Pepkor Holdings Ltd. · JSE:PPH

Pepkor — FY2024 Earnings Presentation

63 slides from Pepkor's earnings presentation, December 2024

  1. Slide 1: Annual Results Presentation

    ANNUAL RESULTS PRESENTATION for the year ended 30 September 2024

  2. Slide 2: Agenda

    Agenda 01 Overview of results 02 Financial performance 03 Strategic implementation 04 Outlook 05 Q&A 2

  3. Slide 3: Overview of Results

    PIETER ERASMUS – CEO 01 OVERVIEW OF RESULTS We solve customer needs. 3

  4. Slide 4: FY24 – Highlights

    FY24 – Highlights Solving customer needs R85.1bn revenue +9.2% Consistent performance R9.8bn operating profit +17.4% Market share gains 140.2c HEPS +10.3% 48.5c dividend declared Improved margin Constrained operating Tangible results in fintech environment Normalised results from continuing operations

  5. Slide 5: FY24 – Highlights

    FY24 – Highlights Building Better Business Enabling affordable living Best Price Leadership 1.2m new accounts added 1m customers added 1m policies written Inclusive growth 4 143 learnerships provided Road to green 9.4 MWp total solar capacity installed Disposed Continued FTSE/JSE Responsible Acquiri

  6. Slide 6: Evolution of operating profit

    Evolution of operating profit Retail remains core Financial services doubled Informal contribution Financial market services 6% Growing informal market 8% Informal Financial market 4% services 4% FY24 FY22 86% 92% Retail Retail 6

  7. Slide 7: Financial Performance

    RIAAN HANEKOM – CFO 02 FINANCIAL PERFORMANCE We use our scale to keep costs down. 7

  8. Slide 8: FY24 – Performance

    FY24 – Performance +7.8% R85.1bn revenue +9.2% normalised & comparable +13.5% R32.6bn gross profit +8.4% R9.8bn operating profit +17.4% normalised & comparable (0.4%) 140.2c HEPS +10.3% normalised & comparable R11.9bn cash generated 22.3% return on net assets Normalised & comparable results from conti

  9. Slide 9: Normalised HEPS

    Normalised HEPS Continuing operations +10.3% 7.8 5.9 140.8 140.2 127.1 FY23 Non-recurring 53rd trading FY23 FY24 Statutory lease week Normalised & HEPS HEPS modification comparable gain HEPS 9

  10. Slide 10: Retail segments and FinTech

    Retail 15% FinTech segments segment Clothing & general Furniture, appliances GROUP 13% Financial services Informal market merchandise segment & electronics segment REVENUE 72% CGM FAE FinTech 14% 7% GROUP OPERATING PROFIT 79% 10

  11. Slide 11: Revenue

    Revenue Clothing & general merchandise segment +9.2% +7.0% +22.5%* +20.0%* Revenue growth to Revenue growth to 7% 4% 50% +6.0 R85.1bn R61.4bn +8.1% 10% % SALES Credit Cash COMPOSITION +34% 14% 86% +2% +6.8% Sales growth LFL +4.2% +6.8% 29% SALES MIX Furniture, appliances & electronics segment +4.5%

  12. Slide 12: Revenue – FinTech segment

    Revenue FinTech segment +25.3 % 10% +26.8% +42.1 Revenue growth to % R12.7bn FINANCIAL SERVICES 35% REVENUE Financial 33% COMPOSITION +20.2% services +20.5 +40.3% % 63% 12% 37% 10% REVENUE >100% +10.2 COMPOSITION % • Credit interoperability • Cellular handset rental • Leveraging insurance capability

  13. Slide 13: Gross profit

    Gross profit +190bps gross profit margin improvement to 38.3% +218bps +129bps 38.1% 48.0% • High interest rates • Increased credit granting -95bps 28.4% 13

  14. Slide 14: Low cost of doing business

    Low cost of doing business +8.4%1 opex growth 27.1%3 27.5% 26.8% +7.1%2 normalised Total Excl. Avenida Salary cost +8.0% +6.7% R4.8 bn Total Excl. Avenida property cost – IAS 17 +5.0% +4.4% -1% FY23 FY24 lease renewals 1 Excludes depreciation & amortisation, debtors’ costs, forex and IFRS 16 gains 2

  15. Slide 15: Operating profit

    Operating profit +17.4% operating profit growth to R9.8bn +12.0% operating profit +55.2% operating profit growth to growth to R7.7bn R1.4bn Financial services 57% 43% +71.5% +38.0 % +22.2% operating profit growth to OPERATING PROFIT R649m COMPOSITION Normalised results on a comparable 52-week basis 15

  16. Slide 16: Operating profit margin

    Operating profit margin +80bps operating margin to 11.5% operating margin operating margin operating margin +60bps improvement to +90bps improvement to +200bps improvement to 12.6% 5.9% 11.2% 20% +240bps 15% 17.3% 7.7% 10% Financial services 5% 0% 16

  17. Slide 17: Insurance

    Insurance Combined group operating profit contribution +38.8% R71m support to +10% divisions R254m increase in 10% operating profit R162m 27% R183m contribution to segments CGM R147m FAE 63% FinTech R92m > 100% increase in R36m statutory operating profit FY23 FY24 17

  18. Slide 18: Cellular performance

    Cellular performance Rbn FY24 FY23 %growth Revenue 22.0 19.4 +13.4% 26% * Handset & accessories sales 11.4 9.9 +14.7% Airtime, data & sim sales 8.6 7.6 +13.9% Ongoing revenue ** 2.0 1.9 +4.2% Gross profit 4.4 4.0 +11.1% 13% * Operating profit 2.3 1.9 +19.0% 23% * Operating profit margin 10.5% 10.0% +50

  19. Slide 19: Retail credit books

    Retail credit books 6.6 4.5 Gross book size (Rbn) 1.9 2.0 0.9 0.8 FY23 FY24 FY23 FY24 FY23 FY24 33% 32% Provision levels % 21% 21% 21% 19% 21% 23% NPL % 13% 13% 14% 13% FY23 FY24 FY23 FY24 FY23 FY24 19

  20. Slide 20: Unsecured lending credit book and Cellular rental book

    Unsecured lending credit book Cellular rental book 3.3 20% 2.5 ROE 18% 17% > 20% 0.9 9% 8% – – FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 Gross book Provision Gross book Provision size (Rbn) level % size (Rbn) level % NPL % 20

  21. Slide 21: Increased debtors' costs

    Increased debtors’ costs +49.6% More customers R734m R2 527m accessing credit Conservative +58% methodology maintained R1 793m R466m R1 689m +47% R1 223m Bad Movement Debtors’ Bad Movement in Debtors’ debts in provisions cost debts provisions cost FY23 FY24 21

  22. Slide 22: Low net debt

    Low net debt DEBT REPAYMENT PROFILE: 30 SEPTEMBER 2024 (Rbn) FY25 FY26 FY27 FY28 FY29 R7.6bn R7.3bn 0.7 times R7.1bn R7.1bn net debt-to-EBITDA -0.9 -1.3 6.2 times EBITDA- R5.0bn interest cover -2.8 -3.1 -3.5 R2.2bn notes raised at substantially lower rates Replaced R1.9bn FY20 FY21 FY22 FY23 FY24 22

  23. Slide 23: Net finance costs

    Net finance costs +16.3% R3.2bn R3.0bn R1.7bn R1.5bn R2.8bn R1.4bn Non-IFRS 16 component R2.2bn Higher interest rates R2.1bn R0.8bn R0.8bn R1.5bn R1.5bn IFRS 16 R1.4bn R1.4bn R1.3bn component FY20 FY21 FY22 FY23 FY24 23

  24. Slide 24: Inventory levels

    Inventory levels +3.1% +14.3% excl. TBCo R17.5bn R17.1bn R17.0bn Cellular performance Buffered inflows R13.3bn +19% Goods-in-transit R12.0bn New stores FY20 FY21 FY22 FY23 FY24 24

  25. Slide 25: R12bn cash generated

    R12bn billion cash generated 3 871 3 384 79% 3 671 cash conversion 15 169 922 2 297 11 921 1 439 EBITDA1 Non-cash Inventory Retail Handset Lending Trade Cash adjustments credit rental payables generated & other by operations 1 EBITDA before capital items (Rm) 25

  26. Slide 26: Returns

    Returns 7-YR AVERAGE Return on net assets 35.5% 36.0% Investment in books Investment in books 24.8% 27.0% Return on equity 22.3% 23.2% 6.9% 15.8% 14.0% 10.1% 8.7% 8.7% 7.8% 5.2% 4.0% 3.5% FY18 FY19 FY20 FY21 FY22 FY23 FY24 26

  27. Slide 27: Capital allocation

    Capital allocation ORGANIC GROWTH M&A 2.9% 2.9% 2.9% Capex 2.4% Disposal implemented % of revenue R1.2bn proceeds Discontinued operations Acquisition announced FY22 FY23 FY24 FY25 3 Sep 2024 Capex excluding Hammarsdale DC development & social unrest and floods < c.4% of market cap Strategic investmen

  28. Slide 28: Strategic Implementation

    SEAN CARDINAAL – COO 03 STRATEGIC IMPLEMENTATION We are relentlessly focused on growth. 28

  29. Slide 29: Traditional Retail

    TRADITIONAL RETAIL 29

  30. Slide 30: Traditional Retail

    Traditional Retail Total sales LFL sales growth growth New stores Total retail +6.4% +4.1% 256 Supply chain +6.8% +4.2% 202 Store opening delays +6.0% +4.7% 58 +6.8% +4.5% 37 +8.1% +3.6% 61 * +22.5% +19.7% 4 * +20.1% +5.5% 42 +4.3% +3.6% 54 Comparable 52 weeks sales performance * Constant currency s

  31. Slide 31: H2FY24 Trading performance vs peers

    H2FY24 Trading performance Positive like-for-like sales FY25 sales growth growth vs peers 7 weeks ended 16 Nov 2024 6.7% 19.3% 5.3% 2.3% 13.4% 0.4% 0.2% 12.4% 11.5% -1.9% -1.5% 5.8% -4.1% -8.9% Competitor 1 Competitor 2 Competitor 3 Competitor 4 Competitor 5 Competitor 6 Lifestyle Lifestyle Home 31

  32. Slide 32: Market share expanded

    Market share expanded 2 out of 3 400 baby wear sales 300 1 out of 2 kids’ wear sales Basis points gained 100 50 3 out of 4 school wear sales 25 7.5 out of 10 prepaid cellular handsets 0 Total CFH Babies Kids School Adults PEP Prepaid HOME cellular handsets RLC 12mma Oct 2024 32 GfK Sept 2024

  33. Slide 33: PEP

    PEP +38 8m cellular handsets sold: 53% smartphones 2 617 stores 58 new stores opened CODB well controlled 43 store revamps 16% more PAXI parcels to 5.7m +410bps full-price sales 96% Best Price Leadership Market share gains 3, 6 & 12mma 9% credit sales mix 33

  34. Slide 34: Acquisition of Choice Clothing

    Acquisition of Choice Clothing 107 stores Quality adult fashion apparel at the lowest prices Positioned at the bottom-end of the discount market Scalable 300+ store potential Opportunity to leverage scale and core competencies 34

  35. Slide 35: Ackermans

    Ackermans 1 041 stores +540bps full-price sales 37 new stores opened Market share gains Exit Woman standalone stores Kids, Babies, School, Women Strong recovery in LFL sales +360bps 8.9% gross profit LFL sales 8.1% margin growth % 5.6% 3.3% 1.9% Q1 Q2 Q3 Q4 Oct 2024 35

  36. Slide 36: Speciality

    Speciality 922 stores FOOTWEAR FORMATS 61 new store openings Competitive branded footwear 36 new Refinery stores to market 154 stores Review of customer value proposition Market share gains 3, 6 & 12mma NEW WOMEN’S CONCEPT CLOTHING FORMATS Affordable value DNA Strong performance Coming soon… 36

  37. Slide 37: Refinery Junior

    Refinery Junior Positioning Value & Fashionability 2024 R4m in Launched sales in the 23k units 7 8% of October first 20 days sold locations sales online 37

  38. Slide 38: Refinery Junior

    refinery_junior

  39. Slide 39: Avenida

    Avenida 183 stores 42 new store openings 47 new store planned in FY25 4 new states entered +20.1% sales +5.5% LFL sales +6.6% LFL base stores Focus areas Categories Home & Footwear New store maturities 2nd distribution centre opened Continued group leverage Constant currency sales performance 39

  40. Slide 40: Lifestyle

    Lifestyle 906 stores HOME 54 new stores opened 43 in HOME Strong performance in HOME 11 in TECH Bradlows brand refresh completed Stable credit mix 12% Sleepmasters market leader CODB well controlled in bedding Shoprite Furniture TECH Scale leverage Competitive market Footprint Financial services SA’

  41. Slide 41: Financial Services & Connectivity

    FINANCIAL SERVICES & CONNECTIVITY 41

  42. Slide 42: Credit interoperability

    Credit interoperability +1.2m new accounts 2.8m account base +35% Other brands 30% CROSS-SHOP Own 70% brand 30% approval rate (FY23: 36%) 74% able to buy (FY23: 75%) 42

  43. Slide 43: Connectivity

    Connectivity 11.5m handsets sold 60% smartphones 18% private label +330bps market share expansion 29m active sim base +5% R2.0bn ongoing revenue +4% Biometric capability in-store Number4Life launched 43

  44. Slide 44: FoneYam

    FoneYam 795k cellular device rentals 1m reached in November 2024 14% of smartphones sold monthly activations Expansion 200 000 OEMs 150 000 Channels Pepkor retail brands 100 000 Embedded insurance 50 000 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 44

  45. Slide 45: Insurance

    Insurance 1m policies activated > 100 000 lives covered for funerals Rolled out in 1 000 PEP, Ackermans & Dunns stores > 90% credit life coverage in Capfin 5.7m PAXI parcels covered Embedded into 45

  46. Slide 46: Omnichannel

    OMNICHANNEL 46

  47. Slide 47: Customer value platform

    Customer value platform Launched in March 2024 5m+ members newly contactable 25% customers R4.5bn scanned sales 20% shop at > 3 brands USSD most popular registration channel 47

  48. Slide 48: Informal Market

    INFORMAL MARKET 48

  49. Slide 49: Flash

    Flash R8.0bn revenue +20% R50bn throughput +30% R15.7bn 1Voucher sales +37% 350k monthly SRD SASSA grant payouts R617m operating profit +38% +22% 7-year CAGR Trader business Competitor 1 Focus areas Traders/devices (no.) 165 000 89 040 Driving trader spend Trader throughput (Rbn) R35bn +25% R33bn +20

  50. Slide 50: Outlook

    PIETER ERASMUS – CEO 04 OUTLOOK We are optimistic about the future. 50

  51. Slide 51: Outlook

    Outlook Optimistic consumer Strategic execution gaining outlook tangible momentum Lower food inflation Retail Suspended electricity load shedding Continued positive trajectory Two-pot retirement 250 – 300 new system reform stores planned Improved spending and indebtedness FinTech Financial services,

  52. Slide 52: Q&A to follow soon

    05 Q&A TO FOLLOW SOON 52

  53. Slide 53: Cash vs credit sales mix

    Cash vs credit sales mix 0% 9% 20% 100% 13% 42% 12% 14% 91% 87% 88% 86% 80% 58% Credit Cash PEP Ackermans PEP Speciality Avenida Lifestyle Pepkor Africa Group group 53

  54. Slide 54: Retail store footprint

    Retail store footprint 30 September 2023 Openings Closures Net movement 30 September 2024 Retail area Retail area Retail area Retail stores ‘000 m2 Retail stores Retail stores Retail stores ‘000 m2 Retail stores ‘000 m2 Clothing and general merchandise 4 888 1 870 202 (97) 105 40 4 993 1 910 PEP 2 6

  55. Slide 55: Normalised & comparable results

    Normalised & comparable results Normalised & Statutory Non-recurring Comparable Statutory Continuing operations Year ended IFRS 16 53rd trading Year ended Year ended Rm 30 Sep 2023 adjustment week 30 Sep 2023 30 Sep 2024 % change Revenue 78 960 – (994) 77 966 85 136 +9.2% Operating profit before capi

  56. Slide 56: FY24 Normalised vs Statutory results

    FY24 Normalised vs Statutory results Statutory Normalised Continuing operations Year ended Year ended Rm 30 Sep 2024 Impairment 30 Sep 2024 Operating profit before capital items 9 802 – 9 802 Capital items (2 908) 2 741 (167) Operating items after capital items 6 894 2 741 9 635 Profit before taxation

  57. Slide 57: FY23 Normalised vs Statutory results

    FY23 Normalised vs Statutory results Statutory Non-recurring Property Normalised Continuing operations Year ended IFRS 16 insurance claim Year ended Rm 30 Sep 2023 adjustment adjustment Impairment 30 Sep 2023 Operating profit before capital items 9 044 (392) – – 8 652 Capital items (6 828) – (37) 6 6

  58. Slide 58: 53rd week impact

    53rd week impact Pro forma 52 Weeks 53 Weeks 52 weeks Continuing operations Year ended Year ended Week 53 Year ended Rm 30 Sep 2024 30 Sep 2023 Adjustment 30 Sep 2023 Revenue 85 136 78 960 (994) 77 966 Operating profit before capital items 9 802 9 044 (304) 8 740 Profit/(loss) for the year 2 083 (1 29

  59. Slide 59: Building Better Business

    Building Better Business We support livelihoods We develop our through enabling Enabling employees, support accessibility to affordable affordable suppliers, and invest in living products and services Building communities we operate Better Business We are efficient with natural resources to keep costs

  60. Slide 60: Enabling affordable living

    Enabling affordable living Pepkor plays a key role in democratising sustainability for customers, making sustainable options accessible and affordable where feasible. R52 average item price in PEP – Best Price Leadership 1 million FoneYam customers – making smartphones affordable 2 million sole flexe

  61. Slide 61: Inclusive growth

    Inclusive growth Learnerships – addressing youth unemployment 4 143 learnerships provided in FY24 32% of all W&R SETA sector learnerships provided by Pepkor Pepkor Retail Learnership Academy is an accredited Skills Development Training Provider with the QCTO1 28% of learnership spend targeted unempl

  62. Slide 62: Road to green

    Road to green LED LIGHTS SOLAR 34% average 60 R92 9.4 saving in electricity use million MWp from lights in stores completed solar investment total installed sites solar capacity 24 750 tCO e saved 2 INVERTERS TARGET since 2019 – enough to charge 3.7bn 519 +1.0 MWp new inverters cellular phones insta

  63. Slide 63: Thank you

    PEPKOR Holdings Limited

Pepkor Holdings — FY2024 Earnings Presentation on 6ix