Acquisition of Office by Truworths - 09 December 2015
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Acquisition of Office by Truworths 09 December 2015
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Truworths Announces the Acquisition of Office
Transaction highlights
● Acquisition of 88.9% of Office for £256m
● Consideration of EV/EBITDA multiple of below 7
● Turnover of £270m in FYE151
● Office is the leading young fashion footwear retailer in the UK
and Republic of Ireland, with a growing German footprint
● Offspring offering gives the opportunity to have a more
sophisticated interaction with its cutting-edge customers and
establish a footwear presence in the likes of Selfridges,
Topshop/Topman and House of Fraser
● Acquisition marks Truworths’ 1st entry into the UK and
continental Europe
● The management team will remain fully committed to the
success of the business, and retains an 11.1% interest
● Transaction completed 4 December 2015
● Regulatory approval has been granted by the South African
Reserve Bank
1January FYE IFRS basis
1
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Table of Contents
1. Truworths’ International Strategy
2. Overview of Office
3. Truworths’ Plans With Office
4. Key Terms of the Transaction
2
1. Truworths’ International Strategy
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Truworths’ International Strategy
The Expansion Started With Africa…
Group retail footprint of 747 stores
Presence in 10 countries outside of
Nigeria
South Africa Ghana
44 corporate stores outside South Africa Kenya
3 franchise stores in Kenya
Zambia
Mauritius
Rest of Africa accounts for c4% of Group
Botswana
retail sales Zimbabwe
Namibia
Swaziland
Lesotho
South
Africa
4
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Truworths’ International Strategy
…and Now Continues With Europe…
Easy entry into the attractive UK footwear retail
market through one of the market leaders
UK
Springboard into continental Europe via German
Ireland presence
Ease of doing business in same time zone
Germany
Provides Truworths with new skills and expertise
in footwear fashion as well as e-commerce
Good management with a wealth of experience
in Office
Diversifying Truworths business mix, with
earnings contribution from developed markets
5
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Truworths’ International Strategy
…Bringing Further Diversification to Our Business
Pro Forma
Rest of Africa Germany UK Germany
6% 0%
Locations
2% 17%
est of Africa
R
Store
South Africa
94%
+ UK
98%
5%
South Africa
77%
747 stores 162 stores 909 stores
Rest of Africa Ecommerce Germany E
commerce 6%
Retail Sales
4% 18% 1%
Germany UK South
South Africa
96%
+ 2%
UK
80%
24%
est of Africa
R
3%
Africa
68%
R11.6bn R5.0bn R16.6bn
Sales %
Cash
Credit
Cash Credit
30% Credit
70% + Cash
100%
51% 49%
R11.6bn R5.0bn R16.6bn
Footwear Footwear
Footwear
lothing /
C 9% 36%
Sales %
lothing /
C
+
Accessories / Accessories /
Other Footwear Other
91% 100% 64%
R11.6bn R5.0bn R16.6bn
Note: ZAR / GBP: 18.02 (Office calendarised to June year end, average FX for the period)
6
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Office – A Highly Attractive Business…
Key Attractions
1 Leading UK Shoe Retailer, with Strong In-House Brands and Excellent
Relationships with Third-Party Brands
2 Attractive Customer Base Demographic
3 Highly Efficient Multichannel Distribution Model
Further Potential from a Substantive E-commerce Business
4
Large Existing Presence in the UK with a Growing Presence in Germany
5
Potential Expansion Opportunities elsewhere in Europe
6 Outstanding Track Record of Top Line Growth
7 Healthy Cash-flow Generation
8 Experienced Local Management Team
7
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
…With Great Potential
Opportunities
Drive growth through continued UK store roll-out
Expand German business and into neighbouring countries
Drive higher margins through increased in-house branded product sales, increasing % sales mix
within Office from existing 25% in the medium term
Further improve performance through Truworths’ retail systems and processes
Truworths to benefit from Office best-in-class footwear fashion experience and leading e-commerce
skillset
Office SA and rest of Africa
Opportunity to sell Truworths products through Office online platform (e.g. bags, accessories and
ultimately apparel)
8
2. Overview of Office
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Office At A Glance
Key Aspects
Financial Highlights1 Geographic Presence
FY15 Revenue:
£270.2m
Selling Channels2
UK
Office Offspring Ireland
Germany
162 52 20%
Stores Concessions Online Sales as % of Total
Key Brands
1 As at January fiscal year end of office. Revenue disclosed on an IFRS basis
2 Current
10SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Outstanding Track Record of Top Line Growth
Increase in Sales and Stores
Leading UK speciality ‘Office London’ opens European
footwear retailer as a concession in the expansion
shopping mecca begins with
Hyper Germany
Reputation for fashionable Expansion into
Ireland
and high-quality products First standalone Office
store opens on the
High customer loyalty fashionable Kings
Road
270 £m
258
Double-digit CAGR in top 246
line since 2011 www.office.co.uk 207
Continued is launched
growth through 167
— Plans in place to the 1980s and 146
improve growth / 1990s 113
101
margins 93
70
52
Continued growth from 26 33
12 16 20
stores roll-out, e- 10
commerce platform, as
1981 1984 1985 1995 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
well as the expansion into
1 1 2 10 13
Germany 29 54 75 113 135 1601
Revenue (£m) (Fiscal Year End) Number of Stores and Concessions (Calendar Year End)
1 As of May 2015
11SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Unique Product Offering: Sports to Formal, for
Men, Women and Kids (1/2)
Third Party Brands Current Brand Mix
● Over 120 brands sold through Office
● Strong relationships with global brands (e.g. part of
Nike’s R10 supplier group and strategic partner)
● Co-designs / picks designs with major brands 14%
● Currently working on projects for exclusive styles with
26%
several major brands
In-house Brands
● Different brands making Office unique:
60%
— Office London and Office Girl for women
— Ask The Missus and Poste for men
— Poste Mistress for women
● Represent c.26% of total sales in FY15
● High margin products Own Brand Third Party Exclusive Third Party
● Each brand has been carefully built over the years
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Unique Product Offering: Sports to Formal, for
Men, Women and Kids (2/2)
Third Party Brands In-house Brands
Select Exclusives Breadth and Depth of Product Range
Nike Toms Adidas UGG Australia
Mango Sunset Skull Print Stan Smith Mesh Petra Short Boots
Converse Timberland Havaianas Solillas
Shearling Inside Wedge Sole Slim Logo Metallic Solillas Sandals
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Successful Omni-channel Distribution Model
Clicks and Mortar
Stores: 162
Concessions: 52
Online: 53m visits to the website in 2014
— c.20% of total sales done via e-commerce, growing in excess of ● Take home
25% over the last 3 years ● Tablet in-store
— Dedicated German website launched in 2015 ● Click & Collect
Mobile website / Mobile App: 61% of online visits are now via ● Home delivery
mobile device
Click & Collect: launched in February 2015; Already representing
20% of orders
In-store tablets: launched November 2014; Nearly 100 tablets at
this stage
Social media presence: 100k+ followers on Facebook, Twitter and ● Click & Collect
Instagram ● Home delivery
Strong Online Sales Which Continue to Grow 1
E-commerce
20%
● Click &
Collect
Bricks and ● Home
Mortar delivery
1
80%
Current
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Experienced and Stable Local Management
Brian McCluskey Ghassan Hodeib
CEO Buying Director
● Chief Executive Officer since 2005 ● Buying Director since 2003
● c.13 years with Office ● c.20 years with Office
● Previously a Director of West Coast ● Started with Offspring as Store Manager
Capital (the family office of Sir Tom / Part time Buyer
Hunter) ● Several promotions culminating in
● Led the acquisition of Office from the appointment as Buying Director in 2003
Casey family ● Prior to joining Office, worked for Sears
● Before joining West Coast Capital, was from 1987 to 1996 in various retail roles
Finance Director of Sports Division at
Jeyes UK
● Qualified Chartered Accountant with
KPMG
● Graduated from Strathclyde University
153. Truworths' Plans with Office
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Continue Rolling Out Additional Stores in the UK
Top 150 Retail Destination Market Gaps
Truworths is committed to
support the growth of Office in
its core market Scotland
0 Gap
Northern
Ireland
75 out of the top 150 UK retail 1 Gap
North England
22 Gaps
destinations do not have
Republic
standalone Office stores of Ireland
Wales
Central England
1 Gap
19 Gaps
— Gaps are mostly located in London
12 Gaps
England South England
20 Gaps
Office Stand Alone Market
Type Store Presence Gap
Locations will be selected Primary Centres 37 9
based on quality and Major Centres 12 34
Urban Centres 4 8
sustainability of venues Regional Malls 13 0
Metropolitan Towns 9 7
Retail Parks 0 8
Outlet Centre 0 9
Source: CACI report (Dec-14) Top 150 Total 75 75
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Further Expand in Germany and Neighbouring
Countries
Truworths also wants to support Target Countries: Cities with Populations > 250,000
Office’s expansion strategy into
Germany Denmark
1 city
Envisages a further 10-15 store
openings by end January 2018,
bringing the total German portfolio to
16-21 stores Netherlands
4 cities
Germany is an attractive market for
footwear
Germany
— Largest European economy Belgium 45 cities
8 cities
— High number of large cities
— High proportion of the population
comprises young educated adults
Austria
— Existing competition is 5 cities
Switzerland
fragmented 5 cities
Potential for further expansion into
neighbouring countries Source: CBRE data
Note: Number in each country indicates the number of cities with populations > 250,000
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Grow The In-House Brands
Office In-House as % of
Total Sales
Truworths wants to further push the growth 2013
of Office in-house brands
13%
24%
Higher margin in-house products
63%
Long term target is to increase the
2015
contribution to sales to 35%
14% 26%
Truworths wants to add handbags and
60%
accessories to the range
2025 Target
Truworths wants to test outerwear on the
website 15%
35%
50%
Own Brand Third Party Exclusive
19SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Cross Benefits Between Truworths and Office
Truworths will benefit from Office’s knowledge and expertise in footwear
Truworths will be able to introduce products and brands which have been
successful with Office into South Africa / other African markets
Truworths will have exposure to defensive Offspring upmarket offering
Office is an opportunity to be explored in SA and the rest of Africa
Truworths will benefit from Office’s experience and leadership in on-line
retail and multichannel approach
Truworths gets access to an expansion platform into Europe
Office will benefit from the introduction of Truworths’ best-in-class retail
skills, retail IT systems and customer tracking / relationship management
204. Key Terms of the Transaction
SELECTOR2015\Presentations\2015 11 30 - Investor Presentation on Transaction\PPT\2015 12 02 - Truworths - Office Transaction Investor Presentation vFINAL.pptx
Summary of Key Transaction Terms
Grow The In-House Brands e
Acquisition
● Enterprise Value of £256m (on a 100% basis)
Price
Post ● A UK resident and managed wholly owned subsidiary of Truworths: 88.9%
Transaction
Shareholding ● Office management team: 11.1%
● Truworths and the Office management team have entered into put/call agreements iro management stake
Put/Call
● Gives Truworths the right to buy, and management the right to sell, this stake over a 3 – 5 year period
Agreements
● Shares to be valued at agreed EBITDA multiple, additional value accruing if performance targets are met
Transaction ● cR3.6bn of cash from South Africa to pay the consideration due to the sellers and transaction expenses
Financing
Structure ● £80m of term loans and £5.9m of revolving credit facilities in the UK, to refinance existing Office net debt
Effective
● Completion date of the acquisition was 4 December 2015
Date
Conditions ● Acquisition was subject to final approval from the Financial Surveillance Department of the South African
Precedent Reserve Bank, which has been granted
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Disclaimer
Information disclaimer
This presentation contains certain information which has not been audited and/or has been obtained from external
sources. It also contains forward-looking statements with respect to the financial condition and results of operations of
Truworths International Limited and its group companies (“the Group”), which by their nature involve risk and uncertainty
because they relate to events and depend on circumstances that may occur in the future. Factors that could cause
actual results to differ materially from those in the forward-looking statements include, but are not limited to:
management estimates and budgets not being achieved; global and national economic conditions; growth in trading
space; interest rates; credit and the associated risks of lending; merchandise clearance rates; inventory levels and stock
turn; gross and operating margins achieved; and competitive and regulatory factors. The Group does not undertake to
publicly update or revise any of these forward-looking statements, whether to reflect new information or future events or
otherwise.
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