Well, good afternoon, ladies and gentlemen, from a cold and wet Cape Town, and thank you very much for joining us at our annual results presentation for the year ended 31 March 2023. On the agenda for this afternoon, start by looking at the highlights followed by our data analysis. We'll then move on to discuss the financial results, after which we'll spend time on targets, talk a little bit about our outlook for the next 12 months, and then at the end of the presentation, as always, ample time to deal with your questions. Joining me this afternoon is Jacques Bestbier, our CFO, and Graeme Lillie from Tier One. Graham will be dealing with the questions at the end of the presentation.
In terms of looking at the review of 2023, revenue for the period increased by 3.1%, supported by merchandise sales growth of 1.4%. Gross profit margin recovered nicely in the second half of the year. We closed this period with a GP of 14.6%. Ladies and gentlemen, the highlight of this set of results is the actual performance of the debtors book, with collection rates achieving an all-time high of 80.8%. This also resulted in a record high number of satisfactory paid customers at 80.4%, and debtor cost was maintained at similar levels to last year, at 12.3%. Operating margin settled at 13.5%, and headline earnings per share benefited from our aggressive repurchase program and increased by 1%.
The board once again displayed a lot of confidence in our medium and longer-term prospects by maintaining the dividend at ZAR 4.13. It's important to give context to this set of results. In certain areas, we performed really well, and in other areas we performed below expectation. To give the results context, it's important to highlight that a lot of global challenges came into play during this period. The economic rebound that we experienced in 2020 and 2021, unfortunately, did not last that long. During this reporting period, we were confronted with slowing global growth, higher inflation right across the globe, as well as a rising interest rate environment, were some of the factors that one had to contend with.
As we all know, the Russia-Ukraine war had a very negative impact on the world economy, and South Africa was also not spared of the consequences. If we specifically look at the South African pressures, high energy prices, food and transport inflation that went through the roof during this period. Once again, in that line, the Russia-Ukraine war also played a massive part in terms of placing a lot of strain on our economy. One can just pause to think about the agricultural sector for a moment. Input costs in the agricultural sector went through the roof as a result of this war, and it finally resulted in food inflation that today is still touching on 14%.
I think we all know and we all feel, we all live the adverse impact of Eskom load shedding, load shedding that has now been with us since 2015. As a matter of fact, in this area, things seems to be getting worse and not better. Record high unemployment rates also battered our customer base during this period. All of these factors resulted in very low levels of consumer confidence, that is. Just generally, ladies and gentlemen, if you just talk to the people around you, we all know that the general feel-good factor in the economy is nowhere to be seen. We also had to deal with significant pressure on imports, resulting from a weakening rand. In our business, we had to deal with high shipping costs.
During the last presentation, we gave that some color and explained that we had to pay between $8,500 and $10,500 per container. That compared to rates of around about two and a half thousand dollars prior to COVID. We had to deal with some rail line disruptions during our peak import period, being the October-November period, following the floods in KZN, and then some further cable theft that also occurred, and that basically left that rail line out of operation for the best part of four weeks. When one consider all of these negatives, it's no surprise that consumers became under significant pressure as cash actually dried up in the economy. Cash sales for our group went backwards or declined by 16% during this period.
As expected, the demand for credit increased. We were well positioned to capitalize on this increased demand for credit, and credit sales increased by 18% for the reporting period. Like mentioned, the highlights for management of this, for this set of results is the superb performance of the debtors book. Credit sales for the period increased by 18.1%. The debtors book grew by 7.5%, and the credit application decline rate benefited from improved marketing strategies. These marketing strategies attracted lower credit risk customers, and the decline rate settled at 34.7%. Collection rates strengthened to a record high of 80.8%, and as mentioned, our satisfactory paid customers also reached an all-time high of 80.4%.
All of these good collection strategies and good execution thereof resulted in a reduction of the impairment provision to 36.2% from last year's 14.4%. Merchandise sales increased by 1.4%. Our traditional brands increased sales by 3.5%, whilst UFO faced a lot of headwinds during this reporting period, and sales for our cash-only retail brand declined by 12.5%. We look at UFO and the high impact or the significant impact that impairment charges has had on the income statement of UFO. It's worthwhile pausing to just discuss some of the reasons that actually caused the significant decline of 12.5% in sales.
We've already spoken about the fact that cash in the economy dried up, and I think that this is even more true for the customer that UFO services. UFO's customer is typically the customer that has got that is really interest rate sensitive because of the fact that a large proportion of these customers have got bonds, they've got vehicles that are financed through banks, they've got credit cards on which the interest rates obviously also increased significantly. All of these factors made it very, very difficult to grow in that sector of the market. We also import 65% of what we sell to our UFO stores. Because of the very high shipping costs that influenced UFO and our pricing strategy in that brand, we also reached a point where customers actually became resistant.
The level of price resistance that developed in that brand was evident if you look at the actual sales numbers on some of the key lines. You might ask: but why is this different in UFO than to the rest of your business? Well, first and foremost, 65% is imported, and then it also comes down to the container loadings, ladies and gentlemen. In UFO, we sell big, bulky furniture, and typically, if I can take an example, in the area of lounge, you'll only get 18-26 lounge suites in one container. Therefore, the material impact of higher shipping rates was felt in the UFO business.
We took the opportunity to go and source some of the furniture lines locally during last year. Unfortunately, most of the lines that were locally sourced did not really gain sales traction. When we get to the segmental analysis portion of the presentation, I'll talk a little bit more about the remedies and the plans that we've got in place to turn the UFO business around. Group credit sales, 18% up. Cash sales, down 16.3%. Other revenue increased by 5.8%. You will recall that other revenue increased by 3.6% during the first half of the financial year. A very, very strong recovery in the second half, posting an increase of 7.9%.
This is solely as a result of the positive impact of higher levels of credit sales that is now washing its way through the book. I can also mention that we expect other revenue. The growth in other revenue to increase closer to double-digit territory in the 2024 financial year. Stock levels were well managed. The supply chain stabilized with raw material that became more readily available. Space on ships also became easier to actually acquire and utilize this opportunity to bring our stock levels down by 15%, and we believe that the current levels are now closer to what we see as being sustainable levels. Also, some good news: we've negotiated shipping rates for the first 4 months of 2024 at very favorable rates.
As a matter of fact, a 70% reduction in terms of what we paid during last year. I can also mention that we are now very close to getting back to pre-COVID levels in terms of shipping. Expenses were well managed. Increase in expenses were contained at 6.7%, which is below the levels of inflation we saw during last year. The balance sheet remains robust, with very low levels of borrowings, and we've also successfully continued with our share repurchase program, repurchasing 5.5 million shares during the last 12 months. Actually now, reaching a point where we've returned over ZAR 1 billion to shareholders since we listed the company. Returned ZAR 1 billion through this avenue. We can move on to talk about store expansion.
Ladies and gentlemen, during an economic downturn, quality retail space becomes more readily available, and normally becomes more readily available at more favorable pricing. We see economic downturns as opportunities to actually accelerate our store expansion. We've got a recipe for our traditional brands that works really well. This encourages us to actually extend our footprint and to utilize economic downturns to further increase market share. During this period, we've opened the highest number of new stores since 2016. A net 21 stores was opened. Five of these were opened outside of South Africa. We've also achieved a milestone of now reaching 250 Lewis stores in the smaller format.
That's 51% of our total Lewis store base, we've continued to invest for the future by keeping our stores current and by refurbishing 150 stores. For your benefit, seven Lewis outlets were opened, eight PEP stores and Electric, and eight PEP stores during this period. You will note that we've also closed two underperforming UFO stores, I can also mention that until we've stabilized the UFO business, until we've restored the business to a position of profitability, no further expansion will take place under the UFO brands. It's also time to start talking a little bit more about our social media strategy. We've made solid inroads since we've embarked on our social media strategy. Now, for the traditional brands, we've launched the strategy in 2020.
See that at the end of that financial year, we already enjoyed 600,000 followers on Facebook. Since, we've expanded that following and increased the following by a very encouraging 192%. I think what's really encouraging is that most of our traditional brands are now, in fact, enjoying the most followers on Facebook, the most if you compare them to other competitors in that sector. You'll also see from our progress that our main focus is on Facebook. We believe that a large proportion of our traditional target market actually enjoy spending time on Facebook. This is an avenue that we will continue to mine and explore as we move forward.
In the case of UFO, in March 2021, we already had quite a saturated follower base for that brand, and we still managed to successfully increase that follower base by 11%. Ladies and gentlemen, this strategy of ours has really been successful. I'm glad to share with you that 5% of the group's merchandise sales were in fact generated through these channels over this reporting period. I already alluded to the fact that we bought back 5.5 million shares in the reporting period, just to look at the whole program and the success that we have achieved. Since 2018, just short of 32 million shares were repurchased. We are very pleased with the results that we've achieved in terms of our active capital management strategy.
On average, over the last five years, we've returned 17.5% to shareholders through share buybacks and through dividend payments. We just look at the achievement for this reporting period, an annual return of 22.1% have been achieved through these channels. It's also important to highlight that we've actually returned 113.1% on average over five years to shareholders, and that's 113% of the attributable profit that the group generated. Over the last two years, 127% was returned to shareholders. Ladies and gentlemen, it's also important to mention that it is management's intention to at least return 100% of the attributable line to shareholders in the 2024 year.
Now move on to look at our dividend per share payment history, also our dividend yield. If we go back to 2019, you will note that we actually maintained the dividend yield during this period, or a range in term of dividends paid over the last five years that ranged between 7.5% and 10.7%. The dividend yield for this reporting period is something that we are very proud of. One go and compare this dividend yield to a lot of others in the market, I think it is a commendable yield at 10.1%. We can then move on to the debtor analysis. Ladies and gentlemen, a very, very proud achievement. Like I said, a highlight of this set of results.
Prior to COVID, we enjoyed installment collection rates of 76.3%. That collection rate improved to what we report today, an all-time high of 80.8%. This strong collection rate resulted in a very favorable debtors book of quality. Collections during this period increased by 7.3%, and our contractual arrears reduced to an all-time low of 27.7%, well down on last year's 33.1%. Debtor costs increased by 7%, and our debtor costs, measured as a percentage of our gross book, in line with last year's performance, at the lower end of our target range at 12.3%. Move on to our payment buckets. Satisfactorily paid at 80.4% is really encouraging.
It's also worthwhile noting that more than 43% of our customers are actually 100% or fully up to date at this point in time. 43% of customers with zero arrears. It's also worthwhile highlighting that our customers in the bottom non-performing bucket reduced from 9% last year to 7%. The general improvement in the book resulted in a reduction in the impairment provision line of ZAR 87 million during the period. Where impairment provisions were last year sitting at coverage of 40.4%, is now reduced to 36.2%. You might also recall that management, on several occasions, mentioned that we believe that we can get the book to a healthy position. That will then basically speak to impairment provisions of around about 36%.
It's fair to say that we've now reached that point, ladies and gentlemen, like I said, this improvement resulted in a release of ZAR 87 million. It's also important to just talk about the future. Just pause for a moment. Let's say the quality of this debtors book can be maintained over the next 12 months. Goes without saying that the impairment coverage will then also remain at 36% of the book. One must bear in mind that should the debtors book increase at similar levels to what it increased by during this year, so let's say, for argument's sake, the book grows by 7% during this period, the actual rounds of impairment provision will then follow, and it will also increase by 7%.
Ladies and gentlemen, maybe to put that differently, if we experience a debtor book growth of 7%, which will then be ZAR 430 million during this period, an additional income statement charge of ZAR 150 million will be processed. Although the impairment provision percentage will still reflect exactly as it does today, 36%. I think before we move on, just important to note that the actual improvement in the arrear bucket was also a significant one, with a reduction of ZAR 186 million during this period. Satisfactorily paid accounts at 80.4%. If we can just go back to the previous slide, just to mention that we now enjoy the benefit of 22,000 additional customers in that top bucket that we can reserve for future sales.
Once again, the changes that we've made to the collection strategy is bearing fruit. If we look at the pre-COVID position, satisfactorily paid of 71%. Nice increase after we came out of the COVID period to 74.4%. Over the last two years, another material shift in terms of the performance of the book at 80.4% satisfactorily paid. Move on to the financial results. The income statement, we've already spoken about the increase in the revenue line of 3.1%, merchandise sales of 1.4%. Gross profit margin slightly up on last year's performance. The operating profit before impairments and capital being 8.3% down. We need to pause to talk about the impairments and the big charge that we have taken.
A big charge of ZAR 102 million during this period. Most of this charge, ladies and gentlemen, as a matter of fact, all of this is as a result of impairment charges that have been taken in the UFO business. Because of the significant underperformance in that business, we took a goodwill impairment of ZAR 91 million for the year, and we also had to take an impairment as a result of right-of-use assets. That impairment came in at ZAR 37 million for the period. The difference that you then see, the balancing difference, is a release that actually occurred in the right-of-use asset line for the traditional businesses. In the case of UFO, significant impairment charges that have been taken as a result of underperformance.
Like I said, when we get to the segmental analysis, we'll talk about the actions that we have taken and that we will be taking to restore UFO and that business to a position of profitability. It leaves us with operating profit. It's down 10%. Like I said, headline earnings per share benefited from an aggressive share buyback program, placing us in a position to still bank a 1 percentage point growth for this period. Segmental analysis. Traditional business on the operating profit line showing a 3% growth, unfortunately, in the case of UFO, a ZAR 128 million impairment charge that basically leaves us with a ZAR 124 million loss, operating loss in that business. Ladies and gentlemen, what have we done to remedy the situation in UFO?
First and foremost, we've taken steps to strengthen the management team. That happened during October and November of last year. As you can imagine, that's a difficult time of the year for a new senior management manager to actually get his hands around the business. I'm confident that he's now had the opportunity to actually get his hands around that business, and I do believe that the value unlock will now start to happen from a management perspective. We've also taken the opportunity to source new ranges. These ranges will be ready for introduction into the UFO business in July, August, and September of this year. Like I mentioned earlier in the presentation, the lower shipping costs will benefit UFO.
Even if the rand remains as weak as ZAR 19.50 to the US dollar, there is still some benefit in selling price release that will actually flow through into this business. We are also in the process of revamping the social media and online strategy in this business, and the first steps in this direction will actually be launched and introduced into the market within the next three to four weeks. A lot of additional cost-saving initiatives have been plugged into this business, and we're already seeing the benefit of some of those. Like I mentioned earlier, management remains confident that it will be possible to actually turn this business around and at least restore it to a position of break-even in the next financial year.
Maybe just to highlight the fact that our operating margin in the traditional business is still a very solid operating margin at 18.4%, and the total number of stores for this period, for the group, settled and closed at 840 outlets. Expenses, well controlled, an increase of 6.7%. You'll see that employment costs reduced. This is mainly as a result of the fact that performance were not up to what the group actually budgeted for, and therefore, less incentives and bonuses were paid out during this period. We had to spend more on marketing to make sure that we keep customers coming in through the front door. Transport and travel, we all understand fuel inflation. That settled, so that is not a surprise.
In the operating cost line, we had to spend more as we returned to face-to-face training after COVID, and we also had to pay more in terms of debit order collection costs, as the number of debit orders increased significantly during this period. On a look-through basis, satisfied with the 6.7% increase. The balance sheet, we've touched on inventory, 15% down. I already mentioned the reasons, and I also made the point that these are the sort of levels that stock holding levels that you can expect to see as we move forwards. I also need to touch on the fact that we now have a net borrowings of ZAR 185 million, where the net position last year was a cash positive position of ZAR 227 million.
Just to mention that the reason for this lies in the fact that we invested heavily in the growth of the debtors book during this period. We believe that that's the best possible investment to make. Just to mention that the yield in the book currently stands at 42%. Key ratios, we've touched on headline earnings per share, that is slightly up. Unfortunately, the improving trend that we achieved in terms of growing our returns over the two preceding years were not maintained during this reporting period. I'll focus on what one can expect to see in the short and medium term when we get to the next slide.
We'll talk about gearing and our targets for the future when we get to the outlook section. The total dividend, as I stated once again, makes it very clear that the board and management believes that the group are enjoying good, medium to longer term prospects. Pre-COVID, we had a ROE of 6.4%, reduced during the COVID period to 3.8%. We saw a very nice and strong recovery to 9% in 2021. Went into double digit territory for the first time in 2022. Like I mentioned, unfortunately, during this last year, we could not maintain that momentum. We've moved backwards. I think what's more important today is to talk about what one can expect in the short and medium term.
First and foremost, 2024 is going to be a challenging year for retailers, and we don't believe that it's going to be different for the Lewis Group. I've already touched on the point that there might be some pressure coming through in the debtor impairment line, not as a result of a deterioration in the book, but solely as a result of book growth. If one actually put all those inputs in your model, you'll see that there is a possibility that the group can actually move sideways in 2024, and there is a possibility that return on equity will not expand during the next financial year. More importantly, I at least believe, more importantly, for the medium and longer term shareholder, is how management actually views the longer term.
Let's start with the medium term for now. We shared return on equity targets with the market a year ago. That point, we basically stretched the point that we believe that the medium term is a five-year horizon. We shared with the market that our ROE target, our target is to get our ROEs up to 15% in the medium term. Happy to share with you that that focus has not changed. 15% target remains on the table, remains a medium-term target, and more importantly, as things stand today, the management believe that that target still very much in play and that it is in fact an achievable goal. Right, we've spoken about the headline earnings per share, just to show that we've actually expanded EPS by 128% from pre-COVID levels.
We can then move on to our net asset value per share slide. Next slide compares our net asset value per share to the share price as at the end of the financial year. Ladies and gentlemen, when you go into our stores on any given day, that is, you'll find the manager's special displayed prominently the front window. Normally, the mere fact that we call it a manager's special, we believe adds a lot of credibility. Today, when I prepared for this presentation, I looked at this slide again, and I thought about what I told you when we last spoke six months ago, and we spoke about Black Friday, so forth. Unfortunately, that message did not fall on fertile ground by the look of things.
Instead of having a manager special, I thought that maybe during this presentation, we should now have something that we call a CEO special, in the hope that it will add credibility. When we actually go about to decide which one of these items we want to select to actually generate or to make that manager special, we go and look at the features and benefits of that specific product. That is what I want to touch on today. Just some of the features and benefits of the offer that we've got on offer today here. First and foremost, before we get into the features and benefits, a good manager special will always have two components attached to it. The one is the was, and the other is the now price.
The outcome of that calculation is obvious, the level of discount that you are prepared to extend. Currently, our share is trading at a discount of 49% to NAV. It's a significant discount if one considers the features and benefits. This is a share that offers a current dividend yield of 10.1%. This is a company, a share in a company that never suspended a dividend since we listed. That's now a long track record. It's almost 19 years ago that we listed this group. We never suspended a dividend. It's also a business that returned 127% of attributable profit to shareholders over the last two reporting cycles. It's a business which management made the statement that the intention is to once again, during 2024, return at least 100% of the attributable line to shareholders.
It's a business that has got a quality debtors book. As a matter of fact, a debtors book that is more than capable to generate sufficient cash to sustain the share buyback program and to sustain the dividend payout ratios. It's also a debtors book that improved significantly over the last five years. It's a business that continues to invest in the future. Not only did we achieve a high point in terms of the stores that we opened, we've got plans to even accelerate that expansion program. Most importantly, this is a business that really believes in its future. It believes that the share is trading at a significant discount.
It has been trading at a significant discount for quite some time. Because of that, it's a business that already bought back and canceled 42% of shares in issue since we've listed. That's the offer on the table. It's available at a discount of 49%. We can then move on to targets. Gross profit margin, related to the fact that we saw a strong second half performance. Our gross profit margin also benefited from the fact that we reduced our stock holdings significantly during half two. I can mention that the half two performance in the GP line speaks to an achievement of 41.8%, bringing us in above the lower end of our target range. Target for 2024, similar to the target that we had on the table.
We once again believe that we can achieve or run this business at GPs of between 40% and 42%, and that target range actually takes rand weakness into account. Even if the rand remains as weak as ZAR 19.50 to the dollar, the lower end of that target range is still an achievable one. Operating margin at 13.5%, slightly below the lower end of the target range. We built conservatism into our target range for 2024. Like I said, there is a lot of headwinds that we need to contend with, and therefore, a target range of 12%-16%. Expenses increased by 6.7%, just slightly up from the middle end of our target range. For the year to come, a target range of 6%-10%.
Credit sales increased by 18% during the year, a strong credit sales performance. Strategically, we've been well positioned to capitalize and to bank the additional demand for credit. We believe that this increased demand for credit will continue in the short term. Therefore, a target range of 59%-63%. You can see that we do not expect a significant comeback in terms of cash sales in the, in the short term. Satisfactory paid customers, solid achievement, well ahead of the upper end of the target range. For the new year, 77%-80%. You'll also see that we believe that is the sort of range that we would want to manage the book in through the cycle. Our medium-term target, 77%-80%. A solid 12.3% debtor cost achievement.
Strongly towards the lower end of the target range. For the new year, a 12%-16% target range. Gearing. In future, we will now split gearing. We'll give you a view that is inclusive of these liabilities, and we'll then also focus on the borrowing line separately. For this year, 24.5%. We look at our target for 2024. You can see that management's very comfortable with the 24.5%, and we've set ourselves a target or a ceiling, I should say, to maintain gearing levels below 30% in the short term. In the medium term, we are prepared to allow gearing to go up to as high as 35% if the right opportunities actually present itself.
The borrowing ratios that we've given or targets that we've set for ourselves is to maintain the levels of borrowings at below 10%, and it's currently at four. Ladies and gentlemen, we can then move on to the outlook section of the presentation. The ongoing global and domestic challenges is not expected to ease in the short term. In the South African economy, we believe that the economy might actually slow, show a 0 or no growth during 2023, ladies and gentlemen. Obviously, the ongoing Eskom load shedding is not something that is going to be resolved in 2023. As a matter of fact, we believe that things are going to get worse before it starts getting better. When we do our planning as a management team, that is exactly what we bargain on.
I'm supposed to say that it will actually be great if companies can just start getting some real benefit, some value unlocked for the taxes that we pay. The company tax rate is on the high end. I don't think that it's unreasonable to only ask for basic services like electricity to be available when you need it. It will be great if some of the tax money can just be spent to actually increase the infrastructure, more specifically so on the logistics side of things. I spoke about the rail line between Durban Harbor and Joburg that were out of action during peak trading. As a matter of fact, over the last two weeks, we had to deal with the same rail line that was once again out of operation.
We once again were pushed into a corner where we had to start making use of road logistics at a massive additional expense. Yes, just to mention that it will be great if we can get better service delivery and some return for the taxes that we are paying. We're not banking on that, though. On a look-through basis, retail conditions is expected to deteriorate further. We do not believe that we've reached a rock bottom as yet, but as always, we've got a very experienced management team that has successfully traded through a lot of economic downturns in the past. We will manage the situation as best as possible, and we've got a very resilient business model that we could fall back on.
We're strategically well positioned to continue to gain market share with new ranges that will be launched in our business from June right through to September. We've got refined marketing strategies that will serve us well to continue to attract lower credit risk customers into our stores. We've got a debtors book with 22,000 additional good-paying customers that will be reserved during the next 12 months. It's clear that the appetite for credit is still growing, and we've got the appetite to extend credit to all credit-worthy customers that want to come in and buy furniture. Same-day delivery will also be utilized and built on as a competitive advantage.
Our traditional brands, we still deliver 98% of all purchases same-day. That service is available in most towns right across South Africa and in the BLNE countries. I alluded to the fact that quality retail space is becoming more readily available. It is our intention to capitalize on this and to open at least 25 new stores during the next year. Should more good quality retail space become available, we see this 25 not as an absolute goal, but or as a ceiling. We see that as the minimum number of stores that will open. We will continue to buy back, as we see tremendous value in our share price as it stand at this point in time. We will continue to unlock value by making use of the CEO special and buying back.
We still have a mandate that is open, that speaks to a further 7% of shares in issue that can be repurchased, we are in the market actively looking to pick up shares at this discount. Ladies and gentlemen, with that, thank you very much for your attendance. We will now turn to deal with your questions. Thank you, Graham.
Thanks, Johan. The first question is from Ya'eesh Patel from SBG Securities. He says, "Thank you for the presentation," and asks: "If the lowering of the debtors provision is an indication of the health of the credit consumer or management's waning intent on de-leveraging credit sales into the next 12 months?
Right. Thank you very much for the question. The actual reduction in impairment provision is solely as a result of the improvement in the debtors book. Although we know that it actually looks counterintuitive to actually see a debtors book that is performing as well as what we've seen over the last 12 months, I must just once again pause to say the changes that we've made to our actual collection strategy from 2020 onwards are now really bearing fruit. Just to give that some color, we introduced debit orders into our business and into our customer base in 2020. At that point in time, we've already developed our systems to actually cater with debit orders. That process started two years prior to that.
The strategy has been really successful, and we believe that the strategy has got some further legs. It's not only about the customer that signs the debit order, it's also about freeing up additional capacity in our stores to actually deal with other defaulting customers. The short answer to the question is, it's the improvement in the debtors book that actually resulted in a lower level of provision.
Thanks. Yeah, a further question from Ya'eesh. What percentage of inventory is manufactured locally? Is there a desire to onshore more? What are the potential hurdles from doing so?
During this reporting period, the group imported 30% of what we sell on a direct basis. I mentioned that in the case of UFO, it's very different. We imported 60% in half two and 65% during half one into UFO. Why that's important and why I'm differentiating between the two halves is to stress the point that when we actually saw that there was price resistance building in UFO, we once again went into local factories to try and see whether we can actually bring some of the UFO product offering up onshore. We launched those products into our business, and generally speaking, those products did not really gain traction. It's not what the customer is looking for.
On the traditional side of the fence, there's actually also not opportunity for us to actually go and source more product locally.
We've got four questions from Chris Reddy, from All Weather Capital. Chris asks, "If you could please give commentary on post-period sales and the debtors book performance?
Chris, yes. Unfortunately, sales during the first seven weeks of the financial year hasn't been as good as what we've hoped for. We still have the month-end period of May to come. If I look at the traditional portion of our business, we'll most probably end very, very slightly in the green, with a small sales growth coming out of the traditional brands at the end of May. In UFO, although we will be in a better position than being 12.5% down, we will most probably still be down in the vicinity of 10%-11%. Still no good traction in UFO as yet. Before I talk about collections, I must just talk about the sales base as well.
Last year, our best sales growth quarter was in fact quarter one. Our toughest trading cycle in terms of comparatives will be quarter one of this financial year. On the debtors book, we're very encouraged and pleased with our collection results for the month of April. Strong collection performance, if we look at May so far, with month end still to come, we don't expect our collection results for this month to be any different. Collections still on the front foot.
A question on the UFO turnaround: What are the risks of further impairments? Can you further reduce the footprint?
There's no intention to further reduce the footprint for now. I think one must give the business a good fighting chance. To do that, we need to get to a position where we can introduce exclusive furniture at prices that the market can absorb at this point in time. Like I said, those ranges will now trickle into our stores June, July, August, and even a little bit in September. We would like to actually give these new ranges a very good chance before we even start considering closing further stores. Is there further downside risk in terms of impairment? The answer to that question is yes. If we look at the remaining goodwill situation for UFO, it's just below ZAR 60 million at this point in time.
Obviously, if we don't turn the business around, and if there's a further deterioration, there is a further risk of further goodwill impairments in times to come. I must just mention that the UFO business is not one that's operationally bent or broken. It's a matter of getting some economic support in that sector of the market, and it's also a question of bringing products to the market where we where price resistance is not as big an issue as what we experienced over the last reporting period.
The next question from Chris: What is the estimated impact of load shedding on operating costs and turnover, assuming stores in malls without backup would have experienced lower footfall?
Chris, yes. For us, the biggest impact of load shedding is actually what load shedding has done to the economy. It's the effect that there's no economic growth, the effect that it resulted in a lot of additional job losses that we believe should not have occurred if load shedding was not in play. We've got a backup in our stores to backup power that is to sufficiently deal with load shedding up to stage four. As a matter of fact, we are now upgrading certain of these systems to actually give us a little bit more backup power. The real cost to the Lewis business is not one of disruption.
We believe that it disrupts sales patterns, but it doesn't necessarily stop the economically active customer from buying furniture. It's the impact on the economy, Chris, that that's the real impact that everybody is feeling at this point.
The final question from Chris: The ROE has slipped. Please can we get more detail on the levers to improve it?
Yes. Yeah, the ROE during this period slipped. As you can see, the big black hole in this set of results is, in fact, the performance of UFO. If you look at the operating performance that was posted by the traditional brands, that wasn't too bad. It's predominantly as a result of the UFO performance during this period. I already alluded to the fact that if we look at 2024, there will most probably not be a recovery in terms of returns in the short term. When we look at our five-year plans, and those are all plans centered around, our operational strategy and the good execution thereof.
If we look at those, a 15% ROE in the medium term, remains achievable, and the levers that will be pulled to actually get us there are all plans that are already in play. You know, there's no new and additional plans that needs to be brought into play to actually get us to the desired ROE of 15%.
Thanks, Johan. Two questions from Alexander Dace, from Umthombo Wealth. He asks: "What are the key drivers to achieve your medium-term operating margin target?
Right. We've now reached the position where the actual levels of impairment provision at 36% is stable. That has always been one of the big drivers. We've also reached the position now where the debtors book started to grow nicely at the 7.5% growth during this period. We believe that those sort of growth levels will be maintained over the next 2-3 years. If you can basically go and plug the actual benefit that we will be receiving from other revenue streams, and the actual support that will be gained through actually running the business at these higher levels of credit sales. You'll basically see that if you contain costs, if you maintain your debtor provision at 36%, you can run your debtor cost percentages at between 12% or 16%.
If you continue with an aggressive share buyback program, and if you continue to return 100% or more of the attributable line to shareholders on a continuous basis, that you can quite comfortably get to an ROE of 15%. Now, I think if you look at what we've achieved in terms of returns measured against the attributable line over the last two years, it's very clear that management has got a very, very clear intention and plan to not actually allow that equity base to grow any further. We spoke about this in the past. We're competing against an equity base that was basically built or established in a business that's very different to the business that we've got today.
We've put a lid on that base, and we believe that we will be in a position, through the strength of our collections and the ability of our debtors book to actually generate cash, we'll be in a position to continue with our capital management strategy of returning more than 100%, or at least 100% of attributable shareholders.
A further question from Alexander. He asks whether Lewis has been gaining market shares, and if so, how much more do you think can be attained?
Our main focus is on growing credit sales in this down cycle. If we look at the contribution that the other two listed furniture retailers are getting out of credit sales and the sort of growth that they've achieved, we believe that we do continue to actually actively gain market shares.
Johann, the final question on the webcast from Andrew Moses, from BIFSA. He asks: "The book is around ZAR 6 billion, and the write-offs have been around 18%. Why the need for a provision as high as 36%?
That is a excellent question, especially if you ask that question to a non-financial person like myself, to an operator. You'll get a very simple answer. That's the outcome of an accounting standard. The outcome of an accounting standard is not always directly aligned or in correlation with reality, but that is the. Those are the rules of the game. We believe that we are more than adequately providing for future bad debts at a rate of 36%. Quite frankly, I would leave it at that.
Well, no further questions on the webcast.
Ladies and gentlemen, just to say thank you very much, just to once again extend a open invitation. If there's anybody on the webcast that hasn't been offered a meeting and that would actually like to spend some time with management to actually understand anything in the results a little bit better, or to talk a little bit more about future prospects and the outlook, you're more than happy to make contact with Graham Lilley, and we'll schedule some time. Thank you very much.