Better, bolder, Brasher
When Richard Brasher assumed the role of Pick n Pay CEO in February 2013, he took on the immense challenge of restoring the deeply troubled retailer to health.
It would seem he has done just that.
“The heavy lifting is now behind us and it’s time to have some fun and try to win a cup this year,” Brasher says.
It sounds like the type of fighting talk shareholders want to hear.
There was already evidence to support Brasher’s bold stance in Pick n Pay’s results for the 52 weeks to February 25. Sales lifted 5.3% (3.1% excluding internal inflation) to R81.6bn, trading profit was up 4.9% at R1.82bn and headline EPS (HEPS) lifted 7.1%.
Underlying growth was far stronger.
A voluntary severance programme (VSP), which cut staff numbers by about 3,500 (10%), cost Pick n Pay R250m. It took this hit in the first half of its past financial year.
Though an exact figure for ongoing annual cost savings that will flow from the VSP has not been provided, Brasher told the Financial Mail in October that it will be “somewhere above R200m”.
Excluding the VSP, trading profit was up 19.3% in the past year, while the trading margin lifted from 2.3% in the previous year to 2.5%. Illustrating the solid progress that has been made, the trading margin in the year to February 2013 was a paper-thin 1.2%.
But it was in the fourth quarter that the reason for Brasher’s optimism really came through. Sales in SA operations were up 7.3%, and samestore sales growth was at 5.3%. This was achieved against a background of internal inflation at a minimal 0.2%.
“I believe we can keep doing it,” says Brasher. Encouragingly, the strong sales growth trend in the fourth quarter continued into the first quarter of the new financial year.
“The results of the huge effort that has been put into Pick n Pay’s turnaround are coming together for the first time,” says Ricco Friedrich, a director of Denker Capital. “I have to take my hat off to Brasher and his executive team for what they have achieved.”
Under Brasher’s watch, Pick n Pay’s HEPS have grown by almost 150% to a new high, and the annual dividend has been upped by 125%.
Pick n Pay today is a far cry from the company handed to Brasher five years ago. Signs of serious problems had begun showing in the year to February 2010, when HEPS growth stalled. Over the next three years HEPS more than halved.
The harsh reality was that Pick n Pay had been grossly underinvesting in its sustainability and had fallen way behind its main rivals — Shoprite, Woolworths and Spar — in terms of new store openings and refurbishments of