Wrap Text
Result Announcement
(Including Audited Summary Consolidated Financial Statements) for the year ended 31 March 2024
Lewis Group Limited
Incorporated in the Republic of South Africa
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
Bond Code: LEWI
SHORT-FORM ANNOUNCEMENT:
RESULTS ANNOUNCEMENT (INCLUDING AUDITED SUMMARY CONSOLIDATED
FINANCIAL STATEMENTS) FOR THE YEAR ENDED 31 MARCH 2024
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2024
1. Introduction
Shareholders are advised that the following have been distributed:
- the company's full announcement being the highlights, results commentary (which
includes the cash dividend declaration referred to below) and the summary
audited consolidated financial results for the year ended 31 March 2024 ("results
announcement")
- the company's audited consolidated financial statements for the year ended 31
March 2024 ("audited financial statements"); and
- cash dividend declaration of 300 cents per share.
The integrated report and notice of the annual general meeting for the year ended 31
March 2024 will be released on or before 30 June 2024.
2. Highlights
• Merchandise sales increased by 4.7% to R4.7 billion
• Revenue increased by 9.8% to R8.2 billion
• Gross profit margin up 250 bps to 43.1%
• Satisfactory paid accounts at 81.3%
• Debtors book growth of 15.6%
• Operating profit up 13.1%
• Earnings per share increased by 15.9% to 806 cents
• Headline earnings per share up 7.1% to 925 cents
• Total dividend increased by 21.1% to 500 cents per share
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3. Results Commentary
Introduction
Lewis Group delivered a resilient performance in a weak retail trading environment,
reporting continued strong credit sales, robust growth in the debtors book, record high
customer payment metrics and improved returns to shareholders.
Pressure on consumers' disposable income from high energy, food, fuel and borrowing
costs continued to constrain the group's cash sales and adversely impacted on the
performance of UFO, the group's cash retail brand.
The board has shown its confidence in the group's prospects and cash generating ability
by increasing the total dividend by 21.1% to 500 cents per share. This is the third
consecutive year that the group has returned more than 100% of earnings to
shareholders through dividend payments and share buybacks.
The group adopted IFRS 17 Insurance Contracts in the reporting period with full
retrospective application. There was no material impact on the earnings for the current or
prior periods. The implementation of IFRS 17 required the restatement of comparatives
from 1 April 2022, fully disclosed in note 1.2 of the audited financial statements.
Trading and financial performance
After increasing by 4.2% for the first nine months of the 2024 financial year, merchandise
sales, supported by new product ranges and good stock levels, grew by 6.7% during the
challenging trading conditions in the fourth quarter, resulting in an overall sales growth of
4.7% to R4.7 billion for the year.
Merchandise sales in the traditional retail segment increased by 6.9%, with all the
traditional brands performing well. Sales in UFO, however declined by 12.6%.
Comparable store sales across all brands grew by 1.9%.
The strong credit sales growth trend continued, with credit sales increasing by 15.8% and
cash sales declining by 11.8%. Credit sales have grown at a compound annual rate of
16.9% over the past three years and now account for 66.2% of total merchandise sales
(2023: 59.9%). The group has maintained its prudent credit granting criteria in the
constrained spending environment and the credit application decline rate increased to
35.1% (2023: 34.7%).
The group capitalised on opportunities to acquire well located trading space to accelerate
the expansion of its store base. The group opened a net 29 new stores, including 10 new
Bedzone stores and a net 4 new traditional stores outside of South Africa. The total store
base of 869 includes 138 stores outside of South Africa.
Other revenue, consisting of effective interest income and ancillary services income as
well as insurance revenue (measured in terms of IFRS 17), benefited from the strong
credit sales growth in recent years, increasing by 17.2%.
Total revenue, comprising merchandise sales and other revenue, increased by 9.8% to
R8.2 billion (2023: R7.5 billion).
The gross profit margin benefited from effective margin management on new
merchandise ranges introduced in the second half of the year and strengthened by 250
basis points to 43.1%.
Following the adoption of IFRS 17, insurance service expenses relating to the group's
insurance business are reported separately. Operating costs, including insurance service
expenses, were well managed and grew by 5.0% in the high inflationary environment.
The group received insurance proceeds of R27.3 million, mainly relating to claims arising
from the 2021 civil unrest, which has been included in operating profit.
The quality of the group's debtors portfolio continued to improve with the level of
satisfactory paying customers increasing to an all-time high of 81.3% (2023: 80.4%) and
collection rates ending the year at 79.7% (2023: 80.8%). Net bad debts as a percentage
of debtors at gross carrying value reduced to 11.2% from 13.1% in the prior year.
Despite the improvement in the quality of the debtors book, the forward-looking
component of the debtors impairment provision, based on the macroeconomic outlook,
resulted in an increase in the debtors impairment provision as a percentage of debtors at
gross carrying value from 36.0% to 37.5%. Management believes this increased
provision appropriately reflects the high levels of uncertainty and potential volatility in the
South African economy for the forecast period. Debtor costs as a percentage of debtors
at gross carrying value increased from 12.0% to 17.6%.
Impairments and capital items totalled R65.4 million compared to R102.2 million in the
prior year. The remaining goodwill of UFO of R59.9 million was impaired.
Operating profit increased by 13.1% to R689.5 million.
Net finance costs increased by R60.5 million to R136.7 million mainly due to higher
borrowing costs and a reduction of R21.1 million in foreign exchange gains relative to the
prior year.
The group's earnings were 6.2% higher at R436.4 million and earnings per share
increased by 15.9% to 806 cents, supported by the positive leverage effect from the
group's share repurchase programme. Headline earnings were 1.9% lower while
headline earnings per share increased by 7.1% to 925 cents.
The group's balance sheet remains strong with a net asset value of R4.7 billion. The
borrowings ratio (gearing ratio, excluding lease liabilities), increased to 11.7% from 4.0%
mainly due to the ongoing investment in the growth of the debtors book.
Share repurchase programme
The group repurchased 4.2 million shares at a cost of R170.0 million in the financial year,
at an average price of R40.82 per share. Since the commencement of the current share
repurchase programme in 2017, the group has bought back 35.7 million shares at a cost
of R1.3 billion and an average price of R35.67 per share.
At the annual general meeting in October 2023, shareholders granted management the
authority to repurchase a further 10% of the issued share capital and the group has
acquired 3.3% to date.
Outlook
Trading conditions are not expected to improve in the short to medium-term as consumer
spending and confidence remain depressed. The risk of political uncertainty and social
instability in the aftermath of the general elections poses a major threat to the trading
environment. Interest rates are likely to remain higher for longer than originally forecast,
while fuel and food inflation as well as unemployment remain at elevated levels.
Turbulent sea-freight markets, with ongoing operational constraints across South African
ports and steep freight rate increases, are expected to remain challenging over the
coming months and are likely to negatively impact economic growth.
Despite the mounting macroeconomic headwinds, the group continues to invest in
longer-term growth strategies to support revenue and margin. Twenty new stores are
planned across the traditional retail brands in the 2025 financial year to further expand
the group's extensive footprint. As consumer demand for credit is expected to be
maintained, the group will continue to invest in the expansion of its debtors book, which is
motivated by the proven history of effective credit practices and the quality of the debtors
book.
Dividend declaration
Notice is hereby given that a final gross cash dividend of 300 cents per share in respect
of the year ended 31 March 2024 has been declared payable to holders of ordinary
shares. The number of shares in issue as of the date of declaration is
52 393 699. The dividend has been declared out of income reserves and is subject to a
dividend withholding tax of 20%. The gross dividend for determining the dividend
withholding tax is 300 cents and the dividend withholding tax payable is 60 cents for
shareholders who are not exempt. The net dividend for shareholders who are not exempt
will therefore be 240 cents. The dividend withholding 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 tax rate. The company's tax
reference number is 9551/419/15/4.
The following dates are applicable to this declaration:
Last date to trade "cum" dividend Tuesday, 23 July 2024
Date trading commences "ex" dividend Wednesday, 24 July 2024
Record date Friday, 26 July 2024
Date of payment Monday, 29 July 2024
Share certificates may not be dematerialised or rematerialised between Wednesday, 24
July 2024 and Friday, 26 July 2024, both days inclusive.
For and on behalf of the board
Hilton Saven Johan Enslin Jacques Bestbier
Independent Chief Executive Officer Chief Financial Officer
non-executive
chairman
Cape Town
31 May 2024
4. Auditors Report in Audited Financial Statements
Our independent auditors, Ernst & Young Inc, have expressed an unmodified audit
opinion on the audited financial statements for the year ended 31 March 2024.
The independent auditors report includes a section on key audit matters. The key audit
matters are:
- Expected credit losses on trade receivables;
- Insurance contract assets and liabilities
The full independent auditor's report is set out on pages 11 to 16 of the audited financial
statements.
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Refer https://www.lewisgroup.co.za/wp-content/uploads/2024/05/Annual-Financial-
Statements-for-the-year-ended-31-March-2024.pdf
5. Short Form Announcement
This short-form announcement is the responsibility of the company's directors and is a
summary of the full audited financial statements for the year ended 31 March 2024 and
does not contain full or complete details.
The results announcement and the audited financial statements can be downloaded from
https://senspdf.jse.co.za/documents/2024/jse/isse/LEW/FY24.pdf and on the group's
website www.lewisgroup.co.za as follows:
Results announcement: Refer
https://www.lewisgroup.co.za/wpcontent/uploads/2024/05/Audited-Final-Results-for-the-
year-ended-31-March-2024.pdf
Audited financial statements: Refer https://www.lewisgroup.co.za/wp-
content/uploads/2024/05/Annual-Financial-Statements-for-the-year-ended-31-March-
2024.pdf
The full results announcement is available for inspection and may be requested at the
company's registered office, at no charge, during normal business hours. Any investment
decision in relation to the company's shares should be based on the full announcement.
Cape Town
31 May 2024
Sponsor
The Standard Bank of South Africa Limited
Debt Sponsor
Absa Corporate and Investment Bank, a division of Absa Bank Limited
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Date: 31-05-2024 07:05:00
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