Wrap Text
Preliminary report: Summarised Audited Consolidated Financial Statements for the year ended 31 December 2014
HomeChoice International PLC
(Incorporated in Malta)
Registration number: C66099
JSE share code: HIL
ISIN: MT0000850108
("HIL" or "the group")
PRELIMINARY REPORT: SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2014
- Revenue up 17,8% to R2,0 billion
- Retail sales up 16,4% to R1,1 billion
- Gross profit margin up from 49,1% to 49,8%
- Debtor costs as a percentage of revenue down from 19,0% to 16,8%
- Operating profit up 19,0% to R522 million
- EBITDA up 20,3% to R542 million
- Headline earnings per share up 15,0% to 352,8 cents
- Total dividend up 46% to 161 cents per share
- Restructuring and formation of offshore holding company
- Successful listing on JSE main board
OVERVIEW
HomeChoice International PLC ("HIL") is an investment holding company incorporated in
Malta and was listed in the General Retailers sector on the JSE Limited in December 2014.
Through its operating subsidiaries, HomeChoice and FinChoice, the group sells innovative
homewares merchandise, personal electronics and loan products to the rapidly expanding
mass middle income market in southern Africa. Established 30 years ago, HomeChoice is
the largest home shopping retailer in southern Africa and offers products through mail
order (catalogue), online channels (Internet and mobile phone) and call centres.
GROUP STRATEGY
Expansion into the rest of Africa presents a major growth opportunity for the business
in the medium to long term. A solid platform for expansion across the continent has been
created in recent years and HomeChoice currently trades in five countries outside
South Africa, contributing 11% of retail sales.
The rationale for the restructuring and formation of a new offshore holding company
centres around the group's ambitions in Africa. An international holding company should
accelerate expansion into Africa as it enable faster and more efficient allocation of
capital. The group plans to open an office in Mauritius during 2015 as a base from which
to drive the pan-African expansion strategy.
HIL's strategy to drive long-term shareholder value creation is as follows:
- Offer innovative retail and financial services products to the growing African middle class
- Extend the group's offering into new retail and financial services markets and new
digital channels
- Optimise allocation of capital through diversification of currency and country risk
to maximise returns.
South Africa is expected to remain the core trading region for both the retail and
financial services businesses in the medium term.
TRADING AND FINANCIAL PERFORMANCE
The group delivered a strong trading and financial performance in the continued tough
consumer environment, entrenching its position as one of South Africa's leading home
shopping retailers.
Revenue increased by 17,8% to R2 billion, driven by merchandise range extension and
innovation, growth in online sales and expansion into Africa. Retail revenue grew by
16,9% to R1,6 billion and accounted for 80% of the group's revenue. FinChoice increased
revenue by 22,2% to R386 million. Merchandise sales increased by 16,4% to nearly
R1,1 billion despite the disruptive impact of the postal strike in the second half
of 2014. FinChoice grew loan disbursements by 24,6% to R945 million. The group customer
base grew by 11% to 619 000.
The gross profit margin improved by 70 basis points to 49,8% through efficient supply
chain management which limited the impact of the volatile and weakening Rand. Over 90%
of merchandise is imported and US dollar denominated.
Debtor costs increased by 4,2% to R329,9 million and reduced as a percentage of revenue
from 19,0% to 16,8%. This reflects the benefit of the tightening of credit policy during
2012 and 2013 in response to the deterioration in the credit market, resulting in an
improved performance on the debtors' and loan books. Debtor costs for the period also
benefited from a change in accounting treatment for debt review customers. FinChoice
previously wrote off loans of customers entering the debt review process regulated by
the National Credit Act, however the recovery rate of these debt review accounts has
proven to be better than initially expected, and it has been decided to bring the debt
review book back onto the balance sheet with a conservative provision of 80%. This
treatment aligns FinChoice with the practices adopted in HomeChoice. Debtor costs,
excluding the change in accounting treatment, increased by 8,2% which is 17,5% as a
percentage of revenue.
The trade and loans receivable books are adequately provided for at 17,9%, up from 16,2%
at the prior year-end. The increase in the provision is primarily due to the change in
the treatment of debt review customers in FinChoice.
Other trading expenses increased by 29,5% to R563 million owing to a focus on customer
acquisition, the investment in merchandise, e-commerce and collections teams, higher
depreciation costs following the investment in building a new distribution centre and
one-off expenses relating to the restructuring and listing.
The strong revenue growth and controlled credit performance delivered a 19,0% increase in
operating profit to R522 million, with the operating margin increasing to 26,6% (2013: 26,4%).
Headline earnings increased by 14,9% to R355,6 million, with headline earnings per share
15,0% higher at 352,8 cents.
The total dividend was increased by 46% to 161 cents per share. The interim dividend of
61 cents per share was not paid as planned in November 2014 as the new holding company
requires audited financial statements before declaring a dividend in terms of Maltese law.
The interim dividend will be paid together with the final dividend in May 2015.
Cash generated from operations reduced from R278,0 million to R233,6 million due to the
higher growth of the business and the related investment in debtors and loan receivables.
OUTLOOK
The trading environment is not expected to show any marked improvement in the year ahead
as the outlook for economic growth in the country is muted. Customers are likely to be
under financial strain as pressures on disposable income continue and the unsecured lending
market remains constrained.
The group's credit strategy remains unchanged in the stabilising credit environment and
current lending practices will be maintained. The devaluation of the Rand will place
pressure on margins and pricing in the retail business.
The group will continue to focus on its digital strategy and expanding its customer base
in Africa. The retail product range will be extended and expanded into new categories,
while HIL will be launching an insurance business.
Capital expenditure of R169 million has been committed for 2015. The group anticipates
investing approximately R110 million for the building of a new 1 000 seat call centre
and retail showroom and R60 million for information technology to drive operating efficiencies
and the group's online strategy.
The above information has not been reviewed and reported on by the company's external auditors.
Gregoire Lartigue Paul Burnett Shirley Maltz
Chief Executive Officer Financial Director Chief Executive Officer
(South Africa)
Qormi, Malta
20 March 2015
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
at 31 December 2014
2014 % 2013
Notes R'000 change R'000
ASSETS
Non-current assets
Property, plant and equipment 299 387 2,3 292 785
Intangible assets 91 125 48,8 61 237
Loans to employees 1 302 6 362
Investment in associates 7 676 6 536
Deferred taxation 18 819 18 133
418 309 8,6 385 053
Current assets
Inventories 2 166 363 14,8 144 964
Taxation receivable 12 232 77
Trade and other receivables 3 1 504 773 28,6 1 169 921
Trade receivables - Retail 865 466 26,1 686 375
Loans receivable - Financial Services 621 804 34,6 462 080
Other receivables 17 503 (18,5) 21 466
Cash and cash equivalents 63 005 67 981
1 746 373 26,3 1 382 943
Total assets 2 164 682 22,4 1 767 996
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated and share capital 1 018 30 980
Share premuim 2 982 202 -
Treasury shares (2 666) (13 733)
Reorganisation reserve (2 960 639) -
Other reserves 3 030 1 902
Retained earnings 1 555 381 1 266 575
Total equity 1 578 326 22,8 1 285 724
Non-current liabilities
Interest-bearing liabilities 266 234 41,5 188 208
Deferred taxation 92 721 68 015
Other payables 4 340 3 510
363 295 39,9 259 733
Current liabilities
Interest-bearing liabilities 30 203 42,8 21 148
Taxation payable 2 882 8 953
Trade and other payables 158 465 17,8 134 552
Provisions 31 078 9 000
Bank overdraft 433 48 886
223 061 0,2 222 539
Total liabilities 586 356 21,6 482 272
Total equity and liabilities 2 164 682 22,4 1 767 996
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014
2014 % 2013
Notes R'000 change R'000
Revenue 1 958 575 17,8 1 661 952
Retail sales 1 082 473 16,4 929 730
Finance charges and initiation fees earned 745 179 619 848
Finance charges earned 537 807 18,7 452 912
Initiation fees earned 207 372 24,2 166 936
Fees from ancillary services 130 923 16,5 112 374
Cost of retail sales (543 108) 14,9 (472 771)
Debtor costs 6 (329 902) 4,2 (316 463)
Other trading expenses 6 (562 879) 29,5 (434 739)
Other net gains and losses (3 787) (2 319)
Other income 2 633 2 661
Operating profit 521 532 19,0 438 321
Interest received 1 948 (5,9) 2 070
Interest paid (21 883) 189,7 (7 554)
Share of loss of associates (2 556) (1 818)
Profit before taxation 499 041 15,8 431 019
Taxation (143 721) 18,1 (121 696)
Profit and total comprehensive income for the year 355 320 14,9 309 323
Earnings per share (cents)
Basic 7 352,5 14,9 306,9
Diluted 349,0 14,2 305,6
Additional information
Retail gross profit margin (%) 49,8 49,1
The retail gross profit margin percentage has been calculated as retail sales less cost
of retail sales, divided by retail sales.
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2014
Equity
Stated attributable
and Reorgan- to owners
share Share Treasury isation Other Retained of the
capital premium shares reserve reserves earnings parent
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 January 2013 30 980 - (11 331) 1 084 1 049 589 1 070 322
Changes in equity
Profit and total comprehensive
income for the year - - - - 309 323 309 323
Conversion to no par
value shares - - (2 536) - - (2 536)
Profit and total comprehensive
income for the year - - 134 - 2 396 2 530
Purchases of treasury shares
by share trust - - - - (94 733) (94 733)
Share option scheme - - - 818 - 818
Total changes - - (2 402) 818 216 986 215 402
Balance at 1 January 2014 30 980 - (13 733) 1 902 1 266 575 1 285 724
Changes in equity
Profit and total comprehensive
income for the year - - - - 355 320 355 320
Treasury shares cancelled (11 067) - 11 067 - - - -
Shares issued on
incorporation of HomeChoice
International PLC 183 - - - - - 183
Shares repurchased (183) - - - - - (183)
Shares issued in exchange for
shareholding in
HomeChoice Holdings Limited 1 014 2 979 539 (2 666) - - - 2 977 887
Net assets acquired (19 913) - 2 666 (2 960 639) - - (2 977 886)
Shares issued 4 2 663 - - - - 2 667
Dividends paid - - - - (66 514) (66 514)
Share option scheme - - - - 1 128 - 1 128
Total changes (29 962) 2 982 202 11 067 (2 960 639) 1 128 288 806 292 602
Balance at 31 December 2014 1 018 2 982 202 (2 666) (2 960 639) 3 030 1 555 381 1 578 326
SUMMARISED GROUP STATEMENT OF CASH FLOWS
for the year ended 31 December 2014
2014 % 2013
Notes R'000 change R'000
Cash flows from operating activities
Operating cash flows before working
capital changes 546 177 20,9 451 910
Movements in working capital (312 612) 79,8 (173 900)
Cash generated from operations 8 233 565 (16,0) 278 010
Interest received 1 948 2 078
Interest paid (21 883) (5 883)
Taxation paid (137 927) (115 668)
Net cash inflow from operating activities 75 703 (52,2) 158 537
Cash flows from investing activities
Purchase of property, plant and equipment (18 004) (134 700)
Proceeds on disposal of property, plant
and equipment 492 9
Purchase of intangible assets (38 906) (26 883)
Loans repaid by employees 6 830 4 115
Loans granted to employees (1 302) -
Investment in associates (3 696) (4 403)
Net cash outflow from investing activities (54 586) (66,3) (161 862)
Cash flows from financing activities
Proceeds from the issuance of shares 2 667 -
Proceeds from the sale of treasury shares - 2 530
Purchase of treasury shares - (707)
Proceeds from interest-bearing liabilities 111 671 229 950
Repayments of interest-bearing liabilities (24 964) (120 357)
Financing costs paid (500) (1 937)
Dividends paid (66 514) (94 733)
Net cash inflow from financing activities 22 360 51,6 14 746
Net increase in cash and cash equivalents
and bank overdrafts 43 477 11 421
Cash, cash equivalents and bank overdrafts
at the beginning of the year 19 095 7 674
Cash, cash equivalents and bank overdrafts
at the end of the year 62 572 227,7 19 095
SUMMARISED GROUP SEGMENTAL ANALYSIS
for the year ended 31 December 2014
Retail Financial Services Property
2014 % 2013 2014 % 2013 2014 % 2013
R'000 change R'000 R'000 change R'000 R'000 change R'000
Segmental revenue 1 571 846 1 344 840 385 988 315 923 28 556 18 689
Retail sales 1 082 473 16,4 929 730 - - - -
Finance charges and initiation
fees earned 430 496 19,0 361 808 314 683 22,0 258 040 - -
Fees from ancillary services 58 877 10,5 53 302 71 305 23,2 57 883 28 556 18 689
Dividends received - - - - - -
Intersegment revenue - - - - (27 815) (17 500)
Revenue from external customers 1 571 846 16,9 1 344 840 385 988 22,2 315 923 741 (37,7) 1 189
EBITDA 337 946 16,6 289 834 189 064 29,8 145 693 27 681 56,6 17 681
Depreciation and amortisation (20 889) (11 950) (616) (490) (1 269) (1 189)
Interest received - - 209 159 - -
Interest paid - - (28 348) (28 993) - -
Segmental results* 317 057 277 884 160 309 116 368 26 412 16 492
Interest received 1 595 1 609 - - 26 17
Interest paid (5 070) (1 721) - - (14 415) (4 284)
Profit before taxation 313 582 12,9 277 772 160 309 37,8 116 368 12 023 (1,7) 12 225
Taxation (89 074) (77 376) (43 614) (33 162) (3 366) (3 420)
Profit for the year 224 508 12,0 200 396 116 695 40,2 83 206 8 657 (1,7) 8 805
Segmental assets** 1 244 768 1 038 561 671 802 502 783 233 779 228 649
Segmental liabilities** 285 109 305 290 31 951 12 127 162 629 62 360
Operating cash flows before
working capital changes 339 252 16,7 290 596 189 223 29,8 145 788 27 681 56,6 17 681
Movements in working capital (174 643) (129 877) (140 920) (47 441) (313) 3 105
Cash generated/(utilised) by operations 164 609 2,4 160 719 48 303 (50,9) 98 347 27 368 31,7 20 786
Gross profit margin (%) 49,8 49,1
Segmental results margin (%) 20,2 20,7 41,5 36,8 92,5 88,2
Capital expenditure
Property, plant and equipment 14 519 55 286 825 610 5 845 78 804
Intangible assets 38 463 26 649 307 234 - -
Items included in segmental results:
Interest received - Other and
Financial Services - - 209 159 - -
Interest paid - Other and
Financial Services - - (28 348) (28 993) - -
Share of loss of associates
Marketing costs 148 906 18,4 125 754 17 338 32,8 13 054 - -
Staff costs 185 315 31,2 141 211 44 567 44,8 30 781 - -
Depreciation and amortisation 20 889 74,2 11 992 616 25,6 490 1 269 6,7 1 189
Other costs 126 339 20,6 104 733 25 892 15,1 22 495 900 (12,6) 1 030
Other trading expenses 481 449 25,5 383 690 88 413 32,3 66 820 2 169 (2,3) 2 219
Debtor costs 220 725 4,1 212 002 109 177 4,5 104 461 - -
Total trading expenses (refer to
note 6) 702 174 17,9 595 692 197 590 15,4 171 281 2 169 (2,3) 2 219
Other Eliminations Total
2014 % 2013 2014 % 2013 2014 % 2013
R'000 change R'000 R'000 change R'000 R'000 change R'000
Segmental revenue - 2 905 - - 1 986 390 1 682 357
Retail sales - - - - 1 082 473 16,4 929 730
Finance charges and initiation fees earned - - - - 745 179 20,2 619 848
Fees from ancillary services - - - - 158 738 22,2 129 874
Dividends received - 2 905 - - - 2 905
Intersegment revenue - (2 905) - - (27 815) (20 405)
Revenue from external customers - - - - 1 958 575 17,8 1 661 952
EBITDA 2 032 (56,3) 4 651 (14 973) 94,8 (7 685) 541 750 20,3 450 174
Depreciation and amortisation - - - - (22 774) (13 629)
Interest received 35 622 29 232 (35 504) (23 222) 327 6 169
Interest paid (9 553) (1 545) 28 344 23 222 (9 557) (7 316)
Segmental results* 28 101 32 338 (22 133) (7 685) 509 746 435 398
Interest received - (5 767) 1 621 (139,1) (4 141)
Interest paid 7 159 5 767 (12 326) 5 070,1 (238)
Profit before taxation 28 101 (13,1) 32 338 (14 974) 94,8 (7 685) 499 041 15,8 431 019
Taxation (7 667) (8 366) - - (143 721) (122 324)
Profit for the year 20 434 (14,8) 23 972 (14 974) 94,8 (7 685) 355 320 15,1 308 695
Segmental assets** 17 833 6 470 (3 500) (8 467) 2 164 682 1 767 996
Segmental liabilities** 110 167 110 962 (3 500) (8 467) 586 356 482 272
Operating cash flows before working
capital changes (9 966) (4 235,3) 241 (13) (99,5) (2 396) 546 177 20,9 451 910
Movements in working capital 3 261 313 3 - (312 612) (173 900)
Cash generated/(utilised) by operations (6 705) (1 310,3) 554 (10) (99,6) (2 396) 233 565 (16,0) 278 010
Gross profit margin (%) 49,8 49,1
Segmental results margin (%) - 1 113,2 - - 26,0 26,2
Capital expenditure
Property, plant and equipment - - - - 21 188 134 700
Intangible assets 136 - - - 38 906 26 883
Items included in segmental results:
Interest received - Other and
Financial Services 35 622 29 232 (35 504) (23 222) 327 6 169
Interest paid - Other and
Financial Services (9 553) (1 545) 28 344 23 222 (9 557) (7 315)
Share of loss of associates (2 556) (1 818) - - (2 556) (1 818)
Marketing costs - - - - 166 244 19,8 138 808
Staff costs 1 718 (7,6) 1 858 - - 231 600 33,2 173 850
Depreciation and amortisation - - - - 22 774 66,6 13 671
Other costs 12 636 (638,2) (2 348) (23 506) 34,3 (17 500) 142 261 31,2 108 410
Other trading expenses 14 354 (3 029,3) (490) (23 506) 34,3 (17 500) 562 879 29,5 434 739
Debtor costs - - - - 329 902 4,2 316 463
Total trading expenses (refer to note 6) 14 354 (3 029,3) (490) (23 506) 34, (17 500) 892 781 18,8 751 202
Reconciliation of segment results:
Segmental results, as reported above 509 746 17,1 435 398
Interest received 1 621 (139,1) 4 141
Interest paid (12 325) 5 070,1 (238)
Profit before taxation 499 041 15,8 431 019
* Refer to note 9 for further details on segments and segmental results
** Excluding group loans, including loans to share trust
NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
for the year ended 31 December 2014
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The summary consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for preliminary reports.
The Listings Requirements require preliminary reports to be prepared in accordance with
the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34: Interim Financial Reporting. The accounting policies applied in the
preparation of the consolidated financial statements from which the summary consolidated
financial statements were derived are in terms of International Financial Reporting
Standards and are consistent with those accounting policies applied in the preparation
of the previous consolidated annual financial statements.
This summarised report is extracted from audited information, but is not itself audited.
The annual financial statements were audited by PricewaterhouseCoopers, who expressed
an unmodified opinion thereon. The audited annual financial statements and the auditor's
report thereon are available for inspection at the company's registered office. The
directors take full responsibility for the preparation of the preliminary report and that
the financial information has been correctly extracted from the underlying annual
financial statements.
No new standards, amendments or interpretations to existing standards, relevant to the
group's operations, became effective for the year ended 31 December 2014.
2014 2013
R'000 R'000
2. INVENTORIES
Merchandise for resale 124 966 118 492
Provision for inventory obsolescence (11 500) (10 484)
Goods in transit 52 897 36 956
166 363 144 964
Inventory sold at less than cost during the current year amounted to R15,558 million
(2013: R12,402 million).
2014 % 2013
R'000 change R'000
3. Trade and other receivables
Trade receivables - Retail 1 063 645 25,8 845 730
Provision for impairment (198 179) 24,4 (159 355)
865 466 26,1 686 375
Loans receivable - Financial Services 748 907 42,6 525 116
Provision for impairment (127 103) 101,6 (63 036)
621 804 34,6 462 080
Other receivables 17 503 (18,5) 21 466
Total trade and other receivables 1 504 773 28,6 1 169 921
Trade and loan receivables 1 812 552 32,2 1 370 846
Provision for impairment (325 282) 46,3 (222 391)
Other receivables 17 503 (18,5) 21 466
Movements in the provision for impairment
were as follows:
Retail
Opening balance (159 355) 20,3 (132 478)
Movement in provision (38 824) 44,5 (26 877)
Debtor costs charged to profit and loss (220 725) 4,1 (212 002)
Debts written off during the year,
net of recoveries 181 901 (1,7) 185 125
Closing balance (198 179) 24,4 (159 355)
Financial Services
Opening balance (63 036) 19,4 (52 792)
Movement in provision (64 067) 525,4 (10 244)
Debtor costs charged to profit and loss (109 177) 4,5 (104 461)
Debts written off during the year,
net of recoveries 45 110 (52,1) 94 217
Closing balance (127 103) 101,6 (63 036)
Retail
Debtor costs as a % of revenue 14,0 15,8
Debtor costs as a % of gross receivables 20,8 25,1
Non-performing receivables as a % of
gross receivables* 8,7 10,6
Provision for impairment as a % of
gross receivables 18,6 18,8
Financial Services
Debtor costs as a % of revenue 28,3 33,1
Debtor costs as a % of gross receivables 14,6 19,9
Non-performing receivables as a % of
gross receivables* 3,5 4,0
Provision for impairment as a % of
gross receivables 17,0 12,0
Group
Debtor costs as a % of revenue 16,8 19,0
Debtor costs as a % of gross trade receivables 18,2 23,1
Provision for impairment as a % of
gross receivables 17,9 16,2
* Defined as accounts 120 days or more in arrears as a percentage of the trade and
loan receivables book
4. CONTINGENT LIABILITIES
The group had no contingent liabilities at the current or prior reporting dates.
5. EVENTS AFTER THE REPORTING DATE
No event material to the understanding of these summarised financial statements has
occurred between the end of the financial year and the date of approval.
2014 % 2013
R'000 change R'000
6. Total trading expenses
Expenses by nature
Debtor costs
Trade receivables - Retail 220 725 4,1 212 002
Loans receivable - Financial Services 109 177 4,5 104 461
Total debtor costs 329 902 4,2 316 463
Amortisation of intangible assets 9 018 42,6 6 324
Depreciation of property, plant and equipment 13 756 87,2 7 347
Restructuring and listing costs 10 225 -
Legal fees 2 924 -
Consulting fees 5 729 -
Audit fees 606 -
Listing 507 -
Advertising 116 -
Other 343 -
Operating lease charges for immovable property 920 3 307,4 27
Total operating lease charges 4 247 (65,8) 12 415
Less: disclosed under cost of retail sales (3 327) (73,1) (12 388)
Marketing costs 166 244 19,8 138 809
Staff costs 231 600 33,2 173 850
Total staff costs 268 077 31,9 203 171
Less: disclosed under cost of retail sales (19 630) 5,6 (18 585)
Less: staff costs capitalised to intangibles (16 847) 56,9 (10 736)
Other costs 131 116 21,0 108 382
Total other trading expenses 562 879 29,5 434 739
892 781 18,8 751 202
7. Basic and headline earnings per share
The calculation of basic and headline earnings per share is based upon profit for
the year attributable to ordinary shareholders divided by the weighted average number
of ordinary shares in issue as follows:
2014 2013
Gross Net Gross Net
R'000 R'000 R'000 R'000
Profit for the year 355 320 309 323
Adjusted for the after-tax effect of:
(Gains)/losses on disposal of
property, plant and equipment
and intangible assets 338 243 (2) (2)
Headline earnings 355 563 309 321
Weighted average number of ordinary
shares in issue ('000) 100 795 100 779
Earnings per share (cents)
Basic 352,5 306,9
Headline 352,8 306,9
2014 % 2013
R'000 change R'000
8. RECONCILIATION OF CASH GENERATED FROM OPERATIONS
Profit before taxation 499 041 15,8 431 019
Share of loss of associates 2 556 40,6 1 818
(Gains)/losses on disposal of property, plant
and equipment and intangible assets 338 (11 366,7) (3)
Loans to employees - amortised cost adjustment (147) (43,5) (260)
Notional interest on loans to employees (321) (49,6) (637)
Depreciation and amortisation 22 774 66,6 13 671
Share-based employee service expense 1 128 37,9 818
Interest paid 21 883 189,7 7 554
Interest received (1 948) (5,9) (2 070)
Capitalised bond costs - amortised cost adjustment 873 100,0 -
Operating cash flows before working
capital changes 546 177 20,9 451 910
Movements in working capital (312 612) 79,8 (173 900)
Increase in inventories (21 399) (38,4) (34 723)
Increase in trade receivables - Retail (179 091) 74,1 (102 847)
Increase in loans receivable -
Financial Services (159 724) 216,7 (50 434)
Decrease in other receivables 3 963 (4,0) 4 129
Increase in trade and other payables 21 561 8,3 19 909
Increase/(decrease) in provisions 22 078 (322,2) (9 934)
233 565 (16,0) 278 010
9. GROUP SEGMENTAL ANALYSIS
The group's operating segments are identified as being Retail, Financial Services,
Property and Other. Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker, being HomeChoice
International PLC's executive directors. The group's reportable segments are
unchanged from the previous reporting date.
Retail consists mainly of the group's HomeChoice and FoneChoice operations, whereas
Financial Services represents the group's FinChoice operations. The group's property
companies, which own commercial properties utilised mainly within the group, are
included in the Property segment. The Other segment relates mainly to the holding
company's standalone results, as well as those of its associates.
The chief operating decision-maker monitors the results of the business segments
separately for the purposes of making decisions about resources to be allocated and
of assessing performance. They assess the performance of Retail and Property segments
based upon a measure of operating profit and Financial Services and Other segments
based on a measure of operating profit after interest received and interest paid.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the statement of financial position approximate
fair values. Discounted cash flow models are used for trade and loan receivables.
The discount yields in these models use calculated rates that reflect the return a
market participant would expect to receive on instruments with similar remaining
maturities, cash flow patterns, credit risk, collateral and interest rates. Fair
values of debt instruments issued by the group and other borrowings, with maturities
consistent with those remaining for the debt instruments being valued.
2014 2013
R'000 R'000
11. COMMITMENTS
Capital commitments for property, plant and equipment
and intangible assets:
Approved by the directors 83 876 68 457
Approved by the directors and contracted for 84 846 -
168 722 68 457
12. STATED CAPITAL, SHARE CAPITAL AND SHARE PREMIUM
On 28 November 2014 a new entity, HomeChoice International PLC, was placed on top
of the existing group, HomeChoice Holdings Limited, by issuing shares to the existing
group shareholders. This transaction was not a business combination and has been
accounted for as a reorganisation of an existing group that has not changed the
substance of the reporting entity. No capital was raised as part of the reorganisation.
At the time of the reorganisation the shareholders of HomeChoice Holdings became the
new shareholders in HomeChoice International PLC.
At the time of the reorganisation the consolidated financial statements of the new
entity, HomeChoice International PLC, were presented using the values from the
consolidated financial statements of the previous group holding company. The equity
structure - that is, the issued share capital, share premium and treasury shares -
reflected that of the new company, with other amounts in equity (such as retained
earnings and other reserves) being those from the consolidated financial statements
of the previous group holding company. The resulting difference that arose has been
recognised as a component of equity, called reorganisation reserve.
Share capital, share premium and treasury shares have been adjusted to include the
effects of:
- the issue of 101 379 351 shares to the HomeChoice Holdings shareholders in terms
of the reorganisation, issued at a price of R29,40 and a par value of R0,01; and
- the HomeChoice Development Trust held 600 000 shares before and after the
reorganisation. The movement in treasury shares represents the adjustments from
applying the accounting for capital reorganisations. Treasury shares are reflected
at R2,666 million, being 600 000 shares at R4,44 per share.
The effect of the transaction is to reflect the share capital, share premium and
treasury shares of the new holding company, HIL, and to eliminate HomeChoice Holdings'
share capital and treasury shares and to create a reorganisation reserve with a debit
balance of R2 960,6 million.
13. RELATED PARTY TRANSACTIONS AND BALANCES
Related party transactions similar to those disclosed in the group's annual financial
statements for the year ended 31 December 2014 took place during the period and
related party balances are existing at the reporting date. Related party transactions
include key management personnel compensation, loans to directors and intragroup
transactions which have been eliminated on consolidation.
14. PURCHASE OF INTANGIBLES
Included in the reporting period's purchase of intangible assets is the capitalisation
of R25,8 million (2013: R9,8 million) of costs relating to the ERP system implementation.
15. COMPARATIVES
To enhance disclosure, certain reclassifications and restatements have been made.
These changes have no impact on overall equity, assets or liabilities.
15.1 Group statement of cash flows
The group has amended the disclosure of dividends paid in the group statement of
cash flows. Dividends paid are now disclosed as a cash flow from financing activities
rather than from operating activities as dividends paid to the shareholders are
payments to the providers of capital.
15.2 Change in accounting estimate
FinChoice and FoneChoice have previously adopted a conservative approach and
wrote off customers who entered the debt review process regulated by the NCA.
The recovery rates on these debt review accounts have proven to be better than
initially expected. In addition, to align FinChoice and FoneChoice with the
treatment adopted in HomeChoice, it was decided to bring the debt review book
back onto the balance sheet with a provision of 80%. This change was accounted
for as a change in an accounting estimate and prior year numbers have not been
restated. This resulted in a once-off benefit to debtor costs and profits of
R10,8 million. It is impracticable to estimate the amount of the impact on
future years.
Registered office: 93 Mill Street, Qormi, QRM3102, Republic of Malta
Transfer secretaries: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor: Rand Merchant Bank, a division of FirstRand Bank Limited
Company secretary: George Said
Directors: S Portelli* (Chairman), G Lartigue*** (Chief Executive Officer), P Burnett***
(Financial Director), A Chorn*, R Garratt**, E Gutierrez-Garcia**, R Hain*,
S Maltz***, C Rapa*
* Independent non-executive ** Non-executive *** Executive
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