RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015
AGENDA Overview of results 3 Debtor analysis 6 Financial results 9 Accounting matters 15 Regulatory update 18 Outlook 21 Questions 24
Overview of results Maintained 335c 14.7% 36.4% + 8.3% R2.8 bn 3 LY 215c LY 384c LY 18.4% Revenue LY 36.9% LY R2.6 bn dividend Interim per share Earnings margin profit Operating profit Gross at 215c
Overview of results 4 ß Sales patterns since year end – Furniture & appliances (81% of business – up 8.9%) – Electronics (19% of business – up 8.8%) ß Credit application decline rate 41% (LY:41%) ß Credit sales at 65.9% (LY:69.7) ß Debtor costs as a % of net debtors 7.4% (LY:6.8%)
Overview of results 3 ß Beares now trades out of 84 stores ß Small format Lewis stores – 178 ß Exclusivity of merchandise 5
DEBTOR ANALYSIS
7 244 6.8% 7.4% Debtor costs as a % of net debtors 192 209 224 7 Debtor costs 401 468 Total debtor costs (16.7% up) Rm H1/2015 Rm H1/2016 ß Bad debts written off ß Impairment provision
8 % of amounts ranges from 31% to 100% period. The provision in this category of amounts due over the contract Customers who have paid 55% or less customers performing Non 15.4% 14.3% 14.0% 7.3% No. 7.3% % 199.6 189.3 212.7 Rm 49 971 50 641 No. due (LY: 22% to 85%). ranges from 23% to 84% of amounts due (LY: 27% to 100%). 113 869 of amounts due over the contract 691 224 Debtor payment analysis 20.9% 22.3% 24.1% % Total impairment provision % of net debtors 1 294.3 1 321.1 1 518.5 Rm 681 728 Totals 115 220 72.1% 74.3% 73.8% % 16.9% 16.5% % 933.2 981.5 1 120.2 Rm period. The provision in this category Customers who have paid 55% to 65% Debtor's Payment Analysis more of amounts due over the % 21.1 22.6 29.8 Rm 462 625 471 067 No. provision. category results from the in duplum contract period. The provision in this Customers who have paid 70% or 67.9% paid Satisfactory 2015 March H1/2015 H1/2016 H1/2015 H1/2016 PROVISION DISTRIBUTION OF IMPAIRMENT NUMBER OF CUSTOMERS 68.1% % customers 155.8 performing Non 10.8% 9.7% 10.3% % 7.9% 8.1% % 140.4 127.7 Rm 1.9% 53 912 55 647 No. provision (LY: 11% to 74%). due and includes an in duplum ranges from 12% to 72% of amounts period. The provision in this category of amounts due over the contract Customers who have paid 65% to 70% Slow payers 1.6% 1.7% 8
FINANCIAL RESULTS
Income statement Operating profit (Rm) 373 (13.4%) 323 Headline EPS (cents) 384 (12.7%) 335 EPS (cents) 341 (12.6%) 298 Attributable earnings (Rm) 18.4% 14.7% Operating profit margin (%) 475 (13.6%) 410 36.9% H1/2016 36.4% Gross profit margin (%) 8.8% 1 128 1 227 Merchandise sales (Rm) 8.3% 2 583 2 798 Revenue (Rm) % Rm H1/2015 Rm 10
Revenue (Rm) 128 Best 382 2.1% 71 18.5% 19.3% Beares 18.5% 190 195% (23) (12.0%) 9.1% 84 Segmental analysis 512 16.3% Revenue growth (%) 362 Operating profit (Rm) H1:15 Number of stores H1:16 Group 2 798 8.3% 410 14.7% 18.4% 724 Lewis 2 226 3.8% 11 Operating margin H1:16
Employment costs 421 110 45 117 1 139 40.7% 1 022 39.2% H1/2015 Rm 111 104 95 127 103 34 104 995 38.5% 971 38.5% Analysis of costs 160 127 Admin and IT 13.0% Marketing Occupancy costs Transport/Travel Depreciation Other operating costs Total Operating costs % of revenue Total costs in Lewis and Best Change % 14.6% 476 9.1% 25.6% 6.8% 34.0% 12.8% 14.5% 5.3% % of revenue excluding Beares H1/2016 Rm 12
Balance sheet overview 7 932 7 478 Retirement benefits - net 31 20 Creditors and re-insurance liabilities 734 784 Interest - bearing borrowings 268 1 746 1 577 Total equity and liabilities 7 932 7 478 13 Shareholders’ equity and reserves 5 421 Total assets 247 H1/2016 Investments Rm H1/2015 Rm Property, plant and equipment 362 329 Trademark 59 - 1 814 Cash 1 714 Inventory 519 425 Tax and Deferred Tax - net 30 (2) Net Debtors 4 901 4 744 5 097
14 11.8% 25.7% 27.6% Gearing ratio (%) 215 215 Interim dividend declared (cents) 14.2% ROA – before tax (%) 14 11.4% 9.6% ROCE – after tax (%) 13.6% 11.0% ROE – after tax (%) H1/2015 H1/2016 Capital ratios
ACCOUNTING MATTERS
14 12.9 Profit before taxation 0.6 1.4 (46.1) Taxation (0.2) (0.4) Effect on attributable profit (12.8) 0.4 1.0 (33.2) Increase / (decrease) in diluted earnings per share 0.4 cents 1.1 cents (41.1) 2.2 16 Rm - Restatement - Income Statement Accounting Matters H1/2016 Rm H1/2015 Rm FY15 Refund of premiums and interest Maintenance contracts (2.1) (2.9) (5.4) Insurance and re-insurance accounting 0.5 17.1 0.4 (37.0 cents)
14 (132.6) (52.1) (162.0) (140.7) (354.8) 119.0 (13.6) (341.2) FY15 H1/2015 Rm (54.6) (162.9) (169.1) (386.6) 134.7 (11.2) (375.4) Rm (145.7) 17 Effect on net asset value - Restatement - Balance Sheet Accounting Matters Refund of premiums and interest Insurance accounting Maintenance contracts Effect on total assets Reinsurance accounting Effect on total liabilities Taxation (375.0) H1/2016 Rm (56.8) (144.3) (166.9) (368.0) 152.7 7.0 (145.9)
REGULATORY UPDATE
19 ß Referral to National Consumer Tribunal – NCR referred Lewis and Monarch to the National Consumer Tribunal – Alleged mis-selling of loss of employment insurance to pensioners and self-employed customers – Internal investigation launched – Identified instances of such mis-selling – Human error and contrary to the group’s policies which prohibit the sale of such cover to customers – Currently refunding premiums together with interest to affected customers – No date set for pre-hearing Regulatory update
20 Regulatory update ß Affordability assessment regulations – Early adopted in July 2015 – Three payslips / bank statements requirement – Minimum monthly expense table ß Capping of credit life insurance – Regulator not yet engaged with industry to discuss
OUTLOOK
Financial and operating targets 27.6% 68.1% Satisfactory paid customers (%) 19 - 21 14.7% Operating profit margin (%) 68 - 70 65.9% Credit sales as a % of total sales 22 Outlook 30 - 34 Gearing (%) Actual 12 - 14 7.4% Debtor costs as a % of net debtors 36.5 - 37.5 40.7% Operating costs as a % of revenue 37 - 38.5 36.4% Gross profit margin (%) 2016 Target H1/2016 66 - 70
ß Outlook 23 ß Trading outlook
QUESTIONS
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