Wrap Text
Final audited results for the year ended 31 March 2015
LEWIS GROUP LTD
Registration number: 2004/009817/06.
Share code: LEW.
ISIN: ZAE000058236
Bond code: LEW01
Bond ISIN No. ZAG000110222
Final audited results
for the year ended 31 March 2015
REVENUE UP
8%
to R5.7 BILLION
GROSS PROFIT MARGIN
36.6%
OPERATING PROFIT MARGIN
20%
HEADLINE EARNINGS PER SHARE
883 cents
NET ASSET VALUE PER SHARE UP
8.9%
TOTAL DIVIDEND MAINTAINED AT
517 cents
Overview
The group posted a strong second half performance and gained market share in the changing
competitive environment. Merchandise sales for the second half increased by 18%, compared
to a decline of 3.5% for the first six months, driven mainly by the exclusive merchandise
offering which was supported by higher levels of promotional activity.
The acquisition of the Beares brand together with 61 stores was completed in late November 2014.
These stores were integrated into the group's operations from the second week in December.
Beares offers exciting growth potential and will enable the group to attract new customers in
higher LSM markets. The 12 My Home stores have been incorporated into the Beares business.
While the group has reported an improving performance, trading conditions have remained
particularly tough, with consumers in the group's lower to middle income target market under
continued financial pressure.
Trading and financial performance
Revenue for the 12 months increased by 8.0% to R5.7 billion, with merchandise sales growth of
7.6% (2014: decrease of 2.5%). Excluding Beares, merchandise sales increased by 4.4%.
Following the acquisition of the Beares stores, and the opening of a net 19 new stores across
the three brands, the store base reached 716 at year-end. A total of 75 Lewis and Best Home and
Electric stores were refurbished during the period.
The gross profit margin was maintained at 36.6% despite the aggressive discounting by competitors
ahead of stores closures in the last quarter of the 2014 calendar year.
Expenses continued to be tightly managed and operating costs, excluding debtor costs, expressed
as a percentage of turnover were in line with last year at 36.1%. Despite the additional costs relating
to the acquisition and integration of the Beares chain, expenses only increased by 8.4%.
The group's operating margin at 20.0% (2014: 21.8%) was impacted by higher debtor costs and costs
relating to the acquisition of Beares. Operating profit was 1.2% lower at R1 140 million. Headline
earnings at R784 million was 4.2% lower than the previous year, with headline earnings per share of
883 cents (2014: 921 cents).
The board has maintained the total dividend at 517 cents per share, confirming its confidence in the
group's business model.
Inventory levels at period-end were higher due mainly to the take-on of the Beares chain.
The gearing ratio reduced to 23.2% (2014: 23.9%) as the longer-term credit contracts fully settled in
the base.
Debtor management
Improving collection rates in the second half of the year contributed to a further slowing of debtor cost
growth to 22% from 27% at September 2014 and 30% in July 2014.
The level of satisfactory paid customers improved to 68.7% (2014: 68.3%) and non-performing
customers reduced to 15.5% (2014: 15.7%). The group's credit customer base increased by 11 000
customers to 690 000 at year-end.
Debtor costs as a percentage of net debtors moved from 11.6% to 13.0% in line with management's
expectations. The impairment provision increased from 18.6% to 19.7%, evidencing the prevailing
challenging credit environment.
The high level of consumer indebtedness in the group's target market is reflected in the increase
in the credit application decline rate from 38.4% in 2014 to 40.2% in 2015.
Credit sales as a percentage of total sales declined from 72% in 2014 to 69% in 2015 due mainly to
the incorporation of the Beares chain which has a higher cash sales component.
Prospects
The retail trading and credit environment is unlikely to show any marked improvement in the short to
medium term as the consumer economy remains weak and unemployment remains high.
In this environment the group will focus on driving quality credit sales, containing costs and further
improving collection rates.
The group continues to invest for future growth and plans to open 30 stores in the year ahead, with
20 across the Lewis brand and 10 new outlets for Beares. Capital expenditure of R100 million has
been budgeted for 2016.
Beares is a scalable brand which offers sustained organic growth prospects. Management will
continue to refine the merchandise offering for the higher targeted LSM market to maximise the
potential growth of the brand.
Through its decentralised customer focused business model the group is well positioned for
further market share gains within the shifting competitive landscape.
Dividend declaration
Notice is hereby given that a final gross cash dividend of 302 cents per share in respect of
the year ended 31 March 2015 has been declared payable to holders of ordinary shares.
The number of shares in issue as of the date of declaration is 98 057 959.
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 302 cents and the dividend tax payable is
45.3 cents for shareholders who are not exempt. The net dividend for shareholders who are not
exempt will therefore be 256.7 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.
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 10 July 2015
Date trading commences
"ex" dividend Monday 13 July 2015
Record date Friday 17 July 2015
Date of payment Monday 20 July 2015
Share certificates may not be dematerialised or rematerialised between Monday 13 July 2015 and
Friday 17 July 2015, both days inclusive.
For and on behalf of the Board
David Nurek Johan Enslin
Independent Chief executive officer
Non-executive chairman
Les Davies
Chief financial officer
Cape Town
27 May 2015
External auditor's opinion
These summary consolidated financial statements for the year ended 31 March 2015 have been
audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The
auditor also expressed an unmodified opinion on the annual financial statements from which these
summary consolidated financial statements were derived.
A copy of the auditor's report on the summary consolidated financial statements and of the
auditor's report on the annual consolidated financial statements are available for inspection at
the company's registered office, together with the financial statements identified in the respective
auditor's reports.
Income statement
For the For the
year ended year ended
31 March 2015 % 31 March 2014
Notes Rm Change Rm
Revenue 5 703.3 8.0% 5 281.7
Merchandise sales 2 591.5 2 409.1
Finance charges and initiation fees earned 1 326.4 1 208.9
Insurance revenue 981.4 975.5
Ancillary services 804.0 688.2
Cost of merchandise sales (1 644.3) (1 524.4)
Operating costs (2 918.8) (2 603.3)
Employment costs (880.8) (818.9)
Administration and IT (241.1) (217.1)
Debtor costs 2 (858.1) (702.4)
Marketing (177.0) (173.1)
Occupancy costs (273.6) (245.2)
Transport and travel (215.8) (192.6)
Depreciation and amortisation (63.8) (58.5)
Other operating costs (208.6) (195.5)
Operating profit 1 140.2 (1.2%) 1 154.0
Investment income 148.0 125.8
Profit before finance costs 1 288.2 1 279.8
Net finance costs (119.7) (102.7)
Interest paid (135.1) (116.8)
Interest received 12.2 6.5
Forward exchange contracts 3.2 7.6
Profit before taxation 1 168.5 1 177.1
Taxation (329.1) (334.9)
Net profit attributable to ordinary shareholders 839.4 (0.3%) 842.2
Statement of comprehensive income
For the For the
year ended year ended
31 March 2015 31 March 2014
Rm Rm
Net profit for the year 839.4 842.2
Movement in other reserves (recycled to income
statement on disposal) 119.3 60.9
Fair value adjustment to available-for-sale
investments 156.8 71.5
Disposal of available-for-sale investments (40.6) (23.9)
Foreign currency translation reserve 3.1 13.3
Retirement benefit remeasurements (10.4) 30.5
Other comprehensive income 108.9 91.4
Total comprehensive income for the year
attributable to equity shareholders 948.3 933.6
Earnings and dividends per share
For the For the
year ended year ended
31 March 2015 % 31 March 2014
Change
1. Weighted average no. of shares
Weighted average 88 840 88 762
Diluted weighted average 89 585 89 614
2. Headline earnings (Rm)
Attributable earnings 839.4 842.2
Profit on disposal of assets and investments (43.2) (24.6)
Gain on acquisition of Beares (12.0) -
Headline earnings 784.2 817.6
3. Earnings per share (cents)
Earnings per share 944.8 (0.4%) 948.8
Diluted earnings per share 937.0 939.8
4. Headline earnings per share (cents)
Headline earnings per share 882.7 (4.2%) 921.1
Diluted headline earnings per share 875.4 912.4
5. Dividends per share (cents)
Dividends paid per share
Final dividend 2014 (2013) 302.0 302.0
Interim dividend 2015 (2014) 215.0 215.0
517.0 517.0
Dividends declared per share
Interim dividend 2015 (2014) 215.0 215.0
Final dividend 2015 (2014) 302.0 302.0
517.0 517.0
Balance sheet
31 March 2015 31 March 2014
Notes Rm Rm
Assets
Non-current assets
Property, plant and equipment 352.9 327.3
Trademark 60.1 –
Deferred taxation 0.5 0.6
Retirement benefit asset 77.4 79.7
Insurance investments 3 1 715.6 1 415.0
2 206.5 1 822.6
Current assets
Inventories 420.3 324.6
Trade and other receivables 4 5 395.9 5 078.9
Insurance investments 3 127.0 283.7
Taxation 34.8 -
Cash on hand and deposits 222.3 480.1
6 200.3 6 167.3
Total assets 8 406.8 7 989.9
Equity and liabilities
Capital and reserves
Share capital and premium 110.8 109.2
Other reserves 548.2 436.1
Retained earnings 5 165.0 4 796.5
5 824.0 5 341.8
Non-current liabilities
Long-term interest-bearing borrowings 825.0 1 000.0
Deferred taxation 248.3 173.5
Retirement benefit liability 106.7 92.9
1 180.0 1 266.4
Current liabilities
Trade and other payables 283.8 227.9
Reinsurance and insurance liabilities 370.0 388.7
Taxation – 7.1
Short-term interest-bearing borrowings 749.0 758.0
1 402.8 1 381.7
Total equity and liabilities 8 406.8 7 989.9
Statement of changes in equity
For the For the
year ended year ended
31 March 2015 31 March 2014
Rm Rm
Share capital and premium
Opening balance 109.2 88.4
Cost of own shares acquired (treasury shares) (26.5) (10.7)
Share awards to employees 28.1 31.5
110.8 109.2
Other reserves
Opening balance 436.1 397.8
Other comprehensive income for the year 119.3 60.9
Share-based payment 19.7 27.0
Transfer to retained earnings (26.9) (49.6)
548.2 436.1
Retained earnings
Opening balance 4 796.5 4 361.1
Net profit attributable to ordinary shareholders 839.4 842.2
Distribution to shareholders (459.3) (459.3)
Share awards to employees (28.1) (28.1)
Transfer from other reserves 26.9 49.6
Profit on sale of own shares – 0.5
Retirement benefit remeasurements (10.4) 30.5
5 165.0 4 796.5
Balance as at 31 March 2015 5 824.0 5 341.8
Cash flow statement
For the For the
year ended year ended
31 March 2015 31 March 2014
Notes Rm Rm
Cash flow from operating activities
Cash flow from trading 1 376.1 1 360.2
Change in working capital (514.0) (429.3)
Cash generated from operations 862.1 930.9
Interest and dividends received 113.1 104.1
Interest paid (131.9) (109.2)
Taxation paid (337.9) (326.9)
505.4 598.9
Cash flow from investing activities
Net disposals of insurance investments 48.2 87.6
Acquisition of property, plant and equipment (86.7) (59.1)
Purchase of Beares business 5 (66.6) –
Proceeds on disposal of property, plant and equipment 11.7 6.8
(93.4) 35.3
Cash flow from financing activities
Dividends paid (459.3) (459.3)
Decrease in long-term borrowings (175.0) (250.0)
(Decrease)/increase in short-term borrowings (50.0) 650.0
Purchase of own shares (26.5) (10.7)
Proceeds on sale of own shares – 3.9
(710.8) (66.1)
Net (decrease)/increase in cash and cash equivalents (298.8) 568.1
Cash and cash equivalents at the beginning of the year 472.1 (96.0)
Cash and cash equivalents at the end of the year 173.3 472.1
Analysis of borrowings and facilities
Borrowings
Long-term 825.0 1 000.0
Short-term 700.0 750.0
1 525.0 1 750.0
Cash and cash equivalents
Short-term facilities utilised 49.0 8.0
Cash on hand (222.3) (480.1)
(173.3) (472.1)
Net borrowings 1 351.7 1 277.9
Unutilised facilities:
Banking facilities 973.3 1 272.1
Domestic Medium-Term Note Programme 1 700.0 1 500.0
Banking facilities and Domestic Medium-Term
Note Programme 4 025.0 4 050.0
Segmental report
Best Home Beares/
Lewis and Electric My Home Group
Reportable segment Rm Rm Rm Rm
2015
Revenue 4 688.5 801.6 213.2 5 703.3
Operating profit 965.4 169.1 5.7 1 140.2
Operating margin 20.6% 21.1% 2.7% 20.0%
Segment assets 4 719.5 760.3 225.3 5 705.1
2014
Revenue 4 400.0 755.6 126.1 5 281.7
Operating profit 962.8 175.9 15.3 1 154.0
Operating margin 21.9% 23.3% 12.1% 21.8%
Segment assets 4 421.1 715.3 128.8 5 265.2
Notes to the financial statements
1. Basis of reporting
The information contained in these financial statements has been extracted from the Group's
2015 audited annual financial statements and which has been prepared in accordance with the
framework concepts and the measurement and recognition principles of International Financial
Reporting Standards (IFRS), IAS34 (Interim Financial Reporting), SAICA Financial Reporting
Guides and Circulars issued by the Accounting Practices Committee, Financial Pronouncements
issued by the Financial Reporting Standards Council and in compliance with the Listing
Requirements of the JSE Limited.
The accounting policies applied are consistent with those applied in the annual financial
statements for the year ended 31 March 2014 except for the following additional policy
included as a result of the purchase of the Beares business:
1.1 Trademarks:
Trademarks acquired in a business acquisition are recognised at fair value at the acquisition
date. Trademarks are amortised over its useful life using the straight-line method.
The Beares trademark acquired is reflected at fair value and will be amortised over its useful
life of 20 years.
31 March 2015 31 March 2014
Rm Rm
Audited
2. Debtor costs
Bad debts, repossession losses and
bad debt recoveries 693.3 570.1
Movement in impairment provision 164.8 132.3
858.1 702.4
3. Insurance investments – available-for-sale
Listed
Listed shares 846.5 701.9
Fixed income securities 869.1 713.1
Unlisted
Money market 127.0 283.7
1 842.6 1 698.7
Investments are classified as available-for-sale and reflected at fair value. Changes in fair
value are reflected in the statement of comprehensive income.
In terms of the fair value hierarchy set out in IFRS 13, listed and unlisted investments are
categorised as Level 1 and Level 2 respectively.
4. Trade and other receivables
Instalment sale and loan receivables 7 763.1 7 314.4
Provision for unearned maintenance income (215.9) (211.0)
Provision for unearned finance charges and
unearned initiation fees (241.5) (230.6)
Provision for unearned insurance premiums (726.6) (802.7)
Net instalment sale and loan receivables 6 579.1 6 070.1
Provision for impairment (1 294.3) (1 129.5)
5 284.8 4 940.6
Other receivables 111.1 138.3
5 395.9 5 078.9
Amounts due from instalment sale and loan receivables after one 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 21.7% (2014: 21.1%)
and the average term of the sale is 32.3 months (2014: 32.5 months).
5. Purchase of Beares business
Trademark at fair value (61.1)
Property, plant and equipment (9.7)
Inventory (33.6)
Accounts payable 8.7
Deferred tax 17.1
Gain on acquisition of Beares 12.0
Total consideration (66.6)
The wholly owned subsidiary of the group, Lewis Stores (Pty) Ltd acquired the Beares
business effective from 1 December 2014 from Ellerines Furnishers Proprietary Limited
(in business rescue). The business consisted of the acquisition of 61 stores, the Beares
brand, inventory and fixed assets. The purchase consideration was paid by cash and the
assumption of liabilities.
Debtors' analysis
The company assesses each customer individually on a monthly basis and categorises customers
into 13 payment categories. This assessment is integral to the calculation of the debtors'
impairment provision and incorporates both payment behaviour and the age of the account.
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.
Distribution of
No. of customers impairment provision
2015 2014 2015 2014
Satisfactory paid No. 473 901 463 048 Rm 21.1 22.9
Customers fully up to date % 68.7% 68.3% % 1.6% 2.0%
including those who have paid
70% or more of amounts due
over the contract period. The
provision in this category results
from the in duplum provision.
Slow payers No. 56 347 56 876 Rm 140.4 121.3
Customers fully up to date % 8.2% 8.4% % 10.9% 10.8%
including those who have paid
65% to 70% of amounts due
over the contract period. The
provision in this category ranges
from 12% to 74% of amounts
due and includes an in duplum
provision (2014: 12% to 79%)
Non-performing customers No. 52 433 51 640 Rm 199.6 180.0
Customers who have paid 55% % 7.6% 7.6% % 15.4% 15.9%
to 65% of amounts due over
the period of the contract. The
provision in this category ranges
from 23% to 87% of the amounts
due (2014: 23% to 90%)
Non-performing customers No. 107 167 106 545 Rm 933.2 805.3
Customers who have paid 55% % 15.5% 15.7% % 72.1% 71.3%
or less of amounts due over
the period of the contract.
The provision in this category
ranges from 32% to 100%
of the amounts due
(2014: 33% to 100%)
Total No. 689 848 678 109 Rm 1 294.3 1 129.5
Debtors impairment provision as a % of net debtors 19.7% 18.6%
Key ratios
For the For the
year ended year ended
31 Mar 2015 31 Mar 2014
Operating efficiency ratios
Gross profit margin (%) 36.6% 36.7%
Operating profit margin (%) 20.0% 21.8%
Number of stores 716 636
Number of permanent employees (average) 7 835 7 590
Trading space (sqm) 248 137 221 336
Inventory turn 3.9 4.7
Current ratios 4.4 4.5
Credit ratios
Credit sales (%) 69.1% 72.3%
Bad debts as a % of net debtors 10.5% 9.4%
Debtor costs as a % of the net debtors 13.0% 11.6%
Debtors' impairment provision as a % of net debtors 19.7% 18.6%
Arrear instalments on satisfactory accounts as a %
of net debtors 8.7% 8.6%
Arrear instalments on slow-paying and non-performing
accounts as a % of net debtors 22.9% 22.6%
Credit applications decline rate 40.2% 38.4%
Shareholder ratios
Net asset value per share (cents) 6 551 6 012
Gearing ratio 23.2% 23.9%
Dividend payout ratio 60.4% 60.2%
Return on average equity (after-tax) 15.0% 16.5%
Return on average capital employed (after-tax) 12.8% 13.6%
Return on average assets managed (pre-tax) 15.7% 16.8%
Notes:
1. All ratios are based on figures at the end of the year unless otherwise disclosed
2. The net asset value has been calculated using 88 908 000 shares in issue (2014: 88 851 000).
3. Total assets exclude the deferred tax asset.
Executive directors: J Enslin (Chief executive officer), LA Davies (Chief financial officer).
Independent non-executive directors: DM Nurek (Chairman), H Saven, BJ van der Ross, Professor F Abrahams, AJ Smart.
Company secretary: MG 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. Registered office: 53A Victoria Road,
Woodstock, 7925. Registration number: 2004/009817/06.
Share code: LEW. ISIN: ZAE000058236 Bond code: LEW01 Bond ISIN: ZAG000110222
These results are also available on our website: www.lewisgroup.co.za
Date: 27/05/2015 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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