November 9, 2015
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.
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 082 468 1507