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Johannesburg – Financial results of investment holding company HomeChoice International [JSE:HIL] for the six months to end-June 2017 were boosted by retail sales, while its financial services business battled with new regulations impacting interest income, the company said on Monday.
Headline earnings per share increased 15.9% to 218 cents per share. Group earnings before interest, tax, depreciation and amortisation (Ebitda) grew 14.6% to R355m. Operating profit was up 17.2% to R329m. Net profit lifted 17.1% to R225m. An interim dividend of 82c was declared.
The international company’s two business units, retail (HomeChoice) offered through digital channels, call centres, catalogues and sale agent networks, and financial services (FinChoice) which offers personal loans and insurance products to retail customers, each reported growth.
Group revenue growth of 14% to R1.3bn was driven by strong growth of 24.3% in retail sales. The retail business grew revenue by 14% to R997m. Ebitda was up 14.9% to R197m, despite a decline in finance charge revenue.
Tighter laws dent credit contracts
However, the financial services business was limited in interest income growth due to new regulations by the National Credit Regulator (NCR), which capped the maximum prescribed interest rates on credit contracts. This - coupled with the introduction of a lower interest-earning retail credit facility account, finance charges and initiation fees for the group - declined 7.5% to R445m.
“The group continues to be negatively impacted by the affordability assessment regulations introduced by the NCR, in particular the requirement for customers to provide proof of income, which has resulted in significant cost increases and lost revenue,” the report read.
Loan disbursements grew by 12.4% to R655m. Loans to existing customers declined from 79.9% to 77.5%. Revenue was up 14.2% to R317m, while revenue from insurance grew, particularly due to the introduction of credit life on short-term products and funeral insurance last year. Ebitda lifted 14.2% to R145m, due to good debtors' performance and the growing insurance business.
Fees from ancillary services, which include insurance and service fees, grew 62.3% to R149m. This is only 11.4% of total revenue earned.
Credit extension
The group, which is positioned to capitalise on digital growth, has extended credit via its digital channels by 38.3% to R507m. This is 32.2% of total credit extended for the period. Digital remains the group’s fastest growing channel representing 15% of sales, up from 12% reported previously.
The group’s credit facility product attracts a lower interest rate; it saw a 17.2% decrease in finance charges and initiation fees earned for the period to R214m.
The financial services business is also strongly enabled by digital. Loan transactions concluded digitally accounted for 67% of all lending; the remainder was concluded via call centres. Of the digital loans, 37% are registered for mobi.
The financial service business, with headquarters in Mauritius is, on track, the group said. There are plans to expand operations in Botswana to the retail customer base. The insurance business in Mauritius has also reported “pleasing” growth in its funeral and credit life products, with further growth expected, said HomeChoice.
HomeChoice International shares were trading at R31.99 on the JSE at around 11:30.
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