Weaver Fintech Ltd. · JSE:WVR
Weaver Fintech — HomeChoice International — FY2019 Earnings Presentation
70 slides from Weaver Fintech's earnings presentation, March 2020
Slide 1: Annual Results 2019
ANNUAL RESULTS 2019 H O M E C H O I C E I N T E R N AT I O N A L P LC
Slide 2: Sustaining strategic direction despite difficult trading performance
SUSTAINING STRATEGIC DIRECTION DESPITE DIFFICULT TRADING PERFORMANCE HomeChoice International plc 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
Slide 3: Annual results 2019 highlights
Revenue +7.3% 271 000 new customers to R3.5 billion acquired Stand-alone Investments in insurance premiums technology and customer Retail sales +48% experience continue +4.9% Headline earnings Milestone Loan disbursements per share R2 billion credit +27.0% 436.0 cents extended on digital channels –
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Slide 5: Annual Results 2019
ANNUAL RESULTS 2019 =) - —— 1 } HOMECHOICE INTERNATIONAL PLC
Slide 6: Agenda
Agenda About us WE ARE A LEADING PROVIDER OF INNOVATIVE Our performance RETAIL AND FINANCIAL Divisional reviews SERVICES PRODUCTS TO A LOYAL AND GROWING Our strategy FEMALE CUSTOMER BASE IN SOUTHERN AFRICA Outlook Questions Annual Results Presentation 2019 HorneChoice International pic 2
Slide 7: About us
ER TRTasvee) PRED CSPIOE ITE eT aT Mie fre iid
Slide 8: Two divisions — Omni-channel Retail and FinTech
Two divisions — Omni-channel Retail and FinTech Yhomechoice > finchoice * Omni-channel Retail providing shopping + Adiversified FinTech business offering a convenience with home delivery + Curated range of quality own-brand textiles and homeware merchandise, and selected range of well-known external
Slide 9: Our customer is a digitally savvy, urban African woman
Our customer is a digitally savvy, urban African woman OUR CUSTOMERS CUSTOMERS REGISTERED FOR PREDOMINANTLY FEMALE DIGITAL ACCESS 71 NEW CUSTOMERS ACQUIRED OETA IN THE YEAR 32 @® SHE IS DIGITALLY CONNECTED FOCUSED ON MASS Multi-channel approach to MIDDLE MARKET customer acquisition with an average m
Slide 10: Providing retail and financial products to suit her lifestyle
Providing retail and financial products to suit her lifestyle for when you need it MOBI PERSONAL | FUNERAL AIRTIME | ELECTRICITY MONEY LOANS COVER Annual Results Presentation 2019 HomeChoice international pic 6
Slide 11: Omni-channel group with digital increasing
Omni-channel group with digital increasing SHOWROOM AND CHOICECOLLECT | Ges (2018: 57%) iC. aaeae 39%) 1 : (2018: 1%) | : (2018: 3%) CUSTOMER CONVENIENCE AND DELIVERY CHOICE f) (2018: 64%) COURIER LIT couse, SALES AGENTS (2018; 23%) (2018: 6%) (2018: 7%), SAPO CLICK AND ly _ AFRICA DELIVERIES COLLEC
Slide 12: Showrooms — new customers and brand awareness
Showrooms —new customers and brand awareness TH yi 9; x 9 showrooms — 6 trading for full year i — Pretoria, Bloemfontein and Mamelodi opened in H2 Potential for 20+ across the country \ Showcase breadth of product range, provide access to digital engagement and click and collect location Locations K
Slide 13: ChoiceCollect containers improving delivery experience
ChoiceCollect containers improving delivery experience Multi-function: Click and collect at convenient locations Place orders Pick up catalogues Bringing the * Digital self-services (queries) brand to her + Proactively manage returns home * Reducing reliance on SAPO deliveries and Gauteng surroundin
Slide 14: Improving shopping experience
Improving shopping experience OMNI-CHANNEL IN STOCK TECHNOLOGY IMPROVING CHOICE OF DELIVERY SHOPPING MESSAGING SPEED OF CREDIT DECISIONS OPTIONS oo ware to 4B Click and Collect 9 q Seniion DIGITAL CUSTOMER COMMUNICATION “fai Sisipho, your order is being ; packed DELIVERED IN 5 DAYS CLICK AND COLLECT
Slide 15: Harnessing social media — monetisation and customer experience
Harnessing social media — monetisation and customer experience Lee QO 8 customer social media channels funnelled into one customer dashboard — Contact centre agents empowered with holistic view of data — transition to “digital agents” — Improvements in customers’ first-call resolution — Generating s
Slide 16: Seamless personalised offers and affiliate websites linked to FinChoice
Seamless personalised offers achieve high conversion rates 5 affiliate websites linked to FinChoice platform — Information flows enable affiliates to dynamically curate FinChoice products — Personalised offers have improved take-up and conversion rates — Acquiring more digital-savvy customers — End-
Slide 17: Our performance
6 by “OUR PERFORMANCE h
Slide 18: Financial performance
Financial performance Revenue Retail sales +7.3% +4.9% to R3.5 billion to R2.0 billion EBITDA atatelKeliitelctate 5 : Loans disbursed -8.5% 79.0c - +27.0% to R751 million down 20.2% oo , to R2.3 billion [ HEPS \4 Cash conversion 436.0c. 58.2% | eoneaeah fi 7.7 down 14.1% a rom 57.7% ranted * : (40.2
Slide 19: A challenging year with lower profit conversion
A challenging year with lower profit conversion * Revenue growth of 7.3% up to R3.5 billion — 4.9% growth in Retail sales — Finance income up 7.6% — Financial Services loan disbursements up 27.0% — Ancillary services increased 18.6%, stand-alone insurance business performing well * Operating profit,
Slide 20: Bad debt write-offs impact profit
e . Bad debt write-offs impact profit , . ° * Net debtors’ book increased by 10.9% Trade and loan receivables (net of provisions) — Retail only up 5.0% due to lower sales growth Rand million 3164 — Financial Services growth of 17.5% due to higher 2627 2853 disbursements 2191 1773 ¢ Retail debtor cos
Slide 21: Debtors portfolio summary
Debtors portfolio summary % 2019 2018 change Retail Gross receivables Rm 1947 4,4% 1865 Active accounts 581 818 (3,7%) 603 944 Debtors costs as % of revenue % 16,5% 14,9% Provision as % of receivables % 18,8% 19,2% Non-performing loans (120+ days) % 10,2% 9,6% Active account holders able to purchase
Slide 22: Good cost containment - focused spend on growth areas
Good cost containment - focused spend on growth areas Marketing expenses (including Showroom) 426 0,2% 425 12,2% 13,1% Customer operations and support 170 47% 162 4,9% 5,0% Technology 97 16,3% 83 2,8% 2,6% Staff 201 1,0% 199 5,8% 6,1% Amortisation and depreciation 73 24,6% 58 2.1% 1,8% Insurance and
Slide 23: Effective cash management
Effective cash management * Cash from operations down 7.8% — Lower profits — Higher loan disbursements — Increased focus on cash collections with Naedo debit orders — Tight management of stock * R44 million once-off tax charge from industry-wide SARS ruling on treatment of bad debt write-offs * Cont
Slide 24: Divisional reviews — HomeChoice
7) DIVISIONAL 'f REVIEWS ~homechoice for the home you love | 7 s
Slide 25: Retail top-line growth delivered in tough market
Retail top-line growth delivered in tough market bd Merchandise sales up 4.9% at R2.0 billion Retail revenue up 4.5% to R2.6bn — 2018 SAPO strike negatively impacted H1 Rand million o Clearance of excess bedding stocks with high 2613 markdowns and increased returns for non-deliveries 2328 2501 : of
Slide 26: Innovation attracting >20 new customers per month
Innovation attracting >20 000 new customers per month * Product performance mixed — Textiles contribution lower due to bedding performance \ — Double-digit growth from innovation and bundling in cookware and appliances Retail sales = Textiles 60% (2018: 64%) — Continued growth in footwear — curated
Slide 27: Retail credit metrics well managed
Retail credit metrics well managed ¢ Strong focus on credit conversion without loosening risk — Streamlining credit decision-making Applications accepted processes Not taken up — Benefits from fraud detection tool CUSTOMER MIX Existing ¢ Increased business with existing New customers Average term —
Slide 28: Divisional reviews — FinChoice
DIVISIONAL REVIEWS »finchoice for when you need it 26
Slide 29: Strong disbursements countered by growth in debtor costs
Strong disbursements countered by growth in debtor costs * Revenue up 16.8% to R871 million Financial Services revenue up 16.8% to R871m * 27.0% growth in loan disbursements, Rand million — Reinvestment of proceeds from sale of debt 871 review book in H1 746 * 48% increase in stand-alone insurance w
Slide 30: Digital usage well embedded in diversified FinTech business
Digital usage well embedded in diversified FinTech business * Increased digital engagement — 86.0% digital transactions (2018: 84.1%) — Value-added services support more frequent digital engagement * Good performance from FinChoice MobiMoney™ — Digital-only facility product, 58% of customer base — K
Slide 31: Financial Services credit metrics improving
Financial Services credit metrics improving * Increase in applications accepted — Increase in MobiMoney three-month facility account withdrawals — Personalised offers to external customers from affiliate sites ¢« Favourable reduction in terms and balances — Increased utilisation and penetration of M
Slide 32: Our strategy
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Slide 33: Transformation journey to a digital player progressing
Transformation journey to a digital player progressing Headline earnings per share Cents per shore et SHAREHOLDEp Re CAGR at 3.7% a Up 504 508 <p N. 9? a INNOVATIVE 389 8 415 436 OFFERS ENHANCE CUSTOMER ginaiiiin 2016 2017 2018 EXPERIENCE = DRIVE EMPLOYEE ENGAGEMENT Dividends per share Cents per sha
Slide 34: Strategy to deliver sustainable profitable growth
Strategy to deliver sustainable profitable growth PRODUCT AND CREDIT OFFERS ACHIEVED IN 2019: DIGITAL TRANSFORMATION ACHIEVED IN 2019: * Curated product and bundling offers + Digital credit extended, delivered strong growth in cookware, 40.2% of total credit Sie DLET SS: GigE GasGane oo. * Launched
Slide 35: Strategy to deliver sustainable profitable growth
Strategy to deliver sustainable profitable growth DATA AND INSIGHT-LED CUSTOMER GROWTH ENHANCE CUSTOMER EXPERIENCE ACHIEVED IN 2019: ACHIEVED IN 2019: * 271000 new customers to the group + Higher contribution of courier deliveries, * REM marketing models enabling more negating SAPO dependencies targ
Slide 36: Outlook
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Slide 37: Committed to strategy despite subdued economic outlook
Committed to strategy despite subdued economic outlook Focused on investments driving growth, technology and channels — Innovative, differentiated quality products through product development and range extension — Use data insights and machine learning models to drive customer growth — Omni-channel
Slide 38: Questions
6 QUESTIONS 36
Slide 39: Appendix
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Slide 40: Debt review book sale 2019Q1 — rationale and impact
Debt review book sale 2019Q1 — rationale and impact * We swopped a poor-performing, low-yielding asset for a high-performing, high-yielding asset, deployed to our best customers * Sold R220 million of debtors held in a debt review book * Customers who showed distress and had entered the formal NCA d
Slide 41: IFRS standards and credit regulations
IFRS standards and credit regulations AUTHENTICATED EARLY IFRS 16 DEBIT ORDER COLLECTION Leases (Debicheck) Impact Impact * Effective 1 January 2019 * New debit order system to prevent . fraudulent abuse * Offices, warehouses and Retail showrooms leased * Electronic system requiring prior approval f
Slide 42: National Credit Amendment Act
National Credit Amendment Act (number 7 of 2019) DEBT RELIEF BILL Impact Background * Signed into law August 2019, effective January 2021 with 24-month phased implementation * Provides relief to over-indebted consumers: * with outstanding unsecured debt <R50 000 * average monthly income <R7 500 * Di
Slide 43: Disclaimer
Disclaimer This document has been prepared and issued by and is the sole responsibility of the management of HomeChoice International pic 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 solicitati
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Slide 45: Summarised group financial statements
SUMMARISED GROUP FINANCIAL STATEMENTS for the year ended 31 December 2019 and cash dividend declaration H O M E C H O I C E I N T E R N AT I O N A L P LC
Slide 46: Commentary
COMMENTARY The Retail business is an omni-channel retailer to the mass market with considerable expertise in both merchandise and credit management. Retail's multi-channel offering includes digital and social media platforms, contact centres, sales agents’ networks, showrooms and the recently launch
Slide 47: Trading performance
Trading performance Group revenue increased by 7.3% to R3.5 billion in a challenging retail market. This was boosted by strong loan disbursements growth of 27.0%, retail sales growth of 4.9% and the acquisition of 271 000 new customers. Finance charges and initiation fees earned increased by 7.6% to
Slide 48: Commentary — Retail
COMMENTARY CONTINUED RETAIL EXPANSION ONGOING IN TOUGH RETAIL MARKET Retail revenue increased by 4.5% to R2.6 billion, Our implementation of a new e-commerce with a 4.9% merchandise sales growth. EBITDA engine during the year was complex and decreased by 2.4% to R442 million largely due to following
Slide 49: Financial Services — digital usage well established
FINANCIAL SERVICES for when you need it DIGITAL USAGE WELL ESTABLISHED IN CUSTOMER BASE Financial Services revenue increased by 16.8% credit limits and shorter-terms loans until their to R871 million, comprising a 14.8% increase in credit behaviour has been proven. finance income and a 21.5% growth
Slide 50: Mixed performance in credit
COMMENTARY CONTINUED Mixed performance in credit The group has a stable credit book, with gross trade and loans receivable increasing by 9.2% to R3.8 billion, primarily due to the high loan disbursements during the period under review. Group debtor costs increased by 28.7% resulting from the impact
Slide 51: Financial Services credit risk and accounting standards
Financial Services credit risk increased; however corrective action taken Debtor costs increased by 54.1% relative to Application of new loan disbursements growth of 27.0%. Bad debts accounting standards written off (net of recoveries) increased by As required by International Financial 17.5%, prima
Slide 52: Outlook and dividend declaration
COMMENTARY CONTINUED Outlook The economic outlook for South Africa remains muted with high unemployment and a slow recovery in key economic indicators. The vibrant informal economy continues to show growth as more individuals supplement their primary income with a secondary income derived from the i
Slide 53: Summarised group financial statements
SUMMARISED GROUP FINANCIAL STATEMENTS 51
Slide 54: Summarised group statement of financial position
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION 2019 % 2018 Notes Rm change Rm Assets Non-current assets Property, plant and equipment 471 1.5 464 Intangible assets 169 45.7 116 Right-of-use asset 67 100.0 – Financial assets at fair value through profit and loss 24 – 24 Deferred taxation 2 100.0 1
Slide 55: Summarised group statement of comprehensive income
SUMMARISED GROUP STATEMENT OF COMPREHENSIVE INCOME 2019 % 2018 Notes Rm change Rm Revenue 3 484 7.3 3 247 Retail sales 1 951 4.9 1 860 Finance income 1 093 7.6 1 016 Fees from ancillary services 4 440 18.6 371 Cost of Retail sales (1 027) 9.5 (938) Other operating costs (1 785) 15.2 (1 550) Credit i
Slide 56: Summarised group statement of changes in equity
SUMMARISED 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 2018 as originally presented 1 3 003 (3) (2 961) 13 2
Slide 57: Summarised group statement of cash flows
SUMMARISED GROUP STATEMENT OF CASH FLOWS 2019 % 2018 Notes Rm change Rm Cash flows from operating activities Operating cash flows before working capital changes 718 (7.5) 776 Movements in working capital (281) (7.0) (302) Cash generated from operations 7 437 (7.8) 474 Interest received 4 33.3 3 Inte
Slide 58: Group segmental information
GROUP SEGMENTAL INFORMATION 2019 Financial Intra- Total Retail Services Property Other group Rm Rm Rm Rm Rm Rm Segmental revenue 3 484 2 613 871 61 – (61) Retail sales 1 951 1 951 – – – – Finance income 1 093 482 611 – – – Fees from ancillary services 440 180 260 61 – (61) EBITDA 751 442 362 36 (34)
Slide 59: Group segmental information 2018
2018 Financial Intra- Total Retail Services Property Other group Rm Rm Rm Rm Rm Rm 3 247 2 501 746 58 – (58) 1 860 1 860 – – – – 1 016 484 532 – – – 371 157 214 58 – (58) 821 453 357 33 (22) – (59) (54) (4) (1) – – 3 2 66 (65) (62) (63) (64) 65 703 399 292 32 (20) – – – – – – (27) (5) (22) – – 676 3
Slide 60: Notes to the summarised group financial statements
NOTES TO THE SUMMARISED GROUP FINANCIAL STATEMENTS 1. Basis of presentation and accounting policies 1.1 Basis of presentation The group annual financial statements for the year ended 31 December 2019 and these summarised group financial statements have been prepared by the group’s finance department
Slide 61: Changes in accounting policies
1.2 Changes in accounting policies (continued) 1.2.1.1 Adjustments recognised on adoption of IFRS 16 (continued) The associated right-of-use assets for property leases were measured as if the standard had been applied since the lease commencement dates, but discounted using the incremental borrowing
Slide 62: Notes: Inventories and trade and other receivables
NOTES TO THE SUMMARISED GROUP FINANCIAL STATEMENTS CONTINUED 2. Inventories 2019 % 2018 Rm change Rm Merchandise for resale 310 8.4 286 Provision for inventory obsolescence (18) 20.0 (15) Goods in transit 57 72.7 33 349 14.8 304 Inventory sold at less than cost during the current year amounted to R2
Slide 63: Trade and other receivables (continued)
3. Trade and other receivables (continued) 2019 % 2018 Rm change Rm Movements in the provision for impairment were as follows: Retail Opening balance (359) (320) Change on initial application of IFRS 9 – (64) Restated opening balance (359) (6.5) (384) Movement in provision (36) (>100.0) 25 Credit im
Slide 64: Non-performing trade and loan receivables
NOTES TO THE SUMMARISED GROUP FINANCIAL STATEMENTS CONTINUED 3. Trade and other receivables (continued) 2019 % 2018 Rm change Rm Non-performing trade and loan receivables (being accounts 120 days or more in arrears, as a percentage of the trade and loan receivable books) were as follows at the repor
Slide 65: Total trading expenses and earnings per share
5. Total trading expenses 2019 % 2018 Rm change Rm Expenses by nature Credit impairment losses Trade receivables – Retail 432 16.1 372 Loans receivable – Financial Services 285 54.1 185 Total credit impairment losses 717 28.7 557 Amortisation of intangible assets 19 (24.0) 25 Depreciation of propert
Slide 66: Reconciliation of cash generated from operations
NOTES TO THE SUMMARISED GROUP FINANCIAL STATEMENTS CONTINUED 7. Reconciliation of cash generated from operations 2019 % 2018 Rm change Rm Profit before taxation 582 (13.9) 676 Deduct finance income earned (1 093) 7.6 (1 016) Add back finance income received 1 055 7.3 983 Share of loss of associate –
Slide 67: Related party transactions, commitments, fair value
9. Related party transactions and balances Related party transactions similar to those disclosed in the group’s annual financial statements for the prior year took place during the year and related party balances are existing at the reporting date. Related party transactions include key management p
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Slide 69: Administration and directorate
ADMINISTRATION Country of incorporation Auditors Republic of Malta PricewaterhouseCoopers Republic of Malta Date of incorporation 22 July 2014 Corporate bank Butterfield Bank (Jersey) Limited Company registration number C66099 JSE listing details Share code: HIL Registered office ISIN: MT0000850108
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HomeChoice International — FY2019 Earnings Presentation on 6ix