Lewis expects up to 45% drop in profit in last 6 months | Fin24
 
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Lewis expects up to 45% drop in profit in last 6 months

Oct 21 2016 10:23
Matthew le Cordeur

(iStock)

Company Data

LEWIS GROUP LIMITED [JSE:LEW]

Last traded 16
Change 0
% Change -2
Cumulative volume 6745
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town – The National Credit Regulator's (NCR) affordability assessment guidelines and tough economic times have resulted in retailer Lewis’s profit dropping by up to 45% in half-year trading, it said on Friday.

The group said in a statement that it expects its headline earnings per share (Heps) – South Africa’s gauge for profit – to be between 35% and 45% lower compared to the corresponding period for the six months ending September 2016.

“The performance … reflects the challenging economic and consumer environment in which the business is trading and how these conditions have impacted the group's lower to middle income target customers.

“This has been compounded by the ongoing impact of the NCR's affordability assessment guidelines which are restricting access to credit in South Africa and severely limiting the group's credit sales.”

Lewis shareholders will meet at the group’s annual general meeting in Cape Town on Friday, where it is expected the board will be challenged on its remuneration policy.

Lewis [JSE:LEW] share price decrease by 1.4% to R41.05 in early trade on Friday.

In 2015, 40% of the shareholders voted against its remuneration policy, the highest recorded opposition of a JSE-listed company.

Adding fuel to the fire, Lewis approved the granting of shares worth millions of rands to executive directors Les Davies and Johan Enslin on 4 July 2016, subject to performance targets.

A note to shareholders in July did not explain what those targets were, except that they would be based on Heps, the quality of the debtors book and gross margin.

These shares allocation was made amid a slump in the share price, with a 50% reduction between 20 June 2015 and 20 June 2016.

“Merchandise sales for the period were in line with last year, with like for like merchandise sales down 9.2%,” Lewis said on Friday.     

“Revenue declined by 2% mainly as a result of a 4% decline in other Revenue over the corresponding prior period.

“The group's gross profit margin has continued to expand in line with management's expectations and improved to 40.5% compared to 36.4% in the previous year.

“Debtor costs for the period increased by 7.3% reflecting a further slowing from the 17% growth reported at the 2016 year end.”

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