| Wed 23 May 2012, 7:05 | | LEW - Lewis Group Limited - Final Audited Results for the year ended 31 March |
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LEW
LEW
LEW - Lewis Group Limited - Final Audited Results for the year ended 31 March
2012
LEWIS GROUP LIMITED
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
Final Audited Results for the year ended 31 March 2012
Revenue up 6.1%
Gross profit margin 38.9%
Operating profit margin 23.5%
HEPS up 13.0%
Final dividend up 30.4%
Overview
Trading conditions became increasingly challenging during the year as
consumers encountered rising transport and utility costs, with lower
disposable income placing pressure on both sales and credit collections.
Revenue for the period increased by 6.1% to R4.9 billion, with merchandise
sales rising 3.3% to R2.4 billion.
Continued merchandise innovation resulted in the gross profit margin improving
from 36.3% to 38.9%, contributing to growth of 13.0% in headline earnings per
share.
The final dividend has been increased by 30.4% to 270 cents per share, with
the company substantially covering the impact of the recently introduced
dividend withholding tax of 15% on behalf of shareholders.
Trading and financial performance
Furniture and appliance sales for the group increased by 4.8% while sales of
electronic goods were 3.5% lower, reflecting the slowdown in discretionary
spending. Furniture sales comprise 54% of total merchandise sales (2011: 53%).
Credit sales as a percentage of total sales were consistent with 2011 at
71.4%.
Merchandise sales in the flagship Lewis brand, which accounts for 83.3% of
total sales, increased by 3.6%. Best Home and Electric sales grew by 10.6%,
with furniture comprising 34% of this brand`s sales (2011: 32%).
Revenue increased by 6.1% to R4.9 billion. Insurance income rose by 15.4%
owing to the higher proportion of longer term contracts now in the debtor
base. Growth in insurance premiums is expected to be generally in line with
sales growth in future. Finance charges declined 1.2% due to the lower average
interest rate in the debtors` book for the period. The 16.2% increase in
ancillary services reflects the impact of higher maintenance fee income.
The gross profit margin improved by 260 basis points to 38.9% owing mainly to
better buying, the introduction of new merchandise ranges and a continued
shift in the merchandise mix to higher margin furniture sales. Management
believes that a sustainable medium-term margin is 36% - 38%.
Operating costs, excluding debtor costs, increased by 8.8%. Cost growth for
the second half of the year was contained at 6.5%. Expenses were impacted by
higher marketing and promotional activity to support sales, as well as
increasing electricity and transport costs.
Operating profit margin increased by 50 basis points to 23.5% and resulted in
8.2% growth in operating profit to R1.14 billion. Headline earnings increased
to R781 million, with headline earnings per share 13.0% higher at 882.5 cents
(2011: 781.1 cents) benefiting from foreign exchange gains of R15.2 million
(2011: loss of R8.0 million).
Cash generated from operations reflected a solid increase of R200 million and
the group`s gearing ratio improved to 23.3% from 26.8% in the previous year.
Debtor management
Debtor costs settled at 10.8% of net debtors in a tight collections
environment. An encouraging feature of the second six months of the year was
the containment of the increase in debtor costs at 8.7% against 13.8% for the
full year.
An analysis of the group`s debtors` book based on payment ratings shows that
72.1% of customers are in the `satisfactory paid` category compared to 74.5%
the previous year. Non-performing accounts increased from 11.2% to 13.0% at
year-end. These accounts remain on the debtors` book for as long as it is
economically viable to collect the outstanding debt and are covered by an
average impairment provision of 95%.
The group remains adequately provided with the impairment provision at 18%
which compares to the average debtor costs of between 10% and 11% over the
last four years.
Store expansion
The group`s store base passed the 600 mark following the opening of 17 Lewis
and 12 Best Home and Electric outlets, bringing the store footprint to 602.
All the new Lewis outlets are the smaller format stores with lower cost
structures and higher sales densities. There are now 54 smaller format stores
in the Lewis portfolio and all are performing according to expectations. The
group remains committed to its medium-term objective of growing the store base
to 700.
Prospects
There has been rapid growth in unsecured credit in the Lewis target market.
Consumers are also under increasing pressure from rising fuel, electricity and
food costs and job creation remains key to stimulating growth in this sector
of the market. Management expects trading conditions to remain challenging in
the year ahead.
The group has strategies in place to meet these challenges and continues to
invest for growth by expanding the retail footprint through adding 20 to 25
smaller format stores in the year ahead.
Dividend declaration
Notice is hereby given that a final gross cash dividend of 270 cents per share
in respect of the year ended 31 March 2012 has been declared payable to
holders of ordinary shares.
The dividend has been declared out of income reserves and is subject to a
dividend tax of 15%. The STC credits ("Secondary Tax on Companies") utilised
in this declaration is R17 969 686. At the time of this declaration, there are
98 057 959 shares in issue and consequently the STC credit per share is
18.32558 cents. Accordingly, the dividend for determining the dividend tax is
251.67442 cents and the dividend tax payable is 37.75116 cents per share for
shareholders who are not exempt. The net dividend for shareholders who are not
exempt will therefore be 232.24884 cents. The dividend tax rate may be reduced
where the shareholder is tax resident in a foreign jurisdiction which has a
Double Tax Convention with South Africa and meets the requirements for a
reduced rate.
The company`s tax reference number is 9551/419/15/4
The following dates are applicable to this declaration:
Last date to trade "cum" dividend Friday 13 July 2012
Date trading commences "ex" dividend Monday 16 July 2012
Record date Friday 20 July 2012
Date of payment Monday 23 July 2012
Share certificates may not be dematerialised or rematerialised between Monday
16 July 2012 and Friday 20 July 2012.
For and on behalf of the board.
David Nurek Johan Enslin
Independent Non-executive Chairman Chief Executive Officer
Cape Town
23 May 2012
External auditors` opinion
The external auditors, PricewaterhouseCoopers Inc., have audited the group`s
annual financial statements and the abridged financial statements contained
herein for the twelve months ended 31 March 2012. A copy of their unqualified
reports are available on request at the company`s registered office.
Abridged annual financial statements
Income Statement
For the For the
year ended year ended
31 March 2012 31 March 2011
Rm % Rm
Notes Audited change Audited
Revenue 4 857.3 6.1% 4 577.7
Merchandise sales 2 365.4 2 290.3
Finance charges earned 908.2 919.6
Insurance premiums earned 868.5 752.4
Ancillary services 715.2 615.4
Cost of merchandise sales (1 446.3) (1 458.6)
Operating costs (2 271.9) (2 066.6)
Employment costs (732.9) (693.5)
Administration and IT (220.7) (208.1)
Debtor costs 2 (522.3) (458.9)
Marketing (184.5) (156.5)
Occupancy costs (207.3) (186.1)
Transport and travel (177.9) (147.5)
Depreciation (48.5) (46.5)
Other operating costs (177.8) (169.5)
Operating profit 1 139.1 8.2% 1 052.5
Investment income 91.9 82.0
Profit before finance costs 1 231.0 1 134.5
Net finance costs (63.2) (91.9)
Interest paid (82.2) (87.1)
Interest received 3.8 3.2
Forward Exchange Contracts 15.2 (8.0)
Profit before taxation 1 167.8 1 042.6
Taxation (367.2) (330.7)
Net profit attributable to
ordinary shareholders 800.6 12.5% 711.9
Statement of comprehensive income
For the year ended For the year ended
31 March 2012 31 March 2011
Rm Rm
Audited Audited
Net profit for the year 800.6 711.9
Fair value adjustment to
available-for-sale investments 72.9 38.1
Disposal of available-for-sale investments (17.2) (17.8)
Foreign currency translation reserve 1.5 (4.1)
Other comprehensive income 57.2 16.2
Total comprehensive income for the year
attributable to equity shareholders 857.8 728.1
Earnings and dividends per share
For the For the
year ended % year ended
31 March 2012 change 31 March 2011
1. Weighted average no. of shares
Weighted average 88 463 88 194
Diluted weighted average 89 446 89 185
2. Headline earnings (Rm)
Attributable earnings 800.6 711.9
Profit on disposal of assets and investments (19.9) (23.0)
Headline earnings 780.7 688.9
3. Earnings per share (cents)
Earnings per share 905.0 807.2
Diluted earnings per share 895.1 798.2
4. Headline earnings per share (cents)
Headline earnings per share 882.5 13.0% 781.1
Diluted headline earnings per share 872.8 772.4
5. Dividends per share (cents)
Dividends paid per share
Final dividend 2011 (2010) 207.0 179.0
Interim dividend 2012 (2011) 172.0 156.0
379.0 335.0
Dividends declared per share
Interim dividend 2012 (2011) 172.0 156.0
Final dividend 2012 (2011) 270.0 30.4% 207.0
442.0 21.8% 363.0
Balance sheet
31 March 2012 31 March 2011
Rm Rm
Notes Audited Audited
Assets
Non-current assets
Property, plant and equipment 311.9 278.7
Deferred taxation 16.1 20.1
Insurance investments 3 1 005.3 857.1
1 333.3 1 155.9
Current assets
Inventories 281.4 256.3
Trade and other receivables 4 4 064.5 3 835.0
Insurance investments 3 373.3 240.2
Cash on hand and deposits 77.9 84.3
4 797.1 4 415.8
Total assets 6 130.4 5 571.7
Equity and liabilities
Capital and reserves
Share capital and premium 95.4 93.5
Other reserves 277.9 207.1
Retained earnings 3 901.3 3 427.5
4 274.6 3 728.1
Non-current liabilities
Long-term interest-bearing borrowings 650.0 400.0
Deferred taxation 111.4 85.1
Retirement benefits 63.6 59.4
825.0 544.5
Current liabilities
Trade and other payables 5 585.8 567.0
Taxation 21.0 49.1
Short-term interest-bearing borrowings 424.0 683.0
1 030.8 1 299.1
Total equity and liabilities 6 130.4 5 571.7
Cash flow statement
For the year ended For the year ended
31 March 2012 31 March 2011
Rm Rm
Audited Audited
Cash flow from operating activities
Cash flow from trading 1 358.3 1 295.6
Change in working capital (385.9) (518.6)
Cash generated from operations 972.4 777.0
Interest and dividends received 76.6 66.0
Interest paid (67.0) (95.1)
Taxation paid (377.4) (328.0)
604.6 419.9
Cash utilised in investing activities
Net additions to insurance investments (194.1) (160.4)
Acquisition of property, plant and equipment (87.8) (78.6)
Proceeds on disposal of property,
plant and equipment 10.2 11.7
(271.7) (227.3)
Cash flow from financing activities
Dividends paid (335.5) (295.6)
Increase in long-term borrowings 250.0 50.0
Increase/(Decrease) in short-term borrowings 50.0 (50.0)
Proceeds on sale of own shares 5.2 3.5
(30.3) (292.1)
Net increase/(decrease) in cash and cash
equivalents 302.6 (99.5)
Cash and cash equivalents at the beginning
of the year (348.7) (249.2)
Cash and cash equivalents at the end
of the year (46.1) (348.7)
Analysis of borrowings and banking facilities
Borrowings
Long-term 650.0 400.0
Short-term 300.0 250.0
950.0 650.0
Cash and cash equivalents
Short-term facilities utilised 124.0 433.0
Cash on hand (77.9) (84.3)
46.1 348.7
Net borrowings 996.1 998.7
Unutilised facilities 753.9 451.3
Total banking facilities 1 750.0 1 450.0
Statement of changes in equity
For the year ended For the year ended
31 March 2012 31 March 2011
Rm Rm
Audited Audited
Share capital and premium
Opening balance 93.5 93.5
Share awards to employees 1.9 -
95.4 93.5
Other reserves
Opening balance 207.1 171.3
Other comprehensive income for the year 57.2 16.2
Share-based payment 19.0 18.4
Other movements (5.4) 1.2
277.9 207.1
Retained earnings
Opening balance 3 427.5 3 008.9
Net profit attributable to ordinary
shareholders 800.6 711.9
Distribution to shareholders (335.5) (295.6)
Other movements 8.7 2.3
3 901.3 3 427.5
Balance as at 31 March 2012 4 274.6 3 728.1
Segmental report
Best Home
Lewis and Electric
Reportable segment Rm Rm
2012
Revenue 4083.8 653.5
Operating profit 985.1 145.6
Operating margin 24.1% 22.3%
Segment assets 3 624.5 535.3
2011
Revenue 3 853.5 588.5
Operating profit 919.7 126.0
Operating margin 23.9% 21.4%
Segment assets 3 422.3 491.5
My
Home Group
Reportable segment Rm Rm
2012
Revenue 120.0 4 857.3
Operating profit 8.4 1 139.1
Operating margin 7.0% 23.5%
Segment assets 104.6 4 264.4
2011
Revenue 135.7 4 577.7
Operating profit 6.8 1 052.5
Operating margin 5.0% 23.0%
Segment assets 102.3 4 016.1
Notes to the financial statements
Basis of reporting
The information contained in these abridged financial statements has been
extracted from the Group`s 2012 audited annual financial statements which has
been prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards (IFRS) including IAS34 (Interim
Financial Reporting), and in compliance with the Listings Requirements of the
JSE. The accounting policies applied are consistent with those applied in the
annual financial statements for the year ended 31 March 2011.
31 March 2012 31 March 2011
Rm Rm
Audited Audited
2. Debtor costs
Bad debts, repossession losses and bad debt recoveries 405.4 336.0
Movement in impairment provision 116.9 122.9
522.3 458.9
3. Insurance investments - available for sale
Listed
Listed shares 442.9 365.2
Fixed income securities 562.4 491.9
Unlisted
Money market 373.3 240.2
1 378.6 1 097.3
Investments are classified as available-for-sale and are reflected at fair
value. Changes in fair value are reflected in the statement of comprehensive
income.
4. Trade and other receivables
Instalment sale and loan receivables 5 871.1 5 454.7
Provision for unearned finance charges and unearned
maintenance income (280.9) (271.4)
Provision for unearned initiation fees (109.8) (102.6)
Provision for unearned insurance premiums (622.2) (562.6)
Net instalment sale and loan receivables 4 858.2 4 518.1
Provision for impairment (875.2) (758.3)
3 983.0 3 759.8
Other receivables 81.5 75.2
4 064.5 3 835.0
Amounts due from instalment sale and loan receivables after 1 year are
reflected as current, as they form part of the normal operating cycle. The
credit terms of instalment sale and loan receivables range from 6 to 36
months.
The average effective interest rate on instalment sale and loan receivables is
22.3% (2011: 24.1%) and the average term of the sale is 28.3 months (2011:
27.9 months).
5. Trade and other payables
Trade payables 71.1 72.7
Accruals and other payables 166.0 178.1
Due to reinsurers 147.2 144.8
Insurance provisions 201.5 171.4
585.8 567.0
Key ratios
For the year ended For the year ended
31 March 2012 31 March 2011
Operating efficiency ratios
Gross profit margin % 38.9% 36.3%
Operating profit margin % 23.5% 23.0%
Number of stores 602 582
Number of permanent employees (average) 7 062 6 842
Trading space (sqm) 229 542 231 184
Inventory turn 5.1 5.7
Current ratios 4.7 3.4
Credit ratios
Credit sales % 71.4% 71.4%
Bad debts as a % of net debtors 8.3% 7.4%
Debtor costs as a % of the net debtors 10.8% 10.2%
Debtors` impairment provision as a %
of net debtors 18.0% 16.8%
Arrear instalments on satisfactory
accounts as a percentage of net debtors 10.3% 10.1%
Arrear instalments on slow-paying
and non-performing accounts as a percentage
of net debtors 21.9% 19.9%
Debtors` impairment provision on
non-performing accounts 76.9% 78.8%
Credit applications decline rate 33.0% 31.5%
Shareholder ratios
Net asset value per share (cents) 4 828 4 225
Gearing ratio 23.3% 26.8%
Return on average equity (after-tax) 20.0% 20.3%
Return on average capital employed (after-tax) 16.7% 17.2%
Return on average assets managed (pre-tax) 21.1% 21.8%
Notes:
1. All ratios are based on figures at the end of the year unless otherwise
disclosed.
2. The net asset value has been calculated using 88 536 000 shares in issue
(2011: 88 237 000).
3. Total assets exclude the deferred tax asset.
Debtors` analysis
The company applies a payment rating assessment to each customer individually,
which categorises customers into 13 payment categories. This assessment is
integral to the calculation of the debtors` impairment provision. The 13
payment categories have been summarised into four main groupings of customers.
An analysis of the debtors book based on the payment ratings is set out below.
No. of customers
2012 2011
Satisfactory paid:
Customers fully up to date including
those who have paid 70% or more of No. 491 478 521 304
amounts due over the contract period % 72.1% 74.5%
Slow payers:
Customers fully up to date including
those who have paid 65% to 70% of No. 55 791 55 439
amounts due over the contract period % 8.2% 7.9%
Non-performing customers:
Customers who have paid 55% to 65% No. 45 978 44 436
of amounts due over the period of the contract % 6.7% 6.4%
Non-performing customers:
Customers who have paid 55% or less
of amounts due over the period of the No. 88 265 78 174
contract % 13.0% 11.2%
Total 681 512 699 353
Impairment provision %
2012 2011
Satisfactory paid:
Customers fully up to date including
those who have paid 70% or more of
amounts due over the contract period 1% 1%
Slow payers:
Customers fully up to date including
those who have paid 65% to 70% of
amounts due over the contract period 26% 27%
Non-performing customers:
Customers who have paid 55% to 65%
of amounts due over the period of the contract 42% 44%
Non-performing customers:
Customers who have paid 55% or less
of amounts due over the period of the contract 95% 98%
Total 18.0% 16.8%
The debtors` impairment provision is allocated to the summary categories based
on the number of customers.
Executive directors: J Enslin (Chief Executive Officer),
L A Davies (Chief Financial Officer)
Non-executive directors: D M Nurek (Chairman) (Ind.), H Saven (Ind.),
B J van der Ross (Ind.), Professor F Abrahams (Ind.), Z B M Bassa (Ind.),
M S P Marutlulle (Ind.), A J Smart
Company secretary: M G McConnell
Transfer secretaries: Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001; PO Box 61051, Marshalltown, 2107
Auditors: PricewaterhouseCoopers Inc.
Sponsor: UBS South Africa (Pty) Ltd
Registered office: 53A Victoria Road, Woodstock, 7925
These results are also available on our website: www.lewisgroup.co.za
23 May 2012
Sponsor: UBS South Africa (Pty) Ltd
Date: 23/05/2012 07:05:02 Produced by the JSE SENS Department.
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