Pepkor turns off the taps

Pepkor Holdings is the latest credit provider to act with caution when it comes to extending credit to customers.

Pepkor said that its operating profit climbed to R9.8 billion in the financial year ended 30 September 2024.

The group said that its revenue grew to R85.1 billion, driven by strong performance across its retail and fintech operations.

CEO Pieter Erasmus said that the group’s strategy of offering value-driven, accessible products while broadening its reach into key growth areas has produced tangible results. This has been supported by strategic decisions and disciplined execution. 

“Our business model’s resilience is evident in these results. We continue to gain market share at improved margins in a challenging trading environment,” said Erasmus.

“Furthermore, our strategic focus on digital inclusion and fintech has added another powerful dimension to our traditional retail strengths, positioning us to serve our customers better while building sustainable long-term value.”

Despite headline earnings per share dropping slightly, the group increased its dividend by 0.8% to 48.5 cents per share.

The group’s traditional retail business saw gross profit margin improving to 190 basis points, rising to 38.3%.

PEP, the group’s largest band, continued its strong performance, expanding its footprint and market share with a focus on affordability and quality.

Ackermans also saw good progress in recovering sales levels, with a positive trajectory in like-for-like sales growth and full-price sales.

When it comes to FinTech, the group increased its market share in prepaid handsets, now selling seven and a half out of every 10 prepaid smartphones in South Africa – up from the previous year’s seven.

The group sold 11.5 million cellular handsets during the year and has an active base of 29 million sim cards. 

Closing the taps

However, Pepkor, like other retailers and credit providers, has been cautious in extending credit to consumers.

Pepkor added 1.2 million new credit accounts in the year.

However, the group maintained its conservative approach to credit granting and saw lower approval rates during the year.

The group said that the number of customers able to make purchases remained at a healthy level of 74% and non-performing loans remained at acceptable levels.

“We executed this strategic expansion with careful consideration of the economic environment, maintaining conservative credit granting criteria and, most importantly, ensuring that we do not put our customers under undue financial pressure,” said Erasmus.

“The benefit is that customers can shop across Pepkor brands with one account and we have a better understanding of their behaviour – allowing us to develop ways to serve them better,” adds Erasmus.  

Pepkor’s competitor Mr Price also recently announced that it made

In its interim results for the 26 weeks ended 28 September 2024, Mr Price said that its credit sales growth of 2.7% highlights the ongoing caution in extending new credit accounts in the current challenging economic environment.

“Demand for credit from consumers remained high as new account applications increased 32.6%, however, the approval rate of 19.0% was appropriate based on customer affordability constraints,” said Mr Price.

“The group will continue to review its credit growth appetite as the environment improves, supported by additional interest rate cuts.”

Pepkor’s future

Pepkor is optimistic about the future direction of the country, with lower food inflation, a more stable electricity supply environment and the introduction of the two-pot retirement system.

“This year hasn’t been without its difficulties, but we have continued to grow, adapt, and innovate to meet the needs of our customers,” said Erasmus.

The improving economic indicators, particularly declining food inflation and more stable electricity support a positive outlook for our customer base.

We’re confident that our consistent performance, expansion into new segments, and growing fintech reach will allow us to continue providing easy access to everyday products and services at affordable prices in the coming year.”

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