Pepkor closes up shop in Zimbabwe


Pepkor closes up shop in Zimbabwe


Published Date: 2019-11-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

Pepkor closes up shop in Zimbabwe

The mass-market retailer has impaired The Building Company and closed up shop in Zimbabwe after incurring a loss from its operations there.

Pepkor has reported a fall in full-year earnings after it impaired its building materials division following a contraction in the market. It's cut its dividend in line with the decline in profitability. The Steinhoff subsidiary has also exited Zimbabwe after PEP Africa reported a R70 million loss from its operations there, including the full impairment of its assets.

The Building Company is the building materials division of Pepkor and includes 124 outlets throughout Southern Africa. It changed its name from Steinhoff Doors and Building Materials (SteinBuild) in January and includes brands such as BUCO, Timbercity, Tiletoria and Brands 4 Africa, amongst others. The retail giant said it impaired goodwill and intangible assets associated with the business by R1.2 billion after it continued to be adversely impacted by the contraction in the market over the past year

Pepkor said its operating results for the year to end-September were 'commendable' despite the difficult retail environment that was characterised by constrained consumer spending, fuelled by high levels of unemployment and low economic growth. It said its defensive discount and value market positioning, as well as a low cost of doing business, helped it gain market share in most of its retail brands. Over the year, it opened 338 new stores, expanding its footprint to 5,415.

Clothing and merchandise, which contributes close to two-thirds of revenue, grew sales by 6.5% and operating profit by 3.7% to R6.3 billion. While its furniture, appliances and electronics division returned to profitability at an operating level, the adoption of new accounting measurements for expected credit losses resulted in an operating loss of R85 million. Building materials reported a 0.9% increase in revenue and a 29% decline in operating profit to R153 million. Its FInTech segment reported a 44% increase in revenue, with operating profit rising to R483 million.

PEP Africa, excluding Zimbabwe, grew revenue by 3.2%, with like-for-like sales growth of 13.5% on a constant currency basis. In rand, sales rose 1.1%. It said the decision to exit Zimbabwe was based on the continued adverse macroeconomic conditions affecting trading and the weakening currency. Operations in Nigeria performed well, while its business in Angola was affected by a lower oil price, which resulted in a significant weakening of the currency.

For the group as a whole, revenue from continuing operations increased by 9% to R69.6 billion in the year to end-September and operating profit from continuing operations rose 16% to R6.8 billion. The impairment of its The Building Company business resulted in a 25% decline in earnings per share (EPS) to 62.6c. Excluding the impairment, total headline EPS improved by 15% to 96.8c per share. It's declared a scrip dividend, with a cash alternative of 20.9c per share, down 25%. It said the scrip dividend was in line with its strategy to reduce gearing to one times net debt-to-EBITDA.

Its shares declined 0.2% to R17.92 yesterday.


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