Pepkor’s 20 percent decline in earnings likely to lead to asset impairments

PEPKOR will likely impair the carrying value of its intangible assets due to a 20 percent earnings slide during the year ended September 30.

Pepkor, the furniture and clothing giant, said yesterday that the Covid-19 pandemic was partially to blame for the earnings decline.

The group said its annual earnings per share and headline earnings per share for the year would fall by at least 20 percent.

Earnings per share were expected to decrease by at least 12.5 cents per share when compared to 62.6c reported in 2019.

Headline earnings a share were likely to decline by at least 19.4c per share when compared to 96.8c reported in 2019, said Pepkor.

Pepkor said the effect of the Covid19 pandemic had impacted the performance in many areas of the group, most notably through lost sales and increased provision levels on credit books.

“This has contributed to the likely impairment of carrying values of goodwill and intangible assets,” Pepkor said.

Pepkor, the South African investment firm, said in July that the group’s liquidity had benefited from strong trading since the relaxation of lockdown measures, pro-active expense management, conservative credit granting, better-than-expected credit book collections and the successful completion of an accelerated book-build which raised R1.9 billion. “The group has made significant progress in its ambition to de-gear the balance sheet and there is, therefore, no risk of debt covenants being breached at September 30, 2020,“said the company.

Pepkor said this had allowed an early settlement of the R1.5bn bridgeterm loan facility, which was due for repayment in August and early settlement of R4bn of the total R6bn preference share funding due to mature in May 2022.

It also said that the process to refinance R5bn in debt due for repayment in May 2021 was successfully concluded and implemented on September 30, 2020, and the debt was now repayable in September 2023.

“In addition, the R1bn bridge revolving credit facility originally due to expire in November 2021, has been extended to September 2023.

“As part of the same process, debt covenants were amended to create sufficient headroom and enhanced flexibility going forward,“said the company.

Pepkor shares closed 0.28 percent higher at R10.85 on the JSE yesterday.