Wrap Text
Interim Results For The Six Months Ended 31 March 2022
Pepkor Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2017/221869/06)
Share code: PPH
Debt code: PPHI
ISIN: ZAE000259479
(“Pepkor”, the “company” or the “group”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2022
Pepkor’s growth strategy delivers strong results
Highlights
- 3.3% growth in revenue to R42.0 billion (+3.7% excluding the disposal of John Craig)
- 189 basis points market share expansion across product categories[1]
- 19.1% growth in operating profit[2] to R5.7 billion (+10.1% on a normalised basis3)
- 28.3% increase in headline earnings per share to 91.5 cents (+12.1% on a normalised
basis[3])
- R4.1 billion cash generated from operations
- 144 new stores opened
- Acquisition of Brazilian value retailer, Grupo Avenida, completed
[1]
Over a two-year period. Sources: Retailers’ Liaison Committee (RLC), Growth from Knowledge
(GfK).
[2]
Before capital items
[3]
Normalised results exclude the non-recurring benefit as a result of the Steinhoff global
settlement, which amounts to R429 million or 12 cents per share. Refer to the full
announcement for further details.
Results for the six months
ended
31 March 2022 31 March 2021 % change
Revenue (Rm) 42 010 40 665 3.3
Operating profit before capital 5 681 4 768 19.1
items (Rm)
Earnings per share (cents) 90.2 71.4 26.3
Headline earnings per share 91.5 71.3 28.3
(cents)
Net asset value per share 1 600.1 1 508.6 6.1
(cents)
Despite a high base in the comparable period, Pepkor achieved another commendable set of
results for the six-month period ended 31 March 2022 (the period). The group’s defensive
business model and unparalleled position within the South African discount and value sectors
continue to drive growth and underpin resilient performance in an increasingly challenging
operating environment.
Revenue growth was muted, impacted by a high base and a product mix change in the Flash
business. Revenue growth, however, strengthened during the second quarter. On a two-year
comparable basis (compared to the six months ended 31 March 2020) the group achieved
exceptional sales growth of 15.4%, underpinned by substantial market share gains across various
product categories. This further entrenched Pepkor’s leading position in the discount and value
sectors.
Profitability remained strong with headline earnings per share (HEPS) increasing by 28.3% to
91.5 cents and includes a non-recurring benefit from the implementation of the Steinhoff
International Holdings N.V. (Steinhoff) global settlement, as described in more detail below.
Normalised HEPS, which excludes this non-recurring benefit, increased by 12.1% to 79.9 cents.
The group generated cash of R4.1 billion during the period with cash sales accounting for 93% of
group sales.
The group's ability to achieve ongoing organic growth is evidenced by its robust store expansion
programme. During the period under review 144 new stores were opened (108 stores on a net
basis). The group retail footprint comprised 5 708 stores as at 31 March 2022.
Acquisition of Grupo Avenida
The acquisition of an interest of approximately 87% in the well-established Brazilian value retailer,
Grupo Avenida (Avenida), was completed in February 2022. The remaining 13% was retained
by the founders and management of Avenida. This represents Pepkor’s entry into the Brazilian
value retail market, which holds enormous long-term growth potential for the group. The Avenida
business was recapitalised as part of the acquisition and the total cost was less than 4% of
Pepkor’s market capitalisation at the time.
Operating performance since February 2022 has exceeded expectations. Good progress was
made in preparing the business for growth, while improved working capital, in particular inventory
levels, supported sales performance. Avenida currently operates 130 stores.
Update on the July 2021 civil unrest impact
To date, the group has reopened 479 (87%) of the 549 stores looted and damaged in the civil
unrest that erupted in the KwaZulu-Natal and Gauteng provinces of South Africa during July 2021.
The reopening of the remaining 70 stores is delayed due to the need for property owners to rebuild
stores or shopping centres.
As previously reported, the group carries comprehensive insurance cover in terms of the South
African Special Risks Insurance Association (SASRIA) for material damage and business
interruption. Insurance claims are in the process of being finalised and it is expected that the final
insurance payments will be received during the remainder of this financial year.
KwaZulu-Natal flooding impact
During April 2022, the KwaZulu-Natal province experienced severe weather conditions that led to
wide-scale flooding across the region. One of PEP’s three distribution centres (Isipingo) sustained
significant damage and has not been operational since. Contingency plans were put in place for
stock to flow through PEP’s unaffected distribution facilities in Johannesburg and Cape Town.
This interruption, in addition to a very challenging supply chain environment at present, will have
an impact on service levels in the business. It is anticipated that operations in PEP’s Isipingo
distribution centre will resume by the end of May 2022, albeit on a limited basis initially.
The group is currently not in a position to quantify the full extent of losses suffered in terms of
merchandise, infrastructure and disruption of operations. The losses incurred are expected to fall
within the group’s insurance cover for material damage and business interruption and the claims
process has been initiated.
Outlook
The group is very pleased with the solid performance for the first half of the 2022 financial year,
based on a stronger second quarter and even more so when considering performance on a two-
year basis, which eliminates volatility caused by COVID-19.
The operating environment remains very challenging as unemployment levels and the cost of
living continue to increase. The extension of the monthly R350 COVID-19 Social Relief of Distress
(SRD) grant to March 2023, as announced in the recent State of the Nation Address (SONA) by
the President, will provide much needed relief for many consumers in South Africa who need to
survive on a very small budget. The increased momentum in events and industries such as
tourism is very encouraging and should alleviate some of the pressure consumers face.
Higher levels of price inflation are expected for the next summer season starting in August 2022.
While challenging, this operating environment motivates operations teams to develop innovative
new ways to ensure that products remain affordable for consumers – thereby redefining and
solidifying the group’s position in the South African discount and value sectors.
Supply chain disruption and uncertainty have continued. The group’s merchandise teams have
done exceptionally well to mitigate the impact of disruption on merchandise inflows and in-store
availability. While global supply chain uncertainties persist, it seems that shipping costs have
stabilised and may trend downwards.
Stronger trading is expected during the second half of the year, supported by the lower base in
the comparable period, which was affected by the civil unrest. Trading in April 2022 was strong
across most businesses, with softer trading in May 2022.
The growth mindset embedded within the group’s culture and management continues to drive
performance. In line with our strategy, plans to open more than 300 stores in the 2022 financial
year remain on track.
Results webcast
A live webcast of the results presentation will be broadcast at 10:00 a.m. (SAST) on Friday,
27 May 2022. The webcast registration link is https://www.corpcam.com/Pepkor27052022 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 full announcement, which can be accessed at:
https://senspdf.jse.co.za/documents/2022/jse/isse/pphe/HY22.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/2022/05/Pepkor-interim-results-for-the-six-
months-ended-31-March-2022.pdf, or may be requested in person at the company’s registered
office or the office of the equity sponsor, at no charge, during office hours.
Parow
27 May 2022
Equity sponsor
PSG Capital
Debt sponsor and Corporate broker
Rand Merchant Bank (A division of FirstRand Bank Limited)
5
Date: 27-05-2022 07:05:00
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