Huge win for Pick n Pay

The Pick n Pay Group has overshot its rights offer by more than double, showing huge demand and confidence from investors in its turnaround strategy.

The rights offer, which sought to raise R4 billion, was 106% oversubscribed, with total subscriptions reaching over R8 billion.

98.7% of shareholders followed their rights, and the group received R4.3 billion in excess applications.

The group said that this underscores shareholders’ strong confidence in the group’s turnaround strategy, leadership team and future growth plans.

The R4 billion generated will be used to pay down debt, stabilise the balance sheet, and invest in Pick n Pay’s turnaround strategy.

As part of the rights offer, the Ackerman family has reduced its holding in the company, reducing its voting rights to below 50%.

The group said that recapitalising the business is one of six strategic priorities aimed at revitalising and restoring profitability at the group’s core Pick n Pay grocery stores while also driving growth in high-performing Boxer and Pick n Pay clothing.

The group said that it is seeing measurable improvements in the core Pick n Pay grocery business.

“We are really pleased with this result. The successful conclusion of the Rights Offer demonstrates the market’s strong confidence in our iconic brand and in our turnaround strategy,” said CEO Sean Summers.

“It marks a crucial first step in our recapitalisation plan, positioning the group well to fund long-term sustainable growth.”

“We can now intensify our focus on our core Pick n Pay retail business. This achievement underscores our commitment to executing our strategy. We appreciate this incredible support from our shareholders.”

With the rights offer completed, the group has completed the first step to recapitalise its business.

The second step will be listing Boxer on the JSE in the second half of the year.

The group needs cash

The recapitalisation of the business comes amid an incredibly poor performance for the group.

For the financial year ended 25 February 2024 (FY2024), the group recorded an R3 billion loss for the year ended 25 February 2024, mainly due to the poor performance of the Pick n Pay grocery store business.

Group turnover did increase by 5.4%, driven by Boxer (17.3%) and Pick n Pay Clothing standalone stores (17.0%).

Nevertheless, the gross profit margin declined by 1.5% to 18.1%, while gross profit in Rand terms declined by 3.1% year-on-year.

Trading profit declined by 87.4% to R385 million following Pick n Pay’s trading loss of R1.5 billion (FY23: R1.3 billion profit).

“The Pick n Pay trading loss was primarily driven by flat (+0.3%) Pick n Pay sales, trading expense growth exceeding sales growth, and gross profit margin contraction in that business,” said the group when the results were released

“The result was further impacted by a 198.8% increase in net interest paid to R701.8 million as a result of higher gearing and increased interest rates. “

The cumulative result was a loss before tax and capital items of R1.4 billion.

In addition, the Pick n Pay grocery business triggered a R2.8 billion non-cash impairment on the assets of Pick n Pay company-owned stores, resulting in an overall after-tax loss of R3.2 billion for the period.

Therefore, the group did not declare a dividend for FY25.

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