Pepco Group Bv · GPW:PCO
Pepco Group Bv — FY2024 Earnings Presentation
41 slides from Pepco Group Bv's earnings presentation, Dec 10, 2024
Slide 1: FY24 Prelim Results
FY24 Prelim Results 10 December 2024 1
Slide 2: Introduction
Introduction Stephan Borchert – Chief Executive Officer 2
Slide 3: Introduction by new CEO – Stephan Borchert
Introduction by new CEO – Stephan Borchert • 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
Slide 4: Highlights of FY24
Highlights of FY24 ➢ 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% ➢ Signific
Slide 5: My immediate focus
My immediate focus • Improve like-for-like performance • Immediate remediation actions at Poundland • Strategy for March 2025 CMD to focus on: - Western Europe growth potential - Digital strategy - Poundland recovery plan More detail on my strategic vision will be presented at a Capital Markets Day
Slide 6: Financial Review
Financial Review Neil Galloway – Chief Financial Officer 6
Slide 7: Profit and loss summary
Profit and loss summary bb Change % Change % EUR million FY24 FY23 (reported) (constant) • Revenue growth and gross Revenue 6,167 5,596 10.2% 8.1% margin expansion drove Like-for-like revenue growth (%) -3.2% +6.0% n/a n/a underlying EBITDA ahead of guidance Gross profit 2,706 2,239 20.9% 18.7% Gros
Slide 8: New store growth has driven revenue, with negative LFL
New store growth has driven revenue, with negative LFL bb FY24 FY23 • Group revenue up +10.2% driven by Pepco and Dealz, supported by store +14.4% +21.8% openings Revenue Revenue growth at +0.2% +5.9% • On a net basis, the Group’s growth at constant store base grew by +392, reported currency with Pe
Slide 9: Quarterly LFL performance over last 2 years
Quarterly bb LFL performance over last 2 years 19.7% • Pepco LFL showed 10.7% an improving trajectory across quarters (1.2)% (2.3)% (2.8)% (2.7)% (2.2)% (3.5)% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 • Pepco LFL in H1 8.9% reflects strong 3.9% 5.3% 4.3% comparator, and in 0.9
Slide 10: Brand LFL price/volume mix over last 2 years
Brand LFL price/volume mix over last 2 years Course correcting pricing to drive improving LFL 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 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24
Slide 11: Pepco LFL: Reinvestment in price driving volume
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 11
Slide 12: Poundland's underperformance from clothing & GM
Poundland’s underperformance from clothing & GM Poundland LFL performance split by category • Clothing and GM LFL negatively impacted since the +1.6% introduction of -9.1% Pepco-sourced product at the -19.1% beginning of FY24 • FMCG category (+1.6% LFL) remains Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY2
Slide 13: FY24 Group revenue by geography
FY24 bb Group revenue by geography FY24 revenue by geography % FY24 y-o-y revenue growth in key markets Revenues 10% UK and ROI 0% €2,006m 32% Poland 14% €1,618m 32% 26% Rest of CEE 7% €1,950m WE 62% €592m UK and ROI Poland Rest of CEE WE 13
Slide 14: FY24 Group revenue by segment
FY24 Group revenue by segment bb FY24 revenue by segment % FY24 y-o-y revenue growth by segment Revenues 5% Pepco 14% €3,853m 33% Poundland 0% €2,006m 62% Dealz 40% €307m Pepco Group 10% €6,167m Pepco Poundland Dealz 14
Slide 15: Category revenue performance
Category bb revenue performance (GM/clothing/FMCG) 26% 31% 28% 28% 28% • GM category LFL 35% 35% 41% 38% 37% performance (-4%) impacted Category sales by Poundland (-9%) and mix Dealz (-12%) performance 39% 35% 34% 35% 31% Q1 FY24 Q2FY24 Q3 FY24 Q4 FY24 FY24 • Clothing category LFL GM Clothing FMCG
Slide 16: Strong gross margin improvement in FY24
Strong bb gross margin improvement in FY24 FY24 Group gross margin (%) bridge Improving quarterly gross margin % trend* FY24: 43.9% 43.9% 45.0% 45.2% +390bps 44.3% FY23: 40.0% 40.0% 41.7% 41.2% 40.3% 39.8% 39.2% 23 gin F uty oss wn ix 24 FY ar d D c do r y FY ct an to ar ego du ht S at Pr o reig F Q
Slide 17: Pepco gross margin drove FY24 Group improvement
Pepco bb gross margin drove FY24 Group improvement 55% 50% FY24 Gross Margin % 45% 40% 46.9% 35% 38.6% 30% 33.4% 25% 20% 43.9% Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 Q3 FY24 Q4 FY24 Pepco Poundland Dealz 17
Slide 18: Renewed focus on Pepco core categories will support margin
Renewed focus on Pepco core categories will support margin 58% 55% 55% 54% 52% 50% 50% 46.9% Pepco 48% gross margin 48% average in FY24 47% 45% 42% 41% 42% 34% 33% 26% #1 #2 #3 #4 #5 #6 #7 #1 #2 #3 #4 #5 #6 #7 #8 #1 #2 Clothing categories GM categories FMCG categories 53% revenue mix 43% revenue mix
Slide 19: Operating cost inflation reflects new store growth
Operating cost inflation reflects new store growth bb Operating cost growth More discipline over distribution and driven by increase in new labour costs, helps to party offset stores rising property costs 1,762 28.6% 26.6% 1,486 452 7.3% 5.7% 321 262 4.2% 4.5% 250 220 3.6% 3.6% 199 pre IFRS-16 €527m
Slide 20: EBITDA performance driven by Pepco
EBITDA bb performance driven by Pepco Underlying EBITDA (EUR m)* • Record Group underlying Y23 Y22 EBITDA (IFRS16) of €944m, driven by Pepco IFRS 16 Pre-IFRS 16 • Pepco underlying EBITDA +25% +28% (IFRS16) landed at €785m, up €515m +41.7% (€231m) following €944m 3 1% strong revenue growth 24 2% €402
Slide 21: Cashflow summary
Cashflow bb summary FY24 FY23 Change EUR million • Capex reduction of €170m y-o-y due to lower store Underlying EBITDA (pre-IFRS 16) 515 402 113 openings and refits Working capital (3) 1 2 Tax paid (85) (75) (10) • Free cash flow increased by 432 328 104 €274m y-o-y to €168m, Operating cash flow dri
Slide 22: FY24 capex spend down significantly y-o-y
FY24 bb capex spend down significantly y-o-y • FY24 capex was €212m – a significant reduction from FY23 (€382m) reflecting lower store openings and refits FY24 capex by type (€m) • We opened fewer stores in FY24 (gross 509) versus FY23 207 (806) • Store related capex was the key source of the declin
Slide 23: Balance sheet summary
Balance bb sheet summary FY24 FY23 Change EUR million • Growth in right of use Assets assets largely driven by Property, plant and equivalent 743 746 (3) additions from our Right of use asset 1,305 1,226 79 continued store expansion Goodwill and other intangible assets 107 847 (740) program Trade an
Slide 24: Inventory days increased on timing differences
Inventory bb days increased on timing differences Stock holding (€m) Stock category mix (%) • Inventory days 1,400 100% 130 increased at the 122 125 90% 20% 19% balance sheet date due to higher level of 1,200 80% stock in transit from 1,000 105 70% shipping delays, and 32% 39% earlier purchases to 6
Slide 25: Working capital
Working capital Strong improvement in cash conversion cycle through inventory and payables management 123 130 122 93 52 46 38 37 0 0 0 0 (47) (71) (84) (94) FY21 FY22 FY23 FY24 Inventory Days Trade Payables Days Trade Receivables Days Cash Conversion Cycle Inventory Days = H1 Closing Inventory / Las
Slide 26: Financing
Financing bb • Bond (maturing June 2028): €375m 5-Year senior Facility Amount Coupon Expiry secured notes with 7.25% coupon Term Loan B €250m 6m Euribor + 1.50% April 2026 • R F (due April 2027) of €390m provides additional (3.00% + 1.50% = 4.50%) working capital (Zero drawn at end of FY24) RCF €390
Slide 27: Business review
Business review Stephan Borchert – Chief Executive Officer 27
Slide 28: Objectives at start of year
Objectives at start of year • Rebuild Pepco’s profitability in its core EE markets through gross margin recovery • Adopt a more disciplined approach to Progress made on all investment with more targeted growth objectives, but there • Review underperforming areas of the remains more to achieve busine
Slide 29: Rebuild profitability in Pepco CEE
Rebuild profitability in Pepco CEE c. 80% • Percentage of FY24 Group EBITDA (IFRS 16) from Pepco CEE +530bps • FY24 Pepco gross margin increase y-o-y driven by strong CEE performance €218k • Pepco CEE store profit back to pre- Covid levels 29
Slide 30: More targeted store growth
More targeted store growth FY24 store openings by brand Pepco store openings more targeted in FY24, with CEE focus Pepco Poundland Dealz Total Chart Title 4,948 3,781 FY24 232 99 331 509 376 836 331 FY23 294 242 536 84 49 -45 -71 -1 -117 0 100 200 300 400 500 600 CEE WE Openings Closures Total store
Slide 31: Review of underperforming areas
Review of underperforming areas We acted swiftly to address non-core activities and strengthen our investment approval processes Pepco ‘Plus’ format paused Exit of Pepco Austria New look programme paused • Pepco ‘Plus’ stores represent 3% of • Exited Austria in February 2024 • Refit programme paused
Slide 32: Stronger cash performance through disciplined investment
Stronger cash performance through disciplined investment FY23 FY24 Gross store openings (#) 806 509 Pepco store re-fits (#) 715 219 Capex(€m) €382m €212m Free cash flow(€m) (€106m) €168m Dividend(€ cents) N/A 6.2 32
Slide 33: Current trading and outlook
Current trading and outlook Stephan Borchert – Chief Executive Officer 33
Slide 34: Current trading and outlook
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 da
Slide 35: Summary
Summary • 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 divid
Slide 36: Q&A
Q&A 36
Slide 37: Appendix
Appendix 37
Slide 38: Store coverage map
Store coverage map TOTAL PEPCO POUNDLAND DEALZ 3,781 836 331 4,948 Poland Bulgaria Latvia Pepco 1339 Pepco 167 Pepco 60 Dealz 331 Slovakia Germany Stores Pepco 153 Pepco 63 United Kingdom Poundland 758 Serbia Slovenia Pepco 145 Pepco 39 Romania Pepco 475 Croatia Estonia Stores Pepco 130 Pepco 38 Cze
Slide 39: Focus on Pepco
Focus on Pepco Revenue & LFL Store Numbers LFL Growth % + 14.2% + 9.6% -2.8% 6.2% 3,853 3,450 3,781 3,375 FY23 FY24 FY23 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % + 41.7% + 28.7% 46.9% 20.4% 16.4% 41.6% 785 1,807 554 1,404 FY23 FY24 FY23 FY24 FY24 figures are unaudited, based
Slide 40: Focus on Poundland
Focus on Poundland Revenue & LFL Store Numbers LFL Growth % + 0.2% -3.6% + 1.6% 5.5% 2,001 2,006 823 836 FY23 FY24 FY23 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % - 21.5% + 2.8% 38.6% 9.8% 37.6% 7.6% 774 195 153 753 FY23 FY24 FY23 FY24 FY24 figures are unaudited, based on lates
Slide 41: Focus on Dealz
Focus on Dealz Revenue & LFL Store Numbers LFL Growth % + 39.5% + 17.0% -4.8% 11.3% 307 331 220 283 FY23 FY24 FY23 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % + 59.4% >200% 33.4% 7.9% 29.1% 3.2% 102 24 64 7 FY23 FY24 FY23 FY24 FY24 figures are unaudited, based on latest Outturn