Significant strategic execution delivers transformational year with strong financial performance

Pepco Group N.V. (“Pepco Group”), a leading pan-European variety discount retailer, today reports its preliminary unaudited results of the continuing operations (excluding Poundland) for the 12 months ended 30 September 2025[1].

SUMMARY

• Implementation of new strategic framework well on track, with strong focus on sustainable value creation, as Pepco’s enhanced proposition and market-leading prices continue to resonate strongly with customers
• Strategic return to core Pepco model of clothing and general merchandise during FY25. Fully exited FMCG within Pepco, as well as disposing of Poundland. Dealz divestment process expected to commence in 2026
• FY25 revenue growth of 8.7% to €4,523m, with return to positive LFL sales of 2.6% (excluding FMCG +4.0%)
• FY25 underlying EBITDA growth of 10.3% to €865m, reflecting a 100 basis point y-o-y gross margin improvement
• FY25 underlying net earnings growth of 19.7% to €219m reflecting focus on improving EBITDA conversion. This is despite a one-off pre-tax IFRS impairment charge of €38m
• Successful refinancing & bond issuance enhanced Group’s financial flexibility and extended maturity profile
• Focus on shareholder returns – strong free cash generation of €334m facilitates an increase in dividend payout ratio to 25% (from 20%) leading to a 55% growth in FY25 dividend to 9.6 cents (FY24: 6.2 cents), in addition to the €50m shares repurchased in Q4 FY25 and a second tranche of €50m currently being executed
• Confirm FY26 underlying EBITDA expected to grow at least 9% y-o-y; underlying net earnings to exceed 25%
• Mid-term guidance reconfirmed on revenue and EBITDA, with upgraded targets for gross margin and unlevered free cash flow. Expect at least 15% underlying net earnings CAGR

Note: Numbers based on continuing operations. All numbers above (including P&L comparatives) exclude Poundland. 

• All references to footnotes can be found in the Explanatory Notes on page 6

STRATEGIC HIGHLIGHTS

• Sale of Poundland successfully completed on 12 June 2025, significantly simplifying the Group structure
• Pepco FMCG exit completed, including conversion of most Pepco Plus stores in Iberia, generating encouraging results
• Improved performance in Poland through targeted initiatives; Western Europe’s strong y-o-y store growth further validated
• Acceleration of our digital journey with new website, app and loyalty scheme ready for launch in calendar Q1 2026
• Dealz now fully independent; divestment process intended to commence in 2026 as we explore strategic options for the business

FINANCIAL HIGHLIGHTS

• FY25 Group revenue of €4.5bn, up 8.7%, driven by LFL growth of 2.6% and new store expansion
  • Pepco revenue of €4,184m, +8.6%; Dealz Poland revenue of €339m, +10.4%
  • Pepco LFL rose +2.7% (excluding FMCG +4.1%), with a positive performance in all quarters
  • Dealz Poland LFL growth of 1.9%
• The Group opened 247 net new stores in FY25 (FY24: 379) leading to a total of 4,359 stores at year-end
• Group gross margin improved 100 bps to 48.0%, driven by enhanced operational efficiency and FMCG exit
  • Pepco gross margin of 48.6% (FY24: 47.7%); Dealz Poland 33.1% (FY24: 30.4%)
• Underlying EBITDA (IFRS 16) growth of 10.3% to €865m, driven by gross margin, despite absorbing higher store costs as volumes grew materially faster than revenues given our focus on delivering more competitive prices for our customers
  • Strong Pepco EBITDA growth of 10.1% to €874m; Dealz EBITDA up 92.3% to €25m
• Reduction of interest expense and a notably lower effective tax rate have contributed to a sharp improvement in underlying PAT to €219m, up 19.7%. This includes a one-off pre-tax impairment charge of €38m reflecting store impairments and prior year restatements following the implementation of an enhanced accounting tool
• Strong balance sheet and liquidity profile with €464m cash at year end; pre-IFRS 16 net debt reduced to €161m (0.3x net leverage ratio). A full refinancing of the Group’s borrowings was executed in Q4 FY25 and Q1 FY26 materially extending the maturity profile of debt, as well as reducing the average paid interest cost from 6.4% to 3.9%

Commenting on the results, Stephan Borchert, Chief Executive Officer, said:

“2025 was a real turning point for the Group. Having outlined our new strategic framework in March, the Group has executed at exceptional pace, delivering significant progress in a short timeframe. The decision to refocus on Pepco and exclusively on our core categories of clothing and general merchandise has been validated by these strong results, in particular our gross margin and free cash performance which were both ahead of expectations.

“We opened 247 net new stores with strengthened store economics and returns on capital for Pepco across our geographies, as we progressed our disciplined opening plans in both Western Europe, and Central and Eastern Europe. The performance of Western Europe has become a clear growth engine, exceeding our initial expectations. It is clear this region is now prepared for future accelerated growth.

“In parallel, we focused on the continuous improvement of our customer value proposition, which includes upgrading our product quality across numerous categories and further ensuring market-leading prices across our estate. We also made significant improvements to our end-to-end supply chain facilitating more consistent availability and improved operating efficiency. The development of our digital capabilities is progressing as per plan, and we are on track for launch during calendar Q1 2026.

“Across the Group, we have a revitalised leadership team, the right strategy in place and good early momentum for Pepco. Given this, we are today upgrading our mid-term guidance for certain parameters based on increasing confidence on our outlook. With our ongoing strong cash generation, we are resolutely focused on driving further shareholder value, evidenced by a substantial 55% increase in our FY25 dividend and over €75m of shares we have repurchased this calendar year to date.

“I would like to thank all our employees for their hard work and dedication in delivering such transformation across the business this year. We are still early in our journey, but have a large opportunity ahead.”

CURRENT TRADING

In the first financial quarter-to-date (1 October to 13 December 2025), Pepco LFL revenues were +3.9% excluding FMCG (LFL of +0.3% including FMCG). Pepco saw a solid start to the quarter in October in terms of like-for-like revenues, which were partially offset by a weaker November in line with the broader market, before returning to growth in December, with a strong uptick in LFL performance over the last three weeks of +7.0% excluding FMCG (+3.5% including FMCG). Gross margin improvement has also continued in the quarter.

Group LFL revenues (including Dealz) were +3.0% excluding FMCG (LFL -0.3% including FMCG). The Group LFL performance reflects a drag from Dealz, with the weak trading exhibited in Q4 FY25 continuing into the new financial year, reflecting challenging trading conditions across all categories, particularly in health and beauty.

OUTLOOK

FY26 guidance

The Group expects to generate FY26 revenue growth of 6% to 8%, with our topline being impacted by the exit of FMCG, which we estimate will impact full year revenue growth by around two percentage points in FY26. This impact will be particularly evident in the first half of the financial year and therefore we expect our topline performance to build throughout the year. For gross margin, we expect to achieve at least 48% in FY26, before the positive impact of FMCG exit, reflecting a more favourable foreign exchange rate, offset by a focus on maintaining market-leading prices for customers. The exit of FMCG is expected to further improve gross margin by around 40 basis points at Group level.

We are targeting approximately 250 net new stores across the Group in FY26, focused in the CEE region but with an acceleration of store openings in Western Europe where we will open 75 new stores, in particular in Iberia and Italy. We do not expect to open new Dealz stores in FY26, prior to exiting the business.

Full year underlying EBITDA (IFRS 16) growth is expected to increase by at least 9% y-o-y, driven by further operational improvements and enhancement of the core customer proposition, despite absorbing a step-up in transformation costs of €25m to €35m which includes, amongst others, accelerating our digital and data capabilities, establishing a technology hub in Porto, enhancing our IT platform and bringing further efficiencies to our operating, finance and supply chain processes.

Underlying net earnings growth will continue the strong momentum from FY25 and is expected to exceed 25% y-o-y, reflecting the above factors and work undertaken to lower our effective tax rate, a refinancing of our indebtedness at lower interest rates and aligning our depreciation policy to more closely match actual store lease lengths.

We expect FY26 unlevered free cash flow generation to exceed €200m, after capital expenditure at the top end of our €160m to €180m per annum mid-term guidance range, mostly reflecting the timing of technology spend and store investments in FY26.

For Dealz, the work to re-platform the business as a standalone entity, following the Poundland sale, has now been successfully completed. This will allow the Dealz management team to fully focus on recovering trading performance, as well as commencing the process for divestment at the start of calendar 2026.

Mid-term guidance

Management is today upgrading certain parameters of its mid-term guidance based on increasing confidence on our outlook. For the period to 2030, we expect revenues to grow by at least 7% CAGR (unchanged), gross margin of at least 48.5% (previously 48.0%). We expect profits to grow faster than revenues as the costs of transformation investments diminish over time. We therefore expect EBITDA growth of at least 9% CAGR (unchanged), while net earnings are expected to grow by at least 15% CAGR over the period – a new mid-term financial target for the Group. This is expected to lead to sustained unlevered free cash generation of at least €250m per annum (previously €200m), with capital expenditure in line with our previous target of €160m to €180m per annum.

Management’s priority is to deliver continuing progress on like-for-like revenues, deliver further improvements in our supply chain, as well as continue investment in digital & data to drive customer engagement. With these foundations, as well as a continued focus on disciplined capex to drive free cash generation, we expect to deliver further strategic and financial progress over the coming years.

CAPITAL ALLOCATION

The overriding objective of the Group’s capital allocation framework is to enhance shareholder value, including maintaining a strong balance sheet and ensuring the business operates with an ample level of liquidity. Central to this strategy is the generation of robust free cash flow (FCF), which the Group aims to achieve through operational improvements, including stronger LFL sales performance, gross margin expansion, and tighter control over operating costs. Additionally, a rigorous focus on net working capital efficiency and optimised cash taxes should further bolster FCF.

Where the Group generates excess cash, we will continue to prioritise investment to grow its business, consistent with attractive returns on capital. However, any surplus capital identified over time may be returned to shareholders by regular, special dividends and/or share buybacks, subject to the Board’s discretion and (as applicable) shareholder approvals. Pepco Group’s mid-term ambition is to generate at least €250m in annual FCF. The Group will continue to target a maximum net leverage (pre-IFRS 16) ratio of up to 1.5x, ensuring financial flexibility while maintaining a strong balance sheet.

Greater focus on disciplined capital investment has improved cash generation during FY25. Capital expenditure was €108 million (FY24: €149 million). Free cash flow for the Group was €334 million (FY24: €287 million). Financial leverage (net debt pre IFRS 16) at the end of FY25 stood at 0.3x, highlighting a continued robust balance sheet position.

Dividend

The Group introduced an inaugural dividend last year, based at a payout ratio of 20% of full-year underlying net profit. Given the focus to enhance capital returns to shareholders, and following a successful refinancing and strengthened balance sheet, the dividend payout ratio is being increased to 25% of full-year underlying net profit. The Board’s expectation remains that the absolute amount of dividend will remain stable or progressively increase on a full-year basis, subject to any significant internal or external factors.

As a result, the Board intends to, subject to final and audited results being available, recommend a full year dividend of 9.6 Euro cents per share (FY24: 6.2 Euro cents), subject to the approval of shareholders at the Annual General Meeting that will be held on 11 March 2026. Further detail, including payout dates, will be provided in due course.

Share buyback programme

At the Capital Markets Day in March 2025, the Board authorised a share buyback capability of up to €200m to be available for use during FY25 – FY27. Priorities include a sharp focus on optimising free cash flow and thoughtful allocation of capital over time, including returns to shareholders to enhance value creation. The Group completed a first €50 million tranche of its share buyback programme from July to August 2025, while subsequently commencing a second €50 million tranche from October 2025, which is expected to complete by mid-January 2026. The Board will continue to evaluate opportunities for future capital returns to drive shareholder value.

REFINANCING

In November 2025, Pepco Group completed a significant refinancing, of €770 million in committed credit facilities provided by a syndicate of 10 relationship banks. The new financing comprises a 3-year term loan of €235 million maturing November 2028, a 5-year term loan of €235 million maturing November 2030, and a 5-year multicurrency revolving credit facility of €300 million. Opening margins for the three new facilities range from 1.35% to 1.70% over EURIBOR.

These facilities refinanced existing indebtedness including the April 2026 term loan (€250 million), the April 2027 revolving credit facility (€390 million), and the remaining 7.25% July 2028 senior secured notes (€200 million). The facilities were coordinated by Citibank, ING Bank and J.P. Morgan Securities. Complementing this, the Group completed a PLN 600 million (approximately €141 million) bond issuance under its PLN 2 billion programme, converted to fixed rate EUR at 4.4% through cross-currency swaps.

This dual-track refinancing strengthened the Group’s capital structure and enhanced financial flexibility while significantly lowering financing costs.

IBEX GROUP EXTENDS INVESTMENT OPERATIONS FOR MULTI-YEAR PERIOD

Pepco Group’s majority shareholder, Ibex Group, has today made an announcement to confirm the extension of the operational period for the IBEX investments platform through to December 2028, with flexibility to further extend through to December 2030.  This extension reaffirms Ibex’s active support for Pepco’s transformation strategy and for the multi-year value creation opportunity at Pepco Group.  The full text of today’s Ibex Group announcement can be found on their website: https://www.ibexholdings.co.za/index.php

CONFERENCE CALL

Pepco Group will host a conference call for analysts and investors to discuss its FY25 preliminary results on Wednesday 17 December 2025 at 8.30am GMT / 9.30am CET. Investors and analysts who would like to participate in the Q&A session can dial the following number (+44 (0) 33 0551 0200) and quote “Pepco“.

Alternatively, a live audio webcast of the call will be available via the following link:

https://brrmedia.news/PCO_FY_25

FORTHCOMING DATES

The Group intends to issue the following updates in the near future:

• Q1 FY26 trading update – 15 January 2026
• FY25 Annual Report publication – 15 January 2026

ENQUIRIES

Investors and analysts

Tej Randhawa, Investor Relations                              +44 (0) 203 735 9210

Rebecca Jamieson, Investor Relations                     +44 (0) 203 735 9210

Media

Rollo Head, FGS Global                                                +44 (0) 7768 994 987

James Thompson, FGS Global                                   +44 (0) 7947 796 965

Blake Gray, FGS Global                                                 +44 (0) 7842 631 475