PPH is the biggest clothing and general merchandise retailer in South Africa by market share. It has been aggressively expanding its footprint to tap into the value and discount market in both Southern Africa and Brazil. PEP and Ackermans are the biggest revenue-generating brands within PPH, but its cash generating units in clothing have primarily been driven by baby and kidswear, which has a strong market share in South Africa. We expect PPH to focus its attention in the long term on capturing market share within the adultwear category, which could be achieved through the Speciality brand, with PPH relaunching Ackermans Woman later in the year.
In Brazil, PPH is planning on rolling out more stores than initially planned when it acquired the Avenida business, and the addition of its second distribution centre will strengthen its supply chain as it can service roughly 51% of stores within 1 000km of a DC. PPH has also realigned the business with a focus on discount, having reduced store sizes to improve densities and reducing the average price of key value items to drive volume growth, which translated into revenue growth in the prior period.
PPH is once again trying to offload its building and materials business, but this time to Capitalworks Private Equity, instead of a competitor company in the market, and as such, we believe the transaction is more likely to occur.
Ongoing revenue from cellular makes up a small proportion of revenue in the FinTech segment, and we expect PPH to focus its attention on value-added services (VAS) as it is easier to sell PPH products to consumers than trying to keep them on PPH sim cards. The inevitable shutdown of the 2G and 3G networks in South Africa by 2027 will negatively affect the consumer base that purchases feature phones from PPH. FoneYam cellular rentals was launched to allow consumers who could not afford or obtain credit to purchase a smartphone, with the ability to rent a device for year.