Strong strategic execution driving substantial profit growth and shareholder returns

Pepco Group N.V. (“Pepco Group”), a leading pan-European variety discount retailer, today reports unaudited interim results for the six-month period ended 31 March 2026.

SUMMARY

• Continued delivery in line with our strategy, supporting Pepco customers across Europe with quality products at great value in an uncertain environment
• Strong H1 FY26 results: Group like-for-like (“LFL”) sales excluding FMCG of +3.6%, gross margin of 49.7% (+250bps y-o-y), underlying EBITDA of €516m (+17.5% y-o-y) and underlying PAT of €198m (+52.3% y-o-y)
• Increasing confidence in Western Europe store economics drives an expansion to our current store rollout plans, with at least 600 new stores now expected to open in existing Western European markets between FY27-FY30, doubling our regional presence
• Updated capital returns framework: Annual return of prior-year excess levered free cash from FY27 onwards, with dividend payout ratio rising to 40% over time (from 25%); In addition, the Group intends to make a one-off capital return of up to €400m in FY26
• Recently upgraded full year FY26 guidance reconfirmed: Revenue growth of 6-8%, low-teens underlying EBITDA growth (IFRS 16) and underlying net earnings growth of at least 50%

Note: Numbers above include Dealz and are based on continuing operations as at 31 March 2026, unless stated otherwise.

FINANCIAL HIGHLIGHTS

• H1 FY26 Group results delivered in line with recently upgraded guidance:
  • Group revenue of €2.5 billion, up +5.0% despite the period being negatively impacted by the exit of FMCG, which will unwind in the second half. LFL revenues grew by +3.6% excluding FMCG (+0.5% including FMCG) – marking six consecutive quarters of positive LFL growth – and 61 net new store openings
  • Group underlying EBITDA (IFRS 16) of €516m, up +17.5%, driven by strong gross margin expansion of 250bps to 49.7%
  • Group underlying net earnings growth of 52.3% to €198m, reflecting improving EBITDA conversion and changes to our depreciation policy to better reflect the intention to remain in locations for longer periods
  • Underlying EPS growth of 56.6% outpaced underlying net earnings growth, reflecting the share buyback programme executed since July 2025. Shares outstanding (excluding treasury shares) reduced from 577.5m at end of H1 FY25 to 551.1m at end of H1 FY26
• The Group’s performance reflects the successful implementation to date of the transformation plan set out at the CMD in March 2025, with further strong results delivered in H1:
  • Pepco reported revenue growth of +6.0% to €2.3 billion and LFL revenue growth of +4.6% excluding FMCG (+1.2% including FMCG), and underlying EBITDA (IFRS 16) of €505m (+14.3% y-o-y) driven by gross margin of 51.3%, a year-on-year increase of 310bps
    • The recovery in Poland, the Group’s largest market, continued with LFL sales of +2.9% excluding FMCG during the period (+1.5% including FMCG)
  • Trading in Dealz remained challenging through the half as revenues declined by 6.6%, while LFL revenues declined by 8.3%. We remain committed to separate Dealz by the end of FY26
• An updated capital allocation framework announced to upgrade shareholder returns alongside investments in growth, underpinned by strong free cash flow generation and a conservative balance sheet. As a result:
  • In FY26, the Group intends to make an additional special one-time capital return to shareholders of up to €400m through a pro-rata tender buyback (with majority shareholder, Ibex, expected to participate). Further details on the process will be announced in due course
  • From FY27 onwards, the Group plans to return all excess prior-year levered free cash to shareholders, after strategic investments to grow the business and to strengthen our operational platform, through a combination of share buybacks and dividends (regular and special). This includes a target to progressively increase the regular dividend payout ratio to 40% of underlying PAT over time (from 25% currently)
• Robust balance sheet and liquidity profile; net debt at end of H1 FY26 was €139m (pre-IFRS 16), representing 0.2x LTM EBITDA (pre-IFRS 16) leverage, well below our publicly disclosed targeted leverage range of 0.5x to 1.5x. The Group will take action to move its leverage closer to c. 1.0x in FY26, to maintain an efficient balance sheet and optimise cost of capital, while retaining financial flexibility

STRATEGIC HIGHLIGHTS

• Despite difficult market conditions, Pepco delivered volume-led growth as we remain focused on refining our customer proposition through new product lines, improved freshness and enhanced visual merchandising, while maintaining our market-leading prices
• Western European store economics continue to improve with store EBITDA margins in Iberia and Italy continuing to trend closer towards Group levels.
  • This, combined with strong LFL revenue growth, gives us confidence to now accelerate our store roll out in the region with at least 600 new stores expected in existing markets between FY27-FY30, doubling our presence in Western Europe, which is in addition to our current store plans
• Successful launch of our new mobile app in Poland in February 2026 to drive customer engagement and loyalty. The app has generated c. 2 million downloads since launch and over 1 million customers joined our ‘Pepco Club’ loyalty programme. These initial results are encouraging with Club customers demonstrating a c. 2x greater spend than non-club members
• Dealz separation expected to complete in FY26. Work in this area is ongoing and we will update the market on progress in due course

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

“I am tremendously proud of what the Pepco team delivered in our last FY25 financial year, in which we made material progress against our strategy presented at the CMD in March 2025. Our performance in the first half of FY26, is again, further testimony to the regained strength of Pepco. Against a competitive backdrop across our markets and continued geopolitical uncertainty, we have produced a resilient top-line performance, with Group revenue growing 5.0% to €2.5 billion and Pepco delivering its sixth consecutive quarter of positive like-for-like growth.

“Beyond the revenue performance, our profitability has stepped up significantly. Strong gross margin expansion of 250 basis points, and the improved operational leverage of our Pepco business, have driven underlying EBITDA growth of 17.5%. This is clear evidence of the hard choices we made to simplify and refocus the business, which are now starting to deliver the returns we expected.

“We have also reached important milestones in our digital journey. The launch of our new mobile app in Poland has exceeded our expectations, complementing our new consumer-facing website, which together materially expands the product discovery experience for our customers. These are the foundations on which we will build a more personalised and engaging relationship with our growing customer base.

“Looking ahead, I remain confident in the growth potential of this business. The accelerating store economics we are seeing in Western Europe give us the conviction to expand on our ambitions there, with at least 600 new stores now planned over four years between FY27 and FY30 – doubling our presence in the region. We are also launching a carefully managed trial in select areas of Ukraine, a market where Pepco already carries genuine brand awareness, and which represents a potentially significant new growth opportunity for the Group over time.

“Underpinning all of this is a new capital returns framework, which we are announcing today, that reflects our confidence in the Group’s cash generation capability and balance sheet strength. We are committed to annually returning the prior year’s excess levered free cash flow to shareholders – through a combination of regular dividends, share buybacks and special dividends – while at the same time accelerating our strategic investments in growth. In addition, we plan to make a special one-time capital return of up to €400m in FY26.

“This commitment, despite an uncertain geopolitical environment, highlights our confidence in our strategy, the strength of our customer proposition and Pepco’s ability to drive long-term value creation.”

CURRENT TRADING

In the third quarter-to-date (6 weeks to 16 May 2026), Pepco saw like-for-like sales increase by +1.5% excluding FMCG (flat including FMCG). On a two-year view across the same period, LFL was +10.2% excluding FMCG (+6.5% including FMCG). In Western Europe, the business continued its strong trading, with double-digit LFL sales growth across the same period.

The performance in April was impacted by unseasonal cold weather in some of our core CEE markets, most notably in the North CEE region, which delayed the seasonal transition into summer clothing ranges and weighed on volumes. In addition, it reflects the earlier timing of Easter, compared to the prior year, where some of the benefit fell into the second quarter. Combining the months of March and April to exclude the impact of Easter, Pepco LFL sales grew by +2.1% excluding FMCG (flat including FMCG).

Pepco experienced a significant jump in momentum in the two weeks to 16 May 2026, with LFL up by +11.6% excluding FMCG (+10.2% including FMCG). This was driven by both clothing and general merchandise categories, with a positive LFL contribution across all countries.

OUTLOOK

The Group maintains its recently updated guidance for FY26. Revenue growth for the full year is expected to be between 6% to 8%, with an unwind of the negative FMCG-exit impact expected during the second half. Guidance to open around 250 net new stores in FY26 remains unchanged.

FY26 Underlying Group EBITDA IFRS 16 growth is expected in the low-teens (FY25: €865m), as gross margin is now expected to be at least 49.0% (from 48.0% previously), with an additional gross margin benefit of 40 basis points relating to the exit of FMCG. Underlying EBITDA growth in the second half of the year will moderate as the business absorbs a step-up in transformation costs (€25m to €35m annualised), as highlighted in December 2025. Full year net underlying earnings are forecast to grow by at least 50% (FY25: €219m), with higher growth in EPS expected reflecting the impact of our share buyback programme.

Cash generation has remained strong in FY26, and the business now expects unlevered free cash flow generation to exceed €250m (previously >€200m), excluding any impact from the potential Dealz transaction. This is 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 increased attractive store investment opportunities.

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 included 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 the final €52.9m tranche of this buyback on 15 May 2026, marking the early completion of the full €200m programme. All purchased shares are held in treasury. Following the completion, there are a total of 577,451,935 Pepco Group shares in issue, which includes 546,034,737 shares outstanding and 31,417,198 shares held in treasury. Details of our future plans for capital allocation are highlighted below.

CAPITAL ALLOCATION

With our strategy progressing well, and accelerating, we are today announcing an enhancement to our capital allocation and shareholder distributions framework. Our refreshed framework is designed with long-term value creation in mind and provides shareholders with enhanced returns, whilst maintaining a strong balance sheet.

Our Pepco business has shown strong performance over the past 12-18 months and is highly cash generative. Current and future growth, plus strategic investments in our operating platforms and omni-channel expansion, are fully funded whilst generating a significant residual free cash flow (available for shareholder capital returns).

Group underlying free cashflow (unlevered) for FY26 is now expected to significantly exceed our previous guidance (> €200m). Our current pre-IFRS 16 leverage of 0.2x sits well below our target leverage range (0.5x-1.5x), despite returning over €200m of capital to shareholders in FY26 to date, in the form of a dividend (€53m) and share buyback programme (€150m). Therefore, the Group intends to take strategic action to move its leverage closer to c. 1.0x in FY26, to ensure an efficient balance sheet and a lower cost of capital, while retaining sustained financial flexibility.

As a result, Pepco today confirms its commitment to return excess cash to shareholders, outside of strategic investments to grow the business and to strengthen our operational platform.

• In FY26, the Group intends to return to shareholders up to €400m of capital via an additional special one-time pro-rata tender buyback. This is expected to include participation from Ibex, the Group’s majority shareholder. This return of capital will result in the Group’s leverage increasing to c. 1.0x pre-IFRS 16 EBITDA, thereby bringing leverage to the middle of our target range of 0.5x – 1.5x. Further details on the process will be announced in due course.
• From FY27 onwards, the Group plans to return to shareholders all prior-year excess levered free cash flow (after interest payments), outside of strategic investments to grow the business and strengthen our operating platform. This will be returned through a combination of share buybacks and dividends (regular and special):
• Regular dividend: The Group introduced an inaugural dividend in FY24, based on a payout ratio of 20% of full-year underlying net profit. Given our intent to enhance capital returns to shareholders, and following a successful refinancing and strengthened balance sheet in FY25, the dividend payout ratio was increased to 25% of full-year underlying net profit. As part of the new capital allocation framework, the Board expects to increase the dividend payout ratio progressively towards the 40% level over the next few years. The Board’s expectation remains that the dividend will remain stable or progressively increase on a full-year basis, subject to any significant internal or external factors.
• Share buybacks and special dividends: Any excess levered free cash, after the payment of a regular dividend, is intended to be returned to shareholders in the financial year following generation, through share buybacks and/or special dividends. This will be subject to the continued strong performance of the business, staying within our target leverage range (0.5x to 1.5x of pre-IFRS 16 EBITDA) and market conditions.

This enhanced capital allocation framework underscores our confidence in the Group’s significant growth potential, strong free cash flow generation, strengthened balance sheet, and reflects our commitment to creating enhanced long-term value for all of our stakeholders.

REFINANCING

The funding of the up to €400m special one-time capital return will be met through a combination of the Group’s existing internal cash reserves and external debt financing. In order to execute this capital return at the intended scale, the Group intends to raise a modest amount of new debt, bringing pre-IFRS 16 leverage to c. 1.0x EBITDA — consistent with the Group’s stated target range of 0.5x–1.5x and representing a prudent and efficient use of the balance sheet. The Group has commenced discussions with its banking partners regarding the external debt component of this financing, and further details will be disclosed at the appropriate time.