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HOMECHOICE REVENUE UP 16% IN WEAK CONSUMER ECONOMY

24 August 2015

Qormi, Malta – Listed home shopping retailer, HomeChoice International, today reported solid revenue growth of 15.6% to R995 million in the six months to June 2015 despite the weak economic environment impacting on its middle-income mass market customer base. EBITDA rose 12% to R268 million.

The group increased cash generated from operations by 26.6% to R123 million through a strong focus on cash collections and more efficient management of working capital.

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. The company listed on the JSE in December 2014.

Shirley Maltz, CEO of the South African operations, said the group continued to experience pleasing growth despite the pressure on consumers from rising living costs, a weak job market and reduced access to credit.

Retail sales increased by a competitive 10.6% with continued product innovation and new product categories such as footwear driving demand. The customer base grew by 5% to 617 000, with 88 000 new customers added in the past six months reflecting the compelling merchandise range and marketing offers.

“Our fastest growing channels are our digital channels (web and mobi), where sales increased by 26% to 11.0% of retail sales. We continue to drive growth in these channels through investment in teams and platforms.”

She said expansion into the rest of Africa continues to present a major growth opportunity. “HomeChoice currently trades in five countries outside South Africa, contributing 10% of retail sales.”

“Our omni-channel home shopping retail model and digital financial services business provide a strong platform for growth in Africa.”

The impact of Rand weakness on the gross margin was limited by selected price increases and efficiencies across the supply chain, with the retail gross margin declining by only 100 basis points to 49.1%. Over 90% of HomeChoice’s merchandise is imported and priced in US dollars.

FinChoice maintained its strategic focus on short-term, low-value personal loans to HomeChoice customers. Loan disbursements increased by 22% to R542 million, with 73% of loans extended to existing customers. The customer base increased by 9.3% to 126 000 in the six-month period.

As a digital financial services provider, FinChoice has focused strongly on developing its mobi platform with encouraging engagement levels on this growing digital channel. Over 70% of repeat loan transactions are originated through the KwikServe mobile platform.

Maltz said credit conditions remain challenging and group debtor costs grew by 19.5%, owing mainly to the increased retail debt write-offs following the SA Post Office strike in 2014. “The strike negatively impacted customer payments and collections, and the expected increase in bad debts materialised during the period.”

Debtor costs in FinChoice were well managed and reduced as a percentage of revenue from 34.2% in 2014 to 31.7% for the six-month period.

On the outlook for the remainder of the financial year, Maltz said while consumer credit health appears to be improving, customers remain constrained and this is likely to impact on demand for retail and financial services products.

“Tight credit policies will be maintained, with cash collections and cost control remaining key focus areas,” she said.

She said HomeChoice will drive customer and revenue growth through its omni-channel retail model and digital strategy. FinChoice remains focused on technology-based customer engagement and plans to launch insurance products in the second half of the year, she said.

The group continues to invest for growth and is spending R100 million on building a new 1 000-seat call centre and retail showroom. Further investment is being made in IT to support the group’s online strategy and in developing an ERP system.

Ends

Issued by Tier 1 Investor Relations on behalf of HomeChoice International

For further information, kindly contact

Shirley Maltz, CEO (South Africa) 021 680 1057