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Lewis Group Headline Earnings Up 21% Despite Tough Trading Conditions

Cape Town – Lewis Group today reported a strong merchandise sales and operating performance for the year to March 2022 despite weakening retail trading conditions, with headline earnings increasing by 21.2% to R561 million.

Headline earnings per share increased by 37.7% to 849 cents, reflecting the positive leverage effect from the group’s aggressive share repurchase programme.

The total dividend was increased by 25.9% to 413 cents per share.

Chief executive officer Johan Enslin said the group reported a competitive performance against the backdrop of the tightening domestic economy, the July 2021 civil unrest as well as local and international supply chain challenges.

The strong operating performance from the Lewis, Best Home and Electric, and Beares brands was adversely impacted by impairment charges totalling R131 million. Operating profit before impairments and capital items increased by 4.3% to R767 million.

Merchandise sales increased by 11.5% to R4.4 billion, with credit sales growing by 16.7% and cash sales by 6.4%.

Enslin said the group continues to carry higher inventory levels to ensure stock availability to meet customer demand and counter the ongoing challenges in the supply chain such as the global shortage of shipping containers and severe port congestion.

Sales in the group’s 129 stores outside South Africa increased by 11.9% and accounted for 17.9% of total sales.

The group’s store footprint increased to 819 following the opening of a net 12 new stores across all brands during the year.

The quality of the group’s debtors’ book continued to improve. Collection rates strengthened to 79.0% from 71.8% in 2021 while the percentage of satisfactory paid accounts increased to 79.0% from 74.4% last year. Debtor costs continued the declining trend, reducing by 13.6% over last year.

Cash generated from operations totalled R863 million and the group’s balance sheet remains robust, with the net asset value per share increasing by 10.4%.

The group has continued its earnings enhancing share repurchase programme, buying back 8.7 million shares at a cost of R353 million. Since the start of the buy-back programme in 2017, the group has repurchased 26 million shares for R829 million.

On the outlook for the group, Enslin said the current challenging retail trading conditions are expected to persist in the short- to medium-term. “There is increasing pressure on disposable income with rising interest rates, transport costs, energy and food prices while the ongoing load shedding is disrupting trade and impacting sales patterns.”

“In this constrained environment we plan to increase market share through innovative marketing strategies which will be supported by new merchandise ranges across all of our brands and high levels of stock availability,” he added.

Enslin said despite the difficult trading conditions the group will continue to expand its store base, with a net 16 new stores planned for the 2023 financial year while a further 150 stores will be revamped.

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