JSE-listed retail and financial services products provider, HomeChoice International PLC has embarked on a capital raising roadshow to fund capital expansion and growth.
The intention is to raise roughly R400 million via both a primary and secondary placement of shares. The company’s two biggest shareholders GSM, which represents the founders and holds 70% of the shares, and DPI, a London-based private equity firm, which owns 23% of the company, have also agreed to dilute their holdings.
Aside from the capital raise, the share placement will help HomeChoice, which has a market cap of R4.7 billion, improve its free float and share liquidity, and add additional institutional shareholders to the group, says group CEO Shirley Maltz. At this point it is not known how many shares will be added to the free-float – this will become clear following the AGM in April. However the JSE will see any improvement on the current 7% free-float as beneficial. Typically it views a free-float of 25% to 30% as satisfactory.
The company has grown revenue organically at a compound rate of 21% a year since 2008, from R557 million to R3.0 billion. Operating profit has grown by 31% a year over the same 10-year period to R752 million. Organic growth will remain a feature, however the company intends to accelerate its growth trajectory.
“We have a five pronged strategy,” says Maltz. This includes plans to deepen the retail product range and expand the financial services offering. In parallel, optimizing the use of customer data will enhance sales. “We are a data led business, our heritage is direct marketing and we can use customer insights to drive growth.”
The digital strategy is another huge focus. Already 16% of HomeChoice’s retail sales and 70% of its FinChoice products are sold digitally (mostly via mobile). “We see digital as a tidal wave and South Africa will be no different. Mobile is the must win channel,” she says.
That said, diversification of channels and income streams is the fourth prong of the strategy. The company is launching four new showrooms – all near large transport hubs – where customers can look at or collect products. It is also expanding its logistics infrastructure and will take FinChoice into Botswana and other neighboring countries.
Credit is seen as a key enabler to provide access to retail products in the mass market, says Maltz. Retail is currently driving the business’ customer acquisition and 92% of its 796 000 active customers use credit for purchases. “We know our customers very very well. She is African, about 40 years old with 2 children and earns R10 000 gross monthly. She spends very carefully and has proven to be a lower credit risk category over time.”
HomeChoice’s ultimate goal is to become a digital department store and a fintech platform focused specifically on a mass market female customer in southern Africa.