Cape Town – Lewis Group today reported the continued turnaround in the performance of its traditional retail brands in the year to March 2019, with strong merchandise sales growth and the early benefits of its diversification strategy driving headline earnings per share 24.3% higher to 376 cents.
The group’s total dividend has been increased by 17% to 234 cents per share.
Merchandise sales were boosted by the acquisition of United Furniture Outlets (UFO) and increased by 22.9% to R3.5 billion. Comparable store sales increased by 6.9%.
Cash sales increased by 51.1%, driven by UFO. Credit sales grew by 8.1% in the second half, reflecting the benefits of the change in the National Credit Act’s affordability assessment regulations on the group’s traditional retail brands of Lewis, Best Home and Electric, and Beares.
Operating profit grew by 16.8% to R443 million and the operating margin increased to 7.2%. Headline earnings rose 18.4% to R308.4 million.
The group’s balance sheet remains ungeared and the group has no borrowings, with cash and cash equivalents totalling R205 million at year end.
Chief executive officer Johan Enslin said the group’s strategy of diversifying across market segments and retail channels is starting to pay dividends. “UFO is proving to be a sound acquisition, with new stores trading well. UFO contributed sales of R478 million in its first full 12 months in the group and has enabled the business to access higher income customers.”
INspire, the start-up omni-channel home shopping retailer, is gaining traction and generated sales of R27.2 million in its first 10 months since launch. INspire has an extensive product offering across linen, bedding, tableware, cookware and small electrical appliances and targets customers in the LSM 4 – 8 categories.
Enslin said the group’s credit collection rates improved over the past year from 74.9% to 76.3% and resulted in an encouraging improvement in the debtor book despite the weak consumer credit environment. Debtor costs continued to decline and reduced by 11.9%.
The group’s store base increased to 784 as 30 stores were opened and 19 closed. UFO opened eight stores and closed three, bringing its store footprint to 36. Five to ten new UFO stores are planned for the 2020 financial year.
The group has 120 stores outside South Africa following the opening of 10 new stores in Namibia.
On the outlook for the year ahead, Enslin said the strong sales growth experienced in the second half is expected to continue into the new financial year, with UFO complementing the performance of the traditional retail brands.
He said the group’s diversification strategy is expected to continue to support sales growth. “UFO has extensive expansion opportunities and INspire is anticipated to reach break-even point in the forthcoming financial year,” he added.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
Enquiries: Graeme Lillie 082 468 1507
Cape Town – Lewis Group continued its turnaround performance in the six months to September 2018 as headline earnings per share increased by 10.7% to 180.8 cents, driven by strong merchandise sales growth and the early benefits of the group’s diversification strategy.
The interim dividend has been increased by 5% to 105 cents per share.
Merchandise sales were boosted by the recent acquisition of United Furniture Outlets (UFO) and increased by 25.9% to R1.6 billion. Excluding the sales from UFO, merchandise sales grew by 8.1%.
Chief executive officer Johan Enslin said UFO has performed well since being successfully integrated into the group and contributed sales of R230 million for the six months. UFO has enabled the group to access higher income customers and as a cash retailer has increased the group’s cash-to-credit sales mix.
Cash sales now account for 43% of total group sales compared to 31% in the prior period.
The group’s debtor costs continued to decline, reducing by 20.8% over the prior period. Collection rates improved from 76.2% to 77.2%, despite the deteriorating consumer environment. The level of satisfactory paying customers improved to 69.9% from 68.4% at the end of the 2018 financial year.
The group is highly cash generative, with cash and cash equivalents totalling R543 million at the end of September, while the balance sheet remains ungeared.
Enslin said the group’s strategy of diversifying across market segments and retail channels, which started with the acquisition of the Beares chain in 2015, has continued with the acquisition of UFO and the launch of omnichannel retailer INspire.
“We believe UFO is scalable with the potential to expand across South Africa and into neighbouring countries. Two stores were opened during the first half, another three stores opened in October and two more outlets are planned to open before December.”
INspire marks the group’s entry into the home shopping market with an extensive product offering across linen, bedding, tableware, cookware and small electrical appliances. The business is marketed through outbound call centres, agents and online shopping. “Our strategy is to attract customers in the LSM 4 – 8 categories to extend the group’s presence in urban areas,” said Enslin.
The group’s store base increased to 779 following the opening of 14 stores and closure of 8 stores during the six month period. The store base in the neighbouring countries of Botswana, Lesotho, Namibia and Swaziland increased by 6 to 116, including the opening of the first five Best Home and Electric stores in Namibia.
Discussing the outlook for the remainder of the financial year, Enslin said the current sales momentum is expected to be maintained, with UFO complementing the performance of the traditional retail brands.
He said the change in the affordability assessment regulations of the National Credit Act has enabled self-employed and informally employed individuals to again apply for credit.
“We expect this to improve the performance of our stores in rural areas which have been most affected by these restrictive regulations. While it will take time before many of these individuals re-enter the credit market, sales to this customer category are encouraging and early payment performance is satisfactory,” he added.
Cape Town – Lewis Group continued its recovery in the financial year to March 2018 with stronger merchandise sales, tight expense control and lower debtor costs, supported by a strong cash position and ungeared balance sheet.
Merchandise sales increased by 9.9%, lifted by the inclusion of the recently acquired United Furniture Outlets (UFO) chain for the last two months of the year. Excluding the sales from UFO, merchandise sales showed competitive growth of 7.3%.
Chief executive officer Johan Enslin said the performance for the year was negatively impacted by a decline in other revenue. “The reduction in other revenue is largely due to declining annuity streams resulting from lower credit sales in prior years, compounded by the implementation of the prescribed maximum credit life insurance rates in August 2017 which capped credit life premium income.”
Headline earnings declined by 26.5% to R261 million with headline earnings per share 24.3% lower at 302.6 cents. The total dividend has been maintained at 200 cents per share.
Enslin said the group remains highly cash generative. “Cash on hand totalled R580 million at year end after paying for UFO and undertaking share repurchases. Over the past 18 months borrowings of R1.5 billion have been repaid, resulting in the balance sheet being ungeared at year end,” he said.
Stores outside South Africa contributed 22.5% of total merchandise sales. Credit sales increased by 10.7% and cash sales by 8.2%, with group credit sales accounting for 65.7% of total sales.
The gross profit margin at 41.4% (2017: 42.4%) remains at the upper end of management’s target range of 38% to 42%.
Debtor collection rates improved to 74.9% from 73.8% last year, with debtor costs declining by 10.1%. The level of satisfactory paid customers at 68.4% is consistent with last year.
The group’s store network totalled 773 at year end following the acquisition of 31 UFO stores and the net closure of 19 stores across the Lewis and Beares brands.
“The integration of UFO has been successfully completed. UFO allows the business to access higher income customers while increasing our cash-to-credit sales mix. We believe UFO is scalable with the potential to expand across South Africa and into neighbouring countries, and 5 to 10 new stores are planned for the year ahead,” said Enslin.
Earlier this month the group entered the home shopping market with the launch of Inspire, an omni-channel retail offering to be marketed through outbound call centres, agents and online shopping at www.inspire.co.za. “Our strategy is to attract customers in the LSM 4 – 8 categories through our extensive product offering to extend the group’s reach in urban areas,” he said.
The group welcomed the outcome of two long-standing legal cases after year end. In the first case the court ruled in favour of Lewis regarding an appeal by the National Credit Regulator (NCR) in relation to club fees and extended warranties. A settlement was reached in the second case between the NCR and Lewis Stores in relation to loss of employment and disability insurance.
On the outlook for the months ahead, Enslin said the current sales momentum is expected to continue.
“The favourable outcome of the clothing industry’s court challenge of the affordability assessment regulations will benefit credit sales. Prospective self-employed and informally employed customers are no longer required to supply bank statements or payslips,” he said. “The group will continue to extend credit in a responsible manner.”
The group plans to open a net 15 stores across all its brands in the new financial year, while continuing to close marginal stores.
Cape Town – Economic conditions impacting the country’s lower to middle income market continued to weigh on Lewis Group’s performance for the six months to September 2017 as headline earnings declined from R173 million to R144 million with headline earnings per share 15.8% lower at 163.9 cents.
However, the group’s results show an improving sales growth trend, stronger gross profit margin, tight expense control and lower debtor costs.
The interim dividend has been maintained at 100 cents per share.
The group continues to generate strong cash flows, with cash of R685 million at end September. Over the past 18 months borrowings of R1.4 billion have been repaid and the group’s balance sheet is ungeared, compared to gearing of 18.8% in the previous year.
Chief executive officer Johan Enslin said trading conditions remain extremely difficult. “Our core lower to middle income customer base continues to be impacted by increasing living costs, high unemployment and limited prospects in the current low growth environment in the country. In addition, credit sales continue to be restricted by the National Credit Regulator’s affordability assessment regulations,” he said.
Merchandise sales increased by 5% mainly as a result of new merchandise ranges and increased promotional activity across the three trading brands Lewis, Beares and Best Home and Electric. Comparable stores sales grew by 7.3%.
The group has 744 stores, including 110 outside South Africa which contributed 24% of merchandise sales.
The group’s gross profit margin strengthened by 40 basis points to 40.9%. The margin benefited from more competitive pricing on locally sourced product and margin expansion in the furniture categories, he said.
Debtor costs declined by 11.5% while collection rates improved from 74.6% in the first half of the 2017 financial year to 76.2% in the current period.
The group recently announced the acquisition of the luxury household furniture retailer United Furniture Outlets (UFO) for R320 million, subject to competition approval. UFO is a cash retailer targeting the higher income market and has a footprint of 30 stores.
“The acquisition of UFO aligns with our strategy of diversifying and gaining access to higher income customers and improving our cash-to-credit sales mix. We believe the business is scalable with the potential to expand its store footprint across South Africa and into neighbouring countries.”
“Following the acquisition of UFO, the group is well positioned to service customers across all market segments,” he said.
On the outlook for the remainder of the financial year, Enslin said the trading environment is expected to remain challenging and the group continues to focus on driving sales growth, managing expenses and reducing debtor costs. “The important festive trading season will be supported by strong promotional activity and new merchandise ranges across our three brands,” he added.
Enquiries
Graeme Lillie 082 468 1507
Cape Town – Lewis Group today announced the acquisition of United Furniture Outlets (UFO), a cash retailer of luxury household furniture to the higher income market, for R320 million. UFO was established in 2004 and has a retail footprint of 30 stores. More than half the outlets are located in Gauteng, including its flagship 5 000 m² mega-store in Marlboro, Sandton.
Lewis Group chief executive officer, Johan Enslin, said the acquisition aligns with the group’s strategy of gaining access to higher income customers and will also allow for improved economies of scale. UFO is one of the larger independent furniture retailers in the country and offers a wide range of local and imported household furniture including lounge, bedroom and dining room ranges. Enslin said UFO will enable the group to diversify and increase its cash-to-credit sales mix by penetrating a new market segment through a wider, more exclusive product range. “We believe the UFO brand and business model is scalable and offers an opportunity to extend the store footprint across South Africa and into the neighbouring Southern African countries where Lewis currently trades.” “The business has an efficient supply chain, good growth prospects and will benefit from our group’s buying power,” said Enslin.
The acquisition is subject to standard regulatory and competition approvals, and the purchase price will be settled from Lewis Group’s current cash resources.
Ends Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact Graeme Lillie, Tier 1 Investor Relations 0824681507
Cape Town – Slowing economic conditions and the impact of the affordability assessment regulations severely impacted Lewis Group’s performance for the six months to September 2016, contributing to headline earnings for the half year declining from R287 million to R173 million. Headline earnings per share were 39.6% lower.
The group declared a dividend of 100 cents per share.
Chief executive officer Johan Enslin said the National Credit Regulator’s affordability regulations require customers to provide their three latest salary advices or bank statements when applying for credit.
“This is proving a major challenge for many customers in our lower to middle income target market who are self-employed or work in the informal sector. The regulations are restricting access to credit and consequently our credit sales growth.”
Merchandise sales grew by 1% while comparable store sales declined by 9.2%. Group credit sales declined by 2.3% and accounted for 63.4% of total sales compared to 65.9% last year. Revenue for the six months was 2% lower at R2.7 billion.
The gross profit margin strengthened by 410 basis points to 40.5%. The margin expansion was driven by a shift in the product mix, with the higher margin furniture category increasing to 58.3% of total sales compared to 54.7% in the previous six months. “Improved pricing on new product ranges and competitively priced merchandise sourced from local suppliers also supported the margin,” he said.
Debtor cost growth slowed to 7.3%. Despite the deteriorating consumer credit environment the level of satisfactory paid customers at 67.9% was similar to the previous year.
Enslin said the portfolio of 56 Ellerines and Beares stores acquired in Botswana, Lesotho, Namibia and Swaziland have been successfully integrated into the group’s operations.
“These stores are showing encouraging sales performance and we expect them to make a solid contribution to the group’s revenue and profitability in the medium-term,” he said.
The group now has 118 stores outside of South Africa, accounting for 15% of the total store base of 780.
Discussing the outlook for the remainder of the financial year, Enslin said trading conditions are not expected to improve as consumers are facing increasing pressures on disposable income.
“We are, however, positive about the group’s medium to long-term prospects as the business remains cash generative with low levels of gearing, reflecting the strength of the balance sheet,” he said.
Cape Town – Lewis Group has completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries, expanding its store presence outside of South Africa to 120.
This follows regulatory and competition approvals in each of these countries for the R250 million acquisition announced in November 2015.
The stores are located in Namibia (21 stores), Botswana (20), Lesotho (10) and Swaziland (6).
Chief executive officer, Johan Enslin, said the newly acquired stores should make a meaningful contribution to the group’s profitability in the medium term.
“The stores in Botswana and Lesotho have already been incorporated into the group’s operations, with the Swaziland stores due to be integrated in early April and the Namibian stores in early May. The stores will trade under either the Lewis or Beares brands,” he said.
Lewis Group purchased the Beares brand and 61 stores in South Africa in 2014 after parent company Ellerines Furnishers was placed under business rescue. The Beares chain has since been expanded to 84 stores in South Africa under Lewis Group’s ownership.
Enslin said the addition of these Beares stores in southern Africa will further improve buying power and bring immediate scale benefits.
Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. Stores outside of South Africa now comprise 15% of the group’s store base.
“The acquisition of these stores will provide Lewis with access to new segments of the furniture retail market and also expand our existing customer base in each of these countries. Lewis has operated in these four countries for over 50 years so has extensive experience in these markets and a thorough understanding of the trading environments,” he added.
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 021 702 3102 / 082 468 1507
Cape Town – Lewis Group has received the go ahead from the Swaziland competition authorities to acquire six Ellerines and Beares stores in the country. This follows the recent approvals for the purchase of 30 Ellerines and Beares stores in Botswana and Lesotho.
The majority of the Ellerines and Beares outlets acquired in the neighbouring southern African countries will in future trade as Lewis stores.
Lewis has operated in Swaziland since 1972 and currently has 15 stores in the country.
Competition approvals are still awaited on the 21 Ellerines and Beares stores purchased in Namibia.
Chief executive officer, Johan Enslin, said the acquisition of the stores in these four countries will effectively double the group’s African store footprint. “Lewis Group has operated in these countries for almost 50 years and has extensive experience in these markets. Once these stores have been integrated into our operations we believe they will make a meaningful contribution to the group’s profitability.”
Lewis Group purchased the Beares brand and 61 stores in South Africa in November 2014 after parent company Ellerines Furnishers was placed under business rescue. The Beares chain has since been expanded to 84 stores in South Africa under Lewis Group’s ownership.
In November 2015 the group announced the proposed acquisition of 61 Ellerines and Beares stores in Namibia, Botswana, Lesotho and Swaziland for approximately R250 million.
Cape Town – Lewis Group has received regulatory and competition approvals for the acquisition of 20 Ellerines and Beares stores in Botswana and 10 in Lesotho.
This follows the announcement in November 2015 of the proposed acquisition of 62 Ellerines and Beares stores in southern Africa for approximately R250 million. This effectively doubled the group’s African store footprint.
The stores in Lesotho have been seamlessly integrated into the group’s operations while the Botswana stores will commence trading in the Lewis stable from early March 2016.
Competition approvals are still awaited on the 21 stores purchased in Namibia and six in Swaziland.
Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. Prior to these acquisitions, the group had 62 stores in these four countries.
Chief executive officer, Johan Enslin, said the acquisition of these Ellerines and Beares stores will enable Lewis to expand and diversify its southern African footprint. “We are not only gaining access to new segments of the furniture retail market but also expanding our existing customer base in each of these countries.
Once all these stores are fully operational they are expected to make a meaningful contribution to the group.”
Lewis Group purchased the Beares brand and 61 stores in South Africa on advantageous terms in November 2014 after parent company Ellerines Furnishers was placed under business rescue. Enslin said the Beares chain has since been expanded to 84 stores in South Africa and enabled the group to attract customers in higher income segments than its traditional target market. “The addition of the Beares stores in southern Africa will further improve our buying power and bring immediate scale benefits,” he said.
Cape Town – Lewis Group today announced the acquisition of 62 Ellerines and Beares stores in southern Africa for a purchase price of approximately R250 million.
The stores are located in Botswana (25 stores), Namibia (21), Lesotho (10) and Swaziland (6), and will increase the group’s total store footprint to 786.
Chief executive officer, Johan Enslin, said Ellerines and Beares are both well-established retail furniture businesses across southern Africa. “The acquisition of these stores will enable Lewis to expand and diversify its southern African footprint. We will not only gain access to new segments of the furniture retail market but also expand our existing customer base in each of these countries.”
Enslin said Lewis was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. The group currently has 62 stores in these four countries which generate approximately 20% of the group’s operating profit.
“We believe Beares is a scalable brand with good growth prospects. The acquisition of the Beares business in South Africa from Ellerines in late 2014 has allowed the group to attract customers in higher income segments,” he said.
The transaction is subject to standard regulatory and competition approvals in the four countries, and is expected to be implemented by the end of February 2016.
Lewis Group today reported results for the six months ended September 2015 which reflect the deterioration in retail trading conditions since July, with merchandise sales growing by 8.8%.
Enslin said the trading environment became increasingly difficult in August and September owing to the impact of the slowing economy and the group’s decision to early adopt the National Credit Regulator’s affordability assessment regulations during the latter part of July.
The group’s headline earnings for the six months reduced by R44.5 million to R286.6 million, with diluted headline earnings per share 12.8% lower at 321 cents.
The interim dividend has been maintained at 215 cents per share, “as the business continues to be strongly cash generative and the board remains confident in the group’s medium-term prospects.”
The high levels of indebtedness among the Lewis target market contributed to the credit application decline rate remaining high at 41%. Debtor costs as a percentage of net debtors moved from 6.8% to 7.4%.
On the outlook for the remainder of the financial year, Enslin said the current adverse trading conditions are not expected to improve in the short term.
“Consumer confidence remains muted and unemployment continues to impact our target market, with customers in the mining and agricultural sectors being under particular pressure.”
“We continue to invest for growth and will be expanding the store footprint over the next six months. Management is confident in the growth prospects of Beares and we will continue to refine the merchandise offering for the higher targeted LSM market,” he added.
Graeme Lillie, Tier 1 Investor Relations 082 468 1507
