Wrap Text
Unaudited interim results for the six months ended 30 September 2012
LEWIS GROUP LTD
Registration number: 2004/009817/06 Share code: LEW ISIN: ZAE000058236
Unaudited interim results
for the six months ended 30 September 2012
Headline earnings per share up 10.6%
Interim dividend up 23.3%
Merchandise sales up 6.4%
Debtor costs reduced by 2.2%
Gross profit margin 37.7%
Overview
Trading and financial performance
While trading conditions remained difficult over the past six months, merchandise sales have
shown an improving growth trend. Sales increased by 6.4% for the period, compared to growth of
3.3% for the previous financial year.
Furniture and appliance sales increased by 8.4% with sales of electronic goods being flat.
Furniture sales now account for 57% (2012: 54%) of total merchandise sales.
Merchandise sales in Lewis, which comprise 83% of group sales, increased by 6.1%.
Best Home and Electric sales grew by 8.5% and My Home by 6.8%.
The continued focus on attracting credit customers through exclusive merchandise offerings
and targeted customer promotions has contributed to credit sales increasing from 73.2% to
75.2% of total sales. The group will benefit from the annuity income of the higher credit sales
into the future. Credit sales for the period increased by 9.5% while cash sales declined by
1.4%, confirming the appeal of the group's credit offering.
Revenue increased by 6.6% to R2.4 billion, with insurance income growing by 9.9%, largely
attributable to a higher level of longer term business. Revenue from ancillary services
increased by 10.9% and finance charges earned increased by 0.7%. In future the growth in
other revenue is expected to be generally in line with sales growth.
The gross profit margin at 37.7% (2012: 38.5%) is well within management's medium-term
target range of 36% to 38%.
Operating costs, excluding debtor costs, increased by 9.4%. Marketing and promotional
activity has been increased to support sales growth while the group also increased its
investment in training to improve productivity levels. Expenses were impacted by the
refurbishment of 83 stores during the period as well as higher utility and fuel costs.
A programme has been initiated to reduce fuel usage across the fleet to counter rising
transport costs. Operating costs are traditionally higher in the first half of the year and
are expected to normalise in the second half.
Operating profit margin at 21.4% (2012: 21.9%) translated into an operating profit of
R520.3 million. Headline earnings increased by 11% to R372 million and headline earnings
per share by 10.6% to 419 cents.
The interim dividend has been increased by 23.3% to 212 cents per share with the company
once again substantially covering the impact of the increase in the rate of withholding tax.
Inventory levels were higher at the end of the period, mainly in preparation for the launch of
the new merchandise ranges in October and the festive season trading period. The level of
stockholding should normalise by year-end.
After increasing net borrowings by R150 million, the gearing ratio is consistent with the
previous year at 26.7%.
Debtor management
Continued focus on credit granting and collections ensured the overall quality of the debtors
book remained stable. Debtor costs as a percentage of net debtors declined to 4.6% from 5.1%
for the period. Debtor costs were R242 million (2012: R247 million), 2.2% down on last year.
The debtors' book increased by 9% mainly as a result of the average term of new credit
contracts increasing from 28 months to 32 months. This is in line with the strategy to offer
longer-term deals on new contracts to good-paying customers.
Store expansion
During the period six Lewis and seven Best Home and Electric outlets were opened, bringing
the store base to 610 at the end of September 2012. All the new Lewis outlets are the
smaller format stores with lower cost structures and higher sales densities. The group is on
track to meet its store opening target of 20 to 25 stores for the financial year.
Regulatory
Lewis is satisfied that its policies and procedures are compliant with applicable legislation,
and more specifically the National Credit Act, and continues to engage with the regulatory and
industry bodies.
Prospects
New merchandise ranges have been introduced and stores are well stocked in preparation for the
Christmas trading period. Strong marketing and promotional campaigns have been developed to
attract credit customers and drive sales growth in the current competitive environment.
Trading conditions are expected to remain challenging for the rest of the financial year and
management will continue to focus on cost control and debtor costs.
Dividend declaration
Notice is hereby given that an interim gross cash dividend of 212 cents per share (LY: 172 cents
per share) in respect of the 6 months ended 30 September 2012 has been declared payable to holders of
ordinary shares.
The dividend has been declared out of income reserves and is subject to a dividend tax of
15%. The dividend for determining the dividend tax is 212 cents and the dividend tax payable
is 31.8 cents per share for shareholders who are not exempt. No STC credits have been
utilised. The net dividend for shareholders who are not exempt will therefore be 180.2 cents.
The dividend 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 rate.
At the time of this declaration, there were 98 057 959 shares in issue. 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 Friday 11 January 2013
Date trading commences "ex" dividend Monday 14 January 2013
Record date Friday 18 January 2013
Date of payment Monday 21 January 2013
Share certificates may not be dematerialised or rematerialised between Monday
14 January 2013 and Friday 18 January 2013, both days inclusive.
For and on behalf of the Board.
David Nurek
Independent Non-executive Chairman
Johan Enslin
Chief Executive Officer
Cape Town
12 November 2012
Income statement
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Unaudited % Unaudited Audited
Notes Rm Change Rm Rm
Revenue 2 428.6 6.6% 2 278.7 4 857.3
Merchandise sales 1 161.4 1 091.2 2 365.4
Finance charges earned 449.3 446.4 908.2
Insurance premiums earned 445.6 405.2 868.5
Ancillary services 372.3 335.9 715.2
Cost of merchandise sales (723.3) (670.9) (1 446.3)
Operating Costs (1 185.0) (1 109.3) (2 271.9)
Employment costs (390.2) (360.0) (732.9)
Administration and IT (105.4) (106.1) (220.7)
Debtor costs 2 (242.1) (247.4) (522.3)
Marketing (107.9) (97.9) (184.5)
Occupancy costs (112.3) (98.0) (207.3)
Transport and travel (94.8) (83.4) (177.9)
Depreciation (29.9) (27.2) (48.5)
Other operating costs (102.4) (89.3) (177.8)
Operating profit 520.3 4.4% 498.5 1 139.1
Investment income 47.2 34.6 91.9
Profit before finance costs 567.5 533.1 1 231.0
Net finance costs (41.8) (30.6) (63.2)
Interest paid (48.1) (43.9) (82.2)
Interest received 5.1 1.3 3.8
Forward Exchange Contracts 1.2 12.0 15.2
Profit before taxation 525.7 502.5 1 167.8
Taxation (152.0) (165.1) (367.2)
Net profit attributable to ordinary
shareholders 373.7 10.8% 337.4 800.6
Statement of comprehensive income
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Net profit for the year 373.7 337.4 800.6
Fair value adjustment to available-for-sale investments 55.6 (0.2) 72.9
Disposal of available-for-sale investments (0.1) (0.3) (17.2)
Foreign currency translation reserve 3.0 2.4 1.5
Other comprehensive income 58.5 1.9 57.2
Total comprehensive income for the period attributable
to equity shareholders 432.2 339.3 857.8
Earnings and dividends
per share 6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 % 2011 2012
Unaudited Change Unaudited Audited
1 Weighted average no. of shares
Weighted average 88 690 88 392 88 463
Diluted weighted average 89 570 89 272 89 446
2 Headline earnings (Rm)
Attributable earnings 373.7 337.4 800.6
Profit on disposal of assets and investments (2.1) (2.7) (19.9)
Headline earnings 371.6 11.0% 334.7 780.7
3 Earnings per share (cents)
Earnings per share 421.3 381.7 905.0
Diluted earnings per share 417.2 377.9 895.1
4 Headline earnings per share (cents)
Headline earnings per share 419.0 10.6% 378.7 882.5
Diluted headline earnings per share 414.9 374.9 872.8
5 Dividends per share (cents)
Dividends paid per share
Final dividend 2012 (2011) 270.0 207.0 207.0
Interim dividend 2012 172.0
270.0 207.0 379.0
Dividends declared per share
Interim dividend 2013 (2012) 212.0 172.0 172.0
Final dividend 2012 270.0
212.0 23.3% 172.0 442.0
Balance sheet
30 September 30 September 31 March
2012 2011 2012
Unaudited Unaudited Audited
Notes Rm Rm Rm
Assets
Non-current assets
Property, plant and equipment 324.8 297.8 311.9
Deferred taxation – 22.4 16.1
Insurance investments 3 1 147.9 879.6 1 005.3
1 472.7 1 199.8 1 333.3
Current assets
Inventories 389.6 307.7 281.4
Trade and other receivables 4 4 357.5 3 982.2 4 064.5
Insurance investments 3 349.8 295.1 373.3
Cash on hand and deposits 108.9 111.2 77.9
5 205.8 4 696.2 4 797.1
Total assets 6 678.5 5 896.0 6 130.4
Equity and liabilities
Capital and reserves
Share capital and premium 107.7 96.9 95.4
Other reserves 347.1 215.0 277.9
Retained earnings 4 023.5 3 587.3 3 901.3
4 478.3 3 899.2 4 274.6
Non-current liabilities
Long-term interest bearing borrowings 850.0 400.0 650.0
Deferred taxation 125.4 91.4 111.4
Retirement benefits 65.8 63.7 63.6
1 041.2 555.1 825.0
Current liabilities
Trade and other payables 5 701.5 645.9 585.8
Taxation 2.8 42.8 21.0
Short-term interest-bearing borrowings 454.7 753.0 424.0
1 159.0 1 441.7 1 030.8
Total equity and liabilities 6 678.5 5 896.0 6 130.4
Statement of changes in equity
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Share capital and premium
Opening balance 95.4 93.5 93.5
Share awards to employees 16.1 3.4 1.9
Treasury shares purchased (3.8) – –
107.7 96.9 95.4
Other reserves
Opening balance 277.9 207.1 207.1
Other comprehensive income for the year 58.5 1.9 57.2
Share-based payment 11.6 9.9 19.0
Other movements (0.9) (3.9) (5.4)
347.1 215.0 277.9
Retained Earnings
Opening balance 3 901.3 3 427.5 3 427.5
Net profit attributable to ordinary shareholders 373.7 337.4 800.6
Distribution to shareholders (239.8) (183.2) (335.5)
Other movements (11.7) 5.6 8.7
4 023.5 3 587.3 3 901.3
Balance at the end of period 4 478.3 3 899.2 4 274.6
Cash flow statement
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Cash flow from operating activities
Cash flow from trading 828.9 763.9 1 358.3
Change in working capital (550.1) (344.5) (385.9)
Cash generated from operations 278.8 419.4 972.4
Interest and dividends received 52.1 35.5 76.6
Interest paid (46.9) (31.9) (67.0)
Taxation paid (167.9) (169.5) (377.4)
116.1 253.5 604.6
Cash utilised in investing activities
Net additions to insurance investments (35.6) (75.4) (194.1)
Acquisition of property, plant and equipment (48.9) (48.9) (87.8)
Proceeds on disposal of property, plant and equipment 8.8 5.8 10.2
(75.7) (118.5) (271.7)
Cash flow from financing activities
Dividends paid (239.8) (183.2) (335.5)
Increase in long-term borrowings 200.0 – 250.0
(Decrease)/increase in short-term borrowings (300.0) 150.0 50.0
Proceeds on sale of own shares 3.5 5.1 5.2
Purchase of treasury shares (3.8) – –
(340.1) (28.1) (30.3)
Net increase in cash and cash equivalents (299.7) 106.9 302.6
Cash and cash equivalents at the beginning of the period (46.1) (348.7) (348.7)
Cash and cash equivalents at the end of the period (345.8) (241.8) (46.1)
Analysis of borrowings and banking facilities
Borrowings
Long-term 850.0 400.0 650.0
Short-term – 400.0 300.0
850.0 800.0 950.0
Cash and cash equivalents
Short-term facilities utilised 454.7 353.0 124.0
Cash on hand (108.9) (111.2) (77.9)
345.8 241.8 46.1
Net borrowings 1 195.8 1 041.8 996.1
Unutilised facilities 954.2 558.2 753.9
Total banking facilities 2 150.0 1 600.0 1 750.0
Segmental report
Best Home
Lewis and Electric My Home Group
Reportable segment Rm Rm Rm Rm
For the six months ended
30 September 2012 (unaudited)
Revenue 2 037.4 328.9 62.3 2 428.6
Operating profit 450.7 65.7 3.9 520.3
Operating margin 22.1% 20.0% 6.3% 21.4%
Segment assets 3 925.8 587.4 106.2 4 619.4
For the six months ended
30 September 2011 (unaudited)
Revenue 1 917.2 305.1 56.4 2 278.7
Operating profit/(loss) 435.9 63.9 (1.3) 498.5
Operating margin 22.7% 20.9% (2.3%) 21.9%
Segment assets 3 556.6 525.2 105.2 4 187.0
For the 12 months ended
31 March 2012 (audited)
Revenue 4 083.8 653.5 120.0 4 857.3
Operating profit 985.1 145.6 8.4 1 139.1
Operating margin 24.1% 22.3% 7.0% 23.5%
Segment assets 3 624.5 535.3 104.6 4 264.4
Notes to the financial statements
1. Basis of reporting
The group's interim financial statements have been prepared in accordance with the recognition and
measurement principles of International Financial Accounting Standards (IFRS) including IAS34 (Interim
Financial Reporting), and in compliance with the Listing Requirements of the JSE. The accounting policies
are consistent with those applied in the annual financial statements for the year ended 31 March 2012.
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
2. Debtor costs
Bad debts, repossession losses and bad debt recoveries 34.9 49.5 405.4
Movement in impairment provision 207.2 197.9 116.9
242.1 247.4 522.3
3. Insurance investments – available for sale
Listed
Listed shares 505.0 369.2 442.9
Fixed income securities 642.9 510.4 562.4
Unlisted
Money market 349.8 295.1 373.3
1 497.7 1 174.7 1 378.6
Investments are classified as available-for-sale and are reflected at fair value. Changes in fair value are
reflected in the statement of comprehensive income.
4. Trade and other receivables
Instalment sale and loan receivables 6 423.9 5 822.4 5 871.1
Provision for unearned finance charges and unearned
maintenance income (281.7) (281.3) (280.9)
Provision for unearned initiation fees (117.7) (105.2) (109.8)
Provision for unearned insurance premiums (721.4) (600.4) (622.2)
Net instalment sale and loan receivables 5 303.1 4 835.5 4 858.2
Provision for impairment (1 082.4) (956.2) (875.2)
4 220.7 3 879.3 3 983.0
Other receivables 136.8 102.9 81.5
4 357.5 3 982.2 4 064.5
Amounts due from instalment sale and loan receivables after 1 year are reflected as current, as they form
part of the normal operating cycle. The credit terms of instalment sale and loan receivables range from
6 to 36 months.
The average effective interest rate on instalment sale and loan receivables is 21.8% (2012: 23.1%) and the
average term of the sale is 32.3 months (2012: 28.1 months).
5. Trade and other payables
Trade payables 70.8 90.7 71.1
Accruals and other payables 216.7 215.8 166.0
Due to reinsurers 172.6 150.7 147.2
Insurance provision 241.4 188.7 201.5
701.5 645.9 585.8
Debtors' analysis
The company applies a payment rating assessment to each customer individually, which categorises customers
into 13 payment categories. This assessment is integral to the calculation of the debtors' impairment provision.
The 13 payment categories have been summarised into four main groupings of customers. An analysis of the
debtors book based on the payment ratings is set out below.
No. of Customers Impairment Provision %
September September September September March
2012 2011 2012 2011 2012
Satisfactory paid:
Customers fully up to date including
those who have paid 70% or more of No. 479 486 512 825
amounts due over the contract period % 69.7% 71.6% 1% 1% 1%
Slow payers:
Customers fully up to date including
those who have paid 65% to 70% of No. 53 059 53 625
amounts due over the contract period % 7.7% 7.5% 25% 28% 26%
Non-performing customers
Customers who have paid 55% to
65% of amounts due over the period No. 48 268 46 847
of the contract % 7.0% 6.6% 42% 44% 42%
Non-performing customers
Customers who have paid 55% or less
of amounts due over the period of the No. 106 953 102 492
contract % 15.6% 14.3% 96% 98% 95%
Total 687 766 715 789 20.4% 19.8% 18.0%
The debtors' impairment provision is allocated to the summary categories based on the number of customers.
Key ratios
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Operating efficiency ratios
Gross profit margin % 37.7% 38.5% 38.9%
Operating profit margin % 21.4% 21.9% 23.5%
Number of stores 610 593 602
Number of permanent employees (average) 7 297 6 981 7 062
Trading space (sqm) 228 151 231 290 229 542
Inventory turn 3.8 4.7 5.1
Current ratios 4.5 3.3 4.7
Credit ratios
Credit sales % 75.2% 73.2% 71.4%
Debtor costs as a % of the net debtors 4.6% 5.1% 10.8%
Debtors' impairment provision as a % of net debtors 20.4% 19.8% 18.0%
Arrear instalments on satisfactory accounts as a percentage
of net debtors 9.1% 10.1% 10.3%
Arrear instalments on slow-paying and non-performing accounts
as a percentage of net debtors 24.6% 23.9% 21.9%
Debtors' impairment provision on non-performing accounts 78.9% 81.2% 76.9%
Credit applications decline rate 36.7% 32.4% 33.0%
Shareholder ratios
Net asset value per share (cents) 5 045 4 404 4 828
Gearing ratio 26.7% 26.7% 23.3%
Return on average equity (after-tax) 17.0% 17.6% 20.0%
Return on average capital employed (after-tax) 14.6% 14.6% 16.7%
Return on average assets managed (pre-tax) 17.8% 18.6% 21.1%
Notes:
1. All ratios are based on figures at the end of the period unless otherwise disclosed.
2. The net asset value has been calculated using 88 769 000 shares in issue (2012: 88 538 000).
3. Total assets exclude the deferred tax asset.
Executive directors: J Enslin (Chief Executive Officer), L A Davies (Chief Financial Officer)
Non-executive directors: D M Nurek (Chairman) (Ind.), H Saven (Ind.), B J van der Ross (Ind.), Professor F Abrahams (Ind.),
Z B M Bassa (Ind.), M S P Marutlulle (Ind.), A J Smart
Company secretary: M G McConnell
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
Auditors: PricewaterhouseCoopers Inc.
Sponsor: UBS South Africa (Pty) Ltd
Lewis Registered office: 53A Victoria Road, Woodstock, 7925
Registration number: 2004/009817/06 Share code: LEW ISIN: ZAE000058236
These results are also available on our website: www.lewisgroup.co.za
Date: 12/11/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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