Pepkor FY25: Record profit surge as digital and fintech scale, but credit risks mount

Key topics:Record profit growth: Normalised HEPS up 23.4%, revenue climbs to R95.3bn, gross margin expands to 39.8%.Fintech acceleration: Flash throughput hits R60bn; FoneYam exceeds 2m customers; fintech revenue up 31%.Rising credit risk: Debtors’ costs surge 62%; speciality division weak; inventory and operating expenses climb.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Pepkor Holdings has delivered a record financial performance for the year ended 30 September 2025, achieving robust earnings growth driven by strategic expansion, accelerated digital adoption, and strong execution across its retail and fintech ecosystems. The group reported double-digit increases across revenue, operating profit and headline earnings, underscoring its momentum as South Africa’s most extensive integrated retail and consumer platform.Management credited the performance to an improving macro backdrop—lower inflation, reduced interest rates, improved electricity availability and modest GDP growth—combined with disciplined operational delivery and a sharpened focus on value-conscious consumers.Profit growth and financial strengthNormalised headline earnings per share (HEPS) rose 23.4% to 161 cents, adjusting for a prior-year tax remeasurement. Reported HEPS increased 14.8%. Group revenue climbed 12% to R95.3 billion, supported by solid retail growth and rapid expansion in fintech and digital products.Operating profit before capital items increased 13.2% to R11.1 billion, while profit after capital items surged 55.5%. Pepkor also lifted its gross profit margin by 150 basis points to 39.8%, driven largely by strong growth in the fintech segment.Cash generation remained robust, with R10.9 billion generated from operations. Return on net assets increased to 24%, while gearing stayed comfortably within the targeted range at 0.77× net debt-to-EBITDA. The dividend was raised 9.2% to 53 cents per share.Market share gains and store expansionPepkor extended its already dominant market position across key value retail categories. It now sells eight out of every ten prepaid cellular handsets in South Africa, two out of three babywear items, half of all kidswear purchases, and 75% of schoolwear.The retailer also breached the 6,000-store milestone, expanding its footprint 4.1% to 6,158 stores. Online sales increased 17%, and its digital ecosystem—boosted by A+ retail credit, FoneYam rentals, Abacus insurance and the +more platform—added more than 10 million customers. The +more platform alone surpassed 12 million members within 18 months of launching.In retail, PEP increased sales by 10.8% (9.3% LFL), reinforcing its Best Price Leadership credentials. Ackermans delivered LFL sales growth of 7.1%.Fintech momentum leads growthFintech remained the standout performer. Revenue grew 31.1% to R16.6 billion, supported by strong informal market traction through Flash, which processed R60 billion in throughput and grew operating profit 32.7%.FoneYam—the handset rental product—surpassed 2 million active customers, demonstrating the scalable demand for flexible, low-cost cellular access.Pepkor also advanced its logistics capabilities with the launch of Skooch, its internal courier service now positioned to handle most PAXI parcel volumes.Operational challenges temper the upsideDespite the strong results, Pepkor faced mounting cost pressures. The sharpest was a 62.3% surge in debtors’ costs to R4.1 billion, reflecting higher credit extension and increased risk from its expanding financial services book.Operating expenses rose 12.5% due to investment in new channels, customer acquisition, marketing and capacity-building for strategic initiatives. Retail margins were squeezed by a higher cellular sales mix.Currency volatility affected operations outside Southern Africa, where constant-currency growth was strong but diminished in rand terms. Inventory increased 6.3% to support the larger store base and new formats such as Ayana and Choice Clothing.The Speciality division was the weakest link, with LFL growth of just 3% due primarily to Shoe City’s underperformance. Management has initiated closures or conversions of 113 Shoe City stores in early FY26.Outlook: Expansion ahead, but risks risingPepkor plans to open 250–300 stores in FY26, integrate newly acquired brands (including Legit, Swagga, Style, Boardmans), and deepen its fintech capabilities after receiving approval to establish a banking presence. It is also awaiting final regulatory clearance for the Shoprite furniture acquisition.While Pepkor expects to continue outperforming the market, management flagged rising credit risk as a critical area requiring caution—particularly as debtors’ costs escalate off an expanded base..Read the results in full by downloading the PDF below

Pepkor FY25: Record profit surge as digital and fintech scale, but credit risks mount

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