Kgomotso Mathe
10 November 2009
Johannesburg — FURNITURE retailer Lewis Group said yesterday revenue growth had shown consistent improvement in the past 18 months despite tough trading conditions.
In its interim results for the six months ended September 30, Lewis said revenue was up 7,9% .
During the period under review, revenue increased to R1,95bn from R1,8bn in the previous reporting period, and merchandise sales grew 6,8% to R951m.
The flagship Lewis brand, which accounts for 85% of merchandise sales, increased revenue 7,9%, Best Home and Electric grew revenue 10,2% and Lifestyle Living 0,8%.
Newly appointed CEO Johan Enslin said trading conditions had been tough but the group was satisfied with the results.
"The credit environment remained challenging over the period, with increasing unemployment, retrenchments and reduced working time affecting disposable income levels," he said.
"This has resulted in higher debtor costs for the group."
Debtor costs increased from 4,5% last year to 5% of net debtors in a tightening collection environment, while the doubtful debt provision for the first half of the year was 17,9%, from 15,5%.
However, Enslin said the group's collections for last month had improved compared to some of the previous months and the group hoped the pattern would continue in the remaining half of the financial year.
Evan Walker, a retail analyst from RMB, said Lewis's increase in bad debts was slightly ahead of what the market had anticipated, but was far better than some furniture retailers.
"Their bad debts are far better than JD Group and better controlled, but still a bit disappointing for a conservative company like Lewis," said Walker.
"Overall, I don't think it was a bad set of results, given the economic situation. They managed to increase gross margin, which was good."
The group's operating margin came under pressure from increased debtor costs, decreasing from 22,6% to 21,8%, but was still the highest in the furniture industry, according to Lewis.
Gross margin improved from 33,1% to 33,5% and dividends were maintained at 144c per share. Headline earnings per share decreased 3,9% to 290,5c.
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