May 22, 2013
Lewis Group increased headline earnings by 14% to R890 million in the year to March 2013 despite trading conditions in the furniture retail sector becoming increasingly challenging.
A final dividend of 302 cents per share has been declared, bringing the total dividend to 514 cents, an increase of 16.3%.
Chief executive, Johan Enslin, said the group delivered a resilient performance, benefiting from its decentralised collection model which resulted in only a marginal increase in debtor costs.
“Tight control of operating expenses and debtor costs, together with increasing credit sales, lifted the operating profit margin by 50 basis points to 24.0%. Operating profit increased by 9.5% to R1.2 billion with headline earnings per share 13.6% higher at 1 003 cents (2012: 883 cents),” he said.
Merchandise sales increased by 4.4% to R2.5 billion, “reflecting the current tight consumer economy and the impact of widespread labour instability during the past year.”
Revenue in the flagship Lewis brand, which comprises 83% of group revenue, increased by 5.8%. Best Home and Electric grew revenue by 12.8% and My Home by 9.9%.
Credit sales increased from 71.4% to 75.3% of total sales as the group focused on “attracting credit customers through exclusive merchandise offerings and targeted customer promotions”.
The gross profit margin at 38.3% benefited from the merchandise import programme and the strategy of sourcing innovative and exclusive products locally and internationally.
Enslin said the overall quality of the debtors’ book has remained stable and the growth in debtor costs was contained to 3%. Debtor costs as a percentage of net debtors improved from 10.8% in 2012 to 9.4% in 2013, exceeding management’s target of 9.5% to 10.5%.
Twenty four new stores were opened during the year to bring the store base to 619, including 59 stores in Botswana, Lesotho, Namibia and Swaziland. All the new Lewis outlets are the smaller format stores with lower cost structures and higher sales densities. The group plans to open 20 to 25 new stores in the year ahead and expand the retail footprint to 700 in the medium term.
Discussing the outlook, Enslin said disposable income in the Lewis target market remains under pressure and consumer confidence continues to decline.
“In this tough trading environment we will continue to focus on sourcing exclusive, value for money merchandise and market our product offer strongly to attract credit customers. Containing expense growth and debtor costs remains a top priority,” he added.
Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 021 702 3102 / 082 468 1507