Pick n Pay: EBITDA up 10.6% but the bottom line is still negative and debt sits at 5.82x EBITDA

On 30 August Pick n Pay released results for the first half of 2026. Revenue came in at ZAR 61,956m (+2.7% year on year), EBITDA at ZAR 2,466m (+10.6%), while the net result stayed negative at minus ZAR 270m. Net debt reached ZAR 8,735m at 30 August, equal to 5.82x trailing-twelve-month EBITDA, and on the portal's model the share trades 64% above fair value. With a loss, high leverage and a valuation above its own history, the stock looks unattractive.

Key takeaways

— Revenue rose 2.7% while EBITDA grew 10.6%, lifting the margin to 4.0% from 3.7%

— The net loss narrowed to ZAR 270m but remains a loss

— Operating cash flow of ZAR 4,252m covers capital expenditure of ZAR 710m

— Net debt rose from ZAR 5.1bn on 31 August 2025 to ZAR 8.7bn on 30 August 2026

— Leverage at 5.82x trailing-twelve-month EBITDA remains high

— At 9.75x trailing-twelve-month EBITDA the valuation is 64% above fair value on the portal's model

Attractiveness

Key figures, ZAR bn

Revenue rose 2.7% while EBITDA grew 10.6%, lifting the margin to 4.0% from 3.7%

For the first half of 2026 Pick n Pay's revenue reached ZAR 61,956m, up 2.7% year on year. Growth is modest but positive against weak South African consumer demand.

EBITDA rose 10.6% to ZAR 2,466m, outpacing revenue. This means costs were kept in check: the EBITDA margin climbed to 4.0% from 3.7% a year earlier. A 0.3 percentage point gain looks small, but for a low-margin retailer it is a meaningful shift.

Operating profit was ZAR 490m, confirming that the core business is profitable. After interest costs and taxes, however, the company remains in loss.

The net loss narrowed to ZAR 270m but remains a loss

The net loss for the first half of 2026 was ZAR 270m, compared with a loss a year earlier. The narrowing is a positive signal, but the company still does not earn a net profit.

The net margin remains negative at minus 0.4% versus minus 0.8% a year earlier. The 0.4 percentage point improvement came from higher EBITDA, but interest costs still absorb a large part of operating profit.

To return to net profit, the company needs either further operating margin improvement or lower debt and interest payments.

Operating cash flow of ZAR 4,252m covers capital expenditure of ZAR 710m

Operating cash flow for the first half of 2026 was ZAR 4,252m. That is well above capital expenditure of ZAR 710m, leaving free cash flow of about ZAR 3,542m.

This liquidity cushion allows the company to service debt and fund operations without additional borrowing. However, free cash flow may go towards debt reduction rather than dividends given the high leverage.

Capital expenditure remains moderate relative to revenue at about 1.1%. This may mean the company is not expanding the store network aggressively but focusing on efficiency.

Net debt rose from ZAR 5.1bn on 31 August 2025 to ZAR 8.7bn on 30 August 2026

Pick n Pay's net debt at 30 August 2026 was ZAR 8,735m. A year earlier, on 31 August 2025, it stood at minus ZAR 5.1bn, meaning the company had a net cash position. The change over 12 months is plus ZAR 13.8bn.

Such an increase in debt sharply changes the risk profile. Where the company could previously fund operations without significant borrowing, leverage has now become material.

The ratio of net debt to trailing-twelve-month EBITDA is 5.82x. This is a high level that limits financial flexibility and increases vulnerability to rising interest rates.

Leverage at 5.82x trailing-twelve-month EBITDA remains high

The ratio of net debt to trailing-twelve-month EBITDA is 5.82x. For a retailer this is a high figure, especially given the low 4.0% EBITDA margin.

High leverage means a significant portion of operating profit goes to debt service. This explains why the company remains in net loss despite positive operating profit.

Debt reduction is the key task for returning to profitability. Without it, even EBITDA growth will be consumed by interest costs.

At 9.75x trailing-twelve-month EBITDA the valuation is 64% above fair value on the portal's model

EV/EBITDA for the trailing twelve months is 9.75x. This is above fair value on the portal's model, which implies 64% downside for the share.

The portal's model factors in EBITDA growth and a target multiple. With the current market capitalisation of ZAR 17,720m and high debt, the valuation looks stretched relative to fundamentals.

For comparison, the 3-year average EV/EBITDA is not provided, so we cannot say whether the current multiple is above or below its own history. However, the portal's model clearly points to overvaluation.

Valuation on the latest reported figures

Bottom line

Pick n Pay showed improvement in operating metrics: revenue rose 2.7%, EBITDA 10.6%, and the margin climbed to 4.0%. However, the company remains loss-making, and net debt rose to ZAR 8,735m, equal to 5.82x trailing-twelve-month EBITDA. The 9.75x trailing-twelve-month EBITDA valuation is 64% above fair value on the portal's model. Bottom line: the stock looks unattractive.