14 March 2017

Cape Town – Home shopping retailer, HomeChoice International, today reported revenue growth of 19.3% to R2.7 billion for the year to December 2016, driven by strong retail sales and improved financial services loan disbursements in the second half.

Retail sales growth of 25.1% to R1.5 billion was mainly attributable to the introduction of a revolving credit facility product, the 40% growth in digital and online sales, and positive customer response to product innovation across the bedding range. Branded home appliances and electronics were introduced into the merchandise range at highly competitive pricing on the new revolving credit facility.

Financial services revenue rose 21.6% to R582 million with an improved second half performance as customers became more familiar with the requirements of the affordability assessment regulations of the National Credit Regulator (NCR). Loan disbursements increased by 10.4% to R1.2 billion.

HomeChoice International is the holding company of HomeChoice, southern Africa’s largest home shopping retailer, which sells homewares, apparel, personal technology, loans and insurance products to the rapidly expanding mass middle income market.

CEO of the South African operations, Shirley Maltz, said the group had delivered good growth across its omni-channel retail and digital financial services businesses in an environment which has been challenging for customers and for the company alike.

“Our middle-income customers are under severe pressure from high food inflation and transport costs, the weak job market and constrained access to credit. At the same time, the group contended with headwinds from the affordability assessment regulations which further limited our customer’s access to credit and have been complex and costly for the group to implement.”

The new retail credit facility product, which replaced the traditional instalment credit offer, attracts a lower interest rate and streamlines customer access to credit. Maltz said the maximum interest rate caps introduced by the NCR from May 2016 has brought some relief to customers, but has increased pressure on credit providers to mitigate the negative impact on the bottom line.

“The growth in our insurance revenue has partially offset the loss of finance income. Credit life insurance is now offered on all loan contracts while customers have responded well to the new funeral cover product introduced in the second half of the year,” she said.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 11.0% to R701 million as finance charges earned increased by only 3.1% due to the lower interest rates charged and the increase in compliance costs for the affordability assessment regulations. Heading earnings grew by 7.5% to R425 million and the directors increased the dividend by 3.6% to 87 cents per share.

Maltz said that digital is the group’s fastest growing channel and now accounts for 12% of retail sales. The financial services business is primarily a digital business with 64% of all transactions concluded on mobile phones. Digital credit extended by both businesses now represents 28% or R846 million of total group credit extended.

The group’s customer base increased by 10% in the past year to 744 000 which includes 57 000 customers in neighbouring African countries. Customer growth in financial services was slower than retail owing to the impact of the affordability regulations. Sales outside South Africa represent 10% of business and the foreign customer base has grown by 14% over the past year.

On the outlook for the year ahead, Maltz said the trading environment is expected to remain challenging and the unsecured lending markets constrained.

“In this environment, our current credit lending criteria will be maintained and we will continue to focus on improving cash collections. We also plan to grow other revenue streams such as our insurance business to mitigate the impact of reduced interest rates.”

Maltz said customer response to the innovative merchandise ranges and the new retail credit facility augurs well for the year ahead. “We are focused on expanding our digital capabilities and driving customer engagement online to create a solid platform to achieve our ambitions of being a digital pan-African retailer and financial services provider,” concluded Maltz.


Issued by HomeChoice International

For further information kindly contact

Shirley Maltz, Chief Executive Officer (South Africa), 021 680 1057