Release Date: May 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue growth of 9.5% in the first half of 2024, driven by strong performance in the fintech segment.
- Significant recovery in gross profit margin, particularly in the retail segment, supported by Ackermans' performance.
- Normalized operating profit growth of 8.2%, aligning with revenue growth.
- Successful launch and positive reception of the +more digital channel, with 2.5 million customers signed up within weeks.
- Strong performance in the PEP Africa segment, with nearly 23% total sales growth and like-for-like growth of nearly 25%.
Negative Points
- High living costs, unemployment, and constrained macroeconomic conditions impacting customer spending.
- Increased crime and infrastructure damage, including supply chain disruptions, particularly at Durban port.
- Higher operating expenses, with a notable 48% increase in debtors' costs.
- Challenges in the Ackermans segment, including port disruptions and late impact of winter, leading to constrained growth.
- May 2024 proved to be a challenging month for PEP and Ackermans due to unusually high temperatures affecting sales.
Q & A Highlights
Q: Will some of the once-off costs continue into the second half of the year?
A: The debtors' costs will continue to grow at the same rate due to the expanding book. However, ForEx losses are expected to be lower in the second half, and lease modification costs will also decrease. Customer acquisition costs will persist and likely accelerate due to new account openings for A+ and FoneYam.
Q: Do you anticipate the books will grow at the same level in the second half?
A: Yes, the growth rate will continue into the next financial year. FoneYam will start to grow faster, while A+ will slow down, but overall growth will remain consistent.
Q: With the growth in credit in PEP, will the GP margin in PEP increase?
A: No, the book is run as a standalone entity, and operating companies do not get involved in A+. The capital allocation is managed to ensure profitability in all books, albeit smaller than standalone products like Capfin.
Q: Do you anticipate raising capital for Avenida's growth?
A: No, the capital for Avenida's accelerated growth is being invested from South Africa. An additional ZAR1 billion is being invested, with ZAR500 million already allocated and the remaining ZAR500 million planned for June-July.
Q: How did PEP and Ackermans perform in April and May?
A: April saw positive growth despite Easter's shift and port delays. May has been challenging due to unusually high temperatures, but there has been an improvement towards the end of the month.
Q: Why were fewer PEP stores opened in H1?
A: The conservative approach was due to high robbery rates in PEP Cell stores and landlord delays in developments. Some competitors pulling back on store openings also contributed to the delays.
Q: What are the expansion plans for South America and Africa?
A: The focus is on Brazil, with plans to double store openings. There are no immediate plans to expand into other South American countries or new territories in Africa. The strategy is to optimize the existing footprint and improve efficiency.
Q: Will Pepkor consider buying back shares from Ibex?
A: There are no current plans for a share buyback strategy, especially from Ibex, as it would require resolutions and decisions from shareholders due to it being a related party.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
