Lewis Group Limited · JSE:LEW
Lewis — H1 2023 Earnings Presentation
32 slides from Lewis's earnings presentation, September 2022
Slide 1: Unaudited Interim Results H1 2023
UNAUDITED INTERIM RESULTS H1 FOR THE PERIOD ENDED 30 SEPTEMBER 2022 2023 LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 1
Slide 2: Agenda
AGENDA 01 02 Highlights Debtor analysis 03 04 Financial Targets and results outlook LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 2
Slide 3: Highlights
01 HIGHLIGHTS ▪ Review of H1 2023 04 ▪ Operational context 05 ▪ Operational achievements 06 ▪ Share repurchases 09 ▪ Dividends per share 12
Slide 4: Review of H1 2023
REVIEW OF H1 2023 Gross profit margin Debtor costs Revenue Merchandise sales at improved by + 4.0% + 4.3% 39.3% 2.2% Operating margin HEPS Interim dividend Headline Earnings maintained at at +4.4% + 19.2% to 13.6% 393 cents per share 195 cents per share LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS
Slide 5: Operational Context
OPERATIONAL CONTEXT ▪ Weakened retail trading conditions - Rising inflation and interest rates - Deteriorating socio-economic conditions - Decreased consumer confidence and spending - Local and international supply chain challenges - Adverse impact of Eskom load shedding ▪ Continued exchange rate pr
Slide 6: Operational Achievements
OPERATIONAL ACHIEVEMENTS ▪ Trading out of 829 store outlets (LY: 817 stores) Sales patterns - Net 10 new stores opened in FY23 - 131 stores outside SA (LY:129 stores) 62.0% 62.6% - 239 small format Lewis stores (49% of Lewis stores) - 103 stores refurbished ▪ Group merchandise sales increased by 4.3
Slide 7: Operational Achievements: Sales Mix
OPERATIONAL ACHIEVEMENTS Sales mix H1 2023 43.5% 56.5% FY 2022 48.6% 51.4% H1 2022 49.4% 50.6% FY 2021 50.9% 49.1% FY 2020 43.1% 56.9% FY 2019 42.1% 57.9% Cash Credit LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 7
Slide 8: Operational Achievements
OPERATIONAL ACHIEVEMENTS ▪ Expenses well managed - Operating costs (excl. debtor costs, impairments and capital items) increased by 5.4%, despite increasing cost pressures ▪ Strong balance sheet ▪ Share repurchase programme - 7.15 million shares repurchased in the 12 months to September 2022 - 41% o
Slide 9: Number of Shares Repurchased Since 2018 (Millions)
NUMBER OF SHARES REPURCHASED SINCE 2018 (MILLIONS) 29.88 26.07 17.31 11.94 8.63 8.76 5.41 5.37 3.22 3.31 3.81 2018 2019 2020 2021 2022 H1 2023 Number of shares purchased Cumulative LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 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: Delivering Shareholder Returns / Active Capital Management
DELIVERING SHAREHOLDER RETURNS / ACTIVE CAPITAL MANAGEMENT H1 2023 H1 2022 Return of capital - share buy back (Rm) 192.2 194.5 Return of income - dividends (Rm) 129.4 131.7 Total spent on increasing shareholder returns (Rm) 321.6 326.2 Market capitalisation (Rm) 2 705.5 2 743.2 Return to shareholder
Slide 12: Dividends per Share (Cents)
DIVIDENDS PER SHARE (CENTS) 413 328 218 234 195 195 185 129 65 195 195 120 133 105 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Interim Final LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 12
Slide 13: Debtor Analysis
02 DEBTOR ANALYSIS ▪ Debtor performance 14 ▪ Gross debtor analysis 16
Slide 14: Debtor Performance
DEBTOR PERFORMANCE Group collections (%) 81.7% 78.7% 79.0% 76.3% 74.5% 71.8% FY 2019 FY 2020 FY 2021 H1 2022 FY 2022 H1 2023 LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 14
Slide 15: Debtor Performance
DEBTOR PERFORMANCE H1 2023 H1 2022 Collections (Rm) Collections from instalment sales 2 332 2 172 Actual collections achieved As a % of one contract instalment per customer per month 81.7% 78.7% Contractual arrears (Rm) 1 940 2 160 % of debtors at gross carrying value 32.9% 37.3% Debtor costs (Rm) D
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 2023 463 910 4 088 511 846 943 20.7 602 185 173 073 119 413 87
Slide 17: Debtor Performance
DEBTOR PERFORMANCE Satisfactory paid accounts (%) 78.8% 75.2% 74.2% 69.9% 69.5% H1 2019 H1 2020 H1 2021 H1 2022 H1 2023 LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 17
Slide 18: Financial Results
03 FINANCIAL RESULTS ▪ Income statement 19 ▪ Segmental analysis 20 ▪ Segmental performance 21 ▪ Analysis of costs 22 ▪ Balance sheet overview 23 ▪ Key ratios 24 ▪ Financial performance 25
Slide 19: Income Statement
INCOME STATEMENT H1 2023 H1 2022 % Revenue (Rm) 3 541 3 406 4.0 Merchandise sales (Rm) 2 076 1 991 4.3 Gross profit margin (%) 39.3 40.2 Operating profit before impairments and capital items (Rm) 316 330 (4.1) Impairments and capital items (Rm) (34) 11 Operating profit (Rm) 282 341 (17.3) Operating
Slide 20: Segmental Analysis
SEGMENTAL ANALYSIS Group Traditional UFO H1 2023 H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 Revenue (Rm) 3 541 3 406 3 292 3 130 249 276 Merchandise sales (Rm) 2 076 1 991 1 830 1 719 246 272 Operating profit before impairments and capital 316 330 320 310 (4) 20 items (Rm) Operating profit /(loss) (Rm)
Slide 21: Segmental Performance – UFO
SEGMENTAL PERFORMANCE – UFO ▪ Challenges - New range launch delayed › KZN/ Gauteng rail link › Transnet strike - Significant product inflation, record high logistics costs › Approximately 66% of range imported - Increased pressure on disposable income of target market ▪ Action taken - Strengthened s
Slide 22: Analysis of Costs
ANALYSIS OF COSTS (EXCLUDING DEBTOR COSTS, IMPAIRMENTS AND OTHER CAPITAL ITEMS) H1 2023 H1 2022 Rm Rm % Employment costs 707 690 2.4 Admin and IT 171 182 (6.0) Marketing 165 146 13.0 Transport and travel 177 139 27.4 Depreciation and amortisation 174 186 (6.5) Other operating costs 304 268 13.4 Tota
Slide 23: Balance Sheet Overview
BALANCE SHEET OVERVIEW H1 2023 H1 2022 Rm Rm Property, plant, equipment and intangible assets 650 701 Right-of-use assets 743 661 Inventory 1 245 1 057 Trade and other receivables 3 763 3 439 Cash on hand 241 390 Other assets 603 779 Total assets 7 245 7 027 Shareholders’ equity and reserves 4 583 4
Slide 24: Key Ratios
KEY RATIOS H1 2023 H1 2022 % HEPS (cents) 393.3 330.0 19.2 ROE – after tax (%)* 8.8 9.7 ROCE – after tax (%)* 7.4 8.8 ROA – before tax (%)* 8.6 10.5 Gearing ratio – including lease liabilities (%) 24.9 9.3 Total dividend declared (cents) 195 195 - * Annualised LEWIS GROUP LIMITED UNAUDITED INTERIM R
Slide 25: Financial Performance: Return on Equity
FINANCIAL PERFORMANCE RETURN ON EQUITY 10.1% 9.7% 9.0% 8.8% 6.4% 3.8% FY 2019 FY 2020 FY 2021 H1 2022 FY2022 H1 2023 LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 25
Slide 26: Financial Performance: Headline Earnings per Share
FINANCIAL PERFORMANCE HEADLINE EARNINGS PER SHARE (CENTS) 849 617 376 393 330 260 FY 2019 FY 2020 FY 2021 H1 2022 FY 2022 H1 2023 LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 26
Slide 27: Financial Performance: NAV per Share vs Share Price
FINANCIAL PERFORMANCE NET ASSET VALUE PER SHARE VS SHARE PRICE (R) 77.92 75.27 71.76 68.14 60.80 61.26 47.00 46.00 41.50 31.10 30.71 17.82 FY 2019 FY 2020 FY 2021 H1 2022 FY 2022 H1 2023 Net Asset Value Closing share price LEWIS GROUP LIMITED UNAUDITED INTERIM RESULTS H1 2023 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 Targets % H1 2023 Year end 2023 Medium-term Gross profit margin 39.3 40-42 41-43 Operating margin 13.6 14-18 16-20 Increase in operating costs 5.4 4-8 3-6 Credit sales as a % of total sales 56.5 52-56 52-56 Satisfactory paid customers 78.8 74-79 75-80 Debtor co
Slide 30: Outlook
OUTLOOK ▪ Increasing pressure on consumer disposable income expected to result in retail conditions deteriorating further - Rising interest rates - Rising food, fuel and electricity prices - Record high unemployment levels ▪ Ongoing Eskom load shedding ▪ Domestic political instability ▪ Russia-Ukrai
Slide 31: Outlook
OUTLOOK ▪ Experienced management team ▪ Strong credit sales growth bodes well to support future income streams ▪ UFO turnaround strategy ▪ Strategically positioned to continue to gain market share ▪ Strong Black Friday and festive season promotions planned ▪ New merchandise ranges and high levels of
Slide 32: Questions
z a 2 > 2 2 oO QUESTIONS