Pick n Pay’s big plan to raise R4 billion

 ·22 Feb 2024

South African retailer Pick n Pay says its board has signed off on a new strategy to raise R4 billion through a rights offer to shareholders and a separate listing of its successful Boxer business.

The proceeds will be used to stabilise the group’s balance sheet it said, while priming it for longer-term sustainable growth.

The move comes after the group suffered a significant loss in its half-year period, reporting a R570 million loss after tax for the six months ending August 2023.

In a trading update on Thursday (22 February), the group recorded another disappointing period, with sales down -0.1% for the 47 weeks ended 21 January 2024.

This, together with increased inventory levels and strategic investment into Boxer, Pick n Pay Clothing and asap!, has led to a marked increase in net debt, from R3.8 billion at the end of H1 FY24 to R7.2 billion at 21 January 2024.

However, while the group’s flagship brands struggle the Boxer brand is “shining”, it said.

Boxer posted sales growth of 17.1% for the 47-weeks ended 21 January 2024, with like-for-like growth of 7.3%.

Amid other structural changes at the retailer – under the leadership of its new and returning CEO, Sean Summers – its board has now unanimously approved a two-step capital raise to stabilise the group’s balance sheet, strengthen liquidity, unlock shareholder value.

The proposed two-step equity capital raise is expected to comprise a rights offer to existing shareholders to provide near-term liquidity around mid-2024, followed by an offering and listing of shares in the Boxer business (IPO) towards the end of 2024.

The group said it intends to retain a majority stake in Boxer post the IPO and will seek to raise up to R4-billion through the Rights Issue.

“The terms of the capital raise are still being finalised and are subject to final board approval as well as the requisite shareholder and regulatory approvals,” it said.

“Shareholders are advised to exercise caution when dealing in their Pick n Pay shares until a further announcement is made. The Ackerman family has given their in-principle support for the two-step capital raise.”

The group said it will release the detailed terms of the planned capital raise after the announcement of its full year results in May.

Pick n Pay CEO Sean Summers said that by reducing debt, the proposed capital raise would allow the group to start putting focus on the core Pick n Pay retail business.

“Our balance sheet needs to be restructured and stabilised,” said Summers. “This is the appropriate action, at the right time, to help our turnaround strategy.

“We have totally reorganised our leadership team and strengthened and simplified our operational structure to drive rapid decision making, focusing on better in-store execution and excellent customer service,” he said.

“Cutting debt and creating a sustainable platform for investment in growth is the next big step towards unlocking the Group’s clear potential, and more details of our turnaround plan will be announced when we release our results in May.”

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