Pepco Group reports record-breaking interim results for H1 2024
Pepco Group, the fast-growing pan-European variety discount retailer, which owns the Pepco and Dealz brands in Europe and Poundland in the UK, has reported exceptional interim results for the six-month period ending 31 March 2024.
The group achieved a record underlying Group EBITDA of €487 million, marking a 28.2% increase in the first half of the year. This impressive growth was largely driven by a 38.9% rise in EBITDA at its Pepco brand, with significant contributions from Pepco’s Central and Eastern European business. The region has successfully rebuilt its gross margin and store profitability to pre-pandemic levels, with further improvement opportunities on the horizon.
Key financial highlights for the six-month period include:
- Record H1 Group revenue of €3.2 billion, up 13.8% year-on-year.
- Group gross margin increased by 310 basis points to 43.1%, led by the Pepco brand.
- Record underlying Group EBITDA (IFRS16) of €487 million, up 28.2%.
- Strong operating cash flow of €182 million, an increase of €99 million compared to last year.
- 289 net new stores opened in H1, with 86 of these in Q2.
- Expected full-year underlying EBITDA (IFRS16) of around €900 million (FY23: €753 million).
- Despite a slight decline in like-for-like (LFL) revenue by 2.5% during H1 against a strong comparator (H1 FY23 LFL +11.1%), the group demonstrated robust financial health. Pepco’s LFL revenue fell by 3.2%, Poundland’s by 0.7%, and Dealz Poland’s by 4.6%.
Pepco Group also reported:
- Group revenue of €3.2 billion, growing 13.8% year-on-year (11.1% at constant currency).
- Gross margin of 43.1% (H1 FY23: 40.0%), with a strong recovery in Pepco (+480 bps year-on-year).
- Underlying EBITDA (IFRS16) of €487 million, up 28.2% year-on-year.
- Underlying profit before tax (PBT) of €174 million, up 21.7% year-on-year.
- Net debt at the end of H1 FY24 was €429 million (pre-IFRS16), representing 0.9x LTM EBITDA (pre-IFRS16) leverage.
Andy Bond, Executive Chair of Pepco Group, commented on the results, highlighting the group’s solid performance, record revenues, and significant uplift in gross margin. Bond noted the standout performance of Pepco’s Central and Eastern European business, emphasizing the successful rebuilding of gross margin and store profitability in the region.
“Despite challenges in implementing significant range changes to Pepco products at Poundland, which we are addressing, and continued progress at Dealz Poland, we made substantial strides in improving our gross margin in H1,” Bond said. He attributed this improvement to enhanced product purchasing and a more stable environment for commodity prices, foreign exchange, and freight costs.
Looking ahead, Bond expressed optimism about the group’s financial strength and strategic focus. He anticipates delivering underlying EBITDA (IFRS16) for the full year around €900 million, with improved free cash flow generation and disciplined capital investment. This positions Pepco Group well to continue executing its growth strategy while maintaining a strong balance sheet.
