Pick n Pay’s Brasher bags R81m for a job well done

Pick n Pay CEO Richard Brasher, widely regarded as having saved the retailer from terminal decline, has at last banked the sort of reward that would not have embarrassed former Shoprite hotshot Whitey Basson.

Pick n Pay’s just released annual financial statements reveal that Brasher’s remuneration for 2019 was R32m, almost three times what he was paid the previous year.

It’s a generous payment but nothing that comes near the eye-watering sums picked up by Basson over the years.

The real kicker for Brasher in 2019 was the additional R81m he got from the sale of 2.2-million shares awarded to him in 2012 and 2015.

This is not the first time Brasher, who was appointed to the top job in 2012, has sold shares awarded to him as part of his remuneration package. Nobody, it seems, thinks Brasher wasn’t worth every cent he banked last year.

"Pick n Pay would be in a world of pain right now if it hadn’t been for Brasher," says Sasfin analyst Alec Abraham.

He reckons conditions on the JSE and in the economy have changed fundamentally in the seven years since the UK-born Brasher took the helm.

Since Brasher took the job in January 2013, Pick n Pay’s share price has risen 56% to R72.

By contrast, Shoprite’s share price has shed 3.4% to R170 in that time. (Spar’s price rose 63% over that period, however.)

Pick n Pay also performed better than Shoprite over the last year, even though both retailers saw their share price weaken.

"Since Brasher joined, economic conditions have deteriorated significantly and the competitive landscape has intensified," Abraham says.

"Brasher stabilised the group and made it more competitive. Improved labour productivity, greater levels of centralised distribution and better buying all helped to produce cost savings — which were used to cut the prices of 2,500 grocery lines and gain market share," he adds.

Evidence of Brasher’s progress was a long time coming. That, and the much tougher investor sentiment, meant share price growth remained sluggish.

In what was seen as a bid to keep Brasher onside at a crucial time in the implementation of his strategic plan, in September 2017 the remuneration committee granted a 12-month extension to the vesting of 1-million share options that had been awarded to Brasher at R42.24 at the time of his appointment. The options were due to expire in November 2017.

The extension was provided on the basis of a rollover of the previous condition that the weighted average share price for the 20 days to November 14 2018 was at least R68.03. That target was missed by a whisper but the extension did not go down well with analysts, even those who backed Basher.

Andrew Bishop of Element Investment Managers attended the 2018 AGM to voice his unhappiness about the change.

This week Bishop tells the FM he continues to believe Brasher has done a good job.

"Previously we were concerned about the remuneration committee changing the rules midway."

Some 2-million of the shares sold by Brasher during financial 2019 were awarded to him in 2012 at a grant price of R42.24 a piece. He exercised these at R74.05c each, generating a profit of R64m.

Considerably more valuable were the 220,000 forfeitable shares awarded to him in 2016 at no cost. These generated a profit of R17m.

The good news for Brasher, though it doesn’t go down well with analysts, is that all the share awards granted since 2015 are forfeitable shares with a nil price tag. Bishop says he is uncomfortable with the awarding of shares at no cost. "We prefer to see alignment with shareholders."

Brasher has accumulated 1.6-million forfeitable shares of which a hefty 1-million were awarded in 2018 alone. The 1-million shares, which can be taken up in June 2021, are worth almost R72m at today’s market price.

Shareholders and analysts will have to wait a few more weeks for details of the performance conditions attached to these generous awards. They may or may not have changed from those referred to in the 2018 remuneration report.

According to that report, an overriding condition is that the group’s return on capital employed is greater than its weighted average cost of capital over the vesting period.

"This is to ensure that the group has generated a real return for shareholders before rewarding its management team," said the remuneration committee.

As for the R20.6m that helped to boost Brasher’s total remuneration in 2019, a Pick n Pay spokesperson tells the FM it was in recognition of his sterling leadership over the past year, "and his success in navigating the group through a difficult economy while maintaining the group’s positive earnings trajectory".