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LEWIS GROUP LIMITED-Unaudited Interim Results For The Six Months Ended 30 September 2015
Lewis Group Limited
Reg No. 2004/009817/06
JSE Share Codes:
LEW01 ISIN: ZAG00011022
(“Lewis”or the “Group”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Trading and financial performance contributed to the credit application decline rate remaining high at 40.8%.
The current and prior reporting period figures have been restated to take
Debtor costs for the period increased by 16.7% owing to higher bad debts account of these adjustments. Refer to note 2 in the Notes to the financial
Retail trading conditions have deteriorated since July, with the weakening and an increase in the impairment provision from 22.3% to 24.1%, reflecting statements for a detailed analysis of the changes and the effects of the
job market and ongoing economic uncertainty in the country limiting the slowdown in the consumer economy. Debtor costs as a percentage of restatements.
prospects for the group’s lower to middle income target market. net debtors moved from 6.8% to 7.4%
Prospects
Revenue increased by 8.3% to R2.8 billion. The trading environment became The level of satisfactory paid customers was in line with the prior year at
increasingly difficult in August and September owing to the impact of the 68.1% (H1 2015: 67.9%). The current adverse trading conditions are not expected to improve in the
slowing economy and the group’s decision to early adopt the National short term. Consumer confidence remains muted and unemployment
Credit Regulator’s affordability assessment regulations during the latter National Consumer Tribunal referral continues to impact the group’s target market, with customers in the
part of July which has proved challenging for consumers in our target mining and agricultural sectors being under particular pressure.
market.
The National Credit Regulator referred two of the group’s subsidiaries,
Management remains confident in the growth prospects of Beares and will
After showing encouraging growth of 15.5% for the four months to end July Lewis Stores and Monarch Insurance, to the National Consumer Tribunal
continue to refine the merchandise offering for the higher targeted LSM
2015, merchandise sales growth for the six months to September slowed to (“NCT”). One of the allegations was the sale of loss of employment
market.
8.8%. Excluding Beares, merchandise sales in Lewis and Best Home and insurance to pensioners and self-employed customers. Following an
Electric reflected no growth. internal investigation the group identified approximately fifteen percent of
The group is investing for growth and will continue to expand its footprint
cases where loss of employment insurance policies were sold to pensioners
over the next six months.
The group’s store footprint increased to 724 with the opening of a net eight and self-employed customers as a result of human error at store level and
stores, including five Beares outlets. contrary to company policy. Lewis is currently refunding the premiums and
interest totaling approximately R67.1 million to the affected customers. Dividend declaration
Credit sales as a percentage of total sales settled at 65.9% (H1 2015: 69.7%) Notice is hereby given that an interim gross cash dividend of 215 cents per
due mainly to the inclusion of the Beares chain which has a higher cash Accounting matters share in respect of the 6 months ended 30 September 2015 has been
sales component. declared payable to holders of ordinary shares.
The Board remains of the view that the audited 2015 consolidated annual
The gross profit margin at 36.4% (H1 2015: 36.9%) is expected to improve The number of shares in issue as of the date of declaration is
financial statements present fairly in all material respects the consolidated
during the second half of the year as newly introduced exclusive 98 057 959.
financial position and performance of the Group.
merchandise ranging gains traction.
Subsequently, the group has conducted a review of the appropriateness of The dividend has been declared out of income reserves and is subject to a
Operating expenses grew by 14.5% owing mainly to the increased costs dividend tax of 15%. The dividend for determining the dividend tax is 215
the group’s accounting policies and has identified the following
from the integration of the Beares chain. This includes an investment of cents and the dividend tax payable is 32.25 cents for shareholders who are
restatements which are the result of clarifying certain accounting policies
R25.2 million for store refurbishment, marketing and brand building. Beares not exempt. The net dividend for shareholders who are not exempt will
and the application thereof. The impact of these restatements is not
has a higher cost structure than the group’s other brands and it is expected therefore be 182.75 cents. The dividend tax rate may be reduced where the
material in relation to the appreciation of the audited 2015 financial
to take approximately three years to bring this in line with the rest of the shareholder is tax resident in a foreign jurisdiction which has a Double Tax
statements and the interim financial statements to September 2015.
group. Operating expenses were tightly managed and increased by 5.4% in Convention with South Africa and meets the requirements for a reduced
Lewis and Best Home and Electric. rate.
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 The company’s tax reference number is 9551/419/15/4.
The group’s operating margin at 14.7% (H1 2015: 18.4%) was impacted by
eliminated on consolidation to reflect the reserve at 100% of unearned
slower sales growth, costs relating to Beares and the fact that the other The following dates are applicable to this declaration:
insurance premiums (previously 87.5%).
revenue streams within Beares have not yet reached a level of maturity.
Operating profit declined by 13.6% to R410 million. Last date to trade
In the past, revenue from maintenance contracts was recognised over
a 24 month period. The group has amended its accounting policy to “cum” dividend Friday 15 January 2016
Headline earnings reduced by R44.5 million to R286.6 million with diluted
defer maintenance income, after the expiry of the supplier’s warranty,
headline earnings per share 12.8% lower at 321 cents (H1 2015: 369 cents). Date trading commences
on an expected cost basis which defers revenue in line with the
expected cost of rendering the service. “ex” dividend Monday 18 January 2016
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)’, Record date Friday 22 January 2016
Currently 75% of income from reinsurance contracts is deferred over
with a stable outlook.
the contract period on a straight line basis. The policy has been
amended to defer 100% of the unearned reinsurance premiums on a Date of payment Monday 25 January 2016
The group continues to be strongly cash generative. The board remains
straight line basis.
confident in the group’s medium term prospects and has maintained the Share certificates may not be dematerialised or rematerialised between
interim dividend at 215 cents per share. Monday 18 January 2016 and Friday 22 January 2016.
The contingency reserve is no longer required by the Short-term
Insurance Act and has now been transferred to retained income.
Inventory was higher at the end of September 2015 owing mainly to For and on behalf of the Board
increased stock levels for Beares and slower than expected sales in the last
The effect of these accounting changes, restatements, and the refund of
two months of the reporting period. Inventory levels are expected to
premiums and interest is as follows:
normalise by year end. David Nurek Johan Enslin Les Davies
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 Independent Chief executive officer Chief financial officer
Debtor management value reduced by R375.4 million. In the six month period ended 30 non-executive chairman
September 2015, profit after tax increased by R0.4 million, and earnings per
The high levels of indebtedness among the Lewis target market, share increased by 0.4 cents. Cape Town
9 November 2015
Earnings and dividends per share Balance sheet
30 Sept 2014
6 month 30 Sept 2015 Restated 31 March 2015
6 months ended 12 months
Revenue up Gross profit ended 30 Sept 2014 ended
Unaudited Unaudited Restated
Notes Rm Rm Rm
margin 30 Sept 2015
Unaudited
%
change
Restated
Unaudited
31 March 2015
Restated
Assets
Non-current assets
1. Weighted average no. of shares
8.3 36.4
Property, plant and equipment 362.1 329.2 352.9
Weighted average 88 829 88 817 88 840 Trademark 58.6 - 60.1
Diluted weighted average 89 160 89 791 89 585 Deferred taxation 0.8 0.5 0.5
2. Headline earnings (Rm) Retirement benefit asset 77.4 79.7 77.4
298.0 341.2 806.2 Insurance investments 4 1 707.4 1 554.1 1 715.6
Attributable earnings
2 206.3 1 963.5 2 206.5
Profit on disposal of assets
(11.4) (10.1) (43.2) Current assets
and investments
- - (12.0) Inventories 518.7 425.1 420.3
Gain on acquisition of Beares
Trade and other receivables 5 4 900.7 4 744.3 5 009.3
Headline earnings 286.6 (13.4%) 331.1 751.0 Insurance investments 4 106.2 160.1 127.0
Headline earnings Interim Dividend Taxation 96.5 37.5 34.8
3. Earnings per Share (cents)
per share maintained at Earnings per share 335.5 (12.7%) 384.2 907.5 Cash on hand and deposits 247.4 268.2 222.3
380.0 899.9 5 869.5 5 635.2 5 813.7
Diluted earnings per share 334.2
323 215
Total assets 8 075.8 7 598.7 8 020.2
4. Headline earnings per share
(cents) Equity and liabilities
Headline earnings per share 322.6 372.8 845.3 Capital and reserves
Diluted headline earnings Share capital and premium 107.5 102.5 110.8
CENTS CENTS per share 321.4 368.7 838.3 Other reserves 454.8 412.4 492.4
Retained earnings 4 858.9 4 582.1 4 845.4
5. Dividends per share (cents)
5421.2 5 097.0 5 448.6
Dividends paid per share Non-current liabilities
Final dividend 2015 (2014) 302.0 302.0 302.0
Long-term interest-bearing borrowings 1025.0 1075.0 825.0
Interim dividend 2015 - - 215.0
Deferred taxation 67.0 40.7 102.4
302.0 302.0 517.0
Retirement benefit liability 108.1 99.1 106.7
Income statement 1 200.1 1 214.8 1 034.1
6 month Dividends declared per share Current liabilities
6 months ended 12 months Interim dividend 2016 (2015) 215.0 215.0 215.0
Trade and other payables 275.6 286.5 283.8
ended 30 Sept 2014 ended Final dividend 2015 - - 302.0
Reinsurance and insurance liabilities 457.9 498.8 504.7
30 Sept 2015 % Restated 31 March 2015
215.0 215.0 517.0 Short-term interest-bearing borrowings 721.0 501.6 749.0
Unaudited change Unaudited Restated
Notes Rm Rm Rm 1 454.5 1 286.9 1 537.5
Revenue 2 797.8 8.3% 2 582.9 5 660.8 Total equity and liabilities 8 075.8 7 598.7 8 020.2
Merchandise sales 1 226.8 1 127.9 2 591.5
Finance charges and Statement of comprehensive income Segmental report
initiation fees earned 722.3 640.7 1 326.4
6 month Reportable segment Best Home
Insurance revenue 456.6 458.9 979.9
6 months ended 12 months Lewis and Electirc Beares Group
Ancillary services 392.1 355.4 763.0 ended 30 Sept 2014 ended
30 Sept 2015 Restated 31 March 2015 Rm Rm Rm Rm
Cost of merchandise sales (780.6) (711.9) (1 644.3)
Unaudited Unaudited Restated For the six months ended
Operating Costs (1 607.0) (1 396.1) (2 918.8) 30 September 2015
Rm Rm Rm
Employment costs (475.5) (420.9) (880.8) (unaudited)
Net profit for the year 298.0 341.2 806.2
Administration and IT (127.1) (111.0) (241.1) Revenue 2 226.2 382.1 189.5 2 797.8
Movements in other reserves (recycle to
Debtor costs 3 (468.1) (400.9) (858.1)
income statement on disposal): (29.8) 40.0 119.3 Operating profit 362.1 70.7 (22.6) 410.2
Marketing (103.4) (94.8) (177.0)
Operating margin 16.3% 18.5% (11.9%) 14.7%
Occupancy costs (160.3) (127.7) (273.6)
Fair value adjustment to available-for-sale Segment assets 4 272.5 704.2 316.8 5 293.5
Transport and travel (110.4) (103.5) (215.8)
investments (50.4) 50.7 156.8
Depreciation and amortisation (45.1) (33.6) (63.8)
Disposal of available-for-sale investments 10.2 (10.9) (40.6) For the six months ended
Other operating costs (117.1) (103.7) (208.6)
Foreign currency translation reserve 10.4 0.2 3.1 30 September 2014
Operating profit 410.2 (13.6%) 474.9 1 097.7 (restated unaudited)
Investment income 67.3 62.5 148.0 Retirement benefit remeasurements - - (10.4) Revenue 2 144.4 374.3 64.2 2 582.9
Profit before finance costs 477.5 537.4 1 245.7 Other comprehensive income (29.8) 40.0 108.9 Operating profit 396.7 72.3 5.9 474.9
Net finance costs (60.2) (57.9) (123.3) Operating margin 18.5% 19.3% 9.2% 18.4%
Total comprehensive income for the
(71.7) (138.7) Segment assets 4 219.1 689.0 131.2 5 039.3
Interest paid (67.9) period attributable to equity shareholders 268.2 381.2 915.1
Interest received 6.2 7.9 12.2
5.3 3.2 For the twelve months ended
Forward exchange contracts 2.1
31 March 2015 (restated)
Profit before taxation 417.3 479.5 1 122.4 Revenue 4 645.2 802.0 213.6 5 660.8
Taxation (119.3) (138.3) (316.2) Operating profit 922.2 169.4 6.1 1 097.7
Net profit attributable to Operating margin 19.9% 21.1% 2.9% 19.4%
ordinary shareholders 298.0 (12.7%) 341.2 806.2 Segment assets 4 355.5 740.0 223.0 5 318.5
These results are also available on
our website www.lewisgroup.co.za
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
Statement of changes in equity Debtors’ analysis Notes to the financial statements (continued)
The company assesses each customer individually on a monthly basis and categorises customers In terms of IAS 8, the relevant comparative information has been restated and the effect on
6 month into 13 payment categories. This assessment is integral to the calculation of the debtors’
6 months ended 12 months the financial statements is as follows:
ended 30 Sept 2014 ended impairment provision and incorporates both payment behaviour and the age of the account.
30 Sept 2015 Restated 31 March 2015 The 13 payment categories have been summarised into four main groupings of customers. 6 month
6 months
Unaudited Unaudited Restated ended 12 months
An analysis of the debtors book based on the payment ratings is set out below. ended
Rm Rm Rm 30 Sept 2014 ended
30 Sept 2015
Distribution of Restated 31 March 2015
Unaudited
Share capital and premium Unaudited Restated
No. of customers impairment provision % Rm
Opening balance 110.8 109.2 109.2 Rm Rm
Sept Sept Sept Sept March
Cost of own shares acquired (38.2) (26.6) (26.5) 2015 2014 2015 2014 2015
(treasury shares)
Effect on Comprehensive Income:
Share awards to employees 34.9 19.9 28.1 Satisfactory paid No. 471 067 462 625 Rm 29.8 22.6 21.1
107.5 102.5 110.8 Customers who have paid % 68.1% 67.9% % 1.9% 1.7% 1.6% Increase/(decrease) in insurance revenue 0.4 16.1 (1.5)
70% or more of amounts due
Increase/(decrease) in ancillary services 2.2 (12.7) (41.0)
Other reserves over the contract period.
Increase in interest paid (2.0) (2.0) (3.6)
The provision in this category
Opening balance 492.4 380.5 380.5 Increase/(decrease) in profit before taxation 0.6 1.4 (46.1)
results from the in
Other comprehensive income (Increase)/decrease in taxation (0.2) (0.4) 12.9
duplum provision.
for the year (29.8) 40.0 119.3 Effect on net profit attributable to ordinary
Share-based payment 10.6 11.0 19.7 shareholders 0.4 1.0 (33.2)
Transfers to retained earnings (18.4) (19.1) (27.1) Slow payers No. 55 647 53 912 Rm 155.8 127.7 140.4
454.8 412.4 492.4 Movement in other comprehensive income
Customers who have paid % 8.1% 7.9% % 10.3% 9.7% 10.9%
(contingency reserve) - (2.5) 0.2
65% to 70% of amounts due
Retained earnings over the contract period. The Effect on total comprehensive income 0.4 (1.5) (33.0)
Opening balance 4 845.4 4 509.9 4 509.9 provision in this category
ranges from 12% to 72% of Effect on Earnings per Share:
Net profit attributable to ordinary
shareholders 298.0 341.2 806.2 amounts due and includes an
in duplum provision ( 2014: Increase/(decrease) in earnings per share
Distribution to shareholders (268.0) (268.2) (459.3)
11% to 74%) (cents) 0.4 cents 1.2 cents (37.3 cents)
Share awards to employees (34.9) (19.9) (28.1)
Increase/(decrease) in diluted earnings per
Transfers from other reserves 18.4 19.1 27.1 Non-performing customers No. 50 641 49 971 Rm 212.7 189.3 199.6 share (cents) 0.4 cents 1.1 cents (37.0 cents)
Retirement benefit remeasurements - - (10.4) Customers who have paid % 7.3% 7.3% % 14.0% 14.3% 15.4%
4 858.9 4 582.1 4 845.4 55% to 65% of amounts due Effect on Total Assets:
Balance at the end of period 5 421.2 5 097.0 5 448.6 over the contract period. The Decrease in trade and other receivable (368.0) (354.8) (386.6)
provision in this category (368.0) (354.8) (386.6)
Cash ?ow statement ranges from 23% to 84% of
amounts due (2014: 22%
Effect on Total Liabilities:
Increase in Reinsurance and insurance liabilities 152.7 119.0 134.7
to 85%) Decrease in deferred taxation (132.6) (145.9)
(145.7)
6 month
6 months ended 12 months Non-performing customers No. 113 869 115 220 Rm 1 120.2 981.5 933.2 7.0 (13.6) (11.2)
ended 30 Sept 2014 ended Effect on Net Asset Value:
Customers who have paid % 16.5% 16.9% % 73.8% 74.3% 72.1% Increase/(decrease) in Comprehensive Income
30 Sept 2015 Restated 31 March 2015 0.4 (1.5) (33.0)
Unaudited Unaudited Restated 55% or less of amounts due Decrease in opening retained income (319.6) (286.6) (286.6)
Rm Rm Rm over the contract period. The Decrease in Other Reserves (55.8) (53.1) (55.8)
provision in this category
Cash flow from operating activities ranges from 31% to 100% (375.0) (341.2) (375.4)
Cash flow from trading 669.2 733.0 1 333.6 of amounts due (2014: 27%
Change in working capital (238.0) (280.2) (467.9) to 100%) Effect on Net Asset Value per Share (in
Cash generated from operations 431.2 452.8 865.7 cents)
Total No. 691 224 681 728 Rm 1 518.5 1 321.1 1 294.3 Decrease in net asset value per share (cents) (422) (385) (423)
Interest and dividends received 61.0 57.8 113.1
Interest paid (66.4) (65.8) (135.5) Debtors impairment as a % of net debtors 24.1% 22.3% 20.9%
Taxation paid (203.8) (191.6) (337.9)
Effect on Cash Flow Statement:
222.0 253.2 505.4 2.6
Increase/(decrease) in cash flow from trading 3.4 (42.5)
(Decrease)/increase in change in working
Cash flow from investing activities Notes to the financial statements capital (0.6) (1.4) 46.1
Net disposals of insurance investments (11.6) 45.9 48.2 Increase in interest paid (2.0) (2.0) (3.6)
Acquisition of property, plant and equipment (58.0) (38.9) (86.7) 1. Basis of reporting
Effect on cash flow from operating activities - - -
Purchase of Beares business - - (66.6) The group's interim financial statements have been prepared in accordance with the
recognition and measurement principles of International Financial Reporting Standards
Proceeds on disposal of property, plant 3. Debtor costs
(IFRS) including IAS34 (Interim Financial Reporting), and in compliance with the Listing
and equipment 6.9 4.1 11.7
Requirements of the JSE. The accounting policies are consistent with those applied in
(62.7) 11.1 (93.4) the annual financial statements for the year ended 31 March 2015, except for the Bad debts, repossession losses and bad
Cash flow from financing activities restatements set out in note 2. debt recoveries 243.9 209.3 693.3
Dividends paid (268.0) (268.2) (459.3) Movement in impairment provision 224.2 191.6 164.8
Increase/(decrease) in long-term borrowings 200.0 75.0 (175.0) 2. Restatements 468.1 400.9 858.1
Decrease in short-term borrowings (50.0) (300.0) (50.0) The group has performed a review of the appropriateness of it's accounting policies
Purchase of own shares (38.2) (26.6) (26.5) and has identified the following restatements which are the result of clarifying certain 4. Insurance investments - available-for-sale
(156.2) (519.8) (710.8) 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 Listed
current interim financial statements under review. Listed shares 843.0 733.4 846.5
Net increase/(decrease) in cash
Fixed income securities 864.4 820.7 869.1
and cash equivalents 3.1 (255.5) (298.8)
(a) Two group subsidiaries, Lewis Stores (Pty) Ltd ("Lewis") and Monarch Unlisted
Cash and cash equivalents at the Insurance Company Limited ("Monarch") were referred by the National Money market 160.1 127.0
106.2
beginning of the period 173.3 472.1 472.1 Credit Regulator ("NCR") to the National Consumer Tribunal in July 2015. 1 813.6 1 714.2 1 842.6
Cash and cash equivalents at the end Details of this matter has been set out in note 6.
of the period 176.4 216.6 173.3 Investments are classified as available-for-sale and reflected at fair value. Changes in fair
The NCR alleged that Lewis and Monarch sold loss of employment insurance value are reflected in the statement of comprehensive income.
Analysis of borrowings and facilities to pensioners and self-employed persons in contravention of the National
Borrowings Credit Act since 2007. An internal investigation determined that In terms of the fair value hierarchy set out in IFRS 13, listed and unlisted investments are
Long-term 1 025.0 1 075.0 825.0 approximately fifteen per cent of pensioners and self-employed persons categorised as Level 1 and Level 2 respectively.
were sold such policies through human error and contrary to the group's own
Short-term 650.0 450.0 700.0 5. Trade and other receivables
internal policies which explicitly prohibit the sale of such policies to such
1 675.0 1 525.0 1 525.0
customers. Accordingly, Lewis and Monarch are in the process of refunding
Cash and cash equivalents the premiums and interest thereon to customers. Instalment sale and loan receivables 7 720.1 7453.0 7 708.5
Short-term facilities utilised 71.0 51.6 49.0
Cash on hand (247.4) (268.2) (222.3) The effect of the above was a restatement, which reduced the profit Provision for unearned maintenance
(176.4) (216.6) (173.3) attributable to ordinary shareholders for the six months ended 30 September income (384.1) (353.2) (385.0)
2014 ("September 2014 period") by R 2.1 million and retained income as at Provision for unearned initiation fees and
Net borrowings 1 498.6 1 308.4 1 351.7 31 March 2014 by R 35.4 million. unearned finance charges (228.6) (227.9) (241.5)
Unutilised facilities: Provision for unearned insurance premiums (814.1) (936.6) (889.5)
Banking facilities 926.4 1016.6 973.3 (b) The unearned premium reserve ("UPR") in Monarch Insurance Company
Limited, the insurance subsidiary, has been correctly calculated in terms of Net instalment sale and loan receivables 6 293.3 5 935.3 6 192.5
Domestic Medium-Term Note Programme 1 700.0 1 700.0 1 700.0 Provision for impairment
the Short-Term Insurance Act by taking into account commission paid to a (1 518.5) (1 321.1) (1 294.3)
Banking facilities and Domestic 4 774.8 4 614.2 4 898.2
fellow subsidiary of 12.5%. On calculating the group UPR, the 12.5%
Medium-Term Note Programme 4 125.0 4 025.0 4 025.0 intercompany commission has now been eliminated to reflect the reserve at Other receivables 125.9 130.1 111.1
100% of unearned insurance premiums as opposed to the 87.5% provided. 4 900.7 4 744.3 5 009.3
Key ratios The effect of the above was a restatement, which increased the profit
Amounts due from instalment sale and loan receivables after one year are reflected as
attributable to ordinary shareholders for the September 2014 period by R 6.6
Six6 month
months 12 months
12 months million and reduced retained income as at 31 March 2014 by R 123.3 million. current, as they form part of the normal operating cycle. The credit terms of instalment
6 month ended
ended ended
ended sale and loan receivables range from 6 to 36 months.
ended 30 Sept 2014 31 March 2015
30 Sept 2015 Restated Restated (c) The accounting policy in respect of maintenance contracts has been
amended to recognise revenue from maintenance contracts as follows: The average effective interest rate on instalment sale and loan receivables is 22.0% (2014:
Operating efficiency ratios - income is deferred until the expiry of the suppliers warranty. 21.4%) and the average term of the sale is 33.4 months (2014: 32.1 months).
Gross profit margin (%) 36.4% 36.9% 36.6% - for the two years of the maintenance contract, revenue will be recognised
Operating profit margin (%) 14.7% 18.4% 19.4% on an expected cost basis which defers revenue in line with the expected 6. Referral to National Credit Tribunal
Number of stores 724 642 716 cost of rendering the service under the maintenance contract.
Number of permanent employees (average) 8 421 7 534 7 835 Lewis and Monarch have been referred by the National Credit Regulator ("NCR") to the
Trading space (sqm) 241 812 214 027 248 137 The effect of the above was a restatement, which reduced the profit National Consumer Tribunal in July 2015. In its referral the NCR alleges that Lewis and
3.3 3.5 3.9 attributable to ordinary shareholders for the September 2014 period by R 9.2 Monarch contravened sections of the National Credit Act ("NCA"), by selling insurance
Inventory turn
4.0 4.4 3.8 million and retained income as at 31 March 2014 by R 92.2 million. policies providing loss of employment and disability cover to pensioners and self-
Current ratio
employed consumers. Lewis and Monarch are opposing the referral and have filed a
Credit ratios comprehensive answering affidavit which has, amongst other matters, dealt with the
65.9% 69.7% 69.1% (d) Income from reinsurance contracts is deferred over the period of the related
Credit sales (%) substance of the two main allegations, being the sale of loss of employment and disability
7.4% 6.8% 13.9% reinsurance contract. The basis of the deferral, which has been consistently
Debtor costs as a % of the net debtors cover.
applied, resulted in approximately 75% of the unearned reinsurance
Debtors’ impairment provision as a
24.1% 22.3% 20.9% premiums being deferred on a straight line basis over the period of the
% of net debtors (i) Loss of Employment
contract with the remaining balance being recognised in income.
Arrear instalments on satisfactory paying
accounts as a percentage of net debtors 9.8% 9.1% 9.3% Lewis and Monarch has disputed that they have committed a contravention of the NCA in
The application of the accounting policy has been revised to defer 100% of
Arrear instalments on slow-paying and non- the unearned reinsurance premiums on a straight line basis over the period this regard, as alleged by the NCR. Following an internal investigation by Lewis and
performing accounts as a percentage of net of the related reinsurance contract. The accounting policy has been updated Monarch, it has been determined that fifteen percent of pensioners and self-employed
debtors 27.7% 26.5% 24.3% persons were sold such policies since 2007, through human error and contrary to the
accordingly.
Credit applications decline rate 40.8% 41.0% 40.2% group’s own internal policies, which expressly prohibit the sale of such policies to
Shareholder ratios The effect of the above was a restatement, which increased the profit consumers. The refunds due to customers (including interest) identified from the internal
Net asset value per share (cents) 6 104 5 745 6 128 attributable to ordinary shareholders for the September 2014 period by R 5.7 investigation conducted by the two companies is in the process of being paid to
Gearing ratio 27.6% 25.7% 24.8% million and reduced retained income as at 31 March 2014 by R 91.3 million. customers. Full provision has been made for the refund of these premiums and the
Dividend payout ratio 70.7% 61.8% 62.9% interest thereon.
Return on average equity (after-tax) 11.0% 13.6% 15.4% (e) With effect from 1 January 2012, the group elected to retain the contingency
Return on average capital employed reserve even though it was no longer required by the Short-term Insurance (ii) Disability Insurance
(after-tax) 9.6% 11.4% 13.0% Act. This policy has been withdrawn and the contingency reserve of R 55.6
Return on average assets managed (pre-tax) 11.8% 14.2% 15.9% million transferred to retained income as at 31 March 2014. 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
Notes: answering affidavit records that notwithstanding the NCR's allegations in this regard
1. All ratios are based on figures at the end of the period unless otherwise disclosed claims by pensioners and self-employed persons in respect of disability policies have been
2. The net asset value has been calculated using 88 808 000 shares in issue (2014: 88 715 000). and continue to be honoured by Monarch. Accordingly no provision has been made in the
3. Total assets exclude the deferred tax asset. financial statements for the matter.
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
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