Wrap Text
Interim Results for the six months ended 31 March 2024
Pepkor Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2017/221869/06)
Share code: PPH
Debt code: PPHI
ISIN: ZAE000259479
LEI: 3789006D677C34F69875
("Pepkor", the "company" or the "group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2024
Pepkor delivers strong performance in a challenging operating environment
Performance driven by robust sales growth, margin improvement and momentum gains in
Pepkor's FinTech strategy
HIGHLIGHTS from continuing operations
- 9.5% growth in group revenue to R43.3 billion
- 24.5% growth in FinTech revenue to R5.8 billion
- 200 bps increase in gross profit margin to 38.1%
- 4.0% growth in operating profit before capital items to R5.1 billion (+13.0% on a
normalised basis(1))
- 3.1% decrease in HEPS(2) to 75.0 cents (+7.8% on a normalised basis (1))
- 85% cash conversion achieved (rolling 12-month basis)
(1) Refer to the Normalised results section in the detailed announcement for further information.
(2) Headline earnings per share.
Results Six months ended Six months ended % change
31 March 2024 31 March 2023
Rm Rm
Revenue (Rm) 43 264 39 526 +9.5%
Operating profit before 5 115 4 917 +4.0%
capital items (Rm)
Earnings per share 75.4 77.7 -3.0%
(cents)
Earnings per share 67.4 81.1 -16.9%
including discontinued
operations (cents)
Headline earnings per 75.0 77.4 -3.1%
share (cents)
Headline earnings per 77.7 80.8 -3.8%
share including
discontinued operations
(cents)
Net asset value per 1 615.6 1 727.6 -6.5%
share (cents)
Continuing operations
Robust sales growth with improved margins in Traditional Retail
- Sales growth strengthened further in the second quarter
- Market share expansion on three-, six- and 12-month basis (Retailers' Liaison
Committee (RLC) March 2024)
- Recovery in retail gross profit margin
- Avenida expansion accelerated and ahead of plan
Strong revenue growth of 9.5% was achieved, driven by robust trading in Traditional Retail which
strengthened further into the second quarter. The Easter trading period was successful on a
comparable basis with double-digit sales growth achieved by PEP, Ackermans and Specialty, and
high single-digit sales growth in JD Group. The group's overall market share expanded on a three,
six-, and 12-month basis (RLC March 2024 data).
This performance was achieved in the context of a challenging operating environment.
Consumers remain financially constrained and unemployment remains high. While there has
been some reprieve from electricity load shedding in recent months, the group continues to build
resilience in renewable solar capacity and through collaborative initiatives such as electricity load
curtailment achieved in PepClo at the Parow campus in Cape Town. Import supply chain
disruption adversely impacted in-store product availability during the period.
Retail gross margins benefited from improved full-price sales with lower markdown activity.
Retail store expansion continued with a total of 111 new stores opened by the group during the
period, expanding the total retail store base to 5 823 stores.
The group's ambition to expand its underrepresented share of the adult apparel market led to the
decision to reposition the Women's standalone retail concept in Speciality as a mid-market retail
brand.
New store openings in Avenida accelerated to 22 during the period, up from six new stores
opened in the same period last year. The Avenida store network expanded to 163 stores.
Momentum builds in FinTech strategic execution – focused on solving customer needs
- More than 550 000 new A+ accounts opened
- More than 200 000 active cellular handset rentals with growing demand
- 650 000 Abacus insurance policies written
- +more launched
- 165 000 informal market traders
Good progress was made during the period in the execution of the group's FinTech strategy,
supporting growth in revenue and gross profit margins. FinTech revenue increased by 24.5% to
R5.8 billion.
The strategic expansion of retail credit interoperability continued in a conservative and
responsible manner, with the health of the credit books maintained. The A+ retail credit base now
includes 2.5 million customer accounts.
The FoneYam cellular handset rental product, which makes smartphones affordable and
accessible to customers, was rolled out further with more than 200 000 active FoneYam
customers at the end of the period. Customer demand remains strong, fuelling activation rates.
Affordable insurance products provided to customers was enabled through Abacus with the
number of written policies nearly doubling to 650 000. The group continues to leverage its
insurance capability, capitalising on its trusted retail brands, store network, and ability to collect
premiums.
The +more customer value platform was successfully launched and is tracking ahead of
expectations, building the group's digital and data capability.
The group expanded its reach into the bustling informal market in South Africa. Throughput value
in Flash increased by 28% during the period, enabled by the 165 000 trader network.
Commendable earnings growth, supplemented by solid cash generation
Focused cost reductions bolstered the group's low cost of doing business and resulted in
commendable operating profit and earnings growth on a normalised basis. The execution of
strategic initiatives such as credit interoperability and FoneYam resulted in significant customer
acquisition costs incurred during the period, weighing on profitability and returns in the short term.
Notwithstanding this, solid cash generation continued, with 85% cash conversion achieved on a
12-month rolling basis.
Portfolio review and capital allocation
The disposal of The Building Company (TBCo) was announced on 29 February 2024. The
disposal will streamline Pepkor's portfolio of businesses, enhancing the group's return on capital
and optimising shareholder returns. Proceeds will be used to reduce debt and fund strategic
growth and value-accretive initiatives.
OUTLOOK
Since March 2024, trading has continued to fluctuate but remains resilient. Trading strengthened
across most brands in April but weakened in May. The second half of the 2024 financial year will
be contending with a higher base as the prior year included a 53rd trading week.
The ongoing import supply chain disruption continues to adversely affect merchandise inflows to
stores in addition to fluctuating shipping rates. Logistics teams are making good progress in
flexing the group's distribution capability to deal with supply backlogs, prioritising stock freshness
to minimise the risk of markdowns.
The uncertainty caused by the national elections on 29 May 2024 in South Africa is noted and the
group will respond to any potential disruption, should this be necessary.
Strategic execution is progressing according to plan with initial success demonstrated in the
current reporting period. This provides confidence in the group's ability to execute and monetise
opportunities that genuinely solve customer needs, driving significant and sustainable growth well
in excess of opportunities provided by the macro environment.
The potential for expansion in Brazil remains compelling, allowing the group to build international
scale and once again establish itself as a global leader in discount and value retail.
Results webcast
A webcast of the results presentation will be broadcast at 10:00 am (SAST) on Tuesday, 28 May
2024. The webcast registration link is: https://www.corpcam.com/Pepkor28052024 and can be
accessed on the Pepkor website: www.pepkor.co.za.
Short-form announcement
This short-form announcement (this announcement) is the responsibility of the directors. It should
be noted that this announcement is only a summary of the information contained in the detailed
announcement and therefore does not contain full or complete details.
Any investment decisions by investors and/or shareholders should be based on the information
in the detailed announcement. The full announcement can be accessed at:
https://senspdf.jse.co.za/documents/2024/jse/isse/pphe/HY24.pdf
Copies of the detailed announcement are also available for viewing on the company's website at:
https://www.pepkor.co.za/wp-content/uploads/2024/05/Pepkor-interim-results-for-the-six-
months-ended-31-March-2024.pdf or may be requested in person at the company's registered
office at no charge, during office hours.
Parow
28 May 2024
Equity sponsor
Investec Bank Limited
Debt sponsor & Corporate Broker
Rand Merchant Bank (a division of FirstRand Bank Limited)
Date: 28-05-2024 07:30:00
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