Fintech-focused digital consumer financial solutions group HomeChoice International (HIL) grew operating profit 25% in the six months to June 30 in a challenging consumer environment and lifted its dividend 9% to 70 cents per share.
HIL’s fintech business grew revenue 29% to R872 million with its operating profit up 44%. Digital revenue now comprises 57% of group revenue.
The fintech operations offer financial services and retail products to more than 1.7 million mobile-savvy, mass-market, mainly women customers in South Africa, as well as payments products through 2 570 retail partners with more than 5 900 points of presence country-wide.
Retail sales operation sales fell 26% to R594m at its 14 stores, a setback after it had started to recover post the Covid pandemic, but credit had been tightened and four new stores were planned for the second half, CEO Sean Wibberley said in a telephone interview.
Group headline earnings per share was steady at 143.7 cents. Group customers grew 14% to 1.7 million.
The group disbursed R2.4 billion of loans (up 12%), delivered Buy Now Pay Later Gross Merchant Value of R0.5bn (up 149%), and demonstrated its cash collection capability by collecting R3.9bn from customers, up 17% year-on-year.
Weaver Fintech contributed 95% of group operating profit. This was offset by a disappointing performance in the retail business, which was restricted by credit risk tightening and market challenges, resulting in flat group earnings and headline earnings per share.
More than 81% of group transactions took place using digital channels, with on average 1.3 million digital users per month and app users growing rapidly.
The customer base is 70% women and 60% Millennials and GenZ consumers.
The scalable platform delivered cost efficiencies with the cost per digital transaction falling by 56% in three and a half years.
Weaver Fintech’s revenue was up 29% to R872m and operating profit up 44% to R295m. Weaver Fintech offers personal lending, insurance and value-added services digitally through FinChoice, as well as digital payment solutions through PayJustNow.
Weaver Fintech grew its combined customer base by 28% to 1.2 million, translating into growth of six times the original customer base since 2019.
Increased scale, high levels of repeat business and a larger share of wallet per customer were delivering increasingly more profitable growth, said Wibberley.
Both businesses follow a conservative low-and-grow credit strategy, initially offering low-value credit on short terms that are increased for customers with a proven payment history. These automated digital credit strategies are supported by digital payments, significant repeat customer engagement and a track record of agility to rapidly respond to market conditions, he said.
Advancing a broad and appealing product suite drove customer spend and provided income diversification. FinChoice’s credit-backed MobiMoney digital wallet had paid out R4.8bn since inception and now offered bill payments at 25 000 Zapper points of presence.
Fee income represents 33% of Weaver Fintech's revenue. Funeral and personal accident insurance, a driver of fee income, grew by 29% year-on-year.
PayJustNow had sustained rapid adoption by more than 900 000 customers in just over two years, with a 38% growth in signed-up customers and a 43% increase in the number of transactions in the 6-month period.
At the retail stores, the weak rand and supply chain constraints contributed to a reduction in gross profit margin from 48.3% to 43.6%. Significantly lower debtor costs (down 34%) and lower trading expenses (down 3%) were insufficient to compensate for the lower sales, leading to operating profit falling 60% to R15m.
Work had already been done in terms of the turnaround with a cost realignment and the implementation of a Smart fulfilment delivery system completed.