ANNUAL AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2019
Agenda Key features Debtor analysis Financial results Financial and operating targets Value proposition Questions Outlook Questions
Key features • Improved performance of Traditional Retail • Solid performance by UFO • Launch of INspire Merchandise Sales Debtor Costs Revenue Gross Profit 3 Operating Profit ▲ ▼ ▲ at ▲ 11.9% 22.9% 10.4% 41.2% 16.8% to R843 million to R3.5 billion to R6.1 billion R1.4 billion to R443 million Total Dividend HEPS ▲ ▲ 17% 24.3% to 234 cents to 376 cents 3
Key features continued… • Merchandise sales increased by 22.9% to R3,519m - Traditional retail up 7.6% to R3,014m - Cash retail (UFO) - R478m - Omni-channel retail (INspire) – R27m 4 • Growth in credit sales of 8.1% to R2,038m • Growth in cash sales of 51.1% to R1,482m 4
Key features continued… • Sales pattern for the year - Furniture 60.8% (LY: 56.7%) - Appliances 25.2% (LY: 27.6%) 5 - Electronics 14.0% (LY: 15.7%) • Credit application decline rate: 37.4% (LY: 37.1%) 5
Key features continued… • IFRS 9 – (Expected credit loss impairment model) replaced IAS39 (Incurred loss model) • Collection rates of 76.3% (LY: 74.9%) • Satisfactory paid at 71.4% (LY:68.4%) 6 • Debtor costs 13.3% of net debtors (LY: 17.2%) • Trading out of 784 stores (LY: 773) - 214 small format Lewis Stores (44% of Lewis base) - 120 stores outside SA (LY: 110 stores) 6
Key features continued… Traditional retail • Merchandise sales +7.6% • Credit sales growth +6.7% • Cash sales growth +9.5% 7 • Credit sales mix 66.7% (LY: 67.3%) • Operating profit increased by 12% to R429m (LY: R384m) Other revenue – positive trend H1 H2 2019 2018 % 2019 2018 % R1 274m R1 364 (6.5%) R1 343m R1 328 1.1% 7
8 Debtor analysis 8
Debtor performance FY19 FY18 Collections Collections from instalment sales Rm 4 041 3 960 Actual collections achieved As a % of one contract instalment per customer per month 76.3% 74.9% Contractual arrears Rm 2 129 2 278 % of gross debtors 35% 38% 9 Debtor Costs Debtor costs (excluding adjustment for interest on credit impaired accounts) Rm 843 957 (11.9%) Bad debts written off Rm 942 898 Debtors impairment provision Rm (99) 59 Adjustment for interest on credit impaired Rm (110) - accounts (23.4%) Total Debtor costs 733 957 Debtor costs as a % of net debtors 13.3% 17.2% 9
Gross debtor analysis Impairment No Customers Gross Receivables Provision Total Instalments in arrears Customer Grouping Period Arrears R 000 1 2 3 >3 No R 000 R 000 % % % R000 R 000 R 000 R000 2019 418 355 71.4 3 282 938 59.4 593 578 18.1 534 435 156 625 105 396 76 314 196 100 Satisfactory Customers who have paid 70% or more paid of amounts due over the contract period. 2018 401 183 68.4 3 063 886 55.0 675 971 22.1 549 506 155 673 105 593 77 633 210 607 2019 88 969 15.2 959 418 17.4 612 172 63.8 606 735 68 541 65 290 60 511 412 393 10 Customers who have paid 55% to 70% of Slow payers amounts due over the contract period. 2018 97 251 16.5 1 049 782 18.9 608 716 58.0 665 893 72 167 69 010 64 474 460 242 2019 78 426 13.4 1 285 439 23.3 1 117 328 86.9 987 580 63 762 62 451 60 902 800 465 Non Customers who have paid less than 55% performing of amounts due over the contract period. customers 2018 88 430 15.1 1 455 670 26.1 1 137 347 78.1 1 062 130 67 452 66 131 64 513 864 034 2019 585 750 100 5 527 795 100 2 323 078 42.0 2 128 750 288 928 233 137 197 727 1 408 958 Gross Debtor Analysis 2018 586 864 100 5 569 338 100 2 422 034 43.5 2 277 529 295 292 240 734 206 620 1 534 883 2019 42.0% Total Impairment provision as a % of Net Debtors - IFRS9 2018 43.5% Total Impairment provision as a % of Net Debtors - 2018 28.9% IAS39 10
Debtor costs vs. Impairment provision + IFRS 9 (Rm) R 3 000 R 2 500 2 422.0 2 323.1 R 2 000 11 1 619.5 R 1 500 1 560.6 1 533.6 1 294.3 1 129.5 R 1 000 1 065.5 1 005.0 997.2 957.3 875.2 858.1 843.1 758.3 702.4 635.4 R 500 539.6 532.7 522.3 458.9 434.2 338.8 R 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 IFRS9 (Rm) Impairment Provision (Rm) Debtor Costs (Rm) 11
12 Financial results 12
Income statement FY19 FY18 % Revenue Rm 6 137 5 557 10.4 Merchandise sales Rm 3 520 2 865 22.9 Gross profit margin % 41.2 41.4 13 Operating profit Rm 443 379 16.8 Operating margin % 7.2 6.8 Attributable earnings Rm 310 264 17.2 EPS cents 378 307 23.0 Headline EPS cents 376 303 24.3 13
Segmental analysis Omni Traditional Cash channel 2019 Group Retail Retail Retail Revenue FY:19 Rm 6 137 5 619 487 31 FY:18 Rm 5 557 5 491 66 - Revenue growth 10.4% 2.3% 14 Operating profit FY:19 Rm 443 429 41 (27) FY:18 379 384 (4.2) - Operating profit growth 16.8% 12% Operating margin FY:19 % 7.2 7.6 8.3 (88.0) FY:18 % 6.8 7.0 (6.4) - Number of stores 784 748 36 - 773 742 31 - 14
Analysis of costs (excluding debtor costs) FY19 FY18 % Rm Rm Employment costs 1 150 1 059 8.5% Admin and IT 348 328 6.0% Marketing 298 247 20.6% Occupancy costs 445 373 19.3% 15 Transport / Travel 242 205 18.0% Depreciation 79 86 (8.5%) Other operating costs (*) 331 244 35.7% Total 2 892 2 542 13.7% (*) Adjusting for the cessation of reinsurance, expenses in traditional retail increased by 4.7% 15
Balance sheet FY19 FY18 restated Rm Rm Assets PPE, goodwill and trademarks 609 607 Inventory 665 580 Insurance investments 617 606 Insurance premiums in advance - 76 Trade and other receivables 3 316 4 200 16 Tax and deferred tax 255 27 Cash on hand 205 608 Total Assets 5 667 6 704 Equity and liabilities Shareholders equity and reserves 4 876 5 448 Trade and other liabilities 688 548 Insurance and reinsurance liabilities 103 177 Interest-bearing borrowings - 531 Total equity and liabilities 5 667 6 704 16
Capital ratios and dividend FY19 FY18 ROE – after tax (%) 6.4% 5.1% ROCE – after tax (%) 6.5% 5.1% 17 ROA – before tax (%) 8.5% 6.6% Gearing ratio (%) ungeared ungeared Final dividend (cents) 129c 100c Total dividend (cents) 234c 200c 17
Financial and 18 operating targets 18
Financial and operating targets Performance indicators Achieved Target Target Medium-term 2019 2019 2020 targets Gross profit margin (%) 41.2 38 - 42 38 - 42 40 - 43 Debtor costs as a percentage of net debtors 13.3 15 - 18 13 - 17 13 - 16 Satisfactory paid customers (%) 71.4 67 - 70 70 - 72 70 - 72 19 Operating profit margin (%) 7.2 5 - 10 7 - 10 10 - 15 Credit sales as a percentage of total sales 57.9 56 - 60 56 - 60 56 - 60 Increase in operating costs (%) 7.2 3 - 5 (excluding UFO and INspire) 13.7 13 - 15 6 - 8 5 – 7 Including UFO and Inspire Gearing (%) Ungeared Ungeared Ungeared Less than 25% 19
20 Value proposition 20
Value proposition Net asset value per share vs share price (cents) • Share buy back programme 90 Hundreds 80 - 3 224m shares repurchased at 77.4 average price of R30.30 70 60 61.28 61.53 61.27 60.81 60.12 58 57.78 50 • Dividend Yield 47 21 40 42.2 41.5 - increased from 4.74% to 7.52% 30 31.1 20 • PE ratio 10 - decreased from 13.75 to 8.24 0 2014 2015 2016 2017 2018 2019 restated Share price (March closing) Net asset value 21
22 Outlook 22
Outlook • Trading conditions expected to remain challenging • Growth in other revenue expected to continue • Diversification strategy - well positioned to gain market share across all income groups 23 • Focus on establishing the brand • Further improve the merchandise range • Optimise sales channels • Open 5 to 10 new stores • Increase penetration of urban markets • Build a revolving credit book (Max term 12 months) • Quality and exclusivity of merchandise • 6 months interest free offering • Nationwide delivery within 5 days • Profitability - break even for the year 23
Outlook • Exclusivity of merchandise and bringing value to the market • Management of the debtors book 24 • Expense focus • Balance Sheet Ungeared 24
25 Questions 25
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