May 28, 2014
Chief executive officer, Johan Enslin, said consumer spending remained under pressure from rising costs and high levels of indebtedness. “Our customers in the middle to lower income market have also been impacted by widespread labour unrest, retrenchments and high levels of unemployment.
“The performance of our debtors’ book reflects the worsening credit climate and the increasingly challenging credit collection environment. We believe the credit environment is unlikely to improve in the short term and could become tougher”, he said.
Revenue increased by 1.8% to R5.28 billion mainly through increased financial services income. Merchandise sales declined by 2.5% to R2.41 billion as trading became more difficult in the second half of the year.
Despite the current slowdown in the consumer economy the group opened 20 new stores, bringing the store base to 636 at year end.
Costs continued to be tightly managed and the growth in operating costs, excluding debtor costs, was well contained to 1.6%, despite inflationary cost pressures from a weakening Rand and other sources.
The increase in debtor costs remained stable at 30%, the same level as reported in the interim results. Debtor costs as a percentage of net debtors moved from 9.4% to 11.6% and the impairment provision increased from 17.4% to 18.6%. The credit application decline rate increased from 36.5% to 38.4%.
The group’s operating profit margin of 21.8% (2013: 24.2%) was impacted by higher debtor costs and lower sales growth. Operating profit was 7.9% lower at R1.15 billion.
On the outlook for the new financial year, Enslin said the current difficult trading conditions are expected to continue owing to low consumer confidence, high personal debt levels and continuing instability in the labour market.
“However, the group believes in its successful decentralised business model and will continue to invest for the future. We plan to open 20 to 25 new stores in the year ahead and are committed to achieving our medium-term target of 700 stores.”
“The focus in this challenging environment will remain on driving credit sales growth, containing costs and improving collections,” he added.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact
Graeme Lillie
Tier 1 Investor Relations
(021) 702 3102 / 082 468 1507
