Credit report

Credit customers have remained under pressure from the impact of the prolonged drought, rising food inflation, high levels of indebtedness, the constrained employment market and the affordability assessment regulations of the National Credit Regulator. The performance of the group’s debtors’ book reflects the challenging credit collection environment.

The ratio of household debt to disposable income of Lewis customers has averaged 48% for the year. This, however, compares favourably with the national average of 75%.

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 throughout the year resulted in debtor cost growth being limited to 6% with total collections of R3 995 million (2016: R4 067 million).

The level of satisfactory paid customers was stable at 68.5% (2016: 68.8%) and non-performing customers declined marginally to 15.3% (2016: 15.5%) The group’s active credit customer base totalled 616 247 (2016: 668 082) at year-end.

Debtor costs as a percentage of net debtors moved from 17.1% to 19.1% as a result of the higher bad debt experience and lower debtor base. The impairment provision increased from 26.1% to 28.6%, evidencing the prevailing challenging credit environment.

The credit application decline rate for new customers remained high at 38.7%.

Credit sales as a percentage of total sales increased from 64.3% to 65.2% in 2017. Credit sales in Beares account for 56.6% of the brand’s sales while 67.2% of Lewis and Best Home and Electric sales are on credit.

The group remains adequately provided with a 28% impairment provision. This compares favourably to the debtor costs of 19.1% reported this year.

Credit ratios and statistics

Credit risk management

Credit collection

Debtors costs

Impairment provision

Contractual Arrears

Combined impairment and contractual arrears table