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
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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
South Africa
Nigeria
Ghana
 44 corporate stores outside South Africa
Kenya
 3 franchise stores in Kenya
Zambia
 Rest of Africa accounts for c4% of Group
retail sales
Mauritius
Botswana
Zimbabwe
Namibia
Swaziland
South
Africa
Lesotho
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Truworths’ International Strategy
…and Now Continues With Europe…
 Easy entry into the attractive UK footwear retail
market through one of the market leaders
 Springboard into continental Europe via German
presence
UK
Ireland
Germany
 Ease of doing business in same time zone
 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
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Truworths’ International Strategy
…Bringing Further Diversification to Our Business
Retail Sales
Store
Locations
Pro Forma
​Rest of Africa
6%
​South Africa
94%
+
747 stores
​Rest of Africa
4%
​South Africa
96%
+
​UK
98%
162 stores
​Ecommerce
18%
​Germany
2%
​UK
80%
R5.0bn
Credit
Sales %
R11.6bn
​Cash
30% ​Credit
70%
+
R11.6bn
Footwear
Sales %
​UK
17%
​ est of Africa
R
5%
​Germany
2%
Cash Credit
51% 49%
R16.6bn
R5.0bn
+
R11.6bn
​Footwear
100%
R5.0bn
​South Africa
77%
909 stores
​ commerce 6%
​Germany E
1%
​UK
​South
24%
Africa
68%
​ est of Africa
R
3%
R16.6bn
​Cash
100%
​Footwear
9%
​ lothing /
C
Accessories /
Other
91%
​Germany
0%
​Footwear
36%
​ lothing /
C
Accessories /
Other
64%
R16.6bn
Note: ZAR / GBP: 18.02 (Office calendarised to June year end, average FX for the period)
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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
4
Further Potential from a Substantive E-commerce Business
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
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…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)
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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
Office
Offspring
Ireland
UK
Germany
162
Stores
52
20%
Concessions Online Sales as % of Total
Key Brands
1
2
As at January fiscal year end of office. Revenue disclosed on an IFRS basis
Current
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Outstanding Track Record of Top Line Growth
Increase in Sales and Stores
 Leading UK speciality
footwear retailer
 Reputation for fashionable
and high-quality products
‘Office London’ opens
as a concession in the
shopping mecca
Hyper
Expansion into
Ireland
First standalone Office
store opens on the
fashionable Kings
Road
 High customer loyalty
European
expansion
begins with
Germany
 Double-digit CAGR in top
line since 2011
246
www.office.co.uk
is launched
Continued
growth through
the 1980s and
1990s
— Plans in place to
improve growth /
margins
258
270
£m
207
167
146
93
101
113
70
 Continued growth from
stores roll-out, ecommerce platform, as
well as the expansion into
Germany
52
10
12
16
20
26
1981 1984 1985 1995 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1
1
2
10
13
29
Revenue (£m) (Fiscal Year End)
1
33
54
75
113
135
1601
Number of Stores and Concessions (Calendar Year End)
As of May 2015
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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
several major brands
26%
In-house Brands
● Different brands making Office unique:
— 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
● Each brand has been carefully built over the years
60%
Own Brand
Third Party
Exclusive Third Party
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Unique Product Offering: Sports to Formal, for
Men, Women and Kids (2/2)
In-house Brands
Third Party Brands
Breadth and Depth of Product Range
Select Exclusives
Nike
Mango Sunset
Converse
Shearling Inside
Toms
Skull Print
Timberland
Wedge Sole
Adidas
UGG Australia
Stan Smith Mesh Petra Short Boots
Havaianas
Slim Logo Metallic
Solillas
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
25% over the last 3 years
— Dedicated German website launched in 2015

Mobile website / Mobile App: 61% of online visits are now via
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
Instagram
●
●
●
●
Take home
Tablet in-store
Click & Collect
Home delivery
● Click & Collect
● Home delivery
Strong Online Sales Which Continue to Grow 1
E-commerce
20%
● Click &
Collect
1
Current
Bricks and
Mortar
80%
● Home
delivery
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Experienced and Stable Local Management
Brian McCluskey
CEO
Ghassan Hodeib
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
Capital (the family office of Sir Tom
Hunter)
● Started with Offspring as Store Manager
/ Part time Buyer
● Led the acquisition of Office from the
Casey family
● Before joining West Coast Capital, was
Finance Director of Sports Division at
Jeyes UK
● Several promotions culminating in
appointment as Buying Director in 2003
● Prior to joining Office, worked for Sears
from 1987 to 1996 in various retail roles
● Qualified Chartered Accountant with
KPMG
● Graduated from Strathclyde University
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3.
Truworths' Plans
with Office
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Continue Rolling Out Additional Stores in the UK
 Truworths is committed to
support the growth of Office in
its core market
Top 150 Retail Destination Market Gaps
Scotland
0 Gap
Northern
Ireland
1 Gap
 75 out of the top 150 UK retail
destinations do not have
standalone Office stores
Republic
of Ireland
Wales
1 Gap
— Gaps are mostly located in
England
 Locations will be selected
based on quality and
sustainability of venues
Source: CACI report (Dec-14)
North England
22 Gaps
Central England
19 Gaps
London
12 Gaps
South England
20 Gaps
Type
Primary Centres
Major Centres
Urban Centres
Regional Malls
Metropolitan Towns
Retail Parks
Outlet Centre
Top 150 Total
Office Stand Alone
Store Presence
37
12
4
13
9
0
0
75
Market
Gap
9
34
8
0
7
8
9
75
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Further Expand in Germany and Neighbouring
Countries
 Truworths also wants to support
Office’s expansion strategy into
Germany
 Envisages a further 10-15 store
openings by end January 2018,
bringing the total German portfolio to
16-21 stores
 Germany is an attractive market for
footwear
— Largest European economy
— High number of large cities
Target Countries: Cities with Populations > 250,000
Denmark
1 city
Netherlands
4 cities
Belgium
8 cities
Germany
45 cities
— High proportion of the population
comprises young educated adults
— Existing competition is
fragmented
 Potential for further expansion into
neighbouring countries
Switzerland
5 cities
Austria
5 cities
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
 Truworths wants to further push the growth
of Office in-house brands
Office In-House as % of
Total Sales
2013
13%
 Higher margin in-house products
24%
63%
 Long term target is to increase the
contribution to sales to 35%
2015
14% 26%
 Truworths wants to add handbags and
accessories to the range
 Truworths wants to test outerwear on the
website
60%
2025 Target
15%
35%
50%
Own Brand
Third Party
Exclusive
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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
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4.
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
Price
● Enterprise Value of £256m (on a 100% basis)
Post
Transaction
Shareholding
● A UK resident and managed wholly owned subsidiary of Truworths: 88.9%
● Office management team: 11.1%
● Truworths and the Office management team have entered into put/call agreements iro management stake
Put/Call
Agreements
● Gives Truworths the right to buy, and management the right to sell, this stake over a 3 – 5 year period
Transaction
Financing
Structure
● cR3.6bn of cash from South Africa to pay the consideration due to the sellers and transaction expenses
Effective
Date
● Completion date of the acquisition was 4 December 2015
Conditions
Precedent
● Acquisition was subject to final approval from the Financial Surveillance Department of the South African
Reserve Bank, which has been granted
● Shares to be valued at agreed EBITDA multiple, additional value accruing if performance targets are met
● £80m of term loans and £5.9m of revolving credit facilities in the UK, to refinance existing Office net debt
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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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