Pepkor mauled by contraction in building materials market
Companies / 26 November 2019, 07:00am / Sandile Mchunu
DURBAN – 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 on Monday.