Lewis Group Limited · JSE:LEW
Lewis — FY2022 Earnings Presentation
31 slides from Lewis's earnings presentation, May 2022
Slide 1: Annual Financial Results for the year ended 31 March 2022
ANNUAL FINANCIAL RESULTS 20 FOR THE YEAR ENDED 31 MARCH 2022 22 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 1
Slide 2: Agenda
AGENDA 01 02 Highlights Debtor analysis 03 04 Financial Targets and results outlook LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 2
Slide 3: Highlights
01 HIGHLIGHTS ▪ Review of 2022 04 ▪ Operational achievements 05 ▪ Share repurchases 09
Slide 4: Review of 2022
REVIEW OF 2022 Gross profit margin Operating margin Revenue Merchandise sales at at + 7.9% + 11.5% 40.5% 15.2% HEPS Total dividend Cash generated from Headline Earnings +21.2% + 37.7% to + 25.9% to operations R863.3m 849 cents per share 413 cents per share LEWIS GROUP LIMITED AUDITED FINANCIAL RESUL
Slide 5: Operational achievements
OPERATIONAL ACHIEVEMENTS ▪ Solid performance for the year ▪ Challenging retail conditions - Continued impact of Covid-19 - Rising inflation - Tightening of domestic economy - July 2021 civil unrest - Local and international supply chain challenges ▪ Trading out of 819 store outlets (LY: 807 stores)
Slide 6: Operational achievements: sales patterns
OPERATIONAL ACHIEVEMENTS ▪ Merchandise sales increased by 11.5% Sales patterns - Comparable stores up by 9.2% - Credit sales increased by 16.7% 61.6% 62.1% - Cash sales increased by 6.4% - Sales increased by 18.9% since March 2020 ▪ Credit application decline rate 36.1% (LY: 38.1%) 25.8%26.2% ▪ Othe
Slide 7: Operational achievements: sales mix
OPERATIONAL ACHIEVEMENTS Sales mix FY 2022 48.6% 51.4% FY 2021 50.9% 49.1% FY 2020 43.1% 56.9% FY 2019 42.1% 57.9% FY 2018 34.2% 65.8% Cash Credit LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 7
Slide 8: Operational achievements
OPERATIONAL ACHIEVEMENTS ▪ Expenses tightly managed - Operating costs (excl. debtor costs) increased by 10% as costs normalised post the lockdown - Increased by 6.5% when compared to 31 March 2020 ▪ Strong balance sheet and robust cashflows ▪ Share repurchase programme - 8.76 million shares repurcha
Slide 9: Number of shares repurchased since 2018
NUMBER OF SHARES REPURCHASED SINCE 2018 (MILLIONS) 26.07 17.31 11.94 8.63 8.76 5.41 5.37 3.22 3.31 2018 2019 2020 2021 2022 Number of shares purchased Cumulative LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 9
Slide 10: Delivering shareholder returns / active capital management
DELIVERING SHAREHOLDER RETURNS / ACTIVE CAPITAL MANAGEMENT 2022 2021 2020 Return of capital - share buy back (Rm) 353.2 112.6 101.7 Return of income - dividends (Rm) 260.4 149.9 198.6 Total spent on increasing shareholder returns (Rm) 613.6 262.5 300.3 Market capitalisation (Rm) 2 945.6 2 195.8 1 37
Slide 11: Dividends per share (cents)
DIVIDENDS PER SHARE (CENTS) 413 328 234 200 185 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 11
Slide 12: Debtor analysis
02 DEBTOR ANALYSIS ▪ Debtor performance 13 ▪ Gross debtor analysis 15
Slide 13: Debtor performance
DEBTOR PERFORMANCE Group collections (%) 79.0% 76.3% 74.9% 74.5% 71.8% FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 13
Slide 14: Debtor performance
DEBTOR PERFORMANCE Pre-covid 2022 2021 2019 Collections (Rm) Collections from instalment sales 4 437 3 911 4 041 Actual collections achieved As a % of one contract instalment per customer per month 79.0% 71.8% 76.3% Contractual arrears (Rm) 1 883 2 057 2 129 % of debtors at gross carrying value 33.1
Slide 15: Gross debtor analysis
GROSS DEBTOR ANALYSIS Number of Gross Impairment Impairment Total Instalments in arrears customers carrying value provision provision arrears 1 2 3 >3 Customer grouping Total R’000 R’000 % R’000 R’000 R’000 R’000 R’000 Satisfactory paid 2022 455 999 3 905 943 841 709 21.5 592 552 169 347 116 257 85
Slide 16: Gross debtor analysis
GROSS DEBTOR ANALYSIS Number of Gross Impairment Impairment Total Instalments in arrears customers carrying value provision provision arrears 1 2 3 >3 Customer grouping Total R’000 R’000 % R’000 R’000 R’000 R’000 R’000 Satisfactory paid 2022 455 999 3 905 943 841 709 21.5 592 552 169 347 116 257 85
Slide 17: Debtor performance: satisfactory paid accounts
DEBTOR PERFORMANCE Satisfactory paid accounts (%) 79.0% 74.4% 71.4% 70.5% 68.4% Highest in 15 years 2018 2019 2020 2021 2022 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 17
Slide 18: Financial results
03 FINANCIAL RESULTS ▪ Income statement 19 ▪ Segmental analysis 20 ▪ Analysis of costs 21 ▪ Impact of impairments and capital items 22 ▪ Balance sheet overview 23 ▪ Key ratios 24 ▪ Financial performance 25
Slide 19: Income statement
INCOME STATEMENT 2022 2021 % Revenue (Rm) 7 256 6 726 7.9 Merchandise sales (Rm) 4 383 3 931 11.5 Gross profit margin (%) 40.5 41.8 Operating profit before impairments and capital items (Rm) 767 735 4.3 Impairments and capital items (Rm) (99) (40) 147.5 Operating profit (Rm) 668 695 (4.0) Operating
Slide 20: Segmental analysis
SEGMENTAL ANALYSIS Group Traditional Cash Revenue (Rm) 7 256 6 678 578 Merchandise sales (Rm) 4 383 3 813 569 Operating profit before impairments and capital items (Rm) 767 728 39 Operating profit (Rm) 668 704 (36) Operating margin: Before impairments and capital items(%) 17.5 19.1 6.8 After impairm
Slide 21: Analysis of costs
ANALYSIS OF COSTS (EXCLUDING DEBTOR COSTS ,IMPAIRMENTS AND OTHER CAPITAL ITEMS) 2022 2021 Rm Rm % Employment costs 1 412 1 259 12.1 Admin and IT 345 325 6.1 Marketing 280 184 52.0 Transport and travel 279 242 15.2 Depreciation and amortisation 328 303 8.3 Other operating costs 536 575 (6.8) Total 3
Slide 22: Impact of impairments and capital items
IMPACT OF IMPAIRMENTS AND CAPITAL ITEMS 2022 2021 Rm Rm % Operating profit before impairments and capital items 766.8 735.1 4.3 Impairments and capital items (98.9) (39.6) Impairment of right-of-use assets (99.2) (33.8) Impairment/write-off of goodwill (31.4) (5.9) Profit on disposal of fixed assets
Slide 23: Balance sheet overview
BALANCE SHEET OVERVIEW 2022 2021 Rm Rm Property, plant, equipment and intangible assets 655 683 Right-of-use assets 747 635 Inventory 1 019 948 Trade and other receivables 3 535 3 367 Cash on hand 308 447 Other assets 643 743 Total assets 6 907 6 823 Shareholders’ equity and reserves 4 717 4 873 Bor
Slide 24: Key ratios
KEY RATIOS 2022 2021 % HEPS (cents) 848.7 616.5 37.7 ROE – after tax (%) 10.1 9.0 ROCE – after tax (%) 8.8 8.7 ROA – before tax (%) 10.4 10.5 Gearing ratio – including lease liabilities (%) 15.3 7.4 Total dividend declared (cents) 413 328 25.9 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 24
Slide 25: Financial performance: return on equity
FINANCIAL PERFORMANCE RETURN ON EQUITY 10.1% 9.0% 6.4% 5.1% 3.8% FY 2018 FY 2019 FY 2020 FY 2021 FY2022 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 25
Slide 26: Financial performance: headline earnings per share
FINANCIAL PERFORMANCE HEADLINE EARNINGS PER SHARE (CENTS) 849 617 376 303 260 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 26
Slide 27: Net asset value per share vs share price
FINANCIAL PERFORMANCE NET ASSET VALUE PER SHARE VS SHARE PRICE (R) 75.27 68.14 60.80 61.26 57.78 47.00 42.20 31.10 30.71 17.82 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Net Asset Value Share price (March closing) LEWIS GROUP LIMITED AUDITED FINANCIAL RESULTS 2022 27
Slide 28: Targets and outlook
04 TARGETS AND OUTLOOK ▪ Financial and operating targets 29 ▪ Outlook 30
Slide 29: Financial and operating targets
FINANCIAL AND OPERATING TARGETS Actual Target Target Target % 2022 2022 2023 medium-term Gross profit margin 40.5 40-42 40-42 41-43 Operating margin 15.2 12-18 14-18 16-20 Increase in operating costs 10.0 8-12 4-8 3-6 Credit sales as a % of total sales 51.4 52-56 52-56 52-56 Satisfactory paid custom
Slide 30: Outlook
OUTLOOK ▪ Increasing pressure on consumer disposable income expected to result in challenging retail trading conditions - Rising interest rates - Rising food and fuel prices ▪ Ongoing Eskom loadshedding ▪ Ongoing supply chain challenges ▪ Russia-Ukraine war impact on global & domestic economy ▪ Busi
Slide 31: Questions
QUESTIONS