30 August 2016

Qormi, Malta – Listed home shopping retailer, HomeChoice International PLC, today reported solid revenue growth of 15.8% to R1.2 billion for the six-month period despite the weak consumer environment impacting on its LSM 4-8 mass market customer base. EBITDA rose 15.5% to R310 million.

Malta-based HomeChoice International is the holding company of HomeChoice and FinChoice, which sell homewares merchandise, personal technology and loan products to the rapidly expanding middle income mass market in southern Africa.

Shirley Maltz, CEO of the South African operations, said the group continued to experience good growth despite the pressure on consumers. Retail sales increased by 16.2% reflecting the benefits of product innovation and range development, particularly in the core bedding ranges which have seen strong volume growth. The gross profit margin declined by 20 basis points from 48.1% to 47.9% with Rand volatility well managed through selective price increases, enhanced operating efficiencies across the supply chain and continuing to reconfigure product offers to ensure products remain affordable.

“Customers continue to respond well to our product and marketing offers and the group customer base has increased by 5.5% over the six-month period to 714 000. Digital remains the fastest-growing sales channel – strong customer engagement through our digital platforms has resulted in sales via digital channels increasing 17.8% for the six-month period, representing 11.6% of sales.”

She said sales into neighbouring African markets also showed strong growth of 27.9% for the period, with further expansion into Africa remaining a strong growth opportunity over the medium term.

FinChoice maintained its strategic focus on short-term, low-value personal loans to HomeChoice customers with a good credit record with the retail business. Loan disbursements to customers increased by 7.4% to R583 million with the slowing disbursement growth a result of the lower acceptance rates from the new affordability process, in particular first-time loan customers.

As a digital financial services provider, FinChoice focusses strongly on its mobi platform development and has experienced encouraging engagement levels on this growing digital channel.

“The KwikServe® platform continues to service 80% of our existing customers via her cell phone, while our mobi platform has grown to serve one-quarter of the customer base as she adopts smartphone technology. Digital self-service accounts for 69% of FinChoice’s repeat loan transactions.”

Group debtor costs increased by 18.1% to R218 million, driven by new Retail customer acquisition during the past six months and challenges in late stage collections impacted by the high volume of debt activities in the market. Other trading expenses were well managed, however exceeded revenue growth due to depreciation and amortisation costs increasing from R14 million to R28 million. Technology platforms were brought onstream late in 2015 and the estimated useful life of software was revised at December 2015, which has impacted the amortisation on a comparable basis. Operating profit increased by 9.8% to R280 million.

The group remains highly cash generative and has increased cash generated from operations by 18.3% to R145 million. Cash conversion (cash generated from operations as a percentage of EBITDA) improved from 45.7% to 46.8% over the period.

Maltz said that the unsecured credit environment remains constrained and the National Credit Regulator’s (NCR) prescribed affordability assessment regulations introduced in September 2015 continue to negatively impact on access to credit.

“The affordability regulations have impacted both businesses through increased customer walkaways and lower credit acceptance. The regulations have required significant changes to business systems and processes across all channels, resulting in higher compliance costs. We have developed multiple channels for customers to submit their documentary proof on income, and invested in staff training and customer engagement and education to improve her experience.”

On the outlook for the remainder of the financial year, Maltz said that customers are expected to remain under pressure and tight credit policies will be maintained, with cash collections and cost control remaining key focus areas. She remains confident that the group’s experienced management team and focused strategies for growth continue to position the business to take advantage of opportunities in both the South African and pan-African markets.


Issued by Tier 1 Investor Relations on behalf of HomeChoice International

For further information kindly contact

Shirley Maltz, CEO (South Africa) 021 680 1057