HOMECHOICE INTERNATIONAL P.L.C.
(Incorporated in the Republic of Malta)
(Registration number C66099)
JSE share code: HIL
ISIN: MT0000850108
(“HIL” or the “Company”)
ABRIDGED PRE-LISTING STATEMENT
This Abridged Pre-listing Statement relates to the listing of HomeChoice International P.L.C. in
the “General Retailers: Broadline Retail” sector of the main board of the JSE with effect from the
commencement of business on Thursday, 4 December 2014. The information and defined terms
used in this Abridged Pre-listing Statement are as set out in the full Pre-listing Statement issued by
HIL on Thursday, 27 November 2014.
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•
This Abridged Pre-listing Statement does not constitute an offer to the public for the sale of or
subscription for, or the solicitation of an offer to buy or subscribe for shares in the Company, but is
issued in compliance with the Listings Requirements for the purpose of providing information to the
public with regards to HIL.
•
This Abridged Pre-listing Statement highlights selected information from the Pre-listing Statement.
It is not complete and does not contain all of the information that readers should consider before
investing in the HIL Shares. Investors should read the Pre-listing Statement carefully in its entirety,
including the “Risk Factors” section, the financial statements provided and the notes to those
financial statements.
•
1. The Listing The JSE has granted the Company a listing in respect of up to 174 279 351 HIL Shares (101 379 351
HIL Shares net of treasury shares) in the “General Retailers: Broadline Retail” sector of the main
board, under the abbreviated name “HomChoice” and share code “HIL”.
the limitations of a physical store presence, as well as predict purchasing behaviour, response
rates and profitability of marketing campaigns;
HomeChoice Holdings has created strong brand loyalty with its predominantly female customer
base in the urban middle-income mass market. In the past year over 80% of HomeChoice
Holdings' business was generated from existing customers;
greater access to the internet and mobile smartphones is expected to boost online retail sales
in South Africa in the next few years. HomeChoice Holdings is at the forefront of this trend with
growing volumes of customers using electronic sales channels;
credit is an enabler of sales to the mass market female customer base. HomeChoice Holdings
has extensive experience in mass market credit management and the credit records of over
1.3 million customers inform credit decision-making processes. Strict and consistent credit
and affordability criteria, together with internally developed scorecards, are applied to all new
credit applications; and
omni-channel marketing relies on specialist skills which are scarce and highly sought after
in the South African retail environment. The ongoing investment in people has enabled
HomeChoice Holdings to retain key skills and attract some of the leading talent in the industry.
5. Growth strategies
HIL’s long-term strategy is to expand into new markets to sustain growth. Sustained economic
growth and the increasing spending power of the emerging middle class in several African
countries makes the sub-Saharan region attractive for growth. Expansion into Africa and other
territories will be accelerated through the Listing, which will provide access to capital markets for
potential funding for future expansion and unlocking value for existing shareholders.
2. Company overview
HIL was incorporated as an investment holding public company under the laws of Malta on
22 July 2014 specifically for the purpose of holding all of the ordinary shares in HomeChoice
Holdings, through its subsidiary, HIL SA.
HomeChoice Holdings’ growth strategy focuses on organic growth of the existing businesses
through attractive product offerings. Attracting new customers and retaining quality customers
through repeat business is key to sustaining growth.
HomeChoice Holdings is a leading home shopping retailer selling homeware merchandise
and financial services products to the rapidly expanding urban middle-income mass market in
southern Africa. Established in Cape Town in 1985, HomeChoice Holdings has developed into
an omni-channel home shopping retailer which offers products through mail order (catalogue),
electronic channels (internet and mobile phone) and telemarketing (call centres). HomeChoice
Holdings currently operates in South Africa and the neighbouring countries of Botswana,
Lesotho, Namibia, Swaziland and Zambia.
The retail growth strategy is focused on:
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•
•
•
•
HomeChoice Holdings has three operating segments:
Retail
broadening the merchandise range;
attracting new customers;
increasing revenue from existing customers;
enhancing the customer experience through technology; and
expanding warehousing capacity and the distribution network.
FinChoice is positioned to increase its share of the personal loan market by:
HomeChoice is an omni-channel home shopping retailer offering an extensive range of household
textiles, homeware merchandise and personal technology through a convenient shopping
experience, together with a home delivery service. The product offering has broadened under
the FoneChoice brand to include laptop computers, tablets and mobile smartphones. Credit is
the enabler of sales on terms of six, 16, 24 and 36 months.
• attracting initial loan customers;
• increasing revenue from existing FinChoice customers; and
• enhancing the customer experience through technology.
6. Prospects
Financial Services
FinChoice is a niche provider of unsecured personal loan products to HomeChoice customers in
South Africa with good credit records. FinChoice leverages the HomeChoice customer database
and marketing platforms to acquire loan customers at low cost and predictable repayment
behaviour. Loan terms range from one to 36 months. Customers are able to transact on their
loan accounts conveniently through their mobile phones 24 hours a day, accessing further credit
over time as needed. FinChoice has a strategic focus on short-term and low-value loans, with an
average product term of 18.9 months and average loan balance of R7 804 at June 2014.
The Group’s target LSM 4 to 8 market has seen significant growth in the past 10 years, with
this segment benefitting from real income growth, increasing home ownership and rising living
standards.
Property
Credit risk strategies will be maintained and the Group will continue to review and enhance
scorecards and vetting procedures.
Merchandise ranges are continuously being expanded and new product categories are being
introduced to enhance the brand’s appeal to its middle-income mass market customer base. The
Group will continue to capitalise on the growth of the internet and smartphone as online shopping
channels and is competitively advantaged in these markets.
HomeChoice Holdings owns the head office building, a property adjacent to the head office
which has been acquired for future expansion and a 200 000m3 centralised warehouse and
distribution facility.
The Group has a strong balance sheet, is cash generative despite being a credit-based business,
and has a track-record of paying dividends. The proven business model, positioning in a growth
sector, expertise in managing mass market credit and focused strategies for growth should
ensure sustainable returns to shareholders.
3. Selected financial information
The Group’s revenue has grown at a compound annual growth rate (CAGR) of 23.1% over the
past ten years, with operating profit showing a CAGR of 18.3% over the same period. This strong
organic growth has been driven by product innovation and merchandise range extension, and
growth of the customer base through customer acquisition and retention. Further growth has
been delivered by leveraging the Company’s customer base with the launch of FinChoice and
FoneChoice. This is demonstrated by FinChoice accounting for 33% of the Group's operating
profit, only seven years after being launched.
7. Directors
The directors of HIL on the Listing Date are set out below:
Name
Stanley Portelli
The following table provides highlights of the Group’s results for the six months ended June 2014
and 2013 and the financial years ended December 2013, 2012 and 2011:
(R'000)
Reviewed Reviewed
six months six months
ended
ended
Jun 2014
Jun 2013
Profitability:
Revenue
762 179
1 661 952
1 434 359
1 121 060
15.9
27.9
28.9
12.9*
21.7*
50.1
49.5
49.1
51.1
53.4
229 650
201 503
438 321
402 862
341 591
Operating profit margin (%)
26.7
26.4
26.4
28.1
30.5
239 655
207 466
450 174
412 565
352 485
27.8
27.2
26.4
28.1
30.5
157.1
140.8
306.9
282.1
234.8
EBITDA margin (%)
Headline earnings per share
(cents)
Audited
year
ended
Dec 2011
Retail gross profit margin (%)
EBITDA
Audited
year
ended
Dec 2012
860 632
Revenue growth (%)
Operating profit
Audited
year
ended
Dec 2013
HEPS growth (%)
11.6* 10.2*
8.8
20.1
22.9
Return on equity (%)
23.8**
25.4**
26.3
29.8
31.9
96 847
109 679
278 010
153 718
143 508
Solvency and liquidity:
Cash generated from
operations
Growth in cash generated
from operations (%)
(11.7)*
24.1*
80.9
7.1
40.8
0.2
0.1
0.1
0.1
– 1 367.2
1 153.2
1 275.8
1 062.0
829.9
Net debt:equity ratio (:1)
NAV per share (cents)
Distributions to
shareholders:
Total distribution (cents)
61
44
110
50
85
Distribution cover (times)
2.6
3.2
2.8
5.6
2.8
* Growth on comparable six-month period
** Annualised
4. Key strengths
HIL believes that the following strengths contribute to the success of HomeChoice Holdings and
distinguish it from its competitors:
• home shopping offers customers a convenient experience that suits their lifestyle and time
constraints. The omni-channel contact points, including call centres, internet and mobile
phone, allow customers to shop at any time of day or night. The home shopping model
enables HomeChoice Holdings to serve a geographically dispersed customer base without
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
Age Position
42 Independent
non-executive
Chairman
Gregoire Lartigue 42 Chief Executive
Officer
Shirley Maltz
43 Executive Director
Nationality
Maltese
Business address
Dar il Barbagan, Triq Strejnu Zejtun,
Malta
Swiss
Paul Burnett
Finance Director
South African
Non-executive
Director
Independent nonexecutive Director
Independent nonexecutive Director
Non-executive
Director British
CH De La Cretaux 1, GLAND 1196,
Switzerland
78 Main Road, Wynberg, Cape
Town, South Africa, 7800
78 Main Road, Wynberg, Cape
Town, South Africa, 7800
78 Main Road, Wynberg, Cape
Town, South Africa, 7800
40 'Nayim', Triq Philip Skippon,
Birguma, Naxxar, NXR 4121, Malta
905 Frobisher Crescent, London,
EC2Y 8HD, England
28 Chelsea Wharf, Lots Road,
London, SW10 0QJ, United
Kingdom 62 Queen Street, London EC4R
1EB, United Kingdom
39
Richard ("Rick")
68
Garratt
Carmel ("Charles") 62
Rapa
Amanda Chorn
56
Eduardo Gutierrez- 47
Garcia
Robert Hain
61
South African
Maltese
South African
South African
Independent non- British/
executive Director Canadian
8. Copies of the Pre-listing Statement
The Pre-listing Statement is only available in English and copies may be viewed on the website of
HomeChoice Holdings (www.homechoiceholdings.co.za), and may be obtained during normal
business hours from Thursday, 27 November 2014 until Thursday, 4 December 2014 from
HomeChoice Holdings, Rand Merchant Bank and Computershare Investor Services (Proprietary)
Limited as follows:
HomeChoice Holdings
78 Main Road
Wynberg 7800
Cape Town
South Africa
Rand Merchant Bank
1 Merchant Place
Cnr Rivonia Road and Fredman Drive
Sandton 2196
Johannesburg
South Africa
Computershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg
South Africa
27 November 2014
Attorneys
Cliffe Dekker Hofmeyr Inc., South African legal advisor to the
Company
Reporting Accountants and Auditors
PricewaterhouseCoopers Inc.
DISCLAIMER:
This abridged pre-listing statement does not constitute an offer of securities for sale in the United States or any other jurisdiction. The securities have not been, and will not be, registered under the US Securities Act of
1933, as amended (the “US Securities Act”) or under the securities legislation of any state or territory or jurisdiction of the United States or any other jurisdiction and may not be offered, sold, transferred or delivered, directly
or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities
laws of any states or other jurisdiction of the United States. There will be no public offering in the United States. HIL is not registered and will not be registered under the US Investment Company Act of 1940, as amended,
and related rules. This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be
relied on in connection with, any contract therefore. Any proposed listing and distribution of this document and other information in connection with a potential listing may be restricted by law in certain jurisdictions, and
persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute
a violation of the securities laws of any such jurisdiction. This abridged pre-listing statement does not constitute an offer of securities to the public in the United Kingdom. This communication is directed only at (i) persons who are outside the United Kingdom; or (ii) persons who
have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); (iii) high net worth entities falling
within Article 49(2) of the Order; and (iv) other persons to whom it may lawfully be communicated (all such persons together being referred to as “relevant persons”). Any investment activity to which this communication
relates will only be available to, and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable implementing
measures in any Member State, the “Prospectus Directive”) is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive.
Copies of this abridged pre-listing statement are not being made and may not be distributed or sent into the United States, Canada, Australia or Japan or in any other jurisdiction where it is unlawful to do so.
This abridged pre-listing statement is not a prospectus and the Offer referred to herein will not be open to the public. This abridged pre-listing statement does not constitute an offer to the public for the sale of or
subscription for, or the solicitation of an offer to buy or subscribe for, shares as defined in the Companies Act No. 71 of 2008 (the “Act”) or otherwise, and will not be distributed to any person in South Africa in any manner
which could be construed as an offer to the public in terms of the Act.
This abridged pre-listing statement may include statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements may be identified by the use of forward-looking terminology,
including the terms “believes”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology, or by discussions
of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company’s current view with
respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company’s business, results of operations, financial position, liquidity, prospects,
growth and strategies. Forward-looking statements speak only as of the date they are made.
Each of the Company, Rand Merchant Bank (a division of FirstRand Bank Limited) (“RMB”), and their respective affiliates expressly disclaims any obligation or undertaking to update, review or revise any forward-looking
statement contained in this abridged pre-listing statement whether as a result of new information, future developments or otherwise.
Neither RMB nor any of its respective directors, officers, employees, advisers or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth,
accuracy or completeness of the information in this abridged pre-listing statement (or whether any information has been omitted from the abridged pre-listing statement) or any other information relating to the Company,
its subsidiaries or associated companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the abridged pre-listing
statement or its contents or otherwise arising in connection therewith.
RMB is acting exclusively for HIL and no-one else in connection with the Listing. They will not regard any other person as their respective clients in relation to the Listing and will not be responsible to anyone other than
HIL for providing the protections afforded to their respective clients, nor for providing advice in relation to the Listing, the contents of this abridged pre-listing statement or any transaction, arrangement or other matter
referred to herein.
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