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HOMECHOICE INTERNATIONAL PLC - Preliminary report: Summarised Audited Consolidated Financial Statements for the year ended 31 December 2014

Release Date: 20/03/2015 13:16
Code(s): HIL     PDF:  
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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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