Home-shopping retailer HomeChoice says its results for the six months ended June 30 are a reflection of the impact of the Covid-19 lockdowns, as well as pleasing outcomes from its decisive response to the pandemic.
It notes that it consciously cut back loan disbursements by R400-million to preserve cash during the national lockdown and to curb credit risk. This, together with about R210-million in lost retail sales, contributed to a 4.9% year-on-year decrease in revenue to R1.6-billion.
Debtors costs increased by 38.3%, owing to payment performance deterioration and prudent provisions raised. The dual impact of lower revenue and increased provisions reduced operating profit by 46.7% to R184-million and headline earnings a share by 54.6% to 104.4c.
The company highlights that it had significant success in preserving its cash resources amid the pandemic – in addition to reduced loan disbursements, HomeChoice also curbed expenses, cut discretionary capital expenditure and focused unrelentingly on cash management.
These efforts culminated in cash from operations increasing by 80%, or R200-million, contributing to a cash conversion rate of 197.8% and a cash balance of R379-million, up 213%, which provides "a robust shield against uncertain economic conditions".
Conservative investment in key strategic growth initiatives continued, with R56-million spent on an additional showroom, three ChoiceCollect containers, equipment for remote working and new technology systems.
A further highlight in the period was the strong acceleration in digital transformation, the company acclaims.
It stopped the printing and distribution of its retail catalogue for the first time in 35 years and significantly increased its marketing through social media and digital channels.
This not only notably reduced marketing costs but digital transactions in retail more than doubled from 19% in the first quarter, to 39% in the third quarter, notes the company.
The financial services business increased its already high digital transactions from 85% to 90% of all transactions.
Despite the lockdown and a reduced ability to trade in the second quarter, the retail business attracted 123 000 new customers for the period, while 18 000 new loan customers and 11 000 new insurance customers joined the FinChoice business in the same period.
“This has possibly been one of the most challenging periods the company has experienced, and the impact thereof is clearly visible in our financial results. To be able to still show strong strategic traction under these conditions reflects positively on the quality of our staff, as well as the fact that our brands and products continue to resonate with customers and that our ever-improving customer experience keeps her coming back,” says executive chairperson Shirley Maltz.
Gross trade and loan receivables were flat year-on-year at R3.5-billion, primarily owing to the curtailment of loan disbursements and lower sales.
Group debtor costs increased by 38.3%, with the impact of Covid-19 adding an additional R96-million.
The company refinanced and upsized its banking facilities during the lockdown period to R1.05-billion.
Pleasingly, net debt excluding group-owned properties has reduced to R321-million with a net debt to equity ratio of 10.5%, notes the company.
“The company is in a strong position to support future growth and protect itself against future economic shocks with available unutilised facilities and cash of R884-million,” it says.
The socioeconomic outlook for South Africa remains challenging as the country recovers from the negative impact of the lockdown, the company notes.
HomeChoice says it will continue to pursue its strategy to provide customers with exciting products, new merchandise categories and financial services products to customers in stable employment.
The company will also continue to accelerate its digital transformation and aggressively use digital marketing and social media tools to capture market share.
The company believes it is well positioned for growth and to take advantage of improvements in economic conditions, with a strong cash position and a robust balance sheet.