Weaver Fintech Ltd. · JSE:WVR
Weaver Fintech — HomeChoice International — H1 2020 Earnings Presentation
78 slides from Weaver Fintech's earnings presentation, June 2020
Slide 1: Interim Results 2020
H O M E C H O I C E I N T E R N AT I O N A L P LC I N T E R I M R E S U LT S 2020
Slide 2: HomeChoice International plc overview
HomeChoice International plc is an investment holding company listed on the JSE Limited. The group is a leading participant in the retail homeware and financial services sectors to the urban middle-income mass market in southern Africa. It has serviced this market for more than 30 years and has buil
Slide 3: Financial performance
FINANCIAL PERFORMANCE Retail revenue Revenue -6.7% R1.6bn -4.9% Loan disbursements curtailed by Digital sales R400m +39% -29.8% Operating profit Funeral insurance premiums -46.7% +33% on lower sales and prudent debtor provisions Credit extended on Headline earnings digital channels per share R778m 1
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Slide 5: Interim Results 2020
INTERIM RESULTS 2020
Slide 6: Agenda
Agenda About us lai latelared(e]| performance Divisional reviews Outlook
Slide 7: Omni-channel Retail and FinTech group HiL
Omni-channel Retail and FinTech group HiL c 4 Yhomechoice Ae : crater relate ec ee aha Digital-first leliveries direct to homes customer interaction on affordable credit terms 73% r R1148m Revenue R426m Q = sox] R7Sm kes RAM RETAIL S3OIAU3S TVIONVNIS * Segmental operating profit includes interest ch
Slide 8: Our customer
a Our customer Group customer base Social Where she engages us Facebook Instagram Email WhatsApp Data How they understand us digital visits transactions
Slide 9: Digital engagement accelerated during lockdown
Digital engagement accelerated during lockdown "a HiL Qa Q a Q Contact canta 69% 51% GB SAE 5% 10% F «| Digital 19% 39x f Digital 85% 90. Showroom and Collect Choice 8% 6% gy Sales agents 5% 4% y Based on number of Retail sales and Financial Services loan transactions
Slide 10: Decisive in response to lockdown
Decisive in response to lockdown Accelerated Digital Conserved Cash Curtailed Credit Stopped print catalogue — 1% time in 35 years Increased digital marketing — social media and e-mailers, digicat Work from home — Contact centre and head office Deliberately cut loan disbursements Cut expenses Cut di
Slide 11: Curtailed credit and strong focus on collections
Curtailed credit and strong focus on collections HiL JUN 2020 DEC 2019 JUN 2020 DEC 2019 Applications accepted Average term 15.8 18.1 13.9 15.0 months month months itt Average balances R4 139 R4 349 R7 859 R8 628 Active acct holders able to purchase/ 66.1% 66.4% 76.3% 76.4% reloan + Controlled custo
Slide 12: Early signs of credit improvement
Early signs of credit improvement EARLY BAD RATES (60+ DAYS ARREARS AFTER 2 MONTHS) 14% 0% May Jun Jul Aug Oct Nov Dec Jan Feb Apr May —Reta cial Services Based on dispatch/disbursement dates * Benefits from credit actions: * Collections operational improvements: * Early vintages tracking better ove
Slide 13: Financial Performance
Financial Performance Jason Wright
Slide 14: Group financial performance
Group financial performance Debtor costs Trading expenses HEPS Digital credit 9 9 extended +38.3% +7.5% Nene) ets R778m
Slide 15: Challenging trading with excellent cash generation
Challenging trading with excellent cash generation * Retail sales: 2020 H1 % 2019H1 * Strong trade in Q1: +9% Rm_ change Rm * Lockdown in Q2: -24% * Loan disbursements: Revenue 1574 (4.9) 1655 * Cut disbursements , R I sal 24 10. 916 Qt: -3% and Q2: -57% etall sales c (10.0) * Gross profit improveme
Slide 16: Lockdown impacted credit books — prudent approach to provisions
Lockdown impacted credit books — prudent approach to provisions JUN 2020 DEC 2019 JUN 2020 DEC 2019 Gross book R1.9bn -1.5% R1.6bn -11.8% Debtor costs % 22.9% 16.5% 44.1% 32.7% of revenue Debtor provision 20.8% 18.8% 15.5% 13.9% % of receivables Non-performing 1.8 1.8 3.0 3.2 loans cover (times) + L
Slide 17: Covid impacted group debtor costs by +R96m
Covid impacted group debtor costs by +R96m . Prior to March lockdown debtor costs were tracking better than forecast in both businesses Q2 impacted by poor payment performance resulting in higher bad debt write-offs and substantial reduction in recoveries » R32m impact on debtor cost . Conservative
Slide 18: Expenses well controlled
Marketing expenses +2.8% R192m Stopped retail catalogue Pivot from print to digital Significant increase in digital spend and social media Expenses well controlled Staffing and Technology +2.4% R145m Reduced tech consultants, more in-house Recruitment freeze Customer ops and Support +0.5% R84m Digit
Slide 19: Strong cash generation protects balance sheet
Strong cash generation protects balance sheet Rm Jun 2020 Jun 2019 * Proactive management of working capital Cash balance R379m RIZIm Cash conversion 197.8% 65.7% * Capex tightly controlled Cash from operations R449m R249m - Capex R56m R7im » Year-end dividend cancelled oo . Net debt* R321m R512m *
Slide 20: Retail
ws |
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Slide 22: Omni-channel experience
20 Omni-channel experience Y All channels Delivered to customer interacts & places order > @ Contact centre wW Showrooms ee Q Sales agents Black, female ©0@ R10 000 pm Digital ? Urbanised Social media a * Showrooms * 3rd-party collection points * ChoiceCollect containers = aS Digitally savvy i, Orde
Slide 23: More than distribution points
More than 1 000 distribution points for convenient collections No. of pick-up points Jun-t9 Jun-20 Jun-22 Showrooms 7 40 8 Containers 4 8 22 oc’s 2 2 2 3rd-party and SAPO collection points Total 1470 1023 1150 @ showrooms (J Containers Q oc New New showrooms containers 3rd Party collection points Yh
Slide 24: Retail financial highlights
Retail financial highlights Debtor costs Trading expenses Operating profit R263m R412m R75m +32.2% +4.5% -52.2% homechoice forthe home you love 20
Slide 25: Covid-19 impact on Retail sales
Covid-19 impact on Retail sales RETAIL SALES GROWTH (% INC) 20% 10% 0% Weeks 1-12 Weeks 13-17 Weeks 18 - 22 Weeks 23 - 26 Qi 24.0% Q2 HI Covid-19 impact estimated at R210m in sales and R105m in gross margin Yhomechoice forthe home you love 2 23
Slide 26: HomeChoice
nomechoice 60.24 24|
Slide 27: Continued steady growth in new customers
Continued steady growth in new customers NEW CUSTOMERS 152657 123.420 82836 69 821 seszq 64896 2019 2020 Qt a? ait NEW CUSTOMER ACQUISITION CHANNEL 16% aon! 16.9% Acquisition of new customers curtailed in Q2, however digital acquisition reaching record levels TV performing consistently and showrooms
Slide 28: Pleasing growth in cash sales — strong focus for H2
26 Pleasing growth in cash sales — strong focus for H2 * Cash sales of merchandise improved CASH SALES % CONTRIBUTION to 7% of total merchandise sales * We expect the contribution of cash 20% sales to total merchandise sales to 18% >18% be substantially higher than in H1 14% ete More competitive 213
Slide 29: Strong digital sales, contribution up from 15% to 24%
Strong digital sales, contribution up from 15% to 24% DIGITAL SALES GROWTH VS. LY 160% 140% 120% 100% 80% 60% 40% 20% 0% Qi 65% 39% 2% a Q2 HI >150% >100% FY =Q1 #Q2 #H1 #H2 # FY DIGITAL SALES % CONTRIBUTION 35% 30% 0% 15.6% ag, 151% 15,3% 31% 23,7% 2019 "2020 >28,0% ili | | | FY Y Yhomechoice 25 27
Slide 30: Well-developed strategy to win
Well-developed strategy to win 26
Slide 31: Focus on speed to improve customer satisfaction
STRATEGIC IMPERATIVES Focus on speed to improve customer satisfaction AVERAGE DELIVERY DAYS 9 8 7,9 7 48 » é 2 & P - 4 ore, : ge: é y ° g Qi Q2 H1 2019 =2020 4 NPS >80% <5 days delivery 95% <24 hours Credit vetting and despatch Customer enquiries v 50% HomeChoice rewards card launch Yhomechoice fort
Slide 32: Three key measurements drive our digital sales growth
30 STRATEGIC IMPERATIVES Three key measurements drive our digital sales growth 4 Good growth in sessions and users Sessions a Users 4 Improvement in customer experience a Conversion a Avg. customer duration 4 Our social media strategy Ya @ Facebook followers a @ Instagram followers Yhomechoice forth
Slide 33: Massive opportunity to grow market share in related categories
STRATEGIC IMPERATIVES Massive opportunity to grow market share in related categories HOMECHOICE MARKET SHARE 3,0% * Massive opportunity in: - consumer electronics & media - fashion (shoes, bags, accessories); - toys, hobbies & DIY - appliances * SAe-Commerce market - R64bn in 2020 - R82bn by 2023 *
Slide 34: Unique and innovative merchandise offering
32 STRATEGIC IMPERATIVES A unique and innovative merchandise offering expanded to attract Y higher-income earners while maintaining our core customer base Differentiation through exciting merchandise solutions We will win by Attracting higher- Innovative and Expanding New merchandise income earners
Slide 35: Increase and maintain profitable private label
STRATEGIC IMPERATIVES Increase and maintain profitable private label Private label sales >80% in bedding and textiles External brands’ growth driven by furniture, large appliances and consumer electronics We offer private label in appliances at improved margin, unique product, e.g. larger urns and k
Slide 36: Build new businesses to enhance customer value proposition
la mys NA YY EG “) Fashion Value-added Cellular Loans and business services market insurance Driven by Expand into new Offer data, Redefine cellular Tight integration Dedicated - categories and electricity, airtime, offering, including with FinChoice - projects office launch dedicated etc. to HomeCh
Slide 37: Driving internal efficiencies to deliver sales growth
STRATEGIC IMPERATIVES Driving internal efficiencies to deliver sales growth of 10% — 15% Y H1 Full Year R100 Declines Declines + Declines >8% Cancellations Cancellations Returns + Cancellations >7% Returns oui “ generated ¥ Returns >20% 4 Sales growth >10% Sales Sales RO “homechoice fortrahemeyoutor
Slide 38: Financial Services Division
Financial Services Division Sean Wibberley >finchoice for when you need it 34
Slide 39: 100% digital and contact centre business
We have NO branches We are a 100% digital and contact centre business In 2020 we have disbursed 36% 1 loan every =a Ganscct with os minute of every day Our customers pay zero in data charges for browsing our mobi platform yy) outside of normal business hours Over 90% of our customers’ loan, insuranc
Slide 40: Financial highlights
Financial highlights Loan disbursements R804m -29.8% Debtor costs R188m +48.0% Insurance premiums +32.9% Trading expenses +13.6% Gross debtors’ book R1.6bn -5.4% Operating profit R74m -53.2% finchoice for when you need it 36 38
Slide 41: Lockdown action - Protect the book and generate cash
Lockdown action - Protect the book and generate cash for the group » © aft ad New loans stopped Credit limits for Leveraged industry and - April and May existing customers employer performance data curtailed to ramp up lending from June | LOAN DISBURSEMENT % INC ON 2019 R400m cut in GS (70%) disburs
Slide 42: Growth in FinChoice MobiMoney limiting risk exposure
40 Growth in FinChoice MobiMoney™ limiting risk exposure LOAN DISBURSEMENTS R1145m 41,8% 10% JUN 2019 =MobiMoney3 month R804m Lowered credit limits and shortened terms during lockdown 35.4% MobiMoney digital-only product " penetration to 69% of active customer base (2019: 50%) Shifted to 90% of disb
Slide 43: Customer highlights
Customer highlights Customer base up 7.3% New loan customers, 47% external to group Existing Customer tand-alone insurance customers up 15.7% New insurance customers
Slide 44: Strategic imperatives
42| Strategic imperatives fi 2. Drive 100% customer digital acquisition engagement oy Expand MobiMoney wallet 4, Scale insurance business Start-up business loans
Slide 45: Drive customer acquisition
STRATEGIC IMPERATIVES Drive customer acquisition Sell loans and insurance at Retail point-of-sale External customers from digital partners 4 HomeChoice customers % © External FinChoice prospects platform 100% digital engagement Launch native mobile app Data-driven personalisation Contact centre supp
Slide 46: Expand FinChoice MobiMoney wallet
44 ERATIVES Expand FinChoice MobiMoney™ wallet r finchoice R2563.00 R126.00 Account status unt VP, Open a free account Every qualifying HomeChoice customer will get a free MobiMoney wallet Fund wallet with credit facility Earn rewards Points Cash back Transact Withdraw into bank account, cell phone
Slide 47: Scale insurance business
STRATEGIC IMPERATIVES » Scale insurance business [ip Platform New products Channels Roll out + Personal accident + Retail point-of-sale + Extended product warranty * 3rd-party digital partner sales cloud-based Root + Commuter cover + Drive digital insurance platform + Legal aid cover (sales, admin,
Slide 48: Start-up business loans
STRATEGIC IMPERATIVES Opportunity Enter the R40bn+ small and informal business lending market Leverage our customer base, platforms and credit knowledge Source: FinFind Start-up business loans Market 900 000 HomeChoice customer base >100 000 small business owners Ihave a cash business that needs ‘ac
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Slide 50: Outlook
Outlook The group is well positioned for growth Customer demand Digital Credit books Robust cash building acceleration improving position + Product range + Shopping on + Tightened risk + Substantial cash extension and new digital platforms criteria balances categories increasing + Identification of
Slide 51: Questions?
Questions? 49
Slide 52: Disclaimer
50 Disclaimer Hi This document has been prepared and issued by and is the sole responsibility of the management of HomeChoice International plc and its subsidiaries (the “Company” or the “Group”). This document does not constitute or form part of any offer or invitation to sell or issue, or any soli
Slide 53: Unaudited Interim Results
H O M E C H O I C E I N T E R N AT I O N A L P LC UNAUDITED I N T E R I M R E S U LT S for the six months ended 30 June 2020 51
Slide 54: Strong cash position and sharp acceleration in digital engagement
STRONG CASH POSITION AND SHARP ACCELERATION IN DIGITAL ENGAGEMENT The Retail business is an omni-channel retailer with considerable expertise in both merchandise and credit management to the mass market. Financial Services is a diversified FinTech business offering a range of personal lending, value
Slide 55: Decisive in response to lockdown; strong cash generation
Decisive in response to lockdown by poor payment performance resulting The six-month period to June has been a tale in higher bad debt write-offs and lower of two quarters. The strong performance in the recoveries. Conservative credit impairment first quarter resulted in sales being up 11.9% and pro
Slide 56: Retail: digital transformation accelerated
COMMENTARY CONTINUED R E TA I L digital transformation accelerated Retail revenue decreased by 6.7% to R1.1 billion. social media strategy, with a healthy increase in An 8.5% increase in Q1 sales was followed by a Instagram and Facebook followers. 24.0% decrease in Q2, resulting in Retail sales Good
Slide 57: Financial Services: protect the credit book
FINANCIAL SERVICES for when you need it protect the credit book and generate cash for the group Financial Services revenue increased by 0.5% to platform will evolve into a credit-backed R426 million, a 2.7% decrease in finance income wallet, enabling customers with multiple and a good growth of 8.1%
Slide 58: Curtailed credit and a strong focus on collections
COMMENTARY CONTINUED Curtailed credit and a strong focus on collections Gross trade and loan receivables increased by 0.3% to R3.5 billion, primarily due to the curtailment of loan disbursements and lower sales. Group debtor costs increased by 38.3%, the impact of Covid adding an estimated additiona
Slide 59: Tightened credit criteria; redomiciliation and board changes
Tightened credit criteria to employment sectors and proven employees, manage Retail credit risk new customers were opened for lending in Debtor costs in Retail increased by 32.2% to June. The average disbursement term was R263 million, R216 million adjusted for the Covid reduced from 15.0 months to
Slide 60: Outlook and dividend declaration
COMMENTARY CONTINUED Outlook The socio-economic outlook for South Africa remains challenging with high levels of unemployment and an uncertain growth path as the country recovers from the negative impact of the lockdown to lives and livelihoods. We expect the informal market to continue to be active
Slide 61: Unaudited Condensed Group Financial Statements
UNAUDITED CONDENSED GROUP FINANCIAL STATEMENTS 59
Slide 62: Condensed group statement of financial position
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION Unaudited Unaudited Audited Jun 2020 Jun 2019 Dec 2019 Notes Rm Rm Rm Assets Non-current assets Property, plant and equipment 472 466 471 Intangible assets 191 140 169 Right-of-use assets 61 55 67 Financial assets at fair value through profit or loss 2
Slide 63: Condensed group statement of comprehensive income
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 % Jun 2019 Dec 2019 Notes Rm change Rm Rm Revenue 1 574 (4.9) 1 655 3 484 Retail sales 4 824 (10.0) 916 1 951 Finance income 527 (0.9) 532 1 093 Fees from ancillary ser
Slide 64: Condensed group statement of changes in equity
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY Equity Stated Reorgan- attributable and share Share Treasury isation Other Retained to owners of capital premium shares reserve reserves earnings the parent Rm Rm Rm Rm Rm Rm Rm Balance at 1 January 2019 – audited 1 3 005 (3) (2 961) 18 2 624 2 684 Chan
Slide 65: Condensed group statement of cash flows
CONDENSED GROUP STATEMENT OF CASH FLOWS Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 % Jun 2019 Dec 2019 Note Rm change Rm Rm Cash flows from operating activities Operating cash flows before working capital changes 207 (45.7) 381 718 Movements in working capital
Slide 66: Group segmental information
GROUP SEGMENTAL INFORMATION Unaudited six months ended June 2020 Financial Intra- Total Retail Services Property Other group Rm Rm Rm Rm Rm Rm Segmental revenue 1 574 1 148 426 32 – (32) Retail sales 824 824 – – – – Finance income 527 234 293 – – – Fees from ancillary services 223 90 133 32 – (32) E
Slide 67: Segmental information six months ended June 2019
Unaudited six months ended June 2019 Financial Intra- Total Retail Services Property Other group Rm Rm Rm Rm Rm Rm 1 655 1 231 424 31 – (31) 916 916 – – – – 532 231 301 – – – 207 84 123 31 – (31) 379 213 192 18 (15) (29) (34) (56) (5) (1) – 28 1 – 1 – 38 (38) (24) – (30) – (32) 38 322 157 158 17 (9)
Slide 68: Notes to the condensed group financial statements
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS 1. Basis of presentation and accounting policies The condensed group financial statements for the six-month period ended 30 June 2020 have been prepared by the group’s finance department, acting under the supervision of P Burnett, CA(SA), the finance
Slide 69: Trade and other receivables
3. Trade and other receivables Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 Jun 2019 Dec 2019 Rm Rm Rm Group Trade and loan receivables 3 539 3 529 3 784 Provision for impairment (649) (540) (620) Other receivables 40 34 24 2 930 3 023 3 188 Provision for impairm
Slide 70: Trade and other receivables (continued)
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS CONTINUED 3. Trade and other receivables (continued) Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 Jun 2019 Dec 2019 Rm Rm Rm Financial Services Gross carrying amount 1 621 1 713 1 837 Performing (stage 1) 1 279 1
Slide 71: Trade and other receivables (continued)
3. Trade and other receivables (continued) Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 Jun 2019 Dec 2019 Rm Rm Rm Movements in the provision for impairment were as follows: Retail Opening balance (366) (359) (359) Movement in provision (excluding disposals) (32)
Slide 72: Retail sales, ancillary fees and trading expenses
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS CONTINUED Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 Jun 2019 Dec 2019 Rm Rm Rm 4. Retail sales Retail sales are disaggregated as follows: Home textiles 596 615 1 249 Appliances and electronics 204 268 635 Fashi
Slide 73: Basic and headline earnings per share
7. Basic and headline earnings per share The calculation of basic and headline earnings per share is based upon profit for the period attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue as follows: Unaudited Unaudited Audited six months six months
Slide 74: Reconciliation of cash generated from operations
NOTES TO THE CONDENSED GROUP FINANCIAL STATEMENTS CONTINUED 8. Reconciliation of cash generated from operations Unaudited Unaudited Audited six months six months year ended ended ended Jun 2020 Jun 2019 Dec 2019 Rm Rm Rm Profit before taxation 133 301 582 Deduct finance income earned (527) (532) (1
Slide 75: Related party transactions, seasonality, commitments
10. Related party transactions and balances Related party transactions, similar to those disclosed in the group’s annual financial statements for the year ended 31 December 2019, took place during the period and related party balances exist at the reporting date. Related party transactions include k
Slide 76: Administration and directorate
ADMINISTRATION Country of incorporation Auditors Republic of Mauritius PricewaterhouseCoopers Republic of Mauritius Date of incorporation 9 April 2020 Corporate bank Butterfield Bank (Jersey) Limited Company registration number C171926 JSE listing details Share code: HIL Registered office ISIN: MT00
Slide 77: GrowthPepper
GROWDPEPPER
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HomeChoice International — H1 2020 Earnings Presentation on 6ix