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Newly listed Poundland owner Pepco Group has announced an increase in first half revenues and profits as the addition of new stores mitigated the impact of Covid shop closures and lower footfall in its UK stores.

The Poland-listed retailer said today revenues were up 9% on a constant currency basis in the six months to 31 March to €2bn, up by 4.4% on a reported basis.

This total included a like for like revenue decline of 2.1% across its brands, driven the 15% of trading weeks lost to Covid-19 related store closures.

Instead, growth was driven by 225 net store additions in the half and 402 versus the end of March 2020, representing 14.1% growth year-on-year taking its estate to 3,246 outlets.

As a non-essential retailer with operations centred in Continental Europe, PEPCO was most impacted by Covid related closures with 19% of trading weeks across the half lost due to enforced closures, primarily in November and late December and again across February and March.

This resulted in a 1.2% like for like sales fall in Pepco stores, although overall revenues grew 3.1% on a constant currency basis to €1m.

Poundland in the UK and its European Dealz stores remained open, however each brand experienced significantly reduced footfall as our customers sought to both consolidate their shopping activity and avoid shopping locations such as covered shopping centres or busy high street locations.

Poundland was disproportionately impacted by this customer behaviour as the majority of stores are located in such locations, Pepco said.

However, trading store like for like growth of 1.4% is likely to have resulted in market share gains in the UK, “providing further evidence of the successful change programme the Poundland brand is undertaking”.

During the period 50 Poundland stores were refitted including the implementation of frozen food, while the Poundland store portfolio increased due to the 80 Fultons Frozen Foods stores acquired in the half year.

Those new stores meant Poundland Group constant currency growth was 15.2% to €979m.

Group underlying EBITDA grew by 16.8% to €46.7m as the group benefitted from continued store expansion, gross margin upside through better sourcing and a short-term mix benefit, alongside tightly managed operating costs coupled with UK government support.

Gross margin increase of over 100 basis points was achieved through ongoing sourcing benefits and a short-term Covid benefit from increased general merchandise revenue.

Looking forward, Pepco said that despite the short-term challenges that renewed cost inflation will likely bring, underlying trading remains in line its previously stated full-year guidance.

CEO Andy Bond commented: “We anticipate that the environment in which we operate will remain changeable and challenging in the short term but over time as consumer behaviour returns to more normal patterns, as any Covid related restrictions that impact our customers confidence to shop are further relaxed.

“However, as these results show, we have a clear and winning customer offer, a long-term growth strategy delivering stores in existing and exciting new markets, as well as a number of key initiatives to drive our sales and margin. As such, we remain confident about our prospects for continued profitable growth in the balance of the financial year and beyond.”

Pepco shares have edged up 0.1% to 47 zlotys this morning, above its 40 złoty per share IPO price in May.

Morning update

On the markets this morning, the FTSE 100 has started the day up 0.3% to 7,091.7pts.

Early risers include Hotel Chocolat, up 6.3% to 369p, Nichols, up 2.4% to 1,475p and AG Barr, up 1.4% to 520p.

Tate & Lyle, down 2.7% to 747.4p, McColl’s Retail Group, down 2.3% to 36p and McBride, down 2.2% to 87.4p.

Yesterday in the City

The FTSE 100 ended the day down 0.2% at 7,074.1pts yesterday after rises on Monday and Tuesday.

Morrisons slipped back 2.1% to 232.9p after Monday’s share price surge. Other fallers included Hotel Chocolat, down 4.9% to 347p, Glanbia, dwn 3.2% to €13.94, Deliveroo, down 2.3% to 251.6p, Coca-Cola Europacific Partners, down 1.9% to €51.80 and Compass Group, down 1.8% to 1,528.5p.

The day’s risers included McBride, up 4.7% to 89.4p, FeverTree, up 2.5% to 2,630p, Premier Foods, up 2.1% to 106.8p and SSP Group, up 1.6% to 299.9p.

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