. We're looking at things like, should we go multi-bureau, does that give us an advantage, what does that mean. So we're looking at all these different ways of how to improve our account opening. And of course, how do we sell the value-added products to the cash database?
Group analytics. You'll hear terms like data scientists and data engineers. I mean, they are all the terms right now that are all the rage. This is something we've been quietly working on in the background. And every time that I've been getting a saving from my credit division because of workforce manager, we've been using some of that money to actually build a group analytics team. And we're really starting to see now it come to fruition. And so this team will look at things like -- they'll be asked by the business, "How do I attract more of the customers that I want to my brand?" Well, first of all, you have to understand: Who does your brand appeal to; what do those customers look like; what kind of products do they buy; such that you can then say, "Well, who do I want more of? Who do I want to attract? Who do I want to grow? Who do I want to retain?" And that's what the group analytics team will look at: What kind of merchandise should I have; how should it vary by demographics? One of the key projects in this team that we are running is single view of customer. You have to have that golden thread, you have to be able to have all the information about a consumer available, both structured and unstructured. So how do you combine social media with your TFG information that you have, with the external information that you might have. Because if you can have personalized relevant communication, we know that it increases engagement levels. That's a key project that is well underway and hopefully, we'll be able to talk about the exciting deliverables from that in the future. And of course, IFRS9, just around the corner. We're well-positioned for it and we're prepared for the implementation of IFRS9. And then I'm going to hand you back to Doug.
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [4]
------------------------------
All right. Final slide on the outlook for the second half. Political economic uncertainty is going to continue, certainly, in 2 of the 3 main territories we trade in. We, obviously in South Africa, we have a big event coming up in December, and we'll just have to see what pans out there. Hopefully, we'll have what we would regard as a good outcome. And in the U.K., obviously, they are looking at what is going to happen with Brexit. We are looking for some sort of certainty as to the way forward there and that might give some more confidence to the consumers in the U.K. The trend that we have seen on cash and credit, which has been presented. We see that continuing, it has since the mid-year, and we expect to be able to maintain the gross margin that we showed at the interim here through to the end of the year. Product inflation we anticipate will remain flat to negative, pretty much as it was at the mid-year here, where the blended mix is about minus 0.7%. Space growth, these numbers I've got up here are for the whole year. So I think we've opened 144 outlets in the Group in the first half and we'll end up with around 270 for the full year, and that's by different jurisdiction, across Africa, London and Australia. Obviously, there's going to be a lot of focus on the key strategic initiatives which we have had in place for a number of years, and which we have often spoken to you about, but there is particular focus on the customer, superior customer experiences and single view of the customer is obviously one of those. Cost control, and Anthony has been talking about that, and we've had a lot of success in this past 6 months. Working capital management, capital optimization, I think Anthony has been highlighting some of the wins that we've had there. Continued profitable international expansion, we will continue to look at opportunities in that regard, as we have done for the past few years. And if I look at what's happened since the interim at the end of September, the first 5 weeks of the second half have basically been at very similar levels to what we had for the first half in constant currency, in all the jurisdictions. At this stage, I normally go and say questions. But just to remind everybody, that we have invited you all to join us at Canal Walk after this for the opening of the Fabiani Women's store. If you didn't respond and you still want to go, it's not a problem, please join us. The event, I think, starts from 6:00, 6:30 but we can get there by -- we're hoping to get there by 7:00. So once we have gone through questions and you have come up and spoken to us here as you normally do, we will want to try and move on because we do want to get through to the store. Just to give you a flavor of that, this is the actual store from the outside, and this is inside the store and some of the product. Jane has been our live model. She is wearing Fabiani Women. I was going to ask her to stand up and walk around, and just -- but you have had good sight of it. I think she looks tremendous in the outfit. So at least we've got a live model here for a change. Also in Canal Walk last week, we opened 2 other big stores. We opened the sportscene store in Canal Walk, it's almost 1,500 square meters. I would encourage everybody that is going to see the Fabiani Women store, please to go and stick your head into this store. I think it's absolutely world-class, it could fit in anywhere in the world. It is a great store. And next door to that, we just opened our 1,000-square meter Exact store, which I also think is a great representation and move on for that brand as well. It's interesting, these are great-looking stores and it comes on the back of what Anthony was also talking about, where we have reduced the average fit-out by 13% in the 6-month period. So please, we would like you to join us later if you can. And if you're unable to, I would really encourage you to get to Canal Walk to see these stores. Right, we will now move on to questions. Do you have any questions, first of all?
==============================
Questions and Answers
------------------------------
Stephen J. Carrott, JP Morgan Chase & Co, Research Division - South African Retail Analyst [1]
------------------------------
It's Stephen from JPMorgan. The excellent working capital situation during this half, I'd just like to get a sense of whether that feels like a sustainable kind of number to yourselves? Or to what extent kind of one-off timing issues might have impacted on that? That was the first question. The second question for Jane, the pretty significant year-over-year increase in the percentage of credit customers able to purchase, little bit surprising to me. I suppose it's a result of accounts being in better condition, but why aren't customers purchasing, do you think -- utilizing their excess capacity? Is it caution to use credit or something else? If you could just talk to that, if you can.
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [2]
------------------------------
I'll ask Anthony to deal with question #1 and Jane will pick up question #2.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [3]
------------------------------
Stephen, the -- yes, looking at the working capital improvements, I think the one lever there is the movement of the book. We're obviously still in a relatively low growth environment for the book. When the book grows significantly on the back of much higher credit sales, potentially that will suck up cash. There are no findings from a timing perspective. And I think for me, the biggest focus we've had has really been around inventories, and I think to contain inventories in a much tougher than expected trading environment is even more difficult. And I think if we look ahead, we run a 5-year forecasting plan right across the Group. If we take a medium-term view, those inventory levels are all looking like they're coming down very nicely over the next 2, 2.5 years. You're going to get blips depending on short-term things in between there, but I mean, sustainable, I think the answer is yes.
------------------------------
Jane Fisher, [4]
------------------------------
Okay, then the question around, you've got more customers in a position open to buy, why are they not spending even more on credit, I think is roughly what you're asking me. What we are seeing is that the volumes of customers that are shopping is fine, there's no issues there. The average sales is what has dropped slightly for our credit customers. Our customers are actually spending slightly less than the average sale. So that's what's impacted more of the credit turnover than anything else.
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [5]
------------------------------
I should welcome our Chairman, who is sitting at the front, Michael Lewis. Nice to have you here, Michael. I hope we've not given you any surprises so far.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [6]
------------------------------
Doug, I've got a couple of questions on (inaudible) and the first one, I think Jane has already answered, but just for the benefit of the person asking the question, what is the gross debtors' book value? Jane?
------------------------------
Jane Fisher, [7]
------------------------------
The answer is ZAR 8.003 billion, to be exact.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [8]
------------------------------
There we go. And what is driving deflation in clothing?
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [9]
------------------------------
I think it's 2 things. One is obviously the foreign exchange movement and the other is all the initiatives that we have had on supply chain. We have been negotiating much harder with our supply base. We've also been looking at where we can increase the volumes, bring down -- certainly on key essential items, bring down the price of the product but maintain or better the same margin. So obviously, if the rand plays its part in that, then it's easier for us to do that. We're certainly okay, I think, for the second half of the year. If the rand remains at these levels, if the rand moves out with anything that might happen on a downgrade, then obviously, that will bring inflationary pressure back into the market next year. But I think there's a lot of water to flow under the bridge and it's a very dynamic currency. So we don't really know -- but it is a combination, obviously, of a more stable -- more stable rand, a stronger rand, and to a very large degree, the supply chain initiatives that we have had in place now for a number of years.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [10]
------------------------------
Next one, Doug, given the lower growth environment in South Africa, and the greater level of international competition coming into South Africa, do you believe that South African operating margins are sustainable at current levels?
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [11]
------------------------------
I don't -- I really don't see why not, because I mean, we are, we're in that environment now. We've had -- the international retailers have been coming in, it's not that they're new coming in. In fact, there's many, many more of them leaving than there are coming in at the moment. So in that aspect, I don't think that, that actually -- I don't think we're seeing a net gain of international retailers coming in. And against that backdrop, against a very difficult trading environment, our very difficult GDP growth environment, we've been able to maintain those margins. So I think it is sustainable.
------------------------------
Anthony E. Thunström, The Foschini Group Limited - CFO, Member of Operating Board & Executive Director [12]
------------------------------
And I had one other question, and again, I'll just answer it for clarity. The question is around why inventory levels have increased. I think we showed quite clearly on the slide that for, certainly TFG Africa and the U.K., they're both down. The Group is obviously up with the inclusion of the Australian businesses. I think we've answered the rest.
------------------------------
Unidentified Analyst, [13]
------------------------------
Maybe you can comment on your expectations for level of competition in the footwear space, with Truworths bringing Office in, and in the homewares space with the acquisition of Loads of Living. Are you worried?
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [14]
------------------------------
What I would suggest you to do is go and look at the sportscene store at Canal Walk and then go and look at any Office store you want, and I think you'll see that no, we are not worried. And Loads of Living, I mean, it's a business we know well, because we did look at it 10 -- 11 months ago, almost 12 months ago, and we know it's a small, very, very small business. And we know the issues that are sitting in that business. So no, we're not worried.
------------------------------
Unidentified Analyst, [15]
------------------------------
[Atia Vada from EVO] Capital. I have a question on the U.K. operating environment. Can you maybe just comment on like-for-like numbers, or even just to give us an indication of average price increases in the U.K.?
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [16]
------------------------------
The average price increases are roundabout 5% -- between 5% to 6%. And in terms of the like-for-like, the -- we've got extremes in there. First of all, concessions are never easy to give a like-for-like, we've said that from the start. They move the [max], they change the size, you can't get a like-for-like. In terms of the bricks-and-mortar, the like-for-likes are probably down about 1% to 2% down, but the flip side of that the online is up in excess of 20%. So that's where -- and we -- and that's in our expectations. We expect bricks-and-mortar to continue to be under pressure, but offset by very fast-growing online numbers. The online numbers also difficult to give like-for-like, because you go onto different sites and that obviously makes a big difference. And if you've got a business like Whistles, which is a total turnaround business, and the numbers there are also very misleading. But all I can say is the Whistles business has been very successfully turned around and is growing at a very good pace.
------------------------------
Unidentified Analyst, [17]
------------------------------
Just a follow-up on that. The difference between your margins in a brick-and-mortar and your online stores in the U.K., specifically at Phase Eight and Whistles.
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [18]
------------------------------
It's quite interesting. Everybody thinks that online will be cheaper, but at the end of the day, if you've got a customer who would have bought -- you've got that sunk cost into the brick-and-mortar store. So if there's a dress that would have been bought there, that's fine, your costs are there. The moment you do it online, of course, you've got other logistics costs that come in. So that does put some pressure on your costs, going online. But that does get offset in the way that you start to reduce your bricks-and-mortar exposure over time. And that's a more obvious and more relevant process in the U.K. than is anywhere else in the world, just because of the sheer size of the online business.
------------------------------
Unidentified Analyst, [19]
------------------------------
Can I just ask on international expansion, do you have ambitions to go beyond the U.K. and Australia? That's one. The second part is you indicated that you are not willing to raise your gearing much more. Can we assume then any sort of further acquisitions going forward will be equity-funded?
------------------------------
Alexander Douglas Murray, The Foschini Group Limited - CEO, Member of Operating Board & Executive Director [20]
------------------------------
I think the first thing to say is we like having a U.K. platform and we like having an Australian platform, and that's all we're looking at, at the moment. We've got 2 exceptional management teams in both those areas, both those regions. The U.K. team, of course, also trades throughout the world, although they are U.K.-based and just under 80% of what they do is in the U.K. So in terms of platforms, I think U.K. and Australia is where we are, certainly in the medium term. There's nothing else outside of that for the time being. When we said we're happy with our gearing coming down, one of the reasons, one of the other reasons that we actually had the capital raise was just to get the gearing down to a much more acceptable level to us. And if you, as Anthony said, if you go through to the end of the year and into next year, that gearing really starts to drop. It was also to allow us to have a little bit of powder in the armory. If there was any other opportunities that came up, so as we wouldn't have to go to the market. And we sit in that position at the moment.
Right. If there's no more questions, I'm very happy for -- we will take questions, as we always do, up here. But then we may be a little bit rude after about 20 minutes, to say that we'd like to get through to Canal Walk. And really, I'd love any of you to come through and join us and see those stores, particularly the Fabiani store that's launching this evening. And thank you for being here.
------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the
Transcript has been published in near real-time by an experienced
professional transcriber. While the Preliminary Transcript is highly
accurate, it has not been edited to ensure the entire transcription
represents a verbatim report of the call.
EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional
editors have listened to the event a second time to confirm that the
content of the call has been transcribed accurately and in full.
------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of
such changes.
In the conference calls upon which Event Transcripts are based, companies
may make projections or other forward-looking statements regarding a variety
of items. Such forward-looking statements are based upon current
expectations and involve risks and uncertainties. Actual results may differ
materially from those stated in any forward-looking statement based on a
number of important factors and risks, which are more specifically
identified in the companies' most recent SEC filings. Although the companies
may indicate and believe that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate or
incorrect and, therefore, there can be no assurance that the results
contemplated in the forward-looking statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2018 Thomson Reuters. All Rights Reserved.
------------------------------