Pepkor Holdings Limited (PPH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. We welcome you to the Ninth Annual General Meeting of Pepkor Holdings Limited. I will be chairing this AGM in my capacity as Chair of the Board. We have a quorum in attendance. I declare this meeting, therefore, properly constituted. During the last few months, we engaged with shareholders through various channels and considered your guidance and feedback. We also published a voluntary update on 2nd of February 2026 for the 3 months ended December 2025. Pepkor continued to deliver solid results in what remains to be a challenging economic environment, driven by the successful strategic execution and the strength of our retail brands. What sets Pepkor apart is our unrelenting purpose to solve customer needs, enabling affordability and accessibility. All directors, including the chairs of the Board committees are in attendance, and I want to thank them for the constructive role they play to ensure rigorous governance oversight and that our Board and Committees fulfill their duties. We will now proceed with the formalities of the meeting. Pursuant to Clause 22.1.2 of the MOI, I determine that the voting in respect of this meeting shall proceed by way of a poll. Such poll voting shall be conducted entirely electronically as contemplated in Section 63(2) of the Companies Act and Clause 21 of the MOI through the electronic online facility provided by the transfer secretaries of the company, Computershare. For the purposes of the poll, I nominate a representative of the transfer secretaries present at this meeting to act as scrutineer. In order to facilitate the conduct of the meeting, all the resolutions to be proposed at today's Annual General Meeting have been seconded by Mr. Riaan Hanekom, who is a shareholder. I will now open the voting on the electronic online facility. Voting can be performed at any time during the meeting until I close the voting on the resolutions. You will be able to send messages and view the webcast whilst the poll is open, and I will consider any questions on any of the resolutions after I have tabled the last resolution on the agenda. The first item on the agenda is the presentation of the annual financial statements for the year ended 30th September 2025, and the reports of the directors, the Audit and Risk Committee and the Social and Ethics Committee report. The full audited consolidated financial statements and the aforementioned reports were made available on the company's website. A summarized version of the annual financial statement was enclosed with the notice of the meeting. The report of the Social and Ethics Committee was also attached to the notice of this meeting. The second item on the agenda is the reelection of directors who retire by rotation. Ordinary resolutions #1, 2 and 3, respectively, relate to the reelection of Ian Kirk, Nunu Ntshingila and myself, Wendy Luhabe as directors of the company. The reelection of the 3 individuals as directors of the company is proposed. The relevant CVs are included in Annexure B of the notice of AGM. You may proceed to complete your electronic voting in respect of ordinary resolution numbers 1, 2 and 3. [Voting]

Item 2.2 of the agenda proposes the election of a new Board member, Mr. Richard Wainwright as a Director of the Board. I request that you complete your electronic voting for resolution 4. [Voting]

Item 2.3 of the agenda proposes the appointment of the members of the Audit and Risk Committee. Kindly complete your electronic voting for resolution #5, the reappointment of Ms. Hester Hickey; resolution #6, the reappointment of Ms. Fagmeedah Petersen-Cook; resolution #7, the reappointment of Ms. Zola Malinga; resolution #8, the reappointment of Mr. Steve Muller; resolution #9,the appointment of Mr. Richard Wainwright. [Voting]

Item 2.4 of the agenda proposes the reappointment of the company's auditors. The company's Audit and Risk Committee recommended and the Board accepted that PricewaterhouseCoopers Inc. be reappointed as auditor for the year and further propose that Mr. A. Hugo be designated to lead the auditor -- the audit, as the registered auditor. I propose that PricewaterhouseCoopers Inc. be reappointed as the company's auditors with Mr. A. Hugo as the registered auditor. You may now complete your electronic voting in respect of ordinary resolution #10. [Voting]

Item 2.5 of the agenda proposes the appointment of the members of the Social and Ethics Committee. Kindly complete your electronic voting for resolution #11 for the reappointment of Ms. Fagmeedah Petersen-Cook; resolution 12, the reappointment of Ms. Zola Malinga; resolution #13, the reappointment of Ms. Paula Disberry; and resolution #14, the reappointment of Mr. Pieter Erasmus. [Voting]

Item 2.6 and 2.7 relate to the nonbinding advisory votes on the company's remuneration policy and the implementation report in respect of the policy. I propose the approval of ordinary resolutions 15 and 16. Kindly complete your electronic voting in respect of ordinary resolutions #15 and 16. [Voting]

Items 2.8 and 2.9 relate to the general authority for directors to issue ordinary shares. I propose the approval of ordinary resolutions 18 and -- 17 and 18 and request you to complete your electronic voting in respect of the resolutions. [Voting]

Item 3 on the agenda relates to the remuneration of the nonexecutive directors. Approvals of the remuneration of directors are sought by separate resolutions. I propose the approval of special resolutions 1.1 to 1.13. Kindly complete your electronic voting in respect of these resolutions. [Voting]

Item 3.2 relates to financial assistance to subsidiary companies in terms of Section 45 of the Companies Act. The resolution specifically excludes financial assistance to directors and prescribed officers. I propose approval of section -- of special resolution #2. Kindly complete your electronic voting in respect of special resolution #2. [Voting]

Item 3.3 on the agenda relates to financial assistance to subsidiary companies for the purchase of shares in the company in terms of Section 44 of the Companies Act. I propose the approval of special resolution #3 and request you to complete the electronic voting. [Voting]

Item 3.4 of the agenda relates to a general authority to repurchase shares. I propose approval of special resolution #4 and kindly complete your electronic voting in respect of this resolution. [Voting]

The last item on the agenda is to transact any other business that may be transacted at an AGM. Notice has not been received of any other business. Unless there are questions that have been raised. Masood, are there any questions?

Madam Chair, I've received some questions on the platform, which the other shareholders are able to see. I've got 4 questions thus far received, all from Mr. Mehluli Mncube from ESG Insight SA. The first question is I think I'll read them in order of -- and then I'll give a chance for people to respond. The first question is regarding climate strategy and net zero credibility. He says, we note that Pepkor has no science-based emissions targets disclosed and no long-term net zero pathway articulated despite total GHG emissions of 301,981 CO2 tonnes. When will the Board commit to adopting science-based targets and publish a clear time-bound net zero roadmap covering Scope 1, 2 and material Scope 3 emissions, particularly given Pepkor's extensive logistics and sourcing footprint. I'll leave the next one after the Board has addressed this question.

Fagmeedah, would you like to respond to that?

Yes. Thank you, Chair. Thank you, Mehluli, for the question. So we addressed a lot of these issues in the sustainability report, which forms part of our integrated reporting suite. But to answer your question, Pepkor is a very large federated business with individual reporting systems in each of the businesses. So one of our primary challenges is collecting information with regards to carbon emissions and in fact, many other metrics and in order that we can produce data that we are comfortable, can be relied upon and that we can get the necessary assurance around. So we have spent a lot of time over the last number of years with internal audit looking at how we construct reliable data and building new data sources as well. And clearly in order for us to measure anything or report on anything, we need to have reliable data. And we are very well advanced on that journey of putting together reliable data in order for us to be able to report confidently around the emissions that we have. And that is why we are now able to report on what our emissions are. Having said that, we are also working on setting electricity targets, which is our largest scope driver. So that would be addressing our Tier 2 emissions. From a logistics perspective, we're also doing a lot of work looking at the efficiency of our fleet and in fact, how we adapt our fleet in order to reduce emissions. Similarly, on the electricity side, you will have seen that we have implemented extensive solar rooftop installations at our warehousing and DC facilities and even stores where we have control of the properties and where it makes commercial sense to do so. And so it's a journey in terms of our climate strategy and net zero credibility. And we feel we're well advanced on that. Thank you, Chair.

Thank you, Fagmeedah. And Chair, the next question is regarding Board skills and strategic capacity. Question is the independent evaluation identified a need for targeted Board skills refresh and earlier strategic involvement, yet no Board changes were made. Can the Chair confirm when shareholders will see tangible Board refreshment, particularly in banking, fintech, cybersecurity and climate risk given the group's strategic evolution?

As I mentioned in one of the resolutions that requests the appointment of Richard Wainwright, who brings extensive banking experience to the Board, we are in the process of strengthening the Board. And as directors complete their 9-year term, we will have an opportunity to begin to recruit and continue to strengthen the composition of the Board.

Chair, the next question is regarding remuneration dissent versus higher STI ceiling. The question is over 25% of shareholders rejected the FY '24 implementation report, yet the STI cap has been increased to 120%. How does the Board reconcile this higher short-term upside with higher shareholder dissent? And what prevent incentivizing short-term risk taking in fintech operations?

We'll request Steve to respond to that.

Yes. Thank you, Mehluli. The 120% STI is benchmarked and not out of the norm. Based on feedback from shareholders, we have implemented several key changes that will take effect in FY '26. Firstly, performance metrics. We introduced a return metric, return on net assets with a short-term incentive, STI, and increased the weighting of transformation, BBBEE targets from 10% to 20%. And then lastly, minimum shareholding effective from FY '26, we have increased the minimum shareholding requirements, MSR for the CEO to 250% and for the CFO and COO to 150% to better align with shareholders' interests and market .

Thank you, Steve. Next question, Masood.

Thank you, Madam Chair. The next question we've received regards the time-based COO retention scheme. Question is the COO retention arrangement appears primarily time-based rather than performance linked. Why has the RemCo not embedded explicit performance risk or capital metrics into this award? And will the structure be revisited to strengthen pay for performance alignment?

Steve, would you like to respond to that?

Yes. Thank you, Madam Chair. This is a specific measure to ensure retention. The COO also has an STI, which is performance-based. The RemCom reviewed the employment terms and conditions of the COO as follows: the COO's contract was updated to a fixed-term employment contract that will be in place until December 2026. The terms and conditions of his employment contract were amended effective 1 October 2023 to include a salary payable in ZAR linked to the pound ZAR exchange rate. By its nature and exchange rate can fluctuate. The COO will continue to participate in the approved STI scheme as in the previous year. In addition, the COO will receive a separate equity incentive arrangement and retention bonus, which aims to ensure that it remains in the employment of the group until December 2026. Thank you.

Thank you. Are there any other questions that have been raised that we need to address?

No, Madam Chair. We've received no other questions.

Thank you. The voting will now be closed, and the results will be displayed shortly. We thank you for your votes. And for those shareholders who have voted against the endorsement of the remuneration policy and the implementation of the policy are invited to advise the company of their reasons for their dissenting votes on these policies by sending correspondence by e-mail to the Group Investor Relations executive, the address is [email protected]. We welcome further engagement on these issues and addressing any concerns you may have. Ladies and gentlemen, as all the business on the agenda has been dealt with, I declare the meeting closed, and we thank you all for your support.