Lewis Group (LEW) H1 2025 earnings summary

Executive summary

• Revenue increased 13.6% year-over-year to R4.4 billion, with merchandise sales up 8.5% and operating profit up 54.1% to R477 million, driven by strong credit demand and improved consumer confidence.

• ROE expanded from 8.4% to 12%, with a 15% target by March 2027; return on capital employed rose from 7.7% to 11.2%, and return on assets from 9.1% to 12.5%.

• EPS grew 53.0% to 544 cents, and HEPS rose 49.1% to 555 cents per share.

• Interim dividend increased by 50% to 300 cents per share, reflecting confidence in growth prospects.

• Satisfactory paid position reached a record 81.6%, above the target range, with debtor book growth of 16.9%.

Financial highlights

• Gross profit margin improved to 40.9%, and operating margin rose from 14.2% to 20.2%.

• Insurance revenue is growing faster than expenses.

• Claims increased by 30% (ZAR 30 million), mainly due to loss of employment and mine retrenchments.

• Claims ratios have stabilized, returning to pre-COVID levels.

• Operating costs were well managed, rising 8.8% year-over-year.

Outlook and guidance

• Management expects to achieve the 15% ROE target by March 2027 or earlier.

• Gross profits and operating margins are expected to remain strong or improve in the second half.

• Debtor costs are expected to close the year in the middle of the target range, improving on last year.

• High demand for credit is anticipated to continue, with ongoing investment in the debtors book and store expansion.

• Black Friday and festive season promotions are planned, leveraging strong inventory and targeted marketing.