Pepkor Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2017/221869/06)
Share code: PPH
Debt code: PPHI
ISIN: ZAE000259479
LEI: 3789006D677C34F69875

(“Pepkor”, the “company” or the “group”)



TRADING UPDATE AND TRADING STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER
2023



1. TRADING UPDATE

CONTINUING OPERATIONS

GROUP REVENUE

Group revenue for the year ended 30 September 2023 (“FY23”) increased by 7.7% to R87.4
billion. The Avenida business in Brazil (which was acquired in February 2022) increased its
contribution to group revenue to 4.3% in FY23 from 2.4% in the prior year - in-line with prior
guidance.

FY23 included a 53rd trading week for the South African-based clothing and general merchandise
retail brands. On a comparable 52-week basis, group revenue increased by 6.5% for the year.
Revenue growth strengthened during the second half of FY23 (“H2FY23”) to 8.8% compared to
growth of 4.3% reported for the first half of FY23 (“H1FY23”).

TRADING PERFORMANCE - Stronger sales performance in the second half of FY23

Group merchandise sales (“sales”) increased by 7.9% for the year. On a 52-week basis, FY23
sales increased by 6.4%, including sales growth of 8.2% in H2FY23 and 4.8% in H1FY23.

Group like-for-like sales growth (which excludes the newly-acquired Avenida business) amounted
to 0.7% for FY23, strengthening to 3.9% in H2FY23 compared to the 2.2% decline reported for
H1FY23.

Customers continue to face financial pressure due to high living costs. Their ability to earn an
income remains negatively impacted by high unemployment, continued electricity supply
interruptions as a result of load shedding and disruption in the payment of social grants.

                                                                                              1
Market share gains were achieved in key product categories. PEP achieved gains in babies,
adults and home while Speciality expanded market share in adults. Ackermans gained share in
schoolwear, younger girls and lingerie (based on 12-month moving average RLC data to
September 2023). JD Group expanded market share in computer and audio based on GfK data
to September 2023.

 Sales growth            FY23           FY23          H1FY23          H2FY23        FY23 Like-
                      Total sales    Total sales    Like-for-like   Like-for-like    for-like
                        growth         growth          sales           sales          sales
                       53 weeks       52 weeks        growth          growth         growth

 Retail segments          7.9%           6.4%          (2.2%)*         3.9%*           0.7%*

 Clothing & general      11.1%           9.1%          (2.1%)*         5.7%*           1.5%*
 merchandise
 segment

 - PEP                   10.1%           8.2%           0.5%            9.0%            4.5%

 - Ackermans              2.6%           0.7%          (8.3%)          (1.1%)          (5.1%)

 - Speciality            11.2%           8.7%           2.4%            7.1%            4.5%

 - PEP Africa**          14.6%          11.8%           6.0%           14.1%            9.9%

 - Avenida**             13.6%          13.6%           8.5%            7.0%            7.8%

 Furniture,              (1.2%)         (1.2%)         (3.7%)          (0.2%)          (2.1%)
 appliances &
 electronics
 segment
 - JD Group

 Building materials      (0.1%)         (0.1%)         (0.8%)          (0.8%)          (0.8%)
 segment
 - The Building
   Company

* Like-for-like sales growth excludes Avenida acquired in February 2022.
** Constant currency sales growth is reported for PEP Africa and Avenida.

Group cash sales increased by 5.6% and credit sales increased by 35.6%, driven by the
implementation of the group’s credit interoperability strategy in the South African-based clothing,
footwear and home (CFH) retail brands. As a result, the overall group credit sales mix increased
to 10% from 8% in the prior year.

With 90% of sales generated in cash, credit is not a material sales enabler for the group. Credit
continues to be granted on a prudent basis within the group’s conservative credit methodologies.


                                                                                                 2
Retail selling price inflation in PEP, Ackermans and Speciality (in aggregate) amounted to 7.3%
for the year.

During the year 324 new stores were opened (87 on a net basis), expanding the group retail store
base to 5 917 stores. The Dealz discount variety format in South Africa and Giovanna footwear
stores in Brazil were closed during the year in addition to PEP Africa’s exit from Nigeria. Retail
space growth amounted to 1.1% for the year.

PEP achieved very pleasing results with strong like-for-like sales growth of 9.0% in H2FY23 (on
a 52-week basis). Market share was expanded in babies, adult and home product categories
(latest RLC data). PEP’s credit sales mix increased to 4% of total sales (0% historically),
supported by the group’s credit interoperability strategy.

Trading in Ackermans showed a marked improvement in H2FY23, with like-for-like sales declining
by 1.1% compared to a decline of 8.3% reported for H1FY23 (on a 52-week basis). Good progress
was made to clear under-performing merchandise through markdowns, resulting in improved
inventory levels.

Performance in Avenida exceeded expectations and the business is well ahead of its original
value creation plan. Plans to expand the retail footprint and distribution network have been
accelerated.

Both Speciality and PEP Africa also reported stronger trading performance during H2FY23. PEP
Africa completed its planned exit from Nigeria.

Weaker trading in durable products and the building materials market weighed on performance in
JD Group and The Building Company. However, both businesses outperformed their peers.

FINANCIAL SERVICES

Performance in the financial services businesses was supported by the group’s credit
interoperability strategy and a high interest rate environment. Tenacity opened a record number
of new accounts (794 000) during the year, which benefited sales via cross-shopping by
customers in group retail brands.

The group maintained its conservative approach to credit granting. Collections, non-performing
loans and provision levels remain well within tolerable levels across all credit books. Credit book
growth has, however, resulted in increased debtors’ costs for the year.

The revenue decline in the Flash business due to a deliberate change in product mix has started
to normalise. Management turnover (based on face value of products sold) increased by 11.6%
and profitability increased by more than 20% for the year.

DISCONTINUED OPERATIONS


                                                                                                 3
As announced at the interim results published on 30 May 2023, the decision was made to exit
PEP Africa’s operations in Nigeria. This is part of the ongoing strategic review of the PEP Africa
business on a country-by-country basis. The Nigerian operations will therefore be classified as
discontinued operations in the group’s FY23 annual results. The Nigerian operations contributed
less than 1% to group revenue in the prior year.


2. TRADING STATEMENT


In terms of the JSE Limited (“JSE”) Listings Requirements, a listed company is required to publish
a trading statement as soon as it becomes aware that a reasonable degree of certainty exists that
the financial results for the financial period to be reported on next will differ by at least 20% from
the financial results for the previous corresponding period.


Impairment of goodwill and intangible assets
The outcome of the annual impairment assessment process on goodwill and intangibles with a
carrying value of R57.5 billion, as required by IFRS, resulted in a total impairment of R6.6 billion
to be recognised in FY23 (the “impairment”).
The methodology applied in the impairment assessment is consistent with prior years, however a
higher weighted average cost of capital (“WACC”) was applied. The WACC rate increased from
14.4% in the prior year to 15.7% this year and is attributed to increased market volatility and
higher interest rates. This resulted in an impairment of R5.9 billion attributable to the clothing and
general merchandise cash generating unit, which includes Ackermans, Dunns, PEP, PEP Africa,
Refinery and Shoe City.
An impairment of R703 million is attributable to the Tekkie Town cash generating unit with 90%
of this due to softer performance in a highly competitive branded footwear market. The remaining
10% is attributable to the higher WACC.
The impairment will impact earnings but will be excluded from headline earnings - as prescribed
by Circular 1: 2023 - Headline Earnings issued by the South African Institute of Chartered
Accountants (“SAICA”).
Shareholders and noteholders are hereby advised that a reasonable degree of certainty exists
that the group’s statutory headline earnings per share (“HEPS”) and earnings per share (“EPS”)
for the year ended 30 September 2023, when compared to the previous corresponding period,
are expected to fall within the ranges reflected in the table below.


 Statutory results                     FY23 expected            FY23 expected          FY22 actual
                                           range                   change                (cents)
                                          (cents)                    (%)

 HEPS - including discontinued
                                       139.3 to 155.6           (4.3%) to (14.3%)              162.6
 operations

                                                                                                    4
 HEPS - continuing operations         138.3 to 154.6          (5.2%) to (15.2%)             163.1

 EPS - including discontinued
                                      (24.8) to (41.4)      (115.0%) to (125.0%)            165.5
 operations

 EPS - continuing operations          (24.5) to (41.1)      (114.7%) to (124.7%)            166.6



Dividend consideration
Based on the group’s credible operating performance and strong cash generation during the year,
in addition to its healthy financial position, the board has resolved that the FY23 impairment will
be disregarded in the consideration and determination of the FY23 dividend. The impairment will
therefore not negatively impact any dividend declared for FY23.


Pro forma constant currency disclosure
The Pepkor group discloses unaudited constant currency information to indicate PEP Africa and
Avenida’s performance in terms of sales growth, excluding the effect of foreign currency
fluctuations. To present this information, current period turnover for these businesses reported in
currencies other than the rand is converted from local currency actuals into rand at the prior
period’s actual average exchange rates per country. The table below sets out the approximate
average rand cost for one unit as well as percentage change in sales, based on the actual
continuing results for the period, in reported currency and constant currency, for the basket of
currencies in which these businesses operate.


 % change in sales compared to the prior             Reported currency       Constant currency
 period

 PEP Africa                                                 23.4%                   14.6%

 Avenida                                                    26.7%                   13.6%



The constant currency information has been prepared for illustrative purposes only. The
information included in this announcement is the responsibility of the directors and does not
constitute an earnings forecast and has not been reviewed and reported on by the group’s
external auditors.


Results announcement and webcast

Pepkor's results for the year ended 30 September 2023 will be published on SENS on
Wednesday, 29 November 2023.




                                                                                                 5
A results presentation will be broadcast at 11:00am (SAST) on Wednesday, 29 November 2023.
The webcast registration link will be made available prior to publication of the results on the
Pepkor website: www.pepkor.co.za.


Parow
2 November 2023


Equity sponsor
Investec Bank Limited



Debt sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)




                                                                                             6