Pepco Group's record revenues show that its strategic priorities are working

Group revenue increased 11.1% on a constant currency level to €3.2bn (£2.7bn) in the six months to March 31, while like-for-like revenue growth declined 2.5% against a “strong comparator” last year.

Underlying profit before tax surged 21.1% on a constant currency level to €174m (£148m).

In this period, Poundland sales grew 5.3% to €1.05bn (£890m), with store growth “higher than normal” due to 46 Wilko conversions. It did, however, perform behind expectations.

Meanwhile, Pepco sales increased 16.3% to €1.9bn (£1.6bn), and sales for Dealz Poland grew 55.3% to €160m (£136m).

The group also delivered some progress on its strategic priorities, which include: rebuilding profitability in Pepco’s core central and eastern European business; strengthening its position in key markets with “disciplined growth”; reviewing all underperforming and non-core areas; and delivering stronger cash generation and cost focus.

Group like-for-like revenues in the seven weeks to May 19 fell behind expectations compared with last year, which Pepco said “reflects the time of Easter” which occurred in March this year. 

The Red Sea still remains a problem with lower-than-expected stock of summer ranges in store.

Pre-pandemic levels of growth

Pepco Group chair Andy Bond said: “We are today reporting a solid group performance for the first half, including record revenues and a significant uplift in gross margin, reflecting good progress against strategic priorities set out last autumn. 

“The standout performer was Pepco’s central and eastern European business, the key engine driver for the group. 

“We have successfully rebuilt gross margin and store profitability in this region back towards pre-pandemic levels with further opportunities for improvement. 

“This achievement underscores Pepco’s continuing and compelling customer offer across apparel and general merchandise at market-leading prices.”

Bond continued: “Despite a positive FMCG contribution, Poundland’s performance was behind expectations due to challenges in implementing the significant range change to Pepco products, which we are addressing. 

“Looking ahead, while consumer sentiment in some of our key markets remains challenging, we expect to deliver underlying EBITDA (IFRS16) for the full year in the region of €900m (£766m), compared with €753m (£641m) in the previous year. 

“We will also benefit from greater focus on disciplined capital investment, with an improvement in free cash flow generation expected in the full year. 

“This financial strength positions us well to continue executing our growth strategy while maintaining a strong balance sheet,” he said.