LEWIS GROUP LIMITED - Unaudited interim results for the six months ended 30 September 2018 (including IFRS 9 implementation report)

Release Date: 21/11/2018 07:05
Code(s): LEW
 
Wrap Text
Unaudited interim results for the six months ended 30 September 2018 (including IFRS 9 implementation report)

LEWIS GROUP LIMITED
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236 
Bond code: LEWI

UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
(INCLUDING IFRS 9 IMPLEMENTATION REPORT)

Highlights

Merchandise sales up 25.9%

Gross profit margin 39.9%

Debtor costs reduced by 20.8%

Merchandise sales excluding UFO up 8.1%

Headline earnings per share up 10.7%

Interim dividend up 5% to 105 cents per share

Balance sheet ungeared

Launched omni-channel retailer INspire

Commentary

Trading and financial performance

The turnaround in performance has continued and Lewis Group delivered strong merchandise
sales growth, tight cost control, lower debtor costs and growth in earnings. This is supported by
early benefits from the group's diversification strategy.

Merchandise sales were boosted by the acquisition of United Furniture Outlets (UFO) and
increased by 25.9% to R1.6 billion. UFO contributed sales of R230 million for the six months
following the successful integration of the brand into the group. Excluding the sales from UFO, the
group's merchandise sales grew by 8.1%. Comparable store sales increased by 7.8%. Stores outside
South Africa contributed 22% (H1 2018: 24.3%) of merchandise sales.

Cash sales increased by 72%, driven primarily by UFO which is a cash retailer, and credit sales by
4.2%. Group credit sales accounted for 57.1% (H1 2018: 68.8%) of total sales.

Group revenue increased by 11.2% and by 2.4% excluding the contribution from UFO (9.3% and
0.4% after adjustment for credit impaired accounts). Other revenue, incorporating finance
charges and initiation fees, insurance premiums and services rendered, declined by 2.8%
(6.6% after adjustment for credit impaired accounts) mainly due to lower credit sales in prior years
which limited annuity income as well as the adverse impact of regulatory capping of credit
insurance.

The group's gross profit margin at 39.9% (H1 2018: 41.6%) remains within management's target
range of 38% to 42%.

The growth in operating costs, excluding debtor costs, was contained well below the growth in
sales and increased by 12.9%. Excluding UFO, costs increased by 6.8%. Marketing and promotional
costs were increased to support sales growth, including the launch of INspire, the omni-channel
home shopping business.

The group's operating margin declined from 7.2% to 6.7%, mainly due to the decline in other
revenue, and is within management's guided range of 5% to 10%.

Finance costs showed a R21.3 million year-on-year movement owing mainly to gains on forward
exchange contracts covering merchandise imports.

Headline earnings increased by 4.5% to R149.6 million (H1 2018: R143.1 million) with headline
earnings per share 10.7% higher at 180.8 cents (H1 2018: 163.3 cents).

The balance sheet is ungeared at the half year. The group's net asset value per share declined by
9.4% to 5 922 cents owing to the impact of the introduction of IFRS 9 (refer to Debtor
Impairment below).

The group remains highly cash generative with cash and cash equivalents totalling R543 million at
the end of the reporting period.

The group has increased its interim dividend by 5% to 105 cents per share.

Debtor management

Debtor costs continued to decline and reduced by 20.8% over the prior period (before adjustment
for credit impaired accounts) as collection rates improved to 77.2% (H1 2018: 76.2%), despite the
deteriorating consumer environment. Debtor costs (before credit impaired adjustment) as a
percentage of net debtors decreased from 7.8% to 6.5%. The level of satisfactory paid customers
improved to 69.9% from 68.4% at the end of the 2018 financial year.

Debtor impairment

IFRS 9 - Financial Instruments is effective for the group for the year ending 31 March 2019,
replacing IAS 39 - Financial Instruments: Recognition and Measurements. The most significant
impact of IFRS 9 on the group relates to the implementation of the forward-looking expected
credit loss impairment model on the measurement of debtors. IAS 39 applied the incurred loss
model. Refer to note 2 for further detail on the transition to IFRS 9.

The adoption of IFRS 9 does not impact on the group's credit management practices and
business model and these will continue to be consistently applied as in the past.

The impact of the transition to IFRS 9 is that the total balance sheet impairment provision
increased by R803 million from R1.62 billion as at 31 March 2018 to R2.42 billion as at 1 April 2018.
This is mainly driven by an increase in the impairment of R658 million in the satisfactory paid
category of accounts due to the forward-looking nature of the expected credit loss provisioning
methodology.

The impairment provision of 29.6% under IAS 39 at 31 March 2018 consequently increased to
43.9% under IFRS 9 at 1 April 2018 following the adoption of IFRS 9.

At 30 September 2018 the impairment provision reduced to 43.5% from 43.9.% at 31 March 2018.

Expanding retail presence

The group's strategy of diversifying across market segments and retail channels continued with
the integration of UFO and the launch of INspire.

UFO has enabled the group to access higher income customers while increasing the cash-to-
credit sales mix. While the availability of space in upmarket shopping malls is proving to be a
hurdle to expanding the chain, two stores were opened during the period. A further three stores
opened in October and two more outlets are planned to open before December.

INspire aims to attract customers in the LSM 4 - 8 categories to extend the group's presence in
urban areas. The business is marketed through outbound call centres, agents and online shopping,
with an extensive product offering across linen, bedding, tableware, cookware and small electrical
appliances. After a slower than expected start, INspire reported sales of R4.2 million for the four
months to the end of September. The business is gaining momentum and sales for October were
encouraging.

The group's store base increased to 779 following the opening of 14 stores and closure of 8 stores
during the reporting period. This comprises Lewis (494 stores), Best Home and Electric (133
stores), Beares (119 stores) and UFO (33 stores). Lewis continues to open smaller format stores
which now account for 43% of the brand's stores. During the period 92 stores were refurbished.

The number of stores in the neighbouring countries of Botswana, Lesotho, Namibia and Swaziland
increased by 6 to 116, including the opening of the first 5 Best Home and Electric stores in
Namibia.

Share repurchase programme

The group repurchased 1.7 million shares during the reporting period, at an average price of
R29.41 per share. Since the commencement of the current share repurchase programme the group
has bought back 4.2 million shares at an average price of R28.66 per share. At the group's annual
general meeting in October 2018 shareholders granted management the authority to repurchase
up to a further 10% of the issued share capital.

Outlook

The change in the affordability assessment regulations of the National Credit Act has
enabled self-employed and informally employed individuals to again apply for credit. This is
expected to improve the performance of the group's stores in rural areas which have been most
affected by these restrictive regulations. While it will take time before many of these individuals
re-enter the credit market, sales to this customer category are encouraging and early payment
performance is satisfactory.

The current sales momentum is expected to be maintained into the second half, with UFO
complementing the performance of the traditional retail brands. UFO is performing well and
customers have responded positively to the new ranges introduced in October. The group plans
to open a net six stores across all brands in the second half of the year.

Dividend declaration

Notice is hereby given that a gross cash dividend of 105 cents per share in respect of the six
months ended 30 September 2018 has been declared payable to holders of ordinary shares.
The number of shares in issue as of the date of declaration is 83 010 692. The dividend has been
declared out of income reserves and is subject to a dividend tax of 20%. The dividend for
determining the dividend tax is 105 cents and the dividend tax payable is 21 cents for shareholders
who are not exempt. The net dividend for shareholders who are not exempt will therefore be
84 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 of trade "cum" dividend                    Tuesday, 22 January 2019
Date trading commences "ex" dividend                 Wednesday, 23 January 2019
Record date                                          Friday, 25 January 2019
Date of payment                                      Monday, 28 January 2019

Share certificates may not be dematerialised or rematerialised between Wednesday,
23 January 2019 and Friday, 25 January 2019, both days inclusive.

For and on behalf of the board

Hilton Saven                                         Johan Enslin
Independent non-executive Chairman                   Chief executive officer

Cape Town
21 November 2018

Income statement
for the six months ended 30 September 2018
                                                           6 months       6 months      12 months
                                                              ended          ended          ended
                                                             30 Sep         30 Sep         31 Mar
                                                               2018           2017           2018
                                                          Unaudited      Unaudited        Audited
                                                 Notes           Rm             Rm             Rm
Revenue                                            4.1      2 904.9        2 658.6        5 556.8
Retail revenue                                     4.2      1 973.4        1 623.7        3 524.2
Merchandise sales                                    8      1 630.5        1 294.8        2 865.0
Ancillary services                                            342.9          328.9          659.2
Insurance revenue                                             326.9          356.4          671.0
Effective interest income                                     604.6          678.5        1 361.6
Finance charges and initiation fees earned                    656.0          678.5        1 361.6
Credit impairment adjustment                                 (51.4)              -              -
Cost of merchandise sales                            8      (980.0)        (755.5)      (1 677.8)
Operating costs                                           (1 731.1)      (1 712.0)      (3 499.7)
Debtor costs                                       3.2      (300.5)        (444.3)        (958.7)
Bad debts                                                   (442.6)        (407.4)        (959.4)
Movement in impairment provision                               64.5         (64.9)         (58.9)
Credit impairment adjustment                                   51.4              -              -
Bad debt recoveries                                            26.2           28.0           60.3
Employment costs                                            (565.2)        (513.8)      (1 059.1)
Occupancy costs                                             (220.9)        (183.4)        (373.2)
Administration and IT                                       (170.4)        (164.3)        (328.8)
Transport and travel                                        (115.9)         (99.1)        (205.0)
Marketing                                                   (161.1)        (134.0)        (246.6)
Depreciation and amortisation                                (38.4)         (43.6)         (85.9)
Other operating costs                                       (158.7)        (129.5)        (243.8)
Operating profit before investment income                     193.8          191.1          379.3
Investment income                                  5.2         23.8           32.8           62.4
Profit before finance costs                                   217.6          223.9          441.7
Net finance costs                                               5.6         (15.7)         (49.2)
Interest paid                                                (34.4)         (37.7)         (87.6)
Interest received                                              19.8           21.3           38.9
Gain/(loss) on forward exchange contracts                      20.2            0.7          (0.5)
Profit before taxation                                        223.2          208.2          392.5
Taxation                                             9       (72.8)         (65.3)        (128.4)
Net profit attributable to ordinary shareholders              150.4          142.9          264.1
Earnings per share                (cents)                     181.8          163.1          306.8
Diluted earnings per share        (cents)                     179.0          162.1          301.3

Statement of Comprehensive Income
for the six months ended 30 September 2018
                                                                6 months    6 months    12 months
                                                                   ended       ended        ended
                                                                  30 Sep      30 Sep       31 Mar
                                                                    2018        2017         2018
                                                               Unaudited   Unaudited      Audited
                                                                      Rm          Rm           Rm
Net profit for the year                                            150.4       142.9        264.1   
Items that may be subsequently reclassified                                                         
to income statement:                                                                                
Movement in other reserves                                         (7.4)         6.0          9.9   
Fair value adjustment to                                                                            
FVOCI/available-for-sale investments                              (22.8)         4.6         22.8   
Disposal of FVOCI/available-for-sale investments                     0.3       (0.8)        (1.3)   
Foreign currency translation reserve                                15.1         2.2       (11.6)   
Items that may not be subsequently reclassified                                                     
to income statement:                                                                                
Retirement benefit remeasurements                                      -           -         42.6   
Other comprehensive income                                         (7.4)         6.0         52.5   
Total comprehensive income for the year
attributable to equity shareholders                                143.0       148.9        316.6   

Earnings and Dividends per Share
for the six months ended 30 September 2018
                                                                6 months    6 months    12 months
                                                                   ended       ended        ended
                                                                  30 Sep      30 Sep       31 Mar
                                                                    2018        2017         2018
                                                               Unaudited   Unaudited      Audited
Weighted average number of shares                                                          
Weighted average                                       ('000)     82 744      87 613       86 073   
Diluted weighted average                               ('000)     84 032      88 167       87 670   
Headline earnings                                                                                   
Attributable earnings                                    (Rm)      150.4       142.9        264.1   
Disposal of fixed assets                                 (Rm)      (0.8)         1.0        (2.4)   
Profit on disposal of                                                                               
available-for-sale investments                           (Rm)          -       (0.8)        (1.2)   
Headline earnings                                                  149.6       143.1        260.5   
Earnings per share                                                                                  
Earnings per share                                    (cents)      181.8       163.1        306.8   
Diluted earnings per share                            (cents)      179.0       162.1        301.3   
Headline earnings per share                                                                         
Headline earnings per share                           (cents)      180.8       163.3        302.6   
Diluted headline earnings per share                   (cents)      178.0       162.2        297.1   
Dividends per share                                                                                 
Dividends paid per share                                                                            
Final dividend 2018 (2017)                            (cents)      100.0       100.0        100.0   
Interim dividend 2019 (2018)                          (cents)          -           -        100.0   
                                                                   100.0       100.0        200.0   
Dividends declared per share                                                                        
Interim dividend 2019 (2018)                          (cents)      105.0       100.0        100.0   
Final dividend 2018 (2017)                            (cents)          -           -        100.0   
                                                                   105.0       100.0        200.0   

Balance sheet
for the six months ended 30 September 2018
                                                             6 months      6 months     12 months
                                                                ended         ended         ended
                                                               30 Sep        30 Sep        31 Mar
                                                                 2018          2017          2018
                                                            Unaudited     Unaudited       Audited
                                                   Notes           Rm            Rm            Rm
Assets
Non-current assets
Property, plant and equipment                                   304.2         319.7         301.8
Trademarks                                                      115.9          64.4         117.8
Goodwill                                                        187.6           5.5         187.6
Deferred taxation                                               156.6          26.4          10.9
Retirement benefit asset                                         91.1          55.0          91.1
Financial assets - insurance investments             5.1        442.9         456.3         471.0
                                                              1 298.3         927.3       1 180.2
Current assets
Inventories                                                     750.5         523.3         579.7
Trade and other receivables                          4.1      3 347.3       4 341.4       4 200.0
Reinsurance assets                                   5.3            -          97.6             -
Insurance premiums in advance                                    17.4         200.3          75.6
Taxation                                                        171.2         166.0         136.5
Financial assets - insurance investments             5.1        133.6         244.3         135.4
Cash-on-hand and deposits                                       543.4         684.2         608.4
                                                              4 963.4       6 257.1       5 735.6
Total assets                                                  6 261.7       7 184.4       6 915.8
Equity and liabilities
Capital and reserves
Share capital and premium                                         0.9         494.3         425.0
Treasury shares                                                 (0.5)       (480.2)       (480.2)
Other reserves                                                   32.3          20.0          42.6
Retained earnings                                             4 805.0       5 381.4       5 461.1
                                                              4 837.7       5 415.5       5 448.5
Non-current liabilities
Long-term interest-bearing borrowings                  6            -         600.0             -
Deferred taxation                                                34.1          79.6         121.0
Retirement benefit liability                                     92.6         106.8          89.8
                                                                126.7         786.4         210.8
Current liabilities
Trade and other payables                                        512.7         410.9         379.2
Payments in advance                                             161.0         137.7         168.9
Insurance and reinsurance liabilities                5.4        121.7         399.1         176.8
Short-term interest-bearing borrowings                 6        501.9          34.8         531.6
                                                              1 297.3         982.5       1 256.5
Total equity and liabilities                                  6 261.7       7 184.4       6 915.8

Statement of Changes in Equity
for the six months ended 30 September 2018
                                                              6 months     6 months     12 months
                                                                 ended        ended         ended
                                                                30 Sep       30 Sep        31 Mar
                                                                  2018         2017          2018
                                                             Unaudited    Unaudited       Audited
                                                                    Rm           Rm            Rm

Share capital and premium
Opening balance                                                  425.0        588.5         588.5
Cost of own shares acquired                                     (51.5)       (94.2)       (163.5)
Treasury shares cancelled                                      (477.7)            -             -
Excess cost of cancelled shares                                  105.1            -             -
                                                                   0.9        494.3         425.0
Treasury shares
Opening balance                                                (480.2)      (480.2)       (480.2)
Cost of own shares acquired                                      (6.1)            -             -
Treasury shares cancelled                                        477.7            -             -
Share awards to employees                                          8.1            -             -
                                                                 (0.5)      (480.2)       (480.2)
Other reserves
Opening balance                                                   42.6          6.2           6.2
Other comprehensive income for the year
Fair value adjustments of available-for-sale
investments                                                     (22.8)          4.6          22.8
Disposal of available-for-sale investments
recognised                                                         0.3        (0.8)         (1.3)
Foreign currency translation reserve                              15.1          2.2        (11.6)
Share-based payment                                               17.4          7.8          26.5
Transfer of share-based payment reserve to
retained earnings on vesting                                    (20.3)            -             -
                                                                  32.3         20.0          42.6
Retained earnings
Opening balance                                                5 461.1      5 325.9       5 325.9
Net profit attributable to ordinary shareholders                 150.4        142.9         264.1
IFRS 9 Transitional adjustments                                (604.8)            -             -
Decrease in trade receivables:
Gross carrying value                                            (39.3)            -             -
Impairment provision                                           (802.6)            -             -
Deferred tax                                                     237.1            -             -
IFRS 15 Transitional adjustments                                (26.0)            -             -
Gross                                                           (36.1)            -             -
Deferred tax                                                      10.1            -             -
Distribution to shareholders                                    (82.8)       (87.4)       (171.5)
Excess cost of cancelled shares                                (105.1)            -             -
Share awards to employees                                        (8.1)            -             -
Transfer of share-based payment reserve
to retained earnings on vesting                                   20.3            -             -
Retirement benefit remeasurements                                    -            -          42.6
                                                               4 805.0      5 381.4       5 461.1
Balance as at the end of period                                4 837.7      5 415.5       5 448.5

Cash Flow Statement
for the six months ended 30 September 2018
                                                           6 months       6 months      12 months
                                                              ended          ended          ended
                                                             30 Sep         30 Sep         31 Mar
                                                               2018           2017           2018
                                                          Unaudited      Unaudited        Audited
                                                 Notes           Rm             Rm             Rm
Cash flow from operating activities
Cash flow from trading                                        195.5          285.7          606.3
Operating profit before investment income                     193.8          191.1          379.3
Adjusted for:
Share-based payments                                           17.4            7.8           26.5
Depreciation and amortisation                                  38.4           43.6           85.9
Movement in debtors impairment provision                     (64.5)           64.9           58.9
Movement in other provisions                                    8.8         (28.1)           47.8
Other movements                                                 1.6            6.4            7.9
Changes in working capital:                                    20.0           89.4          101.9
Increase in inventories                                     (160.7)         (88.4)         (27.3)
Decrease/(Increase) in trade and other receivables             37.8         (34.4)           66.8
Increase/(Decrease) in trade payables                         147.7          180.6          (0.4)
Payments in advance                                           (7.9)          (6.2)             25
Decrease in insurance premiums in advance                      58.2          202.9          327.6
Decrease in reinsurance asset                                     -           54.6          152.2
Decrease in reinsurance and insurance liabilities            (55.1)        (219.7)        (442.0)
Cash generated from operations                                215.5          375.1          708.2
Interest received                                              44.0           54.1           99.5
Interest paid                                                (14.2)         (37.0)         (88.1)
Taxation paid                                                (84.2)         (38.6)         (58.5)
                                                              161.1          353.6          661.1
Cash utilised in investing activities
Net disposals of insurance business investments               (1.8)           55.4          176.0
Purchase of insurance investments                            (63.1)         (22.5)         (81.5)
Disposals of insurance investments                             61.3           77.9          257.5
Acquisition of property, plant and equipment                 (38.9)         (20.8)         (44.4)
Purchase of businesses                             11        (16.5)              -        (234.6)
Proceeds on disposal of property, plant and
equipment                                                       1.2            1.5           12.4
                                                             (56.0)           36.1         (90.6)
Cash flow from financing activities
Dividends paid                                               (82.8)         (87.4)        (171.5)
Repayments of borrowings                                      (0.9)        (347.3)        (422.2)
Purchase of own shares                                       (57.6)         (94.2)        (163.5)
                                                            (141.3)        (528.9)        (757.2)
Net decrease in cash and cash equivalents                    (36.2)        (139.2)        (186.7)
Cash and cash equivalents at the beginning of the year        579.6          788.6          766.3
Cash and cash equivalents at the end of the year              543.4          649.4          579.6

Notes to the financial statements
for the six months ended 30 September 2018

1.     Basis of reporting

       The condensed consolidated interim financial statements are prepared in accordance
       with International Financial Reporting Standards, (IAS 34 Interim Financial Reporting),
       the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
       and Financial Pronouncements as issued by the Financial Reporting Standards Council.
       The accounting policies applied in the preparation of these interim financial statements
       are in terms of International Financial Reporting Standards and are consistent with those
       applied in the previous consolidated annual financial statements except as disclosed in
       note 2.

       The interim financial statements were prepared by the group's Finance Department
       under the supervision of the Chief Financial Officer, Mr J Bestbier CA(SA).

2.     Changes in accounting policies

2.1    Adoption of IFRS 9

       The group has adopted IFRS 9 with effect from 1 April 2018. The group has elected not
       to restate its comparative information as permitted by IFRS 9. Accordingly, the impact of
       IFRS 9 has been applied retrospectively with an adjustment to the group's opening
       retained earnings on 1 April 2018. Therefore comparative information in the prior period
       annual financial statements has not been amended for the impact of IFRS 9.

       The major changes in accounting policies arising from the adoption of IFRS 9 can be
       summarised as follows:

       -  the impairment of financial assets has been significantly amended by IFRS 9.
          The main impact being that IFRS 9 introduces an expected credit loss model when
          assessing the impairment of financial assets. The group has elected to use the
          simplified model for trade receivables while the general model applies to all other
          assets.
       -  the classification of financial instruments from IAS 39 to IFRS 9 categories. This has
          had no impact in the opening earnings of the group or the carrying values of the
          financial instruments.

       The adjustment to opening retained earnings for the transition to the expected credit
       loss model (impairment of trade receivables) as at 1 April 2018 is as follows:
                                                                                               Rm
       Decrease in trade receivables                                                      (841.9)
       Attributable deferred tax                                                            237.1
       Decrease in retained income as at 1 April 2018                                     (604.8)

       For full details of the adoption of IFRS 9, refer to the IFRS 9 Implementation Report
       included in these unaudited financial results for the six months ended 30 September 2018.

       Interest income

       The following change to the effective interest recognition policy was also required
       following the adoption of IFRS 9:

       Interest income is calculated by applying the effective interest rate to the gross carrying
       value of financial assets, except for financial assets that have subsequently become
       credit-impaired (or "stage 3"), for which interest income is calculated by applying the
       effective interest rate to their amortised cost (i.e. gross carrying value less impairment
       provision).

2.2    Adoption of IFRS 15

       The group has adopted IFRS 15 with effect 1 April 2018. In adopting IFRS 15, comparative
       financial information has not been restated and the impact of transitioning to IFRS 15 is
       reflected as an adjustment to opening earnings as at 1 April 2018.

       The effect of the adoption of IFRS 15 as at 1 April 2018 is reflected in Section 5 of the
       IFRS 9 Implementation Report.

       The following change to the accounting policy was required as a consequence of
       transitioning to IFRS 15:

       Cancelled sales

       It is policy to sell goods with the right of return in terms of current consumer legislation.
       Such sales are cancelled where the right of return is exercised. Under IFRS 15, a refund
       liability for the expected refunds is recognised as an adjustment to revenue, trade receivables and trade payables.
       The corresponding right to recover the product from the customer is an
       adjustment to cost of sales and inventory. The accumulated experience of the portfolio
       has been utilised to estimate such returns at the time of sale.

       The adjustment to opening retained earnings as at 1 April 2018 is as follows:
                                                                                               Rm
       Gross amount                                                                        (36.1)
       Reduction in trade receivables                                                      (52.7)
       Increase in accounts payable                                                         (9.9)
       Increase in inventory                                                                 26.5
       Attributable deferred tax                                                             10.1
       Decrease in retained earnings                                                       (26.0)

2.3    Segmental report

       The group's accounting policy states that the group's reportable segments are based on
       the chains that it operates and that these segments reflect how the group's businesses
       are managed and reported to the chief operating decision-makers. With the acquired
       businesses and the development of new business ventures, the reportable segments
       have changed to reflect the new strategic direction of the group.

       The reportable segments are as follows:

       -  traditional business which consists of credit-focused brands of Lewis,
          Best Home and Electric and Beares;
       -  cash business, being the newly acquired UFO business; and
       -  Omni-Channel business being newly launched INspire.

       In accordance with IFRS 8, the comparatives have been prepared as if these reportable
       segments were in place in the prior periods.

2.4    Share capital

       The group's accounting policy regarding share capital needs to be clarified in that where
       shares are cancelled, the consideration paid including the cost attributable to the
       acquisition will be applied to the share premium account and once the share premium
       account is fully utilised, then the excess will be allocated to retained earnings.

2.5    Reclassification

       The following reclassifications were made:

       Where customers have settled their accounts or where customers have paid in advance
       of Lewis performing under the maintenance contract, there was a remaining period
       under the said maintenance contract for which Lewis still had to provide a service. The
       gross carrying value of trade receivables was reduced to the extent of the remaining
       unearned maintenance income. This has now been reclassified to payments in advance
       and disclosed separately under current liabilities.

       Where customers have paid in advance for goods still to be delivered under the sales
       contract, this was previously included in trade and other payables. This has been
       reclassified as payments in advance.

       The reclassifications have the following impact on trade receivables, trade and other
       payables and payments in advance for the six months ended 30 September 2017 and the
       year ended 31 March 2018:
                                       September     September                 March        March
                           September        2017          2017      March       2018         2018
                                2017   Effect of    Previously       2018  Effect of   Previously
                            Restated      change      restated   Restated     change     restated
       Trade receivables     4 341.4       137.7       4 203.7    4 200.0      131.1      4 068.9
       Trade payables              -           -             -      379.2     (37.8)        417.0
       Payments
       in advance              137.7       137.7             -      168.9      168.9            -
       
2.6    Restatement of September 2017 financial results

       In the financial statements for the year ended 31 March 2018, the group reconsidered its
       accounting treatment with respect to the treatment of advertising rebates. As a result of
       reconsidering the accounting policy, the group concluded that it previously incorrectly
       classified these rebates , net of advertising expenses and changed the group's
       accounting policy for inventory. The change in the inventory policy was implemented in
       the results for the year ended 31 March 2018, but not for the six months ended
       30 September 2017. Accordingly, the reclassification referred to needs to be accounted
       for in the financial results for the six months ended 30 September 2017:
                                                                                             2017
                                                                                        Effect of
                                                                                           change
                                                                                               Rm
       Impact on balance sheet                                                                      
       Inventories                                                                            7.5   
       Retained earnings                                                                      5.4   
       Deferred tax liabilities                                                               2.1   
       Impact on income statement                                                                   
       Cost of sales                                                                       (10.3)   
       Other operating expenses - marketing                                                (11.0)   
       Attributable profit for the year                                                     (0.5)   
       Basic earnings per share                    (cents)                                  (0.6)   
       Diluted earnings per share                  (cents)                                  (0.5)   
       Basic headline earnings per share           (cents)                                  (0.6)   
       Diluted headline earnings per share         (cents)                                  (0.7)   
       Impact on statement of cash flows                                                            
       Cash flow from trading                                                               (0.6)   
       Changes in working capital                                                             0.6   
       Net movement in cash and cash equivalents                                                -   

                                                             6 months    6 months       12 months
                                                                ended       ended           ended
                                                              30 Sept     30 Sept        31 March
                                                                 2018        2017            2018
                                                            Unaudited   Unaudited         Audited
                                                                   Rm          Rm              Rm

3.     Trade and other receivables
3.1    Trade receivables
       Trade receivables at carrying value                    5 420.7       5 717.9       5 608.7
       Provision for impairment                             (2 357.6)     (1 625.5)     (1 619.5)
                                                              3 063.1       4 092.4       3 989.2
       Other receivables                                        284.2         249.0         210.8
                                                              3 347.3       4 341.4       4 200.0
       Debtors' impairment provision
       as percentage of net debtors                   (%)        43.5          28.4          28.9

       Amounts due from trade receivables after one year are reflected as current, as they form
       part of the normal operating cycle. The credit terms of trade receivables range from 6 to
       36 months.

       Credit risk of trade receivables

       Credit risk is the risk of suffering financial loss, should any of the group's customers and
       counterparties fail to fulfil their contractual obligations with the group. The main credit
       risk faced is that customers will not meet their payment obligations in terms of the sale
       agreements concluded.

       Credit granting

       The group has developed advanced credit-granting systems to properly assess the
       customer. The credit underwriting process flows through the following stages:

       -  Credit scoring: this involves the gathering of appropriate information from the client,
          use of credit bureaus and third parties such as employers. These input variables are
          run through the various credit scorecards. Lewis deals with its new customers and
          existing customers differently when credit scoring takes place.

          The process differs as follows:
          -  for new customers, application risk scorecards predict the risk with the emphasis
             for such an evaluation on information from credit bureaus and third-party
             information.
          -  for existing customers, behavioural scorecards have been developed to assess the
             risk through predictive behaviour with the emphasis on the customer's payment
             record with Lewis, bureau and other information being considered.

       -  Assessing client affordability: this process involves collecting information regarding
          the customer's income levels, expenses and current debt obligations. Lewis has its
          own priority expense model based on surveys conducted with customers in addition
          to the National Credit Regulator's expense table.
       -  Determining the credit limit for the customer: the customer's risk score determined
          by the scorecard together with the expense assessment and outstanding obligations
          are used to calculate a credit limit within the customer's affordability level.

       The credit granting systems enable the group to determine its appetite for risk.
       In determining the acceptable level of risk, the potential loss is weighed up against the
       revenue potential using the predictive behavioural models inherent in the credit-granting
       system. The group monitors any variances from the level of risk that has been adopted
       and adjusts the credit-granting process on a regular basis.

       The group manages its risk effectively by assessing the customer's ability to service the
       proposed monthly instalment. However, collateral exists in that ownership of
       merchandise is retained until the customer settles the account in full.

       Impairment provision

       The customers payment profile is managed by using payment ratings. Payment ratings
       are determined on an individual customer level and aggregated over all the customer's
       sub-accounts. Payment ratings measure the customers actual payments received over
       the lifetime of the account relative to the instalments due in terms of the contract. These
       payment ratings are used to categorise and report on customers at the store level to
       follow up the slow paying and non-performing customers.

       In accordance with IFRS 9, the group has elected to measure the impairment allowance
       equal to the lifetime expected credit losses ("ECL"). The lifetime ECL is calculated by
       determining cash flows on a probability weighted basis and discounting these at the
       effective interest rate in the contract, including initiation fees. The discounted cash flow
       is compared to the balance owing at point of assessment to determine the ECL.

       The probability weighted cash flows are calculated using the debtor book population's
       payment behaviour in combination with a transition matrix. The transition matrix and
       payment performance for each payment state has been developed utilising customer
       payment history. The transition matrix predicts the population's payment behaviour and
       probability of the account being in a particular payment state and transitioning into
       future payment states. The key states in the transitional matrix are the customer's
       lifetime payment rating, time on book and contractual term. For modelling purposes,
       cash flows are forecast until the account is written off or settled.

       The impairment provision applicable to the payment rating and the trending thereof, is
       correlated with collection rates and customer payment data produced by the credit risk
       information systems. The level of the impairment provision in terms of IFRS 9 will be
       monitored in a similar manner to that of the impairment provision under IAS 39.

       Contractual arrears

       The key aspect of the arrear calculation is Lewis' policy not to reschedule arrears nor to
       amend the terms of the original contract. In other words, the contractual arrears
       calculated is the actual arrears in terms of the originally signed agreement.

       From the onset of the agreement, contractual arrears is calculated by comparing
       payments made life to date with the originally calculated instalments due life to date,
       causing a customer who is paying less than the required contracted instalment to
       immediately fall into arrears. Once the customer exceeds the term of the agreement by
       paying less than the required contracted instalments, the full balance owing will be in
       arrears. The group does not consider arrears the leading indicator, but rather payment
       ratings for the reasons mentioned above.

       Combined impairment and contractual arrears table
       
       The table below reflects the following:
       -  A summary of the main groupings of payment ratings describing payment behaviour.
       -  For each of the main payment ratings the following is disclosed:
          -  Number of customers.
          -  Gross receivables or gross carrying value.
          -  Impairment provision allocated to each grouping.
          -  Contractual arrears for each grouping have been categorised by number of instalments in arrears.
       
       The table refered to above as set out below:

       Gross debtor analysis 

       30 September 2018 (IFRS 9)
                                                Total        Gross                                                    Instalments in arrears
                                               number     carrying   Impairment    Impairment       Total
                                                   of        value    provision     provision     arrears         1          2          3         >3
       Customer grouping                    customers        R'000        R'000             %       R'000     R'000      R'000      R'000      R'000
       Satisfactory paid                      408 005    3 103 155      666 767          21.5     530 205   148 582    102 629     75 903    203 091
       Customers who have paid
       70% or more of amounts due
       over the contract period.                69.9%        57.2%        28.3%                     24.3%
       Slow payers                             91 370      958 938      571 465          59.6     633 196    67 912     64 902     61 756    438 626
       Customers who have paid
       55% to 70% of amounts due
       over the contract period.                15.6%        17.7%        24.2%                     29.1%
       Non-performing accounts                 84 568    1 358 540    1 119 257          82.4   1 013 893    65 006     64 349     63 654    820 884
       Customers who have paid
       less than 55% of amounts due
       over the contract period.                14.5%        25.1%        47.5%                     46.6%
       Gross debtor analysis                  583 943    5 420 633    2 357 489          43.5   2 177 294   281 500    231 880    201 313  1 462 601
       
       Credit impaired debtors as at 30 September 2018
                                                                                 No payment
                                               Non-                                in three
       Credit impaired                   performing                      Debt   consecutive
       categories                          accounts   In duplum   counselling        months         Total
       Gross carrying value as at
       30 September 2018                  1 358 540      43 595       110 129       223 693     1 735 957
       Impairment provision             (1 119 257)    (29 137)      (52 573)     (108 254)   (1 309 221)
       Amortised cost                       239 283      14 458        57 556       115 439       426 736
       
       30 September 2017 (IAS 39)
                                                         Total                                                    Instalments in arrears
                                                        number         Gross   Impairment       Total
                                                            of   receivables    provision     arrears          1           2           3          >3
       Customer grouping                             customers         R'000        R'000       R'000      R'000       R'000       R'000       R'000
       Satisfactory paid
       Customers who have paid 70% or more of          409 445     3 505 117       20 437     561 863    153 413     107 496      80 648     220 306
       amounts due over the contract period. The
       provision in this category results from
       in duplum provision.                              67.7%         56.8%         1.3%
       Slow payers
       Customers who have paid 65% to 70% of            52 312       529 855      195 250     324 376     37 633      36 471      34 665     215 607
       amounts due over the contract period. The
       provision in this category for the current
       period ranges from 13% to 68% (Sept 2016:          8.6%          8.6%        12.0%
       14% to 66%) of amounts due.
       Non-performing accounts
       Customers who have paid between 55%              45 632       557 807      248 575     359 018     33 350      31 744      30 622     263 301
       and 65% of amounts due over the contract
       period. The provision in this category for
       the current period ranges from 23% to 79%
       (Sept 2016: 24% to 78%) of amounts due.            7.5%          9.0%        15.3%
       Non-performing accounts
       Customers who have paid 55% or less of           97 792     1 581 455    1 161 281   1 107 033     71 012      69 576      68 415     898 031
       amounts due over the contract period.
       The provision in this category for the
       current period ranges from 34% to 100%
       (Sept 2016: 33% to 100%) of amounts due.          16.2%         25.6%        71.4%
       Gross debtor analysis                           605 181     6 174 234    1 625 543   2 352 290    295 408     245 286     214 306   1 597 245
       Unearned provision                                          (456 294)
                                                                                    28.4%
       Gross carrying value                                        5 717 940
       
       April 2018 (Transition to IFRS 9)
                                                Total        Gross                                                     Instalments in arrears
                                               number     carrying   Impairment   Impairment       Total
                                                   of        value    provision    provision     arrears          1          2         3          >3
       Customer grouping                    customers        R'000        R'000            %       R'000      R'000      R'000     R'000       R'000
       Satisfactory paid
       Customers who have                     401 183    3 034 888      675 971         22.3     549 506    155 673    105 593    77 633     210 607
       paid 70% or more of
       amounts due over the
       contract period.                         68.4%        55.0%        27.9%                    24.1%
       Slow payers
       Customers who have                      97 251    1 039 846      608 716         58.5     665 893     72 167     69 010    64 474     460 242
       paid 55% to 70% of
       amounts due over the
       contract period.                         16.5%        18.9%        25.1%                    29.2%
       Non-performing
       accounts                                88 430    1 441 893    1 137 347         78.9   1 062 130     67 452     66 131    64 513     864 034
       Customers who have
       paid less than 55% of
       amounts due over the                     15.1%        26.1%        47.0%                    46.6%
       contract period.
       Gross debtor analysis                  586 864    5 516 627    2 422 034         43.9   2 277 529    295 292    240 734   206 620   1 534 883
       
       Credit impaired debtors as at 1 April 2018
                                                                               No payment
                                              Non-                               in three
       Credit impaired                  performing                    Debt    consecutive
       categories                         accounts   In duplum   counselling       months          Total
       Gross carrying value
       as at 1 April 2018                1 441 893      31 622       107 572      135 776      1 716 863
       Impairment provision            (1 137 347)    (19 525)      (54 342)     (59 360)    (1 270 574)
       Amortised cost                      304 546      12 097        53 230       76 416        446 289
       
       31 March 2018 (IAS 39)
                                                      Total                                                     Instalments in arrears
                                                     number         Gross    Impairment        Total
                                                         of   receivables     provision      arrears           1           2          3           >3
       Customer grouping                          customers         R'000         R'000        R'000       R'000       R'000      R'000        R'000
       Satisfactory paid                            401 183     3 521 017        18 039      549 506     155 673     105 593     77 633      210 607
       Customers who have paid 70% or
       more of amounts due over the
       contract period. The provision in this
       category results from in duplum
       provision.                                     68.4%         57.9%          1.1%
       Slow payers
       Customers who have paid 65% to 70%            51 311       522 578       196 021      308 975      37 594      36 230     33 546      201 605
       of amounts due over the contract
       period. The provision in this category
       for the current period ranges from 14%
       to 67% (2017: 13% to 72% ) of amounts           8.7%          8.6%         12.1%
       due.
       Non- performing accounts
       Customers who have paid between               45 940       563 339       262 519      356 918      34 573      32 780     30 928      258 637
       55% and 65% of amounts due over the
       contract period. The provision in this
       category for the current period ranges
       from 25% to 79% (2017: 24% to 86%)              7.8%          9.3%         16.2%
       of amounts due.
       Non- performing accounts
       Customers who have paid 55% or less           88 430     1 471 294     1 142 920    1 062 130      67 452      66 131     64 513      864 034
       of amounts due over the contract
       period. The provision in this category
       for the current period ranges from
       35% to 100% (2017: 35% to 100%) of             15.1%         24.2%         70.6%
       amounts due.
       Gross debtor analysis                        586 864     6 078 228     1 619 499    2 277 529     295 292     240 734    206 620    1 534 883
       Unearned provision                                       (469 549)
       Gross carrying value                                     5 608 678         28.9%

       Interest rate risk

       Interest rates charged to customers are fixed at the date the contract is entered into.
       Consequently, there is no interest rate risk associated with these contracts during the
       term of the contract.

       The average effective interest rate on trade receivables is 22.7% (2017: 22.6%) and the
       average term of the sale is 32.7 months (2017: 32.9 months).

       Fair value

       In terms of paragraph 29(a) of IFRS 7, disclosure of fair value is not required as trade
       receivables form part of a normal operating cycle and the carrying value of trade
       receivables is a reasonable approximation of fair value.

                                                              6 months      6 months      12 months
                                                                 ended         ended          ended
                                                               30 Sept       30 Sept       31 March
                                                                  2018          2017           2018
                                                             Unaudited     Unaudited        Audited
                                                                    Rm            Rm             Rm
3.2    Debtor costs
       Bad debts                                                 442.6         407.4          959.4
       Credit impairment adjustment                             (51.4)             -              -
       Bad debt recoveries                                      (26.2)        (28.0)         (61.0)
       Movement in debtors' impairment
       provision                                                (64.5)          64.9           58.9
       Closing balance                                         2 357.6       1 625.5        1 619.5
       Transition to IFRS 9                                    (802.6)             -              -
       Opening balance                                       (1 619.5)     (1 560.6)      (1 560.6)
                                                                 300.5         444.3          957.3
       Debtor costs as a percentage
       of trade receivables                            (%)         5.5           7.8           17.1

                                                              6 months      6 months      12 months
                                                                 ended         ended          ended
                                                               30 Sept       30 Sept       31 March
                                                                  2018          2017           2018
                                                             Unaudited     Unaudited        Audited
                                                                    Rm            Rm             Rm
4.     Revenue
4.1    Revenue                                                 2 904.9       2 658.6        5 556.8
       Retail revenue                                          1 973.4       1 623.7        3 524.2
       Merchandise sales                                       1 630.5       1 294.8        2 865.0
       Ancillary services                                        342.9         328.9          659.2
       Insurance revenue                                         326.9         356.4          671.0
       Effective interest income                                 604.6         678.5        1 361.6
       Finance charges and initiation fees                       
       earned                                                    656.0         678.5        1 361.6
       Credit impairment adjustment                             (51.4)             -              -

4.2    Retail revenue
       Traditional                                             1 734.8       1 623.7        3 458.2
       Cash retail                                               234.4             -           66.0
       Omni-Channel                                                4.2             -              -
                                                               1 973.4       1 623.7        3 524.2

                                                              6 months      6 months      12 months
                                                                 ended         ended          ended
                                                               30 Sept       30 Sept       31 March
                                                                  2018          2017           2018
                                                             Unaudited     Unaudited        Audited
                                                                    Rm            Rm             Rm
5.     Insurance
5.1    Insurance investments
       Financial assets
       - insurance investments
       Listed investments
       Fixed income securities
       - FVOCI/available-for-sale                                442.9         456.3          471.0
       Unlisted Investments
       Money market
       - FVOCI/available-for-sale                                133.6         244.3          135.4
                                                                 576.5         700.6          606.4
       Analysed as follows:
       Non-current                                               442.9         456.3          471.0
       Current                                                   133.6         244.3          135.4
                                                                 576.5         700.6          606.4
       Movement for the year
       Beginning of the year                                     606.4         750.8          750.8
       Additions to investments                                   63.1          22.5           81.5
       Disposals of investments                                 (61.7)        (77.9)        (255.7)
       Fair value adjustment                                    (31.3)           5.2           29.8
       End of the year                                           576.5         700.6          606.4

       Fair value hierarchy

       The following table presents the assets recognised and subsequently measured at fair
       value:
                                                                           Level 2          Total
                                                                                Rm             Rm
       30 September 2018
       Insurance investments:
       Fixed income securities - FVOCI                                       442.9          442.9
       Money market - FVOCI                                                  133.6          133.6
                                                                             576.5          576.5
       30 September 2017
       Insurance investments:
       Fixed income securities - Available-for-sale                          456.3          456.3
       Money market - Available-for-sale                                     244.3          244.3
                                                                             700.6          700.6
       31 March 2018
       Insurance investments:
       Fixed income securities - Available-for-sale                          471.0          471.0
       Money market - Available-for-sale                                     135.4          135.4
                                                                             606.4          606.4

       The categorisation of the valuation techniques used to value the assets at fair value are
       as set out in IFRS 13.

                                                             6 months     6 months      12 months
                                                                ended        ended          ended
                                                              30 Sept      30 Sept       31 March
                                                                 2018         2017           2018
                                                            Unaudited    Unaudited        Audited
                                                                   Rm           Rm             Rm
5.2    Investment income
       Interest - insurance business                             24.2         31.7           60.7
       Realised (loss)/gain on disposal
       of insurance investments                                 (0.4)          1.1            1.7
                                                                 23.8         32.8           62.4
5.3    Reinsurance assets
       Reinsurer's share of unearned premiums                       -         67.5              -
       Opening balance                                              -        123.8          123.8
       Recognised in income statement                               -       (56.3)        (100.6)
       Cessation of reinsurance                                     -            -         (23.2)
       Reinsurer's share of insurance provisions                    -         30.1              -
       Opening balance                                              -         28.4           28.4
       Recognised in income statement                               -          1.7         (13.5)
       Cessation of reinsurance                                     -            -         (14.9)
       Total reinsurance assets                                     -         97.6              -
5.4    Insurance and reinsurance liabilities
       Unearned premiums                                         77.0        243.5          133.2
       Opening balance                                          133.2        412.1          412.1
       Recognised in income statement                          (56.2)      (168.6)        (278.9)
       Due to reinsurers                                            -          0.8            0.9
       Other insurance and reinsurance liabilities               44.7        154.8           42.7
       Opening balance                                           42.7        206.4          206.4
       Recognised in income statement                             2.0       (51.6)        (125.6)
       Cessation of reinsurance                                     -            -         (38.1)
       Total insurance and reinsurance liabilities              121.7        399.1          176.8

6.     Borrowings, banking facilities and cash
                                                             6 months     6 months      12 months
                                                                ended        ended          ended
                                                              30 Sept      30 Sept       31 March
                                                                 2018         2017           2018
                                                            Unaudited    Unaudited        Audited
                                                                   Rm           Rm             Rm
       Interest-bearing borrowings
       Long-term
       Banking facilities                                           -        600.0              -
                                                                    -        600.0              -
       Short-term
       Banking facilities and bond                              501.9            -          502.8
       Bank overdrafts                                              -         34.8           28.8
                                                                501.9         34.8          531.6
       Cash and cash equivalents
       Cash on hand                                           (543.4)      (684.2)        (608.4)
       Net borrowings                                          (41.5)       (49.4)         (76.8)
       Unutilised facilities
       Banking facilities                                     2 191.5      2 199.4        1 618.4
       Domestic Medium Term Note Programme                    2 000.0      2 000.0        2 000.0
                                                              4 191.5      4 199.4        3 618.4
       Available facilities                                   4 150.0      4 150.0        3 541.6
       Interest rate profile
       Interest rate profile of borrowings is as
       follows:
       Bank borrowings at interest rates linked
       to three month JIBAR. The weighted
       average interest rate at the end of the
       reporting period is 9.32% (2017: 9.28%)                  501.9        600.0          502.8
       Capital management
       Net borrowings                                          (41.5)       (49.4)         (76.8)
       Shareholder's equity                                   4 837.7      5 415.5        5 448.5
       Gearing ratio                         (%)                (0.9)        (0.9)          (1.4)

7.     Reportable segments
                                             Traditional   Cash retail     Omnichannel      Group
       Primary                                        Rm            Rm              Rm         Rm
       For the six months ended
       30 September 2018
       (Unaudited)
       Revenue                                   2 666.3         234.4             4.2    2 904.9
       Operating profit before
       investment income                           186.8          21.6          (14.6)      193.8
       Operating margin        (%)                   7.0           9.2         (316.7)        6.7
       Segment assets                            3 690.9          93.2            24.7    3 808.8
       For the six months ended
       30 September 2017
       (Unaudited)
       Revenue                                   2 658.6             -               -    2 658.6
       Operating profit before                         
       investment income                           191.1             -               -      191.1
       Operating margin        (%)                   7.2             -               -        7.2
       Segment assets                            4 478.7             -               -    4 478.7
       For the twelve months
       ended 31 March 2018
       (Audited)
       Revenue                                   5 490.8          66.0               -    5 556.8
       Operating profit before
       investment income                           383.5         (4.2)               -      379.3
       Operating margin        (%)                   7.0         (6.4)               -        6.8
       Segment assets                            4 327.9         110.0               -    4 437.9

                                            South Africa       Namibia            BLS*      Group
       Geographical                                   Rm            Rm              Rm         Rm
       For the six months ended
       30 September 2018
       (Unaudited)
       Revenue                                   2 425.9         246.7           232.3    2 904.9
       For the six months ended
       30 September 2017
       (Unaudited)
       Revenue                                   2 159.3         258.6           240.7    2 658.6
       For the twelve months
       ended 31 March 2018
       (Audited)
       Revenue                                   4 551.2         497.6           508.0    5 556.8
       * Botswana, Lesotho and Swaziland
                                                              6 months     6 months     12 months
                                                                 ended        ended         ended
                                                               30 Sept      30 Sept      31 March
                                                                  2018         2017          2018
                                                             Unaudited    Unaudited       Audited
                                                                    Rm           Rm            Rm
8.     Gross profit
       Merchandise sales                                       1 630.5      1 294.8       2 865.0
       Cost of merchandise sales                               (980.0)      (755.5)     (1 677.8)
       Merchandise gross profit                                  650.5        539.3       1 187.2
       Gross profit percentage                    (%)             39.9         41.7          41.4

9.     Taxation
       Taxation charge
       Normal taxation
       Current year                                               51.8         53.8          93.5
       Prior year                                                (2.3)            -         (0.6)
       Deferred taxation
       Current year                                               16.0         11.5          29.8
       Prior year                                                  7.3            -         (6.8)
       Withholding tax                                               -            -          12.5
       Taxation per income statement                              72.8         65.3         128.4
       Tax rate reconciliation
       Profit before taxation                                    223.2        208.2         392.5
       Taxation calculated at a tax rate of 28%
       (2017: 28%)                                                62.5         58.3         109.9
       Differing tax rates in foreign countries                    1.7          3.5           4.5
       Disallowances                                               9.6          3.5          22.8
       Exemptions                                                (6.0)            -        (13.9)
       Prior years                                                 5.0            -         (7.4)
       Withholding tax                                               -            -          12.5
       Taxation per income statement                              72.8         65.3         128.4
       Effective tax rate                         (%)             32.6         31.4          32.7

10.    Regulatory matters

10.1   Pending matters 

       The group has the following pending matters:

       -  Referrals by National Credit Regulator to the National Consumer Tribunal ("NCT")
          Second referral (April 2016): relating to club fees and extended maintenance
          contracts charged to customers.
       -  High Court summonses (February/April 2016)
          These were summonses issued at the direction of Summit Financial Partners by
          28 plaintiffs, being existing or previous customers of Lewis, relating to delivery
          charges and extended maintenance contracts.

       -  Homechoice Application (September 2018)
          Homechoice's application launched in the Western Cape High Court relates to Lewis'
          INspire business and certain intellectual property rights which Homechoice alleges
          Lewis has breached.

       -  Referral by Summit Financial Partners ("Summit") to the National Consumer
          Tribunal ("NCT")
          In December 2017, Summit sought leave to self-refer a complaint to the NCT
          regarding the delivery fees charged by Lewis subsequent to NCR, after investigation,
          declining to refer the matter to the NCT.

10.2   Progress

       The following progress has been made on the pending matters in the 6 months ended
       30 September 2018:

       -  Second Referral: On 30 April 2018, the High Court handed down judgment in Lewis'
          favour with regard to the appeal by the NCR.  The matter was dismissed with costs
          against the NCR. The NCR has appealed the High Court's judgment, and its appeal to
          the Supreme Court of Appeal will be heard in due course.

       -  High Court summonses: On 4 August 2017, the plaintiffs' application for leave to
          amend the particulars of their claim was dismissed with a cost order being granted in
          favour of Lewis. The plaintiffs have again sought to amend the particulars of their
          claim and Lewis has objected thereto. The plaintiffs' second application for leave to
          amend will be heard on 29 November 2018.

       -  Homechoice Application: Lewis has filed a notice to oppose Homechoice's
          application, and has also launched its own application against Homechoice related to
          a number of irregularities in the documentation of Homechoice's application. Lewis'
          application will be heard in the Western Cape High Court in February 2019.
 
                                                                6 months    6 months    12 months
                                                                   ended       ended        ended
                                                                 30 Sept     30 Sept     31 March
                                                                    2018        2017         2018
                                                               Unaudited   Unaudited      Audited
                                                                      Rm          Rm           Rm
11.    Purchase of businesses
       Trademarks                                                      -           -         55.7
       Goodwill                                                        -           -        182.4
       Property, plant and equipment                                   -           -          4.9
       Inventory                                                       -           -        116.4
       Trade receivables                                               -           -            -
       Other receivables                                               -           -          5.4
       Cash and cash equivalents                                       -           -         73.0
       Short term borrowings                                           -           -        (0.3)
       Taxation                                                        -           -        (8.2)
       Trade and other payables                                        -           -       (93.5)
       Deferred tax                                                    -           -       (11.7)
       Total consideration                                             -           -        324.1
       Outflow of cash to acquire subsidiary,
       net of cash acquired
       Cash consideration                                              -           -        324.1
       Less: Cash balances acquired                                    -           -       (73.0)
       Less: Deferred purchase consideration                        16.5           -       (16.5)
       Net outflow of cash - investing activities                   16.5           -        234.6

       Purchase of United Furniture Outlets (2018)

       On 1 February 2018, Lewis Stores Proprietary Limited ("Lewis Stores"), a wholly-owned
       subsidiary of the group, obtained control of United Furniture Outlets Proprietary Limited
       ("UFO"), a cash furniture retailer, by acquiring 100% of the issued ordinary share capital
       and voting rights and all shareholders´ claims against UFO from the shareholders.

       UFO is an independent, cash furniture retailer. It sells a
       variety of furniture including lounge, bedroom and dining room products. UFO is
       recognised as a luxury brand with a value offering to the upper consumer spectrum,
       namely LSM 9-10+. The business was established in 2004 and currently more than half of
       its stores are located in Gauteng.

       The total acquisition consideration was a cash amount of R324.1 million.

12.    New Standards and Interpretations not yet effective

12.1   IFRS 16

       IFRS 16 (Leases) replaces IAS 17 with effect from the year ending 31 March 2020. IFRS 16
       will result in most leases being recognised in the statement of financial position, as the
       distinction between operating and finance leases has been removed. Under the new
       standard, an asset representing the right to use the leased item and a financial liability, to
       pay rentals, will be recognised. The only exceptions are short-term and low-value leases.

       The new standard will primarily affect the accounting for operating leases relating to
       retail stores. As at the reporting date the group has non-cancellable operating lease
       commitments of R555.1 million. The group has not yet determined the extent of the right
       of use asset nor the liability for future payments and how this will affect profit and
       classification of cash flows.

12.2   IFRS 17

       IFRS 17 which replaces IFRS 4, applies to insurance contracts and reinsurance contracts.
       The standard will apply to the group for the year ending 31 March 2022. Management has
       not yet performed an assessment of the potential impact of the implementation of this
       new standard.

Key ratios
                                                             6 months     6 months      12 months
                                                                ended        ended          ended
                                                              30 Sept      30 Sept       31 March
                                                                 2018         2017           2018
                                                            Unaudited    Unaudited        Audited
                                                                   Rm           Rm             Rm
Operating efficiency ratios
Gross profit margin                                (%)           39.9         41.6           41.4
Operating profit margin                            (%)            6.7          7.2            6.8
Number of stores at period-end                                    779          744            773
Number of employees                          (average)          8 039        8 180          8 093
Trading space                                    (sqm)        255 829      237 728        258 463
Stock turn (annualised)*                       (times)            2.5          2.9            2.8
Current ratio*                                                    3.8          6.4            3.9
Credit ratios
Credit sales                                       (%)           57.1         68.8           65.7
Debtor costs as a % of trade receivables           (%)            5.5          7.8           17.1
Debtors' impairment provision
as a percentage of trade receivables*              (%)           43.5         28.4           43.9
Arrear instalments on satisfactory accounts
as a percentage of trade receivables               (%)            9.8          9.8            9.8
Arrear instalments on slow-paying and
non-performing accounts as a percentage
of trade receivables                               (%)           30.4         31.3           30.8
Credit applications decline rate                   (%)           38.5         37.4           37.1
Shareholder ratios
Net asset value per share*                     (cents)          5 922        6 309          5 778
Gearing ratio                                      (%)          (0.9)        (0.9)          (1.6)
Dividend payout ratio                              (%)           57.0         66.6           71.1
ROE (annualised, average shareholder's equity)
- after tax*                                       (%)            6.2          5.2            5.1
ROCE (annualised, average capital employed)
- after tax*                                       (%)            5.4          5.0            5.1
Average return on assets (annualised, average
capital employed) - before tax*                    (%)            7.2          6.4            6.6

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 81 694 000 shares in issue (2017: 85 848 000).
3. Total assets exclude the deferred tax asset and the reinsurance asset.
4. Trade receivables refers to the gross carrying value.
5. Ratios marked with an asterisk calculated assuming that the IFRS 9, IFRS 15 and reclassifications were implemented as at 31 March 2018.

IFRS 9 IMPLEMENTATION REPORT
(AS AT 1 APRIL 2018)

1. Statement of responsibility

2. Auditor's assurance report

3. Executive summary
 3.1 Objectives of the IFRS 9 Implementation Report
 3.2 Introduction of IFRS 9
 3.3 Impact of IFRS 9 on the group's business model and credit practices
 3.4 Implementation of IFRS 9
 3.5 Overview of IFRS 9 transitional impact

4. Basis of preparation, accounting policies and significant judgements
 4.1 Basis of preparation
 4.2 Changes in accounting policies for financial instruments
 4.3 Accounting policies for financial instruments – new and amended
  4.3.1. Business model assessment
  4.3.2 Solely payment of principal and interest (SPPI)
  4.3.3 Impairment of financial assets
   4.3.3.1 Impairment of financial assets (excluding trade receivables)
   4.3.3.2 Impairment of trade receivables
  4.3.4 Bad debts
  4.3.5 Interest income
 4.4 Significant accounting estimates and judgements for financial instruments
  4.4.1 Trade receivables
  4.4.2 Bad debts
  4.4.3 Insurance investments

5. Impact of IFRS 9, IFRS 15 and Reclassifications
 5.1 Balance sheet
 5.2 Statement of changes in equity
 5.3 Accounts receivable
  5.3.1 Trade receivables
  5.3.2 Reconciliation between IAS 39 and IFRS 9
   5.3.2.1 Impairment provision
  5.3.3 Combined impairment and contractual arrears table for IFRS 9
  5.3.4 Credit impaired trade receivables
 5.4 Financial instruments – categories
 5.5 Summary of adjustments

Directors' responsibility statement relating to IFRS 9 Implementation Report
as at 1 April 2018

Lewis Group Limited formally implemented new standards on 1 April 2018. The IFRS 9
Implementation Report ("Implementation Report") has been presented based on the group's
31 March 2018 financial information to illustrate the impact of implementing the new standards on
1 April 2018 (refer section 5 pages 55 to 62).

The directors of Lewis Group Limited and its subsidiaries ("the group") are responsible for the
preparation and fair presentation of the financial information set out on pages 41 to 62. The
Implementation Report sets out the effect of the adoption of new standards on the balance sheet,
statement of changes in equity and selected notes as at 1 April 2018. The directors have approved
the accounting policies applied and established that reasonable and sound judgements and
estimates have been made by management when preparing the balance sheet, statement of
changes in equity and selected notes.

Adequate accounting records and an effective system of internal controls have been maintained
to ensure the integrity of the underlying information. For the year ended 31 March 2018, internal
audit has performed a written assessment confirming the effectiveness of the group's system of
internal control and risk management, including internal financial controls. The board is satisfied
that the system of internal controls, which includes internal financial controls, operates effectively.

The Implementation Report has been prepared on the going concern basis. In assessing whether
the going concern basis is appropriate, the directors have reviewed the business of the group
together with budget and cash flows for the year to 31 March 2019 as well as the current financial
position and have no reason to believe that the group will not be a going concern for the
foreseeable future.

The group requested its external auditors, PricewaterhouseCoopers, to perform a reasonable
assurance engagement, in accordance with ISAE 3420 Assurance Engagements, in respect of the
information contained in sections 4 and 5 of the group's Implementation Report as at 1 April 2018.

The Implementation Report of the group as at 1 April 2018, has been approved by the directors
and signed on their behalf by:

H Saven                                J Enslin                               J Bestbier
Chairman                               Chief Executive Officer                Chief Financial Officer

Cape Town
21 November 2018

Independent auditor's assurance report
to the Directors of Lewis Group Limited

An assurance report (in terms of ISAE 3420 Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information) has been issued by the Group's auditors in respect of the Pro forma financial included
in section 5 of the IFRS 9 Implementation Report. A copy of the assurance report is available for inspection 
at the registered office of the company.

3.      Executive summary

3.1     Objectives of the IFRS 9 Implementation Report

        The objective of the IFRS 9 Implementation Report is to detail the impact of the
        transition from IAS 39 to IFRS 9. Also included in this report are the adjustments relating
        to the implementation of IFRS 15 and reclassifications made in order to provide a full
        understanding of the impact of the new standards adopted as at 1 April 2018.

3.2     Introduction of IFRS 9

        The International Accounting Standards Board (IASB) issued International Financial
        Reporting Standard 9 - Financial Instruments (IFRS 9), effective for the group for the 
        financial year ending 31 March 2019. IFRS 9 replaces IAS 39 - Financial Instruments: 
        Recognition and Measurements (IAS 39). Lewis Group formally transitioned to IFRS 9 on 
        1 April 2018. This Implementation Report is based on the group's 31 March 2018 financial 
        information to illustrate the impact of implementing IFRS 9 on 1 April 2018.

        The objective of IFRS 9 is to establish principles for the reporting of financial assets and
        financial liabilities in particular relating to the classification and measurement of financial
        assets, hedging and the introduction of the expected credit loss (ECL) impairment
        provisioning model. The most significant impact of IFRS 9 on the group therefore relates
        to the implementation of the ECL impairment model on the measurement of receivables.
        This disclosure document explains the new ECL methodology, its implications for the
        group and the main judgements the group has made.

        In terms of IAS 39, receivables measured at amortised cost were impaired when there
        was objective evidence of default as a result of events that occurred after the initial
        recognition. Therefore the incurred loss model applied. IFRS 9 introduces an ECL
        model which is forward looking. In terms of the transitional requirements of IFRS 9, the
        group has elected not to restate prior periods but to adjust the opening retained
        earnings as at 1 April 2018.

        The financial impact on the group of IFRS 9 and IFRS 15 adjustments as at 1 April 2018 is as follows:

                Group retained earnings                         Impairment provision (pre-tax)
                -R631 million                                   +R803 million
                (R878 million pre-tax)

3.3     Impact of IFRS 9 on the group's business model and credit practices

        The adoption of IFRS 9 does not impact on the group's credit management practices
        and business model. The group's credit management strategies will continue to be
        consistently applied under IFRS 9. The key elements being:

        Credit granting

        The group has advanced credit granting systems to properly assess the customer. This
        includes risk scorecards for new customer applications and behavioural scorecards for
        existing customers. Processes to assess client affordability and to determine credit limits
        are supported by comprehensive interviews by the store manager and a head office
        compliance call centre.

        Credit collections
 
        Lewis operates a decentralised credit collection process with store based follow up.
        A fully integrated information system supports the administration of the store
        collection process.
 
        Debtor performance management
 
        The customer's payment performance is managed using payment ratings. Payment
        ratings measure the customer's actual payments received over the lifetime of the
        account relative to the instalments due in terms of the contract. These payment ratings
        are used to categorise customers and drive the follow up of slow paying and non-
        performing customers at store level. The payment rating remains integral to the
        calculation of the debtor's impairment provision. The estimated cash flows are projected
        utilising the payment ratings which are key to the ultimate cash recovery expected from
        each individual customer. The payment behaviour of the debtors book is continuously
        monitored by senior management to analyse and assess the state of the debtors book
        and identify trends early. The key indicators reviewed include the following:
 
        Number of satisfactorily paid customers
 
        The key operational objective is to have as many satisfactory paid customers as possible.
        Satisfactory paid customers are the source of future repeat business and one of the core
        strengths of the business model.
 
        Level of impairment provision
 
        The impairment provision applicable to the payment rating and the trending thereof, is
        correlated with collection rates and customer payment data produced by the credit risk
        information systems. Going forward the level of the impairment provision in terms of
        IFRS 9 will be monitored in a similar manner to that of the impairment provision under
        IAS 39.
 
        Contractual arrears
 
        It is Lewis' policy not to reschedule arrears nor to amend the terms of the original
        contract. The arrears presented in this document are the actual contractual arrears in
        terms of the original agreement. A customer who is paying less than the required
        contracted instalment immediately falls into arrears and once the customer exceeds the
        term of the agreement by paying less than the required contracted instalments, the full
        balance owing falls into arrears.
 
        Write-off policy
 
        Accounts in default are written off where the customer's payment behaviour cannot be
        rehabilitated after all reasonable commercially and economically appropriate collection
        methods have been utilised and exhausted. Bad debts result where the customer's
        account balance has been written off or the goods repossessed. The decision to write off
        takes into account, where applicable, the payment rating, recent payment behaviour, the
        number of arrear instalments, whether the customer has exceeded the contractual term
        and the age on book of the account.

3.4     Implementation of IFRS 9

        An effective governance and control framework has been in place during the transition
        to IFRS 9. The group established an Implementation Committee with representation from
        all relevant departments reporting directly into the Audit Committee. The committee
        focused on the development of predictive cash flow models, impairment methodologies,
        output validation, testing and analysis. The ECL cash flow and impairment methodology
        has been developed with the necessary input from expert service providers.
        PricewaterhouseCoopers has performed a reasonable assurance engagement in
        accordance with ISAE 3420 Assurance Engagement in respect of the compilation of the
        information contained in sections 4 and 5 of the group's Implementation Report.

        The key judgements made by the group upon the implementation of IFRS 9 have been
        approved by the Board through the IFRS 9 sub-committee of the Audit Committee.
        Ongoing decision-making is governed by the appropriate work group forum, which has
        been enabled to implement IFRS 9. IFRS 9 outlines a three stage general or a two stage
        simplified model.

        General model

        Stage 1 
        Performing accounts which have not deteriorated significantly in credit risk since
        origination have a 12-month ECL provision.

        Stage 2
        Accounts which have experienced a significant increase in credit risk since origination
        have a lifetime ECL provision.

        Stage 3
        Accounts where there is objective evidence of credit impairment, recognise interest at
        the effective interest rate on the gross carrying value less impairment provision.

        Simplified model

        Stage 2
        IFRS 9 allows for a simplified model which eliminates the need to calculate the 12-month
        ECL provision for stage 1 accounts. Lewis has elected to apply for the simplified model for
        trade receivables and recognises expected credit losses over the lifetime of the trade
        receivable at initial recognition.

        Stage 3
        The criteria for stage 3 credit impaired accounts is consistent with internal credit risk
        management practices. These are:

        -  accounts which are non-performing;
        -  accounts within the ambit of the in duplum rule;
        -  accounts under debt counselling;
        -  accounts where the customer has missed three full consecutive instalments.

        Impairment methodology

        The lifetime ECL is calculated by determining cash flows on a probability weighted basis
        and discounting these at the effective interest rate in the contract, including initiation
        fees. The discounted cash flow is compared to the balance owing at point of assessment
        to determine the ECL.

        The probability weighted cash flows are calculated using the debtor book population's
        payment behaviour in combination with a transition matrix. The transition matrix and
        payment performance for each payment state has been developed using the group's
        customer payment history. The transition matrix predicts the population's payment
        behaviour and probability of the account being in a particular payment state and
        transitioning into future payment states. The key states in the transitional matrix are the
        customer's lifetime payment rating, time on book and contractual term. For modelling
        purposes, cash flows are forecast until the account is written off or settled.

        An economic overlay model was applied. The adjustment required was immaterial.

3.5     Overview of IFRS 9 transitional impact

        The total balance sheet impairment provision increased by R803 million from R1.6 billion
        as at 31 March 2018 to R2.4 billion as at 1 April 2018. This is mainly driven by an increase
        in impairment of R658 million in the satisfactory category of accounts due to the forward
        looking nature of the expected loss provisioning methodology. The table below illustrates
        the impact of transitioning from IAS 39 to IFRS 9. Going forward, trade receivables will
        be reflected at gross carrying value which means that receivables will be presented after
        deducting the unearned provisions. Refer note 5.3 and the tables overleaf:

        IFRS 9
                                                       Total       Gross
                                                      Number    carrying   Impairment       Total
                                                          of       value    provision     arrears
        1 April 2018                               customers       R'000        R'000       R'000
                       Customers fully up
                       to date including             401 183   3 034 888      675 971     549 506
                       those who have
        Satisfactory   paid 70% or more
        paid           of amounts due                            
                       over the contract               68.4%       55.0%        27.9%       24.1%
                       period
                       Customers who
                       have paid between              97 251   1 039 846      608 716     665 893
        Slow           70% and 55% of
        payers         amounts due over
                       the contract                    16.5%       18.9%        25.1%       29.3%
                       period
                       Customers who                  88 430   1 441 893    1 137 347   1 062 130
        Non-           have paid 55% or
        performing     less of amounts
        accounts       due over the
                       contract period                 15.1%       26.1%        47.0%       46.6%
        Total                                        586 864   5 516 627    2 422 034   2 277 529
        Gross carrying value                                   5 516 627        43.9%

        The group has re-assessed its categories and aligned them with internal credit
        management policies. As a consequence of this re-assessment, the previously non-
        performing category where customers have paid between 55% and 65% of amounts due
        has been included with the slow paying customer category.

        IAS 39                                      Total
                                                   Number        Gross     Impairment       Total
                                                       of  receivables      provision     arrears
        31 March 2018                           customers        R'000          R'000       R'000
                       Customers fully up
                       to date including          401 183    3 521 017         18 039     549 506
                       those who have
        Satisfactory   paid 70% or more
        paid           of amounts due
                       over the contract            68.4%        57.9%           1.1%       24.1%
                       period
                       Customers who
                       have paid between           51 311      522 578        196 021     308 975
        Slow           70% and 65% of
        payers         amounts due over
                       the contract
                       period                        8.7%         8.6%          12.1%       13.6%
                       Customers who
                       have paid between           45 940      563 339        262 519     356 918
        Non-           65% and 55% of
        performing     amounts due over
        accounts       the contract
                       period                        7.8%         9.3%          16.2%       15.7%
                       Customers who               88 430    1 471 294      1 142 920   1 062 130
        Non-           have paid 55% or
        performing     less of amounts
        accounts       due over the
                       contract period              15.1%        24.2%          70.6%       46.6%
        Total                                     586 864    6 078 228      1 619 499   2 277 529
        Unearned provisions                                  (469 549)
        Gross carrying value                                 5 608 679          28.9%

4.      Basis of preparation, accounting policies
        and significant judgements

4.1     Basis of preparation

        The group has adopted IFRS 9 with effect from 1 April 2018, accordingly accounting
        policies have been aligned with the requirements of IFRS 9. In adopting IFRS 9,
        comparative financial information has not been restated. The impact of transitioning is an
        adjustment to opening reserves as at 1 April 2018.

        The impact of the adoption of IFRS 9 has been detailed and quantified below. Section 5
        also includes the impact of IFRS 15 and reclassifications in addition to IFRS 9.

        Section 4.2: Changes in accounting policies for financial instruments

        This provides a summary of the key changes in the accounting policies resulting from the
        adoption of IFRS 9.

        Section 4.3: Accounting policies for financial instruments

        This details the new and amended accounting policies for financial instruments as a
        result of the transition to IFRS 9.

        Section 4.4: Significant accounting estimates and judgements for financial
        instruments

        This section details the significant judgements exercised and estimates made
        on application of the financial instrument policies adopted with the transition
        to IFRS 9.

        Section 5: Impact of IFRS 9, IFRS 15 and Reclassifications

        This section sets out adjustments and disclosures required in terms of the transitional
        guidance provided in IFRS 9. Other adjustments for IFRS 15 and reclassifications are also
        included. Reconciliations between the financial information as at 31 March 2018 and the
        financial information as at 1 April 2018 as a result of the implementation of IFRS 9, IFRS 15
        and reclassifications are provided.

        The group's balance sheet, statement of changes in equity and selected notes in the
        Implementation Report have been prepared on the historical cost basis with the
        exception of financial assets measured at fair value through other comprehensive income and
        financial assets and liabilities that are either required or have been elected to be fair
        value through profit and loss.

4.2     Changes in accounting policies for financial instruments

        The major changes in accounting policies arising from the adoption of IFRS 9 can be
        summarised as follows:

        -  the impairment of financial assets has been significantly amended by IFRS 9.
           The main impact being that IFRS 9 introduces an expected credit loss model when
           assessing the impairment of financial assets. The group has elected to use the
           simplified model for trade receivables while the general model applies to all other
           financial assets. The approach to the impairment of financial assets and the
           underlying models (i.e. general and simplified models) appear in the following notes:
           -  Impairment of financial assets, excluding trade receivables (section 4.3.3.1)
           -  Impairment of trade receivables (section 4.3.3.2)
        -  the classification of financial instruments and corresponding accounting treatment
           has been amended by IFRS 9. The classification and corresponding accounting
           treatment appear in the following notes:
           -  Business Model Assessment (section 4.3.1)
           -  Solely payment of principle and interest (SPPI) (section 4.3.2)
        -  bad debts policy as it is a requirement of IFRS 9 to write off the asset when there is
           no reasonable expectations of recovery (section 4.3.4)
        -  interest income policy to cater for the requirements of IFRS 9 that the effective
           interest rate on credit impaired assets must be applied to its amortised cost
           i.e. gross carrying value less impairment provision (section 4.3.5).

4.3     Accounting policies for financial instruments
        - new and amended due to IFRS 9

        Accounting policies related to financial instruments have been significantly amended as a
        consequence of the implementation of IFRS 9. The following significant changes to the
        accounting policies for financial instruments have been made:

4.3.1   Business model assessment

        For debt instruments, IFRS 9 requires that a business model assessment is carried out
        which reflects how the group manages the assets in order to generate cash flows.
        The assessment is at a portfolio level which is the level at which the portfolio is
        managed. Factors considered in determining the business model for a group of assets
        include past experience on how cash flows were collected, how the assets'
        performance is evaluated and reported, risks that affect the assets performance and
        how these risks are assessed and managed and the reasons, frequency, volume of
        timing of sales in prior periods.

        With the adoption of IFRS 9, debt instruments have been classified into the following
        categories:

        -  Amortised cost
        -  Fair value through other comprehensive income ("FVOCI")
        -  Fair value through profit and loss ("FVTPL")

        The group's business models for managing debt instruments and the contractual cash
        flow characteristics of the debt instruments determine the following categories:

        Amortised cost (hold to collect):

        Financial assets within a business model whose objective is solely to hold assets
        to collect contractual cash flows and the contractual terms of these assets are solely
        payments of principal and interest (refer section 4.3.2).

        FVOCI (hold to collect and sell):

        Financial assets held within a business model whose objective is both to hold these
        assets to collect contractual cash flows and to sell these assets and that the
        contractual terms of financial assets are solely payments of principal and interest.
        (refer section 4.3.2)

        FVTPL (hold to sell/manage in a fair value basis):

        Financial assets are held within a business model where the objective is to sell and
        manage these assets on a fair value basis. In addition, financial assets can also be
        included in this category if:

        -  the use of this classification removes or significantly reduces an accounting
           mismatch;
        -  financial assets which do not meet the criteria for amortised cost or FVOCI.

        The group has no equity investments and, therefore, the irrevocable election
        to present an equity investment as FVOCI in paragraph 5.7.5 of IFRS 9 is not
        applicable.

4.3.2   Solely payment of principal and interest (SPPI)

        Where the business model is to hold assets to collect contractual cash flows or to
        collect contractual cash flows and sell, the group assesses whether the assets' cash
        flows represent solely payments of principal and interest (the SPPI test). In making this
        assessment, the group considers whether the contractual cash flows are consistent
        with a basic lending arrangement. Where the contractual terms are inconsistent with a
        basic lending arrangement, the asset is classified and measured at FVTPL.

4.3.3   Impairment of financial assets

4.3.3.1 Impairment of financial assets (excluding trade receivables)

        The expected credit loss ("ECL") model applies to financial assets classified at
        amortised cost and/or FVOCI. ECL is a probability weighted estimate of losses.
        A credit loss is the difference between the cash flows that are due to the entity in
        accordance with the contract and the cash flows it expects to receive, discounted at
        the original effective interest rate implicit in the financial asset.

        The general model for impairment is recognised as follows:

        Stage 1

        ECL is recognised on initial recognition and measured at an amount equal to the
        portion of lifetime expected credit losses that result from default events possible
        within the next 12 months.

        Stage 2

        At each reporting date the group assesses whether there has been a significant
        increase in credit risks ("SICR") since initial recognition. Where evidence exists that
        there has been a SICR, the ECL is based on expected credit losses over the lifetime of
        the asset.

        Stage 3

        Financial assets become credit impaired as a result of a default loss event that has
        occurred after initial recognition. ECL is based on estimated credit losses over the
        lifetime of the account. For these credit impaired assets, the interest or return on these
        assets are calculated on the amortised cost. Amortised cost is defined as the gross
        carrying value on initial recognition (adjusted for any modifications) less the
        impairment provision.

        The impairment gains or losses are presented as follows:

        -  for amortised cost assets, through the income statement
        -  for debt instruments classified as FVOCI, through the income statement

4.3.3.2 Impairment of trade receivables

        The group's trade receivables are amounts due from customers for merchandise sold
        or services performed in the ordinary course of business. These receivables contain a
        significant financing component with terms of business varying from 6 to 36 months,
        and a significant portion conducted on 36 months.

        In accordance with paragraph 5.5.15(a)(ii), the group has elected to measure the
        impairment allowance at an amount equal to the lifetime expected credit losses.
        This policy will be applied to all trade receivables.

        The impact of the election is to recognise the impairment provision at stage 2
        (refer section 4.3.3.1 above) on initial recognition of the trade receivable.

        The ECL is a probability weighted estimate and represents the difference between the
        cash flow that is due to the entity in accordance with the contract and the cash flows
        the entity expects to receive, discounted at the original effective interest rate
        (contractual interest rate and initiation fee included in the customer contract).

        Where trade receivables have become credit impaired as a result of loss events that
        have occurred after initial recognition, those receivables are classified as stage 3
        (refer section 4.3.3.1 above). The effective interest recognised on these assets is
        calculated on the amortised cost being defined as gross carrying value on initial recognition
        (adjusted for any modification) less the impairment provision.

4.3.4   Bad debts

        The group writes off trade receivables when it has exhausted all practical recovery
        efforts and has concluded that there is no reasonable expectation of recovery.

4.3.5   Interest income

        Interest income is calculated by applying the effective interest rate to the gross
        carrying value of financial assets except for financial assets that have subsequently
        become credit-impaired (or "stage 3") for which interest revenue is calculated by
        applying the effective interest rate to their amortised cost (i.e. gross carrying value
        less impairment provision).

4.4     Significant accounting estimates and judgements for financial instruments

4.4.1   Trade receivables

        1.  Business model

            Trade receivables are amounts due from customers for merchandise sold or
            services performed in the ordinary course of business. These receivables contain a
            significant financing component with terms of business varying from 6 to 36
            months, and a significant portion of the business being conducted on 36 months.

            Trade receivables are held to collect contractual cash flows and the contractual
            terms of the trade receivables are solely payments of principal and interest.
            Accordingly, the assessment of the business model is that of holding to collect and,
            therefore, trade receivables are accounted for on an amortised cost basis.
 
        2.  Modifications

            The ECL is calculated with reference to the original contract with the customer.
            No modifications are made to the contract or the contractual cash flows as
            contemplated by IFRS 9. Cash flows may be renegotiated for credit management
            purposes, however, the contractual terms and contractual cash flows agreed with
            the customer remain unchanged.

        3.  Impairment modelling

        3.1 Probability weighted cash flows

            In accordance with paragraph 5.5.15(a)(ii) of IFRS 9, the group has elected to apply
            the simplified model and measures the impairment allowance at an amount equal
            to lifetime expected credit losses. This policy has been applied to all trade
            receivables. Lifetime expected credit losses are assessed by determining cash
            flows on a probability weighted basis and discounting these at the effective
            interest rate including initiation fees.

            The probability weighted cash flows are calculated using the trade receivables
            population payment behaviour in combination with transition matrices and
            conditional probabilities. The transition matrix and payment performance for each
            payment state has been developed using the group's customer payment history.
            The transition matrix predicts the population's payment behaviour and probability
            of the account being in a particular payment state and transitioning into future
            payment states. The key states in the transitional matrix are the following:

            -  customer's lifetime payment rating which measures the customer's actual
               payments received over the lifetime of the account relative to the contractual
               instalments due
            -  age of the account
            -  term of the contract

            For each term, lifetime payment rating and age, the transitional matrix maps the
            probability of an account transitioning into future lifetime payment ratings for the
            remaining months on book. Cash flows are forecast until the account is settled or
            written off.

        3.2 Economic overlay

            An economic overlay has been developed by performing a regression analysis
            between key economic variables with reference to the non-performing category
            over a five-year period (customers who have paid 55% or less of amounts due over
            the contract period). Three economic variables were identified as having statistical
            significance:

            -  Nominal effective exchange rate of the rand (basket of 20 currencies)
            -  Prime overdraft rate
            -  Unemployment rate

            A base, high and low scenarios using the economic variables above are determined
            and a weighted average scenario prepared. This is compared to the base position
            and an appropriate adjustment is made to the whole trade receivables book. The
            adjustment as at the date of transition was immaterial.

        4.  Credit impaired (stage 3)

            The criteria for credit impaired accounts (i.e. when the account moves to stage 3
            as a result of loss events that have occurred after initial recognition) are as follows:

            -  Non-performing accounts (i.e. customers who have paid 55% or less of the
               amounts due over the contract period)
            -  In duplum accounts
            -  Debt counselling accounts
            -  As a backstop, accounts not included in the above categories, where no
               payment has been received over the last three consecutive months

            A credit impaired account will cure when the customer does not meet the criteria
            for being a credit impaired account. For a customer to cure a significant
            improvement in the customer's payment behaviour is required.

            With regard to credit impaired accounts, interest income is recognised by applying
            the effective interest rate to the amortised cost, i.e. gross carrying value less
            impairment provision, resulting in lower interest revenue.

        5.  Unpaid Insurance

            Unearned and unpaid insurance receivables of R375.2 million has been included in
            trade receivables. Impairment of R 170.1 million relating to insurance receivables has
            been included in the impairment provision for trade receivables. Insurance
            receivables are recognised and measured in terms of IFRS 4 Insurance Contracts
            and the group has not amended its polciies for the measurement of IFRS 4. The
            insurance receivables are therfore excluded from the scope of IFRS 9's expected
            credit loss impairment.

      4.4.2 Bad debts
        
            A store based collection system allows the collection staff to deal with customers face
            to face, thus maximising collections and minimising debtor's costs.
        
            Bad debt write-offs take place at the end of each reporting period (i.e. September and
            March). Bad debt write-offs take place where accounts are in default and the
            customer's payment behaviour cannot be rehabilitated after all reasonable
            commercially and economically appropriate collection methods have been utilised and
            exhausted. The bad debt write-offs are initiated where payment behaviour is poor in
            the three months preceding the write-off for the following categories:
        
            -  customers significantly in arrears
            -  non-performing customers in terms of the business' credit management practices
            -  customers with old out-of-term accounts
        
            Strong collection drives precede the write-offs and there is no reasonable prospect of
            significant recoveries once the customer account has been written off.
        
      4.4.3 Insurance investments
        
            The group holds the following investments:
        
            -  fixed income securities
            -  money market investments
        
            From a business model assessment, these assets are held to collect the contractual
            cash flows and to sell the assets. The fixed income securities and money market
            investments meet the SPPI test and are accounted for at FVOCI.
        
            Fixed income securities are almost entirely risk-free government bonds or
            government-guaranteed securities. Money market investments are invested with
            credit-worthy financial institutions. Both foreign and local credit ratings are monitored
            to assess credit-worthiness. There is no expectation of any significant losses arising
            from these investments.
        
5.      Impact of IFRS 9, IFRS 15 and Reclassifications

        The information set out below reflect the following:

        -  The amounts reported in the audited group financial statements for the year ended
           31 March 2018.
        -  IFRS 9 Adjustments relating to the transition to IFRS 9 on 1 April 2018.
           ("IFRS 9 Adjustments"). These relate to the adoption of the expected credit loss
           model ("ECL"). Refer section 5.5.
        -  Reclassification in terms of IFRS 9 has been addressed in section 5.4.
        -  Adjustments relating to the transition to IFRS 15 on 1 April 2018 and reclassifications.
           Details of these adjustments are set out in section 5.5.
        -  The transitioned balance sheet, statement of changes in equity and selected notes
           as at 1 April 2018.

5.1     Impact on Balance Sheet as at 1 April 2018
                                                     Group                                  Group
                                                  31 March         IFRS 9         Other   1 April
                                                      2018    Adjustments   Adjustments      2018
                                                        Rm             Rm            Rm        Rm
        Assets
        Non-current assets
        Deferred taxation                             10.9          145.8         10.1     166.8
        Financial assets
        - insurance investments                      471.0                                  471.0
        Other non-current assets                     698.3                                  698.3
        Current assets
        Inventories                                  579.7                         26.5     606.2
        Trade and other receivables                4 068.9        (841.9)          78.4   3 305.4
        Financial assets
        - insurance investments                      135.4                                  135.4
        Other current assets                         820.5                                  820.5
        Total assets                               6 784.7        (696.1)         115.0   6 203.6
        Equity and liabilities
        Capital and reserves                       5 448.5        (604.8)        (26.0)   4 817.7
        Liabilities
        Deferred taxation                            121.0         (91.3)                    29.7
        Trade and other payables                     417.0                       (27.9)     389.1
        Payments in advance                                                       168.9     168.9
        Other liabilities                            798.2                                  798.2
                                                   1 336.2         (91.3)         141.0   1 385.9
        Total equity
        and liabilities                            6 784.7        (696.1)         115.0   6 203.6

5.2     Impact on Statement of Changes in Equity as at 1 April 2018

                                                   Group                                    Group
                                                31 March         IFRS 9          Other    1 April
                                                    2018    Adjustments    Adjustments       2018
                                                      Rm             Rm             Rm         Rm
        Share capital and premium                  425.0                                    425.0
        Treasury shares                          (480.2)                                  (480.2)
        Other reserves                              42.6                                     42.6
        Retained earnings                        5 461.1        (604.8)         (26.0)    4 830.3
        Balance at 1 April 2018                  5 448.5        (604.8)         (26.0)    4 817.7

5.3     Impact on accounts receivable as at 1 April 2018

5.3.1   Trade receivables
                                                    Group                                   Group
                                                 31 March         IFRS 9         Other    1 April
                                                     2018    Adjustments   Adjustments       2018
                                                       Rm             Rm            Rm         Rm
        Trade receivables at
        gross carrying value                      5 477.6         (39.3)          78.4    5 516.7
        Provision for impairment                (1 619.5)        (802.6)                (2 422.1)
        Trade receivables at
        amortised cost                            3 858.1        (841.9)          78.4    3 094.6
        Other receivables                           210.8                                   210.8
                                                  4 068.9        (841.9)          78.4    3 305.4
        Debtors' impairment
        provision as % of trade
        receivables                                 29.6%                                   43.9%

5.3.2   Reconciliation between IAS 39 and IFRS 9

5.3.2.1 Impairment provision
                                                  Group                                     Group
                                               31 March       Category         IFRS 9     1 April
                                                   2018    Adjustments    Adjustments        2018
                                                  R'000          R'000          R'000       R'000
        Satisfactory paid                        18 039                       657 932     675 971
                                                   1.1%                                     27.9%
        Slow payers                             196 021        262 519        150 176     608 716
                                                  12.1%                                     25.1%
        Non-performing                          262 519      (262 519)                          -
        accounts                                  16.2%                                      0.0%
        Non-performing                        1 142 920                       (5 573)   1 137 347
        accounts                                  70.6%                                     47.0%
        Total                                 1 619 499              -        802 535   2 422 034

        The group has re-assessed its categories and aligned them with internal credit
        management policies. As a consequence of this re-assessment, the previously non-
        performing category where customers have paid between 55% and 65% of amounts due,
        has been included with the slow paying customer category.
                      
5.3.3   Combined impairment and contractual arrears table for IFRS 9

        The table reflects the following:

        -  a summary of the main groupings of payment ratings describing payment behaviour.
        -  for each of the main groupings of payment ratings, the following is disclosed:
            -  Number of customers.
            -  The gross carrying value of trade receivables.
            -  Impairment provision allocated to each grouping.
            -  Contractual arrears for each grouping have been categorised by number
               of instalments in arrears.

        Gross trade receivable analysis restated for IFRS 9

                                        Gross                                             Instalments in arrears
                           Total     carrying
                          number     value of  Impairment Impairment      Total
        1 April               of  receivables   provision  provision    arrears         1           2         3          >3
        2018           customers        R'000       R'000          %      R'000     R'000       R'000     R'000       R'000
                         401 183    3 034 888     675 971      22.3%    549 506   155 673     105 593    77 633     210 607
        Satisfactory
        paid               68.4%        55.0%       27.9%                 24.1%
                          97 251    1 039 846     608 716      58.5%    665 893    72 167      69 010    64 474     460 242
        Slow
        payers             16.5%        18.9%       25.1%                 29.3%
        Non-              88 430    1 441 893   1 137 347      78.9%  1 062 130    67 452      66 131    64 513     864 034
        performing
        accounts           15.1%        26.1%       47.0%                 46.6%
        Total            586 864    5 516 627   2 422 034      43.9%  2 277 529   295 292     240 734   206 620   1 534 883

        Definitions for customers payment categories

        Satisfactory paid 
        Customers who have paid 70% or more of amounts due over the contract period.

        Slow payers
        Customers who have paid 55% to 70% of amounts due over the contract period.

        Non-performing accounts
        Customers who have paid 55% or less of amounts due over the contract period.

5.3.4   Credit impaired trade receivables
                                                                        No payment
                                    Non-                                  in three
        Credit impaired       performing                        Debt   consecutive
        categories              accounts    In duplum    counselling        months          Total
        Gross carrying
        value as at
        1 April 2018           1 441 893       31 622        107 572       135 776      1 716 863
        Impairment
        provision            (1 137 347)     (19 525)       (54 342)      (59 360)    (1 270 574)
        Amortised cost           304 546       12 097         53 230        76 416        446 289

        These are accounts that have moved into stage 3 as a result of loss events that have
        occurred after initial recognition and are presented at gross carrying value and amortised
        cost.

5.4     Reclassification of financial assets on adoption of IFRS 9

        On the date of initial application, 1 April 2018, the financial assets of the group were
        reclassified in terms of IFRS 9 as follows:

                                    Measurement category         Carrying value
                                      Original           New    Original       New     Difference
                                        IAS 39        IFRS 9          Rm        Rm             Rm
        Non-current
        financial assets
        Insurance                   Available-
        investments                   for-sale         FVOCI       471.0     471.0              -
        Current financial assets
        Trade and other              Loans and     Amortised
        receivables                receivables          cost     4 068.9   3 305.4          763.5
        Cash on hand                 Amortised     Amortised                                     
        and on deposit                    cost          cost       608.4     608.4              -
        Insurance                   Available-
        investments                   for-sale         FVOCI       135.4     135.4              -

5.5     Summary of adjustments

        1. IFRS 9 Expected Credit Loss Model

        The impairment of trade receivables has been significantly amended by IFRS 9 with the
        introduction of an expected credit loss model. The group has elected to use the
        simplified model for trade receivables which recognises the expected credit losses over
        the life of the account on initial recognition. The adjustment to opening retained earnings
        for the transition to the expected credit loss model as at 1 April 2018 is as follows:

                                                                                               Rm
        Decrease in trade receivables                                                     (841.9)
        Gross carrying value                                                               (39.3)
        Impairment provision                                                              (802.6)
        Attributable deferred tax                                                           237.1
        Decrease in retained income as at 1 April 2018                                    (604.8)

        2. IFRS 15 - Cancelled Sales

        It is policy to sell goods with the right of return in terms of current consumer legislation.
        Such sales are cancelled where the right of return is exercised. Under IFRS 15, a refund
        liability for the expected refunds is recognised as an adjustment to revenue, trade receivables and trade 
        payables. The corresponding right to recover the product from the customer is an
        adjustment to cost of sales and inventory. The accumulated experience of the portfolio
        has been utilised to estimate such returns at the time of sale.

        The adjustment to opening retained earnings as at 1 April 2018 is as follows:
                                                                                               Rm
        Gross amount                                                                       (36.1)
        Reduction in trade receivables                                                     (52.7)
        Increase in trade payables                                                          (9.9)
        Increase in inventory                                                                26.5
        Attributable deferred tax                                                            10.1
        Decrease in retained income                                                          26.0

        3. Reclassifications

        The following reclassifications were made:

        Where customers have settled their accounts or where customers have paid in advance
        of Lewis' performing under the maintenance contract, there was a remaining period
        under the said maintenance contract for which Lewis still had to provide a service. 
        Previously, the gross carrying value of trade receivables was incorrectly reduced to the extent 
        of the remaining unearned maintenance income. This has been reclassified to payments 
        in advance and disclosed separately under current liabilities.

        Where customers have paid in advance for goods still to be delivered under the sales
        contract, this was previously included in trade and other payables. This has been
        reclassified as payments in advance.

        The reclassifications have the following impact on trade receivables and trade and other
        payables and payments in advance as at 31 March 2018:
                                                                                               Rm
        Increase in trade receivables                                                       131.1
        Decrease in trade payables                                                           37.8
        Payments in advance                                                                 168.9

Corporate information

Non-executive directors:  Hilton Saven (Independent non-executive chairman),
                          Fatima Abrahams, Adheera Bodasing, Daphne Motsepe,
                          Alan Smart, Duncan Westcott

Executive directors:      Johan Enslin (chief executive officer)
                          Jacques Bestbier (chief financial officer)

Company secretary:        Ntokozo Makomba
   
Transfer secretaries:     Computershare Investor Services (Pty) Ltd; 7 Rosebank Towers,
                          15 Biermann Ave, Rosebank, Johannesburg, 2196; 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

www.lewisgroup.co.za
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