Cape Town – HomeChoice Holdings, the home shopping retailer, grew revenue by 22% to R762 million in the six months to June 2013. Demand for HomeChoice retail products and FinChoice loans remained strong despite significant credit risk tightening implemented during this period. While the impact of the depreciation of the Rand was not passed on to customers in higher prices, the group managed to maintain the gross profit margin within targeted levels at 49.5%. The continued deterioration in the consumer credit market has, however, resulted in higher debtor costs and group debtor costs as a percentage of revenue have increased to 19.1% from 14.6%. Despite these pressures, tight cost management and the focus on improving operating efficiencies resulted in an operating margin of 26.4% (2012: 29.0%) and group operating profit increased by 11% to R202 million. Headline earnings for the period grew by 10% to R142 million and an interim dividend of 44 cents per share was declared. The group’s strong focus on cash management and collections from the debtor and loan books has resulted in cash generated from operations increasing by 24% to R110 million. Cash was used to fund the development of the new ERP system and the new distribution centre. Chief executive officer, Shirley Maltz, said the group’s customer base has not been immune to the worsening credit environment. “We responded decisively to the downturn in the credit market by adopting a strategically defensive position to limit the impact on profitability. Credit policies have been tightened, loan terms and loan sizes in FinChoice have been reduced and we have increased the focus on collections and costs.” Retail revenue in HomeChoice increased by 18%. Maltz said product demand from the growing middle-income market remained resilient and retail sales grew by 16%, driven by good growth in the bedding range. Growth in the electronic marketing channels such as Internet and mobi continues to outpace that of the traditional sales channels. “Despite consumers being under pressure, demand for our merchandise remains strong. HomeChoice will continue to offer affordable own-brand products to attract new credit customers.” FinChoice grew revenue by 38% to R158 million as loan disbursements increased by 23%. The financial services business increased its contribution to the group’s operating profit to 38% from 33% in the prior year. Maltz said FinChoice will maintain its focus on shorter-term consumer loans to drive revenue growth. The tightening of credit policy has curtailed loan disbursements and will result in a slowing of the annual revenue growth rate. On the outlook for the second half of the year, Maltz said the group’s focus will be on cash generation, cost containment and managing credit risk. The group is closely monitoring credit performance in this difficult credit environment. “We are satisfied that the provisioning levels across all businesses are appropriate,” she said.
For further information kindly contact Graeme Lillie, Tier 1 Investor Relations Tel: 021 702 3102 / 082 468 1507 Kindly note that the HomeChoice Holdings interim report for the six months ended 30 June 2013 is available on the website here