Former Pick n Pay CEO Pieter Boone gets R16m golden handshake after failed strategy

Former Pick n Pay CEO Pieter Boone was paid a nearly R16m termination fee following the disastrous rollout of his Ekuseni strategy after which the group sent an SOS to its former boss, Sean Summers, to come and keep the company afloat.

Pick n Pay in its 2024 annual report released on Wednesday said Boone, who left the role in September, was paid R15.7m to leave the position early.

His total remuneration in the period, including his termination fee came in at about R25m — more or less the same figure he was paid in the prior year.

Summers, who has been in the role since September, was paid R10m. The company’s remuneration committee has also decided to award 4-million performance-based shares in terms of the “with performance conditions linked to targets under the group’s long-term plan.”

Summers, 70, has been tasked with turning the group’s fortunes around and grooming his successor. He is expected to be in the CEO role for three years — the time group expects it will take for it to be on the path back to profitability.

“As the company is currently in a closed period due to it being under cautionary announcement in relation to the proposed two-step recapitalisation plan, the formal allocation of the shares and clearance to trade will be deferred until after the terms of the rights offer have been announced in the market, which is expected mid-July 2024, and the cautionary announcement has been withdrawn,” the company said in the report on Summers’ shares.

The shares due to Summers provide a serious incentive for him to execute his turnaround plan. At Wednesday’s prices, the 4-million shares would be worth about R100m.

Pick n Pay’s share price has taken a pounding in the past five years as its performance began to suffer. The stock is down more than 50% in the past five years, a deep value destruction, particularly for the founding Ackerman family, whose influence in the group has recently been curtailed.

The company is now worth about R12.3bn on the JSE, a far cry from the market value of its rival, Shoprite, which is worth R168bn, up 76% in the past five years. Pick n Pay had a value of about R41bn when its share price peaked at R83 in 2016.

The Ekuseni strategy, ley by Boone, failed to turn the fortunes of the group around. Unveiled in May 2022, the strategy essentially divided Pick n Pay into two divisions: the core Pick n Pay brand and a lower-income brand named Qualisave, which sells a more limited range.

Qualisave proved to be a disaster as Pick n Pay customers rejected its limited offering. Under Summers’ turnaround plan, Qualisave will be phased out and its stores converted to either Pick n Pay or Boxer outlets.

The rollout of the Ekuseni strategy culminated in the group reporting its first ever annual loss in its 57-year history in the year to end-March, and a debt-pile of R6.3bn, nearly half its market capitalisation.

In a note to shareholders, Pick n Pay’s lead independent director James Formby gave insights into some of the board’s misgivings about the company’s direction and the Ekuseni strategy.

“The board had lost conviction in the Pick n Pay strategy and its execution and made the difficult decision to part ways with Pieter Boone and re-appoint Sean Summers as CEO. These decisions are never easy, and I commend the board for taking decisive action just 15 months after the launch of the strategy,” reads the letter.

“This was also a time of deep introspection, reflecting on the reasons for Pick n Pay’s weakened performance, which had not happened over 15 months, but over an extended period of time where capital investment, in-store execution, innovation and customer service had not been adequately prioritised.”

The group’s non-executive directors were paid a combined R13.5m in the year under review, with outgoing chair and mainstay board member Gareth Ackerman getting the lion’s share of R4.9m.

The company said it had made ex-gratia payments to middle management, despite the tough year in which it also impaired about R2.8bn. It said this was done to retain talent in the group.

“The risk exists that our talented employees will be the first to leave the Pick n Pay business and hence it is imperative to have measures in place to ensure that deserving employees receive some recognition for their commitment and dedication,” the company said.

Correction: June 27 2024
The story has been updated to correct that Pick n Pay’s chair is Gareth Ackerman and not Raymond Ackerman.

KhumaloK@businesslive.co.za