INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Agenda Highlights 3 4 Diversification strategy Key features 5 Debtor analysis 8 13 Financial results 19 Targets and outlook 22 Questions LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Highlights Revenue ▲ 9.3 % to R2.9 billion Merchandise sales ▲ 25.9% 3 Debtor Costs reduced by 20.8% Headline Interim earnings Dividend per share ▲ ▲ 5% to 10.7% 105 c 3 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Diversification strategy 2014 2015 2017 2018 H1/2019 2 main brands Acquired Beares Doubled store base Acquired UFO in Feb Launched Omni- outside of SA to 116 2018 channel retail in May 2018 4 LSM 4 - 7 LSM 7 – 8 LSM 4 – 8 LSM 9 – 10+ LSM 4 – 10+ Merchandise Sales Merchandise Sales = 46% of Revenue = 57% of Revenue Foreign Stores Foreign Stores Merchandise sales Merchandise sales = 17% = 22% Furniture sales mix Furniture sales mix 53% 61% Gearing 23.9% Ungeared 4 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Key features Merchandise sales – up 25.9% Cash retail (UFO) R230m Omni channel retail (INspire) – R3.8m Traditional retail brands – sales growth of 7.8% Credit sales growth in Q2 of 9.6% Gross profit margin – 39.9% (LY: 41.6%) 5 Furniture sales mix 61% (LY: 57%) New product ranges and exclusivity supported margin Competitive sourcing internationally and locally Rest of Africa – solid performance and further expansion 116 stores (LY: 110 stores) Trading out of 779 store outlets (LY: 744 stores) Opened 2 UFO stores Small format Lewis stores now account for 43% 92 stores refurbished 5 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Key features continued Credit application decline rate 38.5% (LY: 37.4%) Group credit sales mix 57.1% (LY: 68.8%) Debtor costs as a % of net debtors 5.5% (LY: 7.8%) Expense control High focus area 6 Within managements target range of 13% - 15% Share repurchase programme 1.7 million shares repurchased during the period Gearing – ungeared and liquid balance sheet Adoption of IFRS9 Expected loss vs Incurred loss model Impact: Group retained earnings –R631m (R878m pre-tax) Impairment provision(pre-tax) +R803m 6 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Net asset value per share vs Share price (cents) 9000 8000 7740 7620 7450 7000 6534 6460 6000 6128 6153 6127 6012 5922 5800 5650 5481 5000 7 4828 4700 4000 4225 4220 4150 3719 3000 3211 2000 1000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1/2019 Share price (March closing) Net asset value 7 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Debtor analysis IFRS 9 8 Debtor analysis Debtor performance 8 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
IFRS 9 – Financial instruments Lewis Group formally transitioned to IFRS 9 on 1 April 2018 IFRS 9 (Expected credit loss) replaces IAS39 (Incurred loss) Most significant impact relates to implementation of the Expected Credit Loss (ECL) impairment model on measurement of Receivables 9 ECL model is forward looking Adopted the more conservative simplified model Opening retained earnings at 1 April 2018 have been adjusted by R631m (R878m pre-tax) Impairment provision + R803m (pre-tax) 9 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Debtor analysis – IFRS 9 Gross carrying Customer Grouping Total No Customers amount Impairment Provision Instalments in arrears 30 September 2018 Arrears (IFRS 9) R 000 No R 000 R 000 % 1 2 3 > 3 R000 R 000 R 000 R000 Satisfactory paid 408 005 3 103 155 666 767 21.5% 530 205 148 582 102 629 75 903 203 091 Customers who have paid 70% or more 69.9% 57.2% 28.3% 24.3% of amounts due over the contract period. 10 Slow payers 91 370 959 938 571 465 59.6% 633 196 67 912 64 902 61 756 438 626 Customers who have paid 55% to 70% 15.6% 17.7% 24.2% 29.1% of amounts due over the contract period. Non performing customers 84 568 1 358 540 1 119 257 82.4% 1 013 893 65 006 64 349 63 654 820 884 Customers who have paid 55% or less 14.5% 25.1% 47.5% 46.6% of amounts due over the contract period. Totals 583 943 5 420 633 2 357 489 43.5% 2 177 294 281 500 231 881 201 313 1 462 601 10 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Debtor costs vs. Impairment provision + IFRS9 (Rm) R 3 000 R 2 500 2 422 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 1 065.5 997.2 1 005.0 957.0 875.2 858.1 758.3 702.4 635.4 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 IFRS9 (Rm) Impairment Provision (Rm) Debtor Costs (Rm) 11 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Debtor performance H1/2019 H1/2018 Collections Collections from instalment sales Rm 2 011 1 990 Actual collections achieved As a % of one contract instalment per customer per month 77.2% 76.2% Contractual arrears Rm 2 177 2 352 % of gross debtors 37% 38.6% 12 Debtor Costs Debtor costs (excluding credit impairment adjustment (-20.8%) Rm 352 444 Bad debts written off(including recoveries) Rm 416 379 Debtors impairment provision Rm (64) 65 Credit impairment adjustment Rm (51) - Total Debtor costs (-32.2%) 301 444 5.5% 7.8% Debtor costs as a % of net debtors 12 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Financial results Income statement Segmental analysis 13 Analysis of costs Balance sheet overview Capital ratios 13 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Income statement H1/2018 H1/2019 Rm Rm % Revenue (Rm) 2 905 2 659 9.3% Merchandise sales (Rm) 1 631 1 295 25.9% 14 39.9% 41.6% Gross profit margin (%) Operating profit (Rm) 194 191 1.4% Operating profit margin (%) 6.7% 7.2% Attributable earnings (Rm) 150 143 5.2% 182 163 11.5% EPS (cents) 181 163 10.7% Headline EPS (cents) 14 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Segmental analysis Traditional Omni retail Cash retail channel Group Revenue (Rm) 2 905 2 667 234 4 Merchandise Sales 1 631 1 396 231 4 15 Operating profit (Rm) 193.8 186.8 21.6 (14.6) Operating margin H1:19 6.7% 7.0% 9.2% - 7.2% 7.2% n/a n/a H1:18 Number of stores H1:19 779 746 33 744 744 - H1:18 15 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Analysis of costs (excluding debtor costs) H1/2019 H1/2018 Change Rm Rm % Employment costs 565 514 10% Admin and IT 170 164 3.7% Marketing 161 134 20.1% 16 Occupancy costs 221 183 20.8% Transport and travel 116 99 17.2% Depreciation 38 44 (13.6%) Other operating costs 159 130 22.3% Total 1 430 1 268 12.8% Expenses in traditional retail increased by 5.5% 16 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Balance sheet overview H1/2019 H1/2018 Rm Rm Property, equipment, goodwill and trademarks 608 390 Inventory 751 523 Insurance investments 576 701 Trade and other receivables 3 347 4 341 Insurance and reinsurance assets 17 298 Tax and deferred assets 294 113 17 Cash on hand 544 683 Total assets 6 137 7 049 Shareholders’ equity and reserves 4 838 5 415 Trade and other payables 674 548 Insurance and reinsurance liabilities 122 399 Interest-bearing borrowings 502 635 Net retirement benefits 1 52 Total equity and liabilities 6 137 7 049 17 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Capital ratios H1/2019 H1/2018 ROE – after tax (%) 6.2% 5.2% ROCE – after tax (%) 5.4% 5.0% 18 ROA – before tax (%) 7.2% 6.4% Gearing ratio (%) Ungeared Ungeared Interim dividend declared (cents) 105c 100c 18 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Targets and Outlook 19 19 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
Financial and operating targets Actual Target Performance indicators H1/2019 2019 Gross profit margin (%) 39.9 38 – 42 Operating profit margin (%) 6.7 5 – 10 Increase in operating costs (%) Traditional retail 5.5 3 - 5 20 Including UFO and INspire 12.9 13 – 15 Credit sales as a % of total sales 57.1 56 – 60 Satisfactory paid customers (%) 69.9 67 – 70 Debtor costs as a % of net Year end 5.5 15 – 18 (H1/18 7.8 ) debtors target Gearing Ungeared Ungeared 20 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
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