HomeChoice has managed to lift revenue despite significantly tightening its credit policy to limit impairments. Photo: Supplied

Nompumelelo Magwaza

DESPITE tightening its credit criteria and implementing an early write-off policy, HomeChoice was able to lift sales by 10.2 percent to R451 million in the six months to June, the direct marketing retailer said yesterday.

Amid the fallout in unsecured lending and a negative credit cycle, HomeChoice has been hard at work.

“The strategic focus remained on offering personal loans [to] proven HomeChoice retail customers on [a] short-term [basis] to limit event risk,” it said.

“FinChoice continued to adopt a cautious approach in lending in the subdued market environment.”

HomeChoice chief executive Shirley Maltz said that as early credit metrics had started to deteriorate in 2012, the group had significantly tightened credit policy by keeping its short-term focus and limiting loan sizes.

“The defensive position, together with further tightening of credit policy in 2013, has borne positive results in the first half,” the group said.

Debtor costs increased to R154m in the six months to June from R145m in the previous period, a 6.3 percent increase. Revenue was up 13 percent to R861m.

HomeChoice was able to reduce provisions for impairments to 18.2 percent of the gross book from 18.8 percent in the previous period.

“The South African credit market has been in a negative cycle for the past two years. This has been driven by significant increases in term and value of loans over the past five years,” it said.

HomeChoice said that the credit landscape had shifted considerably, as some of the largest consumer credit institutions posted slowing growth and significantly higher debtor costs, while “the demise of African Bank heightened fears of systemic risk in the market”.

Revenue in HomeChoice’s financial services division posted growth of 15.1 percent to R182m, with loan disbursements up 20.1 percent to R441m. HomeChoice said 74 percent of these loans were made to existing loan customers in good standing.

The retailer was able to attract 81 000 new customers, increasing its customer base to 557 000.

“Growing demand from customers to shop on the internet and via mobile phones saw online sales increase by 34 percent, with e-commerce now accounting for 9.3 percent of retail sales,” Maltz said.

Earnings before interest, tax, depreciation and amortisation grew 15.5 percent to R240m and operating profit was up 14 percent to R230m as the operating margin improved by 30 basis points to 26.7 percent.

Maltz said the move to the new R150m centralised distribution centre had been completed in January. The facility had increased the group’s total storage capacity from 80 000m³ to 200 000m³. “The focus at the distribution centre is now on reducing costs and driving efficiency improvements.”

Consumer spending was likely to remain constrained in the months ahead. “Although our debtor performance has improved significantly, tight credit polices will continue to be applied until the credit environment shows sustained improvement,” she said.

“We will continue to focus on cash generation and containing expense growth.”