Credit report

South African consumers have remained under pressure from rising costs, high levels of indebtedness and a constrained employment market. The performance of the group’s debtors book reflects the challenging credit collection environment.

The average ratio of household debt to disposable income of Lewis customers has increased from 47.2% in 2013 to 51.7% in 2015. The ratio declined to 47% in October 2015 but increased again to 49% in March 2016, evidence of the increasing cost pressures facing customers. This, however, compares favourably with the national average of 75% and is evidence of Lewis’ conservative credit granting processes.

The group’s centralised credit granting and decentralised collection processes are a core strength in managing credit risk and debtor costs in the current tight consumer environment.

Stable collection rates in the second half of the year contributed to maintaining the debtor cost growth to 17%.

The level of satisfactory paid customers was stable at 68.8% (2015: 68.7%) and non-performing customers remained at 15.5%. The group’s credit customer base settled at 668 082 at year end.

Debtor costs as a percentage of net debtors moved from 15.3% to 17.1%. The impairment provision increased from 23.1% to 26.1%, evidencing the prevailing challenging credit environment.

The credit application decline rate for new customers remained high at 39.3% in comparison to the 40.2% decline rate in 2015.

Credit sales as a percentage of total sales declined from 69% in 2015 to 64% in 2016 due mainly to the new affordability regulations and the incorporation of the Beares chain, which has a higher cash sales component.

The group remains adequately provided with a 26.1% impairment provision. This compares favourably to the debtor costs of 17.1% reported this year.


Credit report 2016

Credit ratios and statistics

Credit risk management

Credit collection

Debtors costs

Impairment provision

Contractual Arrears

Combined impairment and contractual arrears table

Gross Debtor Analysis
Number of Gross Impairment Total Instalment in arrears
MARCH Customers Receivables Provision Arrears 1 2 3 4 >4
2016 Customer grouping Total R’000 R’000    R’000 R’000 R’000 R’000 R’000 R’000
Satisfactory paid Customers fully up to date including those who have paid 70% or more of amounts due over the contract period. The provision in this category results from in duplum provision.

No

%

459 390

68.8%

3 775 137

58.2%

38 319

2.5%

641 286 175 898 121 896 90 493 67 565 185 434
Slow Payers Customers fully up to date including those who have paid 65% to 70% of amounts due
over the contract period. The provision in this category ranges from 13% to 72% of amounts
due and includes an in duplum provision.

No

%

54 507

8.1%

558 758

8.7%

176 249

11.5%

313 201 37 684 36 322 33 604 30 913 174 678
Non performing accounts Customers who have paid between 55% and 65% of amounts due over the contract period. The provision in this category ranges from 24% to 86% of amounts due.

No

%

50 690

7.6%

589 858

9.1%

241 999

15.8%

353 286 35 071 33 189 31 195 29 501 224 330
Non performing accounts Customers who have paid 55% or less of amounts due over the contract period. The provision in this category ranges from 34% to 100% of amounts due.

No

%

103 495

15.5%

1 558 864

24.0%

1 077 046

70.2%

1 068 377 70 458 68 649 66 504 64 447 798 319
Total  668 082  6 485 617 1 533613 2 376 150 319 111 260 056 221 796 192 426 1 382761
 Unearned provisions (refer note 8 on page 100) (606 354)    
 Net instalment sale and loan receivables 5 876 263 26.1%

 

 

Number of Gross Impairment Total Instalment in arrears
MARCH Customers Receivables Provision Arrears 1 2 3 4 >4
2015 Customer grouping Total R’000 R’000    R’000 R’000 R’000 R’000 R’000 R’000
Satisfactory paid Customers fully up to date including those who have paid 70% or more of amounts due over the contract period. The provision in this category results from in duplum provision.

No

%

473 901

68.7%

 

3 734 088

60.0%

 

21 090

1.6%

565 0576 171 459 114 831 82 851 60 838 135 078
Slow Payers Customers fully up to date including those who have paid 65% to 70% of amounts due
over the contract period. The provision in this category ranges from 13% to 72% of amounts
due and includes an in duplum provision.

No

%

 

56 347

8.2%

 

515 896

8.3%

 

140 419

10.8%

267 922 36 137 34 574 31 424 28 511 137 275
Non performing accounts Customers who have paid between 55% and 65% of amounts due over the contract period. The provision in this category ranges from 24% to 86% of amounts due.

No

%

 

52 433

7.6%

 

535 674

8.6%

 

199 613

15.4%

293 763 33 284 30 851 28 464 26 565 147 599
Non performing accounts Customers who have paid 55% or less of amounts due over the contract period. The provision in this category ranges from 34% to 100% of amounts due.

No

%

 

107 167

15.5%

 

1 437 358

23.1%

 

933 224

72.1%

919 049 68 722 66 159 62 982 60 396 660 790
Total     689 848 6 223 016 1 294 346 2 045 790 309 602 246 415 205 721 176 310 1 107 742
 Unearned provisions (refer note 8 on page 100) (626 428)    
 Net instalment sale and loan receivables 5 596 588 23.1%

Note:
1. Due to the reclassification of insurance premiums in advance, gross receivables have been presented for the first time, analysed by payment rating grouping.
This information could not be presented in the past, as insurance premiums in advance were included in gross receivables and it was not possible to analyse insurance premiumns in advance into payment rating groupings.
2. The unearned provisions have not been allocated to gross receivables.
3. Arrears have been categorised by number of instalments in arrear.