“Don’t hold your breath.” That was the message to banks by Pick n Pay CEO Sean Summers this week, answering the question from investors on whether the retailer will be borrowing money again.
Summers has 4.2-billion reasons for his bravado — a brave face he could only dream of when he returned to lead the group in late 2023, tasked with catching a “falling knife”.
By all accounts, the 2024 financial year was the most challenging one in the group’s nearly 60-year history, with the company reporting its first loss, leading to a cessation in dividends and a decline in its share.
In hard numbers, the group reported a R3.2bn loss for the year ended February 2024, including a R2.8bn impairment of Pick n Pay store assets.
To add kick to the Molotov cocktail, the group was seized with a multibillion-rand debt pile. Most of the more than R5bn debt at the time was driven by funding for the disastrous Ekuseni strategy, which increased net gearing from R3.7bn to R6.1bn.
The increase in debt, with the deterioration in Pick n Pay earnings, placed huge pressure on the company’s medium- and long-term debt covenants, with net debt increasing from 1.1 to 6.3 times earnings before interest, taxes, depreciation and amortisation (ebitda).
With the balance sheet weakening, something drastic had to be done. In steps Summers, brought out of retirement by the founding Ackerman family.
He was no stranger to the group, having been its CEO for 11 years before his departure in 2007 after a 31-year career.
But the group he left 17 years prior was a different one from the one he returned to in the spring of 2023.
A priority for Summers was to fix the balance sheet and waning investor and funder confidence. Key to this was to recapitalise the group to meet its funding needs and facilitate a more efficient capital structure and unlock value from Boxer.
The two-step recapitalisation blueprint comprised a rights offer to existing shareholders in mid-2024, followed by the listing of the group’s Boxer business on the JSE towards end-2024.
The two steps raked in R12.5bn (R4bn via the rights issues and R8.5bn in Boxer’s initial public offering).
The recapitalisation left the group with a net cash position of R4.2bn at the end of the 2025 financial year, giving the company flexibility to invest in growth areas without the burden of debt.
This is as the group looks to return to profitability within the next five years. Group CFO Lerena Olivier said the success of the group’s recapitalisation was the best yet in corporate SA.
“We have moved from a net funding position of R6.1bn last year to a net cash position of R4.2bn this year. That is a delta of R10.3bn. That is unheard of in corporate SA. This was made possible by a motivated and dedicated team that is highly invested in the success of Pick n Pay,” Olivier said.
The R4.2bn cash pile has allowed the group to double Pick n Pay’s capex from R500m to R1bn, mainly to refurbish stores.
With the balance sheet fixed, the management’s attention is on returning to profitability with attention to detail at the heart of the turnaround. Summers displayed this attention in an investor call on Monday.
The company said it was also “cleaning” in its private labels offering, which it admits has “gone backwards to a fair degree”, said Summers.
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