HomeChoice International’s fintech business, FinChoice, contributed more than two-thirds to interim trading profit due to rapid growth during the pandemic, the JSE-listed home-shopping group said this week.
In an interview after the release of results for the six months ended June 30, executive chair Shirley Maltz said that prior to the pandemic, FinChoice, which provides short-term loans and insurance products, contributed about 30%-40% of trading profits. This increased to 70% of the R212m trading profit for the interim period.
She said HomeChoice intended to grow FinChoice’s footprint organically by “investing even more in technology”.
Asked about future plans for the division, Maltz said the group was “not necessarily looking at any type of corporate action at this point”.
“There is significant organic growth available to the fintech business,” she said.
“If this changes at some point in the future, all options on the table to unlock shareholder value will be reviewed, including acquisition, disposal, merger, restructuring or a listing.
“Fintech is a disrupting technology and it has global growth and excitement around it. I’m not going to be kicking any options off the table.”
“Fintech” generally refers to technology that automates financial services or brings functions online so customers can transact using computers or smartphones.
Maltz said the financial services business is so different from the traditional retail business of HomeChoice, which sells homeware such as bedding, blankets and appliances, that it is “run entirely separately” with Sean Wibberley heading it as CEO.
Maltz said in a statement accompanying the release of the results that the group overall had “invested significantly in technology in recent years”. The focus had been on cloud-based platforms, digital marketing, machine-learning algorithms and data-driven customer acquisition. The aim was “to drive digitalisation and enhance the customer experience”.
“We have been reaping the rewards of this investment during the Covid restrictions — some 92% of all financial transactions and 32% of retail transactions were concluded digitally in the past six months,” said Maltz.
HomeChoice’s homeware retail business now has about 920,000 customers who are mainly young, female middle-income earners.
Wibberley said FinChoice had about 242,000 women customers at the moment, up about 11% in the past six months.
He said it was particularly positive for FinChoice that it had been able to retain about 87% of its customers.
Credit card on your phone
One of FinChoice’s fastest-growing products has been its credit wallet, which provides customers with a credit card facility on their mobile phones.
Investment analyst Chris Gilmour said the financial services segment in SA in general was very profitable and there was major growth potential in a “post-pandemic environment” in which people were looking to loans and other financial products to make ends meet.
While FinChoice has been enjoying strong growth, HomeChoice’s retail business delivered a far more muted performance, with trading profit declining 19% to R61m.
The group said the business was also affected by R29m in once-off impairment of software and restructuring costs but it was “gaining traction in its recovery plan aimed at improving margins and profitability”.
Discussing the retail division's performance, the division's CEO Chris de Wit said: “Last year in the second half we followed a strategy to reduce pricing quite a bit on certain categories, especially appliances and electronics, and that strategy to create demand didn't work and we went too far.”
He said the group had also reset its cost base, adding that last year during the pandemic “we should have been a bit more cautious”.
De Wit said the group had improved the gross profit margin from 40% in the second half of last year to 45% in the interim period thanks to remedial actions such as resetting the cost base.
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