Retailer shuns weak market
HOME shopping retailer HomeChoice International has continued with its impressive momentum when it reported a 15.8 percent growth in revenue to R1.2 billion for the six months to June, despite the weak consumer environment impacting on its lower income earners.
In the annual results presentation in March, the group said its revenue was up by 14 percent to R2.2bn for the year to December. The halfyearly results are in line with the annual results as far as revenue is concerned.
HomeChoice caters for a LSM (living standard measure) 4 to 8 mass-market customer base, which is mostly affected by the declining local economy. Malta-based HomeChoice International is the holding company of HomeChoice and FinChoice, which sell homeware merchandise, personal technology and loan products to the rapidly expanding middle income mass market in southern Africa.
Chief executive of South African operations Shirley Maltz said: “Customers continue to respond well to our product and marketing offers and the group customer base has increased by 5.5 percent over a six-month period to 714 000 customers. Digital remains the fastest-growing sales channel – strong customer engagement through our digital platforms has resulted in sales via digital channels increasing 17.8 percent representing 11.6 percent of sales.”
HomeChoice’s earnings before interest, tax, depreciation and amortisation (Ebitda) rose 15.5 percent to R310 million, with operating profit increasing by 9.8 percent to R280m.
Maltz said retail sales increased by 16.2 percent reflecting the benefits of product innovation and range development, particularly in the core bedding ranges which had seen strong volume growth.
“The gross profit margin declined by 20 basis points from 48.1 percent to 47.9 percent with rand volatility well-managed through selective price increases, enhanced operating efficiencies across the supply chain and continuing to reconfigure product offers to ensure products remain affordable,” she said. Debtor costs The group said debtor costs increased by 18.1 percent to R218m, driven by new retail customer acquisition during the past six months and challenges in late-stage collections impacted by the high volume of debt activities in the market.
It said other trading expenses were well-managed, however, they exceeded revenue growth due to depreciation and amortisation costs increasing from R14m to R28m during the period.
The group remains highly cash-generative and has increased cash generated from operations by 18.3 percent to R145m. Cash conversion (cash generated from operations as a percentage of Ebitda) improved from 45.7 percent to 46.8 percent.
Maltz said the unsecured credit environment remained constrained and the National Credit Regulator’s prescribed affordability assessment regulations introduced in 2015 continued to negatively impact on access to credit.
Looking ahead, Maltz said customers were expected to remain under pressure and tight credit policies would be maintained. Shares closed unchanged at R36 yesterday.