Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pick N Pay Stores Ltd (STU:PIK, Financial) reported a group turnover increase of 3.7% to ZAR56.1 billion.
- Boxer, a subsidiary of Pick N Pay Stores Ltd (STU:PIK), demonstrated strong sales growth, with a 12% increase and continuous market share growth.
- The company successfully executed a rights offer that was 104% oversubscribed, improving net gearing from ZAR6.1 billion to ZAR2.3 billion.
- Pick N Pay Stores Ltd (STU:PIK) plans to launch an IPO for Boxer, expected to raise between ZAR6 billion and ZAR8 billion, which will strengthen the balance sheet.
- The company has shown strong cost control, with trading expenses increasing only 1.8% on a like-for-like basis.
Negative Points
- Pick N Pay Stores Ltd (STU:PIK) reported a gross profit margin contraction of 60 basis points to 17.9%, reflecting a highly competitive trading environment.
- The company recorded a trading profit of only ZAR82.5 million, despite being up from ZAR32 million last year.
- EBITDA decreased by 38% to ZAR187.7 million, impacted by depreciation savings from loss-making store impairments.
- Pick N Pay South Africa's sales contracted by 0.3%, affected by store closures and franchise terminations.
- The company reported a comparable PBT loss of ZAR1.1 billion, up from a ZAR0.8 billion loss last year, due to incremental financing costs.
Q & A Highlights
Q: Can you speak to how you expect the Pick N Pay gross profit margin trajectory to change and how you reverse the impact of reduced supplier incentives?
A: Lerena Olivier, CFO, explained that the contraction in gross profit margin is largely in the base now, and they do not foresee further contraction in the second half. The focus is on maintaining competitiveness and working with suppliers to support the business.
Q: How is the progress on the closure or conversion of the DGEN 12 stores?
A: Sean Summers, CEO, stated that the process is going well, with less than 30 stores expected to be closed this year. The rest will be converted to franchise or Boxer stores, with some already showing significant growth post-conversion.
Q: What are the main drivers to reduce the trading loss in the Pick N Pay segment significantly?
A: Lerena Olivier, CFO, mentioned that cost savings from depreciation due to impairments and improved performance of company-owned stores will contribute to reducing the trading loss.
Q: Can you provide more detail on the reason why the franchise like-for-like was negative and what needs to be done to bring it back?
A: Sean Summers, CEO, noted that the focus was initially on corporate stores, but now attention is shifting to reinvigorating the franchise network, which is starting to show signs of turnaround.
Q: Can you comment on the structure and size of the newly arranged debt facilities for Boxer and its targeted gearing range?
A: Lerena Olivier, CFO, stated that they cannot provide more details on Boxer's debt structure due to the pending IPO, but investors should look out for the pre-listing statement for more information.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
