This South African retailer is picking up 20,000 new customers per month and has big digital plans
HomeChoice International, a provider of retail and financial service products to a growing female mass market customer base, on Monday announced strong financial results for the period ended June 2018, led by growth in its digital channels.
Headline earnings increased by 16.1% to R260 million and HEPS increased by 14.7% to 249.6 cents, continuing its growth trajectory and pleasingly ahead of the five-year annual compound growth in HEPS of 13.2%.
Group revenue growth substantially outperformed its peer market, increasing by 16.1% to R1.5 billion, while retail sales were up 18.9% to R856 million.
HomeChoice uses call centres, catalogs, and the internet to sell homeware merchandise and financial services to South Africa’s expanding middle class. The group’s custoimer base is 80% female, with a growing base in the black middle class.
CEO South Africa, Shirley Maltz, said: “Despite the current challenging retail environment, we are seeing the benefit of our continuous investment into improving our customer experience and accelerating our digital transformation. Credit extended via digital channels increased by 54.7% to R792 million and now accounts for 39.1% of total credit.”
During the period, the group also made a R37 million investment into a new distribution centre in Gauteng. This, it said, will substantially reduce delivery times for customers and, combined with the rollout of showrooms, will enhance the purchasing experience for HomeChoice customers.
“Investment in key data and analytical skills as well as fraud and technology platforms will continue to accelerate digital adoption by the Company’s customers and will drive growth,” it said.
Retail sales increased by 18.9% and FinChoice, the financial service offering, achieved a 30.0% increase in loan disbursements to R853 million. Operating profit increased by 14.4% to R374 million.
“Pleasingly, we continue to acquire more than 20,000 new customers per month, contributing to continued growth in our customer base,” said Maltz. The group reported that its customer base was up 5.0% to 836,000.
Credit extended on digital channels was up 54.7% to 39.1% of all credit, while cash generated from operations climbed 37.9% to R240 million.
The group declared an interim dividend of 95 cents, up 15.9% on the previous year. A dividend cover of 2.6 times was maintained, it said.
Retail
“We have made notable progress in our transformation to a digital department store,” said Maltz.
Retail sales increased by 18.9% and EBITDA by 17.3%, driven by strong volume growth in homeware textiles and the roll-out of further external brands. The group now sells more than 100 external brands and is well advanced on its journey to become a digital department store, it said.
Digital continues to be the fastest growing channel, up 46.7%, and now represents 18.5% of retail sales (June 2017: 14.8%).
“Customer engagement through digital, especially mobile channels is growing rapidly, with 60% of retail digital sales from mobile phones,” said Maltz.
The retail business has embarked on a strategy to roll out showrooms in key locations. A second small-format showroom was opened in Maponya Mall in Soweto during May 2018 and HomeChoice is advanced with the development and construction of three more showrooms, one being a flagship on Rissik Street, Johannesburg.
Financial Services
Financial Services grew revenue by 13.0% and EBITDA by 15.9%, supported by a 30.0% increase in loan disbursements, as well as good growth in insurance revenue and strong adoption by customers of our mobi-wallet concept, MobiMoneyTM. A notable 86% of loan customers are registered for FinChoice’s digital platforms.
“FinChoice is a rapidly-growing fintech platform,” said Maltz. “Our customers are highly engaged on the platforms; of all loan transactions in the period, 78% were concluded digitally, one-third outside of normal trading hours.”
More than 25% of the active base has activated and engaged with MobiMoneyTM, a digital-only credit facility product which was introduced at the end of 2017. “It provides a gateway for further products and value-added services to be offered to customers via smartphones,” the group said.
It added that the group’s ‘relatively new’ insurance business continues to show strong growth. “This vertical represents an attractive growth opportunity to diversify income and increase customer share of wallet.”
“We will continue to position ourselves as a leading digital partner in the mass market, with an omni channel offering that provides an attractive and seamless retailing experience across all channels,” said Maltz.
“The group continues to see increasing digital adoption by customers and will further develop its omni-channel offering by opening showrooms to enhance this growth trajectory. In the short term, continued tough trading conditions will be navigated,” HomeChoice said.
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