Lewis Group Limited · JSE:LEW

Lewis — H1 2019 Earnings Presentation

23 slides from Lewis's earnings presentation, November 2018

  1. Slide 1: Interim Results for the Six Months Ended 30 September 2018

    INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  2. Slide 2: Agenda

    Agenda 3 Highlights 4 Diversification strategy 5 Key features 8 Debtor analysis 13 Financial results 19 Targets and outlook 22 Questions LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  3. Slide 3: Highlights

    Highlights Revenue ▲ 9.3% to R2.9 billion Merchandise sales ▲ 25.9% 3 Debtor Costs reduced by 20.8% Headline Interim earnings Dividend per share ▲ ▲ 5% to 10.7% 105 c 3 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  4. Slide 4: Diversification strategy

    Diversification strategy 2014 2015 2017 2018 H1/2019  2 main brands  Acquired Beares  Doubled store base  Acquired UFO in Feb  Launched Omni- outside of SA to 116 2018 channel retail in May 2018 4  LSM 4 - 7  LSM 7 – 8  LSM 4 – 8  LSM 9 – 10+  LSM 4 – 10+  Merchandise Sales  Merchandise

  5. Slide 5: Key features

    Key features  Merchandise sales – up 25.9%  Cash retail (UFO) R230m  Omni channel retail (INspire) – R3.8m  Traditional retail brands – sales growth of 7.8%  Credit sales growth in Q2 of 9.6%  Gross profit margin – 39.9% (LY: 41.6%) 5  Furniture sales mix 61% (LY: 57%)  New product ranges an

  6. Slide 6: Key features continued

    Key features continued  Credit application decline rate 38.5% (LY: 37.4%)  Group credit sales mix 57.1% (LY: 68.8%)  Debtor costs as a % of net debtors 5.5% (LY: 7.8%)  Expense control  High focus area 6  Within managements target range of 13% - 15%  Share repurchase programme  1.7 million s

  7. Slide 7: Net asset value per share vs Share price (cents)

    Net asset value per share vs Share price (cents) 9000 8000 7620 7740 7450 7000 6460 6534 6000 6128 6153 6127 6012 5922 5800 5650 5481 5000 7 4828 4700 4000 4225 4150 4220 3719 3000 3211 2000 1000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 H1/2019 Share price (March closing) Net asset value 7 LEW

  8. Slide 8: Debtor analysis

    Debtor analysis  IFRS 9  Debtor analysis 8  Debtor performance 8 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  9. Slide 9: IFRS 9 – Financial instruments

    IFRS 9 – Financial instruments  Lewis Group formally transitioned to IFRS 9 on 1 April 2018  IFRS 9 (Expected credit loss) replaces IAS39 (Incurred loss)  Most significant impact relates to implementation of the Expected Credit Loss (ECL) impairment model on measurement of Receivables 9  ECL mod

  10. Slide 10: Debtor analysis – IFRS 9

    Debtor analysis – IFRS 9 Customer Grouping Gross carrying Total 30 September 2018 No Customers amount Impairment Provision Arrears Instalments in arrears (IFRS 9) R 000 No R 000 R 000 % 1 2 3 >3 R000 R 000 R 000 R000 Satisfactory paid 408 005 3 103 155 666 767 21.5% 530 205 148 582 102 629 75 903 20

  11. Slide 11: Debtor costs vs. Impairment provision + IFRS9 (Rm)

    Debtor costs vs. Impairment provision + IFRS9 (Rm) R 3 000 R 2 500 2 422 R 2 000 1 619.5 11 R 1 500 1 560.6 1 533.6 1 294.3 R 1 000 1 129.5 1 065.5 997.2 1 005.0 957.0 875.2 858.1 758.3 702.4 R 500 635.4 532.7 522.3 539.6 434.2 458.9 338.8 R 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 IFRS9

  12. Slide 12: Debtor performance

    Debtor performance H1/2019 H1/2018 Collections Collections from instalment sales Rm 2 011 1 990 Actual collections achieved As a % of one contract instalment per customer per month 77.2% 76.2% Contractual arrears Rm 2 177 2 352 % of gross debtors 37% 38.6% 12 Debtor Costs Debtor costs (excluding cre

  13. Slide 13: Financial results

    Financial results  Income statement  Segmental analysis 13  Analysis of costs  Balance sheet overview  Capital ratios 13 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  14. Slide 14: Income statement

    Income statement H1/2019 H1/2018 Rm Rm % Revenue (Rm) 2 905 2 659 9.3% Merchandise sales (Rm) 1 631 1 295 25.9% 14 Gross profit margin (%) 39.9% 41.6% Operating profit (Rm) 194 191 1.4% Operating profit margin (%) 6.7% 7.2% Attributable earnings (Rm) 150 143 5.2% EPS (cents) 182 163 11.5% Headline E

  15. Slide 15: Segmental analysis

    Segmental analysis Traditional Omni Group retail Cash retail channel Revenue (Rm) 2 905 2 667 234 4 Merchandise Sales 1 631 1 396 231 4 15 Operating profit (Rm) 193.8 186.8 21.6 (14.6) Operating margin H1:19 6.7% 7.0% 9.2% - H1:18 7.2% 7.2% n/a n/a Number of stores H1:19 779 746 33 H1:18 744 744 - 1

  16. Slide 16: Analysis of costs (excluding debtor costs)

    Analysis of costs (excluding debtor costs) H1/2019 H1/2018 Change Rm Rm % Employment costs 565 514 10% Admin and IT 170 164 3.7% Marketing 161 134 20.1% 16 Occupancy costs 221 183 20.8% Transport and travel 116 99 17.2% Depreciation 38 44 (13.6%) Other operating costs 159 130 22.3% Total 1 430 1 268

  17. Slide 17: Balance sheet overview

    Balance sheet overview H1/2019 H1/2018 Rm Rm Property, equipment, goodwill and trademarks 608 390 Inventory 751 523 Insurance investments 576 701 Trade and other receivables 3 347 4 341 Insurance and reinsurance assets 17 298 Tax and deferred assets 294 113 17 Cash on hand 544 683 Total assets 6 137

  18. Slide 18: Capital ratios

    Capital ratios H1/2019 H1/2018 ROE – after tax (%) 6.2% 5.2% ROCE – after tax (%) 5.4% 5.0% 18 ROA – before tax (%) 7.2% 6.4% Gearing ratio (%) Ungeared Ungeared Interim dividend declared (cents) 105c 100c 18 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  19. Slide 19: Targets and Outlook

    Targets and Outlook 19 19 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  20. Slide 20: Financial and operating targets

    Financial and operating targets Actual Target Performance indicators H1/2019 2019 Gross profit margin (%) 39.9 38 – 42 Operating profit margin (%) 6.7 5 – 10 Increase in operating costs (%)  Traditional retail 5.5 3-5 20  Including UFO and INspire 12.9 13 – 15 Credit sales as a % of total sales 57

  21. Slide 21: Outlook

    Outlook  Share repurchase programme to continue  Trading conditions expected to remain challenging  Opportunity to sell to informally employed and self-employed customers 21  Continued to invest in the future by expanding UFO and building the INspire business  Well prepared for the festive trad

  22. Slide 22: Questions

    Questions 22 22 LEWIS GROUP LIMITED RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

  23. Slide 23: lewisgroup.co.za

    lewisgroup.co.za

Lewis Group — H1 2019 Earnings Presentation on 6ix