Load-shedding costs TFG billions, halves dividend

The Foschini Group (TFG) announced in its year-end results that load-shedding has cost the retailer over R1.5 billion in the 2022/23 financial year. 

“We estimate the financial impact of load-shedding to have reduced TFG Africa’s retail turnover by in excess of R1,5 billion in FY2023,” the company reported in its financial statements for the year ended 31 March.

The company also announced that it has spent R200 million to date on alternative power solutions to combat the effects of load-shedding.

As of 31 March 2023, 1,875 TFG stores had backup power, representing around 75% of TFG Africa’s retail turnover. The company said it has plans to ensure the majority of its key stores “have the much-needed backup power in place over the next few months”.

In addition, TFG Africa lost around 360,000 trading hours during the reporting period due to load-shedding. However, the company said this is a conservative estimate and the “true impact” is likely double this figure.

This is because “customer demand is significantly dampened by the associated disruption and inconvenience with reduced footfall observed before, during and immediately after load-shedding periods”. 

Despite the harmful impact of load-shedding, the company saw a 19.4% increase in group revenue.

However, the impact of load-shedding could be seen on the retailer’s margins, as its group gross margin contracted by 60 basis points to 47.9%, and its profit after tax increased by only 4.0% to R3.0 billion.

In addition, TFG’s cash generation from operations decreased by 13.41%, shrinking from R8.2 billion to R7.1 billion.

TFG’s basic earnings per share increased by 4.1% but its headline earnings per share decreased by 4.0%.

These results led the company to declare a final dividend of 150 cents per share, a 54.5% decrease.