This article first appeared on GuruFocus .
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Revenue:Increased by 11.1% to ZAR10.3 billion.
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Merchandise Sales Growth:Increased by 7.3%.
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Gross Profit Margin:Settled at 43.7%.
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Operating Profit Margin:Expanded by 110 basis points to 23.8%.
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Earnings Per Share:Increased by 13%.
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Headline Earnings Per Share:Expanded by 18.3%.
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Total Dividend:Increased by 12.1%.
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Return on Equity:Strengthened from 15.4% to 16.2%.
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Store Openings:58 new stores opened on a net basis.
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Collection Rate:Declined slightly from 78.9% to 78.1%.
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Arrears:Increased from 23.4% to 25.4%.
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Debtor Costs:Increased by 9.8%, with debtor cost as a percentage of the gross book at 14.3%.
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Borrowings Ratio:Increased from 17.3% to 22.4%.
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Interest Cover Ratio:Improved from 9.4 times to 9.8 times.
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Release Date: May 28, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue increased by 11.1%, supported by merchandise sales growth of 7.3%.
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Gross profit margin settled at a healthy 43.7%, with operating profit margin expanding by 110 basis points to 23.8%.
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Earnings per share increased by 13% and headline earnings per share expanded by 18.3%.
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The company opened a record number of 58 new stores during the period, exceeding the target of 40.
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Dividend payout more than doubled over the last three years, with a current dividend yield of 11.4%.
Negative Points
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Nonperforming accounts as a percentage of the total debtors book rose from 7% to 9.1%.
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The credit application decline rate increased from 38.5% to 41.8%, indicating consumer strain.
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The interest rate environment remained constrained, with insufficient cuts to stimulate the economy.
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High levels of unemployment negatively impacted sales growth and collections.
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The specialty division posted a loss of ZAR53 million after impairments, despite some recovery in sales.
Q & A Highlights
Q: Nonperforming accounts as a percentage of the total debtors book rose from 7% to 9.1% this year. What is management's comfort zone for this NPL ratio? At what specific threshold would it trigger a red flag resulting in a tightening of your current 41.8% credit decline rate? A: Johan Enslin, CEO, stated that the current NPL range is the second lowest since the company was listed, and they are comfortable with these levels. Accounts become uneconomical to collect are written off, with an impairment provision of 87% against those customers. The credit team monitors these movements daily, and accounts are terminated if necessary.
Q: In light of the supply disruptions in oil and other critical commodities caused by the tensions in the Middle East, what specific trends are you seeing in international shipping rates? And what is your base case expectation for these costs for the remainder of the '27 financial year? A: Johan Enslin noted that while base shipping rates have remained stable, fuel surcharges have increased significantly, ranging from $250 to $1,000 per container. Despite this, the company expects to maintain its gross profit margin within the targeted range of 40% to 42% for the remainder of the year.
Q: How should we think about the insurance service expenses and claims experience? How do you expect it to impact earnings going forward? A: Johan Enslin explained that the claims ratio increased from 21% to 31%, driven largely by loss of employment claims. However, no significant change in trends has been observed in the recent trading months of April and May.
Q: Do you anticipate further increases in the size of the book in the year ahead? Given your increased gearing and increased uncertainty surrounding the consumer, is it prudent to slow down the pace of investment in the book? A: Johan Enslin acknowledged that in tougher economic times, the appetite for credit increases, leading to a natural rise in decline rates. The company expects the size of the book to grow further and has adjusted its borrowings accordingly.
Q: Are there any further questions on the webcast? A: Graeme Lillie, Investor Relations, confirmed that there were no further questions. Johan Enslin thanked participants and invited follow-up questions if needed.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
