Pepco Group Bv · GPW:PCO
Pepco Group Bv — H1 FY24 Earnings Presentation
35 slides from Pepco Group Bv's earnings presentation, May 23, 2024
Slide 1: H1 FY24 Interim Results
H1 FY24 Interim Results 23 May 2024 1 1
Slide 2: Introduction
Introduction • Delivered good progress against our strategic objectives • Our core Pepco business has delivered strong profit improvement in H1, with more to come in the second half • The growth opportunity remains intact, with a focus on our CEE markets in the near term • Progress is being made in
Slide 3: Financial Review
Financial Review Neil Galloway – Chief Financial Officer 3
Slide 4: H1 FY24 highlights
H1 FY24 highlights • Record H1 Group revenue of €3.2bn, up 14% year-on- year • Group gross margin up 310 basis points to 43.1% • Record underlying Group EBITDA (IFRS 16) of €487m up 28%, driven by Pepco EBITDA up 39% • 289 net new stores opened in H1, of which 86 in Q2 • Strong operating cash flow o
Slide 5: Profit and loss summary
Profit and loss summary Change % Change % EUR million H1 FY24 H1 FY23 (constant (actual currency) currency) • Revenue growth of +14% driven by Pepco Revenue 3,200 2,812 +11.1% +13.8% • Group gross margin up by Like-for-like revenue growth (%) -2.5% +11.1% - - 310 basis points Gross profit 1,378 1,12
Slide 6: New store growth has driven revenue performance
New store growth has driven revenue performance Q1 FY24 Q2 FY24 H1 FY24 H1 FY23 • Group revenue up 11.1%, Revenue +13.2% +13.7% +13.4% +32.3% benefitting from full year Revenue growth at impact of FY23 store growth at constant +3.1% +4.5% +3.7% +5.8% openings constant currency* currency +41.8% +44.6
Slide 7: LFL performance against a tough y-o-y comparator
LFL performance against a tough y-o-y comparator Pepco 25.0% 18.5% 19.7% 20.0% 15.0% 10.7% 10.0% 7.3% 8.1% 5.0% 0.0% -5.0% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY23 Q1 FY24 Q2 FY24 -0.1% -1.2% -2.3% -3.5% -2.8% Poundland 10.0% 8.9% 8.0% 5.9% 5.3% 6.0% 3.9% 4.3% 4.0% 2.0% 1.3% 0
Slide 8: H1 Group revenue by segment
H1 Group revenue by segment H1 revenue by segment % H1 y-o-y revenue growth by segment H1 FY24 0% 5% 10% 15% 20% 25% 30% Revenues 5% Pepco 16% €1,986m 33% Poundland 5% €1,054m 62% Dealz 55% €160m Pepco Poundland Dealz 8
Slide 9: H1 Group revenue by geography
H1 Group revenue by geography H1 revenue by geography % H1 y-o-y revenue growth in key markets H1 FY24 H1 FY24 0% 5% 10% 15% 20% 25% 30% 35% Revenues 9% UK and ROI 5% €1,054m 33% Poland 19% €840m 32% Rest of CEE 7% €1,010m 26% Rest of WE 78% €296m UK and ROI Poland Rest of CEE Rest of WE 9
Slide 10: Gross margin benefits from better buying & cost normalisation
Gross margin benefits from better buying & cost normalisation FY23 Gross margin (%) bridge Improving quarterly gross margin % trend* Chart Title 40.8 45.0% 44.4% 40.2 2.5% 44.0% -0.5 -3.8 43.0% 1.1% 3.4% 0.7% 42.0% 0.3% 43.1% 41.3% -0.3 0.7% 41.0% 40.9% 40.8 40.1% 40.3% 40.1 40.0% 39.2% Reflects: 39
Slide 11: Profit performance driven by Pepco
Profit performance driven by Pepco Underlying EBITDA (EUR m)* Y23 Y22 IFRS 16 Pre-IFRS 16 • Revenue growth across all formats, driven by Pepco • Record underlying Group EBITDA (IFRS16) of €487m €487m up 28%, driven by Pepco 12 €278m 2 EBITDA up 39% 87 21 €380m 6 €218m • Poundland EBITDA (pre- 93 36
Slide 12: Operating cost inflation driven by new store acceleration
Operating cost inflation driven by new store acceleration • H1 FY24 operating costs as % of revenue has risen y-o-y • Higher operating costs related to labour inflation & central costs Operating cost growth driven by More discipline over distribution and labour costs, 1,200 increase in new stores he
Slide 13: Cash Flow Summary
Cash Flow Summary EUR million H1 FY24 H1 FY23 Change YoY • Significant increase in operating cash flow driven Underlying EBITDA pre-IFRS 16 278 218 +60 by greater control on Working capital (56) (95) +39 inventory and further Working capital – pre-IFRS 16 movements (4) (20) +16 benefits from supply
Slide 14: FY24 H1 capex spend of €155m driven by new stores
FY24 H1 capex spend of €155m driven by new stores Chart Title 100 90 88 • H1 FY24 capex of €155m, 80 versus €149 in H1 FY23 73 70 • Increase driven by committed new store openings from 60 FY23 50 • 346 gross new stores opened in H1 40 37 36 • 219 Pepco refits complete during H1 30 27 24 • Core infra
Slide 15: Balance Sheet Summary
Balance Sheet Summary EUR million 31 Mar 2024 31 Mar 2023 Change YoY Assets Property, plant and equipment 783 606 +177 • Increases in PPE and ROU Right of Use Asset 1,244 1,061 +183 are the main drivers of Goodwill and other intangible assets 857 830 +27 movement in assets, Trade and other receivabl
Slide 16: Disciplined inventory management
Disciplined inventory management Stock holding (€m) Stock category mix (%) • Inventory control and 1,200 115 100% management led to inventory days trending 111 103 105 90% 15.1% 18.8% lower than prior year 1,000 80% 95 • We are closely 70% 800 85 34.8% 60% 38.0% targeting inventory 75 600 50% days a
Slide 17: Working Capital
Working Capital Strong improvement in cash conversion cycle through inventory and payables management 103 111 103 95 59 47 50 34 0 0 0 0 (45) (48) (61) (69) FY21 H1 FY22 H1 FY23 H1 FY24 H1 Inventory Days Trade Payables Days Trade Receivables Days Cash Conversion Cycle Inventory Days = H1 Closing Inv
Slide 18: Financing
Financing • Bond (maturing July 2028): €375m 5-Year Senior Secured Facility Amount Coupon Expiry Notes with 7.25% coupon Term Loan B €250m Euribor + 1.35% April 2026 • RCF (due April 2026) of €390m provides additional working capital (€30m drawn at end of H1 FY24) 2026 (1yr+1yr RCF €390m Euribor + 1
Slide 19: Strategy update
Strategy update Andy Bond – Executive Chair 19
Slide 20: Recap: Pepco Group is well positioned for future success
Recap: Pepco Group is well positioned for future success • We have a clear, compelling and exciting future, but we need to do less to achieve more and re-earn the right to grow • Our vision to be Europe’s biggest and best discount variety business remains intact, serving families on a budget across
Slide 21: Key strategic focus over near term
Key strategic focus over near term 1 2 3 4 Rebuild profitability in Strengthen position in Review all Deliver stronger cash Pepco CEE key markets underperforming and generation and cost non-core areas focus 21
Slide 22: Rebuild profitability in Pepco CEE
1 Rebuild profitability in Pepco CEE Pepco CEE generates around half of Group Pepco CEE Store EBITDA revenues, but the majority of profits* back to pre-Covid levels** Revenue EBITDA Store EBITDA 220 £220k 210 200 190 180 170 Pepco CEE Rest of Group Pepco CEE Rest of Group 160 H1 Revenues H1 EBITDA (
Slide 23: Strengthen position in key markets
2 Strengthen position in key markets H1 FY24 store openings by banner* • 289 net new stores opened in H1; on track to open around 400 net new stores during FY24 Pepco Poundland Dealz Total 4,845 • Store opening schedule front-end loaded, reflecting commitments made during FY23 3,665 • New store grow
Slide 24: Pepco store growth focused on CEE
2 Pepco store growth focused on CEE • 147 net new Pepco CEE stores opened in H1; 68 in Western Europe • H1 partly reflects commitments for store openings that were agreed in the FY23 financial year • Going forward, store openings will be focused on CEE, where we have confidence of driving returns an
Slide 25: Review all underperforming and non-core areas
3 Review all underperforming and non-core areas We have acted swiftly to address non-core activities and strengthen our investment approval processes Pepco ‘Plus’ format on hold Exit of Pepco Austria New look programme paused • Pepco ‘Plus’ stores represent 3% of • Exited Austria in February 2024 •
Slide 26: Deliver stronger cash generation and cost focus
4 Deliver stronger cash generation and cost focus Significant reduction in capex expected Cost and operational efficiencies • Focus on back office and end-to-end supply chain • Group has taken a more disciplined approach to efficiencies to drive lower operating costs capex in FY24 • Investment in st
Slide 27: Current trading and outlook
Current trading and outlook Andy Bond – Executive Chair 27
Slide 28: Current trading and outlook
Current trading and outlook • Group like-for-like revenues behind last year in seven weeks to 19 May, reflecting timing of Easter and Red Sea availability issues impacting summer ranges • Improving outlook for H2 LFL revenues expected • Recovery in gross margin expected to carry through to full year
Slide 29: Summary
Summary • Delivered good progress against our strategic objectives • Our core Pepco business has delivered strong profit improvement in H1, with more to come in the second half • The growth opportunity remains intact, with a focus on our CEE markets in the near term • Progress is being made in Weste
Slide 30: Q&A
Q&A 30
Slide 31: Appendix
Appendix 31
Slide 32: Store coverage
Store coverage TOTAL PEPCO POUNDLAND DEALZ 3,665 864 316 4,845 Poland Bulgaria Latvia Pepco 1317 Pepco 163 Pepco 60 Dealz 316 Slovakia Germany Stores Pepco 149 Pepco 62 United Kingdom Poundland 785 Serbia Slovenia Pepco 132 Pepco 39 Romania Pepco 453 Croatia Estonia Stores Pepco 37 Pepco 127 Czechia
Slide 33: Focus on Pepco
Focus on Pepco Revenue & LFL Store Numbers LFL Growth % + 16.3% + 20.6% -3.2% 15.4% 1,986 3,038 3,665 1,708 H1 FY23 H1 FY24 H1 FY23 H1 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % + 38.9% + 30.1% 45.5% 19.9% 16.7% 40.7% 396 904 285 695 H1 FY23 H1 FY24 H1 FY23 H1 FY24 FY23 figures
Slide 34: Focus on Poundland
Focus on Poundland Revenue & LFL Store Numbers LFL Growth % + 5.3% -0.7% + 5.1% 4.5% 1,001 1,054 822 864 H1 FY23 H1 FY24 H1 FY23 H1 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % - 6.5% + 6.2% 38.8% 9.2% 8.3% 38.5% 409 93 87 385 H1 FY23 H1 FY24 H1 FY23 H1 FY24 FY23 figures are unau
Slide 35: Focus on Dealz
Focus on Dealz Revenue & LFL Store Numbers LFL Growth % + 55.3% + 54.9% -4.6% 18.0% 160 316 103 204 H1 FY23 H1 FY24 H1 FY23 H1 FY24 EBITDA (IFRS 16) Gross Profit EBITDA % Sales Gross Margin % + 59.4% 100.0% 32.2% 7.4% 31.2% 5.7% 51 12 32 6 H1 FY23 H1 FY24 H1 FY23 H1 FY24 FY23 figures are unaudited,