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Investment case

Lewis Group offers investors exposure across southern Africa’s retail customer markets through its portfolio of well-established traditional brands operating in the low to middle income credit market and upper income cash customers through UFO.

The board believes the following factors motivate an investment case for Lewis Group and should support competitive long-term returns for shareholders despite the challenging macro-economic conditions in the country.

The following factors motivate an investment case for Lewis Group and should support competitive long-term returns for shareholders.

Highly Experienced Management Team
  • Stable executive team with average of 18 years’ service
  • Good balance of company and industry experience
  • Current leadership team has led the business successfully through previous economic downturns
  • Leadership succession from senior management
Resilient Business Model Diversification across income segments
  • Decentralised store-based business model is resilient to current constrained retail environment
  • Decentralised collections process ensures a customer-centric approach which supports higher collections
  • Increasing numbers of customers migrating to debit order payments which further supports collections
Favourable positioning even in challenging retail environment
  • Brands are well positioned to gain market share across all market segments through the extensive retail footprint and merchandise offering
  • All retail brands operate in a growth segment of the South African population
  • Credit offering and expertise is a strategic advantage, particularly in the current economic downturn
Extensive retail footprint
  • Deep penetration of retail market with 706 stores across urban and rural areas in South Africa
  • Expansion into the higher income segment in the past five years with the UFO chain which now comprises 43 stores
  • Presence in other African markets with 134 stores across Namibia, Botswana, Lesotho and Eswatini
Diversification across income segments
  • Lewis and Best Home and Electric target low to middle income credit and cash customers
  • Beares targets middle income credit and cash customers
  • Cash retailer, UFO, targets the higher income market segment
Exclusive merchandise supported by strong supplier relationships
  • Differentiated, exclusive and quality product ranges across all brands
  • Focus on selling higher margin furniture and appliance product categories
  • Products sourced locally and offshore that appeal to the needs of the specific income target markets serviced by the Group’s brands
  • Strong supplier relationships and merchandise planning ensure optimal stock levels
Customer loyalty and engagement
  • Loyal customer base with a significant volume of sales generated from existing credit customers
  • High levels of brand awareness and trust with customers
  • Extensive social media following
  • Traditional retail stores conveniently located close to areas where target customer live, work and shop
  • UFO stores located in high footfall areas where higher end customers shop
Proven credit risk management
  • Credit offered across traditional retail brands to facilitate sales growth
  • Extensive experience in managing credit risk in the lower to middle income market
  • Centralised credit approval and granting ensures consistent credit risk management
Strong balance sheet and effective capital management strategy
  • Robust balance sheet and share price trading at a discount to net asset value of approximately 50% at yearend
  • Active capital management strategy enhancing returns to shareholders, with over R1.9 billion returned in dividends and the share buy-back programme over the past five years