Lewis Group Limited · JSE:LEW

Lewis — H1 2017 Earnings Presentation

22 slides from Lewis's earnings presentation, November 2016

  1. Slide 1: Results Presentation for the six months ended 30 September 2016

    RESULTS PRESENTATION for the six months ended 30 September 2016

  2. Slide 2: Agenda

    AGENDA Overview of results 3 Debtor analysis 7 Financial results 11 Regulatory update 17 Outlook 19 Questions 22 2

  3. Slide 3: Overview of Results

    OVERVIEW OF RESULTS Revenue Gross Operating Headline Interim profit profit Earnings dividend margin per share R2.7 bn R 173m 40.5% 10% 100c (1.9%) (39.7%) LY R2.8 bn LY 36.4% LY 14.7% LY R287m LY 215c 3

  4. Slide 4: Overview of Results: Sales patterns and credit

    OVERVIEW OF RESULTS  Sales patterns since year end • Furniture & appliances (83% of business – up 2.8%) • Electronics (17% of business – down 8.7%)  Credit application decline rate 41% (LY: 41%)  Credit sales at 63.4% (LY: 65.9%)  Debtor costs as a % of net debtors 8.6% (LY: 8.1%) 4

  5. Slide 5: Overview of Results: Store footprint

    OVERVIEW OF RESULTS  Beares now trades out of 129 stores (LY: 84 stores)  Rest of Africa 118 stores (LY: 62) solid performance 56 newly acquired stores  Small format Lewis stores 194 (LY: 178)  Store outlets 780 stores ( LY: 724) consolidation in smaller towns 770 stores (by year end) 5

  6. Slide 6: Overview of Results: Gross profit margin

    OVERVIEW OF RESULTS  Gross profit margin - 40.5% (LY 36.4%) • higher margin furniture category - 58.3% of business ( LY 54.7%) • competitive pricing sourced locally • new product ranges supported margin 6

  7. Slide 7: Debtor Analysis

    DEBTOR ANALYSIS 7

  8. Slide 8: Debtor Performance

    DEBTOR PERFORMANCE H1/2017 H1/2016 Collections Collections from instalment sales (-3.6%) Rm 2 027 2 104 Actual collections achieved As a % of one contract instalment per customer per month 74.6% 76.6% Contractual arrears 38.5% 36.1% Debtor Costs Total debtor costs (+7.3%) Rm 502 468 ■ Bad debts writ

  9. Slide 9: Gross Debtor Analysis

    GROSS DEBTOR ANALYSIS Impairment No Customers Gross Receivables Provision Total Customer Grouping Period Arrears Instalments in arrears R 000 No R 000 R 000 % 1 2 3 4 >4 % % R000 R 000 R 000 R000 R 000 Sep 2016 442 103 67.9 3 616 595 56.9 37 673 2.3 629 534 167 576 119 407 89 852 67 936 184 763 Cust

  10. Slide 10: Net Debtor Analysis

    NET DEBTOR ANALYSIS Gross Unearned Net Impairment Period Impairment Impairment Provision Receivables Provisions Receivables Provision % R 000 R 000 R 000 R 000 Sep 2016 6 372 468 (550 728) 5 821 740 1 619 949 27.8% Net Debtor Analysis Sep 2015 6 402 693 (612 714) 5 789 979 1 518 474 26.2% Mar 2016 6

  11. Slide 11: Financial Results

    FINANCIAL RESULTS 11

  12. Slide 12: Income statement

    Income statement H1/2017 H1/2016 Rm Rm % Revenue (Rm) 2 746 2 798 (1.9%) Merchandise sales (Rm) 1 233 1 227 0.5% Gross profit margin (%) 40.5% 36.4% Operating profit (Rm) 275 410 (32.9%) Operating profit margin (%) 10% 14.7% Attributable earnings (Rm) 174 298 (41.5%) EPS (cents) 197 335 (41.4%) Head

  13. Slide 13: Segmental Analysis

    SEGMENTAL ANALYSIS Group Lewis Best Beares Revenue (Rm) 2 746 2 047 354 345 Revenue growth (%) (1.9%) (8.1%) (7.5%) 82.3% Operating profit (Rm) 275 218 55 2 Operating margin H1:17 10.0% 10.6% 15.6% 0.6% H1:16 14.7% 16.3% 18.5% (12.0%) Number of stores H1:17 780 526 125 129 13

  14. Slide 14: Analysis of Costs

    ANALYSIS OF COSTS H1/2017 H1/2016 Change Rm Rm % Employment costs 498 476 4.7% Admin and IT 156 127 23.1% Marketing 113 104 9.1% Occupancy costs 183 160 14.2% Transport/Travel 102 110 (7.9%) Depreciation 49 45 7.6% Other operating costs 134 117 14.5% Total Operating costs 1 235 1 139 8.4% % of reven

  15. Slide 15: Balance Sheet Overview

    BALANCE SHEET OVERVIEW H1/2017 H1/2016 Rm Rm Property, equipment, goodwill and trademarks 440 421 Inventory 450 519 Insurance Investments 1 268 1 814 Trade and other receivables 4 472 4 398 Reinsurance and Insurance assets 1 009 1 753 Tax and Deferred Tax - net 199 30 Cash on hand 836 247 Total asse

  16. Slide 16: Capital Ratios

    CAPITAL RATIOS H1/2017 H1/2016 ROE – after tax (%) 6.4% 11.0% ROCE – after tax (%) 6.4% 9.6% ROA – before tax (%) 7.6% 10.8% Gearing ratio (%) 18.8% 27.6% Interim dividend declared (cents) 100c 215c 16

  17. Slide 17: Regulatory and Legal

    REGULATORY AND LEGAL | 47

  18. Slide 18: Regulatory and legal

    Regulatory and legal  Affordability assessment regulations › Minimum monthly expense table › Three payslips / bank statements requirement › NCR impact study and recommendations  Capping of credit life insurance › Awaiting revised regulations  Litigation update contained in press release 18

  19. Slide 19: Targets and Outlook

    TARGETS AND OUTLOOK ge 19

  20. Slide 20: Financial and Operating Targets

    FINANCIAL AND OPERATING TARGETS Actual Target H1/2017 2017 Performance indicators Gross profit margin (%) 40.5 39 - 41 Operating profit margin (%) 10 12 - 15 Operating costs as a % of revenue 45 40 - 42 Credit sales as a % of total sales 63.4 63 - 66 Satisfactory paid customers (%) 67.9 66 - 70 Debt

  21. Slide 21: Outlook

    OUTLOOK  GCR in Sept 2016 affirmed Lewis Group’s credit rating and outlook › National long-term rating: `A(za)´ › National short-term rating: `A1(za)´ › Outlook: Stable  Trading outlook  Lewis and Best Home and Electric  Beares  Rest of Africa 21

  22. Slide 22: Questions

    QUESTIONS 22

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