TFG Revenue Breaks New High at R60 Billion: Leading to an increased dividend payout

In a challenging retail environment, The Foschini Group (TFG) has shown strength and adaptability in its latest financial results for the half-year ending 30 September 2024. TFG experienced tough conditions like high inflation and slower consumer spending in its main regions, South Africa, the UK, and Australia. However, it managed to keep profit margins stable and even improve them. This was attributed to effective cost management and efficient stock handling. Even though sales and earnings were slightly down, the group increased its interim dividend, showing commitment to returning value to investors and staying resilient in a difficult market.

Key Metrics for Second HY2024:

●       Revenue: R60.1 billion, an 8.9% increase compared to the same 2023 period, marking a new record-high for the group.

●       Gross Profit: R27 billion, up 8.6%.

●       Operating Profit Before Finance Costs: R5.9 billion, up 9.9%, reflecting strong operational efficiency.

●       Net Income: Headline earnings grew 0.8% to R3.1 billion.

●       Earnings Per Share (EPS): 934.7 cents, a slight 0.4% decrease from the second half of 2023.

●       Headline Earnings Per Share (HEPS): 970.7 cents, a 0.2% increase.

●       Cash Generated from Operations: R12.5 billion, up 76.5%, and used for growth, acquisitions, dividends, and debt reduction.

●       Online Sales: Grew 9.9% to R2.8 billion, driven by a 47.9% increase in South Africa’s Bash platform.

●       Free Cash Flow: R47.7 billion for the trailing twelve months, up from R21.4 billion in 2023.

●       Dividend: A dividend of R1.60 per share was declared.

Analyst Expectations

The Foschini Group’s share price is trading around R156, a level last seen in June 2021, and current momentum indicators suggest the price could continue rising. However, investors should be mindful of risks like global instability, inflation, and weaker consumer spending which could affect the retailer’s performance. TFG’s strong cost control and efficient inventory management have boosted profits, leading to positive investor responses and a 5% share price recovery following recent earnings. The company’s increased dividend shows confidence in its financial health. Strong sales growth in Africa and online through its Bash platform adds to its positive outlook. Analysts believe a potential interest rate cut by the South African Reserve Bank could further boost consumer spending, making TFG well-positioned for growth as the economy stabilises.

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** This article was prepared by BROKSTOCK analyst Maboko Seabi