LEWIS : INCREASES DIVIDEND BY 21% ON STRONG PROFIT GROWTH

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May 31, 2024

Cape Town - Lewis Group delivered a resilient performance in a weak retail trading environment in the year to March 2024 as operating profit increased by 13.1% to R690 million. The group reported continued strong credit sales growth, improved margins, robust growth in the debtors' book and an all-time high level of satisfactory paying customers.

The group's earnings were 6.2% higher at R436 million and earnings per share increased by 15.9% to 806 cents, supported by the positive leverage effect from the group's share repurchase programme.

The group has returned R1.3 billion to shareholders since the start of its buy-back programme in 2017, repurchasing 35.7 million shares. During the year 4.2 million shares were repurchased at a cost of R170 million.

The total dividend was increased by 21.1% to 500 cents per share as the board showed its confidence in the group's prospects and cash generating ability.

CEO Johan Enslin said that over the past five years the group has returned an average of 113% of earnings to shareholders through dividend payments and share buybacks.

Merchandise sales increased by 4.7% to R4.7 billion for the year. After increasing by 4.2% for the first nine months, merchandise sales grew by 6.7% during the challenging trading conditions in the fourth quarter.

Enslin said the strong credit sales growth trend continued as credit sales increased by 15.8%. Credit sales accounted for 66.2% of total merchandise sales compared to 59.9% last year.

However, pressure on consumers' disposable income from high energy, food, fuel and borrowing costs continued to constrain the group's cash sales which declined by 11.8%, adversely impacting the performance of the group's cash retail brand UFO.

Total revenue, including merchandise sales and other revenue, increased by 9.8% to R8.2 billion.

The gross profit margin strengthened by 250 basis points to 43.1%, benefitting from effective margin management on new merchandise ranges.

Enslin said a key feature of the results was the improving quality of the group's debtors portfolio. "The level of satisfactory paying customers increased to a record 81.3% from 80.4% last year and collection rates ended the year at 79.7%. Net bad debts reduced to 11.2% from 13.1% in the prior year," he said.

Management capitalised on opportunities to acquire well located trading space to accelerate the expansion of its store network. A net 29 new stores were opened, including 10 new Bedzone stores and a net 4 new stores outside of South Africa.

The group's total store base of 869 includes 138 stores in neighbouring Namibia, Botswana, Lesotho and Eswatini.

Commenting on the outlook for the new financial year, Enslin said trading conditions are not expected to improve in the short to medium-term as consumer spending and confidence remain depressed.

"Interest rates are going to remain higher for longer than originally forecast, while fuel and food inflation as well as unemployment remain high. Port congestion, shipping delays and sharp sea freight rate increases are likely to continue to negatively impact economic growth. Political uncertainty and social instability in the aftermath of the elections pose a major risk to the trading environment."

Enslin said despite the mounting macroeconomic headwinds, the group continues to invest for longer-term growth. "We are planning to open 20 new stores in the 2025 financial year and will continue to invest in the expansion of our debtors' book as consumer demand for credit is expected to be maintained," he added.

Ends

Issued by Tier 1 Investor Relations on behalf of Lewis Group

Enquiries
Graeme Lillie
Tier 1 Investor Relations
082 468 1507