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Lewis profit dives 40% as new credit rules hit sales

Nov 09 2016 09:30
Matthew le Cordeur

(iStock)

Company Data

LEWIS GROUP LIMITED [JSE:LEW]

Last traded 15
Change 1
% Change 6
Cumulative volume 101728
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 – Lewis [JSE:LEW] has reported a 39.6% decrease in headline earnings per share (Heps) in the six months to end-September, as low domestic growth and new credit rules hampered sales.

Headline earnings declined from R287m to R173m, with Heps 39.6% lower and earnings per share 41.4% down on the corresponding prior period, it said in a statement. Revenue fell 2% to R2.7bn.

“The challenging economic and consumer environment in the country, coupled with the ongoing impact of the National Credit Regulator's (NCR) affordability assessment regulations, has severely impacted the group's merchandise sales and in particular credit sales over the past six months,” it said.

Lewis was trading 1.1% lower at 09:40 on the JSE at R36.39 a share.

“The affordability regulations require customers to provide their three latest salary advices or bank statements as part of the credit approval process,” it said. “This is proving a major challenge for many consumers in the group's lower- to middle-income target market who are self-employed or work in the informal sector, restricting their access to credit.”

Trading conditions are not expected to improve over the remainder of the financial year as consumers face increasing pressures on disposable income, it said.

“The directors are positive about the group's medium- to longer-term prospects and the business remains cash generative with low levels of gearing at 18.8% (H1 2016: 27.6%), reflecting the strength of the balance sheet,” it said.

It declared an interim dividend of R1 per share, which is a 55% pay-out of the net profit attributable to ordinary shareholders. This is over half the dividend it paid in the last period of R2.15 a share.

“The dividend has been declared out of income reserves and is subject to a dividend tax of 15%,” it said.

Lewis was referred by the NCR to the National Consumer Tribunal in July 2015 for alleged breaches of the National Credit Act regarding the sale of loss of employment insurance and disability cover to customers who were pensioners or self-employed persons.

“Following the notification of the referral, an internal investigation identified approximately 15% of cases where loss of employment insurance policies were invalidly sold to pensioners and self-employed customers as a result of human error at store level,” it said.

“Lewis is currently refunding the premiums and interest totalling approximately R67.7m to the affected customers.

“To date, Lewis has reimbursed approximately 93% of amounts due,” it said.

lewis  |  credit  |  national credit regulator
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