Our opinion on the current state of HILHomechoice (HIL) is South Africa's largest home shopping retailer, operating through two divisions - retail and financial services. It offers a broad range of home appliances, clothing, fashion, footwear, and related products through a variety of showrooms and online. The share is very tightly held, with over 92% of issued shares held by the controlling shareholder, Richard Garrat, and his family. A planned issue of shares was shelved because conditions in the retail sector are depressed. This would have significantly improved the liquidity and tradability in the share, but it has been postponed until conditions are more favorable.
In our view, the share is too thinly traded even for small private investors but could be a good investment if liquidity in the share is improved through an issue of shares. Homechoice has been rolling out brick-and-mortar stores and has five open with another twenty-five planned. These stores are bringing in new customers both for its retail offering and its micro-loans business. It has extended its offering to micro-loans, insurance products, and funeral cover, and this has become an important part of its business since it often sells on credit as well.
In this tough economic environment, the company has had to increase its provisions for impairments on both its retail credit and micro-loans. The 27% growth of Fin Choice to 40% of group earnings indicates that the company might eventually become a financial services company with a retail sideline. The company mostly sells to women in the Living Standards Measure (LSM) categories from 4 to 8, and it has more than 870,000 active customers. It has been investing heavily in its digital offering to improve its online shopping experience. The company is seeing good growth in offering online loans to customers and is signing on 20,000 new customers per month. The company is rolling out "bright pink" container shops in the townships where clients can collect products that were ordered online or obtain a business loan.
In its financials for the year to 31st December 2023, the company reported retail sales 23.6% down and headline earnings per share (HEPS) up 7.2%. Fintech, which contributes 92% of profits before group costs, had revenue up 30.5%. The company said, "HIL has delivered a strong set of results with exceptional growth from Weaver Fintech, contributing 92% of the group's operating profit." We feel it is a great pity that this share is so thinly traded.
