Lewis Group Limited has released its audited financial statements for the year ending March 31, 2024. Despite a weak retail environment, the company has shown resilience, reporting strong credit sales and robust growth in its debtors book. This article delves into the highlights, financial performance, and strategic outlook of Lewis Group Limited.
Financial Highlights
The financial year ending March 31, 2024, was notable for several key metrics:
| Metric | Value |
|---|---|
| Merchandise Sales Growth | 4.7% to R4.7 billion |
| Revenue Growth | 9.8% to R8.2 billion |
| Gross Profit Margin | Up 250 basis points to 43.1% |
| Satisfactory Paid Accounts | 81.3% |
| Debtors Book Growth | 15.6% |
| Operating Profit Increase | 13.1% |
| Earnings Per Share | Increased by 15.9% to 806 cents |
| Headline Earnings Per Share | Up 7.1% to 925 cents |
| Total Dividend Increase | 21.1% to 500 cents per share |
Sales Performance
Merchandise Sales
Merchandise sales increased by 4.7% to R4.7 billion, with traditional retail segment sales growing by 6.9%. UFO, the group’s cash retail brand, saw a decline of 12.6% in sales. The overall comparable store sales across all brands grew by 1.9%.
Credit and Cash Sales
Credit sales showed a robust increase of 15.8%, while cash sales declined by 11.8%. Over the past three years, credit sales have grown at a compound annual rate of 16.9%, now constituting 66.2% of total merchandise sales.
Revenue and Profitability
Total Revenue
Total revenue for the year increased by 9.8% to R8.2 billion, driven by strong credit sales growth and effective margin management. Other revenue, which includes interest income, ancillary services income, and insurance revenue, increased by 17.2%.
Gross Profit Margin
The gross profit margin improved by 250 basis points to 43.1%, attributed to effective margin management on new merchandise ranges introduced in the latter half of the year.
Operating Profit
Operating profit saw a 13.1% increase, reaching R689.5 million. This was aided by insurance proceeds of R27.3 million, primarily related to claims from the 2021 civil unrest.
Debt and Shareholder Returns
Debt and Impairment
The quality of the debtors portfolio improved, with satisfactory paying customers reaching a record high of 81.3%. However, net bad debts as a percentage of debtors at gross carrying value reduced to 11.2% from 13.1%. The debtors impairment provision increased from 36.0% to 37.5%, reflecting the economic uncertainty.
Dividend and Share Repurchase
The total dividend for the year increased by 21.1% to 500 cents per share. The board’s confidence in the group’s prospects is evident in the dividend declaration and share buyback program. The group repurchased 4.2 million shares at an average price of R40.82 per share. Since 2017, the group has bought back 35.7 million shares at an average price of R35.67 per share.
Strategic Outlook
Expansion Plans
Lewis Group plans to continue its expansion, with 20 new stores across traditional retail brands expected in the 2025 financial year. This expansion aims to support revenue and margin growth despite the challenging macroeconomic conditions.
Credit Sales Focus
The group anticipates continued demand for credit and will invest in expanding its debtors book. The group’s history of effective credit practices supports this strategy.
Economic Environment
The trading environment remains challenging due to high interest rates, inflation, and unemployment. Political uncertainty and operational constraints in South African ports also pose risks. Despite these headwinds, Lewis Group remains committed to long-term growth strategies.
Conclusion
Lewis Group Limited has demonstrated resilience in a challenging trading environment, with significant growth in credit sales and a strong debtors book. The company’s strategic focus on expanding its retail footprint and prudent credit practices positions it well for future growth. Shareholders can take confidence in the group’s ability to generate returns, as evidenced by the increased dividend and share repurchase program. As the economic landscape evolves, Lewis Group remains committed to navigating these challenges and pursuing sustainable growth.