Our opinion on the current state of PPH

Pepkor Holdings (Pep) (PPH), previously known as Pep, is 71,01% owned by Steinhoff International. With the collapse of the Steinhoff group following admissions of "accounting irregularities", the directors of Pep decided to change their name back to Pepkor Holdings to avoid negative publicity. The group includes Ackermans, PEP Stores and Bradlows and HiFi Corporation. Since the problem began in December 2017, and with the COVID-19 pandemic the share price fell as low as R10 per share in May 2020. Over the next year the share staged a remarkable recovery, more than doubling. The company raised R1,9bn in an accelerated book-build. The proceeds have been used to reduce debt as a precautionary measure. On 3rd February 2022 the company announced that acquisition of 87% of the Brazilian clothing retailer Avenida. On 13th April 2022 the company announced that its Isipingo distribution center had suffered significant damage as a result of the flooding in the Natal area and had to be temporarily closed. The company has adequate insurance to cover the damage. In its results for the six months to 31st March 2023 the company reported revenue up 4,3% and headline earnings per share (HEPS) up 11,7%. The company said, "Feedback from our customers indicate that they have no choice but to prioritise spending on necessities. Customers’ ability to earn an income and their shopping behaviour is also impacted by unprecedented levels of electricity load shedding". In a trading statement and trading update for the year to 30th September 2023 the company estimated that HEPS from continuing operations would fall by between 5,2% and 15,2%. Merchandise sales were up 7,9% for the year and revenue rose by 7,7%. Technically, the share appears to be at the start of a new upward trend and should be watched closely.