Pepco Group reports significant financial loss, citing challenges with Poundland.
- The company registers a £675m impairment charge due to underperformance in Poundland.
- A net loss of £548m was reported, driven by this substantial financial adjustment.
- Despite challenges, Pepco Group’s overall revenue shows a 10.2% increase to £6.2bn.
- Future updates and strategic focus aimed at recovery are anticipated in 2025.
Pepco Group has announced a substantial £675m impairment charge on its UK discount chain, Poundland, attributed to weak performance and a challenging market environment. This financial adjustment is primarily a reflection of the diminished goodwill from Poundland’s acquisition, following a 3.6% drop in like-for-like sales for the fiscal year ending 30 September 2024.
The company reported a net loss of £548m during this period, largely due to the impairment charge. The underperformance of the UK discounter is largely blamed on increased competition, rising operational costs, and specific difficulties encountered in its clothing and general merchandise sectors. These challenges have arisen particularly after the transition to using products sourced from Pepco earlier this year.
Stephan Borchert, the Group’s CEO, acknowledged the difficult period for Poundland, especially in its clothing and merchandise segments. He stated, “At Poundland, recent performance has been very challenging, impacted by declines in clothing and general merchandise following the transition to Pepco-sourced product ranges at the start of the year.” To counteract these challenges, Pepco is actively implementing strategies aimed at restoring Poundland’s strengths, with plans to reassess its competitive position and future requirements as a retailer led by fast-moving consumer goods (FMCG).
Conversely, despite the setbacks at Poundland, Pepco Group as a whole has achieved record revenue levels, totalling £6.2bn, representing a 10.2% year-on-year growth. The group’s underlying EBITDA has also seen a 25% increase, reaching £824m, aligning with financial forecasts. Additionally, the group’s expansion efforts in Central and Eastern Europe have been marked by the opening of 331 new stores this year, alongside the announcement of its inaugural dividend, highlighting confidence in its growth outlook and potential for future shareholder returns, including share buybacks.
Non-executive chair Andy Bond reflected on the year’s achievements, noting the group’s focused approach on rebuilding profitability in its core Central and Eastern European markets, recovering gross margins, adopting a disciplined investment strategy, and enhancing cash generation. While acknowledging these successes, Bond also recognised that further goals remain to be achieved. Further supporting this optimistic view, CEO Stephan Borchert described Pepco’s retail businesses as leading in the market, offering a wide range of products, value, and convenience to over 60 million monthly customers across Europe. Looking forward, Pepco intends to build on the strong returns and performance demonstrated in its Central and Eastern European operations.
Pepco remains confident in its strategic direction, despite current challenges with Poundland’s performance.
