HOMECHOICE INTERNATIONAL PLC - Summarised group financial statements for the year ended 31 December 2017 and cash dividend declaration

Release Date: 08/03/2018 07:05
Code(s): HIL
 
Wrap Text
Summarised group financial statements for the year ended 31 December 2017 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 2017 and cash dividend declaration


FINANCIAL HIGHLIGHTS
Retail sales + 16.8% to R1.7 billion
Loan disbursements + 17.5% to R1.5 billion
R1.2 billion group credit extended on digital channels
Cash generated from operations + 29.5% to R358.7 million
Final dividend + 25.2% to 109.0 cents
Headline earnings per share + 22.9% to 509.4 cents


COMMENTARY

HomeChoice International PLC is an investment holding company listed on the JSE Limited primarily 
consisting of two trading operations, HomeChoice (Retail) and FinChoice (Financial Services).

The group has operated for more than 30 years in southern Africa and has developed considerable 
expertise in both retail and credit management targeted at the mass market LSM 4 - 8 consumers. 
As an omni-channel retailer we provide the customer with the convenience to engage with our group 
through their preferred channel. Retail engagement is through digital platforms, call centres, 
sales agents' networks, catalogues and showrooms. Engagement with our Financial Services business 
is via digital platforms with the call centre providing additional support. 

The Retail product offering is mainly driven by homeware textiles and related products with a 
strongly increasing contribution of branded electronics, home appliances, apparel and footwear. 
Personal loans and insurance products comprise the Financial Services offering.

                                                              31 Dec 2017 31 Dec 2016      % change
Group                                    
Revenue                                                  (Rm)     3 003.2     2 664.2          12.7
Earnings before interest, tax, depreciation 
  and amortisation (EBITDA)                              (Rm)       800.6       701.4          14.1
Operating profit                                         (Rm)       751.9       648.1          16.0
Operating profit margin                                   (%)        25.0        24.3      
Headline earnings per share (HEPS)                    (cents)       509.4       414.6          22.9
Cash generated from operations                           (Rm)       358.7       277.0          29.5
Interim dividend paid                                 (cents)        82.0        71.0          15.5
Final dividend declared/paid                          (cents)       109.0        87.0          25.2
                                    
Retail                                    
Revenue                                                  (Rm)     2 337.5     2 082.7          12.2
Retail sales                                             (Rm)     1 749.2     1 497.6          16.8
Gross profit margin                                       (%)        51.2        49.3      
EBITDA                                                   (Rm)       474.7       420.2          13.0
EBITDA margin                                             (%)        20.3        20.2      
                                    
Financial Services                                    
Loan disbursements                                       (Rm)     1 467.6     1 249.0          17.5
Revenue                                                  (Rm)       665.7       581.5          14.5
EBITDA                                                   (Rm)       313.8       260.7          20.4
EBITDA margin                                             (%)        47.1        44.8      

TRADING AND FINANCIAL PERFORMANCE 
Group revenue increased by 12.7% to R3.0 billion, bolstered by above market growth in Retail sales 
of 16.8%, as well as a strong contribution from Financial Services. 

More than 20 000 new customers per month were acquired during the year, contributing to 7.0% growth 
of the group's active customer base to 796 000. New customers are primarily acquired by the Retail 
business, attracted to our curated homewares range. Analytics on the customer base, including 
payment performances, enable us to drive effective marketing campaigns and to develop risk and 
response scorecards to manage credit risk. Applying this knowledge, Financial Services products 
are offered to selected qualifying customers.

The group continues to be negatively impacted by the affordability assessment regulations introduced 
by the National Credit Regulator (NCR). The requirement for customers to provide documentary proof 
of income has adversely impacted revenue, increased operating costs and required continual investment 
in systems.

Group finance charges and initiation fees of R943.1 million were flat with 2016, negatively impacted 
by the annualisation of the lower interest-earning Retail credit facility product and the reduction 
of the NCR's maximum prescribed interest rates in May 2016. 

The group's strategy to diversify its income streams beyond interest income has gained positive 
traction in the period. Fees from ancillary services, which comprises insurance and service fees, 
increased by 37.6% to R311.0 million.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 14.1% to 
R800.6 million, benefiting from an improvement in gross margins as well as efficiencies in trading 
expenses which increased by 14.7%. Improvements in collections, credit management and new fraud 
processes have resulted in group debtor costs increases being well controlled, increasing by 5.3%. 

Operating profit increased by 16.0% to R751.9 million, with an improvement in operating margin from 
24.3% to 25.0%. Headline earnings increased by 24.2% to R527.5 million, with HEPS up 22.9% to 
509.4 cents. 

Excellent progress was achieved in digital transformation across the group. Credit extended via 
digital channels has increased to R1.2 billion, driven by strong digital Retail sales growth of 
48.2% and 44.9% growth in digital loan disbursements. Credit extended from digital now accounts 
for 32.4% (2016: 27.4%) of total group credit.

RETAIL
Retail revenue increased 12.2% to R2.3 billion. Innovations in the core textiles and hard goods 
ranges combined with further expansion of our branded goods offering, delivered strong customer 
demand and Retail sales increased by 16.8% to R1.7 billion. With more than 60 external brands now 
on offer customers have responded positively to the transformation to "a digital department store". 
Our credit facility enables customers to purchase brands on affordable credit, delivered direct 
to her home.

Digital, now the second-largest and fastest-growing sales channel, represents 15.4% of total sales 
(2016: 12.0%). It is exciting to see our customer engagement on digital channels growing.  

The lower interest rate credit facility product, introduced in April 2016 (from the previous 
instalment credit product) has made credit more affordable to customers, but has resulted in the 
full-year finance charges and initiation fees earned being on par with those achieved in 2016. 
Fees from ancillary services were up 38.3% to R129.2 million and is attributable to the increase 
in service fees.

The favourable exchange rate during the second half, combined with our effective management of 
margin on branded goods, has improved the gross profit margin by 190 basis points from 49.3% to 
51.2%. Inventory has increased by 20.1% to R256.8 million to support customer acquisition campaigns 
in the first quarter of 2018. Stock turn was in line with the previous year at 2.7 times.

The business continued to invest in people and technology to drive digital transformation and 
improve customer experience.

Retail EBITDA increased by 13.0% to R474.7 million, a pleasing result in light of the reduced finance 
charges revenue earned.


FINANCIAL SERVICES
Revenue increased by 14.5% to R665.7 million. Finance charges and initiation fees earned, increased 
by 7.8% as the 2016 NCR reduction in the interest rate caps have now annualised. 

Strong growth in loan disbursements delivered an increase of 17.5% to R1.5 billion. Loans to existing 
customers increased from 77.3% to 79.1% of total disbursements over the period, as good customers 
qualify for increases in their credit limits. The customer base has steadily increased by 11.2% to 
158 000 (2016: 142 000). 

Financial Services is a digitally enabled business, with customers preferring to conclude loan 
transactions on their mobile phones. Enhanced self-service functionality on the mobi site and a 
constant focus on improving the customer experience on this digital platform is shifting customer 
engagement online, with 68.7% (2016: 63.5%) of loan transactions carried out on digital channels. 
The call centre is increasingly becoming a digital support team.

MobiMoneyTM, a new credit facility product available exclusively on customers' mobile phones, 
was launched in the fourth quarter to positive customer response. This innovative digital-only 
product will be further developed in 2018 to include value-added products and services enabling 
mobi-wallet functionality.

Customers have responded well to the roll-out of the group's suite of funeral insurance products, 
providing confidence in our strategy to diversify revenue towards fee-based income from insurance 
and value-added services.

During 2017 the business development team focused on establishing lending capability in Botswana 
and Namibia. Pilot loan sales to Botswana commenced in February 2018.

EBITDA grew by 20.4% to R313.8 million following strong improvement in debtors' performance, 
as well as the growing insurance business. 

CREDIT RISK MANAGEMENT
Group debtor costs growth of 5.3% is well below revenue growth of 12.7% and reflects prudent 
credit risk management and improved credit performance in both businesses.

Credit performance for the period is summarised below:
                                                              31 Dec 2017 31 Dec 2016      % change
Group                                    
Gross trade and loans receivable                         (Rm)     3 157.7     2 654.6          19.0
Debtor costs as a % of revenue*                           (%)        16.8        17.9      
                                    
Retail                                    
Gross trade and loans receivable                         (Rm)     1 806.1     1 507.3          19.8
Debtor costs as a % of revenue                            (%)        14.9        15.1      
Provision for impairment as a % of gross receivables      (%)        17.9        18.9      
Non-performing loans (NPLs) (>120 days)                   (%)         9.9        10.3**      
NPL cover                                             (times)         1.8         1.8**      
                                    
Financial Services                                    
Gross trade and loans receivable                         (Rm)     1 351.7     1 147.3          17.8
Debtor costs as a % of revenue                            (%)        23.2        28.0      
Provision for impairment as a % of gross receivables      (%)        14.0        15.5      
Non-performing loans (NPLs) (>120 days)                   (%)         4.2         4.7      
NPL cover                                             (times)         3.3         3.3      
                                    
*  Debtor costs include bad debts written off net of recoveries, as well as movements in provisions.
** Restated.         
                           
Retail vintages have shown improvement benefiting from the implementation of new scorecards, use of 
additional credit bureau data and investment in fraud prevention tools. Upskilling and training of 
the collections teams, combined with improvements in internal and external collections processes, 
have reduced debtor costs as a percentage of revenue to 14.9% (2016: 15.1%). Retail non-performing 
loans have improved from 10.3% to 9.9%. The improved credit performance has resulted in the provision 
for impairment of trade receivables being reduced to 17.9% (2016: 18.9%) whilst still maintaining 
a conservative NPL cover at 1.8 times.

Credit performance of Financial Services was strong, with debtor costs as a percentage of revenue 
at 23.2% (2016: 28.0%). More stringent credit-vetting criteria, term shortening, an increase in the 
reloan proportion of business and enhanced collections strategies have translated into better roll 
rates and payment profiles. As a result, bad debts written off during the year (net of recoveries) 
were up by only 0.6% despite the 17.8% increase in the gross debtors' book. Non-performing loans 
have improved from 4.7% to 4.2% and the provision for impaired loans has been reduced to 14.0% 
(2016: 15.5%) of the book, while maintaining the NPL cover at 3.3 times. The Financial Services' 
business continues to benefit from lending primarily targeted Retail customers who have demonstrated 
ongoing good payment behaviour.

CASH AND CAPITAL MANAGEMENT 
Cash generated from operations increased by 29.5% to R358.7 million, driven by good cash collections, 
a reduction in loan terms and actively managing cash requirements in working capital. The cash 
conversion rate (cash generated from operations expressed as a percentage of EBITDA) increased from 
39.5% to 44.8%.

The group has renegotiated its funding facilities and has entered into an R800 million long-term 
funding facility, replacing a R350 million facility and R160 million shareholder loan. As at 
31 December 2017 the group had drawn down R550 million. The net debt to equity ratio has decreased 
from 28.7% at December 2016 to 28.1%, comfortably below the board's upper limit of 40.0%.

The final dividend has been increased by 25.2% to 109.0 cents per share, bringing the total dividend 
for the year to 191.0 cents per share (2016: 158.0 cents) with the dividend cover remaining at 
2.6 times earnings. 

Capital expenditure at R56.3 million reflects continued investment in the group's technology systems 
and an initial investment in a Gauteng distribution centre to be opened in 2018. 

The financial position of the group remains strong, with net asset value increasing by 16.1% to 
2 291 cents per share from December 2016.

EQUITY CAPITAL RAISING
As the group continues to grow, further capital investments will be made in areas of strategic 
importance, including new product development, systems and platforms to enhance customer experience 
and analytics capabilities, and warehousing and logistics infrastructure. In addition to the 
R800 million long-term funding facility already in place, the board is considering undertaking an 
equity capital raise to fund capital expansion projects. 

In light of the company's concentrated shareholder register, any equity capital raise would also 
be intended to introduce new investors into the company which is expected to have the additional 
benefits of increasing the company's free float and improving liquidity in its shares. The board has 
engaged with the company's major shareholders, GFM Limited and ADP II Holdings 3 Limited, who are 
supportive of this initiative and, subject to favourable market conditions, have agreed to sell a 
portion of their own shareholdings as part of any equity capital raising, in order to further 
promote improved free float and liquidity in the company's shares.

APPOINTMENT OF ALTERNATE DIRECTOR
The board is pleased to announce the appointment of Adefolarin Ogunsanya as an alternate 
non-executive director to Eduardo Gutierrez-Garcia with effect from 7 March 2018. We look forward 
to the contribution that he will bring to the board.

OUTLOOK
Recent political developments have provided improved consumer and business confidence, as well as 
cautious optimism for growth within the South African economy.  

We are continuing to see good demand across the group. The group is well positioned to take advantage 
of any improvement in economic conditions over the next year.

The group will continue to maintain tight credit policies, with cash collections and cost control 
remaining management priorities, while taking advantage of trading opportunities when they arise. 

Driving digital engagement with customers continues to be a key strategic focus as the group looks 
to expand digital penetration in its target customer market, particularly via the mobile phone. 
The Financial Services business will continue to pursue the diversification of income earned from 
insurance and value-added products and services.

S Portelli           G Lartigue                  S Maltz
Chairman             Chief executive officer     Chief executive officer (South Africa) 

Qormi, Malta, 7 March 2018

DIVIDEND DECLARATION
Notice is hereby given that the board of directors has declared a final gross cash dividend of 
109.0 cents (87.2000 cents net of dividend withholding tax) per ordinary share for the year ended 
31 December 2017. 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 104 762 901 ordinary shares. 

The salient dates for the dividend will be as follows: 
Last day of trade to receive a dividend                                       Tuesday, 3 April 2018 
Shares commence trading "ex" dividend                                       Wednesday, 4 April 2018 
Record date                                                                    Friday, 6 April 2018 
Payment date                                                                   Monday, 9 April 2018 

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 April 2018 and 
Friday, 6 April 2018, both days inclusive. 

G Said 
Company secretary 

Qormi, Malta, 7 March 2018



SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
                                                        Notes        2017           %          2016
                                                                       Rm      change            Rm 
Assets                                           
Non-current assets                                           
Property, plant and equipment                                       428.6         0.6         425.9 
Intangible assets                                                    85.6        (4.6)         89.7 
Investment in associates and other                                   43.7                      24.3 
Deferred taxation                                                     0.4                      38.2 
                                                                    558.3        (3.4)        578.1 
                                          
Current assets                                           
Inventories                                                 2       256.8        20.1         213.8 
Taxation receivable                                                   4.2                       4.7 
Trade and other receivables                                 3     2 660.2        20.1       2 214.7 
Trade receivables - Retail                                        1 482.4        21.3       1 221.7 
Loans receivable - Financial Services                             1 162.8        19.9         969.5 
Other receivables                                                    15.0       (36.2)         23.5 
Cash and cash equivalents                                           130.3                     187.2 
                                                                  3 051.5        16.5       2 620.4 
Total assets                                                      3 609.8        12.9       3 198.5 
                                          
Equity and liabilities                                           
Equity attributable to equity holders of the parent                                           
Stated and share capital                                              1.0                       1.0 
Share premium                                                     3 002.7                   2 998.4 
Reorganisation reserve                                           (2 960.6)                 (2 960.6)
                                                                     43.1                      38.8 
Treasury shares                                                      (2.7)                     (2.7)
Other reserves                                                       13.9                       6.4 
Retained earnings                                                 2 332.2                   1 987.6 
Total equity                                                      2 386.5        17.6       2 030.1 
                                          
Non-current liabilities                                           
Interest-bearing liabilities                                        616.0         6.4         579.1 
Deferred taxation                                                   124.6                     134.8 
Other payables                                                        5.6                       4.9 
                                                                    746.2         3.8         718.8 
                                          
Current liabilities                                           
Interest-bearing liabilities                                        165.6      >100.0          31.5 
Taxation payable                                                      8.4                      11.8 
Trade and other payables                                            241.2        12.4         214.5 
Provisions                                                           38.0                      31.7 
Derivative financial instruments                                      5.1                         - 
Bank overdraft                                                       18.8                         - 
Shareholder loan                                                        -                     160.1 
                                                                    477.1         6.1         449.6 
Total liabilities                                                 1 223.3         4.7       1 168.4 
Total equity and liabilities                                      3 609.8        12.9       3 198.5


SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                        Notes        2017           %          2016
                                                                       Rm      change            Rm 
Revenue                                                           3 003.2        12.7       2 664.2
Retail sales                                                      1 749.1        16.8       1 497.6
Finance charges and initiation fees earned                          943.1                     940.6
Finance charges earned                                              647.2        (3.7)        672.1
Initiation fees earned                                              295.9        10.2         268.5
Fees from ancillary services                                        311.0        37.6         226.0
Cost of retail sales                                               (853.6)       12.4        (759.3)
Other operating costs                                            (1 409.7)                 (1 267.8)
Debtor costs                                                6      (503.6)        5.3        (478.1)
Other trading expenses                                      6      (906.1)       14.7        (789.7)
Other net gains and losses                                            0.8                       7.5
Other income                                                         11.2                       3.5
Operating profit                                                    751.9        16.0         648.1
Interest received                                                     6.5        91.2           3.4
Interest paid                                                       (82.8)       27.8         (64.8)
Share of loss of associates                                          (8.8)                     (1.6)
Profit before taxation                                              666.8        14.0         585.1
Taxation                                                           (147.1)       (8.2)       (160.3)
Profit and total comprehensive income for the year                  519.7        22.3         424.8
                                                        
Earnings per share (cents)                                                        
Basic                                                       7       501.9        21.0         414.8
Diluted                                                             496.7        21.0         410.5
                                                        
Additional information                                                        
Retail gross profit margin (%)                                       51.2                      49.3
                                                        
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
                                          Rm         Rm         Rm         Rm         Rm         Rm         Rm
Balance at 1 January 2016                1.0    2 987.6       (2.7)  (2 960.6)       4.5    1 721.6    1 751.4 
Changes in equity                                                  
Profit and total comprehensive income 
  for the year                             -          -          -          -          -      424.8      424.8 
Shares issued                              -       10.8          -          -          -          -       10.8 
Dividends paid                             -          -          -          -          -     (158.8)    (158.8)
Share incentive schemes                    -          -          -          -        1.9          -        1.9 
Total changes                              -       10.8          -          -        1.9      266.0      278.7 
                                                 
Balance at 1 January 2017                1.0    2 998.4       (2.7)  (2 960.6)       6.4    1 987.6    2 030.1 
Changes in equity                                                  
Profit and total comprehensive income 
  for the year                             -          -          -          -          -      519.7      519.7 
Shares issued                              -        4.3          -          -          -          -        4.3 
Dividends paid                             -          -          -          -          -     (175.1)    (175.1)
Share incentive schemes                    -          -          -          -        7.5          -        7.5 
Total changes                              -        4.3          -          -        7.5      344.6      356.4 
Balance at 31 December 2017              1.0    3 002.7       (2.7)  (2 960.6)      13.9    2 332.2    2 386.5


SUMMARISED GROUP STATEMENT OF CASH FLOWS
                                                        Notes        2017           %          2016
                                                                       Rm      change            Rm 
Cash flows from operating activities                                          
Operating cash flows before working capital changes                 813.5        16.4         698.8 
Movements in working capital                                       (454.8)        7.8        (421.8)
Cash generated from operations                              8       358.7        29.5         277.0 
Interest received                                                     6.5                       3.4 
Interest paid                                                       (78.0)                    (60.5)
Taxation paid                                                      (122.4)                   (140.6)
Net cash inflow from operating activities                           164.8      >100.0          79.3 
                                          
Cash flows from investing activities                                          
Purchase of property, plant and equipment                           (28.3)                    (26.3)
Proceeds on disposal of property, plant and equipment                 0.3                       0.4 
Purchase of intangible assets                                       (28.0)                    (20.1)
Loans repaid by employees                                               -                       0.2 
Investment in associates and other                                  (19.8)                     (6.8)
Net cash outflow from investing activities                          (75.8)       44.1         (52.6)
                                          
Cash flows from financing activities                                          
Proceeds from the issuance of shares                                  4.3                      10.8 
Proceeds from interest-bearing liabilities                          714.5                     369.6 
Repayments of interest-bearing liabilities                         (699.5)                   (140.4)
Finance-raising costs paid                                           (8.9)                     (7.2)
Dividends paid                                                     (175.1)                   (158.8)
Net cash (outflow)/inflow from financing activities                (164.7)     <100.0          74.0 
                                          
Net (decrease)/increase in cash and cash equivalents 
  and bank overdrafts                                               (75.7)                    100.7 
Cash, cash equivalents and bank overdrafts at the 
  beginning of the year                                             187.2                      86.5 
Cash, cash equivalents and bank overdrafts at the 
  end of the year                                                   111.5       (40.4)        187.2


GROUP SEGMENTAL ANALYSIS
                                                                    Financial
                                                  Total     Retail   Services   Property      Other Intragroup
2017                                                 Rm         Rm         Rm         Rm         Rm         Rm
Segmental revenue                               3 058.7    2 337.5      665.7       55.5          -          -
Retail sales                                    1 749.2    1 749.2          -          -          -          - 
Finance charges and initiation fees earned        943.1      459.1      484.0          -          -          - 
Fees from ancillary services                      366.4      129.2      181.7       55.5          -          - 
Intersegment revenue                              (55.5)         -          -      (55.5)         -          -
Revenue from external customers                 3 003.2    2 337.5      665.7          -          -          -
                                                 
Total trading expenses (refer to note 6)        1 409.7    1 062.5      360.6       24.0        7.1      (44.5)
                                                 
EBITDA                                            800.6      474.7      313.8       32.9      (20.8)         -
Depreciation and amortisation                     (57.5)     (53.5)      (2.7)      (1.3)         -          - 
Interest received                                   3.6          -        2.9          -       61.3      (60.6)
Interest paid                                     (54.2)         -      (57.2)         -      (57.6)      60.6 
Segmental operating profit*                       692.5      421.2      256.8       31.6      (17.1)         -
Interest received                                   2.9        2.9          -          -          -          - 
Interest paid                                     (28.6)      (4.0)         -      (24.6)         -          - 
Profit before taxation                            666.8      420.1      256.8        7.0      (17.1)         - 
Taxation                                         (147.1)    (101.0)     (46.4)       1.0       (0.7)         - 
Profit after taxation                             519.7      319.1      210.4        8.0      (17.8)         -
                                                 
Segmental assets                                3 609.8    2 154.5    1 387.3      341.1    1 014.7   (1 287.8)
Segmental liabilities                           1 223.3      505.6    1 065.9      283.0      658.1   (1 289.3)
                                                 
Operating cash flows before working 
  capital changes                                 813.5      478.1      309.4       32.9       (6.9)         - 
Movements in working capital                     (454.8)    (270.4)    (179.6)      (3.5)      (1.2)      (0.1)
Cash generated/(utilised) by operations           358.7      207.7      129.8       29.4       (8.1)      (0.1)
                                                 
Capital expenditure                                                 
Property, plant and equipment                      28.3       25.9        0.4        2.0          -          - 
Intangible assets                                  28.0       20.2        7.8          -          -          - 
                                                 
Change in Retail sales             (%)             16.8       16.8                             
Change in EBITDA                   (%)             14.1       13.0       20.4        5.1       94.4        
Change in debtor costs             (%)              5.3       10.9       (5.4)                     
Change in other trading expenses   (%)             14.7       11.7       27.3        7.7      (26.2)       
                                                 
Gross profit margin                (%)             51.2       51.2                             
Segmental results margin           (%)             22.6       18.0       38.6       57.0              

* Refer to note 9 for further details on segments and segmental results.

                                                                    Financial
                                                  Total     Retail   Services   Property      Other Intragroup
2016                                                 Rm         Rm         Rm         Rm         Rm         Rm
Segmental revenue                               2 716.5    2 082.7      581.5       52.3          -          -
Retail sales                                    1 497.6    1 497.6          -          -          -          - 
Finance charges and initiation fees earned        940.6      491.7      448.9          -          -          - 
Fees from ancillary services                      278.3       93.4      132.6       52.3          -          - 
Intersegment revenue                              (52.3)         -          -      (52.3)         -          -
Revenue from external customers                 2 664.2    2 082.7      581.5          -          -          -
                                                 
Total trading expenses (refer to note 6)        1 267.8      953.5      325.1       22.3        9.6      (42.7)
                                                 
EBITDA                                            701.4      420.2      260.7       31.3      (10.7)      (0.1)
Depreciation and amortisation                     (54.8)     (49.5)      (3.6)      (1.3)      (0.4)         - 
Interest received                                   1.5          -        0.6          -       36.1      (35.2)
Interest paid                                     (31.5)         -      (31.7)         -      (34.2)      34.4 
Segmental operating profit*                       616.5      370.7      226.0       30.0       (9.3)      (0.9)
Interest received                                   1.9        1.9          -          -          -          - 
Interest paid                                     (33.3)      (7.5)         -      (25.8)         -          - 
Profit before taxation                            585.1      365.1      226.0        4.2       (9.3)      (0.9)
Taxation                                         (160.3)     (97.5)     (54.1)      (4.2)      (4.5)         - 
Profit after taxation                             424.8      267.6      171.9          -      (13.8)      (0.9)
                                                 
Segmental assets                                3 198.5    1 761.9    1 095.5      340.1      589.8     (588.8)
Segmental liabilities                           1 168.4      572.3      389.7      279.5      514.7     (587.8)
                                                 
Operating cash flows before working 
  capital changes                                 698.8      421.5      255.8       31.3       (9.2)      (0.6)
Movements in working capital                     (421.8)    (265.1)    (161.4)       2.5        1.7        0.5 
Cash generated/(utilised) by operations           277.0      156.4       94.4       33.8       (7.5)      (0.1)
                                                 
Capital expenditure                                                 
Property, plant and equipment                      26.3       21.8        0.8        4.4        0.1       (0.8)
Intangible assets                                  20.1       15.0        0.3          -        4.9       (0.1)
                                                 
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.


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 2017 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) Listings Requirements for abridged reports. The Listings Requirements 
     require abridged reports to be prepared in accordance with the framework concepts and the 
     measurement and recognition requirements of International Financial Reporting Standards (IFRS) 
     and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and 
     Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, 
     as a minimum, contain the information required by IAS 34, Interim Financial Reporting. 
     The accounting policies applied in the preparation of the 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, except for the amendment to IAS 7.

     No new standards, amendments or interpretations to existing standards, relevant to the group's 
     operations, became effective for the year ended 31 December 2017 other than the amendment to 
     IAS 7, Cash flow statements. The impact of this amendment does not have a material impact on 
     the group.                                   
                                          
2.   INVENTORIES                                   
                                                                                 2017          2016
                                                                                   Rm            Rm 
     Merchandise for resale                                                     212.5         198.3 
     Provision for inventory obsolescence                                       (18.0)        (22.3)
     Goods in transit                                                            62.3          37.8 
                                                                                256.8         213.8 
                                          
     Inventory sold at less than cost during the current year amounted to R39.4 million 
     (2016: R14.3 million).
                                          
3.   TRADE AND OTHER RECEIVABLES                                   
                                                                     2017           %          2016
                                                                       Rm      change            Rm 
     Trade receivables - Retail                                   1 806.1        19.8       1 507.3 
     Provision for impairment                                      (323.7)       13.3        (285.6)
                                                                  1 482.4        21.3       1 221.7 
     Loans receivable - Financial Services                        1 351.7        17.8       1 147.3 
     Provision for impairment                                      (188.9)        6.3        (177.8)
                                                                  1 162.8        19.9         969.5 
     Other receivables                                               15.0       (36.2)         23.5 
     Total trade and other receivables                            2 660.2        20.1       2 214.7 
     Trade and loan receivables                                   3 157.8        19.0       2 654.6 
     Provision for impairment                                      (512.6)       10.6        (463.4)
     Other receivables                                               15.0       (36.2)         23.5
                                        
     Movements in the provision for impairment were as follows:                                   
     Retail                                   
     Opening balance                                               (285.6)       26.0        (226.6)
     Movement in provision                                          (38.1)      (35.4)        (59.0)
     Debtor costs charged to profit and loss                       (349.3)       10.9        (315.0)
     Debts written off during the year, net of recoveries           311.2        21.6         256.0 
     Closing balance                                               (323.7)       13.3        (285.6)
                                          
     Financial Services                                   
     Opening balance                                               (177.8)       13.2        (157.0)
     Movement in provision                                          (11.1)      (46.6)        (20.8)
     Debtor costs charged to profit and loss                       (154.3)       (5.4)       (163.1)
     Debts written off during the year, net of recoveries           143.2         0.6         142.3 
     Closing balance                                               (188.9)        6.3        (177.8)
                                          
     Retail                                   
     Debtor costs as a % of revenue                       (%)        14.9                      15.1 
     Debtor costs as a % of gross receivables             (%)        19.3                      20.9 
     Provision for impairment as a % of gross receivables (%)        17.9                      18.9 
                                          
     Financial Services                                   
     Debtor costs as a % of revenue                       (%)        23.2                      28.0 
     Debtor costs as a % of gross receivables             (%)        11.4                      14.2 
     Provision for impairment as a % of gross receivables (%)        14.0                      15.5 
                                          
     Group                                   
     Debtor costs as a % of revenue                       (%)        16.8                      17.9 
     Debtor costs as a % of gross trade receivables       (%)        15.9                      18.0 
     Provision for impairment as a % of gross receivables (%)        16.2                      17.5 
                                          
                                          
4.   CONTINGENT LIABILITIES                                   
     The group is currently involved in a dispute with SARS with regards to the quantum of a deduction 
     that has been claimed in prior years. The group's position is supported by tax specialists and 
     they have concluded that the likelihood of an outflow of economic benefits to settle the obligation 
     is not probable. The contingent tax liability, which includes interest and penalties, is estimated 
     to be less than R10.0 million at the reporting date.                                    
                                          
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                                   
                                                                     2017           %          2016
                                                                       Rm      change            Rm 
     Expenses by nature                                   
     Debtor costs                                   
     Trade receivables - Retail                                     349.3        10.9         315.0 
     Loans receivable - Financial Services                          154.3        (5.4)        163.1 
     Total debtor costs                                             503.6         5.3         478.1 
     Amortisation of intangible assets                               32.1        (1.2)         32.5 
     Depreciation of property, plant and equipment                   25.4        13.4          22.4 
     Operating lease charges for immovable property                   1.4         7.7           1.3 
     Total operating lease charges                                    8.2      >100.0           4.0 
     Less: disclosed under cost of Retail sales                      (6.8)     >100.0          (2.7)
     Marketing costs                                                220.0        16.5         188.9 
     Staff costs: short-term employee benefits                      394.9        18.9         332.0 
     Total staff costs                                              441.2        20.6         365.9 
     Less: disclosed under cost of Retail sales                     (27.2)       25.3         (21.7)
     Less: staff costs capitalised to intangibles                   (19.1)       56.6         (12.2)
     Other costs                                                    232.3         9.3         212.6 
     Total other trading expenses                                   906.1        14.7         789.7 
                                                                  1 409.7        11.2       1 267.8 
                                          
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:                            
                                   
                                                                                 2017          2016
                                                                                   Rm            Rm 
     Profit for the year                                                        519.7         424.8
     Adjusted for the after-tax effect of:                            
     Gain on disposal of property, plant and equipment and intangible assets     (0.1)         (0.2)
     Impairment of property, plant and equipment                                    -           0.1 
     Impairment of investment in associate and other                              3.5             - 
     Share of impairment of property, plant and equipment of associate            4.4             - 
     Headline earnings                                                          527.5         424.7 
                                   
     Weighted average number of ordinary shares in issue ('000)                 103.6         102.4 
     Earnings per share (cents)                            
     Basic                                                                      501.9         414.8 
     Headline                                                                   509.4         414.6 
     Basic - diluted                                                            496.7         410.5 
     Headline - diluted                                                         504.1         410.3

8.   RECONCILIATION OF CASH GENERATED FROM OPERATIONS                                   
                                                                     2017           %          2016
                                                                       Rm      change            Rm 
     Profit before taxation                                         666.8        14.0         585.1 
     Share of loss of associate                                       8.8      >100.0           1.6 
     Profit from insurance cells                                    (13.3)     >100.0          (5.8)
     Gain on disposal of property, plant and equipment 
       and intangible assets                                         (0.1)      (66.7)         (0.3)
     Impairment of property, plant and equipment                        -     >(100.0)          0.1 
     Impairment of investment in associate                            4.9      >100.0             - 
     Depreciation and amortisation                                   57.5         4.9          54.8 
     Share-based employee share expense                               7.5      >100.0           1.9 
     Exchange losses on foreign exchange contracts                    5.1      >100.0             -
     Interest paid                                                   76.6        24.8          61.4 
     Interest received                                               (6.5)       91.2          (3.4)
     Capitalised bond costs - amortised cost adjustment               6.2        82.4           3.4 
     Operating cash flows before working capital changes            813.5        16.4         698.8 
     Movements in working capital                                  (454.8)        7.8        (421.8)
     Increase in inventories                                        (43.0)       (0.9)        (43.4)
     Increase in trade receivables - Retail                        (260.7)        8.8        (239.7)
     Increase in loans receivable - Financial Services             (193.3)        8.0        (179.0)
     Decrease/(increase) in other receivables                         8.5     >(100.0)         (8.8)
     Increase in trade and other payables                            27.4        (7.7)         29.7 
     Increase in provisions                                           6.3       (67.5)         19.4 
                                                                    358.7        29.5         277.0 
                                          
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 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. 
     Trade and other receivables are measured at amortised cost using the effective interest rate 
     method less any allowance for impairment.                            
                                   
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:
                                   
                                                                                 2017          2016
                                                                                   Rm            Rm 
     Properties                            
     Payable within one year                                                      7.7           3.5 
     Payable between two and five years                                          31.3          18.0 
                                                                                 39.0          21.5 
                                   
     Suspensive sale agreements                            
     Payable within one year                                                     15.5          15.2 
     Payable between two and five years                                          13.9          25.7 
                                                                                 29.4          40.9 
     Future finance charges on suspensive sale agreements                        (2.8)         (5.1)
                                                                                 26.6          35.8 
                                   
     The present value of suspensive sale agreement payments is as follows:
     Payable within one year                                                     13.6          12.7 
     Payable between two and five years                                          13.0          23.1 
                                                                                 26.6          35.8 
                                   
     Capital commitments for property, plant and equipment and intangible assets:
     Approved by the directors                                                   13.5          47.2 
                                                                                 13.5          47.2

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 2017 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 carried interest 
     at the South African prime interest rate and was fully repaid during the current period.
                     
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 abridged report and that the financial 
     information has been correctly extracted from the underlying group annual financial statements.
       
              
7 March 2018                     


DIRECTORATE
Non-executive directors
S Portelli* (Chairman), A Chorn*, R Garratt, E Gutierrez-Garcia, R Hain*, C Rapa*, 
A Ogunsanya (alternate)    * 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


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