Lewis Group Limited · JSE:LEW
Lewis — FY2019 Earnings Presentation
25 slides from Lewis's earnings presentation, May 21, 2019
Slide 1: Annual Audited Results for the Year Ended 31 March 2019
ANNUAL AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2019
Slide 2: Agenda
Agenda Key features Debtor analysis Financial results Financial and operating targets Value proposition Questions Outlook Questions
Slide 3: Key features
Key features • Improved performance of Traditional Retail • Solid performance by UFO • Launch of INspire Revenue Merchandise Sales Gross Profit Debtor Costs Operating Profit 3 ▲ ▲ at ▼ ▲ 10.4% 22.9% 41.2% 11.9% 16.8% to R6.1 billion to R3.5 billion R1.4 billion to R843 million to R443 million HEPS T
Slide 4: Key features continued
Key features continued… • Merchandise sales increased by 22.9% to R3,519m - Traditional retail up 7.6% to R3,014m - Cash retail (UFO) - R478m - Omni-channel retail (INspire) – R27m 4 • Growth in credit sales of 8.1% to R2,038m • Growth in cash sales of 51.1% to R1,482m 4
Slide 5: Key features continued
Key features continued… • Sales pattern for the year - Furniture 60.8% (LY: 56.7%) - Appliances 25.2% (LY: 27.6%) 5 - Electronics 14.0% (LY: 15.7%) • Credit application decline rate: 37.4% (LY: 37.1%) 5
Slide 6: Key features continued
Key features continued… • IFRS 9 – (Expected credit loss impairment model) replaced IAS39 (Incurred loss model) • Collection rates of 76.3% (LY: 74.9%) • Satisfactory paid at 71.4% (LY:68.4%) 6 • Debtor costs 13.3% of net debtors (LY: 17.2%) • Trading out of 784 stores (LY: 773) - 214 small format L
Slide 7: Key features continued: Traditional retail
Key features continued… Traditional retail • Merchandise sales +7.6% • Credit sales growth +6.7% • Cash sales growth +9.5% 7 • Credit sales mix 66.7% (LY: 67.3%) • Operating profit increased by 12% to R429m (LY: R384m) Other revenue – positive trend H1 H2 2019 2018 % 2019 2018 % R1 274m R1 364 (6.5%
Slide 8: Debtor analysis
8 Debtor analysis 8
Slide 9: Debtor performance
Debtor performance FY19 FY18 Collections Collections from instalment sales Rm 4 041 3 960 Actual collections achieved As a % of one contract instalment per customer per month 76.3% 74.9% Contractual arrears Rm 2 129 2 278 % of gross debtors 35% 38% 9 Debtor Costs Debtor costs (excluding adjustment f
Slide 10: Gross debtor analysis
Gross debtor analysis Impairment No Customers Gross Receivables Provision Total Customer Grouping Period Arrears Instalments in arrears R 000 No % R 000 % R 000 % 1 2 3 >3 R000 R 000 R 000 R000 2019 418 355 71.4 3 282 938 59.4 593 578 18.1 534 435 156 625 105 396 76 314 196 100 Satisfactory Customer
Slide 11: Debtor costs vs. Impairment provision + IFRS 9 (Rm)
Debtor costs vs. Impairment provision + IFRS 9 (Rm) R 3 000 R 2 500 2 422.0 2 323.1 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 1 005.0 957.3 875.2 858.1 843.1 758.3 702.4 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
Slide 12: Financial results
12 Financial results 12
Slide 13: Income statement
Income statement FY19 FY18 % Revenue Rm 6 137 5 557 10.4 Merchandise sales Rm 3 520 2 865 22.9 Gross profit margin % 41.2 41.4 13 Operating profit Rm 443 379 16.8 Operating margin % 7.2 6.8 Attributable earnings Rm 310 264 17.2 EPS cents 378 307 23.0 Headline EPS cents 376 303 24.3 13
Slide 14: Segmental analysis
Segmental analysis Omni Traditional Cash channel 2019 Group Retail Retail Retail Revenue FY:19 Rm 6 137 5 619 487 31 FY:18 Rm 5 557 5 491 66 - Revenue growth 10.4% 2.3% Operating profit FY:19 Rm 443 429 41 (27) 14 FY:18 379 384 (4.2) - Operating profit growth 16.8% 12% Operating margin FY:19 % 7.2 7
Slide 15: Analysis of costs (excluding debtor costs)
Analysis of costs (excluding debtor costs) FY19 FY18 % Rm Rm Employment costs 1 150 1 059 8.5% Admin and IT 348 328 6.0% Marketing 298 247 20.6% Occupancy costs 445 373 19.3% 15 Transport / Travel 242 205 18.0% Depreciation 79 86 (8.5%) Other operating costs (*) 331 244 35.7% Total 2 892 2 542 13.7%
Slide 16: Balance sheet
Balance sheet FY19 FY18 restated Assets Rm Rm PPE, goodwill and trademarks 609 607 Inventory 665 580 Insurance investments 617 606 Insurance premiums in advance - 76 Trade and other receivables 3 316 4 200 16 Tax and deferred tax 255 27 Cash on hand 205 608 Total Assets 5 667 6 704 Equity and liabil
Slide 17: Capital ratios and dividend
Capital ratios and dividend FY19 FY18 ROE – after tax (%) 6.4% 5.1% ROCE – after tax (%) 6.5% 5.1% 17 ROA – before tax (%) 8.5% 6.6% Gearing ratio (%) ungeared ungeared Final dividend (cents) 129c 100c Total dividend (cents) 234c 200c 17
Slide 18: Financial and operating targets
Financial and 18 operating targets 18
Slide 19: Financial and operating targets
Financial and operating targets Performance indicators Achieved Target Target Medium-term 2019 2019 2020 targets Gross profit margin (%) 41.2 38 - 42 38 - 42 40 - 43 Debtor costs as a percentage of net debtors 13.3 15 - 18 13 - 17 13 - 16 Satisfactory paid customers (%) 71.4 67 - 70 70 - 72 70 - 72
Slide 20: Value proposition
20 Value proposition 20
Slide 21: Value proposition: NAV per share vs share price
Value proposition Net asset value per share vs share price (cents) • Share buy back programme 90 Hundreds 80 - 3 224m shares repurchased at 77.4 average price of R30.30 70 60 61.28 61.53 61.27 60.12 60.81 58 57.78 50 • Dividend Yield 47 40 42.2 21 - increased from 4.74% to 7.52% 41.5 30 31.1 20 • PE
Slide 22: Outlook
22 Outlook 22
Slide 23: Outlook
Outlook • Trading conditions expected to remain challenging • Growth in other revenue expected to continue • Diversification strategy - well positioned to gain market share across all income groups 23 • Focus on establishing the brand • Further improve the • Optimise sales channels merchandise range
Slide 24: Outlook
Outlook • Exclusivity of merchandise and bringing value to the market • Management of the debtors book 24 • Expense focus • Balance Sheet Ungeared 24
Slide 25: Questions
Questions Group Lid 25