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Summarised group financial statements for the year ended 31 December 2016 and cash dividend declaration
HomeChoice International PLC
(Incorporated in Malta)
Registration number: C66099
JSE share code: HIL
ISIN: MT0000850108
("HIL" or "the group")
SUMMARISED GROUP FINANCIAL STATEMENTS
for the year ended 31 December 2016 and cash dividend declaration
GROUP HIGHLIGHTS
Retail sales up 25.1% to R1.5 billion
Customer base up 10%
Revenue up 19.3% to R2.7 billion
Loan disbursements up 10.4% to R1.3 billion
40% increase in digital Retail sales
R846 million digital credit extended, 28% of total group credit
EBITDA up 11.0% to R701.4 million
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 operating
subsidiaries, HomeChoice (Retail) and FinChoice (Financial Services), the group sells
innovative homewares, apparel, personal technology, loans and insurance 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 digital channels, call centres, sales agent networks and a showroom.
The group's omni-channel Retail model and digital Financial Services business provide
a strong platform for achieving its ambitions of becoming a digital pan-African
retailer and financial services provider.
TRADING ENVIRONMENT
Despite the challenging economic environment in South Africa the group has delivered
good growth in revenue and profits. The group's middle income customers have been under
pressure from high food inflation and transport costs, a weak job market and constrained
access to credit.
The affordability assessment regulations introduced in September 2015 by the National
Credit Regulator (NCR) have constrained the unsecured credit environment. The regulations
have been complex to implement and required customer education as well as significant
changes to business systems and processes, resulting in higher operating and compliance
costs. The NCR reduced the maximum interest rates for credit agreements in May 2016,
with a 5% reduction providing some relief to customers and increasing pressure on
business to mitigate the negative impact on the bottom line.
FINANCIAL PERFORMANCE
The group delivered a strong trading and financial performance driven by the continual
focus on our customer proposition and ensuring we steadily grow our customer base.
31 Dec 31 Dec %
2016 2015 change
Group
Revenue (Rm) 2 664.2 2 232.9 19.3
Earnings before interest, tax and
depreciation (EBITDA) (Rm) 701.4 632.2 11.0
Operating profit (Rm) 648.2 580.4 11.7
Operating profit margin (%) 24.3 26.0
Headline earnings per share (HEPS) (cents) 414.6 389.1 6.6
Cash generated from operations (Rm) 277.0 358.5 (22.7)
Retail
Revenue (Rm) 2 082.7 1 754.9 18.7
Retail sales (Rm) 1 497.6 1 197.1 25.1
Gross profit margin (%) 49.3 50.7
EBITDA (Rm) 420.2 377.2 11.3
Financial Services
Loan disbursements (Rm) 1 249 1 131 10.4
Revenue (Rm) 581.5 477.9 21.6
EBITDA (Rm) 260.7 233.4 11.7
Group revenue increased by 19.3% to R2 664.2 million, with stronger growth in the
second half driven by good Retail sales and an improved performance in Financial
Services loans disbursements.
Retail sales had a strong second half increasing by 29.8% to R910.0 million, resulting
in a full-year sales increase of 25.1%. Customers responded positively to the strategic
introduction of the Retail credit facility product at reduced interest rates. This new
credit offer enabled customers to purchase similar product at a lower price or use the
opportunity to purchase higher-value items while keeping the monthly instalment
outlay constant.
The impact of the reduction in the prescribed maximum interest rate was evident in the
second half, resulting in a slowdown in finance charges earned by the group. The credit
facility product in Retail, which attracts a lower interest rate than the previous
instalment credit product, further reduced finance income.
Full-year debtor costs were 20.3% up on the previous year, with a slight deterioration
in the second half reflecting the challenging collections environment.
A strong focus on cost management across the group managed the increase in other
trading expenses below revenue growth. The group had an increase in compliance costs
due to affordability regulations and continued its investment in technology and people
to support its growth.
Group EBITDA increased by 11.0% to R701.4 million as finance charges earned increased
by 3.1% due to the lower interest rates charged. Operating profit increased by 11.7%,
reflecting a more normalised depreciation charge compared to 2015.
Headline earnings for the year increased by 7.5% to R424.7 million, with HEPS up 6.6%
to 414.6 cents due to increased interest paid on property borrowings.
RETAIL PERFORMANCE
Retail sales increased by 25.1% to R1 497.6 million. The business delivered strong
growth in its heritage textiles business with customers responding positively to the
product innovation across the bedding range. Branded home appliances and electronic
products were introduced to support the private label offering and favourable customer
response drove good momentum in the hard goods product category.
Strong marketing offers and the continued use of television advertising increased the
Retail customer base to 700 000, up 9.0% on 2015.
The introduction of the credit facility product (from the previous instalment credit
product) attracts a lower interest rate and resulted in a marginal decrease in finance
charges and initiation fees earned for the year. Fees from ancillary services, which
now include insurance income, were up 42.4% delivering R93.4 million.
The gross profit margin declined to 49.3% from 50.7% in 2015. The change in mix of
products, with an increased percentage from external brands, which typically earns a
lower margin than private label brands, has been mitigated by good efficiencies and
productivity gains achieved in the supply chain.
Retail EBITDA increased by 11.3% to R420.2 million with higher-than-anticipated debtor
costs that increased by 23.9% on 2015. As the Retail business continues with its
digital strategy, other trading expenses have shown good productivity efficiencies,
up 11.2% on 2015. Operating profit has increased by 13.2% to R370.7 million, improved
by a more normalised depreciation and amortisation charge.
Digital is our fastest-growing sales channel, up 40.3% for the year and now represents
12% sales contribution. Mobi is our customer's preferred shopping channel, with 56%
contribution to total digital sales. The business continues to invest in its digital
platforms and introduced products which are only available online to positive
customer response.
Sales to customers in neighbouring African countries represent 10% of business with
good demand from customers in Namibia and Botswana. Over 17 000 new foreign customers
were acquired, which is a 14% growth on 2015.
The bricks and mortar Retail showroom concept has traded well, and customers have
responded positively to the convenient "call and collect" delivery option offered
by this channel. This proven concept will be rolled out as we find suitable sites.
FINANCIAL SERVICES PERFORMANCE
Revenue increased by 21.6% to R581.5 million for the 12 months ended 31 December 2016,
with second-half growth up 23.2%. EBITDA grew by 11.7% to R260.7 million, following
good debtors' performance and investment in people, technology and compliance.
Full-year loan disbursements grew by 10.4%, with the second half growing by 13.1%,
as customers adapted to and become more comfortable with the processes required for
the affordability regulations and the business developed more user-friendly options
for her. The Financial Services customer base grew 6.5% to 142 000. New customer
acquisition reached 35 000 for 2016, 12% down on 2015. New loans contribution increased
from 20.1% in the first half to 25.0% in the second half.
Revenue earned from insurance products has grown significantly during the year as the
group moved to managing insurance through a cell captive business based in Mauritius.
Credit life insurance was offered on all loan contracts from May and the new funeral
insurance product was scaled during the second half with pleasing customer conversion.
We see the opportunity for growth in insurance revenue to expand into 2017 and beyond.
The Financial Services business is primarily a digital business. 64% of all loan
transactions were concluded by our customers via mobile phones. The KwikServe USSD
channel continues to be the primary engagement channel, with 76% of digital customers
preferring to transact from this platform. Strong growth has been experienced from our
mobi site, with registered customers increasing from 15% to 35% of the active loans base.
The digital team commenced adding self-service features to the mobi site to shift more
customer engagement online. The account settlement quote feature was released in
quarter four and has already shifted 30% of such service requests away from the
call centre.
The business opened its first retail presence in the Retail showroom. Customers are
able to open loan accounts and be serviced face to face or engage digitally via a
self-service kiosk. Early results are encouraging and we expect to acquire incremental
customers through this channel.
The Financial Services business in Mauritius commenced operations during the year.
Systems, products and processes were established to conduct a successful pilot of
loan disbursements to South African customers during the second half of the year.
The Mauritius business expects to scale these operations further in 2017 to include
Botswana and Namibia.
CREDIT RISK MANAGEMENT
The group has continued to adapt and manage the credit-granting criteria in line with
the economic conditions and the constrained unsecured lending environment.
Credit performance for the period is summarised below:
31 Dec 31 Dec %
2016 2015 change
Group
Gross trade and loans receivable (Rm) 2 654.6 2 156.2 23.1
Debtor costs as a % of revenue (%) 17.9 17.8
Non-performing loans (NPLs) (>120 days) (%) 7.0 7.3
NPL cover (times) 2.5 2.4
Retail
Gross trade receivable (Rm) 1 507.3 1 208.6 24.7
Debtor costs as a % of revenue (%) 15.1 14.5
Provision for impairment as a % of
gross receivables (%) 18.9 18.7
Non-performing loans (>120 days) (%) 8.7 9.5
NPL cover (times) 2.2 2.0
Financial Services
Gross loans receivable (Rm) 1 147.3 947.6 21.1
Debtor costs as a % of revenue (%) 28.0 29.9
Provision for impairment as a % of
gross receivables (%) 15.5 16.6
Non-performing loans (>120 days) (%) 4.7 4.6
NPL cover (times) 3.3 3.6
Group debtor costs have grown marginally above revenue growth, mainly driven by the
acquisition of new Retail customers and disappointing late-stage collections performance.
The use of television to drive customer acquisition negatively impacted debtor costs
in the first half in Retail. However the tightening of credit criteria and changes in
credit processes for that channel has seen improved metrics in the second half.
The Retail provision has marginally increased from 18.7% to 18.9% at December 2016.
Financial Services debtor costs have reduced from 29.9% in 2015 to 28.0% in 2016.
As the business gains more knowledge on the debt review book in Financial Services,
there has been a reduction in the conservative provisions previously held on the book.
As a result the impairment provision has reduced to 15.5% at December 2016 (2015: 16.6%).
CASH AND CASH MANAGEMENT
Cash and cash equivalents was R187.3 million at year-end.
The group secured term loan financing of R350 million which will create sustainable
long-term funding for the group. All the term loan funds were drawn down prior to
31 December 2016. The group has repaid the listed bond of R100 million in October 2016
and will repay the shareholder loan of R160 million during 2017.
Cash generated from operations at R277.0 million was 22.7% down on 2015. The generation
of cash was negatively impacted by the strong growth in the last quarter in both Retail
sales and Financial Services loan disbursements. This growth required additional
working capital funding while the revenue benefit will only accrue in 2017.
CAPITAL MANAGEMENT
Capital expenditure at R46.3 million reflects more normalised levels of expenditure
following a five-year programme of significant infrastructure investments. More than
half of the capital expenditure for 2016 was focused on investments in the group
technology systems and this is expected to follow a similar pattern for the next
three years.
The net debt to equity ratio has increased from 26.2% at December 2015 to 28.7%,
comfortably below the board's upper limit of 40.0%.
OUTLOOK
The trading environment is expected to remain difficult and the unsecured credit
markets constrained.
The group's credit strategy remains unchanged with the focus on driving improvements
in cash collections while maintaining current lending criteria. The group will look to
mitigate the impact of the annualisation of reduced interest rates by growing other
streams of income, including developing the insurance business and driving cost-efficiencies.
Customers continue to respond well to the innovative merchandise ranges and the new
credit facility offer.
The Retail and Financial Services businesses are focused on expanding their digital
capabilities and driving customer engagement, particularly via the mobile phone.
We will focus on growing the digital acquisition of new customers, origination of
loans and our customer self-service options to empower our customers to manage more
of their relationship with us online.
The above information has not been reviewed or reported on by the group's external auditors.
S Portelli G Lartigue S Maltz
Chairman Chief executive officer Chief executive officer (South Africa)
Qormi, Malta ,13 March 2017
DIVIDEND DECLARATION
Notice is hereby given that the board of directors have declared a final gross cash
dividend of 87.0 cents (69.6000 cents net of dividend withholding tax) per ordinary
share for the year ended 31 December 2016. The dividend has been declared from income
reserves. HIL is registered in the Republic of Malta and the dividend is a foreign
dividend. A dividend withholding tax of 20% will be applicable to all South African
shareholders who are not exempt.
The issued share capital at the declaration date is 103 510 901 ordinary shares.
The salient dates for the dividend will be as follows:
Last day of trade to receive a dividend Tuesday, 4 April 2017
Shares commence trading "ex" dividend Wednesday, 5 April 2017
Record date Friday, 7 April 2017
Payment date Monday, 10 April 2017
Share certificates may not be dematerialised or rematerialised between Wednesday,
5 April 2017 and Friday, 7 April 2017, both days inclusive.
G Said
Company secretary
Qormi, Malta, 13 March 2017
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
Notes 2016 % 2015
R'000 change R'000
Assets
Non-current assets
Property, plant and equipment 425 926 0.9 422 243
Intangible assets 89 654 (12.0) 101 928
Loans to employees - 207
Investment in associates and other 24 259 13 248
Deferred taxation 38 217 25 708
578 056 2.6 563 334
Current assets
Inventories 2 213 750 25.4 170 391
Taxation receivable 4 756 4 271
Trade and other receivables 3 2 214 754 23.9 1 787 273
Trade receivables - Retail 1 221 729 24.4 982 061
Loans receivable - Financial Services 969 544 22.6 790 575
Other receivables 23 481 60.4 14 637
Cash and cash equivalents 187 277 88 300
2 620 536 27.8 2 050 235
Total assets 3 198 593 22.4 2 613 569
Equity and liabilities
Equity attributable to equity holders of the parent
Stated and share capital 1 035 1 025
Share premium 2 998 429 2 987 580
Reorganisation reserve (2 960 639) (2 960 639)
38 825 27 966
Treasury shares (2 666) (2 666)
Other reserves 6 377 4 502
Retained earnings 1 987 648 1 721 626
Total equity 2 030 184 15.9 1 751 428
Non-current liabilities
Interest-bearing liabilities 579 140 >100.0 164 324
Deferred taxation 134 844 112 282
Other payables 4 900 5 070
718 884 >100.0 281 676
Current liabilities
Interest-bearing liabilities 31 453 (85.8) 221 102
Taxation payable 11 801 18
Trade and other payables 214 464 16.2 184 550
Provisions 31 713 12 357
Bank overdraft - 1 780
Shareholder loan 160 094 160 658
449 525 (22.6) 580 465
Total liabilities 1 168 409 35.5 862 141
Total equity and liabilities 3 198 593 22.4 2 613 569
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
Notes 2016 % 2015
R'000 change R'000
Revenue 2 664 230 19.3 2 232 967
Retail sales 1 497 610 25.1 1 197 131
Finance charges and initiation fees earned 940 585 893 722
Finance charges earned 672 083 3.1 652 083
Initiation fees earned 268 502 11.1 241 639
Fees from ancillary services 226 035 59.1 142 114
Cost of retail sales (759 288) 28.7 (590 010)
Other operating costs (1 267 819) (1 064 382)
Debtor costs 6 (478 114) 20.3 (397 469)
Other trading expenses 6 (789 705) 18.4 (666 913)
Other net gains and losses 7 505 (1 873)
Other income 3 532 3 692
Operating profit 648 160 11.7 580 394
Interest received 3 393 0.5 3 375
Interest paid (64 854) 97.7 (32 809)
Share of loss of associates (1 564) (1 137)
Profit before taxation 585 135 6.4 549 823
Taxation (160 281) 3.2 (155 264)
Profit and total comprehensive income
for the year 424 854 7.7 394 559
Earnings per share (cents)
Basic 7 414.8 6.7 388.9
Diluted 410.5 7.4 382.1
Additional information
Retail gross profit margin (%) 49.3 50.7
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 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 for share
option scheme 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 1 January 2016 1 025 2 987 580 (2 666) (2 960 639) 4 502 1 721 626 1 751 428
Changes in equity
Profit and total comprehensive
income for the year - - - - - 424 854 424 854
Shares issued for share
option scheme 10 10 849 - - - - 10 859
Dividends paid - - - - - (158 832) (158 832)
Share option scheme - - - - 1 875 - 1 875
Total changes 10 10 849 - - 1 875 266 022 278 756
Balance at 31 December 2016 1 035 2 998 429 (2 666) (2 960 639) 6 377 1 987 648 2 030 184
SUMMARISED GROUP STATEMENT OF CASH FLOWS
Notes 2016 % 2015
R'000 change R'000
Cash flows from operating activities
Operating cash flows before working
capital changes 698 784 9.7 636 923
Movements in working capital (421 740) 51.5 (278 434)
Cash generated from operations 8 277 044 (22.7) 358 489
Interest received 3 286 3 375
Interest paid (60 512) (31 483)
Taxation paid (140 574) (137 495)
Net cash inflow from operating activities 79 244 (58.9) 192 886
Cash flows from investing activities
Purchase of property, plant and equipment (26 282) (140 434)
Proceeds on disposal of property, plant
and equipment 425 377
Purchase of intangible assets (20 124) (46 819)
Loans repaid by employees 207 1 095
Investment in associates (6 753) (6 709)
Net cash outflow from investing activities (52 527) (72.7) (192 490)
Cash flows from financing activities
Proceeds from the issuance of shares 10 860 5 385
Proceeds from interest-bearing liabilities 369 574 279 464
Repayments of interest-bearing liabilities (140 371) (30 342)
Finance-raising costs paid (7 191) (2 641)
Dividends paid (158 832) (228 314)
Net cash inflow from financing activities 74 040 >100.0 23 552
Net increase in cash and cash equivalents
and bank overdrafts 100 757 23 948
Cash, cash equivalents and bank overdrafts
at the beginning of the year 86 520 62 572
Cash, cash equivalents and bank overdrafts
at the end of the year 187 277 >100.0 86 520
GROUP SEGMENTAL ANALYSIS
Financial
Total Retail Services Property Other Intragroup
2016 R'000 R'000 R'000 R'000 R'000 R'000
Segmental revenue 2 716 561 2 082 731 581 499 52 331
Retail sales 1 497 610 1 497 610 -
Finance charges and initiation
fees earned 940 585 491 716 448 869
Fees from ancillary services 278 366 93 405 132 630 52 331
Intersegment revenue (52 331) - - (52 331)
Revenue from external customers 2 664 230 2 082 731 581 499 - - -
Total trading expenses (refer to
note 6) 1 267 819 953 485 325 143 22 252 9 612 (42 673)
EBITDA 701 422 420 203 260 750 31 330 (10 742) (119)
Depreciation and amortisation (54 825) (49 500) (3 648) (1 272) (434) 29
Interest received 1 470 - 563 - 36 088 (35 181)
Interest paid (31 584) - (31 702) - (34 300) 34 418
Segmental operating profit* 616 483 370 703 225 963 30 058 (9 388) (853)
Interest received 1 923 1 889 - 34 - -
Interest paid (33 270) (7 490) - (25 780) - -
Profit before taxation 585 135 365 102 225 963 4 312 (9 388) (853)
Taxation (160 281) (97 460) (54 104) (4 203) (4 514) -
Profit after taxation 424 854 267 642 171 859 109 (13 902) (853)
Segmental assets** 3 198 594 1 759 458 1 095 512 340 116 22 406 (18 898)
Segmental liabilities** 1 168 409 368 495 55 050 251 406 511 388 (17 930)
Operating cash flows before working
capital changes 698 784 421 481 255 770 31 330 (9 178) (619)
Movements in working capital (421 740) (265 056) (161 359) 2 475 1 705 495
Cash generated/(utilised) by operations 277 044 156 425 94 411 33 805 (7 473) (124)
Capital expenditure
Property, plant and equipment 26 282 21 806 764 4 409 67 (764)
Intangible assets 20 124 15 039 285 - 4 920 (120)
Change in Retail sales (%) 25.1 25.1
Change in EBITDA (%) 11.0 11.3 11.7 3.5 (10.7)
Change in debtor costs (%) 20.3 23.9 14.0
Change in other trading expenses (%) 18.4 11.2 57.9 >100.0 (39.4)
Gross profit margin (%) 49.3 49.3
Segmental results margin (%) 22.7 17.8 38.9 57.4
* Refer to note 9 for further details on segments and segmental results.
** Excluding group loans, including loans to share trust.
Financial
Total Retail Services Property Other Intragroup
2015 R'000 R'000 R'000 R'000 R'000 R'000
Segmental revenue 2 264 042 1 754 999 477 968 31 075
Retail sales 1 197 131 1 197 131
Finance charges and initiation
fees earned 893 722 492 296 401 426
Fees from ancillary services 173 189 65 572 76 542 31 075
Intersegment revenue (31 075) (31 075)
Revenue from external customers 2 232 967 1 754 999 477 968 - - -
Total trading expenses (refer to
note 6) 1 064 382 828 712 245 720 2 365 15 865 (28 280)
EBITDA 632 187 377 702 233 358 30 259 (12 032) 2 900
Depreciation and amortisation (52 930) (50 467) (974) (1 272) (224) 7
Interest received 1 065 - 553 - 39 016 (38 504)
Interest paid (14 907) - (32 034) - (20 105) 37 232
Segmental operating profit* 565 415 327 235 200 903 28 987 6 655 1 635
Interest received 2 310 2 255 - 55 - -
Interest paid (17 902) (5 198) - (13 975) - 1 271
Profit before taxation 549 823 324 292 200 903 15 067 6 655 2 906
Taxation (155 264) (90 762) (55 478) (4 218) (4 806) -
Profit after taxation 394 559 233 530 145 425 10 849 1 849 2 906
Segmental assets** 2 613 569 1 412 344 848 456 337 355 27 445 (12 031)
Segmental liabilities** 862 141 317 029 35 217 253 479 268 493 (12 077)
Operating cash flows before working
capital changes 636 923 376 886 233 736 30 505 (7 104) 2 900
Movements in working capital (278 434) (100 351) (169 147) (1 012) (4 894) (3 030)
Cash generated/(utilised) by operations 358 489 276 535 64 589 29 493 (11 998) (130)
Capital expenditure
Property, plant and equipment 140 434 33 834 955 105 067 578 -
Intangible assets 46 819 44 505 13 - 2 423 (122)
Change in Retail sales (%) 10.6 10.6
Change in EBITDA (%) 16.7 11.8 23.4 9.6 (7.0)
Change in debtor costs (%) 20.5 15.2 31.1
Change in other trading expenses (%) 18.5 19.3 16.1 9.0 10.5
Gross profit margin (%) 50.7 50.7
Segmental results margin (%) 25.3 18.6 42.0 93.3
* Refer to note 9 for further details on segments and segmental results.
** Excluding group loans, including loans to share trust.
NOTES TO THE SUMMARISED GROUP FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The group annual financial statements for the year ended 31 December 2016 and these
summarised consolidated financial statements have been prepared by the group's finance
department, acting under the supervision of P Burnett, CA(SA), finance 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 IFRS 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 2016.
2. INVENTORIES
2016 2015
R'000 R'000
Merchandise for resale 198 333 129 362
Provision for inventory obsolescence (22 344) (11 456)
Goods in transit 37 761 52 485
213 750 170 391
Inventory sold at less than cost during the current year amounted to R14.274 million
(2015: R11.966 million).
3. TRADE AND OTHER RECEIVABLES
2016 % 2015
R'000 change R'000
Trade receivables - Retail 1 507 312 24.7 1 208 631
Provision for impairment (285 583) 26.0 (226 570)
1 221 729 24.4 982 061
Loans receivable - Financial Services 1 147 250 21.1 947 586
Provision for impairment (177 706) 13.2 (157 011)
969 544 22.6 790 575
Other receivables 23 481 60.4 14 637
Total trade and other receivables 2 214 754 23.9 1 787 273
Trade and loan receivables 2 654 562 23.1 2 156 217
Provision for impairment (463 289) 20.8 (383 581)
Other receivables 23 481 60.4 14 637
Movements in the provision for impairment
were as follows:
Retail
Opening balance (226 570) 14.3 (198 179)
Movement in provision (59 013) >100.0 (28 391)
Debtor costs charged to profit and loss (315 052) 23.9 (254 374)
Debts written off during the year,
net of recoveries 256 039 13.3 225 983
Closing balance (285 583) 26.0 (226 570)
Financial Services
Opening balance (157 011) 23.5 (127 103)
Movement in provision (20 695) (30.8) (29 908)
Debtor costs charged to profit and loss (163 062) 14.0 (143 095)
Debts written off during the year,
net of recoveries 142 367 25.8 113 187
Closing balance (177 706) 13.2 (157 011)
Retail
Debtor costs as a % of revenue (%) 15.1 14.5
Debtor costs as a % of gross receivables (%) 20.9 21.0
Provision for impairment as a % of gross
receivables (%) 18.9 18.7
Financial Services
Debtor costs as a % of revenue (%) 28.0 29.9
Debtor costs as a % of gross receivables (%) 14.2 15.1
Provision for impairment as a % of gross
receivables (%) 15.5 16.6
Group
Debtor costs as a % of revenue (%) 17.9 17.8
Debtor costs as a % of gross trade
receivables (%) 18.0 18.4
Provision for impairment as a % of gross
receivables (%) 17.5 17.8
* 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 financial statements has
occurred between the end of the financial year and the date of approval.
6. TOTAL TRADING EXPENSES
2016 % 2015
R'000 change R'000
Expenses by nature
Debtor costs
Trade receivables - Retail 315 052 23.9 254 374
Loans receivable - Financial Services 163 062 14.0 143 095
Total debtor costs 478 114 20.3 397 469
Amortisation of intangible assets 32 498 (6.0) 34 583
Depreciation of property, plant and equipment 22 408 22.1 18 347
Operating lease charges for immovable property 1 304 (37.6) 2 091
Total operating lease charges 4 022 (9.1) 4 424
Less: disclosed under cost of Retail sales (2 718) 16.5 (2 333)
Marketing costs 188 863 4.4 180 855
Staff costs 332 010 25.7 264 115
Total staff costs 365 889 21.8 300 380
Less: disclosed under cost of Retail sales (21 651) 20.6 (17 950)
Less: staff costs capitalised to intangibles (12 228) (33.2) (18 315)
Other costs 212 622 27.4 166 922
Total other trading expenses 789 705 18.4 666 913
1 267 819 19.1 1 064 382
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:
2016 2015
R'000 R'000
Profit for the year 424 854 394 559
Adjusted for the after-tax effect of:
(Gain)/loss on disposal of property, plant and
equipment and intangible assets (241) 207
Impairment of property, plant and equipment 59 84
Headline earnings 424 672 394 850
Weighted average number of ordinary shares in issue ('000) 102 419 101 468
Earnings per share (cents)
Basic 414.8 388.9
Headline 414.6 389.1
Basic - diluted 410.5 382.1
Headline - diluted 410.3 382.4
8. RECONCILIATION OF CASH GENERATED FROM OPERATIONS
2016 % 2015
R'000 change R'000
Profit before taxation 585 135 6.4 549 823
Share of loss of associates 1 564 37.5 1 137
Profit from insurance cells (5 823) >100.0 -
(Gain)/loss on disposal of property, plant
and equipment and intangible assets (335) >(100.0) 288
Impairment of property, plant and equipment 81 >100.0 -
Depreciation and amortisation 54 825 3.6 52 930
Share-based employee share expense 1 875 27.4 1 472
Interest paid 61 435 87.2 32 809
Interest received (3 393) 0.5 (3 375)
Capitalised bond costs - amortised
cost adjustment 3 420 86.0 1 839
Operating cash flows before working
capital changes 698 784 9.7 636 923
Movements in working capital (421 740) 51.5 (278 434)
Increase in inventories (43 359) >100.0 (4 028)
Increase in trade receivables - Retail (239 668) >100.0 (116 595)
Increase in loans receivable - Financial Services (178 969) 6.0 (168 771)
(Increase)/decrease in other receivables (8 844) >(100.0) 2 866
Increase in trade and other payables 29 744 10.9 26 815
Increase/(decrease) in provisions 19 356 >(100.0) (18 721)
277 044 (22.7) 358 489
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 stand-alone 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:
2016 2015
R'000 R'000
Properties
Payable within one year 3 506 2 453
Payable between two and five years 18 031 206
21 537 2 659
Suspensive sale agreements
Payable within one year 15 243 24 594
Payable between two and five years 25 671 28 023
40 914 52 617
Future finance charges on suspensive sale agreements (5 125) (5 409)
35 789 47 208
The present value of suspensive sale agreement payments
is as follows:
Payable within one year 12 719 21 957
Payable between two and five years 23 070 25 251
35 789 47 208
Capital commitments for property, plant and equipment and
intangible assets:
Approved by the directors 47 238 50 568
Approved by the directors and contracted for - -
47 238 50 568
12. 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 2016 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 GFM Limited in May 2015. The loan value
is R160 million, it carries interest at the South African prime interest rate and had
a term of one year. During the period the term was extended for another year and is
repayable in 2017.
13. 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.
14 March 2017
DIRECTORATE
Non-executive directors
S Portelli* (Chairman), A Chorn*, R Garratt, E Gutierrez-Garcia, R Hain*, C Rapa*
* Independent
Executive directors
G Lartigue (Chief Executive Officer), P Burnett, S Maltz
ADMINISTRATION
Country of incorporation: Republic of Malta
Date of incorporation: 22 July 2014
Company registration number: C66099
Registered office: 93 Mill Street, Qormi, QRM3012, Republic of Malta
Company secretary: George Said
Auditors: PricewaterhouseCoopers, Republic of Malta
Corporate bank: Deutsche Bank International Limited, Channel Islands
Sponsor: Rand Merchant Bank, a division of FirstRand Bank Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited
Website: www.homechoiceinternational.com
Date: 14/03/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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