Lewis Group Limited (LEW) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. And a warm welcome to all our shareholders, investors, members of staff and also to all other stakeholders that are joining us for our 2020 results presentation. On our agenda for this afternoon, we will, first and foremost, spend time on the highlights followed by our data analysis. We will then move on to financial results. After that, ladies and gentlemen, we'll really get into the meat of this presentation. I'm sure that everybody is really interested to understand how the group has dealt with COVID-19 so far, and I'm also sure that everybody is very much interested in understanding how the group has been trading since we've opened all our doors on the 1st of June. Following that slide, we will then move on, and we'll spend time on targets. We'll have a look at the targets that we have set for ourselves for 2020, the achievement against those. And we'll then also spend time to actually look at the targets for the new financial year and to give you some insights with regards to our thinking of medium-term achievements. Before we get into the results of 2020, it's important to unpack the impact of COVID-19. When we look at the impact that COVID-19 has had, it will basically place or put the results for 2020 into context. The group's performance for the first 11 months of the financial year can only be described as a resilient performance. For 51 out of 52 weeks, the group really traded well. If I can take you back to our achievements for half 1, ladies and gentlemen, you'll all recall that headline earnings per share for the first half of 2020 increased by 14%, that collections was really performing strongly, and that the satisfactory paid position of the group at that point in time was the best performance over a period of 12 years. The fact that we achieved gross profit margins during that period and that costs were well contained all served us well and the execution of the business model worked really well, and we were proud of the results that we achieved. As a matter of fact, at the end of February, management was basically ahead of all targets that we've set ourselves for the year. Then in March, COVID struck and merchandise sales was impacted to the extent of ZAR 80 million. Collection were impacted to the extent of ZAR 180 million. And our satisfactory paid position also deteriorated, all caused by a loss of 8 trading days for the month of March. As you can see from this slide, at the end of February, merchandise sales increased by 6.9%. That increase was reduced to 4.7% for the year. Collection rates, running at a very strong 77.3%, finally ended on 74.5%. And then satisfactory paid at the end of February, we -- our satisfactory paid bucket reflected a gain of 4% on the previous year, 4 percentage points, that is. And that then reduced to a closing position of 70.5% that were, in fact, below the levels of the previous year. Debtor costs solely as a result of lost collections and raised provisions under IFRS 9 increased from 12.5% at the end of February to 17.6%. I've mentioned the fact that we've lost out on 8 trading days, a significant impact on sales and collections. We then also thought that it will be useful to unpack the actual impact that the lost collections and the forward-looking provisioning has had on the debtor’s impairment line. You will note that the book was in very good state at the end of February and that the impairment provision pre-lockdown would have resulted in actual release or reduction of ZAR 102 million. But instead, the deterioration in the month of March led to a COVID-related increase in the provision of ZAR 123 million. And then the top-up portion of the economic overlay that was solely as a result of COVID-19 resulted in a further ZAR 190 million that was added to the debtor impairment line. Furthermore, in the area of lease impairment provisions under IFRS 16, a further increase in provisions of ZAR 27 million was made. It's a long explanation, ladies and gentlemen. But in summary, on a look-through basis, the impact of COVID-19 on our impairment provisions speaks to an additional impairment of ZAR 339 million that was raised, and that obviously reduced our profit before tax number for the 2020 year. We then move on to the review of 2020. Revenue increased by 5.2%, supported by a merchandise sales increase of 4.7%. Strong gross profit margin performance at the upper end of management's target range at 41%. Operating profit heavily impacted by the ZAR 339 million additional impairment provision that I've just spoken about, therefore, settling 42.7% down on last year. Cash generated by operations, a strong performance at ZAR 636 million. HEPS, obviously, also impacted by our reduction of ZAR 339 million, settling at 30.8% down on last year. And then some good news, ladies and gentlemen. The Board has once again shown confidence in the future prospects of the group and decided to declare a final dividend of ZAR 0.65, bringing our total dividend for the year at ZAR 1.85. This is a dividend payout ratio of 79%. Also, I want to mention that since we listed the group 16 years ago in 2004, the group never suspended dividend payments. And then move on to the operational review. We already mentioned the point that it was really a solid trading and operational performance that was really badly impacted by COVID-19 right at the date of the financial year. And during this lockdown period, the business once again displayed its resilience. And we came through this lockdown period with a strong balance sheet intact, and we've shown that the ability of the business model and management to adapt to changing circumstances has always been good and once again been proven. For the 2020 year, we traded out of 794 stores. We opened a net 10 stores across trading brands for the year. Outside of South Africa, in the BLNE countries, we now trade out of 125 stores with 16% of our store base that contributes 18% of merchandise sales. We continue to open more stores on the more efficient small format. And over the last financial year, we've added 9 more small stores to the fold, either by opening or by resizing existing outlets. We also continued to invest in store refurbishments. We've completed 150 stores. For this financial year, because of the fact that we've lost out on 2 refurbishing months, we still plan to refurbish 100 stores. Good news when we look at the sales patterns, a further expansion in the area of furniture sales. As you know, our higher-margin furniture categories and expanding sales under these have been a continuous focus. 4 years ago and prior to the acquisition of UFO, furniture sales basically accounted for 54% of total sales. As you can see, a solid, almost 62% for the year that we've closed in March. Credit application decline rate remained stable during last year. Currently of utmost importance to actually monitor payment trends, we are in a position to change scorecards should we see any new payment patterns developing. Credit sales mix. Cash sale contribution once again increased during this year, once again, highlighting the successes that we have had in terms with our diversification strategy. Maybe to give that some color, in 2005, when we embarked on our diversification strategy, credit sales accounted for 69% of group total sales. Today, down to 57%. Other revenue performed in line with management's expectation and increased by a healthy 5.8%. We've seen an expansion in finance charges and initiation fees earned. Similarly, we've seen an expansion in the area of insurance premiums, and other services also showed a nice expansion during the period. As always, expense control remains a high focus area. We believe that we've performed well in terms of containing expenses during last year. And on a comparable basis, expenses increased by 5.3%, quite a bit better than our target range of 6.8% (sic) [ 6% to 8% ]. During 2020, we also continued with our share repurchase program. And we repurchased 3.3 million shares during the year, bringing the total shares repurchased since we launched the program in 2016 to almost 12 million shares. We then move on to our debtor analysis. To the end of February, collections really, really performed well, like I mentioned earlier. We were actually at that point ahead of management's expectation. Unfortunately, we've lost out on at least ZAR 180 million worth of collections during March. But having said that, we still banked a small improvement on last year's collections. If we look at the collection rates, we finally settled at 74.5%. Although it's down on the 76.3% of 2019, it's still ahead of our achievements in the 2018 and '17 years. The fact that our arrears still settled below last year once again highlights that there were big improvements and gains made up to the end of February. But unfortunately, some of those gains were now lost during the March trading period. So arrears as a percentage of our gross carrying value, settling at 36.7%. Debtor costs line increased by 38%. Interesting to note that our net bad debt written off actually improved by 4%. And I think it's fair to say that, should COVID not have happened in March, our total debtor cost line for the year would most probably also have displayed an improvement of between 4% and 5%. Be it as it may, debtor costs as a percentage of gross carrying value up from 13.3% to 17.6%. And just once again to mention that the impact of the COVID provision on the impairment line was ZAR 312 million. We then move on to our payment buckets. To start with the positive, we've seen a nice increase in customer numbers, and we've gained 10,000 credit customers during the period. I've already mentioned that our arrear numbers are still below that of last year, or it was at the end of March. Maybe just to draw your attention to the total arrears bucket under the satisfactory paid column. Total arrears for satisfactory paying customers settled at ZAR 615 million compared to ZAR 534 million. So although the overall level of arrears reduced, we've seen an increase in the satisfactory paying bucket. That's an increase of roughly ZAR 80 million. It's important to pause for a moment and I need to make the point that that increase in arrears was solely as a result of lost collections during the month of March. And we see that ZAR 80 million increase in arrears as good collectible COVID arrears. These are all customers that previously paid us at a rate of more than 70% of what was due, and we believe that the only reason why they stopped paying was because of lockdown and COVID. Then if we focus on the total arrears under the slow payer and nonperforming buckets, ladies and gentlemen, you will see that in both those cases, the arrear levels as of the end of March was still below that of last year, once again, clear proof that the quality and the health of the book was in good standing as of the end of February. I think a different way to look at these numbers is also to say what would the impairment provision have been if COVID did not strike us in March. We already alluded to the fact earlier that the impairment provision would have reduced by ZAR 102 million. If we basically put that into our line of thinking, you will see that the impairment provision was increased on that basis by 14%. So if we simply take last year's impairment provision number, we reduce it by the improvement that we have seen and we then apply the ZAR 2.533 billion to debt, you will see that there has been a top-up or an increase in provision of 14%. So quite a significant increase that took place. We've already touched on most of the items on the income statement. Maybe just to highlight that merchandise sales this year contributed 57% of revenue. That is important to us as it once again speaks to the successes that we have had in terms of driving our diversification strategy. 3 years ago, only 47% of our revenue was generated through merchandise sales. So quite a big movement in the right direction. If we can then move on to our segmental analysis. You will note that we've now collapsed our omnichannel business, INspire. This business increased sales by 65% last year. Now taking the opportunity to actually incorporate this business under the Beares brand. We believe that this is the logical next step to further our omnichannel offering. By incorporating it into Beares, we now also offer customers the opportunity to go and view and purchase our merchandise through bricks-and-mortar outlets. And we believe that the operational expertise and daily hands-on management that the brand will be enjoying under Beares will also benefit us. We've proven over the last 2 years that there's a very big demand for the linen that we offer through INspire. We now believe that INspire by Beares will once again offer us the opportunity to penetrate the urban markets, to a larger extent, in a cost-effective manner. I would also like to highlight that UFO have contributed 8% of revenue during the last year and a very healthy 17% of the group's operating profit. Operating margin in UFO have also actually performed quite well, only down by 0.2% during the period. Spoken about the number of stores, and we'll touch on expansion a little bit later. Expenses, like mentioned, on a comparable basis, a 5.3% increase, job well done. If we look at the following year and the targets that we have set for ourselves, ladies and gentlemen, you will see the cost containment will once again be a big focus area, and that we plan to contain costs at a growth of between 3% and 5%. If you will look at our analysis, the only -- we only need to comment on transport and travel, where we've seen an increase that is above inflation. Just to give that a little bit of color, fuel inflation during the period settled at between 3% and 4%, but we also had to invest quite significantly in terms of expanding our UFO brand into the Eastern Cape. And then finally, we also invested in more stock and more especially so, more imported stock during the period. To give that color, imports for the group increased from 26% to 29% of sales during the period. And for UFO, we now import 66% of what we sell in that business. We move on to the balance sheet, where you can see that our stockholding increased from ZAR 665 million to ZAR 741 million. Two reasons for that: Firstly, lost sales. During the last portion of March, we gave you the number, ZAR 80 million lost. And then secondly, on the positive front, we also took the opportunity prior to lockdown to go and cherry-pick and to go and buy some of our bestsellers in advance to ready the stores for the period after lockdown. Then I think it's also necessary to comment on cash, on our cash on hand position. At the end of March, we took precautionary measures just before lockdown and to go and draw down on some existing borrowing facilities to ensure liquidity during the lockdown period. Happy to share with you, ladies and gentlemen, that it was not necessary for us to utilize any of this during the lockdown period. And as things stand today, as a matter of fact, as soon as we opened the stores again, we repaid these borrowings. And great to say that the business today is free of borrowings, no borrowings. As a matter of fact, at the end of July, the group reflected the positive cash position of ZAR 515 million. Key ratios. We now all understand the pressure on HEPS. If we look at all our return ratios, ladies and gentlemen, I think it's fair to say that we made good inroads during the 2019 financial year, that we really started the process of rebuilding our business and getting returns to levels that management feel more comfortable with. That positive sentiment also carried through into half 1 of 2020 where we saw further expansion in all of our returns. But then, unfortunately, we experienced the COVID-19 setback. I can give you the assurance that management remains focused to get to a position where double-digit returns can be achieved, and management is still committed to actually get to double-digit returns in the medium term. Obviously, in getting there, the quality and performance of the debtor’s book will be key, and we believe that we've got the necessary plans in place to get the book back into shape over the next 12 to 18 months. Spoken about the dividend, we've shared the good news. Then we can now move on to our response to COVID-19. I think it's really important to provide shareholders and investors with an understanding of how we've dealt with the pandemic so far, and then also to give you quite a comprehensive update on what we have achieved since reopening our stores. Throughout the pandemic, the health and safety of our employees and of our customers have been top of mind and the top priority. We also realize that it was of the utmost importance to get our business up and running, to get the doors open as quickly as possible and to ensure that the continuity of trade is achieved to actually benefit all of our stakeholders. So you can now imagine, on the 23rd of March, when we received the news that we are about to go into lockdown, that an awful lot of things were about to happened. First and foremost, the biggest concern was that 98% of all our customers are used to pay -- used to paying their accounts in store with cash. We had to adapt to actually ensure that cash keep on going in. Within a period of 72 hours, we mobilized no fewer than 1,300 of our credit follow-up staff, be in a position to start phoning, encouraging and communicating with customers from home. We also had to move and place senior management in a position where they could have communication and comms and to enable them to do their work from home. All of that was successfully achieved within a period of 72 hours. Obviously, strict operating protocols are maintained in our stores and has been maintained since we reopened. I can share with you, ladies and gentlemen, that we've spent no less than ZAR 5 million on personal protective equipment. The really interesting figure is that in our stores, we've utilized or used no less than 20,000 liters of sanitizer. We're also on the front foot in terms of e-learning and getting our people up to scratch and keeping them up-to-date. At this point in time, a whole host of our training courses have been converted to actually be suitable for e-learning. And as we speak, some more is being converted. We also took the opportunity to apply for the TERS benefits to actually aid assistance during this time. I'm happy to share with you that we've already received relief for one of the 2 months that we have applied for. We also switched on alternative payment channels as soon as we went into lockdown, and we encouraged customers to go and pay their accounts at major grocery retailers. And as the apparel guys came online, we also offered that as an option. During this time, we further developed our e-commerce platforms. We also took our Beares brand onto social media, and we've already started to generate sales leads on these e-commerce platforms as early as April. We also took the opportunity to proactively communicate with our entire customer base. We informed all customers that do have insurance cover and especially so in the area of loss of income and loss of employment. We informed them of the cover, not only through telephonic contact, but also through electronic SMS messages during the time. I can pause for a moment just to mention that insurance claims at this point in time is still below management's expectation, and we're confident that we have made contact with those customers as things migrate. And as we move forward, insurance numbers will also be shared when we get to the half year mark. As a matter of fact, there's only 5 weeks of trade left before we complete half 1 of the 2021 financial year. Suppliers. During this time, management took a decision not to deviate from our normal policy of honoring supplier orders. We spoke to all factories prior to going into lockdown. Some of the international factories were, in fact, not in lockdown during that period, and we encouraged them to continue to manufacture for us. And the local guys also closed their doors with a clear understanding that there is work as soon as the lockdown ends. This strategy has played out really well for us, ladies and gentlemen. It has built tremendous supplier loyalty. And as things stand today, some of the international factories are really full. They've got full order books, and they have basically given Lewis priority now. Lewis' orders are enjoying first-in-the-queue status, and we've got no supply chain issues whatsoever. It's really important in a time where sales are growing at rates that can only be described as really unexpected. And then I should just pause for a moment to say that in the last financial year, sales grew by between 6% and 7%. All of a sudden after reopening, we saw sales numbers and are still seeing sales numbers that are performing north -- or growths that are coming through north of 20%. That's not part of your normal planning cycles. We plan for that. It's really difficult to go and find merchandise to stock your stores. A long story, but it's worthwhile mentioning that as of the end of last week, 90% of all SKUs in our business were running at model stock. Our stores are properly stocked as we speak after we've experienced significant sales increases that I will talk to on the next slide. We also took the opportunity to assist our BEE suppliers that have got loans with us in terms of affording them payment holidays for the period that they did not operate. Once again, the right thing to do in tough times, and loyalty will obviously stem from this. Shareholders. I think shareholders can once again be reassured that our business model is a very resilient one. Not only did we come through the lockdown period with no borrowings, we're also confident as a Board and as a management team to continue to make a dividend payment. Not only that, ladies and gentlemen, it's also our plan to continue with our share buyback program, and we will soon be reentering the market to continue the process of buying back shares. You will recall that we got a mandate from shareholders last year in October to buy back 10% group. Unfortunately, close period of almost 4.5 months, the rail debt -- or we placed that buyback process slightly on hold. We're now ready to go back into the market with 8.2% of that mandate still available for us to buy back. I can also, at this point, mention that it is our intention to, once again, at the AGM in October, ask shareholders for a mandate to buy back 10%. We see incredible value in the share price as it stand. We want to utilize this opportunity to unlock further value for shareholders. The share price currently trades at around about ZAR 13, market capitalization of around about ZAR 1.1 billion. Whilst we're holding cash no less than ZAR 515 million, good stock to the extent of ZAR 700 million and then a debtors book, even if you want to impair very heavily, so slightly north of ZAR 3 billion. So we definitely see value in the share, and we will be reentering the market soon. So from the start of April right through to the 18th of May, our stores were closed. On the 18th of May, we started selling merchandise on an e-commerce basis. We took our pending files out, pending deals. We started phoning customers. We upped our presence on social media. We took all the social media leads, and we really started working hard to get sales going. Happy to share with you that the sales increased for the first 12 months -- or for the 12 days, I should say, covering the period between 18 May and 1 June, that speaks to an achievement in terms of merchandise sales growth of 20%. Then on the 1st of June, all our stores reopened in South Africa. And we could really start focusing on cash collections and sales in a big way. Collection rates for quarter 1 settled at 59.9%. We just look at our achievements for the months of May and June where we were open for a period. Collection rates for that period settled at 74.4%. And then good news for July, good improvement in collection rates with July, settling at 76.6%. Merchandise sales, I spoke about the 20% that we achieved in May for the 2-week period. June, very strong merchandise sales performance with a 22% sales growth. In July, sales increased by 17%. And I can share with you that the month of August will most probably end with a sales growth higher than the 17% that we achieved in July. I also want to touch on GP for the first 4 months, just to give you the full picture. It's very good sales growth. GP for the period is also touching on 40%. So it's not like a lot of discounting took place during this period. Solid gross profit performance as well. Expenses for the first 4 months, well managed. And as a matter of fact, below the target range increase of between 3% and 5% for the year. Then finally, to be complete in terms of our update, we all know that the satisfactory paid percentage is a KPI in our business. Because of lost collections in March and the very low collection rate in April, our satisfactory paid percentage drop to 64.2% in April. But happy to share with you that we have seen a recovery already. And for the month of July, our satisfactory paid percentage settled at 65.6%. So ladies and gentlemen, despite challenging conditions, no borrowings by the end of quarter 1 and ZAR 515 million in the bank at the end of July. Now let's go to outlook. I don't think it's necessary to explain to anybody that the levels of uncertainty can't really be any higher than what we are experiencing at this point in time. But we still believe that it's necessary for us to share our targets and our thinking as it stand at this point in time with the market to give you an indication of where we believe we can take the business to in the short and then also in the medium term. But firstly, we need to deal with our achievements for 2020. So here's some of the targets that we achieved during 2020, even despite the impact of COVID-19: Gross profit, a solid performance at 41%, the upper end of the target range. And we look at our credit sales as a percentage of total sales, 56.9%. These are -- this is one of the targets we actually don't mind to be towards the lower end of the target range. Satisfactory paid, still a solid ending performance at 70.5%. Remember, that reduced to 64%. We're now rebuilding. We have a target of 64% to 67% for the new year. Debtor costs, slightly outside of our target range. Once again, if we go back and look at what we've achieved up to the end of February, we should have ended towards the lower or even slightly below the lower end of the target range. And then gearing as a result of IFRS 16, 12%. Yes, and then just in the middle of the slide, I think it's worthwhile once again talking about the increase in our operating expenses, 4.3%. And like I mentioned earlier, on a comparable basis, a 5.3% increase, below the target range of 6% to 8%. Now if we look at the targets for 2021, you will see that we are budgeting for an expansion in the operating profit margin. We basically are giving you the measure both based on revenue and on sales. You might find it interesting if you go and do the count back for 2020, and when I refer to the count back, I solely refer to the COVID impairment impact of ZAR 339 million, operating profit margin based on sales for last year would have been north of 16%. I think that, that just speaks to the underlying quality of this business and what can be achieved during more normal trading circumstances. So all the targets are there for noting, ladies and gentlemen. On gross profit, you will see that we've got no reason to budget backwards. I already mentioned that we are in the mid-range of that target range for the first 4 months of the year. And all other targets are there for noting and for discussion should you wish to do so. Maybe just at that point, if I can interrupt myself, I don't think I invited you to submit questions. So if you haven't done so, please do so. Graeme Lillie of Tier 1 is also with us on standby, ready to read those questions once we've completed the outlook section of the presentation. Right. We then move on to the outlook. The group strategy remains unchanged, ladies and gentlemen. I mentioned the fact that we've once again proven that the business model is a resilient one. I think it's also worthwhile mentioning that a recession and tough trading conditions is not something that the Lewis management team is not familiar with. If I look at my management team, most of the people that I've got by my side, we've also steered the ship through the previous recession and global downturn in 2008 and 2009. High unemployment levels is also something that is not unknown to the Lewis Group. I think with the experience that we've got onboard, we will once again be in a position to achieve our goals and to continue to gain market share during very, very challenging times. I think there's no secret that the next 12 -- or it is no secret that the next 12 to 24 months is going to be really challenging. In the coming months, government's assistance measures will come to an end. Unemployment will most probably continue to rise, and we will then also be trading in an environment or in an economy with low or 0 wage inflation. It will be with us for quite some time. Once again, we believe that we've got the merchandise offering, and we believe that we've got the expertise to go out and continue to gain market share during a period that the size of the market will not expand. We will continue to invest for the longer term. We believe that it's important to look through the cycle and will, therefore, increase our store base -- or I should say we will open on a gross basis 20 new stores, and that, that will happen across all trading brands. We will also continue to invest in e-commerce, a couple of interesting tests that it is coming. The INspire that we've now collapsed into Beares will be on the forefront in terms of offering a revolving credit product. And we believe that, that will actually put us in a position to bring more new customers into the fold of the Lewis Group. Ladies and gentlemen, it's not going to be easy. We all know that there's challenging times that lies ahead of us, but we believe that we've got the management team, the expertise and the balance sheet to actually see us through these challenging times. With that, I would like to take the opportunity to thank you for joining us virtually. I must say it is quite a new experience. Somebody asked me this morning, "So in terms of number of presentations, where are you now since you became the CEO of Lewis?" I'm north of 20, but I must say I'm really looking forward to a time where we can once again shake hands and look each other in the eye when we discuss matters of importance. Thank you for your attendance, and we will now be dealing with your questions.

Right. Johan, the first question is from Charles Boles from Titanium Capital. Why did the online INspire business not work as a stand-alone operation?

Well, Charles, thank you. That's a good question. And I would like to start off by saying that it's not that INspire did not work as a stand-alone operation. We did manage to increase sales by 65%. But we are always looking at ways to actually streamline the business, Charles. And for us, the logical next step here was basically to go and add bricks-and-mortar to our overall offering. If we just look at the synergies that basically exist between INspire and then Beares and what we can build on, on the Beares side, it makes perfect sense for us to now have one management structure that can basically look after the Beares outlets in conjunction with INspire. It also puts us in a position from a collection perspective, Charles, to basically utilize the infrastructure that already exists in Beares to make sure that all customers stay on track and -- from a collection perspective. Furthermore, also important to add that by incorporating INspire into Beares, we can now also collapse the DC operation that is quite costly to run, and we can basically empower the stores to go and make direct contact with customers in terms of affecting the delivery and making sure that the customer is, in fact, happy with the quality of the goods when they, in fact, receive the goods. So it's a logical next step for us, and we believe that there's a lot of things that we will learn through this initiative, and that some of these learnings in time can also be applied to our other 2 traditional brands being Lewis and Beares.

And now the next question here is from Anathi Madubela from Fin24 and very closely related to the first question. "If the company upped its presence online, why provide a brick-and-mortar for your omnichannel offering instead of just focusing on pulling online sales?"

If we look at the target market that we are addressing, customers basically told us that it will really be beneficial for them to go and look and feel at the quality. We must remember that INspire was a start-up brand. We took a decision at that time not to link it to any or one of our own brands. And it was important for people to actually understand what the quality of goods and the offering is. And therefore, we've now taken the next step to see. If you want to buy online, that's perfectly fine. We'll get your delivery to you in good time. But if you want to see the goods, that option is also now available.

And Piet Viljoen from RCM Counterpoint asks that, "Given the strength of the balance sheet and the resilient business model, why are you not buying back shares much more increasingly?"

Yes, Piet, it's a liquidity issue. I mean, at this point in time, if we look at the actual number of shares that is available to buy on the market, it has been holding us back to a large extent. And we would most certainly like to move quicker. The share is quite tightly held. If you look at our latest shareholder registry, you'll see that our top 18 holders of the Lewis shares basically hold 81% of all shares in issue. So the appetite is there. It's just that the actual volume that's available in the market, that's holding us back.

Chris Gilmour from the Investment Analyst Society says the furniture industry master plan should be released by November. One aspect of this is expected to be greater local furniture manufacture. What proportion of locally produced furniture does Lewis currently source? And what proportion could this go to, realistically speaking?

Yes. For our merchandise department and more especially so our merchandise director, we are intimately involved in terms of working together with the dti. As a matter of fact, over the last couple of years, several factory visits, visits to stores and even visits to them with some of our customers have happened. Obviously, for us as Lewis, we would like to procure as much of our merchandise range locally as possible. We believe that through this initiative, the actual competitiveness of the manufacturing industry in South Africa will improve to put us in a position where we can actually buy more. I must also add that we've been a keen supporter of developing local factories. I've previously touched on the point that we've also assessed that our BEE partners during the lockdown period. So we've heavily invested in factories, not only by supplying loans, but also by actually making a lot of members in our finance department available to also upskill some of these manufacturers in the areas of financial management. Ideal situation for us would be to buy as much of the furniture lines that we sell as possible out of local factories. I gave the number on a look-through basis for last year. We imported, across all categories, 29% of what we sold on a direct basis.

And from Siphelele Mdudu from Excelsia Capital. "Hi, Johan, great set of results from you and your team, well done. How are you achieving these good growths in June, July and August? How much of these sales are being driven by credit? Have you changed your credit criteria?"

Yes, thank you very much for the compliment. Very interesting dynamic that's playing out at this point in time, cash sales are actually driving our sales growth to a very large extent, although we have seen an increase in credit. The uptick in credit sales have been small compared to what we achieved in the area of cash. Just to -- and obviously, we'll unpack that when we get to the half year mark. For now, just to say that during the month of July, the credit cash split for the group settled at 50/50. I think that, that gives a very clear indication of where we are at.

And then a continuation of that question from Siphelele. Also, cash seems to be building up. Are there any opportunities to acquire something interesting?

We're in a nice position now where cash is, in fact, building up, and we believe that it's good to keep your powder dry. And should something cross our path that basically fits the longer-term strategy of the group, we will most certainly consider it.

Jan Meintjes from Denker Capital asks, "Can you give the indication of other income growth for the months of June to July or August?"

Yes. The other income growth for the first 4 months settled just below 5%. So it's still a strong performance, but we must realize that the finance charges and initiation fees will come under pressure during the second half of this financial year because of lost sales. And then more importantly, we all know that we have seen a significant reduction in interest rates. Obviously, that reduction only applies to new deals, but it will start washing its way through the book as well.

Then a question from [ Telia Ginsburg ] from [indiscernible] Wealth. "How are customers responding to the new payment channels? Do you see customers still paying off their debt in-store in the future? If yes, will your sales decrease?"

Yes, that's a very good question. So if we look at the collection rates in April, we only utilized other payment channels, and we released that percentage on SENS a couple of weeks ago. The collection rates for April settled at around about 30%. As soon as customers had the opportunity to come back in our stores to come and pay things immediately, it immediately started to improve. Other payment channels are still available as we speak today, and my comment would be that the actual utilization of those channels is low. People still enjoy the experience of coming into a furniture store. We spoke about this many times before. It's about the personal relationship that they enjoy with a local salesperson, and it's also about just walking through the store and see what is new in terms of ranging. And we actually don't see that changing anytime soon.

Another question from Rudi van Niekerk from Desert Lion Capital. "Are you under pressure to do a transaction to improve your BEE credentials?"

No, we are not under pressure.

Okay. And there's question fairly similar to one we've had, [ Trazzan Maria ] from GTM. "UFO was an excellent buy. You have proved that you can improve that business as you have a solid track record in growing your business. Do you have any acquisition targets in the next 12 months?"

Yes. Thank you for the recognition. I think we've made 2 good acquisitions over the last 5 years. First and foremost, the Beares acquisition has been a really good one for us. It has immediately added more cash business to the group, and it has also played quite a significant role in terms of growing furniture as a proportion of the total mix. Then on to UFO. It's been a good acquisition. There's still plenty of runway in terms of finding more stores and growing that brand. It's also a brand that we will be taking into the BLNE countries in the medium to longer term. There might even be some other countries where a cash-based upmarket furniture model can work well. A long-winded answer to say that, yes, we will most definitely not shy away from any acquisition that fits the group's longer-term strategy.

No further questions at this stage then.

Then I would like to thank you all for your attendance. And if there's any follow-up questions, please feel free to e-mail those to Jacques, myself or to Graeme. And normally, we offer calls to shareholders. So I'm sure that invitation has been extended to all shareholders. But if there's any investors that are not currently shareholders that would like to book time with management, please feel free to do so. You can do so by contacting Tier 1, and Graeme will then be glad to put you in touch with us. So thank you very much for your attendance and stay safe.