Wrap Text
Unaudited Interim Results For The Six Months Ended 30 September 2015
LEWIS GROUP LTD
Registration number: 2004/009817/06.
Share code: LEW.
ISIN: ZAE000058236
Bond code: LEW01
Bond ISIN No. ZAG000110222
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
REVENUE UP
8.3%
GROSS PROFIT MARGIN
36.4%
HEADLINE EARNINGS PER SHARE
323 CENTS
INTERIM DIVIDEND MAINTAINED
215 CENTS
Trading and financial performance
Retail trading conditions have deteriorated since July, with the weakening
job market and ongoing economic uncertainty in the country limiting
prospects for the group’s lower to middle income target market.
Revenue increased by 8.3% to R2.8 billion. The trading environment became
increasingly difficult in August and September owing to the impact of the
slowing economy and the group’s decision to early adopt the National
Credit Regulator’s affordability assessment regulations during the latter
part of July which has proved challenging for consumers in our target
market.
After showing encouraging growth of 15.5% for the four months to end July
2015, merchandise sales growth for the six months to September slowed to
8.8%. Excluding Beares, merchandise sales in Lewis and Best Home and
Electric reflected no growth.
The group’s store footprint increased to 724 with the opening of a net eight
stores, including five Beares outlets.
Credit sales as a percentage of total sales settled at 65.9% (H1 2015: 69.7%)
due mainly to the inclusion of the Beares chain which has a higher cash
sales component.
The gross profit margin at 36.4% (H1 2015: 36.9%) is expected to improve
during the second half of the year as newly introduced exclusive merchandise
ranging gains traction.
Operating expenses grew by 14.5% owing mainly to the increased costs
from the integration of the Beares chain. This includes an investment of
R25.2 million for store refurbishment, marketing and brand building. Beares
has a higher cost structure than the group’s other brands and it is expected
to take approximately three years to bring this in line with the rest of the
group. Operating expenses were tightly managed and increased by 5.4% in
Lewis and Best Home and Electric.
The group’s operating margin at 14.7% (H1 2015: 18.4%) was impacted by
slower sales growth, costs relating to Beares and the fact that the other
revenue streams within Beares have not yet reached a level of maturity.
Operating profit declined by 13.6% to R410 million.
Headline earnings reduced by R44.5 million to R286.6 million with diluted
headline earnings per share 12.8% lower at 321 cents (H1 2015: 369 cents).
In August 2015 Global Credit Ratings affirmed the group’s national long-
term credit rating as ‘A(za)’ and the national short-term rating as ‘A1(za)’,
with a stable outlook.
The group continues to be strongly cash generative. The board remains
confident in the group’s medium term prospects and has maintained the
interim dividend at 215 cents per share.
Inventory was higher at the end of September 2015 owing mainly to
increased stock levels for Beares and slower than expected sales in the last
two months of the reporting period. Inventory levels are expected to
normalise by year end.
Debtor management
The high levels of indebtedness among the Lewis target market
contributed to the credit application decline rate remaining high at 40.8%.
Debtor costs for the period increased by 16.7% owing to higher bad debts
and an increase in the impairment provision from 22.3% to 24.1%, reflecting
the slowdown in the consumer economy. Debtor costs as a percentage of
net debtors moved from 6.8% to 7.4%
The level of satisfactory paid customers was in line with the prior year at
68.1% (H1 2015: 67.9%).
National Consumer Tribunal referral
The National Credit Regulator referred two of the group’s subsidiaries,
Lewis Stores and Monarch Insurance, to the National Consumer Tribunal
(”NCT”). One of the allegations was the sale of loss of employment
insurance to pensioners and self-employed customers. Following an internal
investigation the group identified approximately fifteen percent of cases
where loss of employment insurance policies were sold to pensioners and
self-employed customers as a result of human error at store level and
contrary to company policy. Lewis is currently refunding the premiums and
interest totaling approximately R67.1 million to the affected customers.
Accounting matters
The Board remains of the view that the audited 2015 consolidated
annual financial statements present fairly in all material respects the
consolidated financial position and performance of the Group.
Subsequently, the group has conducted a review of the appropriateness of
the group’s accounting policies and has identified the following
restatements which are the result of clarifying certain accounting policies
and the application thereof. The impact of these restatements is not
material in relation to the appreciation of the audited 2015 financial
statements and the interim financial statements to September 2015.
- The unearned premium reserve in Monarch has been correctly
calculated in terms of the Short-Term Insurance Act by deducting an
inter-company commission of 12.5%. This commission has now been
eliminated on consolidation to reflect the reserve at 100% of unearned
insurance premiums (previously 87.5%).
- In the past, revenue from maintenance contracts was recognised over
a 24 month period. The group has amended its accounting policy to
defer maintenance income, after the expiry of the supplier’s warranty,
on an expected cost basis which defers revenue in line with the
expected cost of rendering the service.
- Currently 75% of income from reinsurance contracts is deferred over
the contract period on a straight line basis. The policy has been
amended to defer 100% of the unearned reinsurance premiums
on a straight line basis.
- The contingency reserve is no longer required by the Short-term
Insurance Act and has now been transferred to retained income.
The effect of these accounting changes, restatements, and the refund of
premiums and interest is as follows:
In the financial year ended 31 March 2015, profit after tax reduced by
R33.2 million, earnings per share reduced by 37.3 cents and the net asset
value reduced by R375.4 million. In the six month period ended 30
September 2015, profit after tax increased by R0.4 million, and earnings per
share increased by 0.4 cents.
The current and prior reporting period figures have been restated to take
account of these adjustments. Refer to note 2 in the Notes to the financial
statements for a detailed analysis of the changes and the effects of the
restatements.
Prospects
The current adverse trading conditions are not expected to improve in the
short term. Consumer confidence remains muted and unemployment
continues to impact the group’s target market, with customers in the
mining and agricultural sectors being under particular pressure.
Management remains confident in the growth prospects of Beares and will
continue to refine the merchandise offering for the higher targeted LSM
market.
The group is investing for growth and will continue to expand its footprint
over the next six months.
Dividend declaration
Notice is hereby given that an interim gross cash dividend of 215 cents per
share in respect of the 6 months ended 30 September 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 215
cents and the dividend tax payable is 32.25 cents for shareholders who are
not exempt. The net dividend for shareholders who are not exempt will
therefore be 182.75 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 15 January 2016
Date trading commences
“ex” dividend Monday 18 January 2016
Record date Friday 22 January 2016
Date of payment Monday 25 January 2016
Share certificates may not be dematerialised or rematerialised between
Monday 18 January 2016 and Friday 22 January 2016.
For and on behalf of the Board
David Nurek Johan Enslin Les Davies
Independent Chief executive officer Chief financial officer
non-executive chairman
Cape Town
9 November 2015
Income statement
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited % Unaudited Restated
Notes Rm Change Rm Rm
Revenue 2 797.8 8.3% 2 582.9 5 660.8
Merchandise sales 1 226.8 1 127.9 2 591.5
Finance charges and
initiation fees earned 722.3 640.7 1 326.4
Insurance revenue 456.6 458.9 979.9
Ancillary services 392.1 355.4 763.0
Cost of merchandise sales (780.6) (711.9) (1 644.3)
Operating Costs (1 607.0) (1 396.1) (2 918.8)
Employment costs (475.5) (420.9) (880.8)
Administration and IT (127.1) (111.0) (241.1)
Debtor costs 3 (468.1) (400.9) (858.1)
Marketing (103.4) (94.8) (177.0)
Occupancy costs (160.3) (127.7) (273.6)
Transport and travel (110.4) (103.5) (215.8)
Depreciation and amortisation (45.1) (33.6) (63.8)
Other operating costs (117.1) (103.7) (208.6)
Operating profit 410.2 (13.6%) 474.9 1 097.7
Investment income 67.3 62.5 148.0
Profit before finance costs 477.5 537.4 1 245.7
Net finance costs (60.2) (57.9) (123.3)
Interest paid (71.7) (67.9) (138.7)
Interest received 6.2 7.9 12.2
Forward exchange contracts 5.3 2.1 3.2
Profit before taxation 417.3 479.5 1 122.4
Taxation (119.3) (138.3) (316.2)
Net profit attributable to ordinary
shareholders 298.0 (12.7%) 341.2 806.2
Statement of comprehensive income
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
Rm Rm Rm
Net profit for the year 298.0 341.2 806.2
Movements in other reserves (recycle to
income statement on disposal): (29.8) 40.0 119.3
Fair value adjustment to available-for-sale
investments (50.4) 50.7 156.8
Disposal of available-for-sale investments 10.2 (10.9) (40.6)
Foreign currency translation reserve 10.4 0.2 3.1
Retirement benefit remeasurements - - (10.4)
Other comprehensive income (29.8) 40.0 108.9
Total comprehensive income for the
period attributable to equity shareholders 268.2 381.2 915.1
Earnings and dividends per share
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
% Change
1. Weighted average no. of shares
Weighted average 88 829 88 817 88 840
Diluted weighted average 89 160 89 791 89 585
2. Headline earnings (Rm)
Attributable earnings 298.0 341.2 806.2
Profit on disposal of assets
and investments (11.4) (10.1) (43.2)
Gain on acquisition of Beares - - (12.0)
Headline earnings 286.6 (13.4%) 331.1 751.0
3. Earnings per Share (cents)
Earnings per share 335.5 (12.7%) 384.2 907.5
Diluted earnings per share 334.2 380.0 899.9
4. Headline earnings per share
(cents)
Headline earnings per share 322.6 372.8 845.3
Diluted headline earnings
per share 321.4 368.7 838.3
5. Dividends per share (cents)
Dividends paid per share
Final dividend 2015 (2014) 302.0 302.0 302.0
Interim dividend 2015 - - 215.0
302.0 302.0 517.0
Dividends declared per share
Interim dividend 2016 (2015) 215.0 215.0 215.0
Final dividend 2015 - - 302.0
215.0 215.0 517.0
Balance sheet
30 Sept 2014
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
Notes Rm Rm Rm
Assets
Non-current assets
Property, plant and equipment 362.1 329.2 352.9
Trademark 58.6 - 60.1
Deferred taxation 0.8 0.5 0.5
Retirement benefit asset 77.4 79.7 77.4
Insurance investments 4 1 707.4 1 554.1 1 715.6
2 206.3 1 963.5 2 206.5
Current assets
Inventories 518.7 425.1 420.3
Trade and other receivables 5 4 900.7 4 744.3 5 009.3
Insurance investments 4 106.2 160.1 127.0
Taxation 96.5 37.5 34.8
Cash on hand and deposits 247.4 268.2 222.3
5 869.5 5 635.2 5 813.7
Total assets 8 075.8 7 598.7 8 020.2
Equity and liabilities
Capital and reserves
Share capital and premium 107.5 102.5 110.8
Other reserves 454.8 412.4 492.4
Retained earnings 4 858.9 4 582.1 4 845.4
5 421.2 5 097.0 5 448.6
Non-current liabilities
Long-term interest-bearing borrowings 1 025.0 1 075.0 825.0
Deferred taxation 67.0 40.7 102.4
Retirement benefit liability 108.1 99.1 106.7
1 200.1 1 214.8 1 034.1
Current liabilities
Trade and other payables 275.6 286.5 283.8
Reinsurance and insurance liabilities 457.9 498.8 504.7
Short-term interest-bearing borrowings 721.0 501.6 749.0
1 454.5 1 286.9 1 537.5
Total equity and liabilities 8 075.8 7 598.7 8 020.2
Statement of changes in equity
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
Rm Rm Rm
Share capital and premium
Opening balance 110.8 109.2 109.2
Cost of own shares acquired
(treasury shares) (38.2) (26.6) (26.5)
Share awards to employees 34.9 19.9 28.1
107.5 102.5 110.8
Other reserves
Opening balance 492.4 380.5 380.5
Other comprehensive income
for the year (29.8) 40.0 119.3
Share-based payment 10.6 11.0 19.7
Transfers to retained earnings (18.4) (19.1) (27.1)
454.8 412.4 492.4
Retained earnings
Opening balance 4 845.4 4 509.9 4 509.9
Net profit attributable to ordinary
shareholders 298.0 341.2 806.2
Distribution to shareholders (268.0) (268.2) (459.3)
Share awards to employees (34.9) (19.9) (28.1)
Transfers from other reserves 18.4 19.1 27.1
Retirement benefit remeasurements - - (10.4)
4 858.9 4 582.1 4 845.4
Balance at the end of period 5 421.2 5 097.0 5 448.6
Cash flow statement
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash flow from trading 669.2 733.0 1 333.6
Change in working capital (238.0) (280.2) (467.9)
Cash generated from operations 431.2 452.8 865.7
Interest and dividends received 61.0 57.8 113.1
Interest paid (66.4) (65.8) (135.5)
Taxation paid (203.8) (191.6) (337.9)
222.0 253.2 505.4
CASH FLOW FROM INVESTING ACTIVITIES
Net disposals of insurance investments (11.6) 45.9 48.2
Acquisition of property, plant and equipment (58.0) (38.9) (86.7)
Purchase of Beares business - - (66.6)
Proceeds on disposal of property, plant
and equipment 6.9 4.1 11.7
(62.7) 11.1 (93.4)
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid (268.0) (268.2) (459.3)
Increase/(decrease) in long-term borrowings 200.0 75.0 (175.0)
Decrease in short-term borrowings. (50.0) (300.0) (50.0)
Purchase of own shares (38.2) (26.6) (26.5)
(156.2) (519.8) (710.8)
Net increase/(decrease) in cash and cash
equivalents 3.1 (255.5) (298.8)
Cash and cash equivalents at the
beginning of the period 173.3 472.1 472.1
Cash and cash equivalents at the end
of the period 176.4 216.6 173.3
ANALYSIS OF BORROWINGS AND FACILITIES
Borrowings
Long-term 1 025.0 1 075.0 825.0
Short-term 650.0 450.0 700.0
1 675.0 1 525.0 1 525.0
Cash and cash equivalents
Short-term facilities utilised 71.0 51.6 49.0
Cash on hand (247.4) (268.2) (222.3)
(176.4) (216.6) (173.3)
Net borrowings 1 498.6 1 308.4 1 351.7
Unutilised facilities:
Banking facilities 926.4 1 016.6 973.3
Domestic Medium-Term Note Programme 1 700.0 1 700.0 1 700.0
Banking facilities and Domestic
Medium-Term Note Programme 4 125.0 4 025.0 4 025.0
Segmental Report
Best Home
Reportable segment Lewis and Electric Beares Group
Rm Rm Rm Rm
For the six months ended
30 September 2015
(unaudited)
Revenue 2 226.2 382.1 189.5 2 797.8
Operating profit 362.1 70.7 (22.6) 410.2
Operating margin 16.3% 18.5% (11.9%) 14.7%
Segment assets 4 272.5 704.2 316.8 5 293.5
For the six months ended
30 September 2014
(restated unaudited)
Revenue 2 144.4 374.3 64.2 2 582.9
Operating profit 396.7 72.3 5.9 474.9
Operating margin 18.5% 19.3% 9.2% 18.4%
Segment assets 4 219.1 689.0 131.2 5 039.3
For the twelve months ended
31 March 2015 (restated)
Revenue 4 645.2 802.0 213.6 5 660.8
Operating profit 922.2 169.4 6.1 1 097.7
Operating margin 19.9% 21.1% 2.9% 19.4%
Segment assets 4 355.5 740.0 223.0 5 318.5
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 Reporting 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 2015, except for the
restatements set out in note 2.
2. Restatements
The group has performed a review of the appropriateness of it's accounting policies
and has identified the following restatements which are the result of clarifying certain
accounting policies and the application thereof. The impact of these restatements are
not material to the appreciation of the audited 2015 financial statements and the
current interim financial statements under review.
(a) Two group subsidiaries, Lewis Stores (Pty) Ltd ("Lewis") and Monarch
Insurance Company Limited ("Monarch") were referred by the National
Credit Regulator ("NCR") to the National Consumer Tribunal in July 2015.
Details of this matter has been set out in note 6.
The NCR alleged that Lewis and Monarch sold loss of employment insurance
to pensioners and self-employed persons in contravention of the National
Credit Act since 2007. An internal investigation determined that
approximately fifteen per cent of pensioners and self-employed persons
were sold such policies through human error and contrary to the group's own
internal policies which explicitly prohibit the sale of such policies to such
customers. Accordingly, Lewis and Monarch are in the process of refunding
the premiums and interest thereon to customers.
The effect of the above was a restatement, which reduced the profit
attributable to ordinary shareholders for the six months ended 30 September
2014 ("September 2014 period") by R 2.1 million and retained income as at
31 March 2014 by R 35.4 million.
(b) The unearned premium reserve ("UPR") in Monarch Insurance Company
Limited, the insurance subsidiary, has been calculated in terms of the Short-
Term Insurance Act by taking into account commission paid to a fellow
subsidiary of 12.5%. On calculating the group UPR, the 12.5% intercompany
commission has now been eliminated to reflect the reserve at 100% of
unearned insurance premiums as opposed to the 87.5% provided.
The effect of the above was a restatement, which increased the profit
attributable to ordinary shareholders for the September 2014 period by R 6.6
million and reduced retained income as at 31 March 2014 by R 123.3 million.
(c) The accounting policy in respect of maintenance contracts has been
amended to recognise revenue from maintenance contracts as follows:
- income is deferred until the expiry of the suppliers warranty.
- for the two years of the maintenance contract, revenue will be recognised
on an expected cost basis which defers revenue in line with the expected
cost of rendering the service under the maintenance contract.
The effect of the above was a restatement, which reduced the profit
attributable to ordinary shareholders for the September 2014 period by R 9.2
million and retained income as at 31 March 2014 by R 92.2 million.
(d) Income from reinsurance contracts is deferred over the period of the related
reinsurance contract. The basis of the deferral, which has been consistently
applied, resulted in approximately 75% of the unearned reinsurance
premiums being deferred on a straight line basis over the period of the
contract with the remaining balance being recognised in income.
The application of the accounting policy has been revised to defer 100% of
the unearned reinsurance premiums on a straight line basis over the period
of the related reinsurance contract. The accounting policy has been updated
accordingly.
The effect of the above was a restatement, which increased the profit
attributable to ordinary shareholders for the September 2014 period by R 5.7
million and reduced retained income as at 31 March 2014 by R 91.3 million.
(e) With effect from 1 January 2012, the group elected to retain the contingency
reserve even though it was no longer required by the Short-term Insurance
Act. This policy has been withdrawn and the contingency reserve of R 55.6
million transferred to retained income as at 31 March 2014.
In terms of IAS 8, the relevant comparative information has been restated and the effect on
the financial statements is as follows:
6 months ended
6 months ended 30 Sept 2014 12 months ended
30 Sept 2015 Restated 31 March 2015
Unaudited Unaudited Restated
Rm Rm Rm
Effect on Comprehensive Income:
Increase/(decrease) in insurance revenue 0.4 16.1 (1.5)
Increase/(decrease) in ancillary services 2.2 (12.7) (41.0)
Increase in interest paid (2.0) (2.0) (3.6)
Increase/(decrease) in profit before taxation 0.6 1.4 (46.1)
(Increase)/decrease in taxation (0.2) (0.4) 12.9
Effect on net profit attributable to ordinary
shareholders 0.4 1.0 (33.2)
Movement in other comprehensive income
(contingency reserve) - (2.5) 0.2
Effect on total comprehensive income 0.4 (1.5) (33.0)
Effect on Earnings per Share:
Increase/(decrease) in earnings per share
(cents) 0.4 cents 1.2 cents (37.3 cents)
Increase/(decrease) in diluted earnings per
share (cents) 0.4 cents 1.1 cents (37.0 cents)
Effect on Total Assets:
Decrease in trade and other receivable (368.0) (354.8) (386.6)
(368.0) (354.8) (386.6)
Effect on Total Liabilities:
Increase in Reinsurance and insurance liabilities 152.7 119.0 134.7
Decrease in deferred taxation (145.7) (132.6) (145.9)
7.0 (13.6) (11.2)
Effect on Net Asset Value:
Increase/(decrease) in Comprehensive Income 0.4 (1.5) (33.0)
Decrease in opening retained income (319.6) (286.6) (286.6)
Decrease in Other Reserves (55.8) (53.1) (55.8)
(375.0) (341.2) (375.4)
Effect on Net Asset Value per Share (in
cents)
Decrease in net asset value per share (cents) (422) (385) (423)
Effect on Cash Flow Statement:
Increase/(decrease) in Cash flow from trading 2.6 3.4 (42.5)
(Decrease)/increase in Change in working
capital (0.6) (1.4) 46.1
Increase in interest paid (2.0) (2.0) (3.6)
Effect on Cash flow from operating activities - - -
3. Debtor costs
Bad debts, repossession losses and bad
debt recoveries 243.9 209.3 693.3
Movement in impairment provision 224.2 191.6 164.8
468.1 400.9 858.1
4. Insurance investments - available-for-sale
Listed
Listed shares 843.0 733.4 846.5
Fixed income securities 864.4 820.7 869.1
Unlisted
Money market 106.2 160.1 127.0
1 813.6 1 714.2 1 842.6
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.
5. Trade and other receivables
Instalment sale and loan receivables 7 720.1 7 453.0 7 708.5
Provision for unearned maintenance income (384.1) (353.2) (385.0)
Provision for unearned initiation fees and
unearned finance charges (228.6) (227.9) (241.5)
Provision for unearned insurance premiums (814.1) (936.6) (889.5)
Net instalment sale and loan receivables 6 293.3 5 935.3 6 192.5
Provision for impairment (1 518.5) (1 321.1) (1 294.3)
4 774.8 4 614.2 4 898.2
Other receivables 125.9 130.1 111.1
4 900.7 4 744.3 5 009.3
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 22.0% (2014:
21.4%) and the average term of the sale is 33.4 months (2014: 32.1 months).
6. Referral to National Credit Tribunal
Lewis and Monarch have been referred by the National Credit Regulator ("NCR") to the
National Consumer Tribunal in July 2015. In its referral the NCR alleges that Lewis and
Monarch contravened sections of the National Credit Act ("NCA"), by selling insurance
policies providing loss of employment and disability cover to pensioners and self-
employed consumers. Lewis and Monarch are opposing the referral and have filed a
comprehensive answering affidavit which has, amongst other matters, dealt with the
substance of the two main allegations, being the sale of loss of employment and disability
cover.
(i) Loss of Employment
Lewis and Monarch has disputed that they have committed a contravention of the NCA in
this regard, as alleged by the NCR. Following an internal investigation by Lewis and
Monarch, it has been determined that fifteen percent of pensioners and self-employed
persons were sold such policies since 2007, through human error and contrary to the
group’s own internal policies, which expressly prohibit the sale of such policies to
consumers. The refunds due to customers (including interest) identified from the internal
investigation conducted by the two companies is in the process of being paid to
customers. Full provision has been made for the refund of these premiums and the
interest thereon.
(ii) Disability Insurance
Lewis and Monarch has rejected the NCR's allegation that the sale of disability insurance
to pensioners and self-employed persons constitutes a contravention of the NCA. Their
answering affidavit records that notwithstanding the NCR's allegations in this regard
claims by pensioners and self-employed persons in respect of disability policies have been
and continue to be honoured by Monarch. Accordingly no provision has been made in the
financial statements for the matter.
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 %
Sept Sept Sept Sept March
2015 2014 2015 2014 2015
Satisfactory paid No. 471 067 462 625 Rm 29.8 22.6 21.1
Customers who have paid % 68.1% 67.9% % 1.9% 1.7% 1.6%
70% or more of amounts due
over the contract period.
The provision in this category
results from the in
duplum provision.
Slow payers No. 55 647 53 912 Rm 155.8 127.7 140.4
Customers who have paid % 8.1% 7.9% % 10.3% 9.7% 10.9%
65% to 70% of amounts due
over the contract period. The
provision in this category
ranges from 12% to 72% of
amounts due and includes an
in duplum provision ( 2014:
11% to 74%)
Non-performing customers No. 50 641 49 971 Rm 212.7 189.3 199.6
Customers who have paid % 7.3% 7.3% % 14.0% 14.3% 15.4%
55% to 65% of amounts due
over the contract period. The
provision in this category
ranges from 23% to 84% of
amounts due (2014: 22%
to 85%)
Non-performing customers No. 113 869 115 220 Rm 1120.2 981.5 933.2
Customers who have paid % 16.5% 16.9% % 73.8% 74.3% 72.1%
55% or less of amounts due
over the contract period. The
provision in this category
ranges from 31% to 100%
of amounts due (2014: 27%
to 100%)
Total No. 691 224 681 728 1 518.5 1 321.1 1 294.3
Debtors impairment as a % of net debtors 24.1% 22.3% 20.9%
Key Ratios
6 months 12 months
6 months ended ended
ended 30 Sept 2014 31 March 2015
30 Sept 2015 Restated Restated
Operating efficiency ratios
Gross profit margin % 36.4% 36.9% 36.6%
Operating profit margin % 14.7% 18.4% 19.4%
Number of stores 724 642 716
Number of permanent employees (average) 8 421 7 534 7 835
Trading space (sqm) 241 812 214 027 248 137
Inventory turn 3.3 3.5 3.9
Current ratio 4.0 4.4 3.8
Credit ratios
Credit sales % 65.9% 69.7% 69.1%
Debtor costs as a % of the net debtors 7.4% 6.8% 13.9%
Debtors' impairment provision as a
% of net debtors 24.1% 22.3% 20.9%
Arrear instalments on satisfactory paying accounts as a
% of net debtors 9.8% 9.1% 9.3%
Arrear instalments on slow-paying and non-
performing accounts as a % of net debtors 27.7% 26.5% 24.3%
Credit applications decline rate 40.8% 41.0% 40.2%
Shareholder ratios
Net asset value per share (cents) 6 104 5 745 6 128
Gearing ratio 27.6% 25.7% 24.8%
Dividend payout ratio 70.7% 61.8% 62.9%
Return on average equity (after-tax) 11.0% 13.6% 15.4%
Return on average capital employed (after-tax) 9.6% 11.4% 13.0%
Return on average assets managed (pre-tax) 11.8% 14.2% 15.9%
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 88 808 000 shares in issue (2014: 88 715 000).
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 No. ZAG000110222
These results are also available on our website: www.lewisgroup.co.za
Date: 09/11/2015 07:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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