quick overview:
- Growth in customers and books slowed;
- collections improved towards the end of the period;
- conclusion of deal with Absa; and
- product opportunities for Woolies customers with Absa joint venture.
2009 focus
deal
Finalise deal and maximise available Absa experience and expertise and leverage the Barclaycard brand.
debts
Drive bad debt down.
derive value
Analytical focus to drive additional value out of existing books.
financial services
New account growth in Woolworths Financial services slowed. With the combined impact of the tougher controls introduced by the National Credit Act (NCA) and the high interest rates, this marginal growth in customers was countered by a decline in credit usage. The resultant flat book growth was the clearest signal of the tough consumer environment.
Bad debts rose sharply in the first six months of the year and collections’ capacity were doubled from the beginning of the second quarter to arrest the situation. By the end of the year, there were early signs that the bad debt situation had stabilised.
Non-interest revenue increased 35.5% from R172m to R233m. Collection fees, introduced in February 2008, made a significant contribution and card balance protection penetration increased through the year.
The Woolworths card revenue was flat for the period with fewer customers and lower card usage – only 27.2% of retail sales were made on the Woolworths card. Despite the slow growth and the deteriorating bad debt, the Woolworths card, accounting for more than two-thirds of the financial services revenue, continues to remain profitable.
Personal loans revenue was flat but higher bad debts impacted the profitability of this book.
Significant escalations in bad debt in the Visa book, up to 10.9% from 6.8% in the previous year, shifted the focus from customer acquisition and growth to managing debt.
The announcement, in April, that Absa had acquired 50% plus one share of the Woolworths Financial services business, marked the culmination of a thorough process to secure a partner for this business who would bring financial services expertise to the management of this significant asset. The deal is expected to be finalised during the course of the year.
% of sales spent on Woolworths cards