Slides
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1 FY24 Prelim Results 10 December 2024
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2 Introduction Stephan Borchert – Chief Executive Officer
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3 Introduction by new CEO – Stephan Borchert 3 • Joined Pepco Group in July 2024, formally taking role of CEO in October 2024 as Andy Bond reverted to a Non-Exec Chair role • Spent last few months exploring all parts of the business - recognise the significant opportunity ahead, but also challenges that we need to address • Solid foundations – Will continue driving profitable growth through disciplined investment and build our strategy for the next chapter of the Group’s growth “The ambition to be one of Europe’s leading discount variety retailers remains intact”
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4 Highlights of FY24 4 ➢ Record FY24 Group revenue of €6.2bn, up 10% y-o-y, driven by new store growth ➢ Group gross margin sharply improved to 43.9%, up 390 basis points y-o-y, led by Pepco ➢ Record underlying EBITDA (IFRS 16) of €944m up 25%, ahead of guidance, driven by Pepco EBITDA up 42% ➢ Significant non-cash impairment of Poundland (€775m) ➢ Robust Group balance sheet and liquidity profile ➢ Initiating new capital returns policy and inaugural FY24 full year dividend
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5 My immediate focus 5 • Improve like-for-like performance • Immediate remediation actions at Poundland • Strategy for March 2025 CMD to focus on: More detail on my strategic vision will be presented at a Capital Markets Day on 6 March 2025 - Western Europe growth potential - Digital strategy - Poundland recovery plan
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6 Financial Review Neil Galloway – Chief Financial Officer
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7 bbProfit and loss summary Change % (constant)FY24 FY23 Change % (reported) • Revenue growth and gross margin expansion drove underlying EBITDA ahead of guidance • Revenue performance supported by store growth, offsetting negative LFLs • Group gross margin up by 390 basis points driven by Pepco (+530bps) • Record Group underlying EBITDA (IFRS16) of €944m, +25% on prior year, driven by Pepco (+42%) • Reported PBT includes Poundland impairment charge (€775m) • Discontinued operations impact of €49m reflects Austria exit Revenue 6,167 5,596 10.2% 8.1% Like-for-like revenue growth (%) -3.2% +6.0% n/a n/a Gross profit 2,706 2,239 20.9% 18.7% Gross profit margin (%) 43.9% 40.0% 390 bps 390 bps Underlying EBITDA IFRS 16 944 754 25.2% 23.3% Underlying EBITDA margin IFRS 16 (%) 15.3% 13.5% 180 bps 190 bps Underlying EBITDA pre IFRS-16 515 402 28.1% 26.6% Underlying EBITDA margin pre-IFRS-16 (%) 8.3% 7.2% 110 bps 120 bps Underlying PBT 271 214 26.6% 25.7% Underlying PAT 179 157 14.0% 15.3% Underlying EPS (€ cents) 31.1 27.2 14.3% 15.4% Non-underlying items ( incl. Poundland impairment) (825) (55) >200% >200% Reported PBT (554) 159 <-200% <-200% Reported PAT (662) 108 <-200% <-200% Reported EPS (€ cents) (114.9) 18.8 <-200% <-200% Dividend per share (€ cents) 6.2 - - - Discontinued operations (49) (12) <-200% <-200% EUR million
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8 bbNew store growth has driven revenue, with negative LFL Revenue growth at constant currency +21.8% +5.9% +16.8% Revenue growth at reported currency* FY23 +68.8% +14.4% +0.2% +10.2% FY24 +39.5% LFL revenue growth +6.2% +5.5% +6.0% LFL revenue growth FY23 +11.3% -2.8% -3.6% -3.2% FY24 -4.8% *All figures exclude Austria * Dealz Spain has been restated in Pepco segment (impact FY23 only) • Group revenue up +10.2% driven by Pepco and Dealz, supported by store openings • On a net basis, the Group’s store base grew by +392, with Pepco increasing +331 • Gross store openings in FY24 (509) reduced significantly versus FY23 (806) • Negative Pepco LFL driven by supply chain disruption with weak availability and mix of older inventory • Poundland and Dealz LFL impacted by poor performance in clothing and GM following transition to Pepco-sourced product
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9 bbQuarterly LFL performance over last 2 years 19.7% 10.7% (1.2)% (2.3)% (3.5)% (2.8)% (2.7)% (2.2)% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 3.9% 5.3% 8.9% 4.3% 0.9% (2.8)% (6.9)% (6.4)% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 18.0% 17.9% 9.8% 2.2% (4.6)% (4.6)% (7.3)% (2.8)% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 • Pepco LFL showed an improving trajectory across quarters • Pepco LFL in H1 reflects strong comparator, and in H2 reflects product availability issues due to supply chain disruption • Poundland and Dealz LFL impacted by performance of clothing and GM following adoption of Pepco-sourced product
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10 Brand LFL price/volume mix over last 2 years Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Price Volume Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Price Volume Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Price Volume Course correcting pricing to drive improving LFL
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11 Pepco LFL: Reinvestment in price driving volume +2.0% +4.9% +2.7% Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Price Volume LFL
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12 Poundland’s underperformance from clothing & GM • Clothing and GM LFL negatively impacted since the introduction of Pepco-sourced product at the beginning of FY24 • FMCG category (+1.6% LFL) remains a key driver of footfall at Poundland, retaining its relevance to customers • Initiatives are underway to enhance the value proposition within the FMCG segment Poundland LFL performance split by category Poundland sales mix by category 22% 11% 67% FY24 24% 12% 64% FY23 60% 66% 64% 66% 63% 70% 67% 69% 26% 23% 24% 23% 25% 21% 22% 20% 14% 11% 13% 11% 12% 9% 11% 11% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY24 -19.1% +1.6% -9.1% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FMCG GM CLOTHING
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13 Revenues 0% 14% 7% 62% UK and ROI Poland Rest of CEE WE bbFY24 Group revenue by geography FY24 revenue by geography % FY24 y-o-y revenue growth in key markets €2,006m €1,618m €1,950m €592m 32% 26% 32% 10% UK and ROI Poland Rest of CEE WE
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14 bb €3,853m €2,006m €307m Revenues 62% 33% 5% Pepco Poundland Dealz Pepco Group Dealz Poundland Pepco €6,167m10% 14% 0% 40% FY24 Group revenue by segment FY24 revenue by segment % FY24 y-o-y revenue growth by segment
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15 -4.7% -5.4% -6.0% -0.6% -5.5% -5.2% -5.4% -8.5% 8.3% 4.1% 0.1% 0.2% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 GM Clothing FMCG bbCategory revenue performance (GM/clothing/FMCG) Category sales mix Category LFL sales performance YoY 39% 35% 31% 34% 35% 35% 35% 41% 38% 37% 26% 31% 28% 28% 28% Q1 FY24 Q2FY24 Q3 FY24 Q4 FY24 FY24 GM Clothing FMCG • GM category LFL performance (-4%) impacted by Poundland (-9%) and Dealz (-12%) performance • Clothing category LFL declined by 6%, heavily impacted by Poundland (-19%) • FMCG category posted positive LFL (+3%) driven by Poundland (+2%) and Pepco (+49%), albeit latter from a lower base FY: -4.2% FY: -6.2% FY: +3.2%
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16 bbStrong gross margin improvement in FY24 FY24 Group gross margin (%) bridge Improving quarterly gross margin % trend* * Quarterly numbers are based on a trading gross profit basis only 39.2% 41.2% 40.3% 39.8% 41.7% 45.0% 44.3% 45.2% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 FY23 Product argin F Freight and Duty Stoc oss ar down ategory ix FY24 FY23: 40.0% FY24: 43.9% +390bps 40.0% 43.9%
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17 bbPepco gross margin drove FY24 Group improvement 46.9% 38.6% 43.9% 33.4% 20% 25% 30% 35% 40% 45% 50% 55% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Pepco Poundland Dealz FY24 Gross Margin %
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18 Renewed focus on Pepco core categories will support margin 42% 41% 42% 48% 52% 58% 47% 45% 50% 55% 48% 55% 54% 50% 34% 33% 26% Clothing categories GM categories FMCG categories #1 #3 #5 #6#2 #4 #7 #1 #3 #5 #6#2 #4 #7 #8 #1 #2 46.9% Pepco gross margin average in FY24 53% revenue mix 43% revenue mix 4% revenue mix
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19 bbOperating cost inflation reflects new store growth 595 707 121 121199 220 250 262 321 4521,486 1,762 FY23 FY24 Store Labour Costs Store Occupation Costs Other Store Costs Distribution Costs SG&A Costs 10.6% 11.5% 2.2% 2.0% 3.6% 3.6% 4.5% 4.2% 5.7% 7.3% 26.6% 28.6% FY23 FY24 Store Labour Costs Store Occupation Costs Other Store Costs Distribution Costs SG&A Costs Operating cost growth driven by increase in new stores More discipline over distribution and labour costs, helps to party offset rising property costs pre IFRS-16 8.0% pre IFRS-16 8.6% pre IFRS-16 €446m pre IFRS-16 €527m Rent charge Rent charge Rent charge Rent charge
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20 339 504 75 28 (8) 3 FY23 FY24 Pepco Poundland Dealz 554 785 195 153 7 24 FY23 FY24 Pepco Poundland Dealz bbEBITDA performance driven by Pepco Y23 Y22 Underlying EBITDA (EUR m)* IFRS 16 Pre-IFRS 16 €754m €944m €402m €515m • Record Group underlying EBITDA (IFRS16) of €944m, driven by Pepco • Pepco underlying EBITDA (IFRS16) landed at €785m, up +41.7% (€231m) following strong revenue growth (+14.2%) and gross margin expansion (+530bps) • Poundland underlying EBITDA declined due to flat revenues and higher operating costs • Dealz posted positive underlying EBITDA (pre-IFRS 16) for the first time of €3m 82% 16% 2% % mix* 94% 5% 1% % mix* * Mix based on total underlying EBITDA excluding central costs +25% +28%
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21 bbCashflow summary FY24 FY23 Change Underlying EBITDA (pre-IFRS 16) 515 402 113 Working capital (3) 1 2 Tax paid (85) (75) (10) Operating cash flow 432 328 104 Non-underlying items (52) (52) - Capex (212) (382) 170 Free cash flow 168 (106) 274 Net interest paid (33) (16) (17) Financing activities (120) 116 (236) Proceeds on sale of PPE 2 1 1 Discontinued items (13) (18) 5 Net cash flow 3 (22) 25 Effect of exchange rate fluctuation 30 9 21 Cash and cash equivalents at the beginning of the period 330 344 (14) Cash and cash equivalent at the end of the period 363 330 33 Net debt (pre - IFRS 16) 256 411 (155) Leverage (pre – IFRS 16) 0.5x 1.0x -0.5x EUR million • Capex reduction of €170m y-o-y due to lower store openings and refits • Free cash flow increased by €274m y-o-y to €168m, driven by strong underlying EBITDA and lower capex • Financing activities included repayment of borrowings from our revolving credit facility (€120m) • Group cash closed at €363m, an increase of €33m vs. FY23 • Net debt position of €256m is €155m lower than prior year • Leverage (pre-IFRS 16 ) of 0.5x, the lowest since our IPO
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22 207 100 27 48 129 40 9 34 Store openings Store refits Maintenance capex IT & supply chain FY23 FY24 bbFY24 capex spend down significantly y-o-y 30% 31% 16% FY24 capex by type (€m) Poland Rest of CEE WE UK & ROI 24% 30% 31% 16% • FY24 capex was €212m – a significant reduction from FY23 (€382m) reflecting lower store openings and refits • We opened fewer stores in FY24 (gross 509) versus FY23 (806) • Store related capex was the key source of the decline (-€138m) driven by fewer store openings (-€78m) and lower store refit expenses (-€60m) as our New oo program was paused Capex split by region (%)
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23 bbBalance sheet summary FY24 FY23 Change Assets Property, plant and equivalent 743 746 (3) Right of use asset 1,305 1,226 79 Goodwill and other intangible assets 107 847 (740) Trade and other receivables 103 144 (41) Derivative financial instruments 35 48 (13) Deferred tax asset 106 113 (7) Inventories 1,235 1,120 115 Cash and cash equivalents 363 330 33 Total assets 3,998 4,575 (577) Liabilities Trade and other payables 1,406 1,292 114 Lease liabilities 1,381 1,293 88 Borrowings 613 729 (116) Provision 34 31 3 Derivative financial instruments 52 93 (41) Other non-current liabilities - - - Total liabilities 3,486 3,438 48 Net assets 511 1,138 (627) EUR million • Growth in right of use assets largely driven by additions from our continued store expansion program • Sizeable impairment of Poundland goodwill and brand following lower FY24 performance and weak outlook • Inventories increased y-o-y due to store growth, which also impacted the growth in trade payables • Revolving credit facility repaid from excess cash
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24 48% 43% 32% 39% 20% 19% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% FY23 FY24 Clothing GM FMCG 1,120 1,237 122 130 25 45 65 85 105 125 0 200 400 600 800 1,000 1,200 1,400 FY23 FY24 Stock holding Inventory days bbInventory days increased on timing differences Stock holding (€m) Stock category mix (%) • Inventory days increased at the balance sheet date due to higher level of stock in transit from shipping delays, and earlier purchases to ensure ample seasonal stock • We are closely targeting inventory days as a measure going forward to reduce it to more optimal levels
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25 Working capital Inventory Days = H1 Closing Inventory / Last 12 Months COGS * 365 Trade Payables Days = H1 Closing Trade Payables / Last 12 Months COGS * 365 Trade Receivables Days = H1 Closing Trade Receivables / Last 12 Months Revenue * 365 93 123 122 130 (47) (71) (84) (94) 0 0 0 0 46 52 38 37 FY21 FY22 FY23 FY24 Inventory Days Trade Payables Days Trade Receivables Days Cash Conversion Cycle Strong improvement in cash conversion cycle through inventory and payables management
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26 bbFinancing • Bond (maturing June 2028): €375m 5-Year senior secured notes with 7.25% coupon • R F (due April 2027) of €390m provides additional working capital (Zero drawn at end of FY24) • Strong balance sheet gives access to over €500m of liquidity ‘BB-’ rating ‘Ba3’ rating ‘BB’ rating Public credit ratings from all 3 rating agencies Term Loan B RCF Corporate Bond €250m Expiry €390m €375m 6m Euribor + 1.50% (3.00% + 1.50% = 4.50%) 6m Euribor + 1.15% (3.00% + 1.15% = 4.15%) 7.25% April 2026 April 2027 (+1Y extension option) June 2028 Net debt (pre-IFRS 16) Leverage LTM (pre-IFRS 16) FY24 €256m 0.5x Facility CouponAmount Net debt (IFRS 16) Leverage LTM (IFRS 16) €1,631m 1.7x
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27 Business review Stephan Borchert – Chief Executive Officer
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28 28 Objectives at start of year • Rebuild Pepco’s profitability in its core EE markets through gross margin recovery • Adopt a more disciplined approach to investment with more targeted growth • Review underperforming areas of the business • Deliver stronger cash generation Progress made on all objectives, but there remains more to achieve
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29 29 Rebuild profitability in Pepco CEE • Percentage of FY24 Group EBITDA (IFRS 16) from Pepco CEE • FY24 Pepco gross margin increase y-o-y driven by strong CEE performance • Pepco CEE store profit back to pre- Covid levels c. 80% +530bps €218k
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30 30 3,781 836 331 4,948 Pepco DealzPoundland Total Openings Closures 376 84 49 509 -45 -71 -1 -117 Total stores More targeted store growth 294 232 242 99 0 100 200 300 400 500 600 FY23 FY24 Chart Title CEE WE Pepco store openings more targeted in FY24, with CEE focus FY24 store openings by brand 331 536
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31 31 Review of underperforming areas • Pepco ‘Plus’ stores represent 3% of total Pepco estate • Stores have increased operational complexity • Core focus on standard Pepco format to simplify business Pepco ‘Plus’ format paused Exit of Pepco Austria New look programme paused • Exited Austria in February 2024 • 73 stores operated in the country • Operations loss-making since inception • €1m loss per month in Austria while in operation • Refit programme paused at end of FY23 • Initially targeted c. 2,500 refits across CEE • Future store refits will be on a selective basis to drive highest ROIC We acted swiftly to address non-core activities and strengthen our investment approval processes
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32 32 Stronger cash performance through disciplined investment FY23 FY24 806 509 715 219 €382m €212m (€106m) €168m N/A 6.2 Gross store openings (#) Pepco store re-fits (#) Capex(€m) Free cash flow(€m) Dividend(€ cents)
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33 Current trading and outlook Stephan Borchert – Chief Executive Officer
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34 34 Current trading and outlook • Mixed current trading across formats • Positive Pepco LFL sales since September 2024 driven by volume through sharper pricing • Negative Poundland LFL sales due to continued underperformance of clothing and GM categories • Group gross margin improvement in Q1 FY25 to date • Expect to open around 300 net new stores in FY25 Cautiously optimistic in making progress in year ahead
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35 35 • Good progress made over last 12 months, with record revenue and EBITDA performance driven by Pepco • Business has been reset with more measured growth and capital discipline, providing solid foundation to build on • Management team strengthened with hire of Group CIO and CHRO • First dividend announced following strong free cash generation and robust balance sheet • Pepco concept is our key engine for future strategic and financial growth • Swift action being taken on Poundland to get business back on track • Further detail on strategic vision to be outlined at a Capital Markets Day on 6 March 2025 Summary
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36 Q&A
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37 Appendix
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38 38 Store coverage map Stores Stores Hungary PEPCO POUNDLAND DEALZ Poland Pepco 1339 Dealz 331 Poundland 758 United Kingdom Pepco 167 Pepco 60 Pepco 475 Pepco 153 Pepco 307 Pepco 256 Pepco 145 Bulgaria Latvia Slovakia Serbia Romania Czechia Hungary Spain Italy Croatia Lithuania Ireland Germany Slovenia Estonia Greece Portugal Bosnia & Herzegovina Pepco 63 Pepco 39 Pepco 38 Pepco 37 Pepco 130 Pepco 16 Pepco 35 Pepco 88 Pepco 199 Poundland 78 Pepco 234 3,781 836 4,948331 TOTAL
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FY24 figures are unaudited, based on latest Outturn information and subject to change EBITDA (IFRS 16) Gross Profit Revenue & LFL Store Numbers + 9.6% + 41.7% LFL Growth % EBITDA % Sales FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 3,375 3,853 3,450 3,781 554 785 6.2% -2.8% + 14.2% 16.4% 20.4% 1,404 1,807 + 28.7%Gross Margin % 46.9% 41.6% Focus on Pepco 39
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FY24 figures are unaudited, based on latest Outturn information and subject to change EBITDA (IFRS 16) Gross Profit Revenue & LFL Store Numbers + 1.6% - 21.5% LFL Growth % EBITDA % Sales FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 2,001 2,006 823 836 195 153 5.5% -3.6% + 0.2% 9.8% 7.6% 753 774 + 2.8%Gross Margin % 38.6% 37.6% Focus on Poundland 40
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FY24 figures are unaudited, based on latest Outturn information and subject to change EBITDA (IFRS 16) Gross Profit Revenue & LFL Store Numbers + 17.0% >200% LFL Growth % EBITDA % Sales FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 220 307 283 331 7 24 11.3% -4.8% + 39.5% 3.2% 7.9% 64 102 + 59.4%Gross Margin % 33.4% 29.1% Focus on Dealz 41