The CEO of homeware and financial services provider HomeChoice International, says the informal economy is being underestimated when it comes to forecasting SA’s economic performance.
Shirley Maltz said on Wednesday she believed less affluent South Africans were spending informally. They were also buying her company's products at a healthy rate, given the company’s strong performance.
“I think my view about what the economy will do and the strength of the economy is contrarian. The informal economy is performing well and I think that there will be an overall jump in economic activity next year,” she said.
Maltz said she was happy with HomeChoice’s performance and was confident the company’s fortunes would improve in the rest of 2019 and in 2020. Revenue for the six months to June increased 8.6% to R1.7bn and active customers grew 9% to 915,000. Gross profit margins fell from 51.9% to 47.1%.
Retail grew sales 7%, financial services increased loan disbursements 34.2% and stand-alone insurance premiums grew by 58.0%. Group profit after tax fell 7.7% to R240m and HomeChoice lowered its interim dividend by 8.4% to 87c a share. Credit impairment losses rose by a quarter to R326m. As much as R250m of cash was generated representing a cash conversion rate of 66.0%.
But the company said profits fell in the reporting period as it slashed prices to get rid of excess stock linked to the 2018 SA Post Office (Sapo) strike.
Sapo was battling through a huge backlog of mail in the second half of 2018 after a midyear employee strike. In October 2018, 16-million items were still on the floor at depots around the country. The strike meant HomeChoice had higher opening stock holdings at the beginning of 2019.
“The group took a decision to aggressively promote and clear the surplus stock, resulting in higher markdowns and a reduction in the margin for the six-month period,” Maltz said.
HomeChoice’s vision was to provide for its customers’ lifestyles through digitally focused and innovative retail and financial services products and to position the group as a leading digital player in the mass market, she said.
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