Lewis Group Limited · JSE:LEW
Lewis — Investor Presentation (February 2005)
25 slides from Lewis's investor presentation, February 2005
Slide 1: Customer Account Management
Customer Account Management Presented to: Analysts & Fund Managers February 2005 1
Slide 2: Index
Index • Introduction – Business Model • Credit Book Overview • Bad Debt • Arrears • Centralised Credit Operations • New Business Processing • Existing Account Management • Monitoring & Reporting • Summary & Conclusion • Store Visit 2
Slide 3: Introduction – Business Model
Introduction – Business Model CHOICE CONVENIENCE ♦ Differentiated product range ♦ Established furniture retailer ♦ Exclusive quality products ♦ Extensive store network and well- positioned stores ♦ Value for money ♦ Rapid delivery times ♦ Well-established supply chain ♦ Centralised sourcing ♦ Strate
Slide 4: Credit Book Overview
Credit Book Overview • Over 700,000 active customers • R2.6 billion debtors book • Sales: 38% new / 62% existing customers • Process average 31,000+ new applications pm • Average 22% decline rate 4
Slide 5: Bad Debt
Bad Debt Provisioning Bad debts1 Notes: Note: 1 Includes DD, UFC, UPR, UMC 1 Bad debts charged in income statement as a % of gross 2 2003 (pro forma) and 2004 (actual) includes AC 133 adjustment debtors 5
Slide 6: Arrears
30 29 28 27 26 25 24 23 2000 2001 2002 2003 29.5 28.9 og4 «28.5 . 2004
Slide 7: Centralised Credit Operations
Centralised Credit Operations Credit risk scoring Credit approval Underwriting Fraud prevention Reserve account management 7
Slide 8: New Business Processing
New Business Processing
Slide 9: New Business Application Process
New Business Application Process 9
Slide 10: TransactSM – Processing System
TransactSM – Processing System • Manages the flow of customer information • Performs several internal database enquiries • Dual bureau connectivity to Experian & TransunionITC −Payment profile −National loans registry (Micro-loans) • Credit Referral Department (CRD) • Processed over 900k transaction
Slide 11: Strategy Manager – Decision Engine
Strategy Manager – Decision Engine • Multiple application risk scorecards − Lewis South Africa Experian & ITC (3rd Gen) − Lewis Namibia ITC (2nd Gen) − Lewis Botswana ITC (2nd Gen) − Lewis Swaziland & Lesotho ITC (2nd Gen) − Best Electric Experian & ITC (2nd Gen) • Credit policy − Decline rules − Re
Slide 12: Strategy Manager – Decision Engine
Strategy Manager – Decision Engine • Credit limits & deposit policy *Example only Application Score 0 - 200 201 - 220 221 - 260 261 - Hi Risk Class High Medium Low Very low Credit Limit % 10% 15% 20% 25% Max OTB R5,000 R7,500 R10,000 R15,000 Deposit % 20% 10% 0% 0% − Credit Limit = f (Net Income x L
Slide 13: Hunter – Fraud Prevention
Hunter — Fraud Prevention -——S EE Daily Applications Changed Details De —__ Insurance Claims Employee Details __—— od Run Queries Filter & Prioritize Cleared | @™N / marae OD Confirmed Delivery or Suspect Investigate Group Ltd
Slide 14: Hunter – Fraud Prevention
Hunter — Frau 2 7705315426087 MR RICHARD DE JONGH 7405025832084 MR DANIEL JACOBS: 7903165932086 IMR BONISILE MAJOLA MZONDI d Prevention WORK 217013381 HOME 214855822 7409105279083 MR FAHEEM BLOCK 2 7740208731083 MR SONWABO NTANTISO 8006235561080 MR SONELE JULIUS NYEMBEZI WORK, a S \ home 213870854 7
Slide 15: Disaster Recovery Plan
Disaster Recovery Plan • Distributed branch network − Branch can operate as stand-alone store • Offsite TransactSM backup server − Daily system replication − Alternative network routing 15
Slide 16: Existing Account Management
Existing Account Management
Slide 17: Re-serve Scheme
Re-serve Scheme • Identifies suitability of customer for further credit extension • Fully integrated with debtors system and store operations • Driven by historic payment behaviour & current indebtedness • Customer base is segmented and targeted monthly • Targeted direct mailing with promotional off
Slide 18: Re-serve Scheme
Re-serve Scheme • 62% of business from existing and settled customers • Other furniture retailers < 50% 18
Slide 19: Technical Support of the Reserve Scheme
Technical Support of the Reserve Scheme All accounts are processed monthly through Stratagem, decisions returned to branch: • Behavioural scoring − Combines Lewis payment performance and credit bureau performance • Limit & deposit management − Behavioural score used to calculate credit limits • Stat
Slide 20: Monitoring & Reporting
Monitoring & Reporting
Slide 21: Analytical Reporting
Analytical Reporting • Population stability • Scorecard performance • Customer profiling • Risk profiling • Geographic segmentation • At-age analysis (vintage analysis) • Roll-rate analysis 21
Slide 22: Example of Risk Monitoring
Example of Risk Monitoring 22
Slide 23: Example of Champion-Challenger
Example of Champion-Challenger 23
Slide 24: Summary
Summary 1999 Implemented the TransactSM system and the 1st generation Lewis application scorecard 2001 Implemented the Scope reporting tool Implemented the Open to Buy credit facility 2003 Developed and implemented the 3rd generation Lewis application scorecard Implemented the Stratagem customer man
Slide 25: Conclusion
Conclusion • 60 years of retail credit management in SA • Employ best-of-breed international credit systems • Centralised credit granting and control • Advanced risk scorecard development • Integrated credit and marketing strategies • Sophisticated credit reporting and monitoring 25