November 24, 2021
Cape Town – Lewis Group delivered another strong financial performance in the Covid-19 impacted trading environment for the six months to September 2021 as merchandise sales increased by 20.7% to R1.99 billion and headline earnings grew by 24.5% to R226 million.
The group’s headline earnings per share increased by 39.7% to 330 cents due to the positive leverage effect of the group’s share repurchase programme.
An interim dividend of 195 cents per share was declared, an increase of 46.6%.
Chief executive officer Johan Enslin said the group generated strong sales growth despite the impact of the civil unrest in KwaZulu-Natal and Gauteng on trading in the July to September quarter.
Credit sales grew by 24.4% and cash sales by 17.1%, with credit sales accounting for 50.6% (H1 2021: 49.1%) of total merchandise sales.
He said sales growth was supported by high levels of stock availability during a period of significant supply chain challenges. “We continued to pursue our strategy of increasing inventory levels to ensure adequate stock cover to meet customer demand and to counter the ongoing challenges in the supply chain. Our good stock position is a competitive advantage going into Black Friday and the festive season,” he said.
The health of the group’s debtors’ book continues to improve, with collection rates strengthening to 78.7% (H1 2021: 66.5%), the percentage of satisfactory paid accounts increasing to a 14-year high and debtor costs reducing by 32.8%.
Solid merchandise sales growth and reduced debtor costs contributed to operating profit increasing by 23.3% to R341.2 million, with the operating profit margin improving from 16.8% to 17.1%.
The group expanded its store footprint to 817 with the opening of a net 10 new stores across all brands.
In the KwaZulu-Natal civil unrest 57 stores were damaged and looted, 51 of which have reopened and the remaining six will reopen once the damages have been repaired. The group’s SASRIA claim amounted to R79 million, with R43 million having been paid out and recognised in the results to end September. The balance of the insurance claim of R36 million is expected to be received before the end of the financial year.
The group repurchased 5.4 million shares at a cost of R194.5 million during the past six months. Since the start of the share repurchase programme in 2017, the group has bought back 22.7 million shares at an average price of R29.52 per share.
On the outlook for the remainder of the financial year, Enslin said while sales and collections momentum has continued into October, management expects trading conditions to become increasingly challenging in the second half of the financial year.
“High levels of unemployment, rising interest rates and the sensitivity of our core target market to higher fuel and food prices is expected to constrain spending in the months ahead. This will be compounded by the widespread electricity load shedding which is disrupting trade and impacting sales. Covid-19 continues to pose a risk to the trading outlook,” cautioned Enslin.
Issued by Tier 1 Investor Relations on behalf of Lewis Group
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