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Summary Unaudited Financial Statements for the six months ended 30 September 2024
Lewis Group Limited
Incorporated in the Republic of South Africa
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
Bond Code: LEWI
SHORT-FORM ANNOUNCEMENT:
SUMMARY UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2024.
1. Introduction
Shareholders are advised that the following have been distributed:
- unaudited interim results for the six months ended 30 September 2024 ("results
announcement")
- cash dividend declaration of 300 cents per share.
2. Highlights
- Merchandise sales increased by 8.5% to R2.4 billion
- Revenue increased by 13.6% to R4.4 billion
- Gross profit margin increased to 40.9%
- Satisfactory paid accounts up from 79.9% to 81.6%
- Debtors' book growth of 16.9%
- Operating profit increased by 54.1% to R477 million
- Operating profit margin up from 14.2% to 20.2%
- Earnings per share increased by 53.0% to 544 cents
- Headline earnings per share increased by 49.1% to 555 cents
- Interim dividend increased by 50% to 300 cents per share
3. Results Commentary
Trading and financial performance
Lewis Group delivered a strong trading and financial performance for the first six months
of the 2025 financial year with continued strong credit sales growth, expanding margins,
improved quality of the debtors portfolio and a substantial growth in profit.
Merchandise sales increased by 8.5% to R2.4 billion as sales gained momentum over
the period, supported by the demand for credit, exclusive merchandise offering and
improving consumer confidence. Sales grew by 7.7% for the first quarter and 9.3% for
the second quarter which included a strong trading performance in September 2024.
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Merchandise sales in the traditional retail segment increased by 9.6%, with all the
traditional brands performing well.
The performance of UFO is stabilising with sales in UFO ending 1.9% lower and
comparable store sales increasing by 3.3% for the six months. The chain reported an
operating profit of R1.5 million, compared to a loss of R9.8 million in the prior period.
Comparable store sales across all brands grew by 6.1%.
The strong credit sales growth trend continued, with credit sales increasing by 16.9% and
cash sales declining by 6.7%. Credit sales accounted for 69.4% of total merchandise
sales (H1 2024: 64.4%). The group has maintained its prudent credit granting criteria in
the constrained spending environment and the credit application decline rate increased to
37.4% (H1 2024: 34.8%).
Other revenue, consisting of effective interest income and ancillary services income as
well as insurance revenue, benefited from the strong credit sales growth in recent years
and increased by 20.4%.
Total revenue, comprising merchandise sales and other revenue, increased by 13.6% to
R4.4 billion (H1 2024: R3.8 billion).
The gross profit margin strengthened by 20 basis points to 40.9% despite disruptive sea
freight markets.
Inventory levels were increased by 17.8% as the group invested in stock to mitigate the
impact of shipping delays on imported merchandise and to ensure stock availability
ahead of the Black Friday promotions and festive season trading period. Inventory levels
are expected to normalise by the financial year end.
Operating cost growth was well managed at 8.8%. The growth in insurance service
expenses of 17.2% was contained below the growth in insurance revenue.
The quality of the group's debtors book continued to improve with the level of satisfactory
paying customers increasing to a record level of 81.6% (H1 2024: 79.9%) and collection
rates at the half year at 79.5% (H1 2024: 80.9%).
Debtor costs as a percentage of debtors at gross carrying value improved to 6.9% from
7.0%. The debtors impairment provision as a percentage of debtors at gross carrying
value improved from the year end position of 37.5% to 37.1% (H1 2024: 36.0%).
Operating profit increased by 54.1% to R477 million and the operating margin improved
by 600 basis points from 14.2% to 20.2%.
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Net finance costs were R72.0 million higher at R134.3 million mainly due to higher
borrowing costs and foreign exchange losses following the strengthening of the Rand/US
dollar exchange rate over the reporting period.
Headline earnings increased by 41.6% to R288.8 million. Earnings per share increased
53.0% to 544 cents, headline earnings per share (HEPS) by 49.1% to 555 cents,
reflecting the positive leverage effect of the group's share repurchase programme. This
performance is in line with the earnings guidance provided in the group's trading
statement released on SENS on 30 October 2024.
The group's balance sheet remains strong with a net asset value of R4.8 billion. The
borrowings ratio (gearing ratio, excluding lease liabilities) increased to 26.5% from 13.4%
mainly due to working capital funding to invest in the growth of the debtors book and the
decision to invest in higher inventory levels. Management remains confident of achieving
its year end targeted borrowings ratio of 25%.
The directors have shown confidence in the group's growth prospects by increasing the
interim dividend by 50.0% to 300 cents per share.
Expanding store footprint
The group has increased its presence in the bedding base set market with the acquisition
of Real Beds, a specialised bedding chain. Real Beds is a cash retailer operating 13
stores, primarily in Gauteng. The acquisition of a further four stores in Botswana was
finalised on 1 November 2024.
Fifteen new stores were opened across Lewis (6 stores), Best Home & Electric (6 stores),
Beares (1 store) and Bedzone (2 stores), bringing the total store base to 897. No stores
were closed during the period.
Share repurchase programme
The group repurchased 0.9 million shares at a cost of R43.9 million in the six months to
September 2024 at an average price of R47.00 per share. Since the commencement of
the current share repurchase programme in 2017, the group has bought back 36.7 million
shares at a cost of R1.3 billion and an average price of R35.96 per share. At the annual
general meeting in October 2024, shareholders granted management the authority to
repurchase a further 10% of the issued share capital.
Outlook
Consumer confidence has been buoyed by lower inflation, interest rate relief, lower fuel
and transport costs as well as the suspension of load shedding. However, the group
expects that the recovery in discretionary spending will be slow and consumers will
remain under pressure in the short to medium-term.
In this environment, consumer demand for credit is expected to remain high and the
group will continue to invest in the growth of its debtors book. Management also aims to
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capitalise on opportunities to acquire well-located trading space to expand the store
base.
Appealing Black Friday and festive season promotions are planned across all brands,
supported by new merchandise ranges, favourable stock availability and targeted
marketing campaigns.
Dividend declaration
Notice is hereby given that an interim gross cash dividend of 300 cents per share has
been declared payable to holders of ordinary shares in respect of the six months ended
30 September 2024. The number of shares in issue as of the date of declaration is 52
159 288. The dividend has been declared out of income reserves and is subject to a
dividend withholding tax of 20%. The gross dividend for determining the dividend
withholding tax is 300 cents and the dividend withholding tax payable is 60 cents for
shareholders who are not exempt. The net dividend for shareholders who are not exempt
will therefore be 240 cents. The dividend withholding tax rate may be reduced where the
shareholder is tax resident in a foreign jurisdiction which has a Double Tax Convention
with South Africa and meets the requirements for a reduced tax rate. The company's tax
reference number is 9551/419/15/4.
The following dates are applicable to this declaration:
Last date to trade "cum" dividend Tuesday, 21 January 2025
Date trading commences "ex" dividend Wednesday, 22 January 2025
Record date Friday, 24 January 2025
Date of payment Monday, 27 January 2025
Share certificates may not be dematerialised or rematerialised between Wednesday, 22
January 2025 and Friday, 24 January 2025, both days inclusive.
For and on behalf of the board
Hilton Saven Johan Enslin Jacques Bestbier
Independent Chief executive officer Chief financial officer
non-executive
chairman
Cape Town
21 November 2024
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4. Short Form Announcement
This short-form announcement is the responsibility of the company's directors and is a
summary of the unaudited interim results announcement and does not contain full or
complete details. The unaudited interim results announcement can be downloaded from
https://senspdf.jse.co.za/documents/2024/jse/isse/LEW/HY25.pdf and on the group's website
www.lewisgroup.co.za . The full results announcement may be requested at the company's
registered office, at no charge, during normal business hours. Any investment decision in
relation to the company's shares should be based on the full announcement.
Cape Town
21 November 2024
Sponsor
The Standard Bank of South Africa Limited
Debt Sponsor
Absa Corporate and Investment Bank, a division of Absa Bank Limited
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Date: 21-11-2024 07:15:00
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