Slide 1: Results Presentation: six months ended 30 September 2008
RESULTS PRESENTATION For the six months ended 30 September 2008 1
Slide 2: Agenda
AGENDA 1. Overview of Results 2. Review of Operations 3. Debtor Analysis 4. Management Succession 5. Financial Overview 6. Lewis Strengths and Opportunities 7. Questions 2
Slide 3: 1. Overview of Results
1. Overview of Results REVENUE INCREASED BY 5.0% HEADLINE EARINGS PER SHARE MARGINALLY LOWER BY 0.9% CASH GENERATED FROM OPERATIONS UP BY 27.8% INTERIM DIVIDEND MAINTAINED AT 144 CENTS PER SHARE OPERATING MARGIN AT 22.8% (2007 : 24.6%) DEBTOR COSTS AT 4.5% OF NET DEBTORS (2007 : 3%) GE
Slide 4: 2. Review of Operations
2. Review of Operations TRADING CONDITIONS – Extremely challenging; No clear pattern of trade emerging SALES MIX: • Furniture and appliances (80% of business) 2% up • Electronic sales (20% of business) down 11% MERCHANDISE STRATEGIES INCREASED FURNITURE SALES - Best Home and Electric LEWIS
Slide 5: 2. Review of Operations (Cont'd)
2. Review of Operations (Cont’d) PRICE INFLATION CUSTOMER SEGMENTATION LINKED TO STORE BASED PROMOTIONS DEBTORS BOOK • Collections • Health of Lewis Customer 5
Slide 6: 2. Review of Operations (Cont'd)
2. Review of Operations (Cont’d) EXTENDED TERMS TO SELECTED CUSTOMERS COST CONTAINMENT 6
Slide 7: 2. Review of Operations (Cont'd)
2. Review of Operations (Cont’d) Best Lifestyle Group Lewis Electric Living Revenue growth 5.0% 4.8% 11.6% (10.1%) Merchandise sales % contribution 100% 82.2% 12.0% 5.8% Merchandise sales growth (0.7%) (0.6%) 5.9% (13.5%) No. of stores – total 529 420 88 21 7
Slide 8: 3. Debtor Analysis
3. Debtor Analysis 8
Slide 9: Debtor Costs
Debtor Costs H1/2009 H1/2008 Rm Rm Total Debtor costs 143 83 Bad debts written off 51 42 92 41 Provision for Doubtful Debts Debtor costs as a % of net debtors 4.5% 3.0% Credit Application decline rate 24.5% 21.6% 9
Slide 10: Doubtful Debt Provision
Doubtful Debt Provision H1/2009 H1/2008 Rm Rm Net Debtors before DD Prov. 3 154 2 724 Doubtful Debt Provision 488 419 Doubtful Debt Provision % 15.5% 15.4% 10
Slide 11: Doubtful Debt Provision – last 4 years trend at the half year
Doubtful Debt Provision – last 4 years trend at the half year Doubtful debts provision as % of net debtors Doubtful de bts provision as % of net de btors 20.0% 20.0% 18.4% 18.4% 18.0% 18.0% 16.9% 16.9% 16.0% 15.4% 15.5% 16.0% 15.4% 15.5% 14.0% 14.0% 12.0% 12.0% H1/06 H1/07 H1/08 H1/09 H1/06 H1/07 H1
Slide 12: Debtors Payment Analysis
Debtors Payment Analysis NUMBER O F CUSTOMERS DOUBTFUL DEBT PROVISION H1/2009 H1/2008 H1/2009 H1/2008 MARCH '08 Customers fully up to No. 515 471 544 864 date including those who have paid 70% or Satisfactory paid 0% 0% 0% more of amounts due % 72.5% 75.2% over the contract period Customers who have
Slide 13: Analysis of NCA Business
Analysis of NCA Business NUMBER OF CUSTOMERS NCA NCA 24 Months Over 24 Months Customers fully up to date No. 250,705 117,996 including those who have paid Satisfactory paid 70% or more of amounts due over the contract period % 85.3% 86.4% Customers who have paid No. 14,099 5,333 between 70% and 65%
Slide 14: 4. Management Succession
4. Management Succession 14
Slide 15: Management Succession
Management Succession APPOINTMENT OF C.E.O. - DESIGNATE APPOINTMENT OF C.E.O. - MONARCH INSURANCE 15
Slide 16: 5. Financial Overview
5. Financial Overview 16
Slide 17: Income Statement
Income Statement H1/2009 H1/2008 % Rm Rm Revenue 1 803 1 718 5.0% Merchandise sales 890 897 (0.7%) Gross profit % 33.1% 34.1% Operating profit 411 423 (2.7%) Operating margin % 22.8% 24.6% Attributable earnings 273 285 (4.2%) EPS (cents) 309 317 (2.6%) Headline EPS (cents) 306 309 (0.9%) 17
Slide 18: Segmental Analysis
Segmental Analysis Risk Financial Retail Services Services Total Rm Rm Rm Rm H1/2009 Revenue 1 020 295 488 1 803 Operating profit 124 107 180 411 Operating margin 12.1% 36.3% 36.9% 22.8% H1/2008 Revenue 1 018 250 450 1 718 Operating profit 141 77 205 423 Operating margin 13.8% 31.0% 45.5% 24.6% 18
Slide 19: Analysis of Costs
Analysis of Costs (Excluding Debtor costs) H1/2009 H1/2008 Change Rm Rm % Employment costs 268 265 1.2% Admin and IT 85 84 1.4% Marketing 67 62 8.4% Occupancy costs 72 65 10.5% Transport/Travel 71 61 17.1% Depreciation 28 25 8.3% Other operating costs 63 60 5.8% Total 654 622 5.2% % of revenue 36.3%
Slide 20: Cash Flow
Cash Flow H1/2009 H1/2008 Cash flow from trading 539 501 Change in working capital (157) (202) Cash generated from operations 382 299 + 27.8% 20
Slide 21: Balance Sheet Overview
Balance Sheet Overview H1/2009 H1/2008 Rm Rm Property, plant and equipment 211 184 Investments 707 680 Tax and Deferred tax 11 94 Inventory 269 311 Net Debtors after Doubtful Debts 2 752 2 328 Cash 99 57 Total Assets 4 049 3 654 Shareholders’ equity and reserves 2 788 2 511 Retirement benefits 60 69
Slide 22: Capital Ratios
Capital Ratios H1/2009 H1/2008 Rm Rm Gearing ratio 23.9% 25.3% Share buy back this year 51 162 Dividends paid 158 134 Interim dividend declared (cents) 144 144 Dividend cover (x) 2.0 2.0 ROE – average* 19.8% 22.6% ROCE – average* 17.2% 19.6% ROA – average* 15.4% 17.2% * After-tax 22
Slide 23: 6. Lewis Strengths and Opportunities
6. Lewis Strengths and Opportunities 23
Slide 24: Lewis Strengths and Opportunities (Cont'd)
Lewis Strengths and Opportunities (Cont’d) Industry Developments: • Continuing consolidation in the industry • Change in business models Lewis Business Model: • Store-based customer focus. • Developing long-term relationships • Low cost structures; low break-even point 24
Slide 25: Lewis Strengths and Opportunities (Cont'd)
Lewis Strengths and Opportunities (Cont’d) • Since listing on 4 October 2004, we have returned R1.4 billion to shareholders – 50% of market capitalisation at listing date. Outlook 25
Slide 26: Questions Thank you
7. Questions Thank you Visit our website on: www.lewisgroup.co.za 26