Steinhoff rises on Pepco results


Steinhoff rises on Pepco results

Published Date: 2021-02-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Steinhoff rises on Pepco results

The discount European retailer has reported higher sales but lower earnings due to the impact of Covid-19 on its stores.

Steinhoff International's European subsidiary Pepco Group has reported a rise in full-year sales despite the turbulent trading environment it faced last year. The retail group says its robust profit and cash performance demonstrates the resilience of its discount brands to short-term Covid-19 disruption. Steinhoff's shares rose as much as 8.3%.

Pepco is one of the biggest contributors to Steinhoff's earnings. In January, Steinhoff said it was mulling its options for Pepco, including an independent listing. A year ago, media reports said it was in talks to sell the European division for up to €4.5billion (R80 billion) to a private equity consortium. However, nothing materialised.

Pepco owns the PEPCO and Dealz chains, as well as the UK's Poundland. PEPCO was most impacted by lockdown restrictions as it's considered a non-essentials retailer. Poundland was able to trade most of the time but experienced a big reduction in footfall as shoppers avoided shopping centres and high streets.

The group reported a 3% increase in sales to €3.52 billion for the year to end-September. However, underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 31% to €229 million while underlying profit before tax declined by 58% to €84 million. It said this was largely due to temporary Covid-related store closures, particularly in Central Europe, from April to June last year. Cash generation remained strong, rising 72% to €405 million, driven by new store-led sales growth and effective working capital management as part of its response to Covid-19. It reduced debt by 29% to €328 million.

The group opened a net 327 new stores over the course of the year, ending the period with 3,021 stores in 15 countries. It planned to launch PEPCO in Spain later this year after entering Italy and Serbia. In total, it said it planned to open 400 stores in the current financial year.

Steinhoff's shares pared some of their gains to close 6.2% up at R2.05.

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