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HOMECHOICE INTERNATIONAL PLC - Summarised financial statements for the year ended 31 December 2015

Release Date: 15/03/2016 09:40
Code(s): HIL
 
Wrap Text
Summarised financial statements for the year ended 31 December 2015

HomeChoice International PLC
(Incorporated in Malta)
Registration number: C66099
JSE share code: HIL
ISIN: MT0000850108
("HIL" or "the group")


SUMMARISED FINANCIAL STATEMENTS
for the year ended 31 December 2015

-  Revenue up 14% to R2,2 billion 
-  Retail sales up 11% to R1,2 billion
-  Gross profit margin up from 49,8% to 50,7%
-  EBITDA up 17% to R632 million
-  Operating profit up 11% to R580 million
-  Headline earnings per share up 10% to 389,1 cents
-  Credit extended via digital channels up to 28% of total group credit


COMMENTARY

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 Retail (HomeChoice) and 
Financial Services (FinChoice) businesses, the group sells innovative homewares merchandise, 
personal technology and loan products to the rapidly expanding mass middle-income market in 
southern Africa. As a leading home-shopping retailer, products are offered through online 
channels, call centres, sales agent networks and mail order catalogues. The omni-channel model 
and digital Financial Services business provide a strong platform for realising the group's 
ambitions of becoming a pan-African retailer. 

Trading and financial performance
The group has achieved good growth despite the deteriorating economic environment and mass market 
consumers being under pressure from rising inflation, a weak job market and reduced access to 
credit. The business delivered the following trading and financial performance for the year:

                                                       31 Dec      31 Dec           %
                                                         2015        2014      change
Group                                
Revenue                                     (Rm)        2 233       1 959          14
EBITDA                                      (Rm)          632         542          17
Operating profit margin                      (%)         26,0        26,6         
Cash generated from operations              (Rm)          358         234          53
NAV per share                            (cents)        1 719       1 560          10
Dividend paid per share                  (cents)                        
                                
Retail                                
Revenue                                     (Rm)        1 755       1 572          12
Retail sales                                (Rm)        1 197       1 082          11
Gross profit margin                          (%)         50,7        49,8          
EBITDA                                      (Rm)          378         338          12
Cash generated from operations              (Rm)          277         165          68
                                
Financial Services                                
Loan disbursements                          (Rm)        1 131         945          20
Revenue                                     (Rm)          478         386          24
EBITDA                                      (Rm)          233         189          23
Cash generated from operations              (Rm)           65          48          34

Group revenue increased by 14% to R2,2 billion, with strong performances from both Retail and 
Financial Services. The Retail business continues to attract new customers to the group and grew 
the customer base by 9% to 677 000 while maintaining strict credit-granting criteria. 

The gross profit margin improved by 90 basis points to 50,7%. Other trading expenses were also 
well managed, however exceeded revenue growth due to higher debtor costs and an increase in 
amortisation expenses arising from the continued investment in IT systems. Group operating profit 
increased by 11% to R580 million and EBITDA increased strongly by 17% to R632 million.

Digital engagement is a core competency of the group and a strategic growth driver. The strength of 
our digital performance is reflected in the 20% increase in credit extended by the group via digital 
channels to R745 million, which now represents 28% of total credit extended. 

Retail
2015 has been a year of strong innovation in products and channels. Retail sales grew 11% with 
pleasing volume growth reflecting changes in product mix and the introduction of new ranges. 
Customers have responded well to continued innovation in core bedding. During the year we launched 
footwear and clothing ranges and are pleased with the performance of both categories. Retail 
sales were, however, negatively impacted by credit policy tightening and disruption during the 
development of the new call centre building, and the associated higher levels of staff attrition 
in the call centre. The new call centre was successfully opened in January 2016 and is anticipated 
to contribute to improvements in tenure and performance.

The impact of deterioration in the Rand on merchandise imports was well managed. Gains in the 
margin were achieved through selected price increases, effective product management, operating 
efficiencies in our logistics operations and a focus on costs throughout the supply chain. 
Efficiency gains are being realised from the new distribution centre completed in 2013. Stock was 
well managed and stockholding levels at year-end were only 4% higher than the prior year. Stock 
turn remained at 3,5 times.

Sales via digital channels grew at 30% and remain the fastest growing channel, increasing from 9% 
to 11% of retail sales. 

Financial Services
FinChoice maintained its strategic focus on short-term, low-value personal loans to HomeChoice 
customers with a good credit record with the Retail business. Loan disbursements increased by 22% 
to R1,1 billion, with 73% of disbursements made to existing loan customers. The average term in 
the FinChoice book is 20,2 months (December 2014: 19,2 months) and average balance is R8 792 
(December 2014: R8 206), both well below the market averages. 

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. FinChoice customers continue to engage through the successful KwikServe mobile platform, 
with R454 million of disbursements (representing over 55% of all repeat loan transactions) 
originating via this innovative self-service channel. The number of FinChoice self-service 
customer transactions were up 25% to 2,5 million.

Credit management
Credit conditions remain challenging and the group continues to apply strict credit criteria and 
conservative provisioning policies.

                                                       31 Dec      31 Dec           %
                                                         2015        2014      change
Group                                
Gross trade and loans receivable            (Rm)        2 156       1 813          19
Debtor costs as a % of revenue               (%)         17,8        16,8         
                                
Retail                                
Gross trade receivables                     (Rm)        1 209       1 064          14
Debtor costs as a % of revenue               (%)         14,5        14,0         
Provision for impairment as % of gross 
  receivables                                (%)         18,7        18,6                  
                                
Financial Services                                
Gross loans receivable                      (Rm)          948         749          27
Debtor costs as a % of revenue               (%)         29,9        28,3         
Provision for impairment as % of gross 
  receivables                                (%)         16,6        17,0                  


Group debtor costs increased by 20% to R397 million (2014: R330 million) compared to revenue 
growth of 14%. On a comparable basis, group debtor costs have increased by 16%. Debtor costs in 
2014 were impacted by the change in accounting treatment of the Financial Services debt review 
book which is now included in the loan book with a conservative provision of 80%. 

Retail debtor costs increased by 15%. The postal strike in the last quarter of 2014 impacted on 
our ability to deliver parcels to customers and negatively impacted customer payment performance. 
Higher levels of fraud were also experienced. Credit-granting criteria were tightened and fraud 
detection systems improved. Early new and existing customer vintages are showing improvements. 
The Retail impairment provision was increased to 18,7% (2014: 18,6%).

FinChoice benefits from marketing to creditworthy HomeChoice customers, which lowers credit risk 
and significantly reduces customer fraud. Debtor costs in FinChoice reduced (on a comparable basis) 
as a percentage of revenue from 30,0% in 2014 to 29,9%. The FinChoice impairment provision was 
reduced to 16,6% (2014: 17,0%).

The new affordability assessment regulations introduced by the National Credit Regulator during 
2015 were disruptive to the industry as a whole and are particularly challenging for a home- 
shopping retailer. The new regulations required the group to reprioritise system development and 
change operational processes significantly. The affordability projects have been well implemented 
across both businesses.

Cash and capital management
Cash management and collections of the debtors' books remains a key focus and the group generated 
cash from operations of R358 million, a 53% increase over 2014. The improvement in the cash 
generated was primarily influenced by lower growth in the Retail debtors' book, net of an increase 
in the Financial Services loan book, improved collection processes and better management of working 
capital. Cash conversion (cash generated from operations expressed as a percentage of EBITDA) 
increased substantially from 43,1% in 2014 to 56,7% in 2015.

The group has continued its capital investment programme despite the tough economic environment 
and has invested over R500 million on its operations and platform for growth over the last five years. 
A new 1 000-seat call centre and retail showroom were developed during 2015, and the group continues 
to invest in its IT and digital platforms. 

The financial position of the group remains strong, with net asset value increasing by 10% to 
1 719 cents per share. Cash and cash equivalents at year-end increased from R63 million to 
R87 million. The net debt to equity ratio of 26% remains comfortably within management's targeted 
range of below 40%.

Dividends
In the 2015 financial year dividends of R228 million were paid to shareholders. This represented 
the final dividend for 2014 of 161 cents per share and the half-year dividend for 2015 of 64 cents 
per share. The dividend cover has been increased from 2,2 times to 2,6 times, within the target 
range of 2,2 - 2,8. The directors intend declaring a final dividend for 2015 of 84 cents, payable 
in June 2016. The details of the declaration will be communicated on SENS after the annual general 
meeting on 12 May 2016.

Outlook
Although the credit health of South African consumers appears to be showing early signs of 
improvement, customers in the group's target market remain financially constrained and this will 
continue to impact on demand for the group's products and services. Management continues to focus 
on cost control, cash generation and on sustaining the quality of the debtors' books. We will 
maintain a cautious approach to credit.

HomeChoice aims to drive customer and revenue growth through its omni-channel retail model and 
digital customer engagement strategy, supported by the extension of product ranges and new 
categories. The benefits of the first “bricks and mortar” showroom and the new call centre will 
start to be realised in the 2016 financial year. FinChoice continues to be a niche financial 
services provider focused on technology-based customer engagement.

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 expansion strategies should ensure sustainable returns to shareholders.



Gregoire Lartigue
Chief Executive Officer



Paul Burnett
Financial Director



Shirley Maltz
Chief Executive Officer (South Africa)

Qormi, Malta
14 March 2016



SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
                                                         2015          %         2014
                                                        R'000      change       R'000 
ASSETS                                         
Non-current assets                                         
Property, plant and equipment                         422 243        41,0     299 387 
Intangible assets                                     101 928        11,9      91 125 
Loans to employees                                        207                   1 302 
Investment in associates                               13 248                   7 676 
Deferred taxation                                      25 708                  18 819 
                                                      563 334        34,7     418 309 
                                        
Current assets                                         
Inventories (note 2)                                  170 391         2,4     166 363 
Taxation receivable                                     4 271                  12 232 
Trade and other receivables (note 3)                1 787 273        18,8   1 504 773 
Trade receivables - Retail                            982 061        13,5     865 466 
Loans receivable - Financial Services                 790 575        27,1     621 804 
Other receivables                                      14 637       (16,4)     17 503 
Cash and cash equivalents                              88 300                  63 005 
                                                    2 050 235        17,4   1 746 373 
Total assets                                        2 613 569        20,7   2 164 682 
                                        
EQUITY AND LIABILITIES                                         
Equity attributable to equity holders of the parent
Stated and share capital                                1 025                   1 018 
Share premium                                       2 987 580               2 982 202 
Reorganisation reserve                             (2 960 639)             (2 960 639)
                                                       27 966                  22 581 
Treasury shares                                        (2 666)                 (2 666)
Other reserves                                          4 502                   3 030 
Retained earnings                                   1 721 626               1 555 381 
Total equity                                        1 751 428        11,0   1 578 326 
                                        
Non-current liabilities                                         
Interest-bearing liabilities                          164 324       (38,3)    266 234 
Deferred taxation                                     112 282                  92 721 
Other payables                                          5 070                   4 340 
                                                      281 676       (22,5)    363 295 
                                        
Current liabilities                                         
Interest-bearing liabilities                          221 102       632,1      30 203 
Taxation payable                                           18                   2 882 
Trade and other payables                              184 550        16,5     158 465 
Provisions                                             12 357                  31 078 
Bank overdraft                                          1 780                     433 
Shareholder loan                                      160 658                       -
                                                      580 465       160,2     223 061 
Total liabilities                                     862 141        47,0     586 356 
Total equity and liabilities                        2 613 569        20,7   2 164 682


SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                         2015          %         2014
                                                        R'000      change       R'000 
Revenue                                             2 232 967        14,0   1 958 575
Retail sales                                        1 197 131        10,6   1 082 473
Finance charges and initiation fees earned            893 722                 745 179
Finance charges earned                                652 083        21,2     537 807
Initiation fees earned                                241 639        16,5     207 372
Fees from ancillary services                          142 114         8,5     130 923
Cost of retail sales                                 (590 010)        8,6    (543 108)
Other operating costs                              (1 064 382)               (892 781)
Debtor costs (note 6)                                (397 469)       20,5    (329 902)
Other trading expenses (note 6)                      (666 913)       18,5    (562 879)
Other net gains and losses                             (1 873)                 (3 787)
Other income                                            3 692                   2 633
                                                            
Operating profit                                      580 394        11,3     521 532
Interest received                                       3 375        73,3       1 948
Interest paid                                         (32 809)       49,9     (21 883)
Share of loss of associates                            (1 137)                 (2 556)
Profit before taxation                                549 823        10,2     499 041
Taxation                                             (155 264)        8,0    (143 721)
Profit and total comprehensive income for the year    394 559        11,0     355 320
                                                            
Earnings per share (cents)
Basic (note 7)                                          388,9        10,3       352,5
Diluted                                                 382,1         9,5       349,0
                                                            
Additional information                                                            
Retail gross profit margin (%)                           50,7                    49,8
                                                            
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

                                                                                                      Equity
                                                                                                attributable
                              Stated                            Reorgan-                           to owners
                           and 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 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 1 January 2015      1 018   2 982 202      (2 666) (2 960 639)      3 030   1 555 381   1 578 326 
Changes in equity                                                                       
Profit and total comprehensive 
  income for the year              -           -           -                       -     394 559     394 559 
Shares issued                      7       5 378           -           -           -           -       5 385 
Dividends paid                     -           -           -                       -    (228 314)   (228 314)
Share option scheme                -           -           -           -       1 472           -       1 472 
Total changes                      7       5 378           -           -       1 472     166 245     173 102 
Balance at 31 December 2015    1 025   2 987 580      (2 666) (2 960 639)      4 502   1 721 626   1 751 428


SUMMARISED GROUP STATEMENT OF CASH FLOWS
                                                         2015          %         2014
                                                        R'000      change       R'000 
Cash flows from operating activities                                        
Operating cash flows before working capital changes   636 923        16,6     546 177 
Movements in working capital                         (278 434)      (10,9)   (312 612)
Cash generated from operations (note 8)               358 489        53,5     233 565 
Interest received                                       3 375                   1 948 
Interest paid                                         (31 483)                (21 883)
Taxation paid                                        (137 495)               (137 927)
Net cash inflow from operating activities             192 886       154,8      75 703 
                                        
Cash flows from investing activities                                        
Purchase of property, plant and equipment            (140 434)                (18 004)
Proceeds on disposal of property, plant 
  and equipment                                           377                     492 
Purchase of intangible assets                         (46 819)                (38 906)
Loans repaid by employees                               1 095                   6 830 
Loans granted to employees                                  -                  (1 302)
Investment in associates                               (6 709)                 (3 696)
Net cash outflow from investing activities           (192 490)      252,6     (54 586)
                                        
Cash flows from financing activities                                        
Proceeds from the issuance of shares                    5 385                   2 667 
Proceeds from interest-bearing liabilities            279 464                 111 671 
Repayments of interest-bearing liabilities            (30 342)                (24 964)
Finance-raising costs paid                             (2 641)                   (500)
Dividends paid                                       (228 314)                (66 514)
Net cash inflow from financing activities              23 552         5,3      22 360 
                                        
Net increase in cash and cash equivalents and 
  bank overdrafts                                      23 948                  43 477 
Cash, cash equivalents and bank overdrafts at 
  the beginning of the year                            62 572                  19 095 
Cash, cash equivalents and bank overdrafts at 
  the end of the year                                  86 520        38,3      62 572


SUMMARISED GROUP SEGMENTAL ANALYSIS
                                                 Retail                     Financial Services
                                      2015         %        2014        2015         %        2014
                                     R'000    change       R'000       R'000    change       R'000
Segmental revenue                1 754 999             1 571 846     477 968               385 988 
Retail sales                     1 197 131      10,6   1 082 473           -                     - 
Finance charges and initiation 
  fees earned                      492 296      14,4     430 496     401 426      27,6     314 683 
Fees from ancillary services        65 572      11,4      58 877      76 542       7,3      71 305 
Dividends received                       -                     -           -                     - 
Intersegment revenue                     -                     -           -                     - 
Revenue from external customers  1 754 999      11,7   1 571 846     477 968      23,8     385 988 
                                                            
EBITDA***                          377 702      11,8     337 946     233 358      23,4     189 064 
Depreciation and amortisation      (50 467)              (20 889)       (974)                 (616)
Interest received                        -                     -         553                   209 
Interest paid                            -                     -     (32 034)              (28 348)
Segmental results*                 327 235               317 057     200 903               160 309 
Interest received                    2 255                 1 595           -                     - 
Interest paid                       (5 198)               (5 070)          -                     - 
Profit before taxation             324 292       3,4     313 582     200 903      25,3     160 309 
Taxation                           (90 762)              (89 074)    (55 478)              (43 614)
Profit for the year                233 530       4,0     224 508     145 425      24,6     116 695 
                                                            
Segmental assets**               1 412 344             1 244 768     848 456               671 802 
Segmental liabilities**            317 029               285 109      35 217                31 951 
                                                            
Operating cash flows before 
  working capital changes          376 886      11,1     339 252     233 736      23,5     189 223 
Movements in working capital      (100 351)             (174 643)   (169 147)             (140 920)
Cash generated/(utilised) 
  by operations                    276 535      68,0     164 609      64 589      33,7      48 303 
                                                            
Gross profit margin (%)               50,7                  49,8                              
Segmental results margin (%)          18,6                  20,2        42,0                  41,5
                                                            
Capital expenditure                                                            
Property, plant and equipment       33 834                14 519         955                   825 
Intangible assets                   44 505                38 463          13                   307 
                                                            
Items included in segmental results:                                                            
Interest received - Other and 
  Financial Services                    -                      -         553                   209 
Interest paid - Other and 
  Financial Services                    -                      -     (32 034)              (28 348)
                                                            
Marketing costs                   161 547        8,5     148 906      19 308      11,4      17 338 
Staff costs                       211 815       14,3     185 315      50 766      13,9      44 567 
Depreciation and amortisation      50 467      141,6      20 889         974      58,2         616 
Other costs                       150 509       19,1     126 339      31 577      22,0      25 892 
Other trading expenses            574 338       19,3     481 449     102 626      16,1      88 413 
Debtor costs                      254 374       15,2     220 725     143 095      31,1     109 177 
Total trading expenses (refer 
  to note 6)                      828 712       18,0     702 174     245 721      24,4     197 590 
                                                            
*   Refer to note 9 for further details on segments and segmental results.
**  Excluding group loans, including loans to share trust.
*** Comparative figures for Other and Eliminations have been restated to provide a more accurate 
    reflection of other segment EBITDA. This restatement amounts to R14,973 million and relates 
    to a once-off realisation of profit on donation of treasury shares between subsidiaries.

                                               Property                          Other
                                      2015         %        2014        2015         %        2014
                                     R'000    change       R'000       R'000    change       R'000
Segmental revenue                   31 075                28 556           -                     - 
Retail sales                             -                     -           -                     - 
Finance charges and initiation 
  fees earned                            -                     -           -                     - 
Fees from ancillary services        31 075                28 556           -                     - 
Dividends received                       -                     -           -                     - 
Intersegment revenue               (31 075)              (27 815)          -                     - 
Revenue from external customers          -    (100,0)        741           -                     - 
                                                            
EBITDA***                           30 259       9,3      27 681     (12 032)     (7,0)    (12 941)
Depreciation and amortisation       (1 272)               (1 269)       (224)                   - 
Interest received                        -                     -      39 016                35 622 
Interest paid                            -                     -     (20 105)               (9 553)
Segmental results*                  28 987                26 412       6 655                13 128 
Interest received                       55                    26                               
Interest paid                      (13 975)              (14 415)                              
Profit before taxation              15 067      25,3      12 023       6 655     (49,3)     13 128 
Taxation                            (4 218)               (3 366)     (4 806)               (7 667)
Profit for the year                 10 849      25,3       8 657       1 849     (66,1)      5 461 
                                                            
Segmental assets**                 337 355               233 779      27 445                17 833 
Segmental liabilities**            253 479               162 629     268 493               110 167 
                                                            
Operating cash flows before working 
  capital changes                   30 505      10,2      27 681      (7 104)    (28,7)     (9 966)
Movements in working capital        (1 012)                 (313)     (4 894)                3 261 
Cash generated/(utilised) 
  by operations                     29 493       7,8      27 368     (11 998)     78,9      (6 705)
                                                            
Gross profit margin (%)                                                            
Segmental results margin(%)           93,3                  92,5           -                     -
                                                            
Capital expenditure                                                            
Property, plant and equipment      105 067                 5 845         578                     - 
Intangible assets                        -                     -       2 423                   136 
                                                            
Items included in segmental results:                                                            
Interest received - Other and 
  Financial Services                     -                     -      39 016                35 622 
Interest paid - Other and 
  Financial Services                     -                     -     (20 105)               (9 553)
Share of loss of associates                                           (1 137)               (2 556)
                                                            
Marketing costs                          -                     -           -                     - 
Staff costs                              -                     -       1 534     (10,7)      1 718 
Depreciation and amortisation        1 272       0,3       1 269         224                     - 
Other costs                          1 093      21,4         900      14 107      11,6      12 636 
Other trading expenses               2 365       9,0       2 169      15 865      10,5      14 354 
Debtor costs                             -                     -           -                     - 
Total trading expenses (refer 
  to note 6)                         2 365       9,0       2 169      15 865      10,5      14 354 
                                                            
*   Refer to note 9 for further details on segments and segmental results.
**  Excluding group loans, including loans to share trust.
*** Comparative figures for Other and Eliminations have been restated to provide a more accurate 
    reflection of other segment EBITDA. This restatement amounts to R14,973 million and relates 
    to a once-off realisation of profit on donation of treasury shares between subsidiaries.

                                            Eliminations                         Total
                                      2015         %        2014        2015         %        2014
                                     R'000    change       R'000       R'000    change       R'000
Segmental revenue                        -                     -   2 264 042             1 986 390 
Retail sales                             -                     -   1 197 131      10,6   1 082 473 
Finance charges and initiation 
  fees earned                            -                     -     893 722      19,9     745 179 
Fees from ancillary services             -                     -     173 189       9,1     158 738 
Dividends received                       -                     -           -                     - 
Intersegment revenue                     -                     -     (31 075)              (27 815)
Revenue from external customers          -                     -   2 232 967      14,0   1 958 575 
                                                            
EBITDA***                            2 900                     -     632 187      16,7     541 749 
Depreciation and amortisation            7                     -     (52 930)              (22 774)
Interest received                  (38 504)              (35 504)      1 065                   327 
Interest paid                       37 232                28 344     (14 907)               (9 557)
Segmental results*                   1 635                (7 160)    565 416               509 745 
Interest received                        -                     -       2 310      42,5       1 621 
Interest paid                        1 271                 7 160     (17 902)     45,2     (12 325)
Profit before taxation               2 907                     -     549 824      10,2     499 041 
Taxation                                 -                     -    (155 264)             (143 721)
Profit for the year                  2 907                     -     394 560      11,0     355 320 
                                                            
Segmental assets**                 (12 031)               (3 500)  2 613 569             2 164 682 
Segmental liabilities**            (12 077)               (3 500)    862 141               586 356 
                                                            
Operating cash flows before 
  working capital changes            2 900 (2 2407,7)        (13)    636 923      16,6     546 177 
Movements in working capital        (3 030)                    3    (278 434)             (312 612)
Cash generated/(utilised) 
  by operations                       (130)  1 200,0         (10)    358 489      53,5     233 565 
                                                            
Gross profit margin (%)                                                 50,7                  49,8
Segmental results margin (%)             -                     -        25,3                  26,0
                                                            
Capital expenditure
Property, plant and equipment            -                     -     140 434                21 188 
Intangible assets                     (122)                    -      46 819                38 906 
                                                            
Items included in segmental results:                                                            
Interest received - Other and 
  Financial Services               (38 504)              (35 504)      1 065                   327 
Interest paid - Other and 
  Financial Services                37 232                28 344     (14 907)               (9 557)
Share of loss of associates                                           (1 137)               (2 556)
                                                            
Marketing costs                          -                     -     180 855       8,8     166 244 
Staff costs                              -                     -     264 115      14,0     231 600 
Depreciation and amortisation           (7)                    -      52 930     132,4      22 774 
Other costs                        (28 273)     20,3     (23 506)    169 013      18,8     142 261 
Other trading expenses             (28 280)     20,3     (23 506)    666 913      18,5     562 879 
Debtor costs                             -                     -     397 469      20,5     329 902 
Total trading expenses (refer 
  to note 6)                       (28 280)     20,3     (23 506)  1 064 382      19,2     892 781 
                                                            
*   Refer to note 9 for further details on segments and segmental results.
**  Excluding group loans, including loans to share trust.
*** Comparative figures for Other and Eliminations have been restated to provide a more accurate 
    reflection of other segment EBITDA. This restatement amounts to R14,973 million and relates 
    to a once-off realisation of profit on donation of treasury shares between subsidiaries.


NOTES TO THE SUMMARISED GROUP ANNUAL FINANCIAL STATEMENTS
1.  Basis of presentation and accounting policies
    The group annual financial statements for the year ended 31 December 2015 and these summarised 
    consolidated financial statements have been prepared by the group's finance department, acting 
    under the supervision of P Burnett, CA(SA) and financial director of the group.

    The summarised consolidated financial statements are prepared in accordance with the requirements 
    of the JSE Limited (JSE) for summarised financial statements. The JSE requires summarised financial 
    statements 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 group annual financial statements from which the 
    summarised 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 group 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 2015.

2.  Inventories                    
                                                                     2015        2014
                                                                    R'000       R'000
    Merchandise for resale                                        129 362     124 966 
    Provision for inventory obsolescence                          (11 456)    (11 500)
    Goods in transit                                               52 485      52 897 
                                                                  170 391     166 363 
                              
    Inventory sold at less than cost during the current year amounted to R11,966 million 
    (2014: R15,558 million).                    

3.  Trade and other receivables                              
                                                         2015           %        2014
                                                        R'000      change       R'000
    Trade receivables - Retail                      1 208 631        13,6   1 063 645 
    Provision for impairment                         (226 570)       14,3    (198 179)
                                                      982 061        13,5     865 466 
    Loans receivable - Financial Services             947 586        26,5     748 907 
    Provision for impairment                         (157 011)       23,5    (127 103)
                                                      790 575        27,1     621 804 
    Other receivables                                  14 637       (16,4)     17 503 
    Total trade and other receivables               1 787 273        18,8   1 504 773 
    Trade and loan receivables                      2 156 217        19,0   1 812 552 
    Provision for impairment                         (383 581)       17,9    (325 282)
    Other receivables                                  14 637       (16,4)     17 503

    Movements in the provision for impairment were as follows:
    Retail                              
    Opening balance                                  (198 179)       24,4    (159 355)
    Movement in provision                             (28 391)      (26,9)    (38 824)
    Debtor costs charged to profit and loss          (254 374)       15,2    (220 725)
    Debts written off during the year, net 
      of recoveries                                   225 983        24,2     181 901 
    Closing balance                                  (226 570)       14,3    (198 179)
                                        
    Financial Services                              
    Opening balance                                  (127 103)      101,6     (63 036)
    Movement in provision                             (29 908)      (53,3)    (64 067)
    Debtor costs charged to profit and loss          (143 095)       31,1    (109 177)
    Debts written off during the year, net 
      of recoveries                                   113 187       150,9      45 110 
    Closing balance                                  (157 011)       23,5    (127 103)
                                        
    Retail                              
    Debtor costs as a % of revenue (%)                   14,5                    14,0 
    Debtor costs as a % of gross receivables (%)         21,0                    20,8 
    Provision for impairment as a % of 
      gross receivables (%)                              18,7                    18,6 
                                        
    Financial Services                              
    Debtor costs as a % of revenue (%)                   29,9                    28,3 
    Debtor costs as a % of gross receivables (%)         15,1                    14,6 
    Provision for impairment as a % of 
      gross receivables (%)                              16,6                    17,0 
                                        
    Group                              
    Debtor costs as a % of revenue (%)                   17,8                    16,8 
    Debtor costs as a % of gross trade receivables (%)   18,4                    18,2 
    Provision for impairment as a % of 
      gross receivables (%)                              17,8                    17,9 
                                        
    * Defined as accounts 120 days or more in arrears as a percentage of the trade and 
      loan receivable 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 consolidated financial 
    statements has occurred between the end of the financial year and the date of approval.

6.  Total trading expenses                              
                                                         2015           %        2014
                                                        R'000      change       R'000
    Expenses by nature                              
    Debtor costs                              
    Trade receivables - Retail                        254 374        15,2     220 725 
    Loans receivable - Financial Services             143 095        31,1     109 177 
    Total debtor costs                                397 469        20,5     329 902 
    Amortisation of intangible assets                  34 583       283,5       9 018 
    Depreciation of property, plant and equipment      18 347        33,4      13 756 
    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      2 091       127,4         920 
    Total operating lease charges                       4 424         4,2       4 247 
    Less: disclosed under cost of retail sales         (2 333)      (29,9)     (3 327)
    Marketing costs                                   180 855         8,8     166 244 
    Staff costs                                       264 115        14,0     231 600 
    Total staff costs                                 300 380        12,1     268 077 
    Less: disclosed under cost of retail sales        (17 950)       (8,6)    (19 630)
    Less: staff costs capitalised to intangibles      (18 315)        8,7     (16 847)
    Other costs                                       166 922        27,3     131 116 
    Total other trading expenses                      666 913        18,5     562 879 
                                                    1 064 382        19,2     892 781

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:
                                                     2015                    2014
                                              Gross         Net       Gross         Net
                                              R'000       R'000       R'000       R'000
    Profit for the year                                 394 559                 355 320 
    Adjusted for the after-tax effect of:                                        
    Losses on disposal of property, plant 
      and equipment and intangible assets       288         207         338         243 
    Impairment of property, plant 
      and equipment                             116          84           -           - 
    Headline earnings                                   394 850                 355 563 
                                                  
    Weighted average number of ordinary 
      shares in issue ('000)                            101 468                 100 795 
    Earnings per share (cents)                                        
    Basic                                                 388,9                   352,5 
    Headline                                              389,1                   352,8
    Basic - diluted                                       382,1                   349,0 
    Headline - diluted                                    382,4                   349,2

8.  Reconciliation of cash generated from operations
                                                           2015           %        2014
                                                          R'000      change       R'000
    Profit before taxation                              549 823        10,2     499 041 
    Share of loss of associates                           1 137       (55,5)      2 556 
    Losses on disposal of property, plant and 
      equipment and intangible assets                       288       (14,8)        338 
    Loans to employees - amortised cost adjustment            -      (100,0)       (147)
    Notional interest on loans to employees                   -      (100,0)       (321)
    Depreciation and amortisation                        52 930       132,4      22 774 
    Share-based employee service expense                  1 472        30,5       1 128 
    Interest paid                                        32 809        49,9      21 883 
    Interest received                                    (3 375)       73,3      (1 948)
    Capitalised bond costs - amortised cost adjustment    1 839       110,5         873 
    Operating cash flows before working capital changes 636 923        16,6     546 177 
    Movements in working capital                       (278 434)      (10,9)   (312 612)
    Increase in inventories                              (4 028)      (81,2)    (21 399)
    Increase in trade receivables - Retail             (116 595)      (34,9)   (179 091)
    Increase in loans receivable - Financial Services  (168 771)        5,7    (159 724)
    Decrease in other receivables                         2 866       (27,7)      3 963 
    Increase in trade and other payables                 26 815        24,4      21 561 
    (Decrease)/increase in provisions                   (18 721)     (184,8)     22 078 
                                                        358 489        53,5     233 565

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. 

11. Commitments
    Leases are contracted for periods not exceeding five years and contain escalation clauses of 
    between 8% and 9% and renewal options. The lease expenditure charged to profit and loss during 
    the year is disclosed in note 6.

    At 31 December the future minimum operating lease commitments amounted to the following:
                                                                     2015        2014
                                                                    R'000       R'000
    Properties                    
    Payable within one year                                         2 453       2 272 
    Payable between two and five years                                206       2 659 
                                                                    2 659       4 931 
                              
    Suspensive sale agreements                    
    Payable within one year                                        24 594      19 497 
    Payable between two and five years                             28 023      31 949 
                                                                   52 617      51 446 
    Future finance charges on suspensive sale agreements           (5 409)     (4 504)
                                                                   47 208      46 942 
                              
    The present value of suspensive sale agreement payments 
      is as follows:                    
    Payable within one year                                        21 957      16 846 
    Payable between two and five years                             25 251      30 096 
                                                                   47 208      46 942 
                              
    Capital commitments for property, plant and equipment and 
      intangible assets:                    
    Approved by the directors                                      50 568      83 876 
    Approved by the directors and contracted for                        -      84 846 
                                                                   50 568     168 722
                              
                              
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 group annual 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 
    group annual 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 960 639 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 and intragroup transactions which have been eliminated 
    on consolidation.

    The group entered into a loan agreement with its shareholder, GFM Limited, in May 2015. 
    The loan carries interest at the South African prime interest rate and it has a term of one year.

14. Purchase of intangibles
    Included in the reporting period's purchase of intangible assets is the capitalisation of 
    R30,1 million (2014: R25,8 million) of costs relating to the ERP system implementation.

15. Change in accounting estimate
    During the year the group reviewed the current condition of certain existing software and licences 
    and assessed the impact of the continuous evolution in technology on that software and licences. 
    As a result the estimated useful life of the ERP system included in intangible assets was revised 
    from ten years to five years. The change in accounting estimate is accounted for prospectively 
    from 1 January 2015. The net effect of the changes in the current financial year was an increase 
    in amortisation expense of R9,772 million. Assuming the assets are held until the end of their 
    estimated useful lives, amortisation in future years in relation to these assets will be increased 
    by the following amounts: 
                                                                                R'000 
    Year ending 31 December          
    2016                                                                        5 677
    2017                                                                        5 677
    2018                                                                        3 921

16. Audit opinion
    This summarised report is extracted from audited information, but is not itself audited. 
    The group annual financial statements were audited by PricewaterhouseCoopers, who expressed an 
    unmodified opinion thereon. The audited group 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 this report and that the financial information has 
    been correctly extracted from the underlying group annual financial statements.


Registered office: 93 Mill Street, Qormi, QRM3012, 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


SENS release date: 15 March 2016


Date: 15/03/2016 09:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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