The Finance Ghost — the lowdown on Pick n Pay putting Boxer in the ring, and Bidcorp’s bolt-on boost

It was a busy week for updates from Pick n Pay, with the embattled retailer first releasing trading numbers and then issuing the circular for the proposed initial public offering (IPO) of Boxer, the jewel in what is now a battered crown.

The numbers remind us why it needs to do this in the first place. Although the rights issue was strongly supported by the market, Pick n Pay is still in heaps of trouble. For the 26 weeks to 25 August, Heps will be at least 20% lower than the comparable period. That’s the minimum disclosure required by the JSE for a trading statement, so we can realistically expect the drop to be worse.

Boxer isn’t the problem. In fact, Boxer is where you’ll find the good news. The core Pick n Pay business is performing so poorly that it’s enough to drag Boxer’s excellent numbers deep into the red at group level.

Boxer’s sales growth in the 21 weeks to 21 July 2024 was 9.5% on a like-for-like basis and 13.5% overall, as it is still expanding rapidly. Pick n Pay Supermarkets could only put together like-for-like growth of 2.0% excluding standalone clothing stores.

Before you get too excited about how clothing might have performed, the like-for-like growth was just 0.7%.

Clearly, there are problems. The sales growth (or lack thereof) only tells part of the story, with Pick n Pay suffering gross margin pressure thanks to how wildly competitive the grocery industry is.

The savings from the disappearance of load shedding have been reinvested in price. When you’re up against a goliath like Shoprite, you have little choice.

At least the challenge of higher finance costs will be far less severe, as the rights issue will do wonders for reducing debt levels. It can’t stop there, unfortunately, as the rights offer wasn’t enough to get the retailer out of its deep hole. This is why the Boxer IPO is the next step this year, with a plan to raise roughly R8-billion – an amount that is subject to change. For reference, the rights issue raised R4-billion.

Institutional investors will need to do the maths on what they are willing to pay for Boxer shares, as the IPO process will be run as a bookbuild. It would be lovely to see a piece carved out for retail (non-institutional investor) participation, but, sadly, this is rare in the local market. Perhaps we will get a pleasant surprise.

Bidcorp can give your money a passport

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.