Leading direct marketer HomeChoice Holdings has delivered another strong performance for the six months to 30 June 2011, with continued good customer demand for the group’s retail and loan products contributing to a 34.2% increase in headline earnings per share to 102.1 cents.
Group revenue lifted by 28.1% to R499 million, with operating profit up 75.1% to R152 million, resulting in a group operating margin of 30.4%. Eliminating the effect of the sale of a subsidiary during 2010, group operating profit increased by 42.0%.
The HomeChoice retail business increased sales by 24.0% to R265 million, maintaining strong customer demand through continued focus on the merchandise offering. Retail CEO, Shirley Maltz, said: “Our customers have responded well to innovation in our bedding category, which is our core retail offering, and we continue to see good demand in our housewares and appliances ranges. Our internet sales continue to outstrip the growth in other channels, affirming the strategic focus in this area.”
The Retail gross profit margin of 51.7% remains above the group’s target of 50.0%, with continuing gains from a relatively strong Rand/Dollar exchange rate. Trading expenses were managed down as a percentage of revenue and debtor costs were stable, resulting in the operating profit margin increasing from 22.2% to 30.4%.
Inventories increased by 22.4% to R85 million from December 2010 to support the growth in demand and in anticipation of higher sales in the second half of the year due to the seasonal nature of the retail business. Management expect that inventory holdings will be at lower levels by year-end.
FinChoice, the financial services business, grew revenue by 60.5% to R85 million, as the business continues to show strong controlled growth in personal loans to creditworthy HomeChoice customers. Loan disbursements increased by 63.6% to R233m. Bad debt provisions remained stable at 10.9% of the debtors’ book. The increase in revenue off a relatively stable cost base resulted in operating profit growing by 67.6% to R43 million, with the operating margin increasing from 48.9% to 51.1%.
During the period a final distribution of 30 cents per share in respect of the 2010 financial year was paid to shareholders, and a distribution of 35 cents per share has been proposed for November 2011.
The balance sheet remains strong, with the group holding R43 million in cash and cash equivalents at the end of June. Cash generated by operations before working capital changes increased by 38.5% to R154 million. This funded an investment of R111 million in growing inventories and the loan books. Net asset value increased by 29.5% to 732 cents per share.
Discussing the group’s prospects, Maltz said “Customer demand for both our merchandise and financial services products remained strong during the first 6 weeks after 30 June 2011. We are planning for continued reasonable revenue growth in the second half of the year. Credit granting criteria will be maintained, and it is anticipated that credit risk levels will continue to reflect current trends.”
Chairman Rick Garratt commented: “The continued business success is due to our employees’ drive, focus and ability to implement on strategy.” Garratt said that the board is still pursuing a possible listing on the JSE next year, in order to fund further expansion of the business.
Issued on behalf of HomeChoice Holdings by Tier 1 Investor Relations
For further information, kindly contact:
Tier 1 Investor Relations
Tel 021 702 3102 / 083 703 3131