Pick n Pay’s saviour

Sean Summers has returned to Pick n Pay in the hope of turning around the struggling retailer – with the group raising over R12 billion through its recapitalisation.

Summers returned to the group in late 2023 following abysmal results, with the group’s core Pick n Pay grocery business performing well below the board’s expectations during former CEO Pieter Bonne’s challenged region.

Summers worked with the group from 1974 to 2007, becoming Managing Director in 1997 and CEO in 1999.

At 70 years old, Summers was referred to as a “pensioner” on his return by legendary business journalist Bruce Whitfield.

He was tasked with a mammoth task, with the group recording an after-tax loss of R3.2 billion for the year ended 25 February 2024 (FY24) following a R2.8 billion non-cash impairment on the assets of Pick n Pay company-owned stores.

Pick n Pay grocery recorded a R1.5 billion trading loss during the period, undermining the R1.9 trading profit seen at Boxer.

Notably, the group’s results for FY24 revealed that the retailer was technically insolvent, as its liabilities were higher than its assets.

Summers first few months in the job were not easy going, with the group posting a loss of R827.4 million for the period of 26 weeks ending 25 August 2024 (H1 FY25)

“On my return a year ago, I forecast that our financial performance and results would continue to get worse before they got better, and these results reflect that,” said Summers in the interim results.

“Notwithstanding this, the results are in line with our business plan and encouragingly, Q2 showed a consistent by-period improvement over Q1, a trend that continues.”

“Unlike twelve months ago, I can confidently say that the worst is behind us, notwithstanding the many obstacles that still lie ahead, as we restore Pick n Pay to its rightful place.”

Plan to save the company

The group was in desperate need of cash at the start of Summer’s reign, with the group in breach of debt covenants. It thus announced a two-step recapitalisation plan.

The first part of the recapitalisation plan was a Pick n Pay Rights offer, which raised R4.0 billion in August 2024 and was more than double oversubscribed.

The second step was Boxer’s listing on the JSE in late November. Boxer shares worth R8.5 billion were placed at R54 and were multiple times oversubscribed at the very top end of the price range.

Notably, Boxer’s market cap is now worth around R29 billion, with shares trading at roughly R64.

This is more than Pick n Pay’s market cap of R23.23 billion, with much of this tied to its 60% shareholding in Boxer.

Pick n Pay said that the finalisation of the two-step recapitalisation will help restore the performance of Pick n Pay supermarkets and position the group for long-term sustainable growth.

Following the capital raise, the group is no longer technically insolvent.

Big payday

Summers is set for a sizable reward if he turns Pick n Pay around, with R108 million on the table.

In May 2024, the group’s remuneration committee awarded Summers 4 million performance-based shares under the terms and conditions of its Restricted Share Plan (RSP shares).

The shares are subject to performance conditions being met over 32 months.

The performance conditions include qualitative and quantitative performance indicators that are critical to the turnaround of the core Pick n Pay supermarket business.

At the deemed value of the award at a share price of R27.00, the reward worked out to R108 million at the time.

However, Pick n Pay’s share price has continued to rise (standing at R31 currently) meaning that Summers could receive a larger amount.

Salient details of the RSP award are as follows:

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