Bet­ter, bolder, Brasher

Financial Mail - - MONEY& INVESTING -

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

123Rf/ivan Ryabokon

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