ANNUAL AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2019 Agenda - - PowerPoint PPT Presentation

ANNUAL AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2019

Agenda

Key features Debtor analysis Financial results Financial and operating targets Value proposition Questions Questions Outlook

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3

Key features

• Improved performance of Traditional Retail
• Solid performance by UFO
• Launch of INspire

Revenue ▲

10.4%

to R6.1 billion Merchandise Sales ▲

22.9%

to R3.5 billion Gross Profit at

41.2%

R1.4 billion Debtor Costs ▼

11.9%

to R843 million Operating Profit ▲

16.8%

to R443 million HEPS ▲

24.3%

to 376 cents Total Dividend ▲

17%

to 234 cents

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4

Key features continued…

• Merchandise sales increased by 22.9% to R3,519m
• Traditional retail up 7.6% to R3,014m
• Cash retail (UFO) - R478m
• Omni-channel retail (INspire) – R27m
• Growth in credit sales of 8.1% to R2,038m
• Growth in cash sales of 51.1% to R1,482m

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5

Key features continued…

• Sales pattern for the year
• Furniture

60.8% (LY: 56.7%)

• Appliances

25.2% (LY: 27.6%)

• Electronics

14.0% (LY: 15.7%)

• Credit application decline rate: 37.4% (LY: 37.1%)

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6

Key features continued…

• IFRS 9 – (Expected credit loss impairment model) replaced

IAS39 (Incurred loss model)

• Collection rates of 76.3% (LY: 74.9%)
• Satisfactory paid at 71.4% (LY:68.4%)
• Debtor costs 13.3% of net debtors (LY: 17.2%)
• Trading out of 784 stores (LY: 773)
• 214 small format Lewis Stores (44% of Lewis base)
• 120 stores outside SA (LY: 110 stores)

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7

Key features continued…

Traditional retail

• Merchandise sales +7.6%
• Credit sales growth +6.7%
• Cash sales growth +9.5%
• Credit sales mix 66.7% (LY: 67.3%)
• Operating profit increased by 12% to R429m (LY: R384m)

Other revenue – positive trend H1 H2

2019 2018 % 2019 2018 %

R1 274m R1 364 (6.5%) R1 343m R1 328 1.1%

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Debtor analysis

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Debtor performance

FY19 FY18 Collections Collections from instalment sales Rm 4 041 3 960 Actual collections achieved As a % of one contract instalment per customer per month 76.3% 74.9% Contractual arrears Rm 2 129 2 278 % of gross debtors 35% 38% Debtor Costs Debtor costs (excluding adjustment for interest on credit impaired accounts) Rm 843 957

(11.9%)

• Bad debts written off

Rm 942 898

• Debtors impairment provision

Rm (99) 59

• Adjustment for interest on credit impaired

accounts Rm (110)

• Total Debtor costs

733 957

(23.4%)

Debtor costs as a % of net debtors 13.3% 17.2%

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Gross debtor analysis

Customer Grouping Period No Customers Gross Receivables Impairment Provision Total Arrears R 000 Instalments in arrears No % R 000 % R 000 % 1 R000 2 R 000 3 R 000 >3 R000 Satisfactory paid Customers who have paid 70% or more

• f amounts due over the contract period.

2019 418 355 71.4 3 282 938 59.4 593 578 18.1 534 435 156 625 105 396 76 314 196 100 2018 401 183 68.4 3 063 886 55.0 675 971 22.1 549 506 155 673 105 593 77 633 210 607 Slow payers Customers who have paid 55% to 70% of amounts due over the contract period. 2019 88 969 15.2 959 418 17.4 612 172 63.8 606 735 68 541 65 290 60 511 412 393 2018 97 251 16.5 1 049 782 18.9 608 716 58.0 665 893 72 167 69 010 64 474 460 242 Non performing customers Customers who have paid less than 55%

• f amounts due over the contract period.

2019 78 426 13.4 1 285 439 23.3 1 117 328 86.9 987 580 63 762 62 451 60 902 800 465 2018 88 430 15.1 1 455 670 26.1 1 137 347 78.1 1 062 130 67 452 66 131 64 513 864 034 Gross Debtor Analysis 2019 585 750 100 5 527 795 100 2 323 078 42.0 2 128 750 288 928 233 137 197 727 1 408 958 2018 586 864 100 5 569 338 100 2 422 034 43.5 2 277 529 295 292 240 734 206 620 1 534 883 Total Impairment provision as a % of Net Debtors - IFRS9 2019 42.0% 2018 43.5% Total Impairment provision as a % of Net Debtors - IAS39 2018 28.9%

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Debtor costs vs. Impairment provision + IFRS 9 (Rm)

2 422.0 532.7 635.4 758.3 875.2 997.2 1 129.5 1 294.3 1 533.6 1 560.6 1 619.5 2 323.1 338.8 434.2 458.9 522.3 539.6 702.4 858.1 1 005.0 1 065.5 957.3 843.1 R 0 R 500 R 1 000 R 1 500 R 2 000 R 2 500 R 3 000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 IFRS9 (Rm) Impairment Provision (Rm) Debtor Costs (Rm)

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Financial results

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Income statement

FY19 FY18 % Revenue Rm 6 137 5 557 10.4 Merchandise sales Rm 3 520 2 865 22.9 Gross profit margin % 41.2 41.4 Operating profit Rm 443 379 16.8 Operating margin % 7.2 6.8 Attributable earnings Rm 310 264 17.2 EPS cents 378 307 23.0 Headline EPS cents 376 303 24.3

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Segmental analysis

2019 Group Traditional Retail Cash Retail Omni channel Retail Revenue FY:19 Rm 6 137 5 619 487 31 FY:18 Rm 5 557 5 491 66

• Revenue growth

10.4% 2.3% Operating profit FY:19 Rm 443 429 41 (27) FY:18 379 384 (4.2)

• Operating profit growth

16.8% 12% Operating margin FY:19 % 7.2 7.6 8.3 (88.0) FY:18 % 6.8 7.0 (6.4)

• Number of stores

784 748 36

• 773

742 31

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Analysis of costs (excluding debtor costs)

FY19 Rm FY18 Rm % Employment costs 1 150 1 059 8.5% Admin and IT 348 328 6.0% Marketing 298 247 20.6% Occupancy costs 445 373 19.3% Transport / Travel 242 205 18.0% Depreciation 79 86 (8.5%) Other operating costs (*) 331 244 35.7% Total 2 892 2 542 13.7%

(*) Adjusting for the cessation of reinsurance, expenses in traditional retail increased by 4.7%

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Balance sheet

Assets FY19 Rm FY18 restated Rm PPE, goodwill and trademarks 609 607 Inventory 665 580 Insurance investments 617 606 Insurance premiums in advance

• 76

Trade and other receivables 3 316 4 200 Tax and deferred tax 255 27 Cash on hand 205 608 Total Assets 5 667 6 704 Equity and liabilities Shareholders equity and reserves 4 876 5 448 Trade and other liabilities 688 548 Insurance and reinsurance liabilities 103 177 Interest-bearing borrowings

• 531

Total equity and liabilities 5 667 6 704

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Capital ratios and dividend

FY19 FY18 ROE – after tax (%) 6.4% 5.1% ROCE – after tax (%) 6.5% 5.1% ROA – before tax (%) 8.5% 6.6% Gearing ratio (%) ungeared ungeared Final dividend (cents) 129c 100c Total dividend (cents) 234c 200c

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Financial and

• perating targets

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Financial and operating targets

Performance indicators Achieved 2019 Target 2019 Target 2020 Medium-term targets Gross profit margin (%) 41.2 38 - 42 38 - 42 40 - 43 Debtor costs as a percentage of net debtors 13.3 15 - 18 13 - 17 13 - 16 Satisfactory paid customers (%) 71.4 67 - 70 70 - 72 70 - 72 Operating profit margin (%) 7.2 5 - 10 7 - 10 10 - 15 Credit sales as a percentage of total sales 57.9 56 - 60 56 - 60 56 - 60 Increase in operating costs (%) (excluding UFO and INspire) Including UFO and Inspire 7.2 13.7 3 - 5 13 - 15 6 - 8 5 – 7 Gearing (%) Ungeared Ungeared Ungeared Less than 25%

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Value proposition

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Value proposition

58 77.4 47 41.5 42.2 31.1 60.12 61.28 61.53 61.27 57.78 60.81

10 20 30 40 50 60 70 80 90 2014 2015 2016 2017 2018 restated 2019

Hundreds

Share price (March closing) Net asset value

• Share buy back programme
• 3 224m shares repurchased at

average price of R30.30

• Dividend Yield
• increased from 4.74% to 7.52%
• PE ratio
• decreased from 13.75 to 8.24

Net asset value per share vs share price (cents)

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Outlook

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Outlook

• Trading conditions expected to remain challenging
• Growth in other revenue expected to continue
• Diversification strategy - well positioned to gain market share across all income groups
• Focus on establishing the brand
• Optimise sales channels
• Increase penetration of urban markets
• Build a revolving credit book

(Max term 12 months)

• Quality and exclusivity of merchandise
• 6 months interest free offering
• Nationwide delivery within 5 days
• Profitability - break even for the year
• Further improve the

merchandise range

• Open 5 to 10 new stores

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Outlook

• Exclusivity of merchandise and bringing value to the market
• Management of the debtors book
• Expense focus
• Balance Sheet Ungeared

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Questions