Our opinion on the current state of PICKNPAY(PIK)
Pick 'n Pay (PIK) is a retail grocery chain with over 2,000 stores, primarily in South Africa but also operating in other parts of Africa. The company was founded by Raymond Ackerman in 1967 and became the dominant grocery retailer in the country before being surpassed by Shoprite/Checkers. Richard Brasher previously served as CEO, but Sean Summers, who led the company from 1999 to 2007, has returned to the role of CEO in an effort to restore the company's competitive edge.
In its results for the 52 weeks ending 25th February 2024, Pick 'n Pay reported a 5.4% increase in turnover but posted a headline loss of 203.06c per share, compared to a profit of 259.25c in the previous year. The company highlighted a significant decline in trading profit, which fell 87.4% to R385 million. This was largely due to a R1.5 billion trading loss from Pick 'n Pay, a sharp reversal from FY23's R1.3 billion profit. Meanwhile, Boxer contributed R1.9 billion in trading profit, compared to R1.8 billion in the previous year. The company also faced a substantial 198.8% increase in net interest paid, reaching R701.8 million, driven by higher gearing and increased interest rates.
Technically, Pick 'n Pay has been in a long-term downward trend since 2016, having lost significant market share to Shoprite. The company has been working to catch up in the online shopping market through partnerships with Mr. D and Takealot.
To recapitalise the business, Pick 'n Pay plans to list its Boxer division separately and conduct a rights issue to raise R4 billion by mid-2024. The rights issue was approved by shareholders at a general meeting on 26th June 2024. The company issued 252.2 million nil paid letters of allocation (NPLs) in the ratio of 51.11 NPLs for every 100 Pick 'n Pay shares held, resulting in a 33.8% dilution. The take-up price was set at 1586c per share, representing a discount of approximately 32.48%. The rights offer was more than 100% oversubscribed, but the rights issue caused the share price to fall on 17th July 2024. The Ackerman family had to inject R1 billion to maintain their 25% stake in the company.
In a trading statement for the 26 weeks ending 25th August 2024, Pick 'n Pay estimated that headline earnings per share (HEPS) would decline by between 20% and 30%. The company reported that like-for-like sales grew by just 0.1% for Pick 'n Pay, while Boxer saw stronger growth, with sales increasing by 13.5%. Internal sell price inflation was 4.3%.
We previously recommended applying a 200-day simple moving average and waiting for a clear upside break before further investigation. That break occurred on 27th May 2024 at a price of 2558c, with the share rising to 2850c before the rights issue. However, by the end of August 2024, the share was trading at 2392c. Given the company's challenges, the share remains risky for investors at this stage.
In its results for the 52 weeks ending 25th February 2024, Pick 'n Pay reported a 5.4% increase in turnover but posted a headline loss of 203.06c per share, compared to a profit of 259.25c in the previous year. The company highlighted a significant decline in trading profit, which fell 87.4% to R385 million. This was largely due to a R1.5 billion trading loss from Pick 'n Pay, a sharp reversal from FY23's R1.3 billion profit. Meanwhile, Boxer contributed R1.9 billion in trading profit, compared to R1.8 billion in the previous year. The company also faced a substantial 198.8% increase in net interest paid, reaching R701.8 million, driven by higher gearing and increased interest rates.
Technically, Pick 'n Pay has been in a long-term downward trend since 2016, having lost significant market share to Shoprite. The company has been working to catch up in the online shopping market through partnerships with Mr. D and Takealot.
To recapitalise the business, Pick 'n Pay plans to list its Boxer division separately and conduct a rights issue to raise R4 billion by mid-2024. The rights issue was approved by shareholders at a general meeting on 26th June 2024. The company issued 252.2 million nil paid letters of allocation (NPLs) in the ratio of 51.11 NPLs for every 100 Pick 'n Pay shares held, resulting in a 33.8% dilution. The take-up price was set at 1586c per share, representing a discount of approximately 32.48%. The rights offer was more than 100% oversubscribed, but the rights issue caused the share price to fall on 17th July 2024. The Ackerman family had to inject R1 billion to maintain their 25% stake in the company.
In a trading statement for the 26 weeks ending 25th August 2024, Pick 'n Pay estimated that headline earnings per share (HEPS) would decline by between 20% and 30%. The company reported that like-for-like sales grew by just 0.1% for Pick 'n Pay, while Boxer saw stronger growth, with sales increasing by 13.5%. Internal sell price inflation was 4.3%.
We previously recommended applying a 200-day simple moving average and waiting for a clear upside break before further investigation. That break occurred on 27th May 2024 at a price of 2558c, with the share rising to 2850c before the rights issue. However, by the end of August 2024, the share was trading at 2392c. Given the company's challenges, the share remains risky for investors at this stage.
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