Build­ing ma­te­ri­als con­trac­tion chafes re­sults


SOUTH African re­tailer Pep­kor Hold­ings has suf­fered a write-down of good­will and in­tan­gi­ble as­sets of R1.2 bil­lion in its build­ing ma­te­ri­als seg­ment as a re­sult of the con­trac­tion in the build­ing ma­te­ri­als mar­ket.

The seg­ment has brands such as Buco, Timber City and Tile­to­ria.

As a re­sult, for the year ended Septem­ber op­er­at­ing profit be­fore the im­pair­ment de­creased by 28.5 per­cent to R153 mil­lion.

“The busi­ness is in the process of con­sol­i­da­tion, fol­low­ing a pro­longed pe­riod of cor­po­rate ac­tiv­ity which in­cluded var­i­ous ac­qui­si­tions. In the cur­rent op­er­at­ing en­vi­ron­ment, the busi­ness re­mains fo­cused on pro­tect­ing vol­umes and mar­ket share,” said Pep­kor, which was spun off from Stein­hoff In­ter­na­tional and pre­vi­ously known as Stein­hoff Re­tail Africa.

De­spite the set­back in the divi­sion, Pep­kor con­tin­ued with its store ex­pan­sion dur­ing the pe­riod by adding 338 new stores to take the over­all to 5 415 stores across the con­ti­nent.

Pep­kor said its re­silient busi­ness model, which op­er­ates more than 15 house­hold brands such as Pep Stores, Ack­er­mans, In­cred­i­ble Con­nec­tion, Rus­sells and Shoe City, was able to cap­i­talise on mar­ket op­por­tu­ni­ties and made sig­nif­i­cant gains in mar­ket share, par­tic­u­larly in the Cloth­ing, Footwear and Home di­vi­sions in the year to the end of Septem­ber.

Chief ex­ec­u­tive Leon Lourens said while Pep­kor re­mained cau­tiously op­ti­mistic about the South African re­tail en­vi­ron­ment, their teams con­tin­ued to iden­tify op­por­tu­ni­ties for growth and ex­pan­sion such as lever­ag­ing their foot­print, open­ing more new stores, fresh re­tail for­mats and in­no­va­tive chan­nels to serve cus­tomers.

“We are par­tic­u­larly sat­is­fied that all our cloth­ing, footwear and home brands achieved mar­ket share gains in the last year,” Lourens said.

In the re­sults re­leased yes­ter­day, Pep­kor re­ported a dou­ble-digit growth in earn­ings, with head­line earn­ings per share (Heps) in­creas­ing by 14.5 per­cent to 96.8 cents, sig­nif­i­cantly af­fected by IFRS 9 pro­vi­sions that were not in­cluded in the prior year’s base.

The group said on a nor­malised ba­sis Heps in­creased by 8.3 per­cent to 107.3c.

Rev­enue in­creased by 9 per­cent to R70 bil­lion, while op­er­at­ing profit inched up by 15.6 per­cent to R7bn.

Pep Africa, which con­trib­uted 3.2 per­cent to the group rev­enue, is in a con­sol­i­da­tion phase, and the group de­cided to exit Zim­babwe af­ter clos­ing 19 stores, with 20 still re­main­ing.

The cloth­ing and gen­eral mer­chan­dise seg­ment, which in­cludes Pep, Ack­er­mans, Pep Africa and Spe­cial­ity Stores, con­trib­uted 64.6 per­cent to group rev­enue, with rev­enue growth of 6.5 per­cent to R45bn.

The group de­clared a div­i­dend of 20.9c a share, down from 27.8c the prior year.

Pep­kor closed 0.17 per­cent lower at R17.92 yes­ter­day.

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