Trading Update For The Three Months Ended 31 December 2021

Pepkor Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2017/221869/06)
Share code: PPH
Debt code: PPHI
ISIN: ZAE000259479
(“Pepkor” or the “group”)


TRADING UPDATE FOR THE THREE MONTHS ENDED 31 DECEMBER 2021

Revenue for the quarter ended 31 December 2021 increased by 1.3% to R22.8 billion. Excluding
the disposal of John Craig in the prior year revenue increased by 1.8%. Growth in revenue was
impacted by the strong base in the comparable quarter in the previous financial year and 161
looted stores that had not yet reopened at the start of the quarter following the civil unrest
in Kwa-Zulu Natal and Gauteng during July 2021. Lower revenue in the Fintech segment resulting
from a change in product mix and accounting treatment further weighed on group revenue growth.

From a trading perspective and excluding John Craig, Pepkor achieved 3.1% sales growth for the
quarter, contending with an exceptionally strong base in the prior year. Over a two-year period
compared to the comparable quarter ended 31 December 2019, the group is pleased to have
achieved sales growth of 10.9%. This demonstrates Pepkor’s ability to achieve strong and
consistent sales growth despite volatile trading conditions.

Whilst trading was weak in October 2021, it normalised in November 2021 and strengthened in
December 2021. The improved trading trajectory is very encouraging in contrast to the
challenging operating conditions faced in the wake of a weak economy with record high levels of
unemployment.

Excluding John Craig, cash sales for the group increased by 3.2% and contributed 93% to total
group sales. Credit sales increased by 2.8% and remains a very small contributor to group sales,
at only 7%. The group’s approach to credit granting remains conservative.

The group has now reopened 450 (82%) out of the total 549 stores affected by the civil unrest.
The reopening of the remaining 99 stores is delayed by infrastructure and shopping centre
rebuilds. The resultant insurance claims process relating to material damage and business
interruption is progressing with further payments from the insurers expected during the current
financial year.

It should be noted that sales growth performance reported per business is adjusted for the
disposal of John Craig by Pepkor Speciality, PEP Africa’s exit from Uganda and the rationalisation
of non-core businesses of The Building Company. Like-for-like sales growth reported excludes
looted stores not reopened by 30 September 2021.

Clothing and general merchandise
The clothing and general merchandise segment increased revenue by 2.0% to R15.1 billion for
the quarter. Excluding John Craig revenue increased by 2.7%.

Sales performance in PEP and Ackermans was affected by negative growth in cellular compared
to an extremely strong base in the comparable quarter when handset sales increased by more
than 20%.

PEP and Ackermans opened 79 new stores during the quarter, exceeding its store expansion
plans. Retail selling price inflation in the clothing, footwear and homeware (CFH) product
categories approximated 5.1%.

In Rand terms, PEP Africa increased sales by 2.4% supported by strengthening local currencies.
In constant currency terms, sales declined as a result of varying levels of COVID-19 related
trading restrictions in countries of operation.

The Speciality division achieved good growth with all the brands performing well and trade
strengthening towards the end of the quarter.

The Tenacity credit book, which facilitates sales in the clothing and general merchandise
segment, increased marginally to R3.3 billion from R3.2 billion a year ago (on a gross basis). The
level of non-performing loans improved.

 Sales growth        Like-for-like sales     Total sales growth      Total sales growth
 performance              growth for the        for the quarter         for the quarter
                                 quarter           Year-on-Year            Over 2 Years
                            Year-on-Year

 PEP and Ackermans                 1.6%                    2.4%                   11.5%

 PEP Africa (constant             (0.1%)                  (2.4%)                   3.1%
 rates)

 Speciality                        5.3%                    5.2%                   19.9%




Furniture, appliances and electronics

This segment delivered strong growth against a high base with revenue growth of 9.7% to R3.4
billion for the quarter. Black Friday and Christmas trading in the JD Group was strong despite a
high base in the comparable quarter last year.

The Connect credit book, which facilitates credit sales in the JD Group, was largely maintained at
the R1.6 billion-level (on a gross basis). The level of non-performing loans improved.

 Sales growth       Like-for-like sales       Total sales growth       Total sales growth
 performance             growth for the          for the quarter          for the quarter
                                quarter             Year-on-Year             Over 2 Years
                           Year-on-Year

 JD Group                          9.8%                    10.1%                    20.4%




Building materials

The Building Company’s decline in sales is due to a firm base in the comparable quarter last year
when the building materials market rebounded following the impact of the initial COVID-19 wave.
In addition, the consolidation of the business included the rationalisation of certain non-core
businesses which affected sales growth for the quarter.


 Sales growth         Like-for-like sales      Total sales growth       Total sales growth
 performance               growth for the         for the quarter          for the quarter
                                  quarter            Year-on-Year             Over 2 Years
                             Year-on-Year

 The Building Company              (2.1%)                  (3.2%)                    3.7%




Fintech

Revenue in the Fintech segment declined by 9.9% to R2.1 billion for the quarter. The decline is
attributable to the FLASH business where a deliberate change in product composition resulted in
income now being recognised as “net commission” versus “full transaction value” as determined
by International Financial Reporting Standards. This change forms an integral part of the FLASH
strategy to increase profitability and grow its basket of products and options to improve trader and
customer retention. Virtual turnover continues to show double digit growth and the profitability of
the business remains positive and intact.

The Capfin business achieved positive revenue growth and the credit book increased marginally
to R2.0 billion from R1.9 billion a year ago (on a gross basis). Non-performing loans improved
and remain at very healthy levels.

Refinancing process

The process to refinance funding of R5.0 billion repayable in the 2023 financial year is progressing
well and is expected to be completed by March 2022. The funding will be extended over a longer
term at lower interest rates and will further strengthen the group’s liquidity and debt repayment
profile.

Net debt at 31 December 2021 reduced to R4.1 billion from R5.6 billion one year ago.
Outlook

The positive sales trajectory in the first quarter of the 2022 financial year accelerated into the
January 2022 trading month with exceptionally strong growth in all of Pepkor’s CFH retail brands.
In some of the business units the performance was inflated by the shift in back-to-school dates to
January from February in the prior year.

The table below includes total year-on-year sales growth for the January 2022 trading month
compared to January 2021.


 Sales performance                                                    January 2022**
                                                                  Total sales growth
                                                                        Year-on-Year

 PEP and Ackermans                                                             42.7%

 PEP Africa*                                                                   20.1%

 Speciality                                                                    32.0%

 JD Group                                                                       7.1%

 The Building Company                                                          (7.3%)

* PEP Africa sales performance is reflected in constant currency terms.

** The January 2022 trading month spans from 26 December 2021 to 22 January 2022.

The group is satisfied with the trading performance during the first four months of the financial
year and especially pleased with the growth rates achieved over the two year period since the
onset of COVID-19. Although the economic outlook remains challenging, Pepkor has over many
years been able to achieve strong results and demonstrate resilience under these conditions. We
remain encouraged that the relaxation of COVID-19 restrictions and increased tourism and
economic activity will support growth and a reduction in unemployment levels going forward.

Whilst global supply chain issues have stabilised to a degree and inventory levels are satisfactory,
the expectation is that uncertainties will persist into 2022. Higher levels of price inflation are
expected for the next summer season.

During the quarter ended 31 December 2021 the group opened a total of 102 new stores and
Pepkor’s growth plans remain on track to open more than 300 new stores in the current financial
year.


Pro forma constant currency disclosure
The group discloses unaudited constant currency information to indicate Pep Africa’s
performance in terms of sales growth, excluding the effect of foreign currency fluctuations. To
present this information, current period turnover for Pep Africa reported in currencies other than
ZAR are converted from local currency actuals into ZAR at the prior year's actual average
exchange rates. The table below sets out the percentage change in sales, based on the actual
results for the three-month period, in reported currency and constant currency for the basket of
currencies in which Pep Africa operates.

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

 Pep Africa excluding countries exited                           2.4%               (2.4%)




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. The constant currency information has been prepared for illustrative purposes
only.

Parow

27 January 2022

Equity sponsor

PSG Capital

Debt sponsor and corporate broker

Rand Merchant Bank (A division of FirstRand Bank Limited)

Date: 27-01-2022 08:00:00
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