Pepkor reveals 17% profit growth to R9.8bn, boosting confidence in retail and fintech

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The group, which released its reviewed annual results for the year ended 30 September 2024 declared a 48.5 cents per share dividend.

Pieter Erasmus, chief executive officer at Pepkor Holdings Limited, says the group's strategy of offering value-driven, accessible products while broadening its reach into key growth areas has produced tangible results, supported by strategic decisions and disciplined execution.

“Our business model’s resilience is evident in these results. We continue to gain market share at improved margins in a challenging trading environment. Furthermore, our strategic focus on digital inclusion and fintech has added another powerful dimension to our traditional retail strengths, positioning us to serve our customers better while building sustainable long-term value."

Financial highlights

• Revenue up 7.8% to R85.1bn (+9.2% on a normalised and comparable basis)
  
• Operating profit before capital items increased 8.4% to R9.8bn (+17.4% on a normalised and comparable basis)
  
• Gross profit up 13.5% to R32.6bn
  
• Dividend of 48.5 cents per share declared
  
• R11.9bn in cash generated from operations
  
• 22.3% return on net assets
  
• 3 million customers added on A+, FoneYam and Abacus
  
• 9.4 MWp total solar capacity installed

Solid performance across traditional retail

Pepkor’s traditional retail businesses delivered consistent performance and expanded market share. The group reported a gross profit margin improvement of 190 basis points, rising to 38.3%, underscoring Pepkor's capability to grow profitably without relying on additional discounting.

Pep, the group’s largest brand, continued its strong performance, expanding its footprint and market share with an ongoing focus on affordability and quality.

The brand reported a positive trajectory in like-for-like sales growth throughout the year, while higher full-price sales improved gross profit margin.

Ackermans showed good progress in recovering sales levels, with a positive trajectory in like-for-like sales growth and full-price sales.

Avenida, Pepkor's Brazil-based subsidiary, saw a challenging second half due to a mild winter. Despite this, new store openings accelerated to 42 this year, from 26 in the prior year, and a second distribution centre was opened to facilitate further expansion.

Driving digital inclusion through fintech growth and connectivity

Pepkor also reported significant strides in driving digital inclusion across South Africa, solidifying its position as the country’s leading provider of affordable mobile technology. The group increased its market share in prepaid handsets, now selling seven and a half out of every 10 prepaid smartphones in South Africa, up from seven in the previous year.

The group sold 11.5 million cellular handsets during the year and maintains an active base of 29 million sim cards.

The FoneYam mobile rental initiative, which provides smartphones on an affordable rental basis, has already reached one million customers and now exceeds 120,000 monthly activations, bolstering Pepkor's aim to bring connectivity to underserved markets.

Erasmus comments, “This effort underscores our commitment to making mobile connectivity accessible to all – supporting economic activity, education, and health services in rural and underserved communities.”

Strategic growth in credit operations

Pepkor added 1.2 million new credit accounts in the year under review. The group maintained its conservative approach to credit granting and saw lower approval rates during the year. The number of customers able to make purchases remains at a healthy 74% level and non-performing loans remain at acceptable levels.

“We executed this strategic expansion with careful consideration of the economic environment, maintaining conservative credit granting criteria and, most importantly, ensuring that we do not put our customers under undue financial pressure. The benefit is that customers are able to shop across Pepkor brands with one account and we have a better understanding of their behaviour – allowing us to develop ways to serve them better,” adds Erasmus.

Positive outlook for the future of Pepkor

Pepkor says it remains optimistic about the future. The group says lower food inflation, a more stable electricity supply environment with the end of load shedding, and the introduction of the two-pot retirement system provide a positive backdrop for consumers.

“This year hasn’t been without its difficulties, but we have continued to grow, adapt, and innovate to meet the needs of our customers. The improving economic indicators, particularly declining food inflation and more stable electricity support a positive outlook for our customer base. We’re confident that our consistent performance, expansion into new segments, and growing fintech reach will allow us to continue providing easy access to everyday products and services at affordable prices in the coming year,” concludes Erasmus.