Investment case

Lewis Group has a proven business model, an extensive store footprint and is well positioned in a growing segment of the South African consumer market. While the current economic and regulatory environments are challenging in the short-term, the following factors should support long-term growth and sustainable returns for shareholders.

Strength of the business model

  • ¬†Decentralised customer-focused business model positions the group for market share gains in the changing
    competitive landscape
  • Focused on one business: retailing of furniture and appliances
  • Operates in a growth segment of the South African population
  • Credit offered across all brands to facilitate sales growth
  • Customer loyalty: Approximately 47% of credit sales from existing customers
  • Low-cost structure; internal culture of cost containment
  • High operating margins through all economic cycles
  • Attractive dividend payout ratio
  • Acquisition of the Beares brand positions the group to service the higher LSM group

Proven credit risk management

  • Extensive experience in managing credit risk in the lower to middle income market
  • Centralised credit approval and granting
  • Decentralised cash collections process at stores
  • Advanced application and behavioural risk scorecards
  • High proportion of credit sales: 64.3% of total sales in 2016

Differentiated and exclusive merchandise ranges

  • Stores sell differentiated, exclusive and quality merchandise ranges
  • Products sourced locally and offshore that appeal to needs of lower and middle income target market
  • Focus on selling higher margin furniture and appliance product categories
  • Customers attracted into stores by value for money product offer
  • Beares offers exclusive merchandise aimed at a higher LSM group than Lewis and Best Home and Electric
  • High levels of brand awareness

Growing store presence

  • National coverage with 667 stores across urban and rural areas in South Africa
  • Increased exposure to other African countries through acquisition of 56 stores in Namibia, Botswana, Lesotho and Swaziland
  • 12% of stores outside South Africa at year end. This will increase to 15% over the next year
  • Stores conveniently located close to places where target customers live, work and commute
  • Plans to expand store base to 820 in the medium-term

Experienced management team

  • Stable, long-serving executive team: (Refer to¬†Executive Team)
  • Leadership continuity from strong senior management
  • Good balance of company and industry experience
The Investment case should be read together with the Business model and Strategy and targets.