EXPONENTIAL GROWTH IN THE FINTECH CUSTOMER BASE DELIVERS STRONG PROFITABILITY
“HIL has delivered a strong financial performance, with exceptional growth from Weaver Fintech, which is contributing 95% of the Group’s operating profit. Our digital-first approach continues to provide scalability and efficiency to our businesses and outstanding customer convenience.”
HIL CEO, Sean Wibberley
Salient features:
- 5 million customer base, up 51%
- 0 billion revenue, up 15%
- R388 million operating profit, up 36%
- 2 billion cash collections, up 32%
- 89% of transactions conducted digitally
- HEPS and EPS of 196.9 cents, up 37%
- Interim dividend declared of 95 cents per share, up 36%
- 1 billion of cash and undrawn facilities available for growth
Mauritius, 13 August 2024:
HomeChoice International plc (HIL) delivered sterling results for the six months to 30 June 2024, reporting HEPS and EPS growth of 37% and a dividend of 95 cents per share, up 36%. The digital nature of the Group’s fintech operations has delivered substantial operating profit leverage. A credible 15% revenue growth has resulted in a 36% growth in operating profit. Over 89% of the Group’s transactions are completed through digital channels.
The Group made pleasing progress in the past six months, growing its customer base by 51%. This comes after a 39% customer growth in the previous financial year. HIL also increased disbursements by 17% to R2.8 billion, delivered Buy Now, Pay Later (BNPL) Gross Merchant Value (GMV) of R1.5 billion (up 174%) and increased its merchant points of presence to 8 700 (up 47%), wrote R85 million in standalone insurance premiums (up 25%) and generated R604 million in retail sales (up 2%). Cash collections increased by 32% to R5.2 billion, a notable achievement in the face of economic headwinds and a constrained consumer environment.
Delighting digitally connected urban African women with our innovative products and 24/7 convenience
Our 2.5 million, primarily female customer base, is a vital revenue and profit growth driver. The Group’s attractive product offerings drive strong customer growth, providing customers convenience and an excellent customer experience through mainly digital channels. Our BNPL product is a prime example of this convenience, offering customers a 3-month, zero-interest instalment product digitally registered in minutes. The Weaver ecosystem is attracting over 100 000 customer sign-ups per month. 63% of the Group’s customers are Millennials and GenZ consumers.
Weaver Fintech ecosystem drives cross-selling and profitability
Weaver Fintech offers innovative personal lending, insurance, and value-added services through FinChoice, as well as payment solutions and merchant services through PayJustNow. Weaver Fintech generated a 31% growth in both revenue, to R1.1 billion, and operating profit, to R275 million. Weaver’s customer base increased by 76% to 2.1 million in the six months, with high levels of repeat business. Loan disbursements increased by 17% to R2.8 billion, with 87% of the disbursement value directed to proven existing customers, a cautious approach given current economic headwinds. The book’s short-term nature and strong cash yields resulted in customer collections of R4.5 billion in the six months, close to 90% of Weaver’s gross debtors’ book of R5.1 billion.
Weaver’s customer-focused fintech ecosystem provides a compelling opportunity to cross-sell our financial services products to our extensive customer base. Currently, 21% of customers access two or more products from the product suite, leaving substantial scope for growth. A new retail instalment credit product, PayStretch™, is being actively piloted and will be launched in the broader market later this year. With a sizeable R1.1 billion in cash and undrawn funding facilities, there is ample scope to fund Weaver Fintech’s continuing growth.
Our virally-adopted BNPL product is the number one BNPL in South Africa, with 1.8 million customers generating GMV of R1.5 billion and fees of R73 million for the six months. It has over 2 400 merchant partners, spanning 8 700 points of presence, who benefit from increased basket size, real-time shopper data and analytics, and high brand awareness through 20.2 million merchant referrals from the PJN store directory in the recent period.
FinChoice MobiMoneyTM, our convenient and accessible three-month credit-backed wallet, continues to appeal strongly to customers. MobiMoney disbursements grew by 29.4% to R1.1 billion, contributing 37% to total disbursements.
Retail positive momentum evident
Our omnichannel retailer, HomeChoice’s sales have steadily improved to R0.6 billion, up 2%. Revenue was almost flat in a tough market, and together with the rise in retail sales, a pleasing 190bps improvement in gross profit margin, and a resizing of the cost base, it enabled an operating profit of R19 million. Retail successfully resized its cost structure, resulting in a 9.2% reduction in trading expenses, notwithstanding expense growth from new showrooms.
Implementing a bespoke scorecard and new credit solutions in FY2023 have notably improved the quality of new customers acquired and the profitability of sales generated. The reduction in load shedding has significantly restored the contact centre’s connectivity, and new distribution partners have ensured that customers receive more reliable catalogue delivery. HomeChoice also reduced inventory by 29% and has renewed its focus on its unique heritage bedding and textile lines.
The business’ smaller format showrooms have proven popular and inherently more profitable, with solid footfall, a compelling cash sales proportion and lower credit risk. Ten showrooms were opened during the period, bringing the complement to 32 locations across the country.
Quality credit books, appropriate credit provisioning and healthy cash flows
The Group debtors book was up 19% and debtor costs increased by 23% year-on-year. Weaver Fintech debtor costs increased by 27%, below its book growth of 33%. Weaver has consistently maintained short-term debtors’ books and leverages this strategy to react quickly to market conditions and manage credit risk in response. Retail debtor costs were 15% higher due to non-comparable items reducing the prior period. The concerted focus on improving new business and implementing a new credit scorecard has improved both the quality and yield in the Retail book. The Group has maintained collection rates despite consumers’ constrained financial position. The Group’s credit books remain strongly cash-generative.
Executive chair, Shirley Maltz – “We are excited by the momentum in both our businesses. With more than 2.1 million fintech customers, a compelling financial services offering, and 2 400 merchants in our digital ecosystem, Weaver Fintech is positioned for sustained high earnings growth. We will achieve this by expanding the product range and cross-selling these products within the growing ecosystem. We are also pleased to see accelerated traction in the turnaround of the Retail business.”