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Abridged Pre-listing Statement
HOMECHOICE INTERNATIONAL P.L.C.
(Incorporated in the Republic of Malta)
(Registration number C66099)
JSE share code: HIL
ISIN: MT0000850108
("HIL" or the "Company")
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR
INTO THE UNITED STATES OF AMERICA, CANADA, JAPAN OR AUSTRALIA OR ANY OTHER
JURISDICTION WHERE IT IS UNLAWFUL TO DO SO
ABRIDGED PRE-LISTING STATEMENT
This Abridged Pre-listing Statement relates to the listing of HomeChoice International P.L.C. in the
"General Retailers: Broadline Retail" sector of the main board of the JSE with effect from the
commencement of business on Thursday, 4 December 2014. The information and defined terms used
in this Abridged Pre-listing Statement are as set out in the full Pre-listing Statement issued by HIL on
Thursday, 27 November 2014.
This Abridged Pre-listing Statement does not constitute an offer to the public for the sale of or
subscription for, or the solicitation of an offer to buy or subscribe for shares in the Company, but is
issued in compliance with the Listings Requirements for the purpose of providing information to the
public with regards to HIL.
This Abridged Pre-listing Statement highlights selected information from the Pre-listing Statement. It is
not complete and does not contain all of the information that readers should consider before investing
in HIL Shares. Investors should read the Pre-listing Statement carefully in its entirety, including the
"Risk Factors" section, the financial statements provided and the notes to those financial statements.
1. The Listing
The JSE has granted the Company a listing in respect of up to 174 279 351 HIL Shares (101 379 351
HIL Shares net of treasury shares) in the "General Retailers: Broadline Retail" sector of the main
board, under the abbreviated name "HomChoice" and share code "HIL".
2. Company overview
HIL was incorporated as an investment holding public company under the laws of Malta on 22 July
2014 specifically for the purpose of holding all of the ordinary shares in HomeChoice Holdings,
through its subsidiary, HIL SA.
HomeChoice Holdings is a leading home shopping retailer selling homeware merchandise and
financial services products to the rapidly expanding urban middle-income mass market in southern
Africa. Established in Cape Town in 1985, HomeChoice Holdings has developed into an omni-
channel home shopping retailer which offers products through mail order (catalogue), electronic
channels (Internet and mobile phone) and telemarketing (call centres). HomeChoice Holdings
currently operates in South Africa and the neighbouring countries of Botswana, Lesotho, Namibia,
Swaziland and Zambia.
HomeChoice Holdings has three operating segments:
Retail
HomeChoice is an omni-channel home shopping retailer offering an extensive range of household
textiles, homeware merchandise and personal technology through a convenient shopping experience,
together with a home delivery service. The product offering has broadened under the FoneChoice
brand to include laptop computers, tablets and mobile smartphones. Credit is the enabler of sales on
terms of six, 16, 24 and 36 months.
Financial Services
FinChoice is a niche provider of unsecured personal loan products to HomeChoice customers in
South Africa with good credit records. FinChoice leverages the HomeChoice customer database and
marketing platforms to acquire loan customers at low cost and predictable repayment behaviour. Loan
terms range from one to 36 months. Customers are able to transact on their loan accounts
conveniently through their mobile phones 24 hours a day, accessing further credit over time as
needed. FinChoice has a strategic focus on short-term and low value loans, with an average product
term of 18.9 months and average loan balance of R7 804 at June 2014.
Property
HomeChoice Holdings owns the head office building, a property adjacent to the head office which has
been acquired for future expansion and a 200 000m3 centralised warehouse and distribution facility.
3. Selected financial information
The Group’s revenue has grown at a compound annual growth rate (CAGR) of 23.1% over the past
ten years, with operating profit showing a CAGR of 18.3% over the same period. This strong organic
growth has been driven by product innovation and merchandise range extension, and growth of the
customer base through customer acquisition and retention. Further growth has been delivered by
leveraging the Company’s customer base with the launch of FinChoice and FoneChoice. This is
demonstrated by FinChoice accounting for 33% of the Group's operating profit, only seven years after
being launched.
The following table provides highlights of the Group’s results for the 6 months ended June 2014 and
2013 and the financial years ended December 2013, 2012 and 2011:
Reviewed Reviewed Audited Audited Audited
6 months 6 months year year year
ended ended ended ended ended
(R'000) Jun 2014 Jun 2013 Dec 2013 Dec 2012 Dec 2011
Profitability:
Revenue 860 632 762 179 1 661 952 1 434 359 1 121 060
Revenue growth (%) 12.9* 21.7* 15.9 27.9 28.9
Retail gross profit margin (%) 50.1 49.5 49.1 51.1 53.4
Operating profit 229 650 201 503 438 321 402 862 341 591
Operating profit margin (%) 26.7 26.4 26.4 28.1 30.5
EBITDA 239 655 207 466 450 174 412 565 352 485
EBITDA margin (%) 27.8 27.2 26.4 28.1 30.5
Headline earnings per share (cents) 157.1 140.8 306.9 282.1 234.8
HEPS growth (%) 11.6* 10.2* 8.8 20.1 22.9
Return on equity (%) 23.8** 25.4** 26.3 29.8 31.9
Solvency and liquidity:
Cash-generated from operations 96 847 109 679 278 010 153 718 143 508
Growth in cash generated from
operations (%) (11.7)* 24.1* 80.9 7.1 40.8
Net debt:equity ratio (:1) 0.2 0.1 0.1 0.1 -
NAV per share (cents) 1 367.2 1 153.2 1 275.8 1 062.0 829.9
Distributions to shareholders:
Total distribution (cents) 61 44 110 50 85
Distribution cover (times) 2.6 3.2 2.8 5.6 2.8
* growth on comparable six month
period
** Annualised
4. Key strengths
HIL believes that the following strengths contribute to the success of HomeChoice Holdings and
distinguish it from its competitors:
- home shopping offers customers a convenient experience that suits their lifestyle and time
constraints. The omni-channel contact points, including call centres, Internet and mobile phone,
allow customers to shop at any time of day or night. The home shopping model enables
HomeChoice Holdings to serve a geographically dispersed customer base without the limitations
of a physical store presence, as well as predict purchasing behaviour, response rates and
profitability of marketing campaigns;
- HomeChoice Holdings has created strong brand loyalty with its predominantly female customer
base in the urban middle-income mass market. In the past year over 80% of HomeChoice
Holdings' business was generated from existing customers;
- greater access to the Internet and mobile smartphones is expected to boost online retail sales in
South Africa in the next few years. HomeChoice Holdings is at the forefront of this trend with
growing volumes of customers using electronic sales channels;
- credit is an enabler of sales to the mass market female customer base. HomeChoice Holdings
has extensive experience in mass market credit management and the credit records of over 1.3
million customers inform credit decision-making processes. Strict and consistent credit and
affordability criteria, together with internally developed scorecards, are applied to all new credit
applications; and
- omni-channel marketing relies on specialist skills which are scarce and highly sought after in the
South African retail environment. The ongoing investment in people has enabled HomeChoice
Holdings to retain key skills and attract some of the leading talent in the industry.
5. Growth strategies
HIL’s long-term strategy is to expand into new markets to sustain growth. Sustained economic growth
and the increasing spending power of the emerging middle class in several African countries makes
the sub-Saharan region attractive for growth. Expansion into Africa and other territories will be
accelerated through the Listing, which will provide access to capital markets for potential funding for
future expansion and unlocking value for existing shareholders.
HomeChoice Holdings’ growth strategy focuses on organic growth of the existing businesses through
attractive product offerings. Attracting new customers and retaining quality customers through repeat
business is key to sustaining growth.
The retail growth strategy is focused on:
- broadening the merchandise range;
- attracting new customers;
- increasing revenue from existing customers;
- enhancing the customer experience through technology; and
- expanding warehousing capacity and the distribution network.
FinChoice is positioned to increase its share of the personal loan market by:
- attracting initial loan customers;
- increasing revenue from existing FinChoice customers; and
- enhancing the customer experience through technology.
6. Prospects
The Group’s target LSM 4 to 8 market has seen significant growth in the past 10 years, with this
segment benefitting from real income growth, increasing home ownership and rising living standards.
Merchandise ranges are continuously being expanded and new product categories are being
introduced to enhance the brand’s appeal to its middle-income mass market customer base. The
Group will continue to capitalise on the growth of the Internet and smartphone as online shopping
channels and is competitively advantaged in these markets.
Credit risk strategies will be maintained and the Group will continue to review and enhance
scorecards and vetting procedures.
The Group has a strong balance sheet, is cash generative despite being a credit-based business, and
has a track-record of paying dividends. The proven business model, positioning in a growth sector,
expertise in managing mass market credit and focused strategies for growth should ensure
sustainable returns to shareholders.
7. Directors
The directors of HIL on the Listing Date are set out below:
Name Age Position Nationality Business address
Stanley Portelli 42 Independent Non- Maltese Dar il Barbagan,Triq
executive Strejnu Zejtun, Malta
Chairman
Gregoire Lartigue 42 Chief Executive Swiss CH De La Cretaux 1,
Officer GLAND 1196, Switzerland
Shirley Maltz 43 Executive Director South African 78 Main Road, Wynberg,
Cape Town, South Africa,
7800
Paul Burnett 39 Finance Director South African 78 Main Road, Wynberg,
Cape Town, South Africa,
7800
Richard ("Rick") Garratt 68 Non-executive British 78 Main Road, Wynberg,
Director Cape Town, South Africa,
7800
Carmel ("Charles") 62 Independent non- Maltese 40 'Nayim', Triq Philip
Rapa executive Director Skippon, Birguma, Naxxar,
NXR 4121, Malta
Amanda Chorn 56 Independent Non- South African 905 Frobisher Crescent,
executive Director London, EC2Y 8HD,
England
Eduardo Gutierrez- 47 Non-executive South African 28 Chelsea Wharf, Lots
Garcia Director Road, London, SW10 0QJ,
United Kingdom
Robert Hain 61 Independent Non- British/Canadian 62 Queen Street, London
executive Director EC4R 1EB, United
Kingdom
8. Copies of the Pre-listing Statement
The Pre-listing Statement is only available in English and copies may be viewed on the website of
HomeChoice Holdings (www.homechoiceholdings.co.za), and may be obtained during normal
business hours from Thursday, 27 November 2014 until Thursday, 4 December 2014 from
HomeChoice Holdings, Rand Merchant Bank and Computershare Investor Services (Proprietary)
Limited as follows:
HomeChoice Holdings Rand Merchant Bank
78 Main Road 1 Merchant Place
Wynberg Cnr Rivonia Road and Fredman Drive
Cape Town Sandton 2196
7800 Johannesburg
South Africa
Computershare Investor Services (Proprietary)
Limited
Ground Floor
70 Marshall Street
Johannesburg
South Africa
27 November 2014
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Attorneys
Cliffe Dekker Hofmeyr Inc., South African legal advisor to the Company
Reporting Accountants and Auditors
PricewaterhouseCoopers Inc.
DISCLAIMER:
This abridged pre-listing statement does not constitute an offer of securities for sale in the United
States or any other jurisdiction. The securities have not been, and will not be, registered under the
US Securities Act of 1933, as amended (the "US Securities Act") or under the securities legislation of
any state or territory or jurisdiction of the United States or any other jurisdiction and may not be
offered, sold, transferred or delivered, directly or indirectly, in or into the United States except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the
US Securities Act and in compliance with any applicable securities laws of any states or other
jurisdiction of the United States. There will be no public offering in the United States. HIL is not
registered and will not be registered under the US Investment Company Act of 1940, as amended,
and related rules. This document does not constitute or form part of any offer or invitation to sell, or
any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form
the basis of, or be relied on in connection with, any contract therefore. Any proposed listing and
distribution of this document and other information in connection with a potential listing may be
restricted by law in certain jurisdictions, and persons into whose possession any document or other
information referred to herein comes should inform themselves about and observe any such
restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws
of any such jurisdiction.
This abridged pre-listing statement does not constitute an offer of securities to the public in the United
Kingdom. This communication is directed only at (i) persons who are outside the United Kingdom; or
(ii) persons who have professional experience in matters relating to investments falling within
Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the
"Order"); (iii) high net worth entities falling within Article 49(2) of the Order; and (iv) other persons to
whom it may lawfully be communicated (all such persons together being referred to as "relevant
persons"). Any investment activity to which this communication relates will only be available to, and
will only be engaged with, relevant persons. Any person who is not a relevant person should not act
or rely on this document or any of its contents.
Any offer of securities to the public that may be deemed to be made pursuant to this communication
in any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable
implementing measures in any Member State, the "Prospectus Directive") is only addressed to
qualified investors in that Member State within the meaning of the Prospectus Directive.
Copies of this abridged pre-listing statement are not being made and may not be distributed or sent
into the United States, Canada, Australia or Japan or in any other jurisdiction where it is unlawful to
do so.
This abridged pre-listing statement is not a prospectus and the Offer referred to herein will not be
open to the public. This abridged pre-listing statement does not constitute an offer to the public for the
sale of or subscription for, or the solicitation of an offer to buy or subscribe for, shares as defined in
the Companies Act No. 71 of 2008 (the "Act") or otherwise, and will not be distributed to any person in
South Africa in any manner which could be construed as an offer to the public in terms of the Act.
This abridged pre-listing statement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may be identified by the use of
forward-looking terminology, including the terms "believes", "estimates", "plans", "projects",
"anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future
events or intentions. Forward-looking statements may and often do differ materially from actual
results. Any forward-looking statements reflect the Company’s current view with respect to future
events and are subject to risks relating to future events and other risks, uncertainties and
assumptions relating to the Company’s business, results of operations, financial position, liquidity,
prospects, growth and strategies. Forward-looking statements speak only as of the date they are
made.
Each of the Company, Rand Merchant Bank (a division of FirstRand Bank Limited) ("RMB"), and their
respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any
forward looking statement contained in this abridged pre-listing statement whether as a result of new
information, future developments or otherwise.
Neither RMB nor any of its respective directors, officers, employees, advisers or agents accepts any
responsibility or liability whatsoever for/or makes any representation or warranty, express or implied,
as to the truth, accuracy or completeness of the information in this abridged pre-listing statement (or
whether any information has been omitted from the abridged pre-listing statement) or any other
information relating to the Company, its subsidiaries or associated companies, whether written, oral or
in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever
arising from any use of the abridged pre-listing statement or its contents or otherwise arising in
connection therewith.
RMB is acting exclusively for HIL and no-one else in connection with the Listing. They will not regard
any other person as their respective clients in relation to the Listing and will not be responsible to
anyone other than HIL for providing the protections afforded to their respective clients, nor for
providing advice in relation to the Listing, the contents of this abridged pre-listing statement or any
transaction, arrangement or other matter referred to herein.
Date: 27/11/2014 05:39:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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