Pepco Group Bv · GPW:PCO
Pepco Group Bv — Investor Day (October 2022)
141 slides from Pepco Group Bv's investor day presentation, Oct 13, 2022
Slide 1: Capital Markets Day
Capital Markets Day Introduction Trevor Masters, CEO Valencia, Thursday 13th October 2022 1
Slide 2: Feel the quality, feel the price
feel the quality, —teve-the price YUess
Slide 3: Trevor Masters, CEO
Trevor Masters CEO Joined Pepco in 2019 with responsibility for the largest and fastest growing operating business, Pepco Appointed Group COO in October 2021 and Group CEO in 2022 40 years’ experience within the retail sector internationally Significant executive expertise having served as the CEO o
Slide 4: Agenda
Agenda Thursday 13th October 1pm Introduction Trevor Masters 1.15pm BETTER New Product Initiatives Agnieszka Jaworska Project New Look Agnieszka Olejniczak Pepco Plus in Western Europe Mark Murphy FMCG Mark Murphy 3.00pm Store Tours 6.30pm Depart for Dinner Friday 14th October 8.30am BIGGER Accelera
Slide 5: Our vision is to be the largest variety discount brand in Europe
Our vision is to be the largest, the best, the cheapest and the most well-known variety discount brand in Europe 5 4 4
Slide 6: Building Europe's Pre-eminent Discount Variety Retailer
Building Europe’s Pre-eminent Discount Variety Retailer • Sell for less Sell for less • Price leadership • Low risk inventory • Simple price architecture • Buy for less Buy for less Shared resources & group synergies • $1.55bn sourcing scale Buying scale leverage • Seasonal buying model Product shar
Slide 7: Strong Strategic Progress
Strong Strategic Progress Our four key strategic pillars BIGGER BETTER CHEAPER 1 2 3 Grow revenue, brand Enhance portfolio of stores, Drive cost efficiency and market share categories and ranges SIMPLER 4 Simplify customer offering and drive operational simplicity 7 6
Slide 8: Grow our business: Better - New Product Initiatives
Grow our business: Better New Product Initiatives Agnieszka Jaworska, Commercial Director Valencia, Thursday 13th October 2022 8
Slide 9: Agnieszka Jaworska, Commercial Director
Agnieszka Jaworska Commercial Director Joined Pepco in 2013, with responsibility for product & marketing 20+ years experience in commercial management across Europe Worked with German fashion boutique Orsay 9
Slide 10: Key messages
✓ Pepco strong in established markets of Kidswear and Home ✓ Our customers love us for price, offer and Key messages convenience ✓ Our constantly evolving product offer drives our business 10
Slide 11: Pepco is strong in established markets of Kidswear and Home
Pepco is strong in established markets of Kidswear and Home 11
Slide 12: Kidswear and Home represent 3/4 of Pepco turnover
Key categories of Kidswear and Home represent 3/4 of Pepco turnover, FMCG is the main category in Poundland Pepco’s Poundland’s sales share sales share Pep&Co clothing, 13% home kidswear, 33% products, 44% GM, 26% FMCG, 61% adultswear, 23% kidswear adultswear home products FMCG GM Pep&Co clothing 12
Slide 13: Pepco is the value market leader in Kidswear
Pepco is the value market leader in Kidswear & has consistent market share growth in last 5 years in Poland, Czech Republic, Hungary, Romania MARKET VALUE [EUR] 1,1bn 250m 170m 380m POLAND CZECH REPUBLIC HUNGARY ROMANIA 41% 39% +8 p.p. +14 p.p. +19 p.p. 34% +20 p.p. 36% 34% 31% 31% 29% 28% 28% 29% 2
Slide 14: Womenswear market share growth in key markets
In the very competitive category of womenswear, Pepco has consistently grown market share in key markets for the last 5 years MARKET VALUE [EUR] 3,3bn 1,0bn 800m 1,2bn POLAND CZECH REPUBLIC HUNGARY ROMANIA +2.4 p.p. +1.2 p.p. +2.4 p.p. +3.6 p.p. 6% 6% 5% 5% 4% 4% 4% 4% 4% 3% 3% 3% 3% 3% 3% 3% 2% 2%
Slide 15: Market share in Home Textiles has grown
Pepco market share in Home Textiles has grown consistently for the last 5 years in Poland and Romania MARKET VALUE [EUR] 360m 310m POLAND ROMANIA +3 p.p. +4 p.p. 15% 14% 14% 13% 12% 7% 6% 6% 5% 3% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Source: Internal calculations and analysis based on E
Slide 16: Brand Awareness: Customers
Brand Awareness: Customers shop in Pepco Poland more than any Czech Republic other store Slovakia Hungary for kidswear ladieswear Romania & home products Croatia in Central and Bulgaria Eastern Europe Source: Brand Tracker SS’22. PL, LT, CZK, SK, HU, RO, SL, HR, BG. By Kantar16 Polska 8 Shopping the
Slide 17: Our customers love us for price, offer and convenience
Our customers love us for price, offer and convenience 17
Slide 18: Why customers love us
Why customers love us PRICES ▪ Regular very low prices ▪ Value for money ▪ Freedom of impulse shopping OFFER ▪ Choice: many categories & a wide offer within each category ▪ Quality: materials & finishing ▪ Design: colours & styles ▪ Licences & brands ▪ The best categories: children & home deco CONVE
Slide 19: Pepco is the price leader in Poland and Spain
Pepco is the price leader in Poland and Spain in these categories: ✓ Babywear ✓ Kidswear ✓ Kids’ essentials ✓ Kitchen ✓ Bathroom ✓ Living room 19
Slide 20: Price leader in the kidswear category
Pepco is the price leader in the kidswear category in Poland & Spain Minimum Price Shopping Baskets variance vs Pepco POLAND SPAIN Baby clothing Younger kidswear Kids essentials Younger kidswear Kids essentials H&M Primark 114% H&M 211% 128% C&A 125% C&A 97% Primark 126% H&m 89% H&M 110% Primark 57%
Slide 21: Price leader in the kitchen category
Pepco is the price leader in the kitchen category in Poland & Spain Minimum Price Shopping Baskets variance vs Pepco POLAND SPAIN Kitchen Bathroom Living room Bathroom Living room Kitchen Primark 154% Kik 209% Jysk 88% Carrefour 133% Primark 168% Carrefour 111% Jysk 36% Tedi 74% Primark 78% Tedi 126
Slide 22: Consistently ranked highly in Customer Satisfaction Index
Consistently ranked highly in Customer Satisfaction Index BABSON CSI Index 87.8 checkouts 93.7 The highest customer service quality 92.4 scores are given today’s visit for service 91.9 interior design 91.8 returns 91.7 complaints 91.7 prices 89.2 comprehensive offer 85.2 product selection 84.3 leafl
Slide 23: Average basket size trending upwards
Average basket size trending upwards Average sale Average basket size per customer in EUR per customer currently +4% €10.6 +7% +7% +5% 9.6 10.2 10.6 Pepco 8.9 8.5 customers are loyal visiting on average 3.5x per month 2018 2019 2020 2021 2022* Source.: internal sales data Data in PLN. All countries
Slide 24: Efficient planning and production deliver market leading prices
Pepco's efficient planning and production processes deliver market leading prices whilst maintaining great quality for customers How does Pepco deliver great prices? ✓ Smooth efficient process with "right first time" sampling ✓ Benefits of growing economies of scale ✓ Early order placement allowing
Slide 25: Our constantly evolving product offer drives our business
Our constantly evolving product offer drives our business 25
Slide 26: 250 new products every week
We regularly update and improve our offer to drive customer visit frequency 250 new products every week 80 new collections every season 26
Slide 27: Our collections are always in line with key trends
Our collections are always in line with key Japandi Porto trends Checked Shacket Our collections are always in line with key trends 27
Slide 28: We work closely with brand partners
We work closely with brand partners to broaden our customer offer 28 20
Slide 29: We launch, grow and retain strong proprietary brands
We launch, grow and retain strong proprietary brands 29
Slide 30: We constantly respond to customer needs
We constantly respond to customer needs Bedding Rugs & Chair Pads Small Electricals Branded Stationery Health & Beauty Drawing & Painting Pepco is Green Utensils DIY 30 22
Slide 31: We adapt and expand our proposition in existing categories
We continually adapt and expand our customer proposition in our existing categories Bekkin Sports Adults Seasonal Footwear Ladies Loungewear Beachwear Bekkin Sports Kids Affluent Home Pots & Planters Natural Home Scents 31 23
Slide 32: Western Europe ranges: Clothing in hot countries
We are developing ranges specifically for Western Europe: Clothing in hot countries Baby boys Younger boys Older boys Men Baby girls Younger girls Older girls Women 32 24
Slide 33: Western Europe ranges: Home in hot countries
We are developing ranges specifically for Western Europe: Home in hot countries Gen Z Picnic & Melamine Disposable Tableware Morrocan 33 25
Slide 34: Q&A
Q&A 34
Slide 35: Grow our business: Better - New Look
Grow our business: Better New Look Agnieszka Olejniczak, Marketing Director Valencia, Thursday 13th October 2022 35
Slide 36: Agnieszka Olejniczak, Marketing Director
Agnieszka Olejniczak Marketing Director Joined Pepco in 2013 and currently leading marketing department +20 years experience in leading marketing for major brands Have worked for worldwide brands including Nestle 36
Slide 37: Highlights
✓ Ensure sustainable, dynamic sales growth across all current markets (both CEE and WE) by enhancing our brand equity ✓ Initial trials of New Look customer proposition in two cities in Poland Highlights ✓ Successful outcome of initial trial driving increase in LFL vs control group of 37 percentage p
Slide 38: Strategic context
Strategic context ✓ Changing/growing expectations of our current loyal customer base ✓ Brand perception needs to evolve to attract new, value-led customers in CEE ✓ Adapting to meet the requirements of WE customers ✓ Opportunity to merchandise more products in store and warehouse thanks to E2E proje
Slide 39: Scope of changes
Scope of changes ✓ People ✓ ✓ Place Product 5P ✓ Still the Promotion, lowest Branding, price! Comms 39
Slide 40: The trial
The trial We undertook a trial in in two cities in Poland: Wrocław and Warsaw Our New look stores opened in March 2022 in Wrocław & in June 2022 in Warsaw 40
Slide 41: About first trial city: Wrocław
About first trial city: Wrocław Competitors Major cultural, economic, academic and tourist center 8 The 4th biggest city in Poland, with a population of more than 600 000 people 8 The 2nd richest city in Poland #15 in Financial Times Global Cities of the Future ranking for 21/22 in mid-size cities c
Slide 42: Wroclaw: 22% increase of selling mods
Wroclaw: 22% increase of selling mods through 12% space increase Average increase of sales area by 12% (36.4 sq m) Average increase of mods by 22% (34 mods) ✓ Decreased stock rooms on most of stores ✓ +19% in clothing and +26% in GM ✓ Removed or decreased fitting rooms ✓ Fitting full GM & clothing r
Slide 43: Wroclaw trial performance summary
Wroclaw trial performance summary Success criteria met with performance significantly ahead of expectations Gross sales Run Rate IRR % 23% Average 56% € 95k Capexcapex per per store store +11ppt’s +25ppt's 12% Store profitability 31% +2.8 p.p YoY in comparison to the control group Model Actual Model
Slide 44: Significant NPS improvement in Wroclaw
Significant NPS improvement in Wroclaw +2 increase in very +7 increase in occasional +15 increase in non- loyal shoppers shoppers customers 2% 3% 21% 18% 28% 8% 16% 16% 3% 24% 48% after before 58% 27% after before after before 68% 81% 32% 80% 69% +78 +66 (+7) -27 (+15) Promotors Neutral Detractors 4
Slide 45: About second trial city: Warsaw
About second trial city: Warsaw Competitors The capital, business, academic and tourist center 14 The 1st biggest city in Poland, with a population of almost 1.8m people The 1st richest city in Poland 10 #20 in Financial Times Global Cities of the Future ranking for 21/22 in mid-size cities category
Slide 46: Warsaw: 15% increase of selling mods
Warsaw: 15% increase of selling mods through 4% space increase Average increase of sales area by 4% (14.6 sq m) Average increase of mods by 15% (27.3 mods) ✓ Decreased stock rooms in 16 stores ✓ +10% in clothing and +24% in GM ✓ Removed or decreased most of fitting rooms ✓ Fitting full GM & clothing
Slide 47: Warsaw trial performance summary
Warsaw trial performance summary Success criteria met with performance significantly ahead of expectations Gross sales vs Run Rate IRR % 19.5% Average 33.5% € 107 k Capexcapex per per store store +2ppt’s +3.5ppt's 17.5% Storeprofitability Store profitability* YoY 30.0% +0.7 p.p YoY in comparison in
Slide 48: Complete roll-out to take 2.5 years
18 months 12 months Poland The Baltics Complete Slovakia Bulgaria roll-out to take Czech Republic Croatia Romania Slovenia 2.5 years Hungary Serbia Start in January 2023 Exact timeline TBC 48
Slide 49: Q&A
Q&A 49
Slide 50: Grow our business: Better - Pepco Plus
Grow our business: Better Pepco Plus Mark Murphy, Operations & Procurement Director Valencia, Thursday 13th October 2022 50
Slide 51: Mark Murphy, Operations & Procurement Director
Mark Murphy Operations & Procurement Director Joined Pepco in 2021 with responsibility for operations as well as procurement +30 years experience in leading product categories across Europe as well as Japan and Thailand Have worked with Tesco 1988-2021 Extensive category knowledge in Beers Wines, Sp
Slide 52: Strategic context: combining the best of Pepco and Dealz
Agenda Spain trial Next phase is Strategic context: was a huge further expansion combining the in Spain and trial best of Pepco success in Ireland already and Dealz under driving +30pp showing +53pp one roof in LFL LFL increase 52
Slide 53: What is a Pepco Plus?
✓ Expand the current assortment that Pepco offers with a complementary range of edible and non-edible grocery products (= the “Plus”) What is a “Pepco ✓ Bring the best of Pepco (clothing & GM) and Dealz / Poundland (branded FMCG) Plus”? together “under one roof” ✓ Increases Pepco share of wallet wit
Slide 54: Pepco Plus
Super-charge Pepco’s customer proposition • Weekly replenishment of FMCG to drive incremental traffic and sales Grow quicker: any box, anywhere Pepco Plus • Flexibility to deploy 3 categories (Clothing, GM, FMCG) to fit store size & location: big assortment for big boxes Simpler business: One Busine
Slide 55: Strategic context: combining the best of Pepco and Dealz
Agenda Spain trial Next phase is Strategic context: was a huge further expansion combining the in Spain and trial best of Pepco success in Ireland already and Dealz under driving +30pp showing +53pp one roof in LFL LFL increase 55
Slide 56: Four trial stores
Four trial stores Mislata Merida A high-street store located in a A store located in a busy small suburb of a large retail park of a large regional capital – Valencia regional town of 60k people Denia A stand-alone unit in a small seaside tourist location in the Levante region Nevada, Merida Granada
Slide 57: What we have changed vs Dealz
What we have changed vs Dealz? ✓ Improved assortment Range Pepco GM & clothing (+46% space for GM) ✓ Bigger sales area, smaller stock room -57% smaller stock rooms Macro ✓ Reduction in stock holding of FMCG space -19% reduction in linear space (same SKUs, less space) ✓ Simpler layout for customers L
Slide 58: Before & After video
Before & After video 58
Slide 59: Spain customer feedback: NPS of 79
Spain customer “This store is much better feedback: NPS of 79 than Dealz. Home is amazing and cheap; NPS 64 79 clothing is like Primark and I have my favourite products I used to buy.” Promoters 66 80 “My first time today and I’m going to come back Passives 32 tomorrow because I haven’t 19 Detractor
Slide 60: Financial benefits: LFL +30 pp vs control group
Financial benefits: Gross margin % LFL % LFL +30 pp vs control group LFL +30 pp gross margin +4.3 pp +430bps vs control group 37% reduction in stock cover Dealz Pepco Plus Dealz Pepco Plus 60 Based on data from March – August 2022
Slide 61: Pepco Plus performance summary
Pepco Plus performance summary Pepco Plus delivers an additional 40% IAS 17 EBITDA against a standard WE Pepco Net Revenue €’000 EBITDA €’000 IRR % 2,700 420 Capex per 55% € 415k +4ppt's store +50% +40% 51% 1,800 300 800 Store size (sqm) Standard PEPCO Plus Standard PEPCO Plus Standard PEPCO Plus WE
Slide 62: Strategic context: combining the best of Pepco and Dealz
Agenda Spain trial Next phase is Strategic context: was a huge further expansion combining the in Spain and trial best of Pepco success in Ireland already and Dealz under driving +30pp showing +53pp one roof in LFL LFL increase 62
Slide 63: Pepco Plus stores in Iberia (FY23)
Pepco Plus stores in Iberia (FY23) SPAIN PORTUGAL ✓ Portugal country opening in May 2023 ✓ Openings focused on 3 areas (Porto, Lisbon, Algarve) c45%+ stores in Spain will have FMCG by end FY23 63
Slide 64: Pepco Plus in Ireland
Pepco Plus in Ireland 6-store trial launched in September ✓ 6 stores planned for conversion from Dealz to Pepco Plus ✓ c800 sqm avg size ✓ Same concept as Spain 64
Slide 65: Pepco Plus Omni store Dublin
Pepco Plus Omni store Dublin Trial to Date: +53%pts increase in LFL Sales vs. control group ~50:50 split ATV and Transactions 65
Slide 66: Q&A
Q&A 66
Slide 67: Grow our business: Better - FMCG
Grow our business: Better FMCG Mark Murphy, Operations & Procurement Director Valencia, Thursday 13th October 2022 67
Slide 68: Key messages
✓ FMCG represents a great growth opportunity to leverage the potential within the Group and to deliver sustainable sales growth and profits ✓ We offer unique brands and products at amazing prices Key ✓ Over 2500 existing stores in our estate that do not messages currently stock FMCG at all provides
Slide 69: Current FMCG participation and key benefits
Current FMCG participation and markets 4 markets of FMCG: UK, ROI, Spain, Poland Core categories 3.7% 2.3% 0.5% Poundland 9.9% 29% Clothing 36% Dealz ROI GM Dealz Poland FMCG Pepco Spain 83.6% 35% Pepco Poland Key benefits of expanding our FMCG offering ✓ Unique brands and products at amazing prices
Slide 70: Leveraging our Poundland existing capability
Leveraging our Poundland existing capability within the group Category management ✓ UK Poundland hub provides a centre of excellence for FMCG: Commercial Merchandising ✓ Category management expertise Buying team ✓ Private / Tertiary brands capability ✓ Access to unique and differentiated brands ✓ Ex
Slide 71: Unique products, great prices
Kodak partnership ✓ Over 25m packs sold last year ✓ Zinc 10pk accounts for over 40% of total sales ✓ We have 13% share of total UK batteries market Unique ✓ 16% below cheapest in market products, great prices Lotus partnership ✓ Exclusive biscuits pack ✓ Best selling in the biscuit category ✓ £4.1m
Slide 72: Ranging principles & key categories
Ranging principles & key categories Principles ✓ Customer first approach with defined category roles for all categories ✓ Great market leading Brands and unique products ✓ Disciplined innovation ✓ Offer amazing value everyday Key categories Confectionery Biscuits & Crisps Health & Beauty Household P
Slide 73: FMCG: Ranging strategy using Customer first approach
We will drive maximum commonality of range in order to leverage our scale whilst allowing for disciplined localisation FMCG: Ranging strategy using Customer first approach 73
Slide 74: FMCG Sourcing: Agile sourcing model
FMCG Sourcing: Agile sourcing model to leverage best source of product Flexibility to source via Regional Sourcing hubs when the EU provides the lowest end-to-end cost Leverage our existing sourcing capabilities based in the UK to source Super Core and Core Ranges - currently our scale FMCG Market R
Slide 75: Super Core Ranges
Our Super Core Ranges are key volume items, a combination of Big Global Brands and key Tertiary/Private Label SKUs Super Core Range Leading branded products in all Super Core Markets Ranges Global Brands/ Private Brand/ Tertiary Brands Private Brand for Dried Fruit and Nuts Category to be Stocked ac
Slide 76: Core Ranges
Our Core Ranges are key volume items, a combination of Big Global Brands and key Tertiary Labels which are ranged across multiple markets… Core Range Core Ranges Big Brand not currently ranged in all markets Market Brands/ Private Brand/ Tertiary Brands Group negotiation to leverage scale across the
Slide 77: Local Ranges
Our Local Ranges are monitored to identify any items which we believe we can scale across the wider group Local Range Balconi opportunity for Italian brand to be featured in all markets. Bigger range & Private Local Ranges Brand opportunity to leverage Unique Local Brands Long Chips currently ranged
Slide 78: FMCG next phase
FMCG next phase: Pepco Plus Pepco Pepco New Newstores stores Introduced one Impulse mod in 120 stores & one 22% LFL Sweets mod in FMCG in in 300 stores Pepco Plus stores Excellent results driving roll- out into 1200 stores as well as seasonal products by Christmas 78 11
Slide 79: Q&A
Q&A 79
Slide 80: Grow our business: Bigger - Accelerated Store Expansion
Grow our business: Bigger Accelerated Store Expansion Anand Patel, Pepco Managing Director Valencia, Friday 14th October 2022 80
Slide 81: Anand Patel, Pepco Managing Director
Anand Patel Pepco Managing Director Joined Pepco in 2017 to lead Finance Currently Pepco Managing Director 20+ years experience significant experience within the retail sector Previously Retail Finance Director at Halfords and held senior finance roles at Argos and Egg plc 81
Slide 82: Key messages
✓ Accelerating store growth remains the Group’s single biggest driver of value creation ✓ Aspirational long term store potential of 20,000 stores ✓ There remains headroom for further store growth in Central Europe Key messages ✓ Western Europe will be the primary area of growth in coming years ✓ Cre
Slide 83: Acceleration in store openings underpinned by credible programme
Acceleration in store openings underpinned by credible store opening programme ✓ More than 450 new store New Store Openings Split By Type openings in each of the last two 600 3,961 years 500 3,504 400 3,021 ✓ Significant increase in FY22 WE 300 store openings 200 100 0 FY20 FY21 FY22* ✓ Consistent r
Slide 84: Aspirational long term potential for 20,000 stores
Aspirational long term potential for 20,000 stores ~20,100 ✓ Catchment analysis PEPCO Poundland and Dealz supports significant growth upside with attractive returns on 2,464 ~11,100 invested capital 3,961 ✓ Potential for 20,000 stores in territories where we will be operating from within the next 10
Slide 85: WE markets represent greater share of store roll out
WE markets represent increasingly greater share of the Group’s store roll out Net new stores by territory Accelerated store roll FY19 FY22 FY25 out with >550 new 100% stores annually including 90% ~500 Pepco format 80% WE Continued significant roll 70% out in proven CEE 60% territories 50% 40% Other
Slide 86: Store opportunities remain for PEPCO format in core CEE markets
Significant store opportunities remain for PEPCO format core CEE markets ✓ High delivery certainty for >750 new PEPCO stores 30 ESTONIA in CEE over the next 5 years 52 New PEPCO LATVIA markets entry ✓ Bosnia and Herzegovina next CEE territory to be LITHUANIA Current PEPCO opened with potential for 5
Slide 87: WE significant opportunities for PEPCO format
WE significant opportunities for PEPCO format given consumer scale and expenditure ✓ High delivery certainty for >1,750 new stores in WE over the next 5 years Current WE PEPCO markets ✓ Sizeable Apparel & GM and Grocery markets with FY23 new markets PEPCO entry even further potential to increase pen
Slide 88: Italy Case Study: Opening a new territory
Italy Case Study: Opening a new territory Italy identified as an attractive market for Pepco, it has the 4th largest spend on retail and the 3rd largest mid-lower economic population in Europe 1 2 3 4 Business case & Research Delivering the project Post-opening evaluation market entry strategy 1 Res
Slide 89: Italy Case Study: Delivering the Project
3 Italy Case Study: Delivering the Project ✓ Efficient team and process in place today to enable growth Product Central Team People New/existing New territory country/store opening PMO Place Store Local Team location 89
Slide 90: Italy Case Study: Post-opening evaluation
JAMES 4 Italy Case Study: Post-opening evaluation Where we are now? ATV Stores €16.60 79 ✓ Strong feedback on low prices, value for money and convenience ✓ Pepco Italy has the potential to build its image as a modern & convenient chain for families, offering great kids’ and home products with great
Slide 91: Proven model results in attractive store economics
The proven model results in attractive, market leading store economics ✓ Quality of earnings and investment payback maintained across CEE WE – CEE - current Typical Store Annual go forward* Performance – IAS17 PROFIT & LOSS ✓ Attractive model will further benefit from scale over time in WE as model
Slide 92: Q&A
Q&A 92
Slide 93: Grow our business: Cheaper - PGS Integrated sourcing
Grow our business: Cheaper PGS Integrated sourcing Carlos Coene, MD of PGS & Director of Pepco Group compliance Valencia, Friday 14th October 2022 93
Slide 94: Carlos Coene
Carlos Coene Managing Director, PGS Director of Compliance, Pepco Group Joined PGS in 2016 with responsibility for running the business +30 years’ international sourcing experience providing supply chain solutions Worked for major European, North American and Australian retailers including Adidas, V
Slide 95: Exclusive sourcing capabilities of PGS
✓ Very few discount retailers have an integrated sourcing entity, instead having to source through third-party agents Exclusive ✓ PGS sources own label goods across Apparel, General Merchandise, sourcing Footwear & Accessories through its operations in mainland China, Hong Kong, Bangladesh, Pakistan
Slide 96: PGS: Group owned sourcing entity
Pepco ✓ Product CAD created in-house by PEPCO team – our self designed products are exclusive to PEPCO and cannot be bought PGS: Group anywhere else ✓ Products sourced through PGS with full control on End-to-End production owned PGS sourcing ✓ Working directly with vendors and factories, to secure b
Slide 97: Key benefits of in-house sourcing operation
Key benefits of in-house sourcing operation Scale Transparency Synergy Price Direct factory relations Control Flexibility 97
Slide 98: Scale: PGS one of Asia's largest sourcing entities
EUR 1.55 billion of shipment value in 5 territories (+40% yoy) Scale: PGS has grown to become one of Asia's largest sourcing entities China 63% Pakistan 1% Bangladesh 24% India 10% Myanmar 2% 364 700+ 1.4Bn €1.1 Suppliers Factories Units Average Unit Price FY22 by Category (%) Adult Apparel, 23 GM (
Slide 99: Price: PGS service fee below market average
Price: PGS service fee below market average PGS charges a favourable service fee Service Fee % versus the market 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% average charged by 5.0% alternative sourcing 4.0% companies 3.5% 3.0% 2.5% 2.5% 2.5% 2.5% This competitive 2.0% 1.5% 1.5% 1.5% 1.5% advantage increases
Slide 100: Control: seven-point plan to maximise sourcing margin
Control: PEPCO & PGS developed a seven-point plan to maximise sourcing margin ✓ PGS & PEPCO teams working shoulder to shoulder to develop sourcing strategy Economies Sourcing Strategic Vendor Fabric at Vendor Supplier of Scale Footprint Vendor Consolidation Source Performance Development Optimizatio
Slide 101: End to End Sourcing Model
Control: End to End Sourcing Model provides significant competitive advantage through supply chain optimization Development Production Shipping 30 Days 30 Days 50 Days 30 Days 10 Days 45 Days 14 Days Range Strategy Pre-Production Quality Testing Distribution We repeat this process four times a year
Slide 102: Flexibility: Sourcing footprint expansion
Flexibility: Sourcing footprint expansion to de-risk China & grow flexibility Near Shore Sourcing Far East Expansion ✓ Launch in FY23 ✓ Grow emerging markets: Myanmar, Cambodia, ✓ EU based Sourcing office in Poznan, Poland Vietnam, Pakistan, Indonesia ✓ Regions such as Poland, Romania, Bulgaria, Tur
Slide 103: Direct Factory Relations
Direct Factory Relations: In-house team for vendor production efficiency improvement ✓ We use lean 6 sigma manufacturing standards 01 Factory to maximise operational efficiency Evaluation POC production line ✓ Long-term partnership with strategic factories 02 over a 3 - 5 year period to embed best s
Slide 104: Synergy: PGS audit checks with new vendors
Synergy: PGS conduct several audit checks with new vendors to ensure sites are fit to produce for PEPCO Group ✓ The PGS onboarding process ensures all vendors are rigorously checked ahead of starting any production ✓ This framework protects Group integrity, ensuring new vendors are Ethically, Financ
Slide 105: Transparency: PGS Quality Control teams
Transparency: PGS Quality Control teams work with full transparency to ensure product is fit for purchase ✓ PGS implements strict Quality Control measures to bring low prices and value to our customers while protecting our Brand integrity ✓ We operate a Global Quality Assurance and Quality Control p
Slide 106: PEPCO Group Compliance Code of Conduct
All PEPCO Group ‘own-label’ factories follow the PEPCO Group Compliance Code of Conduct ✓ Aligned to the Ethical Trading Initiative (ETI) Base Code; an internationally recognized set of labour standards based on International Labour Organization conventions Child labour shall Employment is Freedom o
Slide 107: Q&A
Q&A 107
Slide 108: Sustainability
Grow our business: Better Sustainability Agnieszka Olejniczak, Marketing Director Valencia, Friday 14th October 2022 108
Slide 109: ESG
ESG • Our approach to ESG is embedded within our Bigger / Better / Simpler / Cheaper strategy • Price is not a barrier to affordable, sustainable and ethically produced products • We continue to develop our Group-wide ESG strategic framework in 2022, within which the operating companies have freedom
Slide 110: Key areas of ESG engagement
Key areas of ESG engagement Energy efficiency and Charity Ethical Product Packaging People emissions support sourcing reduction 110
Slide 111: Product
Our target By 2025, 30% of Pepco product range will be better for the planet ✓ Joining Better Cotton initiative in FY23 and reaching 25% of our cotton consumption in textile with BCI in 2025 ✓ Growing the number of certified products: OEKO-TEX, organic cotton (GOTS, OCS), FSC, recycled (RSC & GRS),
Slide 112: Packaging
Our target More recyclable and/or recycled packaging in Pepco ✓ Up to 30% content of recycled raw materials in individual packaging by FY25* ✓ Up to 70% of in-store carboard packaging made of FSC-certified paper & expanding the certificate to other paper-based products by FY25 ✓ 100% of care labels
Slide 113: Energy efficiency and emissions
Our target Reduction of Scope 1 & 2 emissions ✓ Introduction of green energy to the organisation through activities such as solar panel investments ✓ Introduction of environmental guidelines for new investments ✓ Including guarantees of origin for energy contracts & procurement of green energy solut
Slide 114: People
Our target Diversity & wellbeing programs in ALL markets ✓ Diversity ✓ Delivering diversity & inclusion activities through trainings, promotional activities, introduction of new policies and monitoring of our progress in D&I. ✓ Wellbeing: ✓ Continuation of Better Move programme in all markets People
Slide 115: Charity support
Our target Significant charitable contributions in all markets ✓ Expanding charity products (bears toys) to all markets with more than 100 stores ✓ Garment collection schemes: expansion of the program in Italy and markets & shoes collection & refurbishment program at Head Office in Poznan Charity su
Slide 116: Q&A
Q&A 116
Slide 117: Grow our business: Simpler - Optimised Supply Chain
Grow our business: Simpler Optimised Supply Chain Alex Kennedy, Supply Chain Director Valencia, Friday 14th October 2022 117
Slide 118: Alex Kennedy, Supply Chain Director
Alex Kennedy Supply Chain Director Joined Pepco in 2018 with responsibility for the supply chain 20+ years experience in planning and supply chain across EMEA Have worked with Blue chip/listed companies e.g. Nike Focus largely on wholesale change programmes 118
Slide 119: Key messages
✓ Lean and efficient company inventory strategy which is driving cost efficiencies ✓ Reduction in company inventories of 14 days ✓ Store staffing levels reduced by 1.5 FTE ✓ Increase in selling space driving +5% increase in LFL per store ✓ Optimised markdown management benefitting gross margin Key m
Slide 120: The result of our previous Supply Chain
The result of our previous Supply Chain ▪ Unworkable for stores ▪ Poor service to customers ▪ Bad for the brand ▪ Expensive and inefficient 120
Slide 121: This is largely how stockrooms look today
This is largely how stockrooms look today ✓ Better for stores ✓ Better for customers ✓ Lower stock levels ✓ Simple and better 121
Slide 122: Achievements resulting from the E2E program
Achievements resulting from the E2E program Four key outcomes: The Pepco E2E “Little and often” Supply Chain strategy supply chain re-design had a large-scale Optimised markdown management positive impact Expansion of retail selling space Improved efficiency of Distribution Centres 122
Slide 123: "Little and often" supply chain strategy
“Little and often” supply chain strategy Key drivers to “Little and often” ✓ Smaller purchase orders, raised more frequently and allocated to stores in smaller pack quantities ✓ 20% of goods allocated to stores the day they arrive at warehouses and dispatched the following day ✓ Stores receive small
Slide 124: Optimised markdown management
Optimised markdown management 11.0 % 10.0 % Key drivers to markdown optimization 9.0 % 8.0 % ✓ E2E Supply chain improvements 7.0 % 6.0 % ✓ Lean company inventory plan 5.0 % Average for discount retail ✓ Targeted levels of store stock levels 4.0 % 3.0 % ✓ Safer/more commercial assortment 2.0 % ✓ Exte
Slide 125: Retail selling space extension
What did we do?What did we do? ✓ Extension of General merchandise selling space Retail selling ✓ Implementation of a snake (queuing/selling space) ✓ Use of pillars/windows space extension ✓ Re-design of entire store layout Enhancing the existing and What was the What was the impact? impact? future s
Slide 126: Improved efficiencies of Distribution Centres
Eliminate delivering everything through transportation hubs Improved Direct store deliveries within 200 kilometers of a Distribution Centre efficiencies of Distribution Doubled picking efficiency of Gyal Centres As a result of our E2E project, new DCs will be smaller and more efficient 126
Slide 127: Location of Distribution Centres
Location of Distribution Centres 3 # Pepco existing # Pepco future potential 2 # Dealz/Poundland existing 127
Slide 128: Pepco supply chain is scalable and repeatable
Pepco supply chain is scalable and repeatable Standard blueprint for all elements of the supply chain which is being retrofitted to existing supply chain and the future deployment model ✓ Warehouse network model “Tipping point” determining size, location and timing of new supply chains Cookie ✓ Stan
Slide 129: Q&A
Q&A 129
Slide 130: Finance Update
Finance Update Mat Ankers, Chief Financial Officer Valencia, Friday 14th October 2022 130
Slide 131: Mat Ankers, Chief Financial Officer
Mat Ankers Chief Financial Officer Joined Pepco Group in 2015 Interim CFO at Pepco since March 2022, CFO at Pepco operating business 7 years with Pepco Group in finance, strategy and change leadership roles across European operating businesses and Group team Prior finance roles with Telefonica and F
Slide 132: Key messages
✓ Delivery on strategic initiatives driving financial performance ✓ Operational action balancing inflation and volatility ✓ Increased investments to fuel more ambitious growth plans and capitalise on current opportunities Key messages ✓ Full year underlying EBITDA outturn in line with guidance withi
Slide 133: Acceleration in store openings driving sales performance
Acceleration in store openings driving sales performance ✓ Record new store openings of 516 with 163 PEPCO openings in strategically Revenue important Western European markets Growth including Italy, Spain and Germany Revenue Growth 4,122 4,824 (€m) 17.4% ✓ 727 store renewals across the year driving
Slide 134: Credible results across all strategic pillars
Credible results across all 4 strategic pillars Bigger Better Simpler Cheaper ✓ Store expansion ✓ Pepco Plus in WE ✓ Lean and efficient Supply ✓ End-to-end work delivering acceleration: pilot with +30%pts LFL sales Chain Network delivering 1.5 FTE (vs 1 FTE last year) targeting 20,000+ stores in vs
Slide 135: External Guidance FY23
Net new stores ✓Accelerated store roll out ✓>550 new stores of which >500 will be under the PEPCO banner Revenue Growth ✓LFL growth tick up of existing estate, supported by store enhancement programme. ✓Mid to high teens total revenue growth given accelerated store roll out & LFL uptick External Gui
Slide 136: Increased capex to drive long term growth
Increased capex to drive long term growth: store 1 ✓ Capex of c. 4% of revenue historically, increases to >6% in F23. expansion and proposition renewal ✓ Average capex spend on a new store: • PEPCO WE ~ €315k to €350k • PEPCO & Dealz CEE ~ €155k to €180k CAPEX split by category ✓ Growth in new store
Slide 137: Debt and Working Capital
Debt and Working Net debt Capital ✓ The Group continues to generate strong 2.0x Operating cash – enabling significant capital 1,430 investment for future growth 0.6x ✓ Significant investment in stock for Q1 FY23 to support growth and reduce supply chain risk 275 ✓ Management focus remains on growth
Slide 138: Summary
✓ Delivering on short term financial results ✓ Navigating volatile environment well Summary ✓ Now is the time for value retail ✓ Exciting, proven and incremental growth plans identified 138
Slide 139: Q&A
Q&A 139
Slide 140: Appendix
Appendix 140
Slide 141: Supporting Guidance
IFRS 16 to • The FY21 rent and rent like items attributable to a store is €70k. This IAS 17 average is expected to increase as the Group expands more into Western EBITDA Europe Effective • The short term interest rate for the Group is expected to be c3% Interest Rate Supporting Effective Tax Rate •