HomeChoice Holdings plans to list on JSE

Strong financial results

In announcing its plans, it released its results for the year to December 2011.

• Earnings per share grew by 34.7% to 237.4 cents, driven by continued strong customer demand for both HomeChoice merchandise and FinChoice financial services
  
• Group revenue increased by 29% to exceed R1 billion for the first time and totalled R1.12 billion
  
• Retail business grew revenue by 26% to R939 million
  
• FinChoice lifted revenue by 49%, off a lower base, to R182 million
  
• Operating margin improved from 28.7% to 30.5%
  
• Operating profit increased 37% to R342 million
  
• Distributions to shareholders increased by 70% to 85 cents per share

HomeChoice Holdings chairman, Rick Garratt, said the growth was achieved in a challenging but improving retail environment, impacted by the fluctuating exchange rate and cotton price increases. "Our customer base, the mass market urban female, continues to benefit from urbanisation, income growth, rising living standards and improving aspirations," he said.

Discussing the proposed listing, Garratt said the capital raised would enable the group to fund continued expansion and maintain the strong growth in FinChoice. "In addition, capital will be used to fund longer terms to creditworthy HomeChoice retail customers and enable us to broaden the product range. A listing will also improve incentives for management and staff by making their shares readily tradable, and assist in attracting and retaining talented people."

HomeChoice has customer loyalty

HomeChoice retail CEO, Shirley Maltz, said consumers remained cautious and value driven in their spending over the past year. "In this environment we continued to leverage our merchandise strategy of offering customers innovative products that represent value, quality and exclusivity.

"We attracted 116 000 new customers and the level of customer loyalty is reflected in the repurchase rate increasing from 65.1% to 65.5%, with sales per customer growing by 15%."

"The direct marketing model remains its core strength and continues to differentiate us in the market, offering customers a shopping experience that suits their lifestyle and time constraints."

Loans from filtered database

The financial services business increased loan disbursements by 51% to R490 million, with repeat loans representing 71% of total loans disbursed. Operating margin rose from 47.1% to 51.2% because of the stable cost base, leveraging off the retail marketing engine and management of bad debt.

"The unsecured credit market continued its unprecedented high growth since the National Credit Act came into force in June 2007 and we were suitably cautious in this market context during the year," said FinChoice CEO, Sean Wibberley.

"Our strategy of sourcing new customers from the filtered database of credit-proven HomeChoice retail customers remains a key strength of our business model. We continued to manage personal loans demand to repayment terms of 24 months or less to contain long-term risk exposure and to focus on building our base of customers for future growth opportunities."

Healthy books

Group receivables increased by 38% to R750 million, with HomeChoice 29% higher at R421 million and FinChoice up 43% to R297 million.

Garratt said the group's credit books remain healthy. "Provisions against both the books decreased slightly, and cash collections were in line with expectations in HomeChoice and ahead of forecast in FinChoice."

The group's financial position remains strong, with the net asset value increasing by 25% to 830 cents per share. Cash generated from operations before working capital changes increased by 25% to R347 million. At year-end, the group held R46 million in cash and cash equivalents.

On the outlook for the year ahead, HomeChoice expects reasonable revenue growth and will focus on attracting a slightly higher proportion of new customers. Credit risk strategies will be maintained at current levels.

Revenue in FinChoice is expected to continue to grow strongly, although not at the same high levels as 2011.

Both have experienced steady growth in demand for the first 12 weeks of the new financial year.

The annual report is available at www.homechoiceholdings.co.za.