JOHANNESBURG – The Public Investment Corporation (PICTURE) and Old Mutual Investment Group seem offering Lewis shares off the back of regulative pressure on its credit life insurance company.
According to share transaction data, the PIC purchased more than R191 million worth of shares between April and June 2015, increasing its shareholding in Lewis to 15.39 %.
Last week, it lowered its shareholding to 14.76 %, sellingcosting least 600 000 or some R47 million worth of shares.
In an emailed response to Moneyweb, the PIC stated the sale belonged to the profile rebalancing process it regularly undertakes on behalf its customers, taking into factor to considerconsidering the macroeconomic outlook in addition to intrinsic valuation of the investment.
It will certainly be interestinginterest see whether it sells out even more thinking about the about turn that Old Mutual has done on its Lewis shareholding.
In August in 2014 Old Mutual Plc increased its shareholding to as much as 10.54 %, only to dump these shares 3 months later and bring its interest in the business to simply 3.49 %.
Likewise in November in 2013, Old Mutual Financial investment Group (OMIG) reduced its shareholding in Lewis to 4.94 %.
The existing OMIG holding, according to Old Mutual, is just 2.2 %. This edges as much as 2.8 % at the Plc level (consisting of OMIG).
“We consider a number of elements when offering shares, however the hazard of Lewis’s revenues coming under regulatory pressures from their insurance coverage company is constantly taken into consideration when purchasing or selling its shares,” Brian Pyle, the Lewis expert at Old Mutual Equities told Moneyweb.
Previously this month, the National Credit Regulator (NCR) referred two Lewis Group subsidiaries, Lewis Stores and King Insurance coverage Company, to the National Consumer Tribunal (NCT).
The NCR said the companies sold loss of employment cover and occupational impairment cover, as part of credit insurance coverage, to pensioners and self-employed consumers.
The Regulator has requested the Tribunal to order a refund of pensioners and self-employed consumers, order an audit to be carried out and enforce a management fine of R10 million on the business.
Lewis responded to that the recommendation associated to only 3 cases, but stated it was “committed to working together fully with the Tribunal to ensure an acceptable resolution of the case”.
Understood for being an active shareholder in the business where it is invested, the PHOTO stated it intends raising the issue of abusive lending practices with Lewis management.
Pressure on unsecured loan providers
The Lewis Group is heavily dependent on credit sales. For the year to March 2015, credit sales represented 69 % of sales. While this was below 72 % in 2014, due to greater money sales from the Beares chain, the group’s credit consumer base grew 11 000 to 690 000.
In direct contrast, Shoprite’s OKAY Furniture business reported credit sales of simply 30 % for the 6 months to December 2014, the remainder being money sales.
Insurance coverage profits contributed a not unimportant R981 million to Lewis’s R5.7 billion full-year revenue. Merchandise sales accounted for the bulk of income at some R2.6 billion, while interest charges and initiation charges on credit contracts contributed R1.3 billion.
“Supplementary services” – consisting of service fees, extended service warranty contracts, delivery charges and earnings from Lewis Family Club membership – contributed R804 million. “MostThe majority of these services are optional to customers,” stated financier relations officer, Graeme Lillie.
The NCR is anticipated to cap credit life insurance charges in the near future, having finalised draft policy together with the Financial Services Board (FSB) and sent this to the Department of Trade and Market (dti).
Dishonest loan providers have been known to charge high rates on credit life to fatten margins, failing to notify consumers of their right to substitute the loan provider’s credit insuranceinsurance coverage with a policy of their own choice.
Finbond Mutual Bank, majority-owned by JSE-listed Finbond Group, remained in June referred to the Tribunal for charging customers “excessive and unreasonable credit life insurance”, according to the NCR.
Finbond said it is positive the NCR application will certainly be dismissed, but its share rate has nonetheless fallen 22 % since.
More recently, lender Capitec’s share price came under pressure off the back of propositions by government to minimize the interest rates on unsecured loans. Capitec CEO, Gerrie Fourie said its average interest charges are not far off the caps proposed by government.
To addcontribute to credit service providers’ distress, a recent High Court ruling regarding emoluments accessory orders (EOA) will likely see the debt recuperation procedure tightened by means of a Magistrates’ Court Amendment Bill.…