Pepkor forecasts 58% interim profit jump

PEPKOR Holdings’ share price rose more than 5 percent on the JSE yesterday after the retailer said it expected its half-year earnings to surge by as much as 57.9 percent for the six months to the end of March, boosted by a strong trading performance during the period.

In its second trading update to the market, the retailer said it was likely that its headline earnings per share (Heps) from continuing operations would increase by between 37.9 percent and 57.9 percent, to between 62.9 cents and 72c a share, up from last year’s Heps of 45.6c. In the first trading update released at the end of last month, Pepkor said it expected its Heps to increase by at least 20 percent.

Its earnings per share (Eps) from continuing operations were likely to rise by between 43.6 percent and 63.6 percent, to between 62.9c and 71.7c, up from 43.8c reported a year earlier.

“The increase in Eps and Heps is attributed to strong trading performance in addition to the marked reduction in net debt and related finance costs during the period,” the group said.

Pepkor managed to reduce its net debt to R6.1 billion during the period, down from R14.1bn compared to last year, despite volatile operating conditions as a result of Covid-19.

The share price rose to R18.07 a share on the JSE in the morning, up from Monday’s closing price of R17. It shed some of the gains in the afternoon before closing at R18.04.

Pepkor reported an 8.1 percent increase in revenue from continuing operations to R36.5bn during the period, and said conservative credit granting across all credit books, in addition to lower interest rates, negatively impacted growth in revenue earned from the Tenacity, Connect and Capfin credit books.

The group’s Heps including discontinued operations was expected to increase by between 53.3 percent and 73.3 percent, while Eps including discontinued operations was expected to increase by between 43.6 percent and 63.6 percent.

Pepkor said both Eps and Heps have been adjusted to reflect The Building Company (TBC) as a discontinued operation after its disposal last year.

The group sold TBC to Cashbuild for about R1.1bn in August last year, with the proceeds expected to reduce its debt.

Pepkor, which has a retail footprint in more than 11 countries on the African continent, explained that the reason for the disposal was based on streamlining its core businesses in discount and value retail.

Pepkor will release its half-year results on May 27.