HomeChoice Holdings to list on JSE in Q4

The HomeChoice Group is a credit-based direct marketer selling homeware merchandise through its retail business‚ HomeChoice‚ and financial services products through FinChoice to the growing urban middle income mass market in southern Africa.

The listing will be implemented together with a capital raising‚ through a private placement of new ordinary shares in the HomeChoice Group and the private placement of a portion of existing ordinary shares by certain HomeChoice shareholders‚ with eligible investors.

The selling shareholders plan to sell a portion of their holdings in order to increase the free float and enhance liquidity after the listing.

The capital raised will be used to fund organic growth through the expansion of existing businesses and accelerating the growth of new businesses. Listing proceeds will also be used for capital investment in information systems and distribution infrastructure‚ as well as the development of a new distribution centre and call centre‚ the company said on Tuesday.

Rand Merchant Bank has been appointed as lead adviser and bookrunner for the transaction.

HomeChoice offers an extensive range of household textiles and homeware merchandise through multiple marketing channels‚ with a home delivery service. Credit is offered on terms of six‚ 16 and 24 months.

FinChoice is a niche provider of unsecured personal loan products solely to HomeChoice customers with good credit records on terms of six‚ 12 and 24 months.

FoneChoice‚ a new business launched in 2011‚ sells mobile smartphones and computer products on credit into the HomeChoice customer base.

As a direct marketer‚ HomeChoice is distinct from traditional 'bricks and mortar' retailers. Customer relationships are conducted over a distance and the primary 'shop' is the catalogue and Internet site.

Multiple marketing channels are used to attract and service customers‚ and to sell products. These range from contemporary channels such as the Internet‚ electronic mail and mobile phone‚ to telemarketing through the call centres‚ the catalogue and print media.

The group is well positioned to capitalise on the anticipated growth of the Internet and mobile channels‚ with online retail sales already accounting for 9% of sales in 2011‚ it said.

It has a predominantly female customer base of over one million people in the LSM 4 to 8 categories‚ spreading across SA and the neighbouring countries of Namibia‚ Botswana‚ Lesotho and Swaziland.

HomeChoice has a proven track record of profitable and cash generative growth. In the five years from 2007 to 2011‚ revenue grew at a compound annual rate of 26.7% per annum. This was driven through product innovation and the extension of the merchandise range.

Operating profit and distributions to shareholders have grown at a compound rate of 32.3% and 203.6% per annum respectively over this period through tight cost control a and strict credit management.

The group continues to experience strong demand for both retail and financial services products in 2012‚ with revenue increasing by 24.6% to R621.8 million in the six months to 30 June 2012. Headline earnings per share increased by 25.2% to 127.8 cents for the period‚ while cash generated from operations increased by 81.0% to R88.4 million. The financial position remains strong‚ with net asset value per share increasing by 24.1% to 907.9 cents‚ it said.

CEO Shirley Maltz said the HomeChoice Group has been operating in the urban middle income mass market for nearly three decades.

"We have developed extensive knowledge of direct marketing‚ credit management and customer behaviour in this target market. The HomeChoice brand has created trust and loyalty with its predominantly female base of 1.13 million customers."

"A listing on the JSE will make the business more competitive and strengthen our growth platform. The capital raised will fund the continued growth of the HomeChoice and FinChoice debtor books‚ and accelerate the growth of new businesses such as FoneChoice. Listing proceeds will also be used for capital investment in information systems and distribution infrastructure‚ the development of a new distribution centre and a new call centre‚" Maltz concluded.