38 of 2021

  Newsletter No 38 / 8 October 2021                           

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TFG’s Prestige clothing (Pty) Ltd creates more jobs with launch of new factory for the hearing impaired

Plaque unveiling – Minister Patel, Ingrid Parkin, Graham Choice & Anthony Thunstrom

Leading fashion and lifestyle retailer TFG officially opened the doors of their latest Prestige Clothing factory in Johannesburg earlier today, specially designed for the hearing-impaired workforce. This is further evidence of TFG’s drive on job creation and growing local manufacturing.

“Many people living with disabilities still face barriers when it comes to employment opportunities. Upskilling and creating local employment for them was a particular focus area for TFG (Africa) over the last few years.” Said Graham Choice, MD TFG Merchandise Supply Chain.

Through TFG’s involvement with Proudly South Africa, a valuable connection was made with St. Vincent School of the Deaf in 2019. Like elsewhere in our country, the school had many learners leaving but unable to find jobs, further challenged by the fact they are deaf.

TFG partnered with the Fibre Processing and Manufacturing (FP&M) SETA and the Thandeka Vocational Education Trust (TVET SA), – an accredited industry training provider, to train school leavers from St. Vincent’s. TFG’s Prestige Clothing, Bidvest and Berzacks all assisted by joining the partnership and providing a modern working environment for the learners.

“The first intake of 23 learners will complete an NQF Level 2 CTFL manufacturing learnership in October 2021. An additional 24 learners are also currently on the programme and will complete their learnership in 2022. We hope to enrol our third group of learners in 2022.” Continued Choice

This year, TFG appointed more than 100 unemployed people living with disabilities into learnerships across the business. Through this programme, learners with a long term or recurring physical or mental impairment are being upskilled through various 12-month learnership programmes and gainfully employed.

The newly launched factory is one of five factories making TFG’s Prestige Clothing is the largest local apparel manufacturer in South Africa, employing 2 470 permanent employees as of 31 July 2021.

“I welcome the efforts by TFG to build a more inclusive economy, providing skills and work opportunities for the hearing-impaired. The industry partnership is about building the dynamism of local factories that can create more jobs, supply competitively-priced goods to consumers and provide a fair wage for workers and a fair return to shareholders,” said Mr Ebrahim Patel, Minister of Trade, Industry and Competition.

Over the past five years, TFG has worked with the South African government, the Department of Trade and Industry and Competition (DTIC) especially, to strategically create a diversified and agile local supply chain. This investment reduced its reliance on China and other international suppliers. This focused strategy has led to an increase in the contribution of locally manufactured products for their retail brands. Five years ago, more than 80% of all TFG merchandise came from the East; today, locally manufactured textiles have grown to a meaningful 37%, and this will increase exponentially over the next few years.

Evidence of this strategy can be seen in the retailer’s expansion of their Prestige Maitland and Caledon factories. Together with the launch of three additional hubs, they are collectively projected to employ 5 000 workers by 2026.

Woolworths reaches sustainable cotton milestone

This summer, all the cotton fibre used in Woolworths’ private label clothing and home ranges is 100% responsibly sourced, either via Better Cotton or certified organic cotton. The announcement but the retailer was shared ahead of World Cotton Day, observed today, 7 October.

Around half of all textiles in the world are derived from cotton. It’s the planet’s most profitable non-food crop, and more than 250 million people across the world rely on cotton farming and production for their livelihoods. For consumers, soft, cool and comfortable cotton is a perennial fabric of choice, from jeans and t-shirts to summer dresses.

However, conventionally grown cotton is fraught with environmental concerns. The industry is known for its heavy use of pesticides and the subsequent degradation of waterways and soils with chemical run-off. Cotton is also a notoriously thirsty crop, taking up more than its fair share of freshwater via intensive irrigation. Turning the commodity into clothing further increases its impacts, with an estimated 2,700 litres of water going into the farming, production and dyeing processes of a single t-shirt.
“Cotton is the most used fibre in our private label clothing and home products which is why over 15 years ago, we embarked on a responsible sourcing strategy for cotton and are delighted to have reached this milestone. Grown across many of the developing regions of the world, including some provinces in South Africa, cotton has significant potential as a poverty-alleviating crop that can provide sustainable and decent work.

“In terms of its product lifecycle, cotton biodegrades quickly in comparison to synthetic textiles, and it can be easily reused and recycled,” says Lawrence Pillay, group head of sourcing Woolworths’ Fashion, Beauty and Home.

“Most of our cotton is sourced through the Better Cotton Initiative, and also includes a South African-grown component that meets the international standard, with the remainder being certified as organic cotton that complies with the Global Organic Textiles Standard,” confirms Pillay.

Better Cotton Initiative
More than a decade ago, the Better Cotton Initiative, spearheaded by the World Wildlife Fund (WWF) brought the global industry and civil society together with leading retailers and brands to develop standards for improvements in the growing of cotton and the production of cotton products.

Today, Better Cotton is the world’s leading sustainability initiative for cotton with 2.7 million farmers in 23 countries accounting for 23% of the world’s cotton is certified as grown in line with the Better Cotton Standard, according to the Better Cotton 2020 Report

The standard fosters thriving cotton communities while protecting and restoring the environment which includes limiting the use of pesticides and herbicides, enhancing water efficiency and soil management, protecting natural habitats in cotton-growing areas and striving for dignified work and fair wages.

This cotton is sourced via mass balance so is not physically traceable to end products. However, the Better Cotton farmers enjoy a variety of benefits from the demand for Better Cotton including much-needed training and resources to adopt sustainable farming practices.

“All these efforts though come to fruition in-store where consumers play a vital role in supporting the brands and retailers offering cotton products that meet these higher standards of caring for the planet and people,” concludes Pillay.    Bizcommunity

TFG joins forces with TymeBank to offer additional services to customers

TFG Financial Services are excited to announce a new initiative with TymeBank which will allow them to integrate an end-to-end financial service offering into the retail environment, both instore and via digital platforms.

“During the course of 2022 we expect to have 600 kiosks rolled out to our stores          offering various financial products and services including a TFG / TymeBank branded debit card,” says TFG CEO Anthony Thunström.

TymeBank, which is backed by African Rainbow Capital, has more than 3.8 million bank account customers and is already a well-loved brand in South Africa offering affordable banking products.

“TFG houses some of South Africa’s most popular and well-established brands and is renowned for its retail strength and strong customer focus. We couldn’t be more excited with TFG as a strategic partner as we look to expand our reach and diversify our customer profile,” says TymeBank CEO Tauriq Keraan.

“Currently TFG offers store card credit facilities to enable merchandise sales, but this strategic partnership with TymeBank will allow us to expand our product offering to meet customers’ changing needs throughout their financial journey.” says Jane Fisher, Group Director TFG Financial Services.

The first service to be launched later this year will be in our JET stores and will be the MoreTyme product, which is an interest free ‘buy now pay later’ product.  Customers will also be able to pay for merchandise instore through the use of a barcode.  These types of payment plans are already hugely successful in England and Australia and give customers far greater choice of payment options. Moretyme will be rolled out to remaining TFG stores next year.

Scott Brown, Head of TFG Value Added Services, says: “TymeBank’s operating model and technology stack is designed for partnership and easy integration which helps with a much faster speed to market.” Scott is responsible for the overall implementation of this initiative.

Once the kiosks are rolled out, more services will be added, all aimed at adding value and making transacting easier for TFG’s customers.

This initiative is subject to regulatory approvals where applicable.

Pepkor – trading statement

In terms of the JSE Ltd. (“JSE”) Listings Requirements (the “Requirements”), a listed company is required to publish a trading statement as soon as it becomes aware that a reasonable degree of certainty exists that the financial results for the financial period to be reported on next will differ by at least 20% from the financial results for the previous corresponding period.

Pepkor advised shareholders and noteholders that a reasonable degree of certainty exists that its headline earnings per share (“HEPS”) and earnings per share (“EPS”) for the year ended 30 September 2021 (“FY21”) will increase by at least 20% as reflected below.

– HEPS is expected to increase by a minimum of 13.1 cents to at least 78.6 cents compared to HEPS of 65.5 cents reported for the year ended September 2020 (“FY20”), representing an increase of at least 20%; and
– EPS is expected to increase by a minimum of 164.8 cents to at least 78.6 cents compared to the loss per share of 86.2 cents reported for FY20.

The increase in HEPS and EPS is attributed to the following factors:

– improved trading performance compared to FY20 which was impacted by COVID-19 trading restrictions;
– lease modification gains in terms of IFRS 16 as a result of favourable lease renewals and retail footprint consolidation in specific retail brands. The acquisition of a portfolio of leased properties as announced on 14 April 2021 on JSE Ltd.’s Stock Exchange News Service (“SENS”) resulted in the derecognition of related right-of-use assets and lease liabilities;
– reduced finance costs due to the marked reduction in the group’s net debt; and
– impairment charges recognised during FY20 which specifically impacted EPS.

The Building Company will be remeasured and represented as continuing operations in the group’s FY21 and FY20 financial results following the termination of the transaction to dispose of the business as announced on 12 August 2021 on the SENS. The HEPS and EPS guidance provided in this trading statement includes the results from The Building Company.

Further guidance of the likely increase in EPS and HEPS will be provided once the required degree of certainty in terms of the Requirements has been established.

Pepkor’s financial results for FY21 will be announced on SENS on or about 19 November 2021.

The financial information on which this trading statement is based, has not been reviewed or reported on by the company’s external auditors.

Rex True final results June 2021

Revenue for the year decreased by 17.1% to R491.4 million (2020: 592.5 million) and gross profit was 11.5% lower at R242.5 million (2020: R274 million). Operating profit recovered to R50.1 million (2020: loss of R73.8 million). Profit for the period attributable to equity holders went up to R23.1 million (2020: loss of R75.3 million). Furthermore, headline earnings jumped 262.5% to 146.6 cents per share (2020: headline loss of 90.2 cents per share).

A dividend on the 6% cumulative preference shares for the six months ended 30 June 2021 in the amount of 6 cents per share was declared by the board of directors on 28 June 2021 and was paid on 12 July 2021. The directors have not proposed a dividend in respect of the ordinary and ‘N’ ordinary shares.

Company outlook
The group anticipates that the current economic environment will remain challenging. The impact of COVID-19 restrictions is still being felt throughout the economy and is further exacerbated by the recent civil unrest, port disruptions as well as the slow vaccination roll out and anticipated “fourth wave”.

The retail business segment has a strong brand in a niche market. Queenspark launched its own online sales platform in June 2020. Existing and new brands will be continually assessed with the intention of providing customers with a portfolio which caters for their changing needs during this time. Cash preservation and liquidity will continue to be a top priority.

The majority of tenants within the property portfolio proved to be resilient during the period of the lockdown however some negative impact was experienced as a result of reduced economic activity and therefore reduced demand for office and retail space. With respect to undeveloped properties, the group continues to seek opportunities that will yield a satisfactory return on capital.

The group’s water assets are performing and saw minimal impact as a result of COVID-19. The businesses are successful working examples of private-public partnerships and are well positioned to take advantage of any new opportunities which may arise within the water and sanitation sector.

During the current financial year the group entered into an agreement to acquire a controlling interest in Telemedia (Pty) Ltd which operates in the media and broadcasting sector, further adding to the diversification of the group’s investments.

Notwithstanding the current trading conditions and many uncertainties which lie ahead, the group will strive to achieve reasonable targets within current operations. We will also continue to utilise our entrepreneurial flexibility to seek opportunities in other sectors of the economy and by doing so further diversify our portfolio of investments.

Pick n Pay – trading statement

Shareholders are advised that Pick n Pay Stores Limited is in the process of finalising its financial results for the 26 weeks ended 29 August 2021 (H1 FY22), which is due to be published on 20 October 2021.

Despite severe trading and operational disruptions in the second quarter of the financial year, the Group delivered a resilient and positive performance, maintaining underlying momentum on sales and earnings growth.

The Group reported sales growth of 4.1% for the period. Normalised sales growth of 8.0% year-on-year (excluding the estimated impact of the disruptions set out in detail below) reflects solid progress against a number of the Group’s strategic priorities – including another market-leading sales performance by Boxer, better value for customers across Pick n Pay and Boxer and progress in growing Pick n Pay’s omnichannel offer.

The Group’s first half earnings will demonstrate continuing benefits from the Group’s Project Future modernisation programme – including a more efficient supply chain, more cost-effective store and support office operations, and strong management of working capital and capital investment.

Update on civil unrest
The civil unrest in KwaZulu-Natal and Gauteng in July had a significant impact on Group operations. 212 stores (112 Pick n Pay and 100 Boxer) were damaged by looting and destruction, with many stores requiring extensive restoration before re-opening. The Group had re-opened 145 (close to 70%) of these damaged stores by the end of August, with a further 18 stores re-opened in September. As well as damage to stores, Pick n Pay’s two largest distribution centres in KwaZulu-Natal were looted of all stock and suffered considerable damage to infrastructure. As a result of exceptional tenacity and teamwork, both of these distribution centres were repaired, re-stocked and operational within two weeks.

At the height of the unrest, the Group closed an additional 551 stores (417 Pick n Pay and 134 Boxer) as a precautionary measure to protect staff and our customers. The majority of these stores re-opened within four days, and all were trading by the end of July.

The Group incurred material damage losses (stock and assets) of approximately R900 million. These losses were fully covered by the Group’s SASRIA insurance policies. The Group is working with insurers and advisors to expedite all claims under the policy, and has to date received R600 million in interim payments.

In addition, the Group expects to recover the majority of all related lost profits under its business interruption insurance covers, subject to relevant policy limits and deductibles. Although it is not yet possible to quantify the full impact of the business interruption on sales and earnings, the Group estimates that it resulted in approximately R930 million of lost sales over the months of July and August.

The Group has submitted its material damage claims to insurers and has made good progress in estimating its lost profits to date (business interruption claims). Insurers have provided assurance around their financial ability and commitment to settle outstanding claims in the market, and loss adjustors have provided assurance around the validity and quantum of the Group’s claims. On this basis, and with the substantial interim payments received to date, the Group is confident that it has the level of certainty required to provide for the recovery of the majority of its losses, in line with International Financial Reporting Standards.
The swift and heroic response of our teams during and after the civil unrest and looting enabled a rapid restoration of retail operations in most of the affected areas. This was vital in maintaining food supplies, social welfare and public morale at a very critical time. We express our sincere thanks to our extraordinary Pick n Pay and Boxer teams, and to our highly-valued franchisees, suppliers and service providers, who worked so tirelessly to rebuild and restore.

Update on Covid-19 trading restrictions
The Group’s liquor business lost a further 55 trading days this period, as a result of the government’s continuing restriction of off-site alcohol sales in response to the Covid-19 pandemic. These restrictions resulted in an estimated R800 million of lost sales over the period.

The South African government is alone among major countries in using restrictions on alcohol sales as a tool in its pandemic response, and we call on the President to heed the extensive evidence that it is not an effective measure, while having a significant negative economic and employment impact.

Trading update

The Group entered the financial year with good trading momentum. This was maintained in the first quarter, with an encouraging performance, in line with Group expectations. However, the severe trading disruptions resulting from the civil unrest and restrictions on liquor sales resulted in an estimated R1.7 billion in lost sales in the second quarter. Across the whole first half, Group turnover increased 4.1% year-on-year to R46.0 billion. The Group’s estimated normalised sales growth, excluding the impact of disruption, is 8.0% for the period.

The normalised sales growth of 8.0% reflects the Group’s strong recovery in categories which were restricted during the hard lockdown in the first half of last year. The Group also continued to deliver market-leading growth in the value segment of the market, through its Boxer and Pick n Pay Value supermarkets, and extended its market share gains in clothing.

Earnings Update
Accounting for the costs and disruption arising from the civil unrest will inevitably add complexity to the Group’s reported financial result. As stated above, the majority of losses in respect of both material damage and business interruption are expected to be recovered under the Group’s insurance programme.

Furthermore, while all related costs and losses will be evidenced across the Group’s Statement of Financial Performance as relevant (turnover, cost of sales, gross profit, trading expenses), most insurance recoveries will be recorded in other income in line with International Financial Reporting Standards. This will have an impact on the Group’s reported margins and other financial ratios. When the Group publishes its result, it will endeavour to provide stakeholders with a normalised view of key performance metrics, excluding any impact from the civil unrest, in order to facilitate a comparable analysis of year-on-year performance.

The Group expects its H1 FY22 earnings to fall with the following ranges:

26 weeks to 26 weeks to 26 weeks to 29 August 2021 29 August 2021 30 August 2020 Current period Current period Prior period Expected range Expected range Actual % growth cents per share cents per share Comparable earnings metrics, excluding hyperinflation and including the impact of all trade disruptions Comparable headline earnings per share (HEPS)* 85% – 95% 68.67 – 72.38 37.12 Reported earnings metrics, including the impact of all trade disruptions

Expected range (26 weeks to 29 August 2021)35%-45%, 59.10cps-63.48cps
Actual (26 weeks to 30 August 2020) 43.78cps

Expected range (26 weeks to 29 August 2021) 80%-90%, 59.81cps-63.35cps
Actual (26 weeks to 30 August 2020) 33.23cps

*Comparable HEPS is the Group’s primary measure in determining its dividend pay-out ratio and excludes any impact from hyper-inflation accounting in Zimbabwe. Comparable HEPS growth this period is reflective of the underlying performance of the Group’s South African segment.

H1 FY22 – Interim Financial Result Announcement

Shareholders are advised that the Group plans to release its financial results for the 26 weeks ended 29 August 2021 on SENS just after 7:00am on Wednesday, 20 October 2021. An online results presentation will follow at 9:00am. All interested stakeholders are invited to register for the results webcast via the following link: https://www.corpcam.com/PicknPay20102021

The slides accompanying the result presentation will be available on the Pick n Pay Investor Relations website at www.picknpayinvestor.co.za shortly before the commencement of the presentation. A playback of the webcast will be made available on our website approximately 2 hours after the presentation.

The financial information on which this trading and earnings update is based has not been reviewed by or reported on by the Group’s external auditors.


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