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• Revenue Growth: Group sales up by 6.3%, Truworths up by 4.6%, Office up by 13.5%.

• Gross Margin: Decline due to increased promotional activity; Office gross profit increased from 42% to 48%.

• Net Income: Truworths trading profit down 17%, profit before tax down 15%.

• Return on Equity: 36%, with a plan to maintain mid-30s level.

• Return on Assets: 27%, with a goal to keep it above the late 20s.

• Inventory Increase: Up 13%, driven by Office expansion.

• Store Changes: Truworths Africa closed 15 stores, opened 23; Office closed 4 stores, opened 6.

• Online Sales: Office online sales account for 40% of total sales.

• Credit Sales: Decreased by 0.9%, with a focus on cleaning up the credit book.

• Dividends and Cash Flow: Consistent dividends with strong cash generation; potential for share buybacks if no acquisitions occur.

• Capital Expenditure: GBP12 million spent on Office expansion; ZAR1 billion on new distribution center in South Africa.

• EBITDA Margin: Office EBITDA margin at 27%.

• Warning! GuruFocus has detected 11 Warning Sign with AGO.

Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Truworths International Ltd (FRA:IUE) has successfully diversified its operations internationally, with the UK Office segment now contributing significantly to group profits.

• The company maintains a strong balance sheet with available cash, positioning it well for potential acquisitions, particularly in the UK.

• Office UK has shown impressive growth, with a profit before tax increase of 21% and a gross profit margin improvement from 42% to 48%.

• Truworths International Ltd has invested in a new distribution center, which is expected to enhance replenishment capabilities and drive sales.

• The company has a healthy credit portfolio with over 2.8 million active customers, indicating strong customer engagement and demand for credit.

Negative Points

• Truworths Africa experienced a decline in sales and trading profit, with a 1% drop in sales and a 17% decrease in trading profit.

• The company's gross margin has dropped to one of its lowest levels in a long time, primarily due to increased promotional activity.

• The South African economy remains challenging, with negligible GDP growth and tough economic conditions impacting consumer spending.

• Truworths International Ltd's merchandise inflation was low, at about 1-2%, which affected gross margins due to increased promotional activity.

• The company's credit sales have been tapered, and there is a strategic decision to maintain a clean credit book, which may limit short-term revenue growth.