Wrap Text
Summarised unaudited group results for the six months ended 30 June 2015
HomeChoice International PLC
(Incorporated in Malta)
Registration number: C66099
JSE share code: HIL
ISIN: MT0000850108
("HIL" or "the group")
SUMMARISED UNAUDITED GROUP RESULTS
for the six months ended 30 June 2015
- Revenue up 15,6% to R995 million
- Retail sales up 10,6% to R499 million
- EBITDA up 12,0% to R268 million
- Headline earnings up 8,5% to R172 million
- Cash generated from operations up 26,6% to R123 million
- Continued investment in the omni-channel retail model and digital platforms
- Interim dividend up 5,8% to 64 cents per share
OVERVIEW
HomeChoice International PLC (HIL) is an investment holding company incorporated in
Malta and listed in the General Retailers sector on the JSE Limited. Through its
operating subsidiaries, HomeChoice and FinChoice, the group sells innovative homewares
merchandise, personal technology and loan products to the rapidly expanding mass
middle-income market in southern Africa. HomeChoice is the largest home shopping
retailer in southern Africa and offers products through online channels, call centres,
sales agent networks and mail order catalogues. Expansion into the rest of Africa
continues to present a major growth opportunity for the business. HomeChoice currently
trades in five countries outside South Africa, contributing 10% of retail sales.
The group's omni-channel home shopping retail model and digital financial services
business provide a strong platform for achieving its ambitions of becoming a
pan-African retailer.
TRADING AND FINANCIAL PERFORMANCE
The group continued to experience pleasing growth despite the weak economic environment
and mass market consumers being under pressure from rising inflation in living costs,
a weak job market and reduced access to credit.
The business delivered the following trading and financial performance for the six-month period:
30 June 30 June %
2015 2014 change
Group
Revenue (Rm) 995 861 15,6
EBITDA (Rm) 268 240 12,0
Operating profit margin (%) 25,7 26,7 (3,8)
Cash generated from operations (Rm) 123 97 26,6
NAV per share (cents) 1 571 1 367 14,9
Dividends paid per share (cents) 161* 66
Retail
Revenue (Rm) 762 678 12,4
Retail sales (Rm) 499 451 10,6
Gross profit margin (%) 49,1 50,1 (1,9)
EBITDA (Rm) 155 142 9,2
Cash generated from operations (Rm) 89 77 15,4
Financial Services
Loan disbursements (Rm) 542 444 22,1
Revenue (Rm) 233 182 27,9
EBITDA 103 86 19,8
Cash generated from operations (Rm) 31 9 246,4
* Includes the proposed November 2014 dividend of 61 cents per share that was deferred
to May 2015 due to the group's listing on the JSE in December 2014.
Group revenue increased by 15,6%, with EBITDA growth of 12,0% reflecting the impact of
the lower gross profit margin, higher retail debt write-offs and increased spend on the
following strategic growth drivers:
- Innovative products, digital channels: Staff costs increased by 26% owing to the
growth of the merchandise and e-commerce teams to support the expansion of the
retail product offering and to enhance customers' online shopping experience.
- Operational excellence: Depreciation and amortisation costs are up 21,6% due to the
investment in the new distribution facility (completed December 2013) and phased
implementation of the ERP system.
- Africa: The Mauritius operation has been established to facilitate the group's
pan-African growth aspirations and an insurance business will be launched during 2015.
Strong focus on cash collections resulted in cash generation from operations improving by 26,6%.
RETAIL
Retail sales increased by a competitive 10,6%, reflecting the benefits of continued product
innovation particularly in the bedding categories and the introduction of new product
categories such as footwear, which ensured merchandise demand remained buoyant. Sales have
been impacted by credit policy tightening, disruptions to the sales team as a result of the
integration of the existing call centre into the new call centre building and the SA Post Office
strike action, which also affected customer credit metrics.
Over 90% of merchandise is imported and US Dollar denominated. The average Rand depreciation
against the US Dollar of 11,4% was well managed and the retail gross profit margin decline of
100 basis points to 49,1% remains within the group's targeted range of 48% to 52%. The impact
of Rand weakness was limited by selected price increases and enhanced operating efficiencies
across the supply chain.
The customer base has been expanded by 4,5% to 617 400, with 88 800 new customers added during
the six-month period.
Investment in the retail digital platform has resulted in digital sales increasing by
26,0%, representing 11,0% of HomeChoice Retail sales (December 2014: 9,0%).
FINANCIAL SERVICES
FinChoice maintained its strategic focus on short-term, low-value personal loans to HomeChoice
customers of proven good credit performance with the retail business. Loan disbursements
increased by 22,1% to R542 million, with 72,7% of disbursements made to existing loan customers.
The customer base increased by 9.3% to 126 000 from December 2014.
The average term in the FinChoice book is 19,6 months (December 2014: 19,2 months) and average
balance is R8 466 (December 2014: R8 206), both well below the market averages. Product terms
range from one month to 36 months, with the 36-month product accounting for only 5,8% of
disbursements in the six-month period (December 2014: 5,6%).
As a digital financial services provider, FinChoice has focused strongly on its mobi platform
development and has experienced encouraging take-up and engagement levels on this growing digital
channel. Customers continue to engage through the successful KwikServe mobile platform, with over
70% of all repeat loan transactions originating via this innovative self-service channel.
MANAGING CREDIT RISK
Credit conditions remain challenging and the group continues to apply strict credit criteria
and conservative provisioning policies. Credit performance during the year is summarised
as follows:
30 June 30 June %
2015 2014 change
Group
Gross trade and loans receivable (Rm) 1 924 1 473 30,6
Debtor costs as a % of revenue 18,5 17,9
Retail
Gross trade receivables (Rm) 1 079 863 25,0
Debtor costs as a % of revenue 14,5 13,6
Provision for impairment as % of gross receivables 18,7 18,2
Financial Services
Gross loans receivable (Rm) 845 608 39,0
Debtor costs as a % of revenue 31,7 34,2*
Provision for impairment as % of gross receivables 16,9 11,6*
* Excludes customers under debt review that were previously written off.
Refer to note 2 in the interim financial statements for more detailed analysis.
Group debtor cost growth at 19,5% is ahead of revenue growth owing mainly to the increased retail
debt write-offs following the SA Post Office strike in 2014. The strike negatively impacted
customer payments and collections, and the expected increase in bad debts materialised during
the period. Higher fraud levels have also contributed to the growth in debtor costs. Management
has responded by further tightening credit risk policy and enhancing fraud detection systems.
We continue to drive further acquisition activity but have reduced credit limits to manage exposure.
Non-performing retail trade receivables have increased from 8,7% at December 2014 to 9,0% and the
provision has been increased to 18,7% from 18,6% at December 2014 to cover the expected write-offs.
Debtor costs in FinChoice were well managed and reduced as a percentage of revenue from 34,2% in
2014 to 31,7% for the six-month period. FinChoice benefits from marketing to proven HomeChoice
customers, which lowers credit risk and practically eliminates fraud. The FinChoice impairment
provision was reduced marginally to 16,9% at June 2015 (December 2014: 17,0%).
CASH AND CAPITAL MANAGEMENT
The group remains cash generative and increased cash generated from operations by 26,6% to
R123 million through more efficient management of working capital.
The group continues to invest for growth. R100 million is being spent in 2015 on building a
new 1 000-seat call centre and retail showroom, which is being integrated into HomeChoice's
South African head office. Further investment is being made in information technology to
support the group's online strategy and developing an ERP system.
The net debt to equity ratio has increased from 18,7% to 27,2% largely due to the increased
investment in the business, but remains comfortably within management's targeted range of below
40%. The financial position of the group remains strong, with net asset value increasing by
14,9% to 1 571 cents per share over the previous year.
DIVIDENDS
The directors intend to declare an interim dividend payable in November 2015 of 64 cents per
share (2014: 61 cents per share), which represents a dividend cover of 2,6 times. A formal dividend
declaration will be made on SENS in due course.
OUTLOOK
Macroeconomic conditions remain challenging. Although consumer credit health appears to be
improving, customers remain constrained and this will continue to impact on demand. Tight credit
policies will be maintained, with cash collections and cost control remaining key focus areas.
HomeChoice aims to drive customer and revenue growth through its omni-channel retail model and
digital strategy, combined with further expansion into Africa, supported by the extension of
product ranges and new categories. FinChoice continues to be a niche financial services provider
focused on technology-based customer engagement. FinChoice is expanding its product range to
include insurance products in 2015.
The group remains committed to the mass market consumer segment, which is expected to continue
to migrate up the LSM spectrum. The group's proven business model, positioning in a growth sector
and focused strategies for growth should ensure sustainable returns to shareholders.
The above information has not been reviewed or reported on by the group's external auditor.
Gregoire Lartigue
Chief Executive Officer
Paul Burnett
Financial Director
Shirley Maltz
Chief Executive Officer (South Africa)
Qormi, Malta
21 August 2015
GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Reviewed Audited
Jun 2015 Jun 2014 Dec 2014
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 344 366 288 303 299 387
Intangible assets 112 247 72 553 91 125
Loans to employees 367 3 658 1 302
Investment in associates 11 231 7 870 7 676
Deferred taxation 20 941 21 771 18 819
489 152 394 155 418 309
Current assets
Inventories 227 681 202 941 166 363
Taxation receivable 18 812 4 169 12 232
Trade and other receivables 1 590 779 1 261 864 1 504 773
Trade receivables - Retail 877 114 705 916 865 466
Loans receivable - Financial Services 702 431 537 633 621 804
Other receivables 11 234 18 315 17 503
Cash and cash equivalents 99 811 50 945 63 005
1 937 083 1 519 919 1 746 373
Total assets 2 426 235 1 914 074 2 164 682
Equity and liabilities
Equity attributable to equity holders of the parent
Stated and share capital 1 022 30 980 1 018
Share premium 2 985 262 - 2 982 202
Treasury shares (2 666) (13 733) (2 666)
Reorganisation reserve (2 960 639) - (2 960 639)
Other reserves 3 722 2 403 3 030
Retained earnings 1 564 172 1 358 230 1 555 381
1 590 873 1 377 880 1 578 326
Non-current liabilities
Interest-bearing liabilities 272 044 225 175 266 234
Deferred taxation 107 522 72 545 92 721
Other payables 3 855 3 975 4 340
383 421 301 695 363 295
Current liabilities
Interest-bearing liabilities 193 990 26 345 30 203
Taxation payable 1 017 3 484 2 882
Trade and other payables 183 361 148 037 158 465
Other liabilities 6 334 - 31 078
Bank overdraft 67 239 56 633 433
451 941 234 499 223 061
Total liabilities 835 362 536 194 586 356
Total equity and liabilities 2 426 235 1 914 074 2 164 682
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Reviewed Audited
six months six months year
ended ended ended
Jun 2015 Change Jun 2014 Dec 2014
R'000 % R'000 R'000
Revenue 995 179 15,6 860 632 1 958 575
Retail sales 498 635 10,6 451 021 1 082 473
Finance charges and initiation fees earned 421 981 23,1 342 666 745 179
Finance charges earned 308 077 25,2 246 023 537 807
Initiation fees earned 113 904 17,9 96 643 207 372
Fees from ancillary services 74 563 11,4 66 945 130 923
Cost of retail sales (253 903) 12,7 (225 279) (543 108)
Debtor costs (184 418) 19,5 (154 356) (329 902)
Other trading expenses (302 715) 20,9 (250 329) (562 879)
Other net gains and losses (176) (1 909) (3 787)
Other income 1 410 891 2 633
Operating profit 255 377 11,2 229 650 521 532
Interest received 1 033 613 1 948
Interest paid (14 825) (8 875) (21 883)
Share of loss of associates (493) (1 178) (2 556)
Profit before taxation 241 092 9,5 220 210 499 041
Taxation (69 239) (62 041) (143 721)
Profit and total comprehensive income for the period 171 853 8,7 158 169 355 320
Earnings per share (cents)
Basic 169,8 156,9 352,5
Diluted 168,8 156,3 349,0
Additional information
Retail gross profit margin (%) 49,1 50,1 49,8
The retail gross profit margin percentage has been calculated as retail sales less cost of retail
sales, divided by retail sales.
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Reviewed Audited
six months six months year
ended ended ended
Jun 2015 Jun 2014 Dec 2014
R'000 R'000 R'000
Equity at the beginning of the period 1 578 326 1 285 724 1 285 724
Profit and total comprehensive income for the period 171 853 158 169 355 320
Shares issued on incorporation of
HomeChoice International PLC - - 183
Shares repurchased - (183)
Dividends paid (163 062) (66 514) (66 514)
Shares issued in exchange for shareholding in
HomeChoice Holdings Limited - - 2 977 887
Net assets acquired - - (2 977 886)
Shares issued under share option scheme:
Share Capital and Share Premium 3 064 - 2 667
Share option scheme - expense 692 501 1 128
Equity at the end of the period 1 590 873 1 377 880 1 578 326
GROUP STATEMENT OF CASH FLOWS
Unaudited Reviewed Audited
six months six months year
ended ended ended
Jun 2015 Change Jun 2014 Dec 2014
R'000 % R'000 R'000
Cash flows from operating activities
Operating cash flows before working capital changes 270 225 11,7 241 854 546 177
Movement in working capital (147 650) (145 007) (312 612)
Cash generated from operations 122 575 26,6 96 847 233 565
Interest received 1 033 613 1 948
Interest paid (14 825) (8 854) (21 883)
Taxation paid (65 006) (70 710) (137 927)
Net cash inflow from operating activities 43 777 144,6 17 896 75 703
Cash flows from investing activities
Purchase of property, plant and equipment (52 976) (2 829) (18 004)
Proceeds from disposal of property, plant
and equipment - 487 492
Purchase of intangible assets (26 725) (15 937) (38 906)
Loans repaid by employees 936 2 952 6 830
Loans granted to employees - - (1 302)
Investment in associates (4 096) (2 512) (3 696)
Net cash outflow from investing activities (82 861) (364,5) (17 839) (54 586)
Cash flows from financing activities
Proceeds from issuance of shares 3 064 - 2 667
Proceeds from interest-bearing liabilities 187 322 55 119 111 671
Repayments of interest-bearing liabilities (16 640) (13 445) (24 964)
Finance-raising costs paid (1 600) - (500)
Dividends paid (163 062) (66 514) (66 514)
Net cash inflow/(outflow) from financing activities 9 084 (136,6) (24 840) 22 360
Net (decrease)/increase in cash, cash equivalents
and bank overdrafts (30 000) (24 783) 43 477
Cash, cash equivalents and bank overdrafts at the
beginning of the period 62 572 19 095 19 095
Cash, cash equivalents and bank overdrafts at the
end of the period 32 572 672,6 (5 688) 62 572
STATISTICS
Jun 2015 Jun 2014 Dec 2014
Profitability
Growth in revenue (%) 15,6 12,9 17,8
Retail gross profit margin (%) 49,1 50,1 49,8
Operating profit margin (%) 25,7 26,7 26,6
EBITDA ('000) 268 485 239 655 541 750
Growth in EBITDA (%) 12,0 15,5 20,3
EBITDA margin (%) 27,0 27,8 27,7
Solvency and liquidity
Net asset value per share (cents) 1 571,4 1 367,2 1 559,7
Growth in net asset value (%) 0,7 7,2 22,3
Inventory turn (times) 2,6 2,6 3,5
Net debt/equity ratio (%) 27,2 18,7 14,8
Performance
Growth in trade receivables - Retail (%) 1,3 2,8 26,1
Growth in loans receivable -
Financial Services (%) 13,0 16,4 34,6
Growth in cash generated from operations (%) 26,6 (11,7) (16,0)
Cash conversion (%) 45,7 40,4 43,1
Return on equity - annualised (%) 21,7 23,8 24,8
Shareholding
Number of shares ('000)
- In issue, net of treasury shares 101 601 103 869 101 191
- Weighted shares in issue, net of treasury shares 101 236 100 779 100 795
- Diluted weighted average 101 812 101 227 101 812
Earnings per share (cents)
- attributable 169,8 156,9 352,5
- diluted attributable 168,8 156,3 349,0
- headline (HEPS) 169,8 157,1 352,8
- diluted HEPS 168,8 156,4 349,2
Distributions to shareholders
Interim dividend proposed/paid (cents per share) 64,0 61,0 -
Final dividend proposed/paid (cents per share) - - 161,0
64,0 61,0 161,0
Dividend cover (times) 2,6 2,6 2,2
In June 2015 the interim and final dividends for the 2014 financial year of R163,1 million
(161 cents per share) were paid to shareholders.
The directors propose declaring an interim dividend of 64 cents per share (2014: 61 cents per share)
and this is expected to be paid by the end of November 2015. This interim dividend of R65,0 million
(2013: R61,5 million) has not been recognised as a liability in the interim financial information.
GROUP SEGMENTAL ANALYSIS
Six months ended 30 June
Financial Elimin-
Retail Services Property Other ations Total
R'000 R'000 R'000 R'000 R'000 R'000
2015 - Unaudited
Segment revenue 761 993 233 186 15 450 - 1 010 629
Retail sales 498 635 - - - 498 635
Finance charges and initiation
fees earned 230 179 191 802 - - 421 981
Fees from ancillary services 33 179 41 384 15 450 - 90 013
Dividends revenue - - - - -
Less: intersegment revenue - - (15 450) - - (15 450)
Revenue from external customers 761 993 233 186 - - - 995 179
Growth in revenue from external
customers (%) 12,4 27,9 15,6
Segment results* 142 212 87 391 14 519 8 908 (1 633) 251 397
Segment results margin (%) 18,7 37,5 24,9
Growth in segment results (%) 8,3 19,7 14,7 9,1
Segment assets** 1 370 081 776 447 274 899 17 286 (12 478) 2 426 235
Segment liabilities** (362 757) (35 985) (171 418) (268 202) 3 000 (835 362)
Group loans receivable/(payable) 66 878 (319 117) (60 103) 312 342 - -
Operating cash flows before working
capital changes 155 312 103 582 15 155 (2 745) (1 079) 270 225
Movement in working capital (65 937) (72 353) (6 265) (3 146) 51 (147 650)
Cash generated/(utilised) from operations 89 375 31 229 8 890 (5 891) (1 028) 122 575
Gross profit margin (%) 49,1 49,1
2014 - Reviewed
Segment revenue 677 709 182 329 13 721 2 039 - 875 798
Retail Sales 451 021 - - - - 451 021
Finance charges and initiation
fees earned 196 553 146 113 - - - 342 666
Fees from ancillary services 30 135 36 216 13 721 - - 80 072
Dividends revenue - - - 2 039 - 2 039
Less: intersegment revenue - - (13 127) (2 039) - (15 166)
Revenue from external customers 677 709 182 329 594 - - 860 632
Growth in revenue from external
customers (%) 12,3 15,1 (0,2) 12,9
Segment results* 131 371 73 032 12 657 15 442 (2 039) 230 463
Segment results margin (%) 19,4 40,1 92,2 26,3
Growth in segment results (%) 12,4 16,0 54,0 12,6
Segment assets** 1 079 106 605 542 228 530 3 309 (2 413) 1 914 074
Segment liabilities** (308 847) (15 640) (110 094) (107 010) 5 397 (536 194)
Group loans receivable/(payable) 153 794 (297 715) (83 990) 227 910 - -
Operating cash flows before working
capital changes 142 355 86 427 13 290 (211) (7) 241 854
Movement in working capital (64 919) (77 411) (352) (2 325) - (145 007)
Cash generated/(utilised) from operations 77 436 9 016 12 938 (2 536) (7) 96 847
* 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.
** Excluding group loans.
Unaudited Reviewed
Jun 2015 Jun 2014
R'000 R'000
Reconciliation of segment results
Segment results as reported above 251 397 230 463
Interest received 414 481
Interest paid (10 226) (9 555)
Share of loss of associates (493) (1 178)
Profit before tax 241 092 220 210
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of presentation and accounting policies
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and the requirements of
the Maltese Companies Act. The accounting policies applied in the preparation of these interim
financial statements are in terms of International Financial Reporting Standards and are
consistent with those applied in the previous consolidated annual financial statements.
Unaudited Reviewed Audited
six months six months year
ended ended ended
Jun 2015 Jun 2014 Dec 2014
R'000 R'000 R'000
2. Trade and other receivables
Trade and other receivables can be
summarised as follows:
Trade receivables- Retail 1 079 083 863 183 1 063 645
Provision for impairment (201 969) (157 267) (198 179)
877 114 705 916 865 466
Loans receivable - Financial Services 845 340 608 174 748 907
Provision for impairment (142 909) (70 541) (127 103)
702 431 537 633 621 804
Other receivables 11 234 18 315 17 503
Trade and other receivables 1 590 779 1 261 864 1 504 773
Trade receivables - Retail
Debtor costs 110 414 91 994 220 725
Debtor costs as a % of revenue (%) 14,5 13,6 14,0
Debtor costs as a % of gross receivables
(annualised) (%) 20,5 21,3 20,8
Provision for impairment as a % of gross
receivables (%) 18,7 18,2 18,6
Loans receivable - Financial Services
Debtor costs 74 004 62 362 109 177
Debtor costs as % of revenue (%) 31,7 34,2 28,3
Debtor costs as a % of gross receivables
(annualised) (%) 17,5 20,5 14,6
Provision for impairment as a % of gross
receivables (%) 16,9 11,6 17,0
Group
Debtor costs 184 418 154 356 329 902
Debtor costs as % of revenue (%) 18,5 17,9 16,8
Debtor costs as a % of gross receivables
(annualised) (%) 19,2 21,0 18,2
Provision for impairment as a % of gross
receivables (%) 17,9 15,5 17,9
Non-performing trade and loan receivables, being accounts 120 days or more in arrears,
as a percentage of the trade and loan receivable books were as follows at the reporting dates:
Retail (%) 9,0 8,5 8,7
Financial Services (%) 4,6 3,7 4,2
Unaudited Reviewed Audited
six months six months year
ended ended ended
Jun 2015 Jun 2014 Dec 2014
R'000 R'000 R'000
3. Reconciliation of cash flows generated
from operations
Profit before taxation 241 092 220 210 499 041
Share of loss of associates 493 1 178 2 556
Loss on disposal of property, plant and
equipment and intangibles - 263 338
Loans to employees - amortised cost adjustment - (57) (147)
Notional interest on loans to employees - (191) (321)
Depreciation and amortisation 13 600 11 183 22 774
Share-based employee service expense 732 538 1 128
Capitalised bond costs - amortised cost adjustment 516 468 873
Interest paid 14 825 8 875 21 883
Interest received (1 033) (613) (1 948)
Operating cash flows before working
capital changes 270 225 241 854 546 177
Movements in working capital (147 650) (145 007) (312 612)
Increase in inventories (61 318) (57 977) (21 399)
Increase in trade receivables - Retail (11 648) (19 541) (179 091)
Increase in loans receivable -
Financial Services (80 627) (75 553) (159 724)
Decrease in other receivables 6 269 3 114 3 963
Increase in trade and other payables 24 418 13 950 21 561
(Decrease)/increase in provisions (24 744) (9 000) 22 078
Cash generated from operations 122 575 96 848 233 565
4. Total trading expenses
Expenses by nature
Debtor costs
Trade receivables - Retail 110 414 91 994 220 725
Loans receivable - Financial Services 74 004 62 362 109 177
Total debtor costs 184 418 154 356 329 902
Amortisation of intangible assets 5 603 4 621 9 018
Depreciation of property, plant and equipment 7 997 6 562 13 756
Restructuring and listing costs - - 10 225
Operating lease charges for immovable property 996 2 920
Total operating lease charges 2 146 1 059 4 247
Less: Disclosed under cost of retail sales (1 150) (1 057) (3 327)
Marketing costs 82 751 84 687 166 244
Staff costs 120 319 95 465 231 600
Total staff costs 129 790 104 850 251 230
Less: disclosed under cost of retail sales (9 471) (9 385) (19 630)
Other costs 85 049 58 992 131 116
Total other trading expenses 302 715 250 329 562 879
Operating costs 487 133 404 685 892 781
5. Basic and headline earnings
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:
Profit for the period 171 853 158 169 355 320
Adjusted for the after-tax effect of:
Loss on disposal of property, plant and
equipment and intangible assets - 263 338
Tax effect - (74) (95)
Headline earnings for the period 171 853 158 358 355 563
6. Purchase of intangible assets
Included in the reporting period's purchase of intangible assets is the capitalisation of
R19,1 million (2014: R9,8 million) of costs relating to the ERP system implementation, as well
as R41,3 million (2014: R0,4 million) relating to the construction of the new call centre and
showroom.
7. Contingent liabilities
The group had no contingent liabilities at the reporting date.
8. 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, loan to directors and intragroup transactions which have been
eliminated on consolidation. Current interest-bearing liabilities includes a R160 million
loan from the group's controlling shareholder which bears interest at the South African prime
lending rate and is repayable in 2016.
9. Events after the reporting date
No event, material to the understanding of this interim report, has occurred between the end
of the interim period and the date of approval of these interim results.
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.
11. Seasonality
Due to its seasonal nature, the retail business has a history of generating higher revenues
during the second half of the year. In the financial year ended 31 December 2014, 42% of retail
sales accumulated in the first half of the year, with 58% accumulating in the second half.
12. Preparation and review of interim financial statements
These interim financial statements were prepared by the group's finance department, acting
under the supervision of P Burnett, CA (SA), finance director of the group.
The current year interim results have not been reviewed or audited by our auditors,
PricewaterhouseCoopers Inc.
The interim financial statements for the prior year were reviewed for the purposes of the
group's listing on the JSE in accordance with International Standards on Review
Engagements 2410.
13. Estimates
In preparing these condensed interim financial statements, the significant judgements made
by management in applying the group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated financial statements for
the year ended 31 December 2014.
14. 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.
Jun 2015 Jun 2014 Dec 2014
R'000 R'000 R'000
15. Capital commitments for property,
plant and equipment and intangible assets
Approved by the directors 44 232 49 442 83 876
Approved by the directors and contracted for 36 250 56 602 84 846
80 482 106 045 168 722
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
24 August 2015
Date: 24/08/2015 09:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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