Lewis Group Limited
Incorporated in the Republic of South Africa
Registration number: 2004/009817/06
Share code: LEW
ISIN: ZAE000058236
Bond Code: LEWI


SHORT-FORM ANNOUNCEMENT:
RESULTS ANNOUNCEMENT (INCLUDING AUDITED SUMMARY CONSOLIDATED
FINANCIAL STATEMENTS) FOR THE YEAR ENDED 31 MARCH 2023
AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023

1. Introduction

Shareholders are advised that the following have been distributed:

   -   the company’s full announcement being the highlights, results commentary (which
       includes the cash dividend declaration referred to below) and the summary
       audited consolidated financial results for the year ended 31 March 2023 (“results
       announcement”)
   -   the company’s audited consolidated financial statements for the year ended 31
       March 2023 (“audited financial statements”)
   -   cash dividend declaration of 218 cents per share.

The integrated report and notice of the annual general meeting for the year ended 31
March 2023 will be released on or before 30 June 2023.

2. Highlights

   •   Merchandise sales increased by 1.4% to R4.4 billion
   •   Revenue increased by 3.1%to R7.5 billion
   •   Gross profit margin at 40.6%
   •   Satisfactory paid accounts at 80.4%
   •   Debtors’ book growth of 7.5%
   •   Debtor cost growth contained to 7.0%
   •   Earnings per share decreased by 5.7% to 689 cents
   •   Headline earnings per share increased by 1.0% to 857 cents
   •   Total dividend maintained at 413 cents per share




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3. Results Commentary

Introduction
The group’s performance for the 2023 financial year reflects the state of consumers in
South Africa’s low growth, high inflationary environment where escalating fuel, energy,
food and borrowing costs is placing significant pressure on spending, with load shedding
weighing heavily on consumer sentiment and economic growth.

The highlight of the results is the quality and performance of the group’s debtors’ book.
Despite the weak consumer economy, the debtors’ book has shown good growth,
collection rates have strengthened, and the percentage of satisfactory paid accounts
increased to a record level, resulting in the reduction of the debtors’ impairment
provision.
The Group proved its resilience with credit sales continuing to grow strongly across the
traditional retail brands of Lewis, Beares and Best Home & Electric. Cash sales slowed
further which adversely impacted the performance of the cash retail brand, UFO.
The board has shown its confidence in the group’s cash generating capability and
maintained the total dividend for the year at 413 cents per share.

Trading and financial performance
Merchandise sales increased by 1.4% to R4.4 billion. Sales in the traditional retail
segment increased by 3.5% while the cash retailer UFO reported a decline of 12.5%. The
group’s comparable store sales were 0.3% lower.

Credit sales continued to be robust in the current environment and grew by 18.1% while
cash sales declined by 16.3%. Credit sales accounted for 59.9% of total merchandise
sales compared to 51.4% in the prior year. The group has maintained its strict credit
granting criteria and through adjusted marketing initiatives, attracted more low-risk credit
customers with the application decline rate settling at 34.7% (2022: 36.1%).

Sales in the stores outside South Africa, which represent 16.0% of the store base,
increased by 3.4% and accounted for 18.3% of the group’s sales.
The group has continued to invest in expanding its store base and opened a net 21 new
stores across all brands, bringing the store footprint to 840. This is the highest number of
net store openings since 2016. A further 150 stores were revamped as part of the
ongoing store refurbishment programme.




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Other revenue, consisting of effective interest income, insurance revenue and ancillary
services income, benefited from the strong credit sales growth in the past two years and
increased by 5.8%.

Total revenue, comprising merchandise sales and other revenue, increased by 3.1% to
R7.5 billion.

Despite continued cost pressures the group’s gross profit margin strengthened in the
second half and closed at 40.6% (2022: 40.5%), within the group’s target range of 40% -
42%. The Group has been successful in securing better shipping rates which are
approximately 70% lower than the inflated sea freight charges reported since the
outbreak of the Covid-19 pandemic in 2020.

Operating costs, excluding debtor costs, impairments and capital items, were well
managed and grew by 6.7%, despite significantly higher transport costs and the
increased investment in marketing and training. Employment costs declined due to lower
performance-related incentives.

The health of the group’s debtors’ portfolio continued to improve and the debtors’ book
grew by 7.5% over the prior year. The level of satisfactory paid customers increased to
80.4% (2022: 79.0%), having improved significantly from 68.4% five years ago.

Enhanced collection strategies continued to contribute to collection rates strengthening to
80.8% at year end (2022: 79.0%).

Debtor cost growth was contained to 7.0%, compared to the debtor book growth of 7.5%
while debtor costs as a percentage of debtors at gross carrying value was maintained at
12.3%.

The quality of the debtors’ book and the sustained collections performance over the past
few years resulted in the impairment provision as a percentage of debtors at gross
carrying value reducing from 40.4% to 36.2% for the current period.

Operating profit before impairments and capital items declined by 8.3% to R702.8 million.
The slower trading in UFO resulted in an impairment of R91.1 million being recognised
against its goodwill. An impairment of R22.9 million was recognised against the group’s
right-of-use assets. Operating profit for the year declined by 10.1% to R600.6 million.

Net finance costs increased by R44.0 million mainly due to higher bank interest paid,
which was partially offset by foreign exchange gains of R21.9 million (2022: losses of
R5.1 million).

Earnings declined by 15.7% to R407.1 million and earnings per share (EPS) decreased
by 5.7% to 689 cents. Headline earnings were 9.8% lower at R506.3 million. Headline




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earnings per share (HEPS) increased by 1.0% to 857 cents, reflecting the positive
leverage effect from the group’s aggressive share repurchase programme.

Inventory levels reduced by 14.7% as the supply chain stabilised in recent months. Over
the past two years the group has consciously carried higher inventory levels to ensure
the business has adequate stock cover to counter the supply chain challenges and meet
customer demand.

The group’s balance sheet remains strong with the net asset value increasing by 7.3% to
R80.76 per share.

In line with expectations, the gearing ratio, including lease liabilities, increased to 24.5%
from 15.3% in the prior year mainly due to the ongoing investment in the debtors’ book
due to the higher level of credit sales.

Share repurchase programme

The group repurchased 5.5 million shares at a cost of R275.7 million during the year, at
an average price of R49.96 per share. Since the commencement of the current share
repurchase programme in 2017, the group has bought back 31.5 million shares at a cost
of more than R1.1 billion and an average price of R34.99 per share. At the annual
general meeting in October 2022, shareholders granted management the authority to
repurchase a further 10% of the issued share capital and the group had utilised 2.6% of
this mandate by year end.

Outlook

The current tough retail conditions are likely to deteriorate further with increasing
pressure on consumer disposable income due to rising interest rates, transport costs,
energy and food prices. Additionally, the ongoing issue of electricity load shedding
continues to impact trade, causing disruptions in sales patterns.
The group has proven its resilience through previous economic downturns and
management is confident in the group’s medium-term prospects.
The consumer appetite for credit is expected to continue into the new financial year and
management believes that the overall health of the book can be maintained, supported
by the enhanced collections practices.
New merchandise ranges are being introduced across all brands and the more
favourable shipping rates on imported products should support sales growth. UFO in
particular will benefit from the lower rates as approximately 65% of the chain’s
merchandise is imported. However, cost pressures will arise from the weakening Rand
exchange rate, placing pressure on the Group’s import programme and pricing strategy,
should the Rand not recover in the short-term.



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The group is accelerating its store expansion programme in response to opportunities to
acquire well located trading space and plans to open 25 stores across the traditional
retail brands in the new financial year.
Dividend declaration

Notice is hereby given that a final gross cash dividend of 218 cents per share in respect
of the year-ended 31 March 2023 has been declared payable to holders of ordinary
shares. The number of shares in issue as of the date of declaration is 57 259 052. The
dividend has been declared out of income reserves and is subject to a dividend tax of
20%. The dividend for determining the dividend tax is 218 cents and the dividend tax
payable is 43.6 cents for shareholders who are not exempt. The net dividend for
shareholders who are not exempt will therefore be 174.4 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
tax 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                         Tuesday,18 July 2023
Date trading commences "ex" dividend                      Wednesday,19 July 2023
Record date                                               Friday, 21 July 2023
Date of payment                                           Monday, 24 July 2023

Share certificates may not be dematerialised or rematerialised between Wednesday,19
July 2023 and Friday, 21 July 2023, both days inclusive.


For and on behalf of the board


Hilton Saven              Johan Enslin                     Jacques Bestbier
Independent               Chief executive officer          Chief financial officer
non-executive
chairman

Cape Town
25 May 2023




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4. Auditors Report in Audited Financial Statements

Our independent auditors, PricewaterhouseCoopers, have expressed an unmodified
audit opinion on the audited financial statements for the year ended 31 March 2023.

The independent auditors report includes a section on key audit matters. The key audit
matters are:
   - Expected credit losses on trade receivables
   - Impairment assessment of right-of-use assets

The full independent auditor’s report is set out on pages 11 to 16 of the audited financial
statements.

Refer https://www.lewisgroup.co.za/wp-content/uploads/2023/05/Annual-Financial-
Statements-for-the-year-ended-31-March-2023.pdf


5. Short Form Announcement

This short-form announcement is the responsibility of the company’s directors and is a
summary of the results announcement and does not contain full or complete details.

The results announcement and the audited financial statements can be downloaded from
https://senspdf.jse.co.za/documents/2023/jse/isse/LEW/FY23.pdf and on the group’s
website www.lewisgroup.co.za as follows:

Results announcement: Refer
https://www.lewisgroup.co.za/wpcontent/uploads/2023/05/Audited-Final-Results-for-the-
year-ended-31-March-2023.pdf

Audited financial statements: Refer https://www.lewisgroup.co.za/wp-
content/uploads/2023/05/Annual-Financial-Statements-for-the-year-ended-31-March-
2023.pdf




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The full results announcement is available for inspection and may be requested at the
company’s registered office, at no charge, during normal business hours. Any investment
decision in relation to the company’s shares should be based on the full announcement.

Cape Town
25 May 2023

Sponsor
The Standard Bank of South Africa Limited

Debt Sponsor
Absa Corporate and Investment Bank, a division of Absa Bank Limited




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