Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pepkor Holdings Ltd (PPKRF, Financial) reported a 9.2% increase in revenue and a 17.4% rise in operating profit, indicating strong financial performance.
- The company maintained its dividend policy with a three times cover, showing confidence in its financial stability.
- Significant market share gains were achieved across various segments, including a 300 basis point improvement in prepaid cellular handsets.
- The fintech segment showed impressive growth with a 27% increase in revenue and a 55% rise in operating profit.
- Pepkor Holdings Ltd (PPKRF) successfully expanded its store footprint with 256 new store openings, enhancing its market presence.
Negative Points
- The company faced supply chain disruptions, particularly in the first half of the year, affecting product availability and sales.
- Ackermans and other segments experienced challenges with late winter and stock delays, impacting sales performance.
- The footwear segment, particularly Techie Town, struggled due to high levels of discounting and increased competition.
- Pepkor Holdings Ltd (PPKRF) reported a slight decline in return on net assets due to upfront provisioning and investments.
- The company had to manage increased inventory levels, partly due to concerns over port congestion and supply chain issues.
Q & A Highlights
Q: Can you provide more details on the slowdown in Avenida's performance?
A: The slowdown was due to several macroeconomic factors, including changes in ICMS tax in various states, reduced agricultural output, and increased food inflation. Internally, issues in the home and footwear categories and the new store maturity curve also impacted performance. However, improvements are already being seen in the problematic categories. - Unidentified_3
Q: Was the H2 recovery in Ackermans attributable to increased credit usage?
A: No, the credit mix remained stable, with only a 1% increase from 19% to 20%. The recovery was not driven by credit but rather by improvements in product proposition and pricing. - Unidentified_3
Q: How does Pepkor plan to address supply chain disruptions?
A: Pepkor is the largest local sourcing entity in South Africa for clothing, footwear, and home products. While increasing local sourcing is a goal, the capacity in South Africa is limited. Therefore, the strategy is to plan for disruptions by increasing inventory levels as needed. - Unidentified_3
Q: What is the strategy for Techie Town given the current market dynamics?
A: Techie Town is increasing its clothing category, rationalizing brand mix, and enhancing private label offerings. While market conditions may normalize, the focus is on internal strategies to improve performance without relying on external changes. - Unidentified_3
Q: What is the outlook for Pepkor's financial services and fintech margins?
A: There is potential for margin growth, particularly in financial services. The phone product, which made a small loss this year, is expected to turn profitable. Additionally, the A plus and insurance segments are anticipated to contribute to margin improvements over the next few years. - Unidentified_2
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
