Pepkor delivered robust FY25 results, mainly due to a strong performance in FinTech. Managements expects the gross credit book to grow c. 30% y-y in FY26, signalling strong appetite for credit. The FoneYam and Capfin units are rolling out longer-term products to ensure sustained growth in financial services.
The Retailability acquisition completed post period-end and will be integrated for FY26. However, given that the Speciality division now has a significant number of chains, management is considering consolidation, and we think subscale brands like Swagga and Style may be consolidated into other brands. PPH is also exiting the Shoe City brand due to continued underperformance.
The Pepkor Lifestyle business achieved good revenue growth and improved like-for-like growth in FY25. Management’s plan to integrate the SHP Furniture acquisition was delayed due to Lewis Group intervening in the transaction. We do not agree with Lewis’ statement that PPH would have a c.50% market share post-transaction, and we calculate that figure to be closer to 33%. While no timeline has been given for when the Constitutional Court matter will conclude, PPH is targeting full implementation towards end-FY26.
PPH has signalled its intention to register as a banking institution, but it remains to be seen how it will align its proposition. So far, the Prudential Authority has only given regulatory approval in terms of Section 13(1) for PPH to establish a banking presence. PPH will put forward its proposition in the Section 16 application, and if successful, will be granted Section 17 to register as a bank. We don’t believe that PPH will partner with another bank given that it has made the CloudBadger acquisition, which should streamline banking integration and help avoid increasing costs associated with this endeavour.