Pepco Group (PCO) H2 2024 earnings summary

Executive summary

• Group revenue reached a record €6.2bn, up 10.2% year-over-year, driven by new store growth and strong Pepco performance, despite negative like-for-like sales.

• Underlying EBITDA rose 25.2% to €944m, exceeding guidance, with Pepco's EBITDA up 41.7% and gross margin improving by 390bps to 43.9%.

• Significant non-cash impairment of Poundland (€775m) led to a reported net loss of €662m.

• Free cash flow improved to €168m, reducing net debt (pre-IFRS 16) to €256m and leverage to 0.5x.

• Announced inaugural full-year dividend of 6.2 euro cents per share, reflecting strong balance sheet and new capital returns policy.

Financial highlights

• Like-for-like revenue declined 3.2% year-over-year, with Pepco at -2.8%, Poundland at -3.6%, and Dealz Poland at -4.8%.

• Group gross margin improved to 43.9%, led by Pepco's 46.9% (+530bps), returning to pre-COVID levels.

• Underlying pre-tax profit increased 27% to €271m; underlying PAT up 14% to €179m; underlying EPS up 14.3% to 31.1 cents.

• Capex reduced 45% to €212m, supporting improved free cash flow.

• Net debt (pre-IFRS 16) fell 37.7% to €256m; net debt/EBITDA leverage at 0.5x.

Outlook and guidance

• Cautiously optimistic for FY25, expecting to open around 300 net new stores, mainly in Pepco's CEE region.

• Focus on improving like-for-like sales, especially at Pepco, and remediating Poundland.

• Continued gross margin improvements visible in Q1 FY25, supported by FX and disciplined capex.

• Strategic plan to be detailed at Capital Markets Day in March 2025, with emphasis on Western Europe, digital, and Poundland recovery.