Pepco Group has achieved record revenue and underlying EBITDA for the year ending September 30, 2024, yet challenges at Poundland cast a shadow over the success.
- Despite record overall earnings, a £675 million impairment charge and revenue growth of just 0.3% at Poundland highlighted difficulties.
- Poundland grappled with falling like-for-like sales and a 21.5% drop in EBITDA while transitioning to Pepco-sourced products.
- Pepco Group’s net loss reached £576 million, despite a strong 25.2% increase in underlying EBITDA and a 10.2% jump in revenue.
- In contrast, Pepco’s performance soared with a 14.2% rise in revenue, contributing significantly to the group’s overall success.
Pepco Group, marking a year of striking contrasts, reported exceptional financial figures but grappled with notable setbacks. The year ending September 30, 2024, saw the group achieve record revenue and underlying EBITDA, reflecting its strong market position. However, Poundland’s struggles, marked by a £675 million impairment charge, highlighted the challenges within the group. Despite a modest revenue growth of 0.3% year-on-year, Poundland saw a 3.6% decline in like-for-like sales, which significantly impacted its financial performance.
The increasing competition and complexities of transitioning to Pepco-sourced products led to a 21.5% drop in Poundland’s EBITDA, down to £134 million. This decline was instrumental in Pepco Group reporting a net loss of £576 million for the year, despite an impressive 25.2% growth in underlying EBITDA to £824 million and overall revenue growth of 10.2%. The group clearly acknowledged these challenges, citing the impairment charge as primarily related to goodwill, following a noticeable decline in Poundland’s performance and a tougher profitability outlook amidst a competitive environment.
Stephan Borchert, the CEO of Pepco Group, emphasized the difficulties faced by Poundland, particularly in categories such as clothing and general merchandise after the shift to Pepco-sourced ranges. He expressed the company’s commitment to addressing these issues by realigning Poundland with its core strengths and reevaluating its competitive positioning to ensure future success as an FMCG-led format. Borchert assured that more information regarding Poundland’s progression would be shared in the first half of 2025.
On a more positive note, Pepco’s operational leap was a significant counterbalance to the challenges at Poundland. The division’s revenue increased by 14.2%, with a notable expansion in Central and Eastern Europe where 331 new stores opened during the year. This success further strengthened Pepco’s position as the key driver of the group’s growth, showcasing the brand’s strong market footprint and its considerable contribution to the group’s earnings. The announcement of Pepco Group’s first-ever dividend also indicates a positive outlook for the company’s financial stability and future capital returns.
Non-executive chair Andy Bond articulated the group’s strategic objectives, which included bolstering profitability in the Central and Eastern European market, addressing gross margin recovery, and adopting a more disciplined focus on investments. While the group met several of its goals, challenges remain to be addressed. Borchert reiterated the importance of the Pepco concept in the group’s overall strategy, highlighting its role as the core engine for strategic and financial growth. He pointed out the positive trends in Pepco’s like-for-like performance since September, underlining a promising start for future improvements.
Despite the hurdles faced by Poundland, Pepco Group remains optimistic about its future, driven by strong performances elsewhere within the group.
