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LEWIS GROUP LIMITED - Preliminary reviewed results for the year ended 31 March 2016

Release Date: 25/05/2016 07:08
Code(s): LEW     PDF:  
Wrap Text
Preliminary reviewed results for the year ended 31 March 2016

LEWIS GROUP LTD
Registration number: 2004/009817/06.
Share code: LEW. 
ISIN: ZAE000058236 
Bond code: LEW01 
Bond ISIN No. ZAG000110222

PRELIMINARY REVIEWED
RESULTS for the year ended 31 March 2016

MERCHANDISE SALES
UP 2.9%

GROSS MARGIN UP
140BPS TO 38.0%

OPERATING COSTS
WELL MANAGED

HEADLINE EARNINGS
PER SHARE
622 CENTS

TOTAL DIVIDEND
MAINTAINED AT
517 CENTS PER SHARE

TRADING AND FINANCIAL PERFORMANCE
Trading conditions in the credit retail sector have proved
demanding over the past year. Adverse economic conditions have
constrained consumer spending and this has been compounded
by the introduction of the National Credit Regulator's affordability
assessment regulations.

The significant impact of the affordability regulations is reflected in
the decline of 10.3% in credit sales for the second half of the year.
These regulations require customers to provide their three latest
pay advices or bank statements as part of the credit application
process. This is proving a major challenge for many consumers in
the group's lower to middle income target market who are self-
employed. Group credit sales for the year were 4.5% lower. Credit
sales in Beares account for 50% of the brand's total sales while in
Lewis and Best Home and Electric 66% of total sales are on credit.

Merchandise sales increased by 2.9% over the prior year. After
increasing by 8.8% in the first half, trading conditions became
increasingly challenging in the second half with the drought
impacting the agricultural sector and particularly hard felt in rural
South Africa. Unemployment reached an all-time high during the
period and contributed to a decline of 2% in merchandise sales in
the second half. Sales in the fourth quarter were further affected
by aggressive discounting by a major competitor ahead of store
closures which will be completed shortly.

The group's revenue for the year increased by 2.2% to R5.8 billion.
Insurance revenue declined by 7.3% owing to the slower credit
sales and the shift from term to lower priced monthly insurance
policies in both Beares and Best Home and Electric. Finance
charges increased by 7.5% owing to higher levels of credit sales
in prior periods.

The launch of new merchandise ranges in the second half saw the
gross profit margin strengthen by 140 basis points to 38.0%. All three
brands have reported an improved gross profit margin.

Operating costs increased by 12.1%, due to the integration costs of the
Beares chain. Excluding Beares, operating costs were well managed
to an increase of 4.7%. Beares integration costs, covering mainly IT
and store refurbishment, amounted to R21 million. This together with
a generally higher cost structure than the group's other brands is
reflected in the increase. It is expected to take another two to three
years to align Beares expenses with the rest of the group.

The group's operating margin, impacted by slower revenue growth
and the Beares integration costs, contracted to 14.1% (2015: 19.4%).
Operating profit before investment income was 25.7% lower
at R815 million. Headline earnings declined from R751 million to
R552 million with headline earnings per share 26.5% lower.

The move from term to monthly insurance policies in all three trading
brands will significantly reduce the capital required by the group's
wholly-owned subsidiary, Monarch Insurance. In order to further de-
risk the business (in light of a potential sovereign rating downgrade),
a large portion of the equity and bond portfolio within Monarch was
realised. This capital gain increased investment income by R452.6
million to R600.6 million and increased earnings per share for the
year by 19.3% to 1 082 cents from 908 cents.

These results are in line with the group's trading statement released
on SENS on 16 May 2016.


DEBTOR MANAGEMENT
Debtor costs for the period increased by 17.1% owing to higher bad
debts and an increase in the impairment provision from 23.1% to 26.1%.
Debtor costs as a percentage of net debtors increased from 15.3% to
17.1%. The level of satisfactory paid customers at 68.8% is in line with
last year's 68.7% supported by stable collection rates.

STORE EXPANSION
The group acquired a portfolio of 56 Ellerines and Beares stores
in four Southern African countries for R200 million, increasing the
store presence outside South Africa to 119. The stores in Botswana
(20 stores) and Lesotho (10 stores) were integrated into the group's
operations late in the financial year while the stores in Swaziland
(5 stores) and Namibia (21 stores) were integrated in April and May
2016 respectively. At year end the group traded out of 760 outlets and
the store opening target for the new financial year is 10 to 15 stores.

REGULATORY UPDATE
Referrals by NCR to the NCT
As shareholders are aware, in July 2015, the National Credit Regulator
("NCR") referred both Lewis and Monarch to the National Consumer
Tribunal ("NCT") for alleged breaches of the National Credit Act
("NCA") in relation to the sale of loss of employment insurance and
disability cover to customers who were pensioners or self-employed
persons.

Following an internal investigation the group identified approximately
fifteen percent of cases where loss of employment insurance policies
were invalidly 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 totalling
approximately R67.7 million to the affected customers.

Lewis and Monarch have opposed the Referral, filing detailed answering
affidavits which address both issues. The Tribunal has set the date
of hearing for the matter as 28 July 2016. Shareholders will in due
course be advised of the outcome of the hearing, once the ruling of
the Tribunal has been made available.

In April 2016, the NCR referred Lewis to the NCT for alleged breaches
of the NCA relating to club fees and extended maintenance contracts
charged to its customers. Lewis has opposed the second Referral
and filed a comprehensive answering affidavit disputing the NCR's
allegations. A date of hearing will be set in due course by the NCT.

High Court Summonses
In February 2016 Lewis was served with a summons issued in the name
of 15 plaintiffs and in April 2016 a second summons was served by 13
plaintiffs, all plaintiffs being existing or previous customers of Lewis.
The summonses were issued at the direction of Summit Financial
Partners. The total quantum of both claims is R85 082 plus interest.
The plaintiffs' claims are for damages as a consequence of alleged
breaches of the NCA in relation to delivery charges and extended
maintenance contracts.

Lewis disputes liability on the merits and various other grounds and
is contesting the action.

PROSPECTS
While trading conditions are expected to remain challenging in the
short term, the business remains strongly cash generative with low
levels of gearing at 25.5% reflecting a strong balance sheet. The board
remains positive about the group's medium to longer term prospects
and has maintained the dividend for the full year at 517 cents.

Following the acquisition of the Beares chain and the 56 stores outside
South Africa, together with the closure of Ellerines and the significant
reduction in the footprint of a major competitor, the group is well
positioned to grow market share across all three trading brands. The
newly acquired stores outside South Africa are expected to make
a solid contribution to the group's revenue and profitability in the
medium term.

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 2016 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            Tuesday 19 July 2016

Date trading commences "ex" dividend         Wednesday 20 July 2016

Record date                                  Friday 22 July 2016

Date of payment                              Monday 25 July 2016

Share certificates may not be dematerialised or rematerialised between
Wednesday 20 July 2016 and Friday 22 July 2016, 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
25 May 2016

EXTERNAL AUDITORS' REVIEW CONCLUSION
These condensed consolidated financial statements for the year
ended 31 March 2016 have been reviewed by PricewaterhouseCoopers
Inc., who expressed an unmodified review conclusion. A copy of the
auditor's review report is available for inspection at the company's
registered office together with the financial statements identified in
the auditor's report.

The auditor's report does not necessarily report on all of the information
contained in this announcement/financial results. Shareholders are
therefore advised that in order to obtain a full understanding of the
nature of the auditor's engagement they should obtain a copy of the
auditor's report together with the accompanying financial information
from the issuer's registered office.

INCOME STATEMENT
for the year ended 31 March 2016
                                                                                                                    Reviewed
                                                                                         Reviewed                   Restated
                                                                                             2016            %          2015
                                                                              Notes            Rm       Change            Rm
Revenue                                                                                   5 785.0         2.2%       5 660.8
Merchandise sales                                                                         2 667.7                    2 591.5
Finance charges and initiation fees earned                                                1 426.3                    1 326.4
Insurance revenue                                                                           908.2                      979.9
Ancillary services                                                                          782.8                      763.0

Cost of merchandise sales                                                               (1 652.8)                  (1 644.3)
Operating Costs                                                                         (3 317.2)                  (2 918.8)

Employment costs                                                                          (946.3)                    (880.8)
Administration and IT                                                                     (274.5)                    (241.1)
Debtor costs                                                                      3     (1 005.1)                    (858.1)
Marketing                                                                                 (192.4)                    (177.0)
Occupancy costs                                                                           (329.1)                    (273.6)
Transport and travel                                                                      (224.2)                    (215.8)
Depreciation and amortisation                                                              (85.6)                     (63.8)
Other operating costs                                                                     (260.0)                    (208.6)

Operating profit before investment income                                                   815.0      (25.7%)       1 097.7
Investment income                                                                           600.6                      148.0

Profit before finance costs                                                               1 415.6                    1 245.7
Net finance costs                                                                         (136.1)                    (123.3)
Interest paid                                                                             (158.4)                    (138.7)
Interest received                                                                            14.0                       12.2
Forward exchange contracts                                                                    8.3                        3.2

Profit before taxation                                                                    1 279.5                    1 122.4
Taxation                                                                                  (318.0)                    (316.2)
Net profit attributable to ordinary shareholders                                            961.5        19.3%         806.2


STATEMENT OF COMPREHENSIVE INCOME
Net profit for the year                                                                     961.5                      806.2

Movement in other reserves (may be recycled to income statement on disposal):             (456.7)                      119.3
Fair value adjustment to available-for-sale investments                                    (71.2)                      156.8
Disposal of available-for-sale investments                                                (406.3)                     (40.6)
Foreign currency translation reserve                                                         20.8                        3.1

Retirement benefit remeasurements                                                           (2.3)                     (10.4)
Other comprehensive income                                                                (459.0)                      108.9
Total comprehensive income for the year attributable to equity shareholders                 502.5                    915.1

EARNINGS AND DIVIDENDS PER SHARE
for the year ended 31 March 2016
                                                                                                                    Reviewed
                                                                                         Reviewed            %      Restated
                                                                                             2016       Change          2015
1.   Weighted average no. of shares 
     Weighted average                                                                      88 811                     88 840
     Diluted weighted average                                                              89 532                     89 585
 
2.   Headline earnings (Rm) 
     Attributable earnings                                                                  961.5                      806.2
     Profit on disposal of available for sale investments                                   (2.7)                      (2.7)
     Profit on disposal of investments                                                    (406.3)                     (40.5)
     Gain on acquisition of businesses                                                      (0.4)                     (12.0)
     Headline earnings                                                                      552.1                      751.0

3.   Earnings per share (cents)
     Earnings per share                                                                   1 082.6        19.3%         907.5
     Diluted earnings per share                                                           1 073.9                      899.9
 
4.   Headline earnings per share (cents) 
     Headline earnings per share                                                            621.7      (26.5%)         845.3
     Diluted headline earnings per share                                                    616.7                      838.3
 
5.   Dividends per share (cents) 
     Dividends paid per share 
      Final dividend 2015 (2014)                                                            302.0                      302.0
      Interim dividend 2016 (2015)                                                          215.0                      215.0
                                                                                            517.0                      517.0
     Dividends declared per share 
      Interim dividend 2016 (2015)                                                          215.0                      215.0
      Final dividend 2016 (2015)                                                            302.0                      302.0
                                                                                            517.0                      517.0
 
BALANCE SHEET
as at 31 March 2016
                                                                                                                    Reviewed
                                                                                                      Reviewed      Restated
                                                                                                          2016          2015
                                                                                            Notes           Rm            Rm
Assets               
Non-current assets               
Property, plant and equipment                                                                            370.4         352.9
Trademarks                                                                                                61.4          60.1
Deferred taxation                                                                                         85.7           0.5
Retirement benefit asset                                                                                  63.0          77.4
Insurance investments                                                                           4        432.0       1 715.6
                                                                                                       1 012.5       2 206.5
Current assets               
Inventories                                                                                              444.5         420.3
Trade and other receivables                                                                     5      4 514.3       4 413.3
Insurance premiums in advance                                                                          1 185.4       1 485.5
Taxation                                                                                                  28.3          34.8
Insurance investments                                                                           4      1 236.5         127.0
Cash on hand and deposits                                                                                587.2         222.3
                                                                                                       7 996.2       6 703.2
               
Total assets                                                                                           9 008.7       8 909.7
               
Equity and liabilities               
Capital and reserves               
               
Share capital and premium                                                                                 92.1         110.8
Other reserves                                                                                            27.5         492.4
Retained earnings                                                                                      5 329.8       4 845.4
                                                                                                       5 449.4       5 448.6
Non-current liabilities               
Long-term interest-bearing borrowings                                                                  1 375.0         825.0
Deferred taxation                                                                                         60.8         102.4
Retirement benefit liability                                                                             100.2         106.7
                                                                                                       1 536.0       1 034.1
Current liabilities               
Trade and other payables                                                                                 270.2         283.8
Reinsurance and insurance liabilities                                                           6      1 153.1       1 394.2
Short-term interest-bearing borrowings                                                                   600.0         749.0
                                                                                                       2 023.3       2 427.0
               
Total equity and liabilities                                                                           9 008.7       8 909.7

STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2016
                                                                                                                    Reviewed
                                                                                                      Reviewed      Restated
                                                                                                          2016          2015
                                                                                            Notes           Rm            Rm
Share capital and premium                               
Opening balance                                                                                          110.8         109.2
Cost of own shares acquired (treasury shares)                                                           (53.0)        (26.5)
Share awards to employees                                                                                 34.3          28.1
                                                                                                          92.1         110.8
Other reserves                               
Opening balance                                                                                          492.4         380.5
Other comprehensive income for the year                                                                (456.7)         119.3
Share-based payment                                                                                       10.3          19.7
Transfer to retained earnings                                                                           (18.5)        (27.1)
                                                                                                          27.5         492.4
Retained earnings                               
Opening balance                                                                                        4 845.4       4 509.9
Net profit attributable to ordinary shareholders                                                         961.5         806.2
Distribution to shareholders                                                                           (459.0)       (459.3)
Share awards to employees                                                                               (34.3)        (28.1)
Transfer from other reserves                                                                              18.5          27.1
Retirement benefit remeasurements                                                                        (2.3)        (10.4)
                                                                                                       5 329.8       4 845.4
                               
Balance as at 31 March                                                                                 5 449.4       5 448.6
                               
                               
                               
CASH FLOW STATEMENT                               
for the year ended 31 March 2016                               
                                                                                                                    Reviewed
                                                                                                      Reviewed      Restated
                                                                                                          2016          2015
                                                                                                            Rm            Rm
Cash flow from operating activities                                 
Cash flow from trading                                                                                 1 104.7       1 333.6
Change in working capital                                                                              (154.3)       (467.9)
Cash generated from operations                                                                           950.4         865.7
Interest and dividends received                                                                          119.0         113.1
Interest paid                                                                                          (150.1)       (135.5)
Taxation paid                                                                                          (330.3)       (337.9)
                                                                                                         589.0         505.4
Cash flow from investing activities                                 
Net disposals of insurance investments                                                                    79.6          48.2
Acquisition of property, plant and equipment                                                           (104.3)        (86.7)
Purchase of businesses                                                                          7      (101.1)        (66.6)
Proceeds on disposal of property, plant and equipment                                                     12.7          11.7
                                                                                                       (113.1)        (93.4)
Cash flow from financing activities                                 
Dividends paid                                                                                         (459.0)       (459.3)
Increase / (decrease) in long-term borrowings                                                            550.0       (175.0)
Decrease in short-term borrowings                                                                      (100.0)        (50.0)
Purchase of own shares                                                                                  (53.0)        (26.5)
                                                                                                        (62.0)       (710.8)
                                 
                                 
Net increase/(decrease) in cash and cash equivalents                                                     413.9       (298.8)
Cash and cash equivalents at the beginning of the year                                                   173.3         472.1
Cash and cash equivalents at the end of the year                                                         587.2         173.3
  
  
Analysis of borrowings and facilities  
Borrowings  
  Long-term                                                                                            1 375.0         825.0
  Short-term                                                                                             600.0         700.0
                                                                                                       1 975.0       1 525.0
Cash and cash equivalents                                 
  Short-term facilities utilised                                                                             –          49.0
  Cash on hand                                                                                         (587.2)       (222.3)
                                                                                                       (587.2)       (173.3)
                                 
Net borrowings                                                                                         1 387.8       1 351.7
Unutilised facilities:                                 
      Banking facilities                                                                               1 337.2         973.3
      Domestic medium term note programme                                                              1 700.0       1 700.0
Banking facilities and domestic medium term note programme                                             4 425.0       4 025.0

SEGMENTAL REPORT
for the year ended 31 March 2016
                                                                                              Best Home
                                                                                    Lewis  and Electric     Beares     Group
Reportable segment                                                                     Rm            Rm         Rm        Rm
2016                                       
Revenue                                                                           4 564.7         793.3      427.0   5 785.0
Operating profit before investment income                                           700.4         143.0     (28.4)     815.0
Operating margin                                                                    15.3%         18.0%     (6.7%)     14.1%
Segment assets                                                                    3 759.8         624.1      403.3   4 787.2
                                         
2015 (restated)                                         
Revenue                                                                           4 645.2         802.0      213.6   5 660.8
Operating profit before investment income                                           922.2         169.4        6.1   1 097.7
Operating margin                                                                    19.9%         21.1%       2.9%     19.4%
Segment assets                                                                    3 864.3         650.2      208.0   4 722.5



NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2016
1. Basis of reporting
   The condensed consolidated financial statements are prepared in accordance with the requirements of
   the JSE Limited Listing Requirements for preliminary reports and the requirements of the Companies Act
   of South Africa. The Listing Requirements require preliminary reports to be prepared in accordance with
   the framework concepts and the measurement and recognition requirements of International Financial
   Reporting Standards ("IFRS") and the SAICA Financial Reporting Guides as issued by the Accounting
   Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
   Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

    The accounting policies applied in the preparation of the condensed consolidated finacial statements
    are in terms of IFRS and 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 2.1.

2.1 Restatements
    The group has performed a review of the appropriateness of it's accounting policies during the course
    of the first half of the financial year and identified the following restatements which are the result of
    clarifying certain accounting policies and the application thereof. These restatements were disclosed in
    the interim results for the six months ended 30 September 2015 released on 9 November 2015 and for
    purposes of clarity, there have been no further restatements since then.

(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 8.

    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 invalidly
    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 year ended 31 March 2015 ("2015 year") by R 3.9 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 correctly calculated in terms of the Short-Term Insurance Act by taking into account commission
    paid to a fellow subsidiary of 12.5%. This commission was previously not eliminated on consolidation.
    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 error of not eliminating the commission was a restatement, which increased the profit
    attributable to ordinary shareholders for the 2015 year by R 6.0 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 a more appropriate
    policy to recognise revenue from maintenance contracts as follows:

    - income is deferred until the expiry of the suppliers warranty in terms of the group's contractual
      arrangement with suppliers which is one year.

    - 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 2015 year by R 29.6 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 change in policy was a restatement, which reduced the profit attributable to ordinary
    shareholders for the 2015 year 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:

                                                                                                    Reviewed
                                                                                    Reviewed        Restated
                                                                                        2016            2015
                                                                                          Rm              Rm
Effect on Comprehensive Income:                    
Increase/(decrease) in insurance revenue                                                13.9           (1.5)
Increase/(decrease) in ancillary services                                                3.0          (41.0)
Increase in interest paid                                                              (2.0)           (3.6)
Increase/(decrease) in profit before taxation                                           14.9          (46.1)
(Increase)/decrease in taxation                                                        (4.2)            12.9
Effect on net profit attributable to ordinary shareholders                              10.7          (33.2)

Movement in other comprehensive income (contingency reserve)                               –             0.2
Effect on total comprehensive income                                                    10.7          (33.0)
Effect on Earnings per Share:                    
Increase/(decrease) in earnings per share (cents)                                 12.0 cents    (37.3 cents)
Increase/(decrease) in diluted earnings per share (cents)                         12.0 cents    (37.0 cents)
Effect on Total Assets:                    
Decrease in trade and other receivables                                              (352.7)         (386.6)
                                                                                     (352.7)         (386.6)
Effect on Total Liabilities:                    
Increase in reinsurance and insurance liabilities                                      153.7           134.7
Decrease in deferred taxation                                                        (141.7)         (145.9)
                                                                                        12.0          (11.2)
Effect on Net Asset Value:                    
Increase/(decrease) in Comprehensive income                                             10.7          (33.0)
Decrease in opening retained income                                                  (319.6)         (286.6)
Decrease in Other reserves                                                            (55.8)          (55.8)
                                                                                     (364.7)         (375.4)
Effect on Net Asset Value per Share                    
Decrease in net asset value per share (cents)                                          (412)           (423)
                    
Effect on Cash Flow Statement:                    
Increase/(decrease) in Cash flow from trading                                           16.8          (42.5)
(Decrease)/increase in Change in working capital                                      (14.8)            46.1
Increase in interest paid                                                              (2.0)           (3.6)
Effect on Cash flow from operating activities                                              –               –

2,2 Reclassification
    The following reclassifications have been made in the presentation of the 2015 comparative figures:
     - the insurance premiums received in advance by the group's insurance subsidiary with respect to term business has
       been separately disclosed in the balance sheet. It was previously included within trade receivables.

     - the unearned premium reserve was previously included within the trade receivables as was the insurance premiums
       received in advance. With the separate disclosure of the insurance premiums in advance, the unearned premium
       reserve has been reclassified with insurance and reinsurance liabilities.

                                                                                                                  Reviewed
                                                                                                  Reviewed        Restated
                                                                                                      2016            2015
                                                                                                        Rm              Rm
3.   Debtor costs
     Bad debts, repossession losses and bad debt recoveries                                          765.8           693.3
     Movement in impairment provision                                                                239.3           164.8
                                                                                                   1 005.1           858.1

4.   Insurance investments – available-for-sale
     Listed
        Listed shares                                                                                    –           846.5
        Fixed income securities                                                                      432.0           869.1
     Unlisted
        Money market                                                                               1 236.5           127.0
                                                                                                   1 668.5         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.

     The move from term to monthly insurance policies will significantly reduce the capital required by the group's
     insurance subsidiary. Consequently, to limit risk, the insurance subsidiary sold the equity and a large portion of the
     bond portfolio releasing a capital gain of R495.6 million which was included in investment income.

5.   Trade and other receivables
     Instalment sale and loan receivables                                                          6 482.6         6 223.0

     Provision for unearned maintenance income                                                     (376.5)         (385.0)
     Provision for unearned initiation fees and unearned finance charges                           (229.8)         (241.5)

     Net instalment sale and loan receivables                                                      5 876.3         5 596.5
     Provision for impairment                                                                    (1 533.6)       (1 294.3)
                                                                                                   4 342.7         4 302.2
     Other receivables                                                                               171.6           111.1
                                                                                                   4 514.3         4 413.3

     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 22.2% (2015: 21.7%) and the average
     term of the sale is 32.8 months (2015: 32.3 months).

6.   Reinsurance and insurance liabilities
     Unearned premium reserve, net of reinsurance                                                    726.8           889.5
       Unearned Insurance Premiums                                                                 1 090.8         1 345.6
       Less: reinsurer's share of unearned premiums                                                (364.0)         (456.1)
     Due to reinsurers                                                                                98.4           134.4
     Other insurance and reinsurance provisions                                                      327.9           370.3
                                                                                                    1153.1          1394.2

7.   Purchase of businesses
     Trademarks                                                                                      (6.0)          (61.1)
     Property, plant and equipment                                                                   (3.1)           (9.7)
     Inventory                                                                                      (26.5)          (33.6)
     Trade receivables                                                                              (77.5)               –
     Accounts Payable                                                                                  6.2             8.7
     Deferred tax                                                                                      5.4            17.1
     Gain on acquisition of Beares                                                                     0.4            12.0
     Total consideration                                                                           (101.1)          (66.6)

     During the current year, the group's subsidiaries in Lesotho and Botswana have acquired the businesses trading
     under the Ellerines and Beares brands from the relevant in-country subsidiaries of Ellerines Services Proprietary
     Limited (subsidiary of Ellerines Furnishers Proprietary Limited in business rescue). The businesses consisted of
     30 stores, the Ellerines and Beares brands, trade receivables, inventory and fixed assets. The purchase consideration
     was paid by cash and assumption of liabilities. The stores will trade either under the Lewis or Beares brands.

     In the prior year, the wholly owned subsidiary of the group, Lewis Stores (Pty) Ltd acquired the Beares South
     African business 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.

8.   Regulatory Matters
     Referrals by National Credit Regulator to the National Credit Tribunal
     As shareholders are aware, in July 2015, the National Credit Regulator ("NCR") referred both Lewis and Monarch
     to the National Consumer Tribunal ("NCT") for alleged breaches of the National Credit Act ("NCA") in relation to
     the sale of loss of employment insurance and disability cover to customers who were pensioners or self-employed
     persons. 

     Following an internal investigation the group identified approximately fifteen percent of cases where loss of
     employment insurance policies were invalidly 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 premiums and interest totalling
     approximately R67.7 million to the affected customers.(Refer note 2.1(a))

     Lewis and Monarch have opposed the Referral, filing detailed answering affidavits which address both issues. The
     Tribunal has set the date of hearing for the matter as 28 July 2016. Shareholders will in due course be advised of
     the outcome of the hearing, once the ruling of the Tribunal has been made available.

     In April 2016, the NCR referred Lewis to the NCT for alleged breaches of the NCA relating to club fees and extended
     maintenance contracts charged to its customers. Lewis has opposed the second Referral and filed a comprehensive
     answering affidavit disputing the NCR's allegations. A date of hearing will be set in due course by the NCT.

     High Court Summonses
     In February 2016, Lewis was served with a summons issued in the name of 15 plaintiffs and in April 2016, a second
     summons was served by 13 plaintiffs - all plaintiffs being existing or previous customers of Lewis. The
     summonses were issued at the direction of Summit Financial Partners. The total quantum of both claims is R85 082
     plus interest. The plaintiffs' claims are for damages as a consequence of alleged breaches of the NCA in relation
     to delivery charges and extended maintenance contracts.

     Lewis disputes liability on the merits and various other grounds and is contesting the action.

9.   Capital Commitments
     Material capital commitments contracted for or authorised and contracted at
     end of year:
     Purchase of the Beares and Ellerines businesses in Namibia and Swaziland                              100             – 
     
     
KEY RATIOS                                                                                                2016          2015
Operating efficiency ratios                
                
Gross profit margin %                                                                                    38.0%         36.6%
                
Operating profit margin %                                                                                14.1%         19.4%
                
Number of stores                                                                                           760           716
                
Number of permanent employees (average)                                                                  8 409         7 835
                
Trading space (sqm)                                                                                    254 566       248 137
                
Inventory turn                                                                                             3.7           3.9
                
Current ratios                                                                                             4.0           3.8
                
                
Credit ratios                
                
Credit sales %                                                                                           64.3%         69.1%
                
Debtor costs as a % of the net debtors                                                                   17.1%         15.3%
                
Debtors' impairment provision as a % of net debtors                                                      26.1%         23.1%
                
Arrear instalments on satisfactory accounts as a percentage of                
                
gross debtors                                                                                             9.9%          9.1%
                
Arrear instalments on slow-paying and non-performing accounts                
                
as a percentage of gross debtors                                                                         26.8%         23.8%
                
Credit applications decline rate                                                                         39.3%         40.2%
                
                
Shareholder ratios                
                
Net asset value per share (cents)                                                                        6 158         6 128
                
Gearing ratio                                                                                            25.5%         24.8%
                
Dividend payout ratio                                                                                    52.7%         62.9%
                
Return on average equity (after-tax)                                                                     17.6%         15.4%
                
Return on average capital employed (after-tax)                                                           14.7%         13.0%
                
Return on average assets managed (pre-tax)                                                               15.8%         14.5%

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 88 499 000 shares in issue (2015- 88 908 000).
3. Arrear instalments have been calculated as a % of gross debtors (previously net debtors).
4. Total assets exclude the deferred tax asset.


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

                                                                2016       2015             2016       2015

Satisfactory paid

Customers fully up to date including those who        No.    459 390    473 901   Rm        38.3       21.1
have paid 70% or more of the amounts due over
the contract period. The provision in this category
results from an in duplum provision.                    %      68.8%      68.7%    %        2.5%       1.6%

Slow payers

Customers fully up to date including those who        No.     54 507     56 347   Rm       176.3      140.4
have paid 65% to 70% of amounts due over the
contract period. The provision in this category
ranges from 13% to 72% of amounts due and               %       8.1%       8.2%    %       11.5%      10.9%
includes an in duplum provision (2015: 12% to 74%)

Non-performing customers

                                                      No.    50 690      52 433   Rm       242.0      199.6
Customers who have paid 55% to 65% of amounts
due over the period of the contract. The provision                                                       
in this category ranges from 24% to 86% of the
amounts due (2015: 23% to 87%)                          %       7.6%       7.6%    %       15.8%      15.4%

Non-performing customers

Customers who have paid 55% or less of amounts        No.    103 495    107 167   Rm      1077.0      933.2
due over the period of the contract. The provision                                                        
in this category ranges from 34% to 100% of the           
amounts due (2015: 32% to 100%)                         %      15.5%      15.5%    %       70.2%      72.1%

Total                                                 No.    668 082    689 848   Rm      1533.6     1294.3

Debtors impairment provision as a % of net debtors                                         26.1%      23.1%       

These results are also available on our website:
www.lewisgroup.co.za

25 May 2016
Sponsor: UBS South Africa (Pty) Ltd

Date: 25/05/2016 07:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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