Companies / 22 November 2018, 09:00am / Sandile Mchunu
DURBAN – Lewis Group’s share price rose by more than 9 percent on the JSE after the credit retailer reported 25.9 percent growth in merchandise sales, driven by its acquisition of United Furniture Outlets (UFO).
For the six months to end September, UFO was instrumental in lifting the group’s merchandise sales to R1.6 billion and by 8.1 percent with the exclusion of sales from UFO during the period.
Lewis, which operates Lewis, Best Home and Electric and Beares, acquired the entire issued ordinary share capital and all shareholders’ claims against UFO for a cash amount of R320 million, plus any applicable interest in October, last year.
Lewis Group shares closed 9.72 percent higher at R30.94 on the JSE yesterday.
Chief executive Johan Enslin said UFO had performed well since being successfully integrated into the group and contributed sales of R230m.
“UFO has enabled the group to access higher income customers and as a cash retailer has increased the group’s cash-to-credit sales mix. We believe UFO is scalable with the potential to expand across South Africa and into neighbouring countries,” Enslin said.
Two UFO stores were opened during the first half, with three stores opened in October after the reporting period. Two more outlets were planned to open before December.
The group said cash sales increased by 72 percent during the period, driven primarily by UFO, which is a cash retailer, and credit sales by 4.2 percent.
The group’s credit sales now account for 57.1 percent compared to 68.8 percent last year and cash sales for 43 percent of total group sales.
In the results, revenue increased by 11.2 percent to R2.90bn and by 2.4 percent, excluding the contribution from UFO.
Profit was up by 5.25 percent to R150.4m, while headline earnings per share increased by 10.7 percent to 180.8 cents a share, driven by strong merchandise sales growth and the early benefits of the group’s diversification strategy.
The group declared a 5 percent increase interim dividend to 105c a share.
Lewis increased its stores to 779 after opening 14 stores and it closed eight stores. The store base in the neighbouring countries of Botswana, Lesotho, Namibia and eSwatini increased by 6 to 116.
Lewis is a leading credit retailer of household furniture and electrical appliances.
The group has recently launched omni channel retailer INspire by entering into the home shopping market with an extensive product offering across linen, bedding, tableware, cookware and small electrical appliances.
Enslin said he expected the current sales momentum to be maintained during the remainder of the year.