Lewis Group Limited · JSE:LEW
Lewis — FY2023 Earnings Presentation
32 slides from Lewis's earnings presentation, May 2023
Slide 1: Annual Financial Results for the Year Ended 31 March 2023
ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 2023
Slide 2: Highlights, Debtor Analysis, Financial Results, Targets and Outlook
01 02 HIGHLIGHTS DEBTOR ANALYSIS 03 04 FINANCIAL TARGETS RESULTS AND OUTLOOK LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 2
Slide 3: Highlights
01 HIGHLIGHTS ▪ Review of 2023 04 ▪ Operational context 05 ▪ Operational achievements 06 ▪ Share buy backs 11 ▪ Return to Shareholders 12 ▪ Dividends 14
Slide 4: Key results highlights
REVENUE MERCHANDISE GROSS PROFIT SALES MARGIN AT + 3.1% + 1.4% 40.6% COLLECTION SATISFACTORY DEBTOR COSTS RATES AT PAID ACCOUNTS AT MAINTAINED AT 80.8% 80.4% 12.3% OPERATING HEPS TOTAL DIVIDEND MARGIN AT + 1.0% to MAINTAINED AT 13.5% 857 cents per share 413 cents per share LEWIS GROUP LIMITED ANNUAL
Slide 5: Operational context: global and South African challenges
Global challenges - Slowing global growth - Higher inflation and interest rates - Russia-Ukraine war Increased South African pressures demand for credit - High energy, food and transport costs placing significant pressure on consumer spending - Adverse impact of Eskom load shedding - Deteriorating s
Slide 6: Operational achievements: credit sales and collections
Credit sales growth of 18.1% Growth of the debtors’ book of 7.5% Credit application decline rate settled at 34.7% (2022: 36.1%) Collection rates strengthening to 80.8% Level of satisfactory paid customers increasing to 80.4% Reduction in the impairment provision from 40.4% to 36.2% LEWIS
Slide 7: Merchandise sales performance
- Traditional brands up by 3.5% Group merchandise sales increased by 1.4% - UFO declined by 12.5% - Group credit sales increased by 18.1% - Group cash sales declined by 16.3% Other revenue increased by 5.8% 13.6% Reduction in inventory levels as supply chain stabilised MERCHANDISE 60.8% SALES
Slide 8: Expenses managed, robust balance sheet, share repurchases
1 Expenses well managed Operating costs (excl. debtor costs, impairments and capital items) increased by 6.7%, despite inflationary pressures 2 Robust balance sheet - 5.5 million shares repurchased in the 12 months 3 Continuing share repurchase programme to March 2023 - 42% of shares in issue
Slide 9: Highest number of new store openings since 2016
2022 2023 Lewis 485 7 492 Beares 146 8 154 Best Home & Electric 143 8 151 Net 21 new stores opened in 2023 134 stores outside SA UFO 45 -2 43 (2022:129 stores) 250 small format Lewis stores (51% of Lewis stores) 150 stores refurbished Highest number of new store openings since 2016 LEWIS GROUP LIMIT
Slide 10: Return to Shareholders
LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 10
Slide 11: Share buy backs: number of shares purchased
31.59 26.07 17.31 11.94 8.63 8.76 5.41 5.37 5.52 3.22 3.31 2018 2019 2020 2021 2022 2023 Number of shares purchased Cumulative LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 11
Slide 12: Total spent on increasing shareholder returns
2023 2022 2021 2020 2019 Return of capital - share buy back (Rm) 275.7 353.2 112.6 101.7 98.2 Return of income - dividends (Rm) 241.8 260.4 149.9 198.6 168.1 Total spent on increasing shareholder returns (Rm) 517.5 613.6 262.5 300.3 266.3 Market capitalisation (Rm) 2 340.5 2 951.6 2 195.8 1 370.4 2
Slide 13: Attributable profit vs shareholder returns
ATTRIBUTABLE PROFIT vs SHAREHOLDER RETURNS (R’ MILLIONS) Attributable profit Dividends paid Share buyback 260.4 241.8 432.9 483.1 198.6 149.9 407.1 168.1 353.2 309.5 275.7 182.4 98.2 101.7 112.6 2019 2020 2021 2022 2023 Average return to shareholders over 5 years 113.1% LEWIS GROUP LIMITED ANNUAL FI
Slide 14: Dividends and dividend yield
10.7% 413 413 10.4% 10.1% 328 8.8% 7.5% 218 218 234 195 185 129 65 195 195 120 133 105 2019 2020 2021 2022 2023 Interim Final Dividend yield LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 14
Slide 15: Debtor Analysis
02 DEBTOR ANALYSIS ▪ Debtor performance 16 ▪ Gross debtor analysis 18
Slide 16: Instalment collections (%)
INSTALMENT COLLECTIONS (%) 80.8% 79.0% 76.3% 74.5% 71.8% FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 16
Slide 17: Contractual arrears, collections and debtor costs
2023 2022 Collections (Rm) Collections from instalment sales (+7.3%) 4 762 4 437 Contractual arrears (Rm) 1 698 1 883 % of debtors at gross carrying value 27.7% 33.1% Debtor costs (Rm) Debtor costs (+7.0%) 752 702 ▪ Net bad debts written off 839 825 ▪ Debtors’ impairment provision (87) (123) Debtor
Slide 18: Gross debtor analysis
Number of Gross Impairment Impairment Total Instalments in arrears customers carrying value provision provision arrears ≤3 months >3 months Customer grouping Total R’000 R’000 % R’000 R’000 R’000 Satisfactory paid 2023 478 396 4 488 557 1 005 591 22.4 623 336 406 214 217 122 % 80.4 73.3 45.4 2022 45
Slide 19: Satisfactory paid accounts (%)
SATISFACTORY PAID ACCOUNTS (%) 79.0% 80.4% 74.4% 71.4% 70.5% 2019 2020 2021 2022 2023 LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 19
Slide 20: Financial Results
03 FINANCIAL RESULTS ▪ Income statement 21 ▪ Segmental analysis 22 ▪ Analysis of costs 23 ▪ Balance sheet overview 24 ▪ Key ratios 25 ▪ Financial performance 26
Slide 21: Income statement
2023 2022 % Revenue (Rm) 7 483 7 256 3.1 Merchandise sales (Rm) 4 443 4 383 1.4 Gross profit margin (%) 40.6 40.5 Operating profit before impairments and capital items (Rm) 703 767 (8.3) Impairments and capital items (Rm) (102) (99) 3.0 Operating profit (Rm) 601 668 (10.0) Operating margin (%) 13.5
Slide 22: Segmental analysis: Group, Traditional, UFO
Group Traditional UFO 2023 2022 2023 2022 2023 2022 Revenue (Rm) 7 483 7 256 6 977 6 678 506 578 Merchandise sales (Rm) 4 443 4 383 3 945 3 813 498 569 Operating profit before impairments and 703 767 699 728 4 39 capital items (Rm) Operating profit /(loss) (Rm) 601 668 725 704 (124) (36) Operating m
Slide 23: Analysis of costs
2023 2022 Rm Rm % Employment costs 1 377 1 412 (2.5) Admin and IT 370 345 7.2 Marketing 316 280 12.9 Transport and travel 348 279 24.7 Depreciation and amortisation 351 328 7.0 Other operating costs 630 536 17.5 Total 3 392 3 180 6.7 LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31
Slide 24: Balance sheet overview
2023 2022 Rm Rm Property, plant, equipment and intangible assets 601 655 Right-of-use assets 760 747 Inventory 869 1 019 Trade and other receivables 4 072 3 535 Cash on hand 183 308 Other assets 562 643 Total assets 7 047 6 907 Shareholders’ equity and reserves 4 609 4 717 Trade and other payables 6
Slide 25: Key ratios
2023 2022 % HEPS (cents) 856.9 848.7 1.0 ROE – after tax (%) 8.7 10.1 ROCE – after tax (%) 7.9 8.8 ROA – before tax (%) 9.2 10.4 Gearing ratio – including lease liabilities (%) 24.5 15.3 Gearing ratio – excluding lease liabilities (%) 4.0 (4.8) Total dividend declared (cents) 413 413 - LEWIS GROUP L
Slide 26: Return on equity (%)
RETURN ON EQUITY(%) 10.1% 9.0% 8.7% 6.4% 3.8% FY 2019 FY 2020 FY 2021 FY2022 FY 2023 LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 26
Slide 27: Headline earnings per share (cents)
HEADLINE EARNINGS PER SHARE (CENTS) 849 857 617 376 260 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 27
Slide 28: Net asset value per share vs share price
NET ASSET VALUE PER SHARE VS SHARE PRICE (R) 80.76 75.27 68.14 60.80 61.26 47.00 41.00 31.10 30.71 17.82 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Net Asset Value Closing share price LEWIS GROUP LIMITED ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 28
Slide 29: Targets and Outlook
04 TARGETS AND OUTLOOK ▪ Financial and operating targets 30 ▪ Outlook 31
Slide 30: Financial and operating targets
2023 Targets (%) Actual Targets Year-end 2024 Medium-term Gross profit margin 40.6 40-42 40-42 41-43 Operating margin 13.5 14-18 12-16 16-20 Increase in operating costs 6.7 4-8 6-10 3-6 Credit sales as a % of total sales 59.9 52-56 59-63 52-56 Satisfactory paid customers 80.4 74-79 77-80 77-80 Debto
Slide 31: Outlook
Share repurchase Ongoing global and domestic programme to continue challenges Group continues to invest for the future and remains on track Ongoing Eskom to open 25 new stores load shedding Retail trading conditions Same day delivery remains a expected to deteriorate further competitive advantage -
Slide 32: Questions
lewis QUESTIONS 2023 Group Lid THANK YOU