Pepkor’s R2 billion property deal in South Africa
Pepkor has sold three distribution centres in South Africa to Badger Properties, unlocking roughly R2 billion in capital for the company.
Pepkor will still have a stake in the properties, retaining a 35% minority interest, and has leased the properties for the next 15 years.
“To ensure absolute operational continuity, Pepkor has secured 15-year ‘triple net’ lease agreements,” the company said.
Two of the three primary distribution centres are operated by PEP, while the third is run by Ackermans, both of which are subsidiaries of Pepkor.
The retailer said that all three centres would continue to operate as normal under its subsidiaries.
“The distribution centres will continue to be operated by PEP and Ackermans with no change to daily operations,” it said.
While Pepkor’s operations will continue as normal, the company has also gained R2 billion from the sale to Badger Properties.
It said that this newly gained capital would be used for expansion projects and reducing the group’s total debt.
“This transaction unlocked approximately R2 billion in capital, and these proceeds will be redeployed to fund high-yielding growth opportunities across the group and reduce net debt,” it said.
“This will optimise overall capital efficiency and further strengthen Pepkor’s balance sheet.”
The company has been eyeing an expansion into South Africa’s banking sector and has been given regulatory approval from the Prudential Authority.
The group plans to leverage its large retail footprint in South Africa to support this expansion, with thousands of branches expected.
In a recent trading statement, Pepkor said that building banking capabilities would be a long-term growth strategy for the company.
The group expects the new banking services, called “PlusB”, will subdue earnings growth for the last financial year due to its investments in the sector.
It said that the banking services should be introduced in the second half of the 2027 financial year, and will not exceed the initial planned investment amount of R1 billion.
“PlusB is expected to launch in the second half of FY27, subject to regulatory approvals,” it said. “The total build cost remains on track to be below R1 billion and within target.
The group has also focused on expansion in recent months, opening 195 new stores across its segment in the last ten months.
A difficult environment
Pepkor’s expansion efforts over the last ten months are expected to moderate the company’s earnings growth.
It said that, along with expanding into the banking world, a weaker retail environment and a high comparative base will both weigh on the group’s earnings.
While the company said it is confident in its medium-term guidance that Headline Earnings Per Share will grow by between 10% and 15% by the end of 2027, it expects muted earnings for 2026.
For the 2026 financial year, Pepkor said it expects HEPS to be between a 1% contraction and 9% growth, with earnings per share being in a similar range from -2% to 8%.
Normalised HEPS are expected to grow year-on-year by between 2% and 12%, excluding the group’s investments in its banking sector.
Pepkor said that, while the earnings are muted, it represents a resilient performance in a difficult spending environment in South Africa.
“This performance demonstrates the resilience of the group’s core customer proposition, even as pressure on consumer disposable income weighs on discretionary spending and market growth,” it said.
Despite the difficult trading environment, the group saw sales growth across all its retail sectors except its clothing subsidiary, Ackermans.
The company was also supported by its international operations, such as Avenida, which saw stronger sales growth than its South African retailers.
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