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HOMECHOICE PROFIT UP 19% AS REVENUE REACHES R2 BILLION

20 March 2015

Cape Town – Recently listed home shopping retailer, HomeChoice International, increased operating profit by 19% to R542 million in the year to December 2014 as revenue from its retail and financial services businesses grew 17.8% to R2 billion.

Headline earnings increased by 14.9% to R356 million with headline earnings per share 15% higher at 352.8 cents. The total dividend increased by 46% to 161 cents per share.

Malta-based HomeChoice International is the holding company of HomeChoice and FinChoice, which sell homewares merchandise, personal electronics and loan products to the rapidly expanding mass middle income market in southern Africa. The company listed on the JSE in December 2014.

Chief executive officer, Greg Lartigue, said the group delivered a strong trading and financial performance in the continued tough consumer environment, and entrenched its position as one of South Africa’s leading home shopping retailers.

He said revenue growth was driven by the extension and innovation of the product range, higher online sales and expansion into Africa.

“Expansion into the rest of Africa presents a major growth opportunity in the medium to long term. We have created a solid platform for expansion across the continent where HomeChoice trades in five countries outside South Africa, contributing 11% of retail sales.”

“The rationale for the restructuring of the group and the formation of a new offshore holding company centres around our ambitions in Africa. We will be opening an office in Mauritius in 2015 as a base from which to drive our pan-African expansion strategy,” he said.

Retail revenue grew by 16.9% to R1.6 billion while FinChoice increased revenue by 22.2% to R386 million. Merchandise sales increased by 16.4% “despite the disruptive impact of the postal strike in the second half of 2014”. FinChoice grew loan disbursements by 24.2%. Overall, the group increased its customer base by 11% to 619 000.

Lartigue said efficient supply chain management limited the impact of the weakening Rand and the gross profit margin increased 70 basis points to 49.8%. Over 90% of merchandise is imported and US dollar denominated.

Head of the South African operations, Shirley Maltz, said the group showed a pleasing improvement in the performance of its debtors’ and loan books, with debtor costs only increasing 4.2% and reducing as a percentage of revenue from 19% to 16.8%.

“This reflects the benefit of our decision to tighten credit policy during 2012 and 2013 in response to the deterioration in the credit market. Debtor costs did benefit from a one-off change in accounting treatment for debt review customers. Excluding this change, debtor costs were still well managed to an increase of 8.2%,” she said.

On the outlook for the year ahead, Maltz said the trading environment is not expected to show any marked improvement. “Customers are likely to be under financial strain as pressures on disposable income continue and the unsecured lending market remains constrained.”

She said the current credit strategy and lending practices will be maintained in the stabilising credit environment while the devaluation of the Rand is expected to place pressure on margins and pricing in the retail business.

“We will continue to focus on our digital strategy and expand our customer base in Africa. The group has committed R110 million for the building of a new 1 000 seat call centre and retail showroom adjacent to the head office in Cape Town, and R60 million for information technology to drive operating efficiencies and the group’s online strategy” added Maltz.

Ends

Issued by Tier 1 Investor Relations on behalf of HomeChoice International

For further information, kindly contact

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