Cape Town – Lewis Group continued its recovery in the financial year to March 2018 with stronger merchandise sales, tight expense control and lower debtor costs, supported by a strong cash position and ungeared balance sheet.
Merchandise sales increased by 9.9%, lifted by the inclusion of the recently acquired United Furniture Outlets (UFO) chain for the last two months of the year. Excluding the sales from UFO, merchandise sales showed competitive growth of 7.3%.
Chief executive officer Johan Enslin said the performance for the year was negatively impacted by a decline in other revenue. “The reduction in other revenue is largely due to declining annuity streams resulting from lower credit sales in prior years, compounded by the implementation of the prescribed maximum credit life insurance rates in August 2017 which capped credit life premium income.”
Headline earnings declined by 26.5% to R261 million with headline earnings per share 24.3% lower at 302.6 cents. The total dividend has been maintained at 200 cents per share.
Enslin said the group remains highly cash generative. “Cash on hand totalled R580 million at year end after paying for UFO and undertaking share repurchases. Over the past 18 months borrowings of R1.5 billion have been repaid, resulting in the balance sheet being ungeared at year end,” he said.
Stores outside South Africa contributed 22.5% of total merchandise sales. Credit sales increased by 10.7% and cash sales by 8.2%, with group credit sales accounting for 65.7% of total sales.
The gross profit margin at 41.4% (2017: 42.4%) remains at the upper end of management’s target range of 38% to 42%.
Debtor collection rates improved to 74.9% from 73.8% last year, with debtor costs declining by 10.1%. The level of satisfactory paid customers at 68.4% is consistent with last year.
The group’s store network totalled 773 at year end following the acquisition of 31 UFO stores and the net closure of 19 stores across the Lewis and Beares brands.
“The integration of UFO has been successfully completed. UFO allows the business to access higher income customers while increasing our cash-to-credit sales mix. We believe UFO is scalable with the potential to expand across South Africa and into neighbouring countries, and 5 to 10 new stores are planned for the year ahead,” said Enslin.
Earlier this month the group entered the home shopping market with the launch of Inspire, an omni-channel retail offering to be marketed through outbound call centres, agents and online shopping at www.inspire.co.za. “Our strategy is to attract customers in the LSM 4 – 8 categories through our extensive product offering to extend the group’s reach in urban areas,” he said.
The group welcomed the outcome of two long-standing legal cases after year end. In the first case the court ruled in favour of Lewis regarding an appeal by the National Credit Regulator (NCR) in relation to club fees and extended warranties. A settlement was reached in the second case between the NCR and Lewis Stores in relation to loss of employment and disability insurance.
On the outlook for the months ahead, Enslin said the current sales momentum is expected to continue.
“The favourable outcome of the clothing industry’s court challenge of the affordability assessment regulations will benefit credit sales. Prospective self-employed and informally employed customers are no longer required to supply bank statements or payslips,” he said. “The group will continue to extend credit in a responsible manner.”
The group plans to open a net 15 stores across all its brands in the new financial year, while continuing to close marginal stores.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
Enquiries: Graeme Lillie 082 468 1507
Cape Town – Economic conditions impacting the country’s lower to middle income market continued to weigh on Lewis Group’s performance for the six months to September 2017 as headline earnings declined from R173 million to R144 million with headline earnings per share 15.8% lower at 163.9 cents.
However, the group’s results show an improving sales growth trend, stronger gross profit margin, tight expense control and lower debtor costs.
The interim dividend has been maintained at 100 cents per share.
The group continues to generate strong cash flows, with cash of R685 million at end September. Over the past 18 months borrowings of R1.4 billion have been repaid and the group’s balance sheet is ungeared, compared to gearing of 18.8% in the previous year.
Chief executive officer Johan Enslin said trading conditions remain extremely difficult. “Our core lower to middle income customer base continues to be impacted by increasing living costs, high unemployment and limited prospects in the current low growth environment in the country. In addition, credit sales continue to be restricted by the National Credit Regulator’s affordability assessment regulations,” he said.
Merchandise sales increased by 5% mainly as a result of new merchandise ranges and increased promotional activity across the three trading brands Lewis, Beares and Best Home and Electric. Comparable stores sales grew by 7.3%.
The group has 744 stores, including 110 outside South Africa which contributed 24% of merchandise sales.
The group’s gross profit margin strengthened by 40 basis points to 40.9%. The margin benefited from more competitive pricing on locally sourced product and margin expansion in the furniture categories, he said.
Debtor costs declined by 11.5% while collection rates improved from 74.6% in the first half of the 2017 financial year to 76.2% in the current period.
The group recently announced the acquisition of the luxury household furniture retailer United Furniture Outlets (UFO) for R320 million, subject to competition approval. UFO is a cash retailer targeting the higher income market and has a footprint of 30 stores.
“The acquisition of UFO aligns with our strategy of diversifying and gaining access to higher income customers and improving our cash-to-credit sales mix. We believe the business is scalable with the potential to expand its store footprint across South Africa and into neighbouring countries.”
“Following the acquisition of UFO, the group is well positioned to service customers across all market segments,” he said.
On the outlook for the remainder of the financial year, Enslin said the trading environment is expected to remain challenging and the group continues to focus on driving sales growth, managing expenses and reducing debtor costs. “The important festive trading season will be supported by strong promotional activity and new merchandise ranges across our three brands,” he added.
Enquiries
Graeme Lillie 082 468 1507
Cape Town – Lewis Group today announced the acquisition of United Furniture Outlets (UFO), a cash retailer of luxury household furniture to the higher income market, for R320 million. UFO was established in 2004 and has a retail footprint of 30 stores. More than half the outlets are located in Gauteng, including its flagship 5 000 m² mega-store in Marlboro, Sandton.
Lewis Group chief executive officer, Johan Enslin, said the acquisition aligns with the group’s strategy of gaining access to higher income customers and will also allow for improved economies of scale. UFO is one of the larger independent furniture retailers in the country and offers a wide range of local and imported household furniture including lounge, bedroom and dining room ranges. Enslin said UFO will enable the group to diversify and increase its cash-to-credit sales mix by penetrating a new market segment through a wider, more exclusive product range. “We believe the UFO brand and business model is scalable and offers an opportunity to extend the store footprint across South Africa and into the neighbouring Southern African countries where Lewis currently trades.” “The business has an efficient supply chain, good growth prospects and will benefit from our group’s buying power,” said Enslin.
The acquisition is subject to standard regulatory and competition approvals, and the purchase price will be settled from Lewis Group’s current cash resources.
Ends Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact Graeme Lillie, Tier 1 Investor Relations 0824681507
Cape Town – Slowing economic conditions and the impact of the affordability assessment regulations severely impacted Lewis Group’s performance for the six months to September 2016, contributing to headline earnings for the half year declining from R287 million to R173 million. Headline earnings per share were 39.6% lower.
The group declared a dividend of 100 cents per share.
Chief executive officer Johan Enslin said the National Credit Regulator’s affordability regulations require customers to provide their three latest salary advices or bank statements when applying for credit.
“This is proving a major challenge for many customers in our lower to middle income target market who are self-employed or work in the informal sector. The regulations are restricting access to credit and consequently our credit sales growth.”
Merchandise sales grew by 1% while comparable store sales declined by 9.2%. Group credit sales declined by 2.3% and accounted for 63.4% of total sales compared to 65.9% last year. Revenue for the six months was 2% lower at R2.7 billion.
The gross profit margin strengthened by 410 basis points to 40.5%. The margin expansion was driven by a shift in the product mix, with the higher margin furniture category increasing to 58.3% of total sales compared to 54.7% in the previous six months. “Improved pricing on new product ranges and competitively priced merchandise sourced from local suppliers also supported the margin,” he said.
Debtor cost growth slowed to 7.3%. Despite the deteriorating consumer credit environment the level of satisfactory paid customers at 67.9% was similar to the previous year.
Enslin said the portfolio of 56 Ellerines and Beares stores acquired in Botswana, Lesotho, Namibia and Swaziland have been successfully integrated into the group’s operations.
“These stores are showing encouraging sales performance and we expect them to make a solid contribution to the group’s revenue and profitability in the medium-term,” he said.
The group now has 118 stores outside of South Africa, accounting for 15% of the total store base of 780.
Discussing the outlook for the remainder of the financial year, Enslin said trading conditions are not expected to improve as consumers are facing increasing pressures on disposable income.
“We are, however, positive about the group’s medium to long-term prospects as the business remains cash generative with low levels of gearing, reflecting the strength of the balance sheet,” he said.
Cape Town – Lewis Group has completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries, expanding its store presence outside of South Africa to 120.
This follows regulatory and competition approvals in each of these countries for the R250 million acquisition announced in November 2015.
The stores are located in Namibia (21 stores), Botswana (20), Lesotho (10) and Swaziland (6).
Chief executive officer, Johan Enslin, said the newly acquired stores should make a meaningful contribution to the group’s profitability in the medium term.
“The stores in Botswana and Lesotho have already been incorporated into the group’s operations, with the Swaziland stores due to be integrated in early April and the Namibian stores in early May. The stores will trade under either the Lewis or Beares brands,” he said.
Lewis Group purchased the Beares brand and 61 stores in South Africa in 2014 after parent company Ellerines Furnishers was placed under business rescue. The Beares chain has since been expanded to 84 stores in South Africa under Lewis Group’s ownership.
Enslin said the addition of these Beares stores in southern Africa will further improve buying power and bring immediate scale benefits.
Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. Stores outside of South Africa now comprise 15% of the group’s store base.
“The acquisition of these stores will provide Lewis with access to new segments of the furniture retail market and also expand our existing customer base in each of these countries. Lewis has operated in these four countries for over 50 years so has extensive experience in these markets and a thorough understanding of the trading environments,” he added.
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 021 702 3102 / 082 468 1507
Cape Town – Lewis Group has received the go ahead from the Swaziland competition authorities to acquire six Ellerines and Beares stores in the country. This follows the recent approvals for the purchase of 30 Ellerines and Beares stores in Botswana and Lesotho.
The majority of the Ellerines and Beares outlets acquired in the neighbouring southern African countries will in future trade as Lewis stores.
Lewis has operated in Swaziland since 1972 and currently has 15 stores in the country.
Competition approvals are still awaited on the 21 Ellerines and Beares stores purchased in Namibia.
Chief executive officer, Johan Enslin, said the acquisition of the stores in these four countries will effectively double the group’s African store footprint. “Lewis Group has operated in these countries for almost 50 years and has extensive experience in these markets. Once these stores have been integrated into our operations we believe they will make a meaningful contribution to the group’s profitability.”
Lewis Group purchased the Beares brand and 61 stores in South Africa in November 2014 after parent company Ellerines Furnishers was placed under business rescue. The Beares chain has since been expanded to 84 stores in South Africa under Lewis Group’s ownership.
In November 2015 the group announced the proposed acquisition of 61 Ellerines and Beares stores in Namibia, Botswana, Lesotho and Swaziland for approximately R250 million.
Cape Town – Lewis Group has received regulatory and competition approvals for the acquisition of 20 Ellerines and Beares stores in Botswana and 10 in Lesotho.
This follows the announcement in November 2015 of the proposed acquisition of 62 Ellerines and Beares stores in southern Africa for approximately R250 million. This effectively doubled the group’s African store footprint.
The stores in Lesotho have been seamlessly integrated into the group’s operations while the Botswana stores will commence trading in the Lewis stable from early March 2016.
Competition approvals are still awaited on the 21 stores purchased in Namibia and six in Swaziland.
Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. Prior to these acquisitions, the group had 62 stores in these four countries.
Chief executive officer, Johan Enslin, said the acquisition of these Ellerines and Beares stores will enable Lewis to expand and diversify its southern African footprint. “We are not only gaining access to new segments of the furniture retail market but also expanding our existing customer base in each of these countries.
Once all these stores are fully operational they are expected to make a meaningful contribution to the group.”
Lewis Group purchased the Beares brand and 61 stores in South Africa on advantageous terms in November 2014 after parent company Ellerines Furnishers was placed under business rescue. Enslin said the Beares chain has since been expanded to 84 stores in South Africa and enabled the group to attract customers in higher income segments than its traditional target market. “The addition of the Beares stores in southern Africa will further improve our buying power and bring immediate scale benefits,” he said.
Cape Town – Lewis Group today announced the acquisition of 62 Ellerines and Beares stores in southern Africa for a purchase price of approximately R250 million.
The stores are located in Botswana (25 stores), Namibia (21), Lesotho (10) and Swaziland (6), and will increase the group’s total store footprint to 786.
Chief executive officer, Johan Enslin, said Ellerines and Beares are both well-established retail furniture businesses across southern Africa. “The acquisition of these stores will enable Lewis to expand and diversify its southern African footprint. We will not only gain access to new segments of the furniture retail market but also expand our existing customer base in each of these countries.”
Enslin said Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. The group currently has 62 stores in these four countries which generate approximately 20% of the group’s operating profit.
“We believe Beares is a scalable brand with good growth prospects. The acquisition of the Beares business in South Africa from Ellerines in late 2014 has allowed the group to attract customers in higher income segments,” he said.
The transaction is subject to standard regulatory and competition approvals in the four countries, and is expected to be implemented by the end of February 2016.
Lewis Group today reported results for the six months ended September 2015 which reflect the deterioration in retail trading conditions since July, with merchandise sales growing by 8.8%.
Enslin said the trading environment became increasingly difficult in August and September owing to the impact of the slowing economy and the group’s decision to early adopt the National Credit Regulator’s affordability assessment regulations during the latter part of July.
The group’s headline earnings for the six months reduced by R44.5 million to R286.6 million, with diluted headline earnings per share 12.8% lower at 321 cents.
The interim dividend has been maintained at 215 cents per share, “as the business continues to be strongly cash generative and the board remains confident in the group’s medium-term prospects.”
The high levels of indebtedness among the Lewis target market contributed to the credit application decline rate remaining high at 41%. Debtor costs as a percentage of net debtors moved from 6.8% to 7.4%.
On the outlook for the remainder of the financial year, Enslin said the current adverse trading conditions are not expected to improve in the short term.
“Consumer confidence remains muted and unemployment continues to impact our target market, with customers in the mining and agricultural sectors being under particular pressure.”
“We continue to invest for growth and will be expanding the store footprint over the next six months. Management is confident in the growth prospects of Beares and we will continue to refine the merchandise offering for the higher targeted LSM market,” he added.
Graeme Lillie, Tier 1 Investor Relations 082 468 1507
Cape Town – Multi-brand furniture retailer Lewis Group today reported a strong second half performance for the year to March 2015 as the group gained market share in the changing competitive environment.
Merchandise sales for the second half increased by 18%, compared to a decline of 3.5% for the first six months, driven by the exclusive merchandise offering which was supported by higher levels of promotional activity. Merchandise sales for the year grew by 7.6% (2014: decrease of 2.5%) and excluding the benefit of the recently acquired Beares chain, sales increased by 4.4%.
The group’s operating profit for the year was impacted by higher debtor costs and additional expenditure on Beares, and declined by 1.2% to R1 140 million. Headline earnings were 4.3% lower at R784 million.
The total dividend has been maintained at 517 cents per share.
Chief executive officer, Johan Enslin, said while the group has reported an improving performance, trading conditions have remained particularly tough, with consumers in the group’s lower to middle income target market under continued financial pressure. The high level of consumer indebtedness in the group’s target market is reflected in the credit application decline rate which increased from 38.4% in 2014 to 40.2% in 2015.
Lewis Group acquired the Beares brand together with 61 stores in November 2014. The chain was integrated into the group’s operations from mid December.
Enslin said Beares “offers exciting growth potential and will enable us to attract new customers in higher LSM markets where we currently have limited exposure”.
Following the purchase of the Beares stores, and the opening of a net 19 new stores, the group’s store base reached 716 at year end. He said the gross profit margin was maintained at 36.6% despite “the aggressive discounting by competitors ahead of stores closures” in the last quarter of the 2014 calendar year.
On the outlook for the year ahead, Enslin said the retail trading and credit environment is unlikely to show any marked improvement in the short to medium term as the consumer economy remains weak and unemployment remains high.
The group plans to open 30 stores in the year ahead, including 20 Lewis and 10 Beares outlets.
“Beares is a scalable brand which offers good organic growth prospects. We are continuing to refine the merchandise offering for the chain’s higher LSM customers to maximise the potential growth of the brand,” he said.
“In this environment our focus will be on driving quality credit sales, containing costs and further improving collections rates. We believe the business is well positioned for further market share gains within the shifting competitive landscape,” said Enslin.
Ends Issued by Tier 1 Investor Relations on behalf of Lewis Group For further information kindly contact Graeme Lillie, Tier 1 Investor Relations 082 468 1507
Lewis Group, which last week announced the planned acquisition of Beares, continued to be impacted by the slowdown in the furniture retail sector in the six months to September 2014 with headline earnings declining 11.3%.
Despite the lower earnings, the interim dividend has been maintained at 215 cents per share, as the board remain confident in the business model.
Chief executive officer, Johan Enslin, said the trading environment remains extremely challenging, with the group’s middle to lower income target market under continued pressure. “However, the results show initial signs of a stabilising credit environment with debtor cost growth slowing.”
Enslin said management is encouraged by the improving collection trend as the increase in debtor costs for the six months slowed to 27% from the 30% reported for the four months ended July 2014. “This reflects the dual impact of a more stable labour market following the settlement of the mining strikes and our improved collections productivity at stores.”
Debtor costs as a percentage of net debtors moved from 5.3% to 6.4%.
The credit application decline rate increased from 39% to 41%, “demonstrating the high levels of indebtedness in the target market”.
“Trading conditions in August and September proved particularly difficult owing to aggressive discounting by competitors ahead of store closures. This resulted in sales for the half year declining by 3.5% to R1.13 billion. Revenue for the period increased by 1.6% supported by increased financial services income,” he said.
Lewis reached the 500 store mark following the opening of nine new outlets during the period, bringing the group’s store base to 642 at the end of September.
Commenting on the proposed acquisition of Beares, Enslin said negotiations with the business rescue practitioners are progressing well.
In terms of the proposed agreement, the group will acquire the Beares brand and 63 of the existing Beares stores in South Africa. The purchase price is R40 million, with stock to a maximum value of R50 million. Approval from the competition authorities is expected to be finalised by 17 November 2014.
“Beares is a scalable brand with exciting medium-term expansion potential. The acquisition will enable the group to attract new customers in higher LSM markets where we currently have limited exposure,” said Enslin.
The Beares chain will be integrated into the group’s business model. Management plans to retain the Beares brand and incorporate the My Home chain into the Beares business.
On the outlook for the rest of the financial year, Enslin said retail trading conditions will remain challenging but he expects disruptive competitor activity to decline as stores are closed.
New merchandise ranges have been launched in stores ahead of the festive season trading period and will be supported by strong marketing campaigns.
“The integration of the Beares business into the group’s store, merchandise, supply chain and credit operations will be a priority in the months ahead,” he said.
Despite the adverse trading conditions the group continues to invest for growth and is on track to open the targeted 20 Lewis stores in the 2015 financial year.
Graeme Lillie
Tier 1 Investor Relations
021 702 3102 / 082 468 1507
