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Chairman's report
Focusing on long-term value creation for our shareholders
The Group's financial performance in the reporting period was notably impacted by a decline in retail sales experienced by Truworths in South Africa which had a cascading effect on the income statement. However, the benefits of the Group's diversification strategy were evident in the sustained performance of Office in the UK, which contributed 32% of the Group's retail sales and 35% of profit on a pro forma basis.

CASH GENERATED FROM OPERATIONS increased by 23.2% to R4.7 billion (2023: R3.8 billion)
Headline earnings per share (HEPS) for the Group decreased by 6.3% to 818 cents, and the annual dividend of 529 cents per share was 6.4% lower than the previous period, maintaining a dividend cover of 1.5 times HEPS. Detailed factors influencing this performance are discussed in the Retail trading environment, the CEO's report, and the CFO's report.
Despite these challenges, the Group generated robust cash flows, demonstrated disciplined cost management, and achieved globally competitive return ratios. The balance sheet remained strong with significantly reduced net debt.
Cash generated from operations increased by R885 million (23.2%) to R4.7 billion, funding dividend payments of R2.2 billion and capital investments of R770 million.
Net debt was reduced from R850 million to R306 million, even with an additional R352 million investment in Truworths' new world-class distribution centre. (Refer to Supply chain in the Truworths Operational review for more detail.) Consequently, the net debt to equity ratio improved to 3.2% from 11.1%.
The Group's capital allocation strategy aligns with its long-term value creation vision for shareholders included in its Business Philosophy, focusing on reinvesting in organic growth and returning surplus funds to shareholders through dividends and share buy-backs, while cautiously exploring acquisition opportunities.
Over the past five years, R8.6 billion has been returned to shareholders in dividends. Although no shares were repurchased in the past two years due to investment in the new distribution facility, the board remains committed to share buy-backs as opportunities arise.
The Group's share buy-back programme, launched in 2002, has resulted in repurchases of 155 million shares at an average price of R38.72 per share. During the COVID-19 era, when investor sentiment declined, the Group repurchased nearly 52 million shares (12% of shares in issue) for R2.5 billion at an average price of R47.88 per share. By the end of the 2024 period, these last-mentioned shares were valued at over R4.8 billion, representing a 21.6% annual return on investment since January 2020. Shareholders have also benefited from the uplift in HEPS due to the reduced number of shares in issue.
The Group's capital structure is actively managed to enhance financial returns and generate competitive capital ratios. Our return on equity (ROE) at 36% and return on assets (ROA) at 24% significantly exceed the average performance of leading international fashion retailers and local listed apparel retailers. The return on invested capital (ROIC) continues to surpass our weighted average cost of capital (WACC) by a substantial margin.
Despite numerous headwinds in recent years, the Group has continued to seek opportunities in adversity, investing to capitalise on growth opportunities as economies recover and retail sectors rebound in the medium term.
Recent positive developments in South Africa have improved consumer sentiment, which is expected to lead to increased spending over the next 12 to 18 months, potentially marking a long-awaited turnaround for the local retail sector.
GOVERNANCE, ASSURANCE AND REPORTING
The Group's governance philosophy is based on the belief that good governance practices enhance corporate performance, reduce risks, and ensure business sustainability.
The high standard of the Group's integrated reporting was recognised once again in the Ernst & Young 2024 Excellence in Integrated Reporting Awards, where our 2023 Integrated Report was ranked 7th among the top 100 companies on the JSE. This marks the 17th consecutive year our report has been in the top 10, making us the only company on the JSE to achieve this accolade. The awards are independently judged by a panel of integrated reporting experts and are acknowledged as a benchmark of excellence for the quality of integrated reporting to investors.
Deloitte & Touche (Deloitte) was appointed as the Group's new external auditor, with the appointment approved by shareholders at the 2023 annual general meeting (AGM). We thank the partners and staff of Deloitte and our finance team for ensuring the successful external audit transition.
Board effectiveness is integral to the Group's governance framework. An annual evaluation is undertaken to assess the effectiveness of the board, committees and individual directors. The outcome of this year's evaluation, which is detailed in the Report on Corporate Governance and Application of King IV principles 2024, confirmed that the board's overall functioning and governance were excellent. The committee evaluation indicated that the committees achieved an effective level of governance, function well and meet the objectives of their respective charters.
The independence and effective functioning of the board was strengthened with the introduction of the position of lead independent director, as recommended by King lV. Hans Hawinkels, a director since 2018, was appointed to this position with effect from 1 September 2023.
Looking ahead, the remuneration reporting and disclosure landscape in South Africa will undergo material change following the recent signing into law of the Companies Amendment Act. The new requirements will include pay gap disclosures, binding Remuneration policy and Remuneration report votes at the AGM and the requirement in circumstances where the Remuneration report is not approved for the members of the remuneration committee to stand for re‑election. While the implementation date of the legislation has not been determined, it is expected to be effective for the Group's 2025 financial reporting period and our remuneration reporting practices will be aligned to ensure compliance with the legislation.
SUSTAINABILITY
As a board, we recognise our ultimate responsibility for the Group's environmental, social and governance (ESG) practices which we believe are essential in creating and sustaining long-term value. The board has delegated the responsibility for monitoring ESG performance, particularly in relation to environmental and social matters, to the Social and Ethics Committee.
We also recognise the need to enhance reporting to enable investors to assess the risks and impact of our sustainability programme on the Group's enterprise value. The inaugural sustainability reporting and disclosure standards of the International Sustainability Standards Board published in June 2023 have introduced a global reporting benchmark which will benefit companies and investors alike. The adoption of the standards is not yet mandatory in South Africa and management has commissioned an independent review of the Group's sustainability reporting which will include an assessment of these new disclosure standards.
The Group is committed to advancing the sustainability of the business and contributing towards a better society and our ESG practices have been aligned with seven of the United Nation's Sustainable Development Goals (SDGs). In our reporting we make a distinction between those SDGs that impact on the assessment of the Group's enterprise value and those SDGs that have a societal impact.
BOARD OF DIRECTORS
Board and committee changes
Our board remains stable and independent, with a healthy balance of recently appointed and long-serving directors fostering debate and ensuring continuity in our independent oversight. The board's commitment and engagement are reflected in the 99.4% attendance at board and committee meetings over the past year.
We welcomed Daphne Motsepe and Wayne Muller as independent non-executive directors effective 1 August 2023. Daphne brings extensive experience in consumer credit, finance, and strategic planning, while Wayne offers a wealth of knowledge in financial and risk management, customer engagement, and governance from his executive roles in retail service and manufacturing industries.
Independent non-executive director Maya Makanjee retired from the board in November 2023. We thank her for her service over the past five years.
Our board committees were strengthened with the appointment of Dawn Earp to the Risk Committee effective 1 July 2023, and Wayne Muller to the Remuneration and Nomination Committees effective 1 September 2023.
Non-executive director succession
We are following a structured process to refresh the non-executive component of the board, with eight new non-executive directors appointed over the past six years as part of this succession strategy. The average tenure of our non-executive directors is approximately 10 years.
We do not believe that the tenure of non-executive directors necessarily limits their judgment or independence of thought, nor does it negatively impact their contribution. The board succession process ensures continuity in independent oversight, with newly appointed non-executive directors increasingly influencing board deliberations and assuming positions on board committees.
Board diversity
Diversity in the boardroom ensures that the interests of all stakeholder groups are addressed. Our board is diverse in its composition and the insights that each director brings to the boardroom. We believe this enables the board to add value to the strategic direction of the Group and ensures that the needs and concerns of our mass middle-income target market are addressed.
We have maintained the voluntary medium-term targets contained in the board diversity policy of 30% female and black director representation. Following the board changes in the reporting period, female representation is 31% (2023: 36%) and black representation 23% (2023: 29%).
Appointment post period-end
After the end of the reporting period, we announced the appointment of Brendan Deegan as an independent non-executive director and member of the Audit Committee, with effect from 1 October 2024. Brendan is an experienced chartered accountant and former partner of PricewaterhouseCoopers where he held senior roles including head of the audit practices in South Africa and Africa, chair of the Africa governance board and head of the global internal audit practice. His expertise in accounting, financial reporting, leadership, governance and assurance will be an asset to the board and we look forward to benefitting from his contribution in the years ahead.
APPRECIATION
Thank you to my non-executive colleagues for their active participation in boardroom affairs and for ensuring high standards of governance and oversight of the business. On behalf of the board, I thank our executive team of Michael Mark, Sarah Proudfoot and Mannie Cristaudo for their inspired leadership in the adverse trading environment of the past year, ably supported by the directors and management in Truworths and Office.
Our stakeholders are integral to our success and sustainability, and we thank our shareholders, customers, employees, suppliers, business partners and regulators for their continued support and engagement.
Hilton Saven
Independent Non-executive Chairman