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PEPKOR HOLDINGS LIMITED - Reviewed Annual Results For The Year Ended 30 September 2020

Release Date: 23/11/2020 07:30
Code(s): PPH PEP02 PEP01     PDF:  
Wrap Text
Reviewed Annual Results For The Year Ended 30 September 2020

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”)


Pepkor achieves substantial market share gains during the COVID-19 pandemic

The Pepkor group achieved an exceptional performance during a challenging year as COVID-19
and the resultant lockdown protocols exacerbated an already weak consumer retail market.
Despite having lost approximately R5.0 billion in revenue through COVID-19 trading restrictions,
the group managed to achieve positive revenue growth for the year which is an outstanding result.

The group’s defensive discount and value positioning has been an advantage during the tough
economic conditions. Consumer focus on less discretionary and more affordable products and
services resulted in substantial market share gains. Pepkor’s strong corporate culture and
execution ability ensured a swift response to the COVID-19 crisis with stores and the supply chain
reacting very quickly to the challenging environment. The group’s expansive store footprint
appealed to customers who chose to shop in more convenient locations closer to home.

The group adopted IFRS 16 – Leases during the current year, using a modified retrospective
approach with no restatement of prior period reported results. This had a material impact on the
group’s statutory results for the current period. To form a meaningful assessment of group
performance, shareholders and noteholders are referred to Pepkor’s full results announcement,
available on the Pepkor website at

Group highlights for the year

-    Revenue from continuing operations increased by 3.6% to R63.7 billion
-    Market share growth of 240 basis points in clothing, footwear and homeware products
     as reported by the Retailers’ Liaison Committee
-    Cash generated of R9.2 billion (excluding IFRS 16)
-    Net debt reduced by R6.9 billion (excluding IFRS 16)
-    230 new stores opened

                                       Statutory results                  Results
                                      including IFRS 16              excluding IFRS 16

 Operating profit before              0.3% decrease to               18.4% decrease to
 capital items                           R6.5 billion                    R5.3 billion

 Headline earnings per                32.3% decrease to              23.7% decrease to
 share                                    65.5 cents                     73.9 cents

 Headline earnings per                34.4% decrease to              21.0% decrease to
 share from continuing                    62.6 cents                     75.4 cents

 Earnings per share                  >100% decrease to               >100% decrease to
                                     a loss of 86.2 cents            a loss of 73.6 cents

 Earnings per share from             >100% decrease to               >100% decrease to
 continuing operations               a loss of 80.3 cents            a loss of 62.5 cents

Earnings were impacted by the impairment of goodwill and intangible assets of R4.8 billion (as
announced on 6 November 2020). The impairment is a result of the impact of COVID-19 and
constrained future growth expectations in PEP Africa, Speciality, Tekkie Town and the JD Group,
in addition to an increase in the weighted average cost of capital.

As communicated during the group’s interim results published on 27 May 2020, no dividend is
declared for the year ended 30 September 2020 (20.9 cents in the prior year), based on
heightened levels of prudence applied by the board and the focus on liquidity preservation and
allocation of resources.

Performance and outlook

Pepkor’s sales performance since the relaxation of lockdown measures has been excellent and
has underscored the strength of its business model and market positioning. The group has gained
significant market share in the period since May 2020. The strong sales momentum continued
into the months of October and November 2020 with double-digit like-for-like sales growth
reported in PEP, Ackermans, Speciality and the JD Group. Providing the South African consumer
with affordable products has become even more important in the current environment and the
group is ideally positioned to execute on this.

While the evolution of the COVID-19 pandemic and its economic impact in the near to medium
term remains uncertain, there is an expectation that the toughest times for the economy and
customers are still to come as unemployment increases and special grants and other benefits are
reduced. Our view on the future remains cautious and conservative.
Cash generation has been excellent and the balance sheet has been significantly strengthened
which provides security and the ability to capitalise on potential opportunities that may arise in the
market. Significant progress was made in restructuring and consolidating the group’s portfolio of
operations to enhance efficiency and profitability levels.

Pepkor is well positioned to continue gaining market share in a future constrained retail
environment. The group will continue to entrench its discount and value positioning through
providing affordable products to the consumer as it stands to benefit from consumers in search
of value.

The resolve, resilience and loyalty shown by the group’s employees and customers during one of
the most challenging periods in history is most encouraging. The strong and healthy corporate
cultures of the group and its retail brands have helped sustain the business during this trying time
and resulted in a commendable, market-leading performance for the year. The support and
understanding from our loyal, long-standing suppliers and business partners have been
invaluable, and similarly we value the support from our investors.

The group’s operations are prepared for changes in consumer behaviour with accelerated
progress in e-commerce and fintech capability, supplemented by its convenient and accessible
retail store footprint. The group continues to identify opportunities for store expansion driven
mainly by PEP and Ackermans, in addition to the development of new retail formats. In terms of
new markets, exciting opportunities exist in the adult wear market, while the group will also
consider other expansion opportunities.

Results webcast

A live webcast of the results presentation will be broadcast at 12:00pm (SAST) on
23 November 2020. Webcast Registration link:

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 in the detailed
announcement and therefore does not contain full or complete details.

The reviewed condensed consolidated financial statements for the year ended
30 September 2020 (“Reviewed Results”) have been reviewed by Pepkor’s auditor,
PricewaterhouseCoopers Inc., who issued an unmodified review conclusion. The unmodified
review opinion forms part of the Reviewed Results which can be accessed via the links below.

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:

Copies of the full announcement are also available for viewing on the company’s website at:
ended-30-September-2020.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.

23 November 2020

Equity sponsor
PSG Capital

Debt sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)

Date: 23-11-2020 07:30:00
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