Sample ZA Confidential Newsletter

ZA CONFIDENTIAL April 23rd 2013

Today’s Topic: Pick n Pay Annual results to 3rd March 2013

The Company itself says the performance over the year was disappointing, blaming much of this on the restructuring of the business. Turnover rose by 7.1%, but headline earnings per share (HEPS) from continuing operations fell by 30.8%. New CEO Richard Brasher gave a confident presentation to analysts in Johannesburg, and his track record at the UK supermarket giant Tesco suggests that he should have the skills to help turn around Pick n Pay. However this is a highly competitive environment, and questions remain about how much Brasher will be his own man, and how much he will be held back by the supermarket chain’s founding dynasty, the Ackerman family.

Expert views

1. Lavan Gopaul from 28E Capital:

Pick n Pay have opened 107(11% increase) new stores and still delivered a 30% dip in HEPS. Higher electricity and petrol prices may have resulted in a small spend by consumers. Their model of stalling payment to suppliers translates into higher interest income during periods of high interest. Pick n Pray for higher earnings in the next report.

2. Chris Gilmour from ABSA Investments:

Pick n Pay, under the new leadership of Richard Brasher, is on the long, slow and painful path to recovery and, in the process, reclaiming its iconic status among South African shoppers. It will probably take at least two to three years before the turnaround process – which incorporates better category management, enhanced centralised distribution and greatly improved profit margins – is complete. But while we are confident that this process will work, we are not convinced that the stock offers value.

3. Ron Klipin from SA Stockbrokers:

Richard Brasher has an awesome challenge ahead of him, but I am sure he will have a major amount of autonomy. I imagine a man of that ilk would have reached an agreement with the Ackerman family so that he can run with the ball. They are trying to play a catch-up game, but hopefully they have the skills in-house to turn the company around.

Conclusion

The jury is out. Pick n Pay’s management team faces a monumental task in turning around the business with some very strong competitors barking at its heels. Do the Ackermans have the stomach for a fight, and the right new CEO, or are they just waiting for the right offer to sell up and leave?

Tweet of the Day

@wjflowers: Les Misérables is probably the only movie named after its audience.


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