Major leadership changes at Lewis as profits slump

Cape Town – The chairperson, a board member and the chief financial officer of Lewis Group [JSE:LEW] have announced they are leaving as the retailer announced a 35.6% decline in headline earnings per share for the year ended 31 March 2017.

Lewis announced it would pay a final gross cash dividend of 100 cents per share for the year ended 31 March 2017. Its share price was 1.1% down at the close of business on Tuesday.

Lewis chairperson David Nurek “advised the board that he plans to retire after serving as a director and chairman since the group’s listing on the JSE in 2004,” the group said in a statement on Wednesday.

Additionally, Les Davies “has advised the board that he will be stepping down as chief financial officer and as an executive director of the group with effect from 31 March”, Lewis said in another statement on Wednesday.

It also reported on Wednesday that headline earnings declined from R552m to R355m with headline earnings per share at 400.1 cents.

“Trading conditions continued to deteriorate during the year as economic growth slowed, the group’s customer base was adversely impacted by the affordability assessment regulations, high levels of unemployment and the protracted drought affecting the rural economy,” it said.

“Revenue at R5.6bn was 3.3% down on the previous year owing to a 4.3% decline in other revenue,” it said. “The gross profit margin expanded by 360 basis points to 41.6% due to more competitive procurement of locally sourced product, tight stock control and an increased sales contribution from the higher margin furniture category.”

Lewis said operating costs were contained to an increase of only 5.5%. “Expenses were impacted by the integration of the stores acquired outside South Africa, general compliance costs including the compliance call centre at head office and upgrades to the point-of-sale system in stores,” it said.

“The group remains strongly cash-generative,” Lewis said. “Cash generated from operating and investing activities was used to repay borrowings of R1bn and to fund dividend payments of R357m,” it said, adding that the group’s cash and cash equivalents totalled R789m.

“Trading conditions are not expected to improve in the short term and in this environment of muted consumer spending, management will remain focused on tight expense control, improving collections productivity, driving sales growth and sourcing innovative merchandise ranges which appeal to its target market,” it said.

New appointments

Hilton Saven will take over as chairperson, while Jacques Bestbier will take over as chief as CFO, Lewis said.

“Through a managed succession process, Mr Nurek has agreed to stand for re-election as a director at the forthcoming annual general meeting in August 2017,” said Lewis. “He will serve as a director until a suitable candidate has been appointed to the board to succeed Mr Saven as chairman of the audit committee, at which time he will formally retire from the board and be succeeded by Mr Saven.”

Davies, who has served as the group’s CFO and financial director since 1989, will continue to serve as the chief executive officer of the group’s short-term insurer Monarch Insurance, Lewis said.

Bestbier, a chartered accountant, has been a general manager at Lewis since 2012. “Prior to joining Lewis he spent six years with the Shoprite Group in financial and divisional management roles.”

Lewis said another board member, Ben van der Ross, will be retiring from the board at the forthcoming AGM, while two new board members have been appointed.

“Daphne Motsepe and Adheera Bodasing have been appointed as non-executive directors with effect from 1 June 2017,” Lewis said.

“Ms Motsepe is an experienced banking executive and company director. She was formerly chief executive of unsecured lending at Absa and also served as managing director of Postbank. She is currently a non-executive director of Edcon, Mercantile Bank Holdings, Rand Mutual Assurance Company and Kapela Investment Holdings.

“Ms Bodasing is an attorney and lobbyist with widespread experience in the public and private sectors. She was previously chief director legal services at National Treasury and later served as a commissioner on the Gambling Review Commission. Ms Bodasing is currently the managing director of Polarity Consulting, a legal and lobbying consultancy which she founded in 2007.”

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