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HomeChoice targets Africa’s middle class

 

DIRECT marketing retailer HomeChoice seems to be making headway with growing business in Africa with plans to open its Pan-African office in Mauritius this year.

The group which sells homeware merchandise, personal electronics and loan products, said on Friday that it planned to offer innovative retail and financial services products to the growing African middle class.

“Expansion into the rest of Africa presents a major growth opportunity for the business in the medium to long term.

“A solid platform for expansion across the continent has been created in recent years and HomeChoice currently trades in five countries outside South Africa, contributing 11 percent of retail sales,” the group said.

HomeChoice, which listed on the JSE last year December, had already made its African expansion strategy known to its shareholders. South Africa will remain the core trading region for both retail and financial services businesses in the medium term.

The group’s revenue for the year to December grew by 17.8 percent to R2 billion, driven by merchandise range extensions and innovation, growth in online sales and expansion into Africa.

Retail revenue increased by 16.9 percent to R1.6bn and accounted for 80 percent of the group’s revenue while FinChoice increased revenue by 22.2 percent to R368 million.

HomeChoice said despite the Post Office strike in the second half of last year, merchandise sales increased by 16.4 percent to R1.1bn.

The firm’s chief executive, Greg Lartigue, said the group delivered a strong trading and financial performance in a tough consumer environment, and entrenched its position as one of South Africa’s leading home shopping retailers.

“The rationale for the restructuring of the group and the formation of a new offshore holding company centres around our ambitions in Africa. We will be opening an office in Mauritius in 2016 as a base from which to drive our Pan-African expansion strategy,” said Lartigue.

The group’s debtors’ costs increased by 4.2 percent to R329.9m and reduced as a percentage of revenue from 19 percent to 16.8 percent.

“This reflects the benefit of the tightening of credit policy during improved performance on the debtors’ and loan books,” the company said.

HomeChoice head of the South African operations, Shirley Maltz, said the group showed a pleasing improvement in the performance of its debtors’ and loan books.

The strong revenue growth and controlled credit performance delivered a 19 percent increase in operating profit to R522m, with the operating margin up by 26.6 percent.

The group’s headline earnings grew by 14.9 percent to R355.6m, with headline earnings a share 15 percent higher at 352.8 cents.

Maltz said the trading environment was not expected to show any marked improvement.

HomeChoice shares rose by 2.56 percent to close at a record high of R36.10 on Friday.

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