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Pepco Group – Preliminary Statement

Strong financial and strategic progress despite a challenging Covid-affected trading environment

The fast-growing pan-European variety discount retailer, Pepco Group, which owns the PEPCO and Dealz brands in Europe and Poundland in the UK, today reports preliminary financial results for the year ending 30th September 20211.

Financial Summary

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Financial Highlights

·       Full year Group revenue of €4,122m, +17.2% year on year (“YoY”).

  • Strong underlying constant currency full year like-for-like (“LFL”)3 sales growth of 6.5%, including:
    • PEPCO: 9.8% LFL growth; and
    • Poundland Group: 3.1% LFL growth.

·       Gross profit margin increased by 220 bps (FY21 42.9% versus FY20 40.7%) representing a return to FY19 levels, driven through mark down improvements and product mix despite a backdrop of supply chain headwinds.

  • Cost of doing business (“CODB”) ratio reduction of 90 bps from 28.2% to 27.2% driven through PEPCO costs leverage, principally in distribution, and Poundland Group rental savings.
  • Closing net debt5 of €1,202m (€37m reduction YoY), delivering an EBITDA / net debt ratio of 1.9x (2.8x in FY20).
  • Closing net financial debt6 (excluding store lease liabilities) of €108m a €220m reduction YoY and an EBITDA / financial net debt ratio of 0.3x. These improvements reflect management action to reduce stock and optimise working capital across the year.
  • Full year underlying EBITDA of €647m represents 46.2% growth on the Covid impacted prior year.


Strategic Progress

Accelerating Store Expansion

·       Significant new store expansion continues across all our trading brands. Openings were in line with guidance with 483 net new stores opened in the year (424 excluding Fultons stores acquired and trading at the year-end), comprising:

o   PEPCO: 364 net new store openings, which represents a 17.3% increase versus last year, including 36 in the strategically important Western European market initially in Italy, Spain and Austria and the opening of our first stores in Serbia; and

o   Poundland Group: 119 net new stores (60 excluding Fultons) driven by Dealz expansion in Poland and Spain, which represents an increase of 12.9% YoY (6.5% excluding Fultons).

Driving LFL Sales

·       Significant proposition progress in the year including further expansion of Poundland simple price points and range development across both Poundland and PEPCO.

·       954 store renewals completed, updating stores to our latest layout and environment, accelerating our customer proposition transformation and contributing to the 6.5% LFL sales growth, comprising:

o   827 PEPCO refits; and

o   127 Poundland refits.

Reducing Cost of Operations

·       The Group continued to drive operating efficiencies and expand operating margins in the year including;

o   Continued reduction in the absolute levels of store rent where 212 leases were renegotiated in the period with an average reduction of 37%;

o   The closure of one of Poundland’s four regional distribution centres; and

o   Warehouse and Distribution delivered a 130bps decrease in the cost of selling, general and administrative expense items as a percentage of sales at PEPCO.

Investing in Infrastructure

·       The Group implemented the first Oracle ERP module, which is the beginning of numerous modules being delivered across the Group over the coming years.

·       The scale and pace of the programme is under constant review to ensure that implementation risk, particularly in light of Covid, is appropriately managed.

Enhanced Governance and Financial Position

·       The Group completed the refinancing of €550m term debt and €190m RCF as part of the IPO process, helping to formalise those banking relationships at the core of delivering our planned growth across Europe, whilst also reducing future debt service costs by over 500bps versus the existing debt structure.

·       The Group successfully listed on the Warsaw Stock Exchange on 26th May 2021 and enhanced the governance structure through the appointment of an Independent Chairman and four additional Independent Non-Executive Directors.