Pepco Group N.V.

PEPCO GROUP N.V. 213800OVMJPFP79OB449 2024-09-30 213800OVMJPFP79OB449 2022-09-30 213800OVMJPFP79OB449 2023-09-30 213800OVMJPFP79OB449 2022-10-01 2023-09-30 213800OVMJPFP79OB449 2022-09-30 213800OVMJPFP79OB449 2023-09-30 213800OVMJPFP79OB449 2022-09-30 ifrs-full:PreviouslyStatedMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:PreviouslyStatedMember 213800OVMJPFP79OB449 2022-09-30 ifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:FinancialEffectOfCorrectionsOfAccountingErrorsMember 213800OVMJPFP79OB449 2022-09-30 ifrs-full:IssuedCapitalMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:IssuedCapitalMember 213800OVMJPFP79OB449 2022-09-30 ifrs-full:SharePremiumMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:SharePremiumMember 213800OVMJPFP79OB449 2022-09-30 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800OVMJPFP79OB449 2022-09-30 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213800OVMJPFP79OB449 2023-10-01 2024-09-30 ifrs-full:ReserveOfSharebasedPaymentsMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:IssuedCapitalMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:IssuedCapitalMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:SharePremiumMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:SharePremiumMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:ReserveOfCashFlowHedgesMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:ReserveOfCashFlowHedgesMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:ReserveOfSharebasedPaymentsMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:ReserveOfSharebasedPaymentsMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:RetainedEarningsMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:RetainedEarningsMember 213800OVMJPFP79OB449 2023-09-30 ifrs-full:MergerReserveMember 213800OVMJPFP79OB449 2024-09-30 ifrs-full:MergerReserveMember 213800OVMJPFP79OB449 2023-10-01 2024-09-30 iso4217:EUR iso4217:EUR xbrli:shares xbrli:pure iso4217:EUR xbrli:shares Well-positioned for future success Annual Report and Consolidated Financial Statements 2024 Focused growth We are a large-scale variety discount retailer operating across Europe. We are committed to oﬀering our shoppers – and especially families on a budget – everything they need to replenish and enhance their home across key apparel, general merchandise and FMCG categories. Introduction Other information 79 Remuneration report 84 Deviation from the Dutch 1 Highlights 140 Independent auditor’s report Corporate Governance Code 2 At a glance 146 Articles of Association provisions and Warsaw Code governing the distribution of profit 86 Directors’ report Strategic report 147 List of branches 148 Statutory list of all subsidiaries 4 Non-Executive Chair's statement Financial statements and affiliated companies 6 CEO's statement 89 Consolidated income statement 150 Glossary of terms 8 Q&A with our Chief Executive Officer 90 Consolidated statement of other 152 Shareholder information 10 Business model comprehensive income 12 Our strategy 91 Consolidated statement of 18 Market review financial position 20 Key performance indicators 92 Consolidated statement of 22 Financial review changes in equity 34 Sustainability 93 Consolidated statement of 52 Risk management cash flows 54 Principal risks and uncertainties 94 Notes to the consolidated financial 59 Going concern statements 129 Separate income statement Governance 130 Separate statement of financial position 60 Introduction to governance 131 Separate statement of changes 62 Board of Directors in equity 65 Corporate governance statement 132 Separate statement of cash flows 70 Audit Committee report 133 Notes to the separate 74 Nomination Committee report financial statements 76 Remuneration Committee report For more on Pepco Group, visit our website: www.pepcogroup.eu Highlights Revenue Like-for-like sales Net new stores1 €6,167m -3.2% 392 FY24 6,167 FY24 -3.2 FY24 392 FY23 5,596 FY23 6.0 FY23 648 Gross margin Underlying (IFRS16) EBITDA2 Underlying (pre-IFRS16) EBITDA3 43.9% €944m €515m FY24 43.9 FY24 944 FY24 515 FY23 40.0 FY23 754 FY23 402 Underlying profit after tax4 Reported (loss) / profit after tax5 Underlying earnings/share6 €179m -€662m 31.1c FY24 179 FY24 (662) FY24 31.1 FY23 108 FY23 157 FY23 27.2 Free cash flow7 Net debt (pre-IFRS16)8 ROIC9 €168m €256m 22% FY24 168 FY24 256 FY24 22 FY23 (106) FY23 411 FY23 17 New ESG goals We are launching our new 2030 ESG Strategy Planet People Product Carbon emission Employee engagement Packaging and waste Diversity reduction Responsibly sourced materials Ethical sourcing Further information on our new 2030 ESG strategy can be found on page 34 1 Net new stores is an Alternative Performance Measure (APM), defined as the 6 Underlying EPS is defined as basic earnings per share based on underlying profit number of stores opened during the period less stores closed during the period. after tax from continuing operations. A reconciliation to reported EPS is shown in 2 Underlying (IFRS16) EBITDA is an APM, defined as profit on ordinary activities note 30. before depreciation, amortisation, rent, net finance costs and taxation. 7 Free cash flow is an APM, defined as operating cash flow on a pre-IFRS 16 basis A reconciliation of underlying EBITDA to statutory measures is presented on note less non-underlying items and capex. See note 27 for further details. 27 in the financial statements. 8 Net debt (pre-IFRS16) is an APM, defined as the Group’s pre-IFRS 16, long-term 3 Underlying (pre-IFRS16) EBITDA is an APM, defined as profit on ordinary activities borrowings, net of cash and bank balances as at 30 September 2024. before depreciation, amortisation, net finance costs and taxation. A 9 ROIC is an APM, defined as NOPAT/IC, where IC (invested capital) = PP&E + reconciliation of underlying EBITDA to statutory measures is presented on note 27 intangibles (excl. goodwill) + NWC (current assets – current liabilities excluding in the financial statements. IFRS 16 lease liabilities) and NOPAT = net underlying operating profit after tax. 4 Underlying profit after tax is an APM, defined as profit on ordinary activities after 10 Pepco Austria is classified as a discontinued operation following the Group’s exit tax adjusted for non-underlying items. A reconciliation of underlying PAT to of Austria. All numbers above (including comparators) exclude Pepco Austria. statutory measures is presented on note 30 in the financial statements. R See note 27 for deﬁnitions and reconciliations of APMs 5 The reported loss in FY24 is significantly impacted by impairments recognised in the year as shown in the consolidated income statement. 1 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 At a glance A leader in discount retailing We are a leading pan-European variety discount retailer, operating a network of 4,948 stores across 20 countries under the Pepco, Poundland and Dealz brands, proudly serving over 61 million shoppers each month. Our locations Revenue By Region 38 60 78 88 1,339 758 331 UK&I 32% 63 307 Poland 26% 153 Rest of CEE 32% 256 475 Rest of WE 10% 130 39 145 35 199 167 By Brand 16 234 37 Pepco 62% Pepco Poundland Dealz Poundland 33% * Dealz and Pepco stores in Ireland are reported under the Poundland segment Dealz 5% Stores Customers (per month) Employees Operating countries 4,948 61.1m 47,760 20 2 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Our businesses Pepco Poundland Dealz PGS Pepco operates over 3,700 Poundland has a network of Dealz operates 331 locations PGS provides direct stores in 18 countries, and is over 830 stores in the UK in towns and cities across product sourcing, product widely recognised as one of and the Republic of Ireland Poland. Dealz offers over development and technical CEE’s strongest retail brands. (where it operates under 3,000 FMCG products in services to our Pepco, Pepco serves millions of the Dealz format). 18 categories at the Poundland and Dealz customers a month, offering Poundland offers customers lowest prices. brands. PGS is a real point clothing for the whole family, amazing value through a of difference as we bring and household goods at the range of branded quality value to customers using lowest prices. everyday essentials. our vertically integrated supply operation. Our strategic objectives Delivering stronger Optimising and Driving cost Enhancing the cash generation expanding our and operational customer offer through disciplined store network efficiency investment R Read about our Strategy on pages 12 to 19 Why invest? Number of stores Unique proposition A unique differentiated clothing and general merchandise (GM) offering supported by exclusive in-house sourcing office, PGS, that enhances supply chain efficiencies and accelerates speed to market. Growing discount market Well-positioned in the growing discount retail sector, the Group is focused on achieving profitable growth, strengthening its price leadership position, and continually enhancing its value proposition for price-conscious consumers. Pepco 3,781 Strong brand equity Poundland 836 Well-established brands with a strong market share in core markets, underpinned by a loyal and growing customer base that values affordability, quality, and convenience. Dealz 331 Robust financials With a strong balance sheet, the Group is adopting a highly disciplined approach to capital expenditure, positioning itself for healthy free cash flow generation. Profitability is a core focus, supported by expanding gross margins. 3 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Non-Executive Chair’s statement Focus on measured growth Resetting the business My mission at the start of the 2024 financial year was to go back to the Group’s roots of what made our business a success in the first place. I am proud of the progress we have made over the last 12 months. We have delivered record revenues and EBITDA across the Group, with a strong recovery in gross margin of over 300 basis points. Pepco had fallen into a trap of seeking growth for growth’s sake, opening an ever-increasing number of new stores without a clear portfolio strategy, and expanding into areas that were non-core to the business. On assuming the role of Executive Chair in September 2023, I re-focused the business around "doing less, to achieve more" – a phrase that I have continued to remind my team of over the last year. I am particularly pleased of the turnaround in Pepco store profitability in its core Central and Eastern Europe (CEE) markets, which is now delivering profit per store ahead of pre Covid-19 levels. We have reviewed all underperforming areas of the business, including exiting the unprofitable Austrian market, and stopped non-core activities. We introduced greater rigour and analysis across all investment decisions, with a strict hurdle rate of return for all spend. This has resulted in slowing growth in Western Europe while we assess expected returns, and pausing our three-category Pepco ‘Plus’ format of stores, which sold FMCG, alongside our core categories of clothing and general merchandise. Early on in the financial year, we also paused Andy Bond our new look store renewal programme that was scheduled to Non-Executive Chair continue across all CEE stores. Instead, we have doubled down on the opportunity in our CEE markets, which are those we know best and where we generate the highest returns. New store growth will continue to be targeted within the CEE over the next financial year, with ample white I am proud of the progress we space opportunity within the region to grow the business further have made over the last over the medium term. twelve months, but there Following the appointment of new Chief Executive Officer Stephan Borchert, I reverted back to the role of Non-Executive Chairman remains more to achieve.” from 1 October 2024. I have always had confidence in the underlying strength of this business. Now, with Stephan at the helm, I believe we have the right person in place to address the challenges we face and to continue to deliver profitable growth. Strong financial results in the face of challenges The Group reported record revenues in FY24 which exceeded €6 billion for the first time, growing by 10% over the prior year. In addition, Group EBITDA increased by 25% to €944m, driven by a strong Pepco performance where EBITDA was up by 42% as a result of store expansion and a strong recovery in gross margin within Pepco. This in turn contributed to a Group-level gross margin of 43.9%, representing a 390 basis point improvement year-on-year. 4 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Despite the strong financial results, like-for-like (LFL) revenues were During the period, there were a few changes to the Board. Pierre lower than last year across all of our brands. Group LFL declined Bouchut stepped down in his role as Independent Non-Executive by 3.2% overall in FY24. Pepco was impacted by a combination of Director and Audit Committee Chair at the AGM in March 2024. supply chain disruption, affecting the consistent and timely The Board thanks Pierre for his service and commitment to the availability of stock, as well as working its way through excess Company over the last three years. Frederick Arnold was older stock from previous seasons that was gradually reduced appointed to the Board as an independent Non-Executive Director over the year through markdown. Trading in Poundland and in June 2024, as Audit Committee Chair. Frederick is an Dealz was negatively affected as the ranges transitioned to experienced senior financial executive who has extensive Pepco-sourced clothing and general merchandise. For experience serving as board chair, audit committee chair and Poundland, in particular, we misread the scale of challenge in chair of a variety of other special committees across numerous getting our customers to understand and embrace Pepco ranges. public and private UK and US companies. We also made several planning and execution mistakes which has In addition, Sean Mahoney joined the Board as a Non-Executive resulted in a significant decline in Poundland's profitability for Director in March 2024, proposed by our majority shareholder. FY24. While we expect initiatives to improve our supply chain, and Sean is part of the Board’s Audit and Nomination Committees. have made changes to remediate the shortcomings of Pepco- Sean has extensive experience serving as a board director for sourced product during the year, it is likely to take time for large public and private companies across Europe and the US. Poundland and Dealz customers to recognise improvements. With his proven track record in investment banking and as a Despite the challenging environment, the Group's financial non-executive director, Sean’s significant experience of business position has improved significantly during the year with a stronger and financial strategy, capital markets and financing has made balance sheet as we generated stronger free cash flow, which him a strong addition to our Board. improved by €274 million year-on-year. The Company has access to over €500 million in liquidity (from cash and credit facilities). This Looking forward strong financial foundation, alongside strong brand equity and I am increasingly optimistic about the prospects for the Group. leading market share in our core CEE markets, with a proven We started the year with a number of objectives which included profitable store model, gives us confidence in the opportunity to rebuilding profitability in our core CEE markets, gross margin continue building Europe’s leading variety discount retailer. recovery, adopting a more disciplined approach to investment with more targeted growth and delivering stronger cash Valuing our people generation. I was honoured to step into the role of Executive Chair, at the We have delivered on these objectives, but there remains more request of the Board, 12 months ago until a successor for CEO was to achieve. Our core focus in the year ahead will be to strengthen appointed. During this period, I have been incredibly impressed LFL revenues, which I am confident will improve as the business by the resilience of our team as we’ve navigated a period of overcomes inventory and supply chain challenges. We will also uncertainty, while resetting our short-term strategy to focus on continue to concentrate on expanding our price leadership measured profitable growth and cash generation. We have seen position and enhancing the core customer proposition. With these the fruits of this hard work in the strong financial results delivered foundations, as well as a focus on disciplined capital expenditure in FY24, and much of this is down to the adaptability and energy to drive free cash generation, we expect to deliver further with which our team has approached these challenges. strategic progress in FY25. I want to take the opportunity to thank all 47,760 colleagues across our 20 operating countries, who continue to put the customer at the heart of everything they do, every day. This result Andy Bond would not have been achieved had it not been for their ongoing Non-Executive Chair dedication to the business. Evolving our Board and management I am delighted that Stephan Borchert joined the Group as Chief Executive Officer in July 2024. Stephan brings a wealth of experience and a results-driven track record in retail and international business operations. Stephan served from 2018 to 2022 as CEO of GrandVision, the global leader in optical retail operating more than 7,400 stores in over 40 countries worldwide. Prior to that, Stephan was President of Sephora EMEA on the Global Executive Committee. I look forward to working closely with Stephan as we deliver our renewed strategy to improve profitability and cash generation in our core established business. 5 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 CEO’s statement Signiﬁcant opportunity ahead It is an honour to be writing to you as Pepco Group’s new Chief Executive Officer. Pepco Group has a strong reputation for delivering outstanding value, range and convenience for our customers. The Pepco brand itself sits uniquely amongst other discount retailers, offering customers a breadth of items across the clothing and general merchandise categories at affordable prices, while also ensuring high-quality standards. Harnessing opportunities Since joining the business in July 2024, I have been exploring the various pockets of opportunity that lie in front of us. Pepco is firmly entrenched in its core Central and Eastern European (CEE) markets, with a loyal customer base who regularly visit our stores. We will continue to grow our strong and profitable market position in the CEE region, while defining an expansion strategy for key markets in Western Europe that benefit from a supportive macro economic backdrop. Whilst the business has faced challenges over recent years, I have been impressed by the energy and willingness of the team to overcome any setbacks and drive the business forward. 47,760 colleagues contribute every day to elevate the customer experience through their commitment and passion in each of our 4,948 stores that operate across 20 markets. Foundation for growth Stephan Borchert Under Andy Bond’s leadership over the last year, the business has Group CEO laid solid foundations for long term success by re-focusing on driving profitable growth through disciplined investment. Working from this strong base, we recognise the need for further evolution to enhance our agility as a business, setting us up to tackle current and emerging challenges and allowing the Group The ambition to be one to realise its full potential. of Europe’s leading This will require a review of all areas of the business, as well as the discount variety retailers current Group structure and our operating and expansion model, remains intact." to determine where we can increase efficiencies and drive the strongest returns for the Group. I look forward to updating you on my strategic plan for the Group at our Capital Markets Day in March 2025. The ambition to be one of Europe’s leading discount variety retailers remains intact. I am excited to work with my leadership team, supported by the Board, to deliver on the Group’s strategic priorities as Pepco Group enters the next phase of its growth journey. 6 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Building a more sustainable and equitable future At Pepco Group, we recognise our responsibilities for our business practices, in order to create sustainable long-term value creation, in a world where our various stakeholders including customers, employees, suppliers and investors, increasingly expect businesses to contribute positively to society and the environment. Therefore, in FY25, we are introducing a new sustainability strategy that marks a bold step forward in our dedication to fostering a more sustainable and equitable future. This strategy aims to weave social responsibility and environmental sustainability into all aspects of our operations, including product sourcing, operational processes, and our interactions with customers and communities. Our approach is guided by three core pillars: Planet, People and Product, each of which is underpinned by specific, measurable goals that align with global sustainability standards and disclosure requirements. Our 2030 ESG strategy will deliver our mission to demonstrate that price is not a barrier to sustainable and ethically produced products – see further details on page 34. I look forward to reporting on our momentum across these areas going forward. Outlook While it remains early in the year, the Group expects to build on the like-for-like sales momentum delivered by Pepco so far in FY25. Focused price investment on key line items, alongside an improvement in availability and freshness of stock, is expected to drive volume-led growth in revenues during the year. For FY25, we are targeting to open approximately 300 net new stores across the Group, with new stores principally focused on the Pepco brand and primarily in the CEE region. Management’s priority in FY25 will be to deliver continuing progress on like-for-like revenues, which should improve as we overcome supply chain challenges, supported by better prices, while we continue to enhance the core customer proposition. With these foundations, as well as a continued focus on disciplined capital expenditure to drive free cash generation, we expect to deliver further strategic progress in FY25. On behalf of the entire Group, I would like to thank all our stakeholders for their continuous support. Stephan Borchert Group Chief Executive Officer 7 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Q&A with our Chief Executive Oﬃcer Q&A with Stephan Borchert Taking a more measured approach to focus on sustainable, proﬁtable growth will remain a priority.” 8 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 What is your background and why is it What are your three biggest priorities? relevant to Pepco Group? As well as immersing myself inside the business since joining, I have also met with a variety of external stakeholders, from our I have worked for a diverse range of retail industries for more than largest shareholders and creditors to our key suppliers. It has 20 years, including fashion, beauty, pharmacy and healthcare been important for me to listen to truly understand the primary services. All of these operated on either a pan-European or opportunities and challenges for the business. global level with multi-format or multi-brand omni-channel From my discussions, it is clear that one of the most important strategies. Some of them were publicly listed on stock exchanges priorities we need to address is improving our like-for-like sales and I served on their Boards as an Executive Director or CEO. momentum and further investing in an efficient operating model In addition, I have always been driven by cultivating a strong for future profitable growth. relationship between the business and the customer. Only by I will also be assessing our Group structure to better understand keeping the customer at the heart of everything a retail business how our three brands (Pepco, Poundland and Dealz) work does can a company maintain its relevance, succeed in highly competitive environments and grow market share. together, appreciate the level of integration and determine the optimal structure going forward. I believe that my experience with a wide variety of global market-leading companies stands me in good stead to apply Thirdly, investigating our opportunity in Western Europe and its best practice around leadership, omni-channel operations, potential future growth profile for the Group will be another focal point. Our Pepco business has strong roots in Central and Eastern supply chain optimisation and store operation management to Europe, where we need to defend and grow our market position. Pepco Group, helping it to achieve a next level of excellence. However, if taking a longer-term view, I believe the white space What attracted you to the role of CEO opportunity of Western Europe will be a substantial growth driver for us in five years and beyond. at Pepco Group? When should we expect to hear your Pepco Group sits in the attractive and growing discount retail long-term vision for the Company? sector with a unique and market-leading position in its core markets. The Group operates over 4,900 stores across 20 European countries and employs over 47,000 people. This is I have clear ideas on how to address the challenges that the a business that has seen rapid growth over the last decade. business has faced, as well as the catalysts needed to profitably grow the business. I look forward to outlining my strategic vision However, the Group has had its challenges over recent times and, for the Group at a Capital Markets Day event, which will be held in my view, has not yet capitalised on the enormous opportunities in March 2025. it has. I therefore look forward to working with my leadership team Will there be any U-turns in on unlocking the full benefits from the scale of this business to drive revenues, increase returns and grow shareholder value. strategic direction? What are your initial impressions of The building blocks that have been laid out by Andy Bond over Pepco Group? the last year have formed a good foundation for this strategic review. It is clear that the business tried to grow too quickly My most notable observation since joining the business is the size previously, without steadily developing the infrastructure of the opportunity we have. Pepco already benefits from high alongside it in order to support an expanding retail footprint. levels of brand recognition and market share in its core CEE markets, but there is more we can do to build on this to create Taking a more measured approach to focus on sustainable, profitable growth will remain a priority, as well as maintaining a stronger business. control on capital spend to drive cash generation. However, I will On numerous site visits across the Group since I joined and many also assess the best Group structure to drive this growth, as well conversations with people around the business, I have been as seeking new channels of growth to complement the existing happy to witness the pride in our workforce, who do their best business, such as exploring the benefits of adding a digital focus, to put the customer at the heart of everything they do. Our as well as investing in technology and supply chain to improve success will be driven by a crystal-clear view of what our the decision making that takes place across all parts of the customers want. Putting their needs at the centre of our thinking, product cycle. shaping our business around serving them and further easing the shopping experience. Stephan Borchert Chief Executive Officer 9 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Business model Building Europe’s leading discount variety retailer Pepco Group oﬀers price leadership and a diﬀerentiated product proposition, facilitated by increasing economies of scale through our vertically integrated sourcing model. Our strengths Our key retail brands Differentiated products We are proud of the brands we have built up within the Pepco Group. Leveraging our scale and sourcing strategy, we offer a diverse range of clothing, homeware-led general merchandise (GM) and fast-moving consumer goods (FMCG), providing our core shopper, Pepco a “family on a budget”, with their regular shopping needs. Leading clothing and GM-led variety discount Understanding customer preferences and focusing on quality is retailer in CEE expanding into Western Europe key to delivering customer satisfaction and growing market share. • Focus on price leadership with market leading entry prices Local stores in convenient locations • Clothing for the whole family (with a particular strength in kids and babywear), home décor, toys and seasonal products We own and operate a multi-format pan-European variety discount retail business, with more than 4,900 conveniently located stores • 3,781 stores across 18 countries, which includes 549 stores in located across 20 countries. By focusing on standardisation and Western Europe. repeatability across our operations, we aim to expand our store • footprint efficiently in line with our growth prospects. Integrated with PGS, our global sourcing office dealing with a supply network of over 375 vendors utilising around 750 factories Infrastructure and distribution network Poundland We continue to invest in the development of high-quality, scalable infrastructure, including information technology, warehouses and Delivering amazing value in branded quality, more efficient and resilient back office support. everyday essentials • FMCG-led offering with a price architecture anchored around a Direct sourcing operation limited number of simple price points PGS maximises buying scale and operating efficiencies, thereby • Growing product offering of clothing and GM including home, lowering costs and improving margins. With the full product garden, food, toys, health, beauty, pets & more development chain for clothing and merchandise managed • within the Group, the vertically integrated model provides 836 stores across the UK and Ireland flexibility in sourcing. Dealz Our colleagues Fast growing discount retailer Talent retention and development is central to the success of our • Dealz offers unique international FMCG and GM products at the business, and we aim to maintain the right pipeline of skills within lowest prices with 3,000 products across 18 categories the Group to facilitate the long-term success of our growth strategy. • The best deals and brands are sourced from Poland, Europe and We maintain a strong commitment to ethical and responsible business conduct, honesty and integrity, both within the Group Asia, offering thousands of branded products for the whole family and throughout our value chain. • 331 Dealz stores in Poland 10 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Pepco Group is a powerhouse retail business with a strong reputation for delivering outstanding value, range and convenience for our customers.” Stephan Borchert Chief Executive Officer Our proposition Creating value Revenue growth +10% in FY24 Customers 61m customer transactions per month across 20 countries Colleagues 3,048 colleague promotions across the Group during FY24 Society Supporting charitable activities across the Group, including the Poundland Foundation Supply chain €1.4bn of shipment value in FY24 1 2 3 Governments Signiﬁcant economic contribution Sell for less Buy for less Operate for less to our operating countries through our role as both taxpayer and tax collector, including payroll-related • • • Price leadership €1.4bn sourcing scale Standardised taxes remitted in employing >47,000 store format • • colleagues across the Group Low-risk inventory Seasonal • buying model Volume leverage • Simple price on operating costs • architecture Direct from suppliers • Discount mindset • • Optimised markdown Consolidated volume management 11 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Our strategy Delivering our strategy Our core strategy to date has been outlined by the key pillars below: Optimising and Enhancing the expanding our customer oﬀer store network Delivering stronger Driving cost cash generation and operational through disciplined eﬃciency investment R This has also informed our ESG strategy, which can be found on page 34 Pepco has strengthened its store Notwithstanding these overriding strategic pillars, the year in review was characterised by addressing issues in the business that proﬁtability and customer positioning in had arisen through undisciplined growth during the previous the CEE region using its proven, proﬁtable couple of years. and scalable model” • Rebuild profitability in Pepco's core CEE heartland, prior to formulating a clear plan for profitable expansion in Western Europe Andy Bond • Ensure we addressed shortcomings in our customer offer, in particular focusing on regaining price leadership Non-Executive Chair • Address cost inflation and drive cost optimisation opportunities from our growing scale • Temper the pace of store openings focusing on higher return locations and markets, while also improving working capital through better supplier and stock management 12 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Optimising and expanding our store network The Group’s ambition remains to be Europe’s leading variety discount retailer. We aim to achieve this by oﬀering quality clothing and GM products at the best prices, with stores located close to our customers, whether that is in high streets, retail parks or shopping malls. The convenience of our store locations, along with maintaining price leadership is critical to providing a compelling value proposition for our customers and to growing market share. Poundland – Performance impacted by transition Net new store openings 392 to Pepco-sourced clothing and GM ranges Poundland opened 84 stores during FY24 that was a higher-than- normal store opening programme, which largely reflects 46 Wilko conversions. In addition, we closed 71 stores in the period, as a result of The Group strengthened its store profitability and customer positioning managed lease expiries as well as a number of closures related to the in the CEE region during the period, returning to pre-Covid 19 opening of the new Wilko conversions nearby. There has been a mixed performance. New store growth was principally focused in core existing performance from the Wilko conversions, with some stores operating markets, where we have a strong track record in driving returns. For above expectations, but others requiring further investment in order to Pepco, there was a particular focus on growing scale in our core CEE bring the look and feel and product proposition in line with the markets, while we continue to assess our performance in Western Poundland offer. It has become clear, however, that larger stores are not Europe. For Poundland in the UK, the growth of new stores was primarily where Poundland delivers best performance, and we will be much more driven by the conversion of Wilko stores. Dealz Poland made further focused on any future store openings being of a size of around 700 sqm, progress in Poland. which is optimal for the offer. The Group delivered 392 net new store openings during FY24. This In FY25, there will be greater scrutiny of new Poundland store openings, excludes the impact of exiting Austria, which resulted in the closure of 73 given the reduced profitability the business has faced during 2024. New stores. Our store opening programme in FY24 partly reflected stores will be opened only where we are confident of delivering an commitments made during FY23, which resulted in a front-end-loaded appropriate return on investment through delivery of our core offer to store opening schedule. This was reflected by 203 net new stores in Q1, our customers. Additional rigour will also be applied to any investment in but reducing to 86 net new stores in Q2, and just 103 stores during the store refits and improvements. second half overall. Poundland’s FY24 profit was significantly impacted by not delivering on For FY25, by prioritising attractive returns on capital, we are targeting the ambition of enhancing the business through replacing its traditional approximately 300 net new stores across the Group, with new stores clothing and GM ranges with those of Pepco. The rationale for the move principally focused on the Pepco brand and primarily in the CEE region. was to consolidate sourcing to a larger buy across the Pepco Group in order to drive scale, increase efficiencies, lower prices for customers and Pepco – Profitability rebuilt in core CEE business raise Pepco brand awareness. However, it became clear as the year Our Pepco CEE business remains the key engine driver for the Group, progressed that both the planning and execution of this implementation delivering the highest returns across the estate. Pepco’s core CEE had shortcomings, with gaps in clothing and GM product for the UK business generated 53% of FY24 Group’s revenues, but given the customer, impacting revenues and profitability during the year. It further historically strong profitability of these stores, it generated the vast became clear that our UK customers had a different expectation of the majority of the Group’s EBITDA. Poundland brand proposition compared with Pepco customers which has led to a fundamental rethink of approach going forward. The core CEE estate had seen store profitability (4-wall EBITDA pre-IFRS 16) decline since 2019, as a result of external factors (supply chain Pepco-sourced clothing was first introduced across the Poundland disruption, input cost inflation, weak consumer spending, higher freight estate from September 2023, bringing new, high-quality ranges into the costs and adverse movements in foreign exchange), as well as internal UK market at a lower price point. While customer reaction to the new factors (losing focus on price leadership and unfocused growth). Pepco clothing ranges saw positive feedback – notably around value Reversing this trend and driving improving 4-wall EBITDA was a key – the product offer did not fully replicate the previous breadth or depth objective at the start of the year. This is a target that we exceeded by of Poundland’s men’s and women’s ranges and coverage across sizes, September 2024, driven by higher revenues, a strong recovery in gross leading to lower LFL revenues. The improved clothing offer for children’s margin and various other operating initiatives. We continue to see wear, which is a core strength for Pepco, did not offset the shortfall in further opportunity to grow store operating profit during FY25. adult wear. There was similar disruption for Poundland’s new Pepco- sourced GM ranges, which were introduced from March 2024. Notably Pepco opened 331 net new stores during the year, with 232 net new these had gaps in seasonal ranges, where Poundland has had strength stores in CEE and 99 net new stores in Western Europe. About 70% of net historically, and had a weaker range offer in other categories of new store openings were across our core CEE markets during the period. historical Poundland strength, for example in DIY. We saw 83 new net store openings in Poland in the period, with 1,339 stores in total at the period end. Outside of Poland, the majority of new While we have taken remedial steps to correct sizing and some of the openings within the CEE took place in Bosnia and Romania, Serbia and other range issues for FY25, which will address some of the missteps of Czechia. FY24, it is clear that Poundland will need to take significant steps in order to recover performance and meet customers’ needs and During FY25, our store location strategy will continue to be targeted into expectations. the CEE region, given the familiarity of these markets and our confidence in driving returns, which will enable us to improve our strong Dealz – Store growth of 17% and positive EBITDA market position. There remains a significant white space opportunity in our core CEE markets to meet our overall store targets over the next Our Dealz stores in Poland offer well-known international FMCG brands several years. and GM at low prices, with 3,000 products across 18 sub-categories. Dealz opened 48 net new stores during the year, reaching 331 stores in Western Europe (“WE”) remains an important region for future growth for total that now operate across Poland. Brand awareness continues to Pepco, particularly within Iberia (Spain, Portugal) and Italy, which grow quickly for our key target customers aged between 19-45 years old. account for 87% of WE sales and 82% of stores. While we remain confident in developing a store performance model that will allow us to The performance of Dealz stores in FY24 improved over the prior year, drive profitable growth and attractive returns in WE, we will continue to and generated positive EBITDA for the first time, but was impacted by manage the pace of new store openings in this region over the near the introduction of Pepco-sourced GM from March 2024, which has not term until we see appropriate and sustainable performance being resonated with customers. In the FMCG category the market was highly delivered. competitive during the year driven by the large Polish food retailers, and Dealz suffered from not having sufficient range differentiation which it is The opening of a new distribution centre (“DC”) in Madrid, Spain during reviewing. Strengthening the GM offer will be a key focus during FY25 in September 2024 marks an important step in realising an appropriate order to recover sales and improve gross margin. economic model for our Iberian operations. It will structurally reduce current high transport and distribution costs, while improving availability in stores which should drive improved sales. The opening of the DC will cut lead times on clothing and GM products within Spain and Portugal, while lowering stock holding and distribution costs. The DC will help support growth in the region for the foreseeable future. 13 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Our strategy in action Optimising and expanding our store network New distribution centre to support growth in Iberia In September 2024, the Group launched its newest DC near Madrid, Spain, a key milestone in enhancing returns and improving product availability in stores. The opening of this new DC will significantly reduce the transport cost and time for goods to reach our stores across Spain and Portugal, which were previously served by DC Gyál in Hungary. The Guadalajara DC is essential for expanding our store footprint in the Iberian region, supporting our growth in the coming years. It features advanced stock handling capabilities, including a 140-metre sorter machine that organises and prepares items for picking, streamlining our operations and boosting efficiency. Stock arrives from Asian vendors via the port of Valencia, as well as directly from European vendors. The DC will achieve a full flow of goods to all Iberian stores via ten transport hubs. 14 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Our strategy continued Enhancing the customer oﬀer Whilst knowing our customers has always been a key focus, the growing competitiveness of the markets in which we operate now demands that we further deepen our customer understanding, enabling us to respond to their evolving needs with market-leading prices. New Pepco collections every season into the business to continue to support and drive our growth 130 agenda. We invest in colleague training and development providing mandatory, induction and development training to our people at least on an annual basis through our regional training Pepco – Better understanding our customers centres. Additionally, we use tablets in stores to offer more Improving our knowledge of customers is a key element of our e-learning options. A key focus has been on improving internal strategy. We regularly conduct surveys and talk to our career pathways to retain the best talent. Reflecting on our customers to understand more clearly consumer trends, brand commitment to the development of our colleagues, we equity and impacts of macroeconomic activity. This analysis is promoted over 3,048 colleagues during FY24, which then used across the business, from buying teams to demonstrates our strong commitment to internal development. procurement, in order to tailor our products and store layout to our customers’ needs. Refits and refurbishments The business regularly adapts the offer to ensure a continuing At the end of 2023, we paused our Pepco New Look range of new products on store shelves. The offer is regularly programme, where we were initially targeting to re-fit all c. refreshed and improved with over 130 new collections every 2,500 Pepco stores in the CEE region, as it was clear we were season. not delivering the expected sales uplift and returns. As a result, while 715 conversions took place in FY23, the number of store Feedback from our customer surveys continues to highlight refits dropped to 219 in FY24, which were mainly concentrated that two-thirds of shoppers view low prices as the key reason across Poland, Romania, Czechia and Slovakia. We are for Pepco customers to visit a store. The chain has a large base reviewing our store formats with a view to meeting better the of loyal customers with over half visiting a store more than once needs of our customers and future conversions will reflect a a month. We know that customers have faced a more difficult more considered investment approach as we continue to financial period over the last year, which has meant greater maintain and enhance our network. appreciation for the affordability of Pepco’s customer offer. Poundland grows digital presence Poundland’s online business has grown rapidly, although from a standing start, following the 2022 acquisition of Poundshop. com, with orders more than doubling under Poundland ownership. During the year, Poundland has transitioned operations to a new distribution hub at Darton, South Yorkshire, which gives the business extra capacity to expand its online operations at pace. Last year, the business combined Poundshop.com with its principal Poundland.co.uk website as the natural next step in order to allow customers to shop from a more tailored e-commerce offer from Poundland online. It is clear customers are using the online channel for a different shopping mission with a significantly higher average basket online versus in store. Poundland has continued to explore the potential for increasing digital engagement with its customers. During the year the business launched its first-ever Rewards app, Poundland Perks, allowing customers to save more at the check-out. Poundland Perks was previously on trial in around 100 stores on the Isle of Wight, Northern Ireland and Scotland, before rolling out nationwide in October 2024. Customers are rewarded for their spending to earn ‘Perks Points’ when they spend in different parts of the store. Customers can then turn these points into digital reward vouchers to spend in store or online, or to save for a bigger purchase. Investing in our people to enhance customer satisfaction We believe that the ability for colleagues to build rewarding careers enhances both the service we provide to our customers and our employment brand. We continue to invest in the capability of our people both in terms of developing our existing colleagues, and attracting new, high-calibre recruits 15 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Our strategy continued Driving cost and operational eﬃciency Our strategy has been to focus on improving proﬁtability, cash generation and operational simplicity. This requires a more disciplined approach to new store openings and investment in existing core markets, addressing all non-core and underperforming areas of the business, and driving cost eﬃciency through labour and end-to-end supply chain improvements to help oﬀset inﬂationary pressures. Operating costs (IFRS 16, excl. rent) as % of sales Exit of Pepco Austria 28.6% The Group announced on 19 February 2024 that it would cease its operations in Austria. The Group entered the market in 2021 and operated 73 Pepco stores in the country. The decision to discontinue these operations was made as part of the Group’s review of Innovation and optimisation to achieve efficiencies performance across all its markets. Pepco Austria was losing cash Labour efficiencies are a focus area in both Pepco, against a backdrop EBITDA of about €1 million per month, such that the exit has improved of a sustained high wage inflation environment in Central Europe, and underlying EBITDA. Austria has been classified as a discontinued item in Poundland given increases in labour costs. The businesses have the financial statements. In total, Austria has led to a non-cash loss on delivered a reduction in labour hours of 6.2 FTE per store in FY23 to 5.7 in discontinued operations of €49 million largely reflecting impairment of FY24 through a combination of investment in technology such as loans and receivables payable to other subsidiaries of the Group. The self-service tills, more efficient allocation of colleagues on the shop cash costs associated with the exit of Austria all incurred during the year floor, as well as changes in processes to reduce stock handling. In amounted to approximately €13 million, including costs. addition, the implementation of modern retail point-of-sale systems has Modernising IT to provide platform for future growth improved the speed and quality of service to our customers and simplifies the work for our colleagues. The rollout of a modern IT platform across the Group is fundamental to the future successful growth of the business, providing a robust system, Reviewing underperforming and non-core areas while delivering operating efficiencies. We have been deploying an Over the last 12 months, we have stopped non-core activities across the Oracle ERP (enterprise resource planning) system across the Group. Poundland successfully launched new modules during summer 2023, business in order to focus on our core retail operations. This has included cancelling early-stage plans for franchising and wholesaling giving it a single, modern inventory management and finance solution, while introducing enhanced visibility and management of financial opportunities. We paused Pepco’s New Look refit programme across the CEE markets, exited loss-making Pepco Austria, paused expansion of data, along with greater efficiency in managing accounts payable. our Pepco Plus format in Iberia, and undertook a rigorous performance For Pepco, the development of a new ERP platform has been under review of all stores across the Group. We have enforced greater development over the past three years, specifically focusing on the disciplines across our internal investment approvals and revisited our deployment of an Oracle system supporting stock and finance, similar store evaluation processes and capex to provide greater certainty on to what had been implemented in Poundland. However, it became clear, the results from new store openings and other investments going following a review earlier in the year, that there were issues with the forwards. design and implementation plans for this system. We have now decided to stop the programme, and instead will relaunch a revised programme Move to a single Pepco format with clearer objectives and timelines given the strategic changes in Our Pepco ‘Plus’ store format, which is currently limited to Spain and Pepco’s operations and growth aspirations. The recent recruitment of a Portugal, offers FMCG in addition to our core range (clothing and GM). new Group CIO will drive this relaunch in order to streamline our model This format created additional complexity to our operations, alongside to drive operational efficiencies. the need for larger stores, higher levels of capex and consumed additional time for management instead of focus on our core clothing Continuing to diversify sourcing footprint and GM categories. In order to simplify the business, and to focus on the Pepco Global Sourcing (PGS), our captive wholly-owned sourcing entity stronger returns delivered by our standard Pepco format, the Group for clothing and GM, provides a key competitive advantage for the announced during the year it had paused the rollout of new Pepco Plus Group. Very few discount retailers have an integrated sourcing entity, stores, pending a more detailed review of the future of this format within instead relying on third-party agents. PGS was fully integrated into the Group. Pepco during FY23, helping to drive further operating efficiencies. Pepco Plus represents a very small portion of the overall Pepco estate. PGS supported the delivery of 22% unit volume growth year-on-year At the end of FY24 we operated 123 stores all located in Spain and during FY24 with its share of the Group’s buy (excluding branded Portugal, accounting for 3% of overall Pepco stores. products) increasing from 88% to 92% of our clothing and GM ranges. By maintaining direct relations with over 375 suppliers, which represent over Subsequent to the year end and following a detailed review of the format, the Group has taken a decision to focus on its core clothing and 750 factories principally in Asia, we are able to achieve significant cost benefits and negotiate better payment terms, with a consequent GM format and to develop this to the best that we can make it. Accordingly, we are closely evaluating the best positioning for our positive impact on our working capital. Pepco ‘Plus’ stores in Spain and Portugal over the next 12 months. We do PGS has continued to focus on diversifying its sourcing footprint. PGS’ EU not expect this to impact the business opportunity in these markets sourcing office, in Poland, saw the value of FOB sourced in the region given the expected growth opportunity for Pepco generally. exceeding our initial expectations, although it remains a small percentage of the overall buy. We expect these near-shore sourcing operations to grow further in FY25, as some of our remaining direct vendors migrate to PGS. We have also increased our sourcing flexibility out of countries such as Cambodia and Pakistan. 16 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Delivering stronger cash generation through disciplined investment Greater focus on disciplined capital investment has improved cash generation. This ﬁnancial strength positions us well to continue executing our growth strategy while maintaining a strong balance sheet. FY24 free cash generation operating cost efficiency. Following significant progress during €168m the year we have confidence that we can deliver improving cash flow and value to our shareholders over the long term, while maintaining a strong balance sheet and healthy liquidity. By delivering more measured growth – doing less, to achieve Capital allocation policy more – the Group has taken a more disciplined approach to The Group reviewed its approach to allocation of capital with investment capex in FY24. This was principally related to the overriding objective being to enhance shareholder value. slowing new store growth and refits. The number of gross store We will continuously assess our medium-term plans which take openings was significantly lower in FY24 (509) compared to the account of investment in the business, growth prospects, cash prior year (806). We also spent significantly less on the Pepco generation, net debt and leverage and shareholder returns. store re-fit programme, with 219 conversions in FY24, compared Our capital allocation framework is centred on maintaining a to 715 in FY23. strong balance sheet and ensuring the business operates with With respect to our store investments, we reviewed our store an ample level of liquidity. Where the Group generates excess assessment model with a more stringent selection criteria and cash, it will continue to prioritise investment to grow its business revised financial targets to drive a better quality pipeline of organically, consistent with attractive returns on capital. new stores. In addition to this, we reduced capex spend per Recognising the current strength of the balance sheet (FY24 store and optimised working capital requirements which pre IFRS 16 financial leverage is 0.5x) and increasingly helped drive an improved return on invested capital on our cash-generative nature of the business, the Board has newest stores. decided to announce an inaugural full year dividend for FY24. As a result, capital expenditure in FY24 was significantly lower It is the Board’s intention to pay a dividend initially at a payout y-o-y at €212 million (FY23: €382 million), which supported a of 20% of full-year underlying net profit. The Board’s strong improvement in free cash generation during the year. expectation is that the absolute amount of dividend will remain FY24 underlying operating cash flow was €906 million, which stable or increase on a full-year basis, subject to any increased by €174 million y-o-y. Free cash flow for the Group significant internal or external factors. was €168 million, an improvement of €274 million over the same period last year. Therefore, the Board has recommended a full year dividend of 6.2 Euro cents per share, subject to the approval of In relation to supply chain, we opened a new distribution shareholders at the Annual General Meeting that will be held centre in Spain, to support better market economics for our on 12 March 2025. Further detail, including payout dates, will be operations in Iberia. This DC is in a ramp-up phase at present. provided in due course. In relation to IT, we have invested in enhancing cyber security, POS terminals and systems and disaster recovery planning. Alongside the dividend, the Board will also review on an ongoing basis the potential for additional cash returns. Any All capital allocation decisions moving forward will focus on surplus capital identified over time may be returned to supporting our strategic objectives of driving LFL sales, shareholders by further dividends and/or share buybacks, targeting higher quality growth, strengthening our core subject to the Board’s discretion and shareholder approvals. infrastructure and control environment and improving 17 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Market review Navigating industry trends Pepco Group seeks to grow market share by better understanding our customers and what is inﬂuencing their shopping decisions. Knowing our customer Economic conditions We regularly engage with our customers to ensure that At the start of 2024, the CEE region showed signs of we understand their preferences, and can adapt our model recovery after a period of stagnation, with inflation as needed. Pepco conducted a customer survey earlier this declining from a peak of 10.6% in October 2022 to an year, confirming a number of facts: estimated 2.4% by April 2024, primarily due to falling retail energy prices. Despite a strong labour market and • Our core Pepco customer remains a mum on a budget. double-digit wage growth, which outpaces core inflation, The majority of our shoppers across all markets are the rise in the saving rate to 14.4% has limited private women, with nearly 80% professionally active and consumption growth to just 1.3%, still below historical trend having children in secondary education. Over half of levels. our customers are aged between 25 and 45. While real disposable income growth suggests some • Two-thirds of respondents view low prices as the key consumer prosperity, many customers continue to feel reason to shop at Pepco stores. Other reasons include the effects of the ongoing cost of living crisis. an attractive product range and good value for money. • Pepco enjoys a large base of loyal customers, with over What this means for us half visiting our stores more than once a month. Feedback from Pepco customers demonstrates a challenging financial situation, with nearly half of • Over two-thirds of customers who enter a Pepco store respondents complaining of deterioration over the last make a purchase, confirming that the Pepco shopping year due to inflation. This underscores the need to experience meets visitors' expectations and delivers further emphasise our price and value proposition. the products they seek. • Pepco customers admit they have faced a difficult Our response period recently, with nearly half feeling their financial • Maintaining price leadership will remain a core focus, situation has deteriorated over the last year due to particularly across key value items. inflation. This underscores the need to further emphasise • Continuing to prioritise convenience in our retail footprint our price and value proposition. by ensuring that our shops are located closely to where our customers live, work and play. • Maintaining regular engagement with our customers to understand and adapt our product ranges to their needs. Link to strategy Link to strategy 18 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Link to strategy Investing in Optimising and expanding Enhancing the Driving cost and infrastructure and people our store network customer offer operational efficiency to support growth Discount retail trends Supply chain Retail sales in Europe are forecast to increase by With 30% of global container trade transiting through the approximately 3.7% in real terms in 2024, supported by real Suez Canal, the unprecedented Red Sea shipping crisis, disposable incomes moving back into positive territory as resulting from conflict in the Middle East, upended supply inflation continues to slow. The evolution of consumer chains and increased shipping costs during the year. This spending habits and the prioritisation of experience caused the prices of some routes, particularly from Asia to spending is expected to continue, positively impacting Europe, to surge nearly five-fold, whilst also extending discretionary spend. shipping times to our key ports. The discount retail segment has grown more strongly over What this means for us recent years. The Polish clothing market has grown by 25% As a result, the Group experienced elevated spot freight since 2021 according to Euromonitor, with strong levels of rates and delays to container lead times. The majority of growth forecast to continue. The discount home market has our freight costs were contracted, but the business still seen similarly strong growth, up by 17% since 2021 in Poland. faced additional surcharges from carriers in relation to the longer shipping routes being taken. What this means for us Pepco has maintained a strong market position in its core In addition, these supply issues led to lower-than-expected categories. In kidswear, Pepco has continued to grow its stock at various points in the year, with stock typically market share which is over 30% in Poland. Market share in taking two to four weeks longer to hit shelves. homeware has grown by five percentage points over the Nevertheless, we saw the gradual improvement of inventory last five years to 12%. quality in Pepco during the year, with older stock from There remains a significant white space opportunity in our previous seasons being removed through mark down, which core CEE markets, for example in key countries like Romania, improved the mix towards higher-margin newer stock that is Hungary, Bosnia and Herzegovina, Bulgaria and Serbia. selling strongly. There are also new CEE markets open to us in the future including Macedonia, Kosovo and Albania. Our response • As we move into the new year, we are seeking to mitigate In Western Europe, there remains significant opportunity to supply issues by shipping product earlier from factory grow new stores in our existing markets, particularly in Spain which is expected to improve availability. and Italy, over the medium term, without the need to seek new country locations. • We are optimising shipping routes to ensure the fastest delivery times relative to cost. Our response • We are using a variety of carrier options, including air and • Continue to offer a range of product choices. train freight, where there is a more pressing need to • Maintain price leadership against key competition. receive stock quickly, particularly focused around seasonal goods. • Our new DC in Madrid, Spain will also help improve availability to our stores in Iberia by improving delivery times. Link to strategy Link to strategy 19 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Key performance indicators Monitoring performance across the Group The following key performance indicators (KPIs) include Alternative Performance Measures (APMs). The Directors use APMs1 as they believe these measures provide additional useful information on the Group’s performance. R The Group has environmental and social KPIs and targets which are shown on page 35 Link to strategy Investing in Optimising and expanding Enhancing the Driving cost and infrastructure and people customer offer operational efficiency our store network to support growth Store growth Total Space Revenue growth Number of net new stores 2,3 Retail trading space (‘000 sqm) Total sales growth (%) FY24 392 FY24 2,343 FY24 10.2 FY23 648 FY23 2,115 FY23 16.8 Achieving profitable growth drives our Retail trading space of 2.3 million square Like-for-like sales growth (%) ability to create value in the long term. metres represents an increase of 10.8% year on year. We took a more disciplined and targeted approach to growth in FY24 with 392 net FY24 (3.2) new store openings in FY24, leading to 4,948 overall stores. FY23 6.0 Definition and relevance: Definition and relevance: Definition and relevance: Net store numbers accounts for store Trading space is defined as retail LFL growth is fundamental to our Group closures during the year. trading space including tills, excluding strategy in delivering operating leverage. back-of-house and changing rooms. Disciplined and controlled store growth LFL revenue growth is defined as is fundamental to our Group strategy. Store space growth allows us to extend year-on-year revenue growth for our ranges and drive profitability. stores open beyond their trading anniversary and is reported on a constant currency basis. Link to Link to Link to strategy strategy strategy R Read more in our strategy section on pages 12 to 19 1 APMs are not defined under IFRS Accounting Standards and therefore may not be directly comparable with other companies’ APMs. These measures are not intended to be a substitute for, or superior to, IFRS Accounting Standards measurements. See note 27 for definitions of APMs. 2 New store numbers exclude Pepco Austria, which the Group exited from in February 2024. 20 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Proﬁt Stock Underlying EBITDA IFRS 16 (€m) Underlying EBITDA IFRS 16 Stock holding (€m) Margin (%) FY24 944 FY24 15.3 FY24 1,235 FY23 754 FY23 13.5 FY23 1,120 Underlying EBITDA of €944 million EBITDA margin is 180 basis points up Group stock holding has increased by represents a growth of 25% against FY23. year-on-year driven by a significant 10% against FY23 as a result of both gross margin recovery. the growth of the business and earlier purchase of inventory related to mitigating supply chain delays. Definition and relevance: Definition and relevance: Definition and relevance: Underlying profit before tax, net finance Underlying profit before tax, net finance Stock at cost post net realisable value costs, depreciation and amortisation. costs, depreciation and amortisation, (NRV) provisions. Prepared on an IFRS 16 basis. divided by sales excluding VAT. Prepared The cost of stock directly impacts the on an IFRS 16 basis. IFRS 16 is the accounting requirement profitability of sales. Aligning inventory under which EBITDA is reported. IFRS 16 is the accounting requirement levels with sales expectations is crucial to under which EBITDA is reported. ensuring optimal stock holding. Link to Underlying EBITDA pre-IFRS 16 Underlying EBITDA pre-IFRS 16 strategy (€m) margin (%) FY24 515 FY24 8.3 FY23 402 FY23 7.2 Cash generation EBITDA margin is 110 basis points up Underlying increase of 28% driven year-on-year driven by a significant by revenue growth and recovery Free cash flow gross margin recovery. of gross margin. FY24 168 Definition and relevance: Definition and relevance: Underlying profit before tax, net finance Underlying profit before tax, net finance FY23 (106) costs, depreciation and amortisation. costs, depreciation and amortisation, Prepared on an pre-IFRS 16 basis. divided by sales excluding VAT. Prepared on an pre-IFRS 16 basis. Pre-IFRS 16 EBITDA is the Group’s leading The Group’s cash generation materially metric on profitability. Growing EBITDA margin is a key focus stepped up reflecting solid EBITDA within our profit and loss statement. generation in conjunction with lower capital expenditure. Definition and relevance: Cash generated from operations, after lease costs and working capital movements but pre-capital expenditure, Link to Link to funding and investment. strategy strategy Executing in a disciplined manner with a strong emphasis on efficient working capital and returns will deliver strong cash flows. Link to strategy 21 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review A mixed scorecard Underlying EBITDA YoY +25.2% Net Cash from Operations (pre-Capex) €379m Introduction The Group experienced a mixed performance during FY24. While revenues hit record levels at €6.2bn (+10.2%), this was driven by new store expansion, against negative like-for-like (“LFL”) sales (-3.2%) in all three brands. Pepco saw quarter-on-quarter improvements in its LFL sales performance through the year, exiting the year in September with positive LFL. We will continue to focus on consistent LFL sales growth as a key priority for the Group across all brands. Notwithstanding the challenging top line, we delivered better, and earlier than expected gross margin recovery, driven by Pepco. This progress was driven by a combination of better buying from our suppliers, while also benefitting from a more favourable foreign exchange environment and normalised freight costs. Group gross margin improved by 390bps to 43.9% (FY23: 40.0%), while Pepco’s Neil Galloway gross margin increased by 530 bps to 46.9% (FY23: 41.6%), Chief Financial Officer recovering to its pre-Covid levels. This margin recovery, alongside an improving focus on costs, lifted FY24 Group underlying EBITDA (IFRS 16) to a record €944m, up 25.2% on the prior year. This was largely as a result of the improvement in Pepco’s underlying EBITDA which increased 41.7% A strong gross margin to €785m (FY23: €554m). In contrast, Poundland EBITDA declined recovery at Pepco and by 21.5% to €153m (FY23: €195m), due to weak execution on the transition to Pepco-sourced clothing and general merchandise greater investment discipline (“GM”). Dealz delivered positive EBITDA of €24m, although delivered record underlying undershot its target for the year due to the impact of transitioning proﬁt and a better cash to Pepco-sourced GM. performance, but this oﬀset a With tighter discipline on investment spending, particularly driven by reduced store openings, capex reduced significantly to €212m weak top line, with negative for the year, 45.0% lower than FY23 spend of €382m. Alongside LFL sales, and a signiﬁcant continued focus on improving working capital and optimising our deterioration in Poundland’s supply chain finance programme, net financial debt for the year reduced to €256m (FY23: €411m), the lowest level since the performance. Company’s IPO in 2021. As a ratio of EBITDA, pre IFRS 16 net financial leverage declined to 0.5x in FY24 (from 1.0x in FY23). With a healthy balance sheet and stronger cash generation the Group is well positioned for future growth. 22 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 We took decisive action to exit Austria during the year, given the We identified a number of areas of focus in FY24 to drive an underperformance across almost all stores in that market and improvement in financial performance, the following of which we with limited prospect of turning around performance in the have delivered: medium term. This has allowed better focus in our key markets. • A recovery in FY24 gross margin, which increased from 40.0% to The impact of exiting Austria has been classified as discontinued 43.9% year-on-year, principally driven by the improvement in operations in our financial statements. Pepco by 530bps to 46.9%. In February 2024, our discovery of a fraudulent phishing attack in • An improvement in the 4-wall cash EBITDA of our core Pepco Hungary, perpetrated through a sophisticated social engineering business in CEE to pre-Covid levels, a target which has been scam, led us to review both our financial and IT control exceeded during the year. Our average 4-wall cash EBITDA per environment to guard against any future similar events occurring. store in core CEE stores was €218k in FY24 compared with €217k Despite proactively working with the relevant authorities, it is in FY19. unlikely we will recover any of the funds which were the subject of • the fraud. A slow-down in store expansion with greater focus on improving returns on investment through ensuring we open higher quality As a result of the material underperformance in Poundland, along stores in our core markets. We opened 509 stores (net 392) in with slower growth prospects and a higher cost outlook in the UK FY24 compared with 806 stores in FY23 (net 648) with a following the recent budget, we have assessed the carrying value significant reduction in new store capex spend at €129m, of that investment and recognised a non-cash impairment of the compared with €207m in the prior year. Most of the stores goodwill and brand asset related to Poundland of €775m, which opened in FY24 have been focused on our core CEE markets has driven a reported net loss for the year for the Group of €662m. where we continue to deliver strong returns. On an underlying basis, Group net profit for FY24 was €179m, up • 14.0% on the prior year. Halting our New Look programme, which did not deliver the required return on investment, resulted in a €38m reduction in Strategic focus capex compared to the prior year. For much of FY24 the focus across the business was on Where we have underperformed relative to our expectations was remediating challenges resulting from the over-ambitious pace of in our sales targets, with negative LFL sales for the year across all store expansion across FY22 and FY23, stretching our resources three brands. Our positive sales performance for the year was and infrastructure. From a financial perspective we have four key driven by store expansion from FY23 (as we annualised prior year operating levers at our disposal to drive profitability and cash openings) and FY24. The need to drive positive LFL sales is a key generation across our business. These levers, which are covered focus area for FY25. throughout the financial review are: We also experienced higher operating costs. This was partly • Revenue underpinned by LFL performance, supplemented with related to budgeting our costs for a better sales outturn, which growth through new store expansion. Key to driving sales is our did not materialise, alongside experiencing continuing inflationary ability to deliver a relevant product offer at leading price points challenges in many of our key markets, particularly for labour. to retain our existing customers and attract new ones. With the underperformance of both Poundland and Dealz in • Gross margin driven by category mix and our ability to optimise adapting to Pepco-sourced clothing and GM ranges, it became sourcing and buy better, while managing certain external clear during the year that transitioning to a single business and factors such as foreign exchange movements, freight and customer offer was not working as expected. Consequently, while commodities, balanced with maintaining a price leadership each of Poundland and Dealz will have the option to continue to position and managing stock. source from Pepco’s product range, they will have increasing flexibility to source their own ranges appropriate for their markets • Operating costs principally across our store operations in and customers. This has resulted in some incremental costs as addition to our supply chain, central functions and head office. they resource for this compared with previous plans of closer Notwithstanding inflationary challenges it is critical we focus on integration with Pepco. growing our sales ahead of costs and drive greater operating leverage through cost efficiencies coming from increased scale. Aside from the trading performance, we also experienced some disruption and higher costs during the year related to our exit from • Cash generation through a combination of discipline on Austria (shown as a discontinued operation) and the impact of the investment spending, with increasing focus on returns, and fraud we experienced in Hungary. Following on from the latter effective management of our working capital principally driven event there was a detailed review of both our IT and control by focus on stock and supplier management. environment, with a variety of actions taken to strengthen these further in order to limit any likelihood of a future recurrence. 23 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review continued Strategic focus continued In relation to challenges with our supply chain during the year, the The Group’s and Pepco’s LFL performance over recent and events in the Middle East disrupted shipping. This resulted in prior periods helps to illustrate these factors, particularly longer lead times of containers arriving at our operating ports, the performance drop off in H2 FY23 following a strong H1. and having to carry additional stock in the business, all of which were unplanned. Further temporary delays were incurred later in LFL% Evolution the financial year, due to the political protests in Bangladesh, a key sourcing market for our clothing. 2.6% Trading environment FY19 Trade across the Group in FY24 remained challenging despite 6.1% improvements in macroeconomic indicators in our key markets. Whilst inflation and interest rate pressures receded from the levels -5.2% seen in FY23, they remained relatively high in most markets where we operate relative to historical levels, which maintained pressure FY20 -7.1% on our consumers as to how they prioritised their spend. While Pepco still retains, and has improved, a strong price leadership position in its key clothing and GM categories across the CEE 6.5% region, we are increasingly operating under a more intense FY21 competitive environment. 9. 8% Various supply chain issues affected the consistent and timely availability of stock in-store, which impacted trade for most of 5.2% FY24. Product availability issues due to supply chain delays were FY22 increasingly mitigated by shipping product earlier, optimising 7. 4% shipping routes, and selectively utilising faster carrier options. However, this led to some surcharges in freight rates as containers had to travel longer routes. Expedited methods, such as air or 6.0% train freight, needed to be used to guarantee timely stock FY23 availability, particularly for our seasonal ranges. 6.2% In Pepco, the combination of supply chain delays impacting store availability, together with the more difficult competitive -3.2% landscape contributed to negative LFL sales for FY24 of -2.8%. This FY24 improved sequentially quarter-on-quarter through the year and -2.8% we exited the year with positive LFL sales in September 2024. We also made progress in the improvement of inventory in Pepco through the year, with older stock from previous seasons being 6Yr CAGR Pepco Group +1.9% removed through mark down, improving the overall mix towards 6Yr CAGR Pepco +3.1% higher-margin newer stock. In the UK, where Poundland operates, we saw increasing Pepco Group Pepco competition from the larger format retailers during the year for share of the customers’ FMCG spend, resulting in weaker FMCG sales (+1.6% LFL) and margin, as we sought to mitigate this challenge. Performance was principally affected by the transition to Pepco sourced clothing and GM products, which has not met customers’ expectations for a variety of reasons. In clothing (-19.1% LFL), there were issues with the offer not fully replicating the previous breadth or depth of Poundland’s men’s and women’s ranges and coverage across sizes. In addition, with average unit prices being materially below Poundland’s prior offering (-14.9%), the business required significant increases in volume to deliver improving LFL sales which it was unable to achieve. GM (-9.1% LFL) was also impacted by the Pepco offering not resonating with our UK customers and some of the more traditionally relevant GM products being phased out, for example, some traditionally strong seasonal ranges. LFL sales in Poundland was -3.6% for the year, despite Q1 being +0.9%. Dealz also traded below expectations with LFL for the year landing at -4.8%, reflecting intense competition from other food retailers, including well established supermarkets, as well as issues with the Pepco-sourced GM offering. 24 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 FY24 financial performance Profit & Loss Account review The Group delivered strong FY24 underlying IFRS 16 EBITDA growth at +25.2%, with 180bps of EBITDA margin expansion. This was principally driven by the strong gross margin performance by Pepco following a normalisation of commodity costs, better contracting with suppliers, favourable FX movements and a stabilisation of container costs from the prior year. Operating costs increased by 18.6%, which was driven principally by store expansion and the impact of inflationary pressures, particularly on wages. With weaker than anticipated sales throughout the year, the Group’s operating leverage deteriorated by 200bps vs prior year. Recognising this, we are taking a more intense approach to both operating costs and capital investment as we go forward. FY23 YoY YoY Pepco Group (€m) FY24 (restated) (reported) (constant) Revenue 6,167 5,596 10.2% 8.1% Like-for-like revenues (%) -3.2% 6.0% n/a n/a Gross profit 2,706 2,239 20.9% 18.7% Gross profit margin (%) 43.9% 40.0% 390 bps 390 bps Operating costs (1,762) (1,486) 18.6% 16.2% Operating costs % 28.6% 26.6% 200 bps 200 bps Underlying EBITDA 944 754 25.2% 23.3% Underlying EBITDA margin 15.3% 13.5% 180 bps 190 bps Underlying EBITDA (pre-IFRS 16) 515 402 28.1% 26.6% Underlying EBITDA margin (pre-IFRS 16) 8.3% 7.2% 110 bps 120 bps Depreciation and amortisation (564) (459) 22.9% 20.5% Underlying EBIT (IFRS 16) 380 295 28.8% 27.8% Net financial expense (109) (81) 34.6% 32.1% Underlying PBT 271 214 26.6% 25.7% Underlying PAT 179 157 14.0% 15.3% Underlying EPS (cents) 31.1 27.2 14.3% 15.4% Impairment of Poundland (775) - n/a n/a Other non-underlying items (50) (55) -9.1% -12.7% Reported PBT (554) 159 <-200% <-200% Tax (108) (50) 116.0% 110.0% Reported PAT (662) 108 <-200% <-200% Reported EPS (cents) (114.9) 18.8 <-200% <-200% Loss from discontinued operations (49) (12) <-200% <-200% FY23 YoY FY24 (restated) (reported) Net debt 1,631 1,692 -3.6% Leverage: Net debt to EBITDA 1.7x 2.2x -0.5x 256 Net debt (pre-IFRS 16) 411 -37.7% Leverage (pre-IFRS 16): Net debt to EBITDA 0.5x 1.0x -0.5x 1 Numbers above based on continuing operations and according to IFRS 16 unless stated otherwise. 2 Pepco Austria is classified as a discontinued operation following the Group’s exit of Austria. All numbers above (including comparators) exclude Pepco Austria. 25 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review continued FY24 financial performance continued Revenue Group revenue of €6.2bn grew +10.2% during the year driven by continued store expansion, with 392 net new stores opened in the year. LFL revenue of -3.2% saw all three brands report negative LFL revenue during the year. While Pepco saw sequential improvement quarter-on- quarter during the year, and exited the year with positive LFL revenue in the month of September, there is intense focus on delivering positive sustainable LFL revenues as we move into FY25. Sales Growth % Pepco Poundland Dealz Total Q1 LFL (3.5%) 0.9% (4.6%) (2.2%) Q2 LFL (2.8%) (2.8%) (4.6%) (2.9%) Q3 LFL (2.7%) (6.9%) (7.3%) (4.3%) Q4 LFL (2.2%) (6.4%) (2.8%) (3.5%) FY LFL (2.8%) (3.6%) (4.8%) (3.2%) Sales Growth % Pepco Poundland Dealz Total Q1 Total 16.2% 3.5% 52.1% 13.0% Q2 Total 16.4% 7.9% 57.3% 14.9% Q3 Total 13.7% (0.7%) 30.1% 9.2% Q4 Total 10.3% (8.5%) 23.4% 4.1% FY Total 14.2% 0.2% 39.5% 10.2% Gross Margin % Operating costs Group gross margin increased by 390bps YoY to 43.9% in FY24, FY24 Group operating costs increased by €276m to €1,762m (FY23: driven by the 530bps YoY improvement in Pepco gross margin to €1,486m). The largest element of our operating costs relates to the 46.9%. During the year, the Group’s principal currencies of Polish costs of operating our stores, which increased by 13% during the Zloty, British Pound and Euro strengthened against our main year, from €1,165m in FY23 to €1,310m in FY24, driven by an increase purchasing currencies of US Dollars and Chinese Yuan which in trading space in Pepco. Store costs are principally driven by delivered a transactional FX benefit to the gross margin, movements in rent, labour and utility costs and the growth in the particularly in the second half of the year. This benefit is expected overall number of operated stores. to continue to support margin in FY25. Store costs Gross The ratio of Group store operating costs to revenues increased by margin % Pepco Poundland Dealz Total 40bps to 21.3% in FY24 (from 20.8%), driven by lower-than expected LFL growth during the year and store labour cost increases in both Q1 42.9% 39.6% 31.7% 41.7% Pepco and Poundland due to inflationary pressures and minimum 45.0% Q2 49.1% 37.8% 32.9% wage increases in the UK. Rent costs also increased 21.2% to Q3 47.3% 38.4% 35.6% 44.3% €459m. Q4 49.5% 38.1% 33.6% 45.2% SG&A costs FY 46.9% 38.6% 33.4% 43.9% FY24 Group SG&A costs increased to €452m in FY24 (from €321m in FY23) driven largely by increases in payroll costs, including During the fourth quarter of FY24, Pepco commenced a series of bonuses, due to headcount growth and wage inflation, additional targeted product price investments to maintain its price store opening and closure costs, increased IT system running leadership position, which will continue into FY25. This, together costs and investments in strategic projects across the Group. with a stronger focus on ensuring availability of key products lines and seasonal ranges, are some of the actions that we expect will underpin the recovery of sales into FY25. 26 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Underlying EBITDA Group underlying (IFRS 16) EBITDA increased 25.2% to €944m (FY23 €754m) during the year largely driven by sales growth coming from increasing store numbers, and gross margin expansion, offset by higher operating costs, principally linked to store expansion. Group underlying (pre-IFRS 16) EBITDA of €515m (8.3% of sales) represents an increase of 28.1% year-on-year. Segmental reporting During FY23, we reviewed the changing operating and financial profile of the Group as it continues to evolve and expand. We took a decision to change the segmental reporting of the Group in FY24 as follows: Presentation of financial information • Four geographic segments: UK and Republic of Ireland (“ROI”), Poland, Central and Eastern Europe, and Western Europe; and Where appropriate the financial information has been quoted on an “underlying” basis, removing the impact of • Three trading segments: Pepco, Poundland, Dealz. “non-underlying” items, defined as material and unusual in Geographic segments nature, in order to help the reader better understand the The business delivered strong sales growth in all regions other key drivers of business performance. Please refer to note 27 than the UK and ROI, driven by the growth of stores in these of the financial statements for detail on use of APMs for markets. The Group’s revenue growth during the year was driven further information. by a strong performance from Pepco and Dealz. Like-for-like revenue FY24 FY23 (%) (%) UK & ROI (3.6%) 5.5% Poland (3.6%) 4.9% CEE (1.7%) 8.3% Western Europe (6.5%) (0.3%) Total (3.2%) 6.0% 27 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review continued Segmental reporting continued Revenue Revenue by Geographic Location (€bn) FY24 Poland +14% 5-year CAGR vs FY23 Other CEE +19% 5-year CAGR €m FY24 FY23 (%) UK & Ireland +3% 5-year CAGR 6.2 UK & ROI 2,006 2,001 0.2% 5.6 0.6 Poland 1,618 1,414 14.4% 4.8 0.4 CEE 1,950 1,816 7.4% 4.1 0.2 2.0 3.5 0.1 1.8 Western Europe 592 365 62.2% 3.4 1.5 0.1 1.2 Total 6,167 5,596 10.2% 0.9 0.8 1.6 1.4 1.2 1.1 0.8 0.9 Trading segments Pepco represents 62.5% of total Group FY24 revenue (FY23: 60.3%) 1.9 2.0 2.0 1.8 1.7 1.7 and more than the entirety of the Group’s FY24 operating profit. Poundland and Dealz contributed 32.5% and 5.0% of total FY24 FY19 FY20 FY21 FY22 FY23 FY24 revenue respectively (FY23: 35.8% and 3.9%). The significant change in operating profit contribution was driven by an UK & Ireland Poland Other CEE Other WE improvement in performance in Pepco and Dealz, while Poundland performance declined due to the negative performance of its clothing and GM categories following a poor transition to Pepco-sourced products. Geographic Location Revenue Mix FY24 FY23 Like-for-like revenue (%) (%) 1% 2% 2% 4% 7% 10% Poundland (3.6%) 5.5% 24% 25% 28% Pepco (2.8%) 6.2% 31% 32% 32% Dealz (4.8%) 11.3% 24% 25% 26% Total (3.2%) 6.0% 25% 25% 26% FY24 51% 48% vs FY23 44% 39% 36% 33% Revenue (€m) FY24 FY23 (%) Poundland 2,006 2,001 0.2% Pepco 3,853 3,375 14.2% FY19 FY20 FY21 FY22 FY23 FY24 Dealz 307 220 39.5% UK & Ireland Poland Other CEE Other WE Total 6,167 5,596 10.2% FY24 Total revenue vs FY23 Underlying (IFRS 16) Operating profit (€m) FY24 FY23 (%) EBITDA Poundland (3) 43 -107.0% Pepco 411 271 51.7% Dealz (8) (14) 42.9% Other (20) (5) <-200.0% Total 380 295 28.8% Pepco 62% Pepco 82% Poundland 33% Poundland 16% Dealz 5% Dealz 3% 28 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Pepco Pepco Pepco FY24 sales grew at +14.2% driven by the annualisation of store openings in FY23, along with the in-year impact of opening 3311 net new stores in FY24. This took the total number of Pepco Revenue stores to 3,781, with new space growth of +11%. LFL revenues €3,853m landed at -2.8% for the year, albeit showed a steady improvement quarter-on-quarter, exiting the year in positive territory. +14.2% In FY24, Pepco did not enter any new territories, as management focused its attention on rebuilding profitability in its core CEE FY24 €3,853m region, alongside tighter capital investment and delivering operational improvements. We continued the expansion into FY23 €3,375m Western Europe, but at a slower pace than in FY23, with 99 new stores opened (vs. 302 in FY23), predominately in Italy (+42) and Spain (+29). In February 2024 the group announced the exit from LFL Austria, as the market had not achieved the level of profitability -2.8% that was expected and to focus management’s attention on driving results in more profitable markets. As we move into FY25, we are seeing some early signs of recovery driven by better performance of our key value items in GM and FY24 -2.8% clothing, reflecting better prices alongside improved stock availability in our stores. FY23 6.2% FY24 Underlying operating costs (IFRS 16) in Pepco has increased Gross margin by 20.1% year-on-year in absolute terms. A large portion of this 46.9% relates to the expansion of the estate, inflationary pressures, cost associated with upgrading capacity and capability in specific teams and investment in strategic projects. +530bps Pepco’s FY24 underlying EBITDA (IFRS 16) increased by 41.7% to FY24 46.9% €785m (FY23: €554m), with the underlying EBITDA margin expanding 400bps year-on-year to 20.4%. This was driven by FY23 41.6% gross margin improvements, partly offset by cost headwinds. On a pre-IFRS 16 basis, FY24 underlying EBITDA was €504m, up by 48.7% versus FY23. EBITDA 20.4% 1 The opening balance of 3,523 Pepco stores (as at 30 September 2023) has been restated to 3,450 to account for the 73 discontinued Austria stores. This is made up of the 53 stores as at the end of FY22 taken out of the FY23 opening +400pbs balance and 20 stores opened in FY23. FY24 20.4% FY23 16.4% EBITDA pre-IFRS 13.1% +300bps FY24 13.1% FY23 10.1% 29 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review continued Poundland Poundland Poundland’s FY24 performance was characterised by a weak performance in LFL sales (-3.6%). The main driver of LFL sales underperformance was led by GM (-9.1%) and clothing (-19.1%), Revenue following the transition to Pepco-sourced ranges at the beginning €2,006m of the year. FMCG, which is 67% of Poundland’s sales mix, delivered +1.6% LFL sales for the year, with consumers continuing to experience pressure from macroeconomic factors. +0.2% Issues with Poundland’s new Pepco-sourced ranges include the FY24 €2,006m new clothing offer not fully replicating the previous depth of Poundland’s men’s and women’s ranges, coverages across sizes, FY23 €2,001m as well as relatively low unit prices. In GM, the offering did not resonate with the UK consumer, and some of the more traditionally LFL relevant products and categories, such as stationery and -3.6% gardening, being phased out, or with reduced space allocation in stores. Stock shrink also become a material issue for Poundland, rising to c. €52m in FY24, up 30% over the last two years. Management is FY24 -3.6% committed to putting measures in place to minimise the impact of this widespread industry trend, while also seeking to ensure the FY23 5.5% safety of our store-based colleagues. Gross margin for the year expanded by 100bps, following better Gross margin margin from the Pepco ranges and benefits from reduced 38.6% container costs. Further margin benefits were limited by the mix impact from a disappointing performance in GM and clothing. +100bps Operating costs (IFRS 16) as a percentage of sales increased by 300bps to 30.9%. This is due to provision releases in FY23, FY24 38.6% compounded by inflationary pressures across FY24, predominately due to UK wage inflation. SG&A cost increases in FY23 37.6% Poundland were driven by one-off adjustments in FY23 that were not repeated in FY24, increased Oracle running costs following the EBITDA full deployment on this system in Poundland, and one-off 7.6% marketing costs related to a TV campaign. Poundland reported FY24 EBITDA (IFRS 16) of €153m, below the -220bps prior year at €195m. EBITDA margin declined by 220bps to 7.6%. Pre-IFRS 16 EBITDA was €28m in FY24, falling by 62.7% due to sales FY24 7.6% underperformance, provision movements and year-on-year inflationary cost increases. FY23 9.8% EBITDA pre-IFRS 1.4% -240pbs FY24 1.4% FY23 3.8% 30 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Dealz Dealz Similar to Pepco, Dealz delivered strong sales growth of 39.5%, driven by space growth, as LFL sales landed at -4.8%. Dealz added 48 net stores during the year, all in Poland, the only country Revenue in which the company now operates. The negative LFL sales result €307m was driven by the weak performance in GM (-11.9%) as a result of the transition to Pepco-sourced ranges at the beginning of the year. FMCG also performed below expectations with a LFL of +39.5% -2.8%, impacted by a highly competitive food market in Poland. FY24 €307m Gross margin for the year expanded by 430bps to 33.4%. This was driven by FX benefits as a result of the relative strength of the FY23 €220m Polish zloty against Dealz’ buying currencies. IFRS 16 operating costs as a percentage of sales improved by 40bps to 25.5%, driven by sales leverage, helping to offset the absolute increase in the LFL cost base (+€21m) as a result of the store expansion, as well as -4.8% other inflationary pressures. At an IFRS 16 level, Dealz EBITDA increased by €17m, to hit €24m in FY24, driven by revenue growth. This represents a 470bps EBITDA margin expansion year-on-year. FY24 pre-IFRS 16 EBITDA was FY24 -4.8% €3m, increasing from a EBITDA of €(8)m in FY23. FY23 11.3% Gross margin 33.4% +430bps FY24 33.4% FY23 29.1% EBITDA 7.9% +470bps FY24 7.9% FY23 3.2% EBITDA pre-IFRS 0.9% +450bps FY24 0.9% FY23 -3.6% 31 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial review continued Profit before tax Non-underlying items FY24 Group statutory loss before tax was €554m (FY23: profit of In FY24 non-underlying items totalled €825m (FY23: €55m) €159m), driven principally by the non-cash impairment of including: Poundland. At an underlying level, FY24 Group underlying PBT • €775m relating to the non-cash impairment of Poundland increased by 26.6% to €271m (FY23: €214m). (primarily goodwill) Our effective interest rate has increased to 6.85% (FY23: 3.75%) due • €29m relating to ERP Software-as-a-Service (SaaS) costs which to our secured bond incurring interest of 7.25% and other debt is considered to be unusual and material costs by nature facilities being subject to variable interest rates which have increased year on year. These facilities, including the increased • €16m relating to the fraud in Hungary revolving credit facility (RCF) from €190m to €390m, provide • €4m relating to Poundland restructuring additional liquidity given the ongoing growth and expanding • scale of the business. €1m relating to the Value Creation Plan (VCP) scheme Other than the fraud in Hungary the other non-underlying items Taxation are consistent with prior reporting. In FY24 the Group’s tax charge was €108m (FY23: €50m), Discontinued operations representing an effective tax rate of -19.4% (FY23: 31.8%). Our effective tax rate is significantly distorted by non-underlying items The Group announced on 19 February 2024 that it would cease its and the de-recognition of previously recognised deferred tax operations in Austria. The Group entered the market in 2021 and assets, with the Group’s underlying effective tax rate in FY24 being operated 73 Pepco stores in the country. The decision to 33.8% (FY23: 26.8%). discontinue these operations was made as part of the Group’s review of performance across all its markets. Austria has been FY24 classified as a discontinued item in the accounts. In total, the €m Underlying Non-Underlying Reported Austria exit led to a non-cash loss on discontinued operations of €48.5m, largely reflecting impairment of loans and receivables (Loss)/profit before taxation 271 (825) (554) payable to other subsidiaries of the Group. Taxation (charge)/credit (92) (16) (108) (Loss)/profit after taxation 179 (841) (662) Balance Sheet review Effective tax rate 33.8% -1.9% -19.4% We saw growth in core balance sheet items such as “Property, plant and equipment”, and “Right of use assets” which are largely driven by additions from our continued store expansion program. FY23 (restated) Additions totalled €205m and €403m respectively for these line €m Underlying Non-Underlying Reported items. (Loss)/profit before taxation 214 (55) 159 On an annual basis, we are obliged to perform an impairment Taxation (charge)/credit (57) 7 (50) analysis of the goodwill held on the Group’s balance sheet to (Loss)/profit after taxation 157 (48) 108 determine if the carrying value can be recovered. As a result of Effective tax rate 26.8% 12.3% 31.8% the significant deterioration in Poundland’s performance, resulting from the weak execution to Pepco-sourced clothing and GM In our five largest operating markets of the UK, Poland, Spain, ranges, along with slower growth prospects, increased Romania, and Czechia, the headline rate of corporate tax is currently 25%, 19%, 25%, 16%, and 21% respectively, with performance in each operating territory impacting our effective tax rate. Group stock holding (€m) FY23–FY24 130 122 116 115 108 55 101 101 41 95 277 39 26 29 257 49 242 50 50 257 205 235 217 252 904 822 762 703 680 684 664 626 Dec 22 Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 Jun 24 Sep 24 Pepco Poundland Dealz Poland Inventory Days 32 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Balance Sheet review (continued) Cash flow review competition and a higher cost outlook in the UK following the Pepco Group (€m) FY24 FY23 YoY recent budget, we have fully impaired the goodwill of €725m Cash generated by Operations recognised on the acquisition of Poundland. We have also (reported) 906 732 +174 recognised an impairment of €38m relating to the Poundland Lease payments (IFRS 16 brand as well as €13m of impairments related to fixed assets. Payments and Interest) (442) (380) (62) Inventory increased by 10.3% to €1,235m in FY24 (FY23: €1,120m), Tax Paid (85) (75) (10) representing an increase in stock days from 122 to 130. Stock Net Cash from Operations holding has increased due to continued growth in store numbers (pre-Capex) 379 276 +103 and in bringing forward stock purchases into Q4 earlier than last Capex (212) (382) +170 year in order to ensure the Group is ready for the peak Christmas Free Cash Flow 168 (106) +274 trading period. Funding and investment activities (164) 84 (248) Financing Following the issue of an inaugural Eurobond in FY23 to refinance Net Cash Flow 3 (22) +25 our earlier Term Loan A, there were no financing events in FY24. Effect of exchange rate However, we did exercise our option to extend the maturity of our fluctuations 30 9 +21 €390m Revolving Credit Facility (RCF) by a year from April 2026 to Cash and cash equivalents at April 2027. the beginning of the period 330 344 (14) The ratings agencies maintained their corporate ratings on the Cash and cash equivalents at company as follows: Fitch at ‘BB’, Moody’s at ‘Ba3’ and S&P Global the end of the period 363 330 +33 at ‘BB-‘, in line with our key peers. Net debt (pre-IFRS 16) 256 411 (155) As of 30 September 2024, the Group’s total gross external debt Net debt: underlying EBITDA (excluding lease liabilities) was €620m, and made up as follows: (pre-IFRS 16) multiple • €375m 7.25% bond due 2028 (leverage) 0.5x 1.0x (0.5x) • €250m Term Loan B due 2026 Current ratio 1.0 0.9 +0.1 • Zero drawn on the Company RCF Free cash flow improved by €274m to €168m in FY24, allowing a • €7m finance leases repayment of borrowings. There was a small improvement in working capital, with an increase in supply chain financing offset • Less €12m of debt issuance costs which have been capitalised by higher year-end inventory. Cash at 30 September 2024 was €363m, €33m higher than prior year, partly reflecting pay down of our RCF, resulting in a net Lease payments of €442m grew 16.2% year-on-year, reflecting the financial debt position of €256m (FY23 €411m). Our net debt to growth in the store portfolio. underlying LTM EBITDA leverage ratio is as follows: Capex was significantly lower for FY24 at €212m (FY23: €382m) • 0.5x on a pre-IFRS 16 basis (excluding leases) reflecting greater investment discipline along with a slower store roll-out, fewer store refits and a focus on our core CEE markets. In • 1.7x on an IFRS 16 basis (including leases) FY24, capex represented 3.4% of revenues and the principal areas This puts our leverage at the lowest level since Pepco Group’s IPO of expenditure were as follows: in 2021 and significantly below our covenant levels. This outturn • €129m was invested in opening 509 gross new stores (FY23: 806 reflects much stronger discipline and focus on cash and balance gross new stores). This included 84 stores in the UK & ROI, 166 in sheet management. Poland, 160 in CEE and 99 in Western Europe. UK expansion was Net external finance expenses increased from €80m in FY23 to largely driven by the opening of a number of stores obtained €109m in FY24. Of this, non-lease related interest costs increased via the collapse of Wilko. by €12m to €32m, an effective interest rate of 6.85%. • €40m was invested in store refit programmes. • €22m was invested in IT. • €12m was invested in supply chain infrastructure principally relating to the opening of a new DC in Spain. • The remaining €9m investment relates to maintenance capex, largely store upkeep. Neil Galloway Chief Financial Officer 20 December 2024 33 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability Our ESG strategy Introduction: Launching our new 2030 ESG strategy: In today’s world, customers, employees, and investors increasingly As we navigate the evolving landscape of global business, the expect businesses to contribute positively to society and the urgency of addressing environmental and social challenges such environment. At Pepco Group, we understand the importance of as climate change or social inequity is very clear. At Pepco Group, sustainable business practices. This report highlights our ongoing we recognise that the path to long-term success lies in our ability efforts to integrate sustainability into every aspect of our operations to innovate and adapt to these challenges. That’s why we have – from reducing our environmental footprint, to ensuring fair and developed a new sustainability strategy, representing a bold step safe working conditions, and maintaining strong governance forward in our commitment to building a more sustainable and practices. We are building a retail business that not only meets equitable future. It is designed to integrate social responsibility the needs of today but also contributes to a more sustainable and environmental sustainability deeply into every facet of our and equitable future for all. Our focus is on providing value to our operations, from how we source products, how we operate and customers, driving sustainability into every price point and product how we engage with customers and communities. Our approach offering. We believe in the democratisation of sustainability – so is guided by three core pillars: Planet, People and Product, each everyone can participate in protecting the planet and supporting of which is underpinned by specific, measurable goals that align decent working conditions – no matter the size of their budget. with global sustainability standards and disclosure requirements. Our 2030 ESG strategy will deliver our mission to demonstrate that We report our ESG progress on an annual basis. This ESG price is not a barrier to sustainable and ethically report covers the 12-month period from 1 October 2023 to produced products. 30 September 2024. The organisational structure of Pepco Group comprises the following: Pepco, Dealz, Poundland, PGS. Following In FY24, the Board approved this new five-year ESG strategy the introduction of the EU Corporate Sustainability Reporting (2025-2030) which applies across the whole Group. The three Directive (CSRD), Pepco Group will be required to report according core pillars enable us to map better to material topics identified to the European Sustainability Reporting Standards (ESRS) for the by stakeholders through double materiality assessments. The first full financial year data set after January 2024. Due to Pepco timing for launching a new strategy works well – our UK business, Group’s financial year, that means our first report will follow the Poundland, concluded its previous five-year sustainability action close of our FY25 financial year (1 October 2024-30 September plan (2019-2024) this year. 2025). We will complete an EFRAG-aligned Double Materiality The strategy simplifies our previous strategy while maintaining Assessment in Q1 FY25 and assure the process as preparation the same key aspects: for our CSRD disclosure in 2025. As part of our transition to a low-carbon economy, we include our annual EU Taxonomy report New 2030 strategy Previous strategy in this report Our climate-related financial disclosures started Planet Greener environment with our UK operating company, Poundland, in 2023. Further detailed information on the internal processes and programmes People Exceptional employer that we have developed to manage our impacts (and those on us) Most valued supply chain can be found in the ESG section of our website. Stronger society We welcome stakeholder feedback on our ESG reporting – Product Better products please contact [email protected]. Underpinned by strong governance Resilient business Planet People Product Reduce our Develop our carbon footprint people Use responsibly sourced materials in products Use less materials Care for our colleagues Minimise waste 34 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Revised targets: To align with the EU CSRD requirements, we have established the following targets to measure progress against our strategy. The targets were developed with senior leaders and key functional groups within the business and then approved by the Group Executive Committee and the Board. In each case the targets: • align to our new 2030 five-year strategy (Planet, People and Product); • align to material topics which will be assessed in early FY25 in an ESRS-aligned Double Materiality Assessment (DMA); • align to CSRD reporting requirements; and • use FY24 as the baseline against which we will measure future progress. The table shows how we map strategy across targets, KPIs, materiality and future CSRD disclosures. The definitions and baselines of each target are described in the subsequent sections of this report. Planet targets KPIs Link to FY23 material topic Related CSRD ESRS topical standards Reduce scope 1 and 2 Scope 1 and 2 emissions Climate and carbon emissions by 50% emissions by 2030 Standard E1: climate change Reduce supply chain carbon Scope 3 emissions Responsible supply emissions by 25% by 2035 chain (environment) 100% of own-brand product % of product packaging that Waste and Standard E5: resources packaging designed for is recyclable packaging and circularity circularity by 2030 % reduction product Waste and Standard E5: resources packaging intensity packaging and circularity Reduce operational waste Tonnes of operational waste Waste and Standard E5: resources by 20% by 2030 packaging and circularity People targets 100% of employees can Engagement survey score participate in feedback channels by 2030 Employment Standard S1: own workforce 40% women in senior % of women in top three positions by 2030 leadership levels 100% Pepco own-brand % of own-label products Responsible supply Standard S2: value chain workers products are ethically made in Category 1, 2 and 3 chain (social) sourced by 2030 factories by 2030 Product target Increase responsibly sourced % of certified cotton in Responsible supply Standard E5: resources materials to at least 30% in own-brand range by 2030 chain (environment) and circularity own-brand products by 2030 35 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued Planet – Environment Pepco Group is committed to minimising our environmental impact and advancing sustainability across our operations. We have embedded environmental stewardship into our business practices and decision-making processes. In this section, we outline our approach to environmental sustainability through our strategic pillar, Planet. We recognise that addressing environmental challenges requires us to not only reduce our own footprint but also to work collaboratively with our stakeholders, including suppliers, customers, and communities. Planet strategic pillar: Priorities Associations and accreditations SDGs • Reduce our carbon footprint • Responsible Business Forum Poland • Use less materials • Forestry Stewardship Council (FSC) • Minimise waste • PEFC – Programme for the Endorsement of Forest Certification • Oeko-tex® Standard 100 – certification for textile product safety including Policies organic cotton • Pepco Group Environment Policy • Pepco Group Packaging Policy Our activities generate greenhouse gas (GHG) emissions The significant increase in absolute emissions from FY23 to FY24 through our operations (stores, warehousing and shipping), is due to a number of factors, several of which are one-off actions products and product packaging. We are committed to in FY24: minimising the environmental impact involved in the • We continue to improve and extend our carbon reporting. We manufacturing, transportation, storage and consumption of have closed several reporting gaps from FY23 to include less the products we sell. estimations and more actual data, for example the employee As part of our new 2030 ESG strategy, we have set new car fleet in Pepco and Dealz Poland store heating emissions. Group-wide goals against which we will measure progress. In • For several months in FY24, our new Spanish distribution centre this first year of Scope 3 baseline calculation, we have used was generating electricity from on-site diesel generators while transaction data to get a spend analysis and identify hotspots. waiting for connection to the national grid, resulting in much The data comes from supplier invoices and covers purchased higher emissions than expected from 76,364 litres of diesel. products and services, capital goods, upstream transport and Going forward, all our Spanish operations (office, stores and distribution, and business travel. Moving forward, we will collect DC) will source renewable electricity. actual carbon data from key suppliers (starting with top annual spend) which will provide an increasingly accurate picture of • In FY24, Poundland took over 61 stores from Wilko. These stores progress against our goals. had a non-renewable gas energy contract and increased Poundland’s scope 1 stationary combustion carbon emissions by 270% from FY23. Scope 1 emissions from diesel transport also Reducing our carbon footprint increased due to the increase in store footprint. In FY24, we have established baselines for Pepco Group across scopes 1, 2 and 3. • More stores were opened in high carbon-emitting countries: 50% of net new store openings were in Poland, Czechia, Serbia % of total and Bosnia. The electricity in these countries is predominantly Tonnes CO2e emissions generated from coal which has a carbon emission factor of Scope 1 20,477 1% 0.806 tCO2e vs natural gas (Italy: 0.455 tCO2e) or renewable electricity (Spain: 0.134 tCO2e). Scope 2 129,099 4% Scope 3 2,944,536 95% % change FY24: absolute and intensity results scope 1 and 2 FY22 FY23 FY24 FY23-FY24 Absolute tCO2e 106,214 101,674 149,600 + 32% Intensity tCO2e/€m turnover 22.0 18.0 24.0 + 25% 36 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 We have established the following absolute GHG emissions reduction goals which have been approved by both the Executive Committee and the Board: 1. Reduce scope 1 and 2 carbon emissions by 50% by 2030 (against a FY24 baseline). 2. Reduce supply chain carbon emissions by 25% by 2035 (against a FY24 baseline). These goals form interim targets for our net zero strategy as described in the next section. Progress against the goal on Scope 1 and 2 emissions reduction forms part of the 10% ESG element of the Executive LTIP performance conditions. Net zero strategy The Pepco Group net zero strategy was agreed by our Board and senior business leaders early in 2024. Our long-term ambition is to reach net zero as defined by the Science-Based Targets Initiative (SBTi). The SBTi’s Corporate Net Zero Standard enables companies to set robust and credible net zero targets in line with a 1.5°C future. Net zero focuses on reducing GHG emissions as much as possible before neutralising any emissions that cannot be avoided using permanent carbon dioxide removals. Pepco Group net zero goals Scope 1 Net zero 2035 Scope 2 Net zero 2040 Net zero 2050 Scope 3 Net zero 2050 Progress against these long-term goals is supported by the ESG 2030 strategy carbon emissions interim goals described above. The table below describes how we intend to reach net zero interim and long-term goals. Further details will be described in our Climate Transition fact sheet available in the ESG section on our website. Pepco Group net zero carbon transition action plan 1. Emission reduction targets: 8. Reporting and transparency: Pepco Group commits to ambitious and science-based Pepco Group is committed to transparently reporting its emission reduction targets encompassing scope 1, scope 2, progress toward net zero goals. This includes regular disclosure and scope 3 emissions. of emission data, progress against targets, and the impact of sustainability initiatives. Targets will be set in accordance with the latest climate science and will be regularly reviewed to ensure alignment with global 9. Offset and removal strategies: efforts to limit temperature rise. Where emissions cannot be eliminated by other means, Pepco 2. Renewable energy adoption: Group will invest in high-quality carbon offset projects and explore carbon capture technologies. Pepco Group will transition to 100% renewable energy for its operations. This involves investing in on-site renewable energy projects, purchasing Renewable Energy Certificates (RECs), and Resources and circularity exploring Power Purchase Agreements (PPAs) for renewable Beyond GHG emissions, the Planet pillar within our 2030 strategy energy sources. sets targets with regard to packaging and waste as part of our priorities to use less materials and reduce waste, contributing to 3. Energy efficiency measures: a low-carbon circular economy. Implementation of energy-efficient technologies and practices At Pepco Group we focus on reducing resource consumption to reduce overall energy consumption. Regular assessments will by designing our own-brand product packaging for circularity and be conducted to identify emerging efficiency solutions. minimising weight. We define “packaging designed for circularity” as packaging that is designed to be easily reused, recycled, or 4. Supply chain engagement: composted to ensure that materials are kept in use for as long as possible. We emphasise the use of fewer resources by setting a Collaborative efforts with suppliers to set emission reduction goal to reduce packaging weight and volume while maintaining targets and promote sustainable practices. product protection and usability. In addition, we request recycled 5. Innovation and research: content in our product specifications and use standard labelling to indicate how and which materials can be easily recycled by Partnering in research and development to explore and adopt consumers. innovative technologies that contribute to emissions reduction. Our revised packaging goals are designed to be more specific and measurable and will enable us to track progress 6. Circular economy practices: more effectively: Integration of circular economy principles into product design, 1. 100% of own-brand product packaging is designed for manufacturing, and end-of-life management to minimise waste circularity by 2030 and reduce environmental impact. 2. 20% reduction in product packaging intensity by 2030. 7. Employee and stakeholder engagement: Inclusive programmes to educate and engage employees, customers, and other stakeholders in sustainable practices. Regular communication will keep all stakeholders informed about our progress and goals. 37 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued Planet – Environment continued For the period under review, activities which contribute to one or more of the following six environmental objectives are in scope for reporting: (i) climate change mitigation; (ii) climate change Resources and circularity continued adaptation; (iii) Sustainable use and protection of water and marine resources; (iv) Transition to a circular economy; (v) Pollution Baseline prevention and control; and (vi) Protection and restoration of Goal KPI FY23 FY24 biodiversity and ecosystems. 100% of own-brand1 % of packaging that New goal 99.4% packaging is reusable, in FY24 Approach designed for recyclable or In order to present the required KPI disclosures we have assessed circularity by 2030 compostable our activities in terms of Taxonomy eligibility and Taxonomy % reduction New goal 0.053 kg/ alignment under the following methodology: packaging intensity in FY24 unit sold • Step 1: Identify activities eligible under the Taxonomy (Taxonomy-eligible activities) – as in the previous year, all 1 Own-brand is defined as products offered to consumers under the Pepco, Poundland and Dealz brands, and manufactured by selected suppliers with activities listed in the Taxonomy were analysed in terms of design, qualities and packaging specified by Pepco Group. revenue, capex and opex Our FY24 baseline for recyclable own-brand packaging is already • Step 2: Identify activities that are eligible and aligned under high. The goal will ensure that we maintain this performance and the Taxonomy (Taxonomy aligned activities) – review eligible focus on recyclable materials in our own-brand packaging. We activities against the Taxonomy’s substantial contribution will therefore concentrate our efforts on reducing the overall criteria and “do no significant harm” (DNSH) principle to assess amount of packaging around our own-brand products. The whether the activity meets the technical screening criteria. combination of the two goals will bring attention to the reduction Activities are aligned to one of the six environmental objectives as of packaging weight, while discouraging any regrettable outlined above, ensuring no double counting between objectives. substitutions with lightweight, but difficult to recycle materials. The following accounting principles have been applied to Waste determine turnover, opex and capex KPIs relevant to the The Group’s activity generates waste through both products and Taxonomy disclosures: product packaging in the supply chain, in store, distribution and • Turnover: total turnover corresponds to net sales in the office operations and through waste in customer households. consolidated income statement in the financial report. As part of our 2030 ESG strategy, we have a new, Group-wide For further information about turnover, please see the Group’s goal for operational (store, distribution and office) waste income statement in this report. reduction. • Capex: covers additions to tangible and intangible assets during the financial year considered before depreciation, Baseline amortisation and any re-measurements, including those Goal KPI FY24 resulting from revaluations and impairments, for the relevant By 2030, reduce operational Tonnes of 115,291 financial year and excluding fair value changes. The waste by 20% by 2030 from operational tonnes denominator shall also cover additions to tangible and a FY24 baseline waste intangible assets resulting from business combinations. • Opex: covers direct non-capitalised costs that relate to EU Taxonomy research and development, building renovation measures, The EU Taxonomy is a classification system that defines criteria short-term lease, maintenance and repair, and any other direct for economic activities that are aligned with a net zero trajectory expenditures relating to the day-to-day servicing of assets of by 2050 and the broader environmental goals other than climate. property, plant and equipment by the undertaking or third Under the Taxonomy, economic activities that qualify as party to whom activities are outsourced that are necessary to environmentally sustainable are those that: (i) contribute ensure the continued and effective functioning of such assets substantially to any one of six environmental objectives using science-based criteria; (ii) cause no significant harm to any of the other environmental objectives; (iii) ensure compliance with minimum social safeguards; and (iv) meet the technical eligibility screening criteria that have been set by the Commission. Companies must disclose specific KPIs – turnover, capital expenditure (capex) and operating expenditure (opex) – which indicate the portion of their economic activities which are environmentally sustainable. 38 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Eligibility assessment Our contribution to environmentally Following a review of activities listed in the Taxonomy, it was sustainable activities concluded that the main revenue-generating activity of the We have concluded that our main activity (retail of FMCG, GM and Pepco Group – retail of FMCG, GM and apparel goods – is not apparel goods) is not in the activities listed in the Taxonomy, and included in the taxonomy activities and is therefore out of scope. consequently our Taxonomy-eligible turnover and opex is 0% and As a result 0% eligible turnover is reported for this activity and Taxonomy-eligible capex is 3%, falling from 4% in FY23, reflecting eligible capex and opex related to this activity is also 0%. lower spend on energy efficient infrastructure as store upgrade programmes for LED lighting in Pepco and air conditioning unit However, capex and opex spend on activities related to the installation in Poundland tail-off as an increasing proportion of purchase of output from taxonomy-eligible economic activities the store portfolio has been upgraded over time. Taxonomy- that support our core activity was identified. This capex spend eligible opex of 0% is in line with the previous year. relates to the following categories: We believe our commitment to conducting business in an • 7.3 Installation, maintenance and repair of energy efficiency environmentally sustainable way, as described in this section, equipment – installation and replacement of energy efficient enables the Group to make a broader contribution to the EU’s air conditioning units in Poundland stores and installation of environmentally sustainable objectives. It should be noted that energy efficient LED lighting in Pepco and Poundland stores. the Taxonomy is subject to periodic revisions, which in the future • 7.4 Installation, maintenance and repair of charging stations may define a separate category and specific technical for electric vehicles in buildings (and parking spaces attached qualification criteria for activities. For the time being, the Group to buildings) - installation of electric vehicle charging points at has provided the appropriate disclosures in relation to its our Poundland head office and warehouse sites. supporting activities that are included in the Taxonomy. • 7.5 Installation, maintenance and repair of instruments and In order to ensure compliance with Taxonomy reporting devices for measuring, regulation and controlling energy requirements in the future, we will continue to monitor updates to performance of buildings – installation of smart meters and the existing regulation and inclusion of new economic activities as other building and equipment management systems which well as reviewing our approach to climate risk assessments in improve energy efficiency. order to meet the DNSH criteria. The percentage of eligible capex is calculated by dividing the We will continue to review the way in which information is Taxonomy-eligible capex by total capex as described above. classified and organised by Group companies in our finance and The percentage of eligible opex is calculated by dividing the IT systems. We will also identify opportunities for improvement in Taxonomy-eligible opex by total opex as described above. collecting and managing information to enable better reporting in the future. Alignment assessment For an activity to be taxonomy-aligned, it must meet three conditions (i) Substantially contribute to at least one of the six environmental objectives outlined above, by meeting the Taxonomy’s technical criteria; (ii) Do No Significant Harm (DNSH) to any of the other environmental objectives and (iii) comply with minimum social and governance safeguards, such as human rights, labour rights, and anti-bribery regulations. In order to meet the DNSH criteria companies must complete a climate risk assessment. The Group has not completed a climate risk assessment in line with the Taxonomy’s DNSH criteria. It is therefore not possible to conclude that any Taxonomy-eligible activities meet the alignment criteria and therefore Taxonomy- aligned turnover, opex and capex is 0%. The KPIs required to be reported under the Taxonomy are set out in the tables on the following pages. 39 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued Planet – Environment continued Taxonomy KPIs Substantial TURNOVER Contribution Criteria DNSH criteria Y; N; Y; N; Y; N; Y; N; Y; N; Y; N; EUR m % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T N/EL N/EL N/EL N/EL N/EL N/EL A. Taxonomy eligible activities A.1 Environmentally sustainable activities (Taxonomy-aligned) N/A N/A Nil 0% N/EL N/EL N/EL N/EL N/EL N/EL N N N N N N N 0% — — A.1 Turnover of environmentally sustainable activities (Taxonomy-aligned) N/A Nil 0% 0% 0% 0% 0% 0% 0% N N N N N N N 0% — — A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) N/A N/A Nil 0% N/EL N/EL N/EL N/EL N/EL N/EL A.2 Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Nil 0% 0% 0% 0% 0% 0% 0% 0% Total (A.1+A.2) Nil 0% 0% 0% 0% 0% 0% 0% 0% B. Taxonomy non-eligible activities Turnover of Taxonomy non-eligible activities 6,166.7 100% Total (A+B) 6,1667 100% Proportion of Taxonomy turnover/total turnover1 Taxonomy Taxonomy aligned eligible CCM 0% 0% CCA 0% 0% WTR 0% 0% CE 0% 0% PPC 0% 0% BIO 0% 0% 1 The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA); Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO). 40 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Criteria for CAPEX significant contribution DNSH Criteria Y; N; Y; N; Y; N; Y; N; Y; N; Y; N; EUR m % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T N/EL N/EL N/EL N/EL N/EL N/EL A. Taxonomy eligible activities A.1 Environmentally sustainable activities (Taxonomy-aligned) N/A N/A Nil 0% N/EL N/EL N/EL N/EL N/EL N/EL N N N N N N N 0% — — A.1 Capex of environmentally sustainable activities (Taxonomy-aligned) Nil 0% 0% 0% 0% 0% 0% 0% N N N N N N N 0% — — A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Installation, maintenance and repair of energy efficiency equipment 7.3 6.1 3% EL N/EL N/EL N/EL N/EL N/EL Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 0.4 0% EL N/EL N/EL N/EL N/EL N/EL A.2 Capex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 6.5 3% 3% 0% 0% 0% 0% 0% 4% Total (A.1+A.2) 6.5 3% 3% 0% 0% 0% 0% 0% 4% B. Taxonomy non-eligible activities Capex of Taxonomy non-eligible activities 205.2 97% Total (A+B) 211.7 100% Proportion of capex turnover/total capex1 Taxonomy Taxonomy aligned eligible CCM 0% 3% CCA 0% 0% WTR 0% 0% CE 0% 0% PPC 0% 0% BIO 0% 0% 1 The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA); Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO). 41 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued Planet – Environment continued Taxonomy KPIs continued Substantial OPEX Contribution Criteria DNSH criteria Y; N; Y; N; Y; N; Y; N; Y; N; Y; N; EUR m % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T N/EL N/EL N/EL N/EL N/EL N/EL A. Taxonomy eligible activities A.1 Environmentally sustainable activities (Taxonomy-aligned) N/A N/A Nil 0% N/EL N/EL N/EL N/EL N/EL N/EL N N N N N N N 0% — — A.1 Opex of environmentally sustainable activities (Taxonomy-aligned) Nil 0% 0% 0% 0% 0% 0% 0% N N N N N N N 0% — — A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Installation, maintenance and repair of energy efficiency equipment 7.3 0.1 0% EL N/EL N/EL N/EL N/EL N/EL Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 0.2 0% EL N/EL N/EL N/EL N/EL N/EL A.2 Opex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) 0.4 0% 0% 0% 0% 0% 0% 0% 0% Total (A.1+A.2) 0.4 0% 0% 0% 0% 0% 0% 0% 0% B. Taxonomy non-eligible activities Opex of Taxonomy non-eligible activities 2,371.4 100% Total (A+B) 2,371.8 100% Proportion of Taxonomy opex/total opex1 Taxonomy Taxonomy aligned eligible CCM 0% 0% CCA 0% 0% WTR 0% 0% CE 0% 0% PPC 0% 0% BIO 0% 0% 1 The following abbreviations have been used in the table above: Climate Change Mitigation (CCM); Climate Change Adaptation (CCA); Water and Marine resources (WTR); Circular Economy (CE); Pollution Prevention and Control (PPC); Biodiversity and Ecosystems (BIO). 42 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Nuclear and fossil gas-related activities Nuclear energy-related activities The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation No facilities that produce energy from nuclear processes with minimal waste from the fuel cycle. The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process No heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies. The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including No for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades. Fossil gas-related activities The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil No gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation No facilities using fossil gaseous fuels. The undertaking carries out, funds or has exposures to construction, refurbishment and operation of heat generation facilities that produce heat/cool No using fossil gaseous fuels. Article 8 (6), (7) and (8) of the Delegated Regulation 2022/1214 obliges non-financial undertakings to make relevant disclosures concerning their nuclear and fossil gas related activities. To meet this obligation, the Group presents the necessary information in the table above, including its turnover, capex and opex KPIs for nuclear and fossil gas related activities. The Group is not exposed to nuclear and fossil gas-related activities and therefore does not include any additional data. 43 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued People – Social Pepco Group is a multinational company operating across a wide range of geographies and jurisdictions. Strong business ethics and accompanying policies help to maintain responsible practices, protect human rights across the Group and value chain and uphold our reputation with our stakeholders. We are aware of the potential impact that any breach of ethical standards could have on the wellbeing and livelihoods of both our own employees and the people within our supply chain. People strategic pillar Priorities Policies SDGs • • Develop our people Anti-Bribery and Corruption • Care for our colleagues • Supplier Code of Conduct • Pepco Group Human Rights policy • Child Labour Remediation policy Associations and • Factory Audit policies accreditations • Whistle Blowing policy • Ethical Trading Initiative aligned • SEDEX: global data platform for supply chain assessment As part of our 2030 ESG strategy, we have established new goals and baselines to disclose and measure progress: Progress/ Goals KPIs FY23 Baseline FY24 100% of employees can participate in Engagement survey score Poundland only: Pepco, PGS and feedback channels by 2030 78% response rate Group only: 88% response rate 40% women in senior positions by 2030 % of women at top three leadership levels2 New goal in FY24 28% 100% of Pepco own-brand1 products are % of own-label products made in Category 1, 2 New goal in FY24 97% ethically sourced by 2030 and 3 factories3 Perform annual audit of our factories % of factories audited against our audit plan4 100% 100% These new goals address our key intentions to effectively engage with employees, to promote diversity and inclusion in our Group and to ensure that we uphold and extend ethical standards across our supply chain. 1 Own-brand products = products offered to consumers under the Pepco, Poundland and Dealz brands, and manufactured by selected suppliers with design, qualities and packaging specified by Pepco Group. 2 Top three leadership levels = business leaders at Group level: CEO, CEO-1 and CEO-2 plus operating company management teams. 3 Category 1, 2 and 3 factories are defined as having no-risk to medium-risk issues and are approved for new business with Pepco Group. Business restrictions are imposed on factories with Category 4 and 5 grading for having high-risk or critical issues. Factories need to submit a Corrective Action Plan for all high-risk issues identified during the audit. 4 Defined as the percentage of social and ethical audits completed by our Group sourcing compliance team against the annual audit plan. 44 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Own workforce As a large retail organisation with 47,760 colleagues in direct operations across 20 countries, we recognise the essential role our people play in driving growth. We are committed to creating an environment where everyone feels valued, supported, and empowered to achieve their best. We actively encourage internal career progression and personal development. Our commitment spans the entire Group, ensuring all colleagues, regardless of role or location, benefit from competitive pay, career opportunities, inclusive policies, and effective engagement. In FY24, we have extended our reporting capabilities in preparation for CSRD ESRS S1 disclosures in FY25. Employees FY24 Female Male Total Employed for a definite period of time 9,577 690 10,267 Employed indefinitely 29,836 7,657 37,493 Number of employees, by type of employment: Full time 25,311 4,151 29,462 Part-time 14,102 4,196 18,298 39,413 8,347 47,760 New employee hires and employee turnover FY24 Number of new Rate of new employee hires employee hires Number of new employee hires (permanent employees only) 11,899 59% FY24 Rate of employee Total number of employee turnover (per person) by: Number of leavers turnover Voluntary 11,152 23% 13,621 28% Involuntary1 Total 24,773 52% 1 Involuntary leavers include: redundancy/termination by company/end of fixed term employment. Employee training and development: We invest in colleague training and development providing mandatory, induction and development training to our people at least on an annual basis through our regional training centres. Additionally, we use tablets in stores to offer more e-learning options. A key focus has been on improving internal career pathways to retain the best talent; the table below summarises promotions across the Group. Average training hours per year per employee FY24 Average number of training hours per criterion Mandatory training Induction training Development e-learning 0.9 1.3 0.2 Classroom 4.4 11.8 2.5 Overall average number of training hours 5.3 13.1 2.7 Promotions FY24 Female Male Poundland 681 332 1,627 71 Pepco Dealz 285 35 PGS 12 0 Group 2 3 Total 2,607 441 3,048 45 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued People – Social continued Employee engagement: At Pepco Group, we have a wide range of channels to facilitate effective employee engagement, including feedback surveys, internal communication platforms, regular meetings, regional road shows and town halls. These provide us with the opportunity to share business performance, achievements and progress. Our ESG 2030 strategy goal is for 100% of employees to be able to participate in feedback channels by 2030. In FY24, we extended our employee survey across the whole Group and all employees have feedback channels available to them. Employee surveys within the different operating companies are on different time scales. There was no survey for Pepco in 2023 and while employee surveys were extended to PGS and Group employees in FY24, Poundland and Dealz closed their surveys after year end, and those results are excluded from the FY24 report. Employee engagement Survey response rate % Engagement score %1 FY23 FY24 FY23 FY24 Poundland 78% n/a 74% n/a Pepco n/a 75% n/a 54% Dealz n/a n/a n/a n/a PGS n/a 94% n/a 84% Group n/a 94% n/a 63% Average 88% 67% 1 Engagement is defined as the level at which employees commit their energy and effort to contribute to the Company’s success. Diversity and inclusion We remain focused on diversity, equality, and inclusion, regularly reviewing data from recruitment processes and feedback gathered through our annual surveys. Colleagues are empowered to be “champions” and can participate in various focus groups. We have established a goal to drive improved representation of females in leadership positions. Our goal is to achieve 40% women in senior positions by 2030. We define senior positions as business leaders at Group-level CEO, CEO minus 1 and CEO minus 2, plus operating company management teams. Senior leadership gender split As at 30 September 2024 Female Male Total Female % CEO 0 1 1 0% CEO – 1 0 5 5 0% CEO – 2 4 7 11 36% Dealz Management 4 4 8 50% Pepco Management 3 4 7 43% 0 7 7 0% Poundland Management Total 11 28 39 28% Diversity of governance bodies and employees Percentage of employees from each category compared Percentage of Executive Committee Percentage of Group Board members by to the total number of employees in the organisation members by age and gender age and gender FY24 Female Male Total Female Male Total Female Male Total 80% 20% 14,509 0% 0% — 0% 0% — Aged <30 84% 16% 26,910 0% 100% 3 0% 0% — Aged 30-50 Aged >50 81% 19% 6,333 50% 50% 2 29% 71% 7 Total % by gender 83% 17% 47,752 20% 80% 5 29% 71% 7 For FY24, our improved HR data and systems means that we can disclose gender pay gap by the country that we operate in. There are significant national variations influenced by local employment and hiring norms and the distribution of roles, with many women in store positions. We are committed to fair treatment and career support for all employees. Store positions, our largest employee group, follow standardised pay rates. We use grading and market benchmarks for other roles to ensure fair pay practices. 46 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Supply chain workforce Gender pay gap1 We work with our suppliers to develop sustainable and ethically Mean sourced product options which meet our customers’ preferences Country FY23 FY24 Difference at an affordable price point. Our vertically integrated supply Bangladesh 19% 37% 18.3% chain enables better oversight and influence over the ethical and Bulgaria 34% 30% -4.4% environmental management practices of our partners and -2% China 4% -5.7% therefore facilitates a higher level of risk mitigation. Our FMCG Czechia 29% 28% -1.2% products are sourced directly from both domestic and international suppliers including some of the world’s biggest Germany 44% 35% -9.3% brands. More details of our Supply Chain Human Rights approach Estonia2 -8% 0% - and programmes can be found in the ESG section of our website. Spain 18% 19% 1.4% Greece 22% 24% 2.4% We have strong policies in place to protect the integrity of our supply chain, including a Pepco Group Supplier Code of Conduct Hong Kong 28% 27% -1.3% which applies to all suppliers and contractors. The Code of Croatia 58% 55% -3.3% Conduct is aligned with the Ethical Trading Initiative (ETI) Base Hungary 17% 17% 0.4% Code, an internationally recognised code of labour practice Ireland 6% 3% -3.1% founded on the conventions of the International Labour India -9% -24% -14.9% Organisation (ILO). It includes expectations concerning human Italy 18% 15% -2.9% rights (with specific reference to child labour), ensures colleagues Lithuania 67% 77% 10.1% in factories are treated fairly, and lays out our position on bribery, transparency and unauthorised subcontracting as well as Latvia 43% 33% -9.6% environmental provisions. In FY24, we have further extended our Poland 45% 46% -0.8% policies with regard to the protection of human rights within our Portugal 22% 17% -5.0% supply chain, these can be found in the Pepco Group Compliance Romania 40% 43% 3.3% Policies Manual published on our website. Serbia 38% 33% -4.8% We have also established a new ethical sourcing goal to Slovenia 29% 29% -0.4% complement our previous ethical audit goal. Over the last few Slovakia 21% 44% 23.2% years, we have disclosed the percentage of ethical audits across United Kingdom 13% 9% -3.7% all our supplier factories. We will retain this goal as it is linked to the 10% ESG element of the Executive remuneration and is 1 ESRS S1-16: the male-female pay gap, defined as the difference between important to maintain focus on this key programme. We also average gross hourly earnings of male paid employees and of female paid wanted to be able to demonstrate the progress and outcomes employees expressed as a percentage of average gross hourly earnings of male paid employees. that our audit programme is driving with suppliers, therefore we 2 Estonia – zero male employees. have established a new goal related to showing the percentage of low-risk/high-performing suppliers against our ethical At Pepco Group, employees can report discrimination or standards. harassment through a dedicated procedure. During FY24, we launched a new, independent reporting process which facilitates Progress/ confidential reporting, and have taken steps to raise awareness of Goals KPIs Progress FY23 Baseline FY24 the procedure amongst our colleagues. 99 cases of discrimination were reported, compared to 0 in FY23, which demonstrates to us 100% of % of own-label New goal 97.4% that the system is working better than previously. Pepco products made in FY24 own-brand1 in Category 1,2, Discrimination cases (September 2023-August 2024) products are and 3 factories2 ethically Number of cases during period sourced by FY23 FY24 2027 Poundland — 87 Perform % of factories 100% 100% Pepco — 12 annual audit audited against Dealz — 0 of our our audit plan3 PGS — 0 factories Group — 0 1 Own-brand products are defined as products offered to consumers under the Total 0 99 Pepco, Poundland and Dealz brands, and manufactured by selected suppliers with design, qualities and packaging specified by Pepco Group. 2 Category 1,2,3 factories are defined as having no-risk to medium- risk issues and are approved for new business with Pepco Group. Business restrictions are imposed on factories with CAT 4 and CAT 5 grading for having high-risk or critical issues. Factories need to submit a Corrective Action Plan for all high-risk issues identified during the audit. 3 Defined as the percentage of social and ethical audits completed by our Group Sourcing Compliance team against the annual audit plan 47 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued Product At Pepco Group, we aim to democratise sustainability for our customers by oﬀering aﬀordable choice and demonstrating that price is not a barrier to sustainable and ethically produced products. One of the most impactful ways that we can positively contribute to our customers and communities is through oﬀering a larger range of aﬀordable and sustainable products available in our stores. Product strategic pillar Priorities Associations and accreditations SDGs • • Responsibly source Better Cotton Initiative product materials • SEDEX: global data platform for supply chain assessment • ZDHC: Zero Discharge Hazardous Chemicals – a collaboration platform Policies for textiles suppliers • Supplier Code of Conduct • Supplier Environmental Guidelines • Product quality specifications As part of our new 2030 ESG strategy, we focus on responsible sourcing of materials through the Product pillar. We have set a new goal which applies to all our own-brand textile products sourced for sale throughout the Group. Goal KPI FY23 Progress FY24 Increase responsibly sourced % of certified cotton in own-brand range 21% 26% materials to at least 30% in by 2030 own-brand products by 2030 100% of our suppliers are audited against our Ethical Sourcing policy and some of our materials are certified to external standards such as the Recycled Claim Standard (RCS), the Global Recycled Standard (GRS) for recycled materials, the Organic Content Standard (OCS) or the Global Organic Textile Standard (GOTS) for cotton, the Forest Stewardship Council for products from forestry, such as paper or wood, or Oeko-TEX for textiles. We want to focus our efforts, and our goal, on textiles and specifically cotton as clothing forms the largest percentage of our product mix and revenue. Certified cotton We have been a member of the Better Cotton Initiative (BCI) since 2022. The Better Cotton Initiative (BCI) aims to support farming communities socially, environmentally and economically. 2.13 million farmers in 22 countries now have a licence to sell their cotton as Better Cotton and the initiative has reached almost 4 million people whose working lives are connected to cotton production. Those people are trained to use water efficiently, care for soil health and natural habitats, reduce use of the most harmful chemicals and respect workers’ rights and wellbeing. The tonnage of cotton that Pepco Group sources under the BCI scheme is recorded via the BCI membership platform each calendar year. It is independently assessed and subsequently reported, providing an external validation of Pepco Group’s progress against this responsibly sourced material goal. By sourcing cotton through Better Cotton, Pepco contributes to raising the standards of cotton production, which translates into the wellbeing of farmers and the local environment. In addition to responsibly sourced cotton, we provide our customers with a range of affordable, sustainable product options across our clothing, general merchandise and FMCG lines including Oeko-Tex and Forest Stewardship Council (FSC) eco-certified products, recycled polyester clothing and vegan and vegetarian ranges. We label those products accordingly, to help our customers clearly identify more sustainable choices and show our commitment to environmentally responsible production. 48 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 ESG Governance As a Group, we are committed to ethical business conduct, strong corporate governance, sustainability and transparency, aligning performance with our long-term goals. We have established governance frameworks aimed at ensuring the eﬀective operation of our Board, protecting stakeholder interests, maintaining business resilience and building trust. ESG oversight and management Pepco Group Board and Audit Committee Reviews ESG strategies, goals and targets and monitors progress quarterly, advising the Board as appropriate ESG Executive Committee Chaired by the Group CFO, the ESG Executive Committee determines and aligns strategy, reviews progress and next steps for ESG across Pepco Group Group sustainability team OpCo sustainability committees Includes representatives from across the Group. It Implement ESG action plans and roadmaps at coordinates and reports on ESG work across the Group operating company level, and report on progress against agreed KPIs Group-wide policy revision and summaries The Group CFO oversees the Group’s ESG strategy and is responsible for its execution, supported by senior management in We have recently updated our policies to reflect a centralised the operating companies and the Group’s Head of ESG. Quarterly Group position. The policies are summarised below, and longer ESG progress updates are presented to the Group’s Audit descriptions can be found in the Pepco Group Policy Handbook. Committee. The ESG Executive Committee is chaired by the Group These revisions strengthen core principles aimed at safeguarding CFO to align and drive ESG priorities, review progress, manage our employees and the business, while promoting a culture of trust risks, and develop strategies for the Group and its companies. and integrity. Additionally, as part of our proactive approach to maintaining a culture of transparency, ethical conduct and Pepco, Dealz and Poundland have sustainability committees, with compliance across the Group, employees are required to representatives from key functions such as operations, marketing, complete a dedicated training module based on this updated commercial teams, finance, HR and IT/data management. The policy suite. Our mandatory Group-wide compliance training sustainability managers for each operating company work with initiative and user platform was extended in FY24, focusing on internal communications to regularly update our colleagues. critical topics such as anti-bribery and corruption, fraud The Group sustainability team facilitates cross-Group decision- prevention, whistle blowing and human rights. The training is making through consolidated reporting and drives best practice interactive, tailored to our specific industry and business areas, in the various business units. Our in-house sourcing business, PGS, and aligns with the standards and principles outlined in our and its Asia-based teams manage supplier-related ESG risks. ESG updated Group policy suite. To ensure inclusivity and engagement risks are monitored through the Group’s risk register (see the risk across the Group, the courses were translated into multiple section of this report), reported by Internal Audit and overseen by languages. We are actively monitoring completion rates and we the Audit Committee. have over a 90% completion rate reported across all entities. Additionally, we have published an annual training plan to Business ethics and human rights support the release of new topics, which will be subject to As a multinational organisation operating across diverse ongoing review and update. geographies and jurisdictions, we remain committed to upholding Anti-bribery and corruption strong business ethics and we have placed a strong emphasis on Bribery is illegal in all the countries in which we operate. It driving further improvements, including the revision and damages markets and communities and transfers resources into introduction of Group-wide policies and the implementation of new mandatory compliance training. Our enhanced policies aim the wrong hands. Our position on bribery and corruption is clear: to foster responsible practices, uphold human rights throughout we do not engage in corruption, and we never request, pay, the Group and its value chain and protect our reputation with authorise, or solicit or accept bribes, facilitation payments or stakeholders. We fully recognise the potential impact that any kickbacks, regardless of local custom or practice. There were zero breach of ethical standards could have on the wellbeing and confirmed cases of bribery and corruption in FY24. livelihoods of our employees, as well as those within our supply chain, and are dedicated to mitigating these risks through continuous improvement. 49 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Sustainability continued ESG Governance continued Human rights Pepco Group is committed to business practices in our operations and supply chain throughout the world that do not infringe human Group-wide policy revision and summaries continued rights and that are aligned with international standards of Anti-fraud responsible business conduct, including the conventions of the Pepco Group has zero tolerance of fraud committed by anyone International Labour Organisation (ILO). associated with it and takes all appropriate action to prevent Environment fraud in respect of its activities. We recognise that the impact At Pepco Group, we are committed to conducting business in an of fraud on economies, communities, businesses and individuals environmentally responsible manner. We recognise the importance can be devastating, and we therefore do not tolerate any form of sustainability and strive to reduce our environmental impact in of fraud connected with our business. We are committed to key aspects of our operations and supply chain. complying at all times with applicable anti-fraud laws wherever in the world we operate. Child Labour Remediation policy The Pepco Group has a zero-tolerance approach to child labour. Anti money-laundering and terrorist financing We are clear that there must be no recruitment of child labour or We do not assist, support, participate in or permit money exploitation of children in any part of our supply chain. laundering or terrorist financing. Even the slightest suggestion of being involved in any such activity would be extremely damaging Whistle blowing for the Group. Pepco Group is committed to conducting business with honesty and integrity and creating a culture of openness and Gifts and hospitality accountability. We encourage people to raise concerns and The proper management of the giving and acceptance of gifts are committed to supporting those that do. We strongly believe and hospitality is key to avoiding the risk of actual or perceived that this ethos will contribute to the success of our business, our improper influence and obligation. We prohibit the giving or people and our reputation. receiving of any gifts. Hospitality must be appropriate and approved through the correct channels. Grievance mechanisms and remediation Conflicts Since 2021, the independent whistle blowing provider, Safecall, We try to avoid conflicts wherever possible. Even where there is has been used by the Group. Over this period, the number of no ill-intention, the appearance of conflicting interests can reported cases has varied, prompting us to focus on improving compromise integrity and damage the Group’s reputation and the quality of reports through training and to implement a more image. We should never put our own interests ahead of those of refined investigation process in FY24. As part of these ongoing the business, even if it appears that the decisions may be efforts, a report assessment process was introduced earlier this beneficial for everyone. year, overseen by the Group compliance team. This process ensures that reports are directed to the appropriate subject Charitable donations, sponsorship and political donations matter experts for management and investigation, providing Making charitable donations and supporting community-based greater visibility at the Group level and a more efficient initiatives across the jurisdictions we, and our suppliers, operate experience for the reporter. in is an important part of our social responsibility commitment. We Our Whistle Blowing policy has also been updated as referenced must ensure that donations to charities or political organisations in the policy section to reinforce our commitment to conducting are made properly, and that we only support reputable business with honesty, integrity, and promoting a culture of organisations, whilst complying with the law and best practice. openness and accountability. Maintaining a zero-tolerance Due diligence stance on retaliation, we strongly encourage individuals to voice their concerns and remain dedicated to supporting Our third-party relationships can present risks to the business. whistleblowers. Going forward, we will incorporate cases of We could be investigated or prosecuted and suffer significant retaliation into our metrics, which are designed to monitor the financial and reputational damage if we are associated with overall effectiveness of the programme. people and/or companies who engage in wrongdoing. We therefore need to understand who we are dealing with and how To ensure independence from local management when they operate. We do this by conducting due diligence and investigating cases, we have implemented measures that drive assessing all suppliers and third parties with which we interact impartiality and objectivity throughout the process. This includes during the course of our business. diverting certain cases to our Group-level team and introducing an investigator conflict of interest declaration ensuring that Sanctions and export control sensitive or complex matters are handled without bias or We are committed to complying with our legal obligations relating influence. Additionally, our newly introduced “triage process” to sanctions and export controls. As the Group continues to further reinforces independence by reviewing and classifying expand its sourcing footprint worldwide, we need to ensure that cases centrally, ensuring they are escalated to the appropriate we are vigilant and maintain robust compliance practices that level for investigation and resolution. This structure helps maintain keep pace with the rapidly evolving legislation and the geographical reach of our business. the integrity and fairness of all investigations. Competition law Managing third parties Pepco Group is committed to fair competition across our We have further refined our approach to managing third-party operations anywhere in the world. We do not engage in relationships and the risks they present to the Group, achieving practices that restrict fair market competition and are committed significant progress in recent months. To strengthen our position, to complying with competition laws in the markets in which we we have updated our Supplier Code of Conduct, which will be operate. re-published in FY25. This revision reinforces our commitment to Anti-tax evasion acting ethically and responsibly in all regions where we operate. Pepco Group is committed to acting ethically and professionally Our goal is to source products and services in a manner that is in all our business dealings and takes a zero-tolerance approach ethical, sustainable, and socially responsible. The revised Code to tax evasion or the facilitation of tax evasion, whether under protects the integrity of our supply chain and outlines our UK law or under the law of any foreign country. We implement and minimum expectations for how suppliers should operate, helping enforce effective systems to counter tax evasion and its facilitation. us uphold our commitment to ethical business practices. 50 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 In addition to complying with legal requirements and our Code, We aim to be clear and proactive in our interactions with tax we expect our suppliers to be guided by our dedication to ethical authorities. Alongside our Corporate Criminal Offence Policy, our behaviour and to make the right choices. We fully support our Speak Out Policy and whistleblowing hotline are available in the suppliers in continually improving their social and ethical event that concerns are raised about our business conduct and practices. Connections to individuals or companies involved in integrity in relation to tax matters. No specific concerns were misconduct could lead to investigations or legal actions, resulting raised in this respect through these channels in FY24. We do not in serious financial and reputational damage. With a network of currently report on assurance metrics specifically related to tax suppliers across China, Bangladesh, Hong Kong, India, and matters; however this is an area that we will consider for future Pakistan, our due diligence process must address both country- development. specific risks, such as corruption and human rights concerns, and broader risks, including politically exposed persons (PEPs), Data protection and privacy sanctions, and watchlists. This year we have taken significant steps to enhance our data protection and privacy practices. We are working towards Additionally, we have focused on enhancing our third-party due implementing a robust Privacy Management Platform to strengthen diligence process. Given that third parties carry varying levels of our accountability and compliance with GDPR and other relevant risk, the depth of scrutiny applied will be adjusted accordingly. regulations. We have expanded cooperation among Group This approach allows the Group to make informed decisions on companies to establish a unified approach to data protection and whether and how to engage with each third party. By improving privacy, aligning policies, frameworks, and functional accountability. our methods, collecting valuable data upfront, prioritising key Group-wide training programmes have been launched to engage jurisdictions, and evaluating the availability and quality of data employees in privacy matters, raising awareness and fostering a available in those regions we are better equipped to assess these culture that values and protects personal data. relationships both initially and on an ongoing basis. This puts us in a stronger position to support and grow the business. We are committed to continuously enhancing our technical and operational controls to secure the data we manage. This Our approach to tax commitment is demonstrated by our active data protection We understand that the taxes we pay to governments in the committees and teams across the Group. Additionally, we have countries in which we operate are central to fiscal policy and established active processes to uphold data subject rights, macroeconomic stability, being an important source of revenue ensuring timely responses to requests. In FY24, we were not in providing a stable infrastructure, social fabric, and economic subject to any fines or corrective actions by any relevant Data environment for citizens of those countries who are also our Protection Authority. colleagues and customers. We are committed to conducting our business in an honest and ethical manner, and our core tax Reporting boundaries: principle is to manage our tax affairs responsibly, which means All entities described in this report are included in the ensuring that we pay the right and fair amount of tax at the right consolidated financial statements. Companies subject to time in the countries in which we operate, in compliance with local non-financial reporting are defined based on the operational and international law. control criteria, considering the significance of individual entities’ impact on relevant activity areas. This includes all relevant Our Board-approved tax strategy is reviewed and re-published sources of GHG emissions and other sustainability KPI reporting annually and, whilst a requirement under UK law, is intended to data over which the Group has the full authority to introduce and summarise our overall tax strategy as a Group. Our tax strategy can be found on our website under “Our approach to tax”: implement its operating policies at the operation. Under the www.pepcogroup.eu/about/how-we-operate. Operational Control approach determined by the GHG Protocol, 100% of the calculated impact arising from Group companies and Ultimate responsibility for tax governance and management of tax subsidiary entities over which Pepco Group has operational risk sits with the Board and the CFO, supported by the Group control is included. The organisational boundary is reviewed Treasurer and the Head of Group Tax, who engage with the Group continuously to ensure that any new operations are included Audit Committee. Day-to-day management of tax risk for our where necessary. This is completed using the organisational operating companies is delegated to the relevant Finance Director. structure from the Group’s Company Secretary. The ESG team is kept informed by the Legal Counsel about any changes. We seek to reduce the level of tax risk arising from our operations as far as is reasonably practicable by ensuring that reasonable The updated organisational and property records are then care is applied in relation to all processes which could materially reconciled to determine the boundary for the reporting year, affect compliance with our tax obligations. Known risks are after which the emissions source data is requested from the monitored for business and legislative changes which may impact appropriate site contacts. Emissions from legal entities or leases them and changes to processes or controls are made when acquired during the fiscal year will be incorporated into the required. As a multinational group operating in an increasingly annual greenhouse gas report from the date of acquisition (or complex and developing tax environment, some risk is store opening where relevant, for example in relation to acquired unavoidable. Nevertheless, the level of risk which we are prepared store leases) in accordance with the scope and boundary criteria to accept is consistent with our objective of achieving material set out in this document. Emissions from entities disposed of certainty with regard to our tax affairs. When entering into during the year are included up to the date of disposal within the commercial transactions we seek to utilise available tax incentives, respective annual reporting year. reliefs, and exemptions in line with, and in the spirit of, applicable During the reporting period Pepco discontinued operations in tax law and prevailing practice. We observe guidelines published Austria in February 2024. Emissions data was captured in our FY24 by the Organisation for Economic Co-operation and Development carbon emissions reporting until the entity was put into liquidation. (OECD) and endeavour to conduct intercompany transactions on an arm’s length basis. We do not undertake tax planning unrelated to commercial or strategic transactions, nor do we undertake tax planning that is contrived or artificial. We seek to foster positive relationships with tax authorities and to undertake all dealings with tax authorities in a professional, courteous, and timely manner. 51 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Risk management Our approach to risk management Risk management and internal control framework The world around us is constantly changing and so our framework is designed to be sufficiently agile to respond to external changes Pepco Group’s enterprise risk management and internal control in market conditions and geopolitical circumstances. Framework is an essential part of doing business, enhancing our resiliency, strengthening operations and building confidence in Internally, risk management is a focus throughout the the delivery of our strategy. organisation. Our “bottom-up” identification of risks is overlaid by those risks highlighted from the “top-down” review and challenge Our approach to risk management remains broadly consistent process by the Group Risk Management Team and Group Board. with the previous year, leveraging a proactive approach to These assessments are aggregated, together with the identify and respond to material risks, executed through consideration of risks existing at the Group level, to compile an governance and decision-making. overall Group-wide view of risk. Utilising a structured risk management approach helps us to embed the practices and behaviours needed to create and preserve long Risk Governance and Operating Model term value. This is a guided process from risk evaluation, control The Board is responsible for the review and approval of Pepco activities, monitoring and continuous improvement. Group’s risk management framework, our risk appetite and key strategic and emerging risks. Our risk management is aligned to our strategy, and each principal risk and uncertainty is considered Governance and Culture in the context of how it relates to the achievement of the Group’s strategic objectives. The Audit Committee is a subset of the Board and holds Monitoring and Strategy Evaluate Control responsibility for independent review of the effectiveness of our Continuous Development Risks Activities risk and internal control systems and the quality and accuracy Improvement of financial reporting. The Audit Committee is also responsible for the ongoing monitoring of external audit provision and consideration of any findings shared from the auditors’ scope of review. Strategy and Performance Review and Revise Objective Setting Within the operating business areas, risk management is a key focus of leadership teams who are responsible for overseeing risk, internal control and output from our annual audit activities, Information and Communication holding business leaders to account for their risk management responsibilities. Risk management principles and culture Providing a range of specialist advice and guidance on a Group Endorsed by the Board and championed throughout the business, and local level, technical teams across the business support risk the framework is designed to identify, prioritise and manage, management through standards, policies, procedures and direct rather than eliminate, risks to the business and to provide interventions to establish control activities. reasonable assurance against material misstatement or loss. Governance – Board & Audit Committee Role: Establishes the strategic direction and objectives of the business and provides governance and oversight of ERM Direction Accountability Delegation Reporting Provision of resources Management Internal Audit Day to day operational delivery in pursuit of business objectives, Independent Assurance including the management and oversight of key risks Third Line • First Line Second Line Independent and objective • • Day to day business operations Support services providing assurance on all matters relating and the provision of services specialist expertise to delivery of objectives to customers • • Setting standards, policies and Advice and guidance • Alignment Risk ownership procedures to operate in line • Engagement and selection • with business risk appetite Information Control ownership of audit partners sharing • Support, challenge and monitor • • Operational and management Provide assurance on the the management of risk Communication oversight, checks and monitoring effectiveness of the Company • Define the Company risk risk management practices framework 52 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Internal reporting External Top-down reporting • Review and approval Group-level risks by the Board and • Consolidation of significant risks from Principal risks Audit Committee underlying risk registers and uncertainties • Full disclosure of • Overlay of Group-level risks • Review and approval principal risks and by the Board and • Review and agreement of the principal risks by uncertainties Audit Committee the Executive Directors • Full disclosure of • Review and approval by the Audit Committee principal risks and uncertainties Business and functional risk registers • Development and ongoing maintenance of risk registers, including consideration of emerging risks, by business owners and leadership teams Bottom-up • Review and challenge of risk content and • Group Risk team the quality of mitigation plans by the Group Risk teams • Business and functional • Monitoring of risks associated with our leadership teams operating companies review and challenge of risks at leadership forums • Policy and process owners Emerging risks and issues • Monitoring emerging areas of change or issues that may become significant at a Group level will make trade off decisions, weighing up the impact of the risk vs Strengthening our framework: the potential benefits) or ‘Tolerant’ (meaning that we are willing to Enhancements to our Audit and Internal Control teams over the past take justified risks to achieve the highest possible return). year have strengthened the collaborative ways of working across the three lines of defence and improvements to internal controls. Our risk appetite framework continues to mature, with further development planned in 2024/25 to establish risk appetite metrics Following the fraudulent phishing attack in Hungary, the Audit and and improved reporting. Internal Controls teams initiated a review of the financial control environment. Some instances of non-compliance with procedures Risk Management Operation and accounting rules were discovered, including related to supplier discounts, although the impact was not financially material. Additional Monitoring of risks and the Regular risk review effectiveness of our internal with Executive teams Internal Audit activities were performed together with external controls through a series of and the Risk and Audit forensic specialists to leverage industry best practice and subject checks and evaluations Committee to reflect on key matter expertise. These efforts included performing a comprehensive across different levels of the strategic priorities and analysis of balance sheet positions and implementing measures to organisation, contributing to associated risks, informing 1. Strategic prevent future occurrences. Any issues identified were remediated an integrated view of focus points and risk Development assurance. improvement objectives. and corrected as part of year-end reporting. Looking ahead, further work is planned to develop our maturity as part of the risk roadmap. Our plan is endorsed by the Board and modelled on the international COSO framework, enabling 4. Review 2. Risk benchmarking and the ability to track our progress. The roadmap and Revise Evaluation seeks to respond to the ever-changing external environment, alongside close support for business growth, transformation and continuous control improvement. Control frameworks aligning Identification, measurement to industry best practice and reporting of risks 3. Control Risk appetite standards enable against consistently applied Activities Risk appetite is the amount of risk we are willing to accept in benchmarking in key areas, criteria, considering both e.g. Financial Controls, pursuit of our strategic objectives, setting out guardrails for the likelihood of occurrence General Information and potential impact to the decision making and business operations. Risk appetite is forward Technology Controls, Entity Group, with clear ownership looking and takes into consideration the internal and external level controls. Alongside, risk sitting with relevant environment, regulatory obligations, culture, corporate values and improvement plans and functional leaders. the geographies we operate within. remediation priorities. Pepco Group’s risk appetite is reviewed at least annually or A simple structure sits at the heart of the risk framework, ensuring a following material business changes and approved via the Board. common understanding and consistent application across the Group We monitor risk regularly, evaluating our risk position versus The output from the above process is subject to periodic review and appetite levels to determine what further actions may be required. challenge by the Executive Directors and, subsequently, the principal Appetite levels are described on a three-point scale; ‘Averse’ risks and uncertainties are submitted to the Audit Committee ahead (meaning that avoidance of risk is a core objective, and we will of final review and approval by the Group Board. always select the lowest risk option), ‘Balanced’ (meaning that we 53 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Principal risks and uncertainties The Directors conﬁrm that they have carried out a robust assessment of the principal risks and uncertainties facing the Group, including any emerging risks and those that would threaten its business model and future performance. Changes to risk profile • Readiness for the launch of a digital offers’ solution is a key strategic focus, ensuring that resiliency, privacy, accessibility During the year, a coordinated review of existing risks has and user experience drive engagement. been undertaken, alongside regular consideration of insight and the external environment to identify new and emerging risks. • Increasing geopolitical instability and impact on global supply Any potential changes to principal risks are validated through chains and transportation remains a constant factor in analysis and evaluation of control measures, actions plans planning and decision making. and data points. The principal risks outlined below represent, in the judgement of Principal risks the Group Board, the most significant gross risks to the Group. The principal and emerging risks are discussed and monitored throughout the year to identify changes to the risk landscape. Topical and emerging risks Risk information flows up through operating companies and specialist risk teams, creating a Pepco Group wide profile. • The macroeconomic environment remains challenging, with Principal risks are material risks or themes, which are common inflationary pressures and low unemployment continuing into across multiple operating areas or have the potential to this reporting year and being a focus within our plans. significantly impact strategy or ability to operate. Each principal • Consumer sentiment remains cautious and sensitive to the risk has a defined response strategy, endorsed by the Board economic environment. This factor, in addition to increasing and Executive Committee, which is regularly monitored and costs of doing business, including wage inflation, energy, reported on. transportation and costs associated with sourcing and manufacturing, have the potential to impact profitability in some of our countries of operation, if not properly controlled. Risk Description and key drivers Risk mitigation Operations and customer • IT Systems – Disruption or loss of IT systems supporting critical Information security and data protection policies, underpinned by training Cyber and DR processes or data, as a result of internal or external and awareness programmes, with dedicated cyber security specialists and events, which could result in disruption to business Data Protection Officers. Link to strategy: operations impacting customers and commercial • Security Centre Operations provide 24/7 monitoring and alerting to act on performance, reputational damage and potential potential threats. regulatory actions. Risk movement: • Automated simulated phishing campaigns providing colleagues with • Failure to prevent or respond to a cyber-attack additional training. resulting in loss of business-critical systems and data and/or data breaches • Critical IT systems have resiliency with proactive monitoring and alerting of system processing failures. • IT system failure • IT systems increasingly moved to the cloud providing further resilience and • IT system vendor or third party support partner disaster recovery. failure or poor performance • There is robust IT change management across the Group with change • Lack of resilience or recovery capabilities for freeze periods implemented during the key trading months. critical businesses processes Strategy key: Change key: Optimising and expanding our Driving cost and operational Increased Unchanged Decreased New Risk store network efficiency Deliver stronger cash generation Enhancing the customer offer through disciplined investment R Read more about our strategy on page 12 to 19 54 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Risk Description and key drivers Risk mitigation Legal and compliance • Legal and The business is subject to an evolving regulatory and Steering Committee in place to focus on regulatory mapping and compliance legislative landscape, with the need to remain up horizon scanning. to date with changing frameworks across multiple • Link to strategy: In-house legal teams across Group, Pepco and Poundland with jurisdictions. Failure to comply with legal and dedicated expertise. regulatory obligations may lead to fines, criminal sanctions and significant reputational impacts. • Law firm panel of external legal expertise in every key practice area across Risk movement: the Group. • Compliance with existing laws and regulations and changing legal landscape • Whistleblowing reporting line for colleagues and suppliers to report concerns around misconduct or non-compliance. • Statutory compliance • The Group Code of Conduct was updated in 2024, outlining and enhancing • Pace and scale of global regulatory change core values, ethics and regulatory requirements. and introduction of mandatory disclosures • Supplier Code and Supplier Audit Policy to inform suppliers of core • New geographies and markets requirements and behaviours expected. • Governance maturity and coverage • Suite of Group compliance policies covering topics including anti-bribery • IP and brand protection and corruption, due diligence, conflicts, sanctions etc. • • Ethical Trade Standards and Regulatory Group-wide mandatory training programme for core, high-risk Compliance regulatory areas. • • Supplier Mapping, due diligence and Specific training programmes for senior managers. contract protections • Group supplier due diligence procedure integrated across procurement processes. • Monitoring of registered IP and embedded checks when developing IP/branded products. Operations and customer • People and talent Dependence on key personnel and ability to Aligned talent assessment and development approach across Pepco attract or retain the required knowledge, skills and Group and operating businesses. Link to strategy: capability, with the right cultural fit, could undermine • Performance and talent management process and training in place across growth plans, strategic and operational delivery. the business. • Attraction and retention Risk movement: • Employee opinion surveys rolled out Group-wide with key themes • Geographical labour market challenges aggregated across all functions and operating companies to understand employee sentiment, and implement resulting action plans. • Availability of specialist knowledge and experience • Reward and retention strategy to attract and retain talent, aligned to • Post pandemic working environment and Pepco values and ethics. arrangements • Values based leadership programme to support corporate culture and • Culture and wellbeing conduct expectations for all colleagues. • Organisational structure • Reward strategy • Training and development Strategy key: Change key: Optimising and expanding our Driving cost and operational Increased Unchanged Decreased New Risk store network efficiency Deliver stronger cash generation Enhancing the customer offer through disciplined investment R Read more about our strategy on page 12 to 19 55 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Principal risks and uncertainties continued Principal risks continued Risk Description and key drivers Risk mitigation Brand and ethics • ESG Failure to meet our customers’ and wider society’s Group-wide ESG Strategic Framework, goals and vision (see our ESG section expectations in addressing ESG impacts. Balancing for further details). Link to strategy: the risks we face as a result of climate change and • Group CFO responsible for setting the Group’s ESG Strategic Framework, limiting the impacts our operations have on the with overall responsibility for execution. environment and communities in which we trade. Risk movement: • ESG Executive Committee; the purpose of which is to determine, align and • Transformation pressures and rapid growth plans review progress and next steps for ESG across Pepco Group. Chaired by the • Adverse external events could increase cost, Group CFO, its objectives are to create alignment and drive progress across disrupt our supply chain and operations, and the the Group. The terms of reference and standing agenda of this Committee demand for our product cover all priority material topics as identified in the recent double materiality assessment. • Consideration of ESG within strategy, business • change planning and delivery Updates on ESG progress are made for review and approval at the Audit Committee each quarter. • Extreme weather and climate change • The Group business model, including both the vertical integration of our • Inflation and supply chain cost pressures sourcing operations through PGS and the work of our in-house Group • sourcing compliance team, provides a high degree of visibility over our supply Supplier resiliency chain and constructive working relationships with our supply partners. • Lack of long term, strategic planning • Democratising sustainability for our customers by offering affordable and partnerships choice and demonstrating that price is not a barrier to sustainable and ethically produced products. Strategic and change • External political, Global economic and political volatility impacting Steerco established to focus on regulatory mapping and horizon scanning macroeconomic, our cost base and earnings potential. Varying and to oversee projects initiated to prepare the business for changes and geopolitical employment levels across Europe, alongside cost of in policy. environment living pressures may undermine customer demand, • Projects established to anticipate change and prepare business for impact whilst foreign exchange instability across sourcing Link to strategy: of key changes (e.g. Bulgaria’s entry to the Eurozone). and operating regions, interest rates, inflation and core commodity prices may impact margin, • Improved sanctions monitoring and sanction screening implemented destabilise supply chains and impact delivery for suppliers. Risk movement: of strategic growth plans. • Group-wide business continuity and disaster recovery programme. • Interest rate volatility • Diversification of product sourcing. • Foreign exchange volatility • Inflation • Levels of employment and disposable income • Increasing cost base, including regulatory wage increases • Sanctions • Political instability and transition • Business Failure to implement the Group’s growth strategy: Store expansion programme continued throughout 2024, adopting a more transformation to strengthen market-leading proposition in existing disciplined approach to growth, with new store openings focusing on our and long term markets; and implement long-term expansion into existing markets. strategy new markets. • Continued enhancement to our customer offer through store and • Link to strategy: Macroeconomic and political volatility proposition renewals. • • Business capacity to support the change and Transformation programmes are aligned to the Pepco Group business transformation agenda, embedding a robust strategy and closely governed by senior management. platform for future growth • Dedicated strategy and transformation operating model in place to support focus and track delivery of key programmes and business Risk movement: changes activities. Strategy key: Change key: Optimising and expanding our Driving cost and operational Increased Unchanged Decreased New Risk store network efficiency Deliver stronger cash generation Enhancing the customer offer through disciplined investment R Read more about our strategy on page 12 to 19 56 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Risk Description and key drivers Risk mitigation Strategic and change continued • Competition, Ability to effectively respond to a complex and Brand awareness and customer satisfaction insights gathered regularly consumer trends geographically diverse competitive landscape or • Diversification across multiple markets, fragmenting and limiting the impact and behaviours changes in consumer demand, impacting of competition competitive advantage, earnings potential and Link to strategy: • strategic delivery. Pepco offers price leadership and a differentiated proposition. This is facilitated by increasing economies of scale and Group-level buying and • Fragmented geographical markets operating cost synergies. Risk movement: • Failure to successfully anticipate and respond to • We offer a diverse range of FMCG, homeware-led GM and apparel, providing competitive changes in a timely and cost- our core shoppers, with their regular shopping replenishment needs. effective manor • We own and operate a multi-format, Europe-wide variety discount retail • Complex competitor dynamic across European business, through local and therefore convenient stores, located across 20 countries. discount retail sector and specialist retailers of varying sizes and product offerings • We continue to invest in the development of high-quality, scalable infrastructure, including information technology, automated warehouses and more efficient and resilient multi-point distribution. Finance and treasury • Financial, Insufficient liquidity to meet obligations under Cash generative including self-funding of expansion. profitability credit facilities, settle liabilities, deliver on • Significant headroom within the covenants of the existing and liquidity corporate goals, and/or inability to access further Senior Facility Agreement. external financing in the future. Link to strategy: • €390m Revolving Credit Facility to April 2027. • Insufficient earnings • Pepco Group bond, issued in 2023, continues to trade strongly indicating • Interest rate volatility strong debt investor appetite. Risk movement: • Access to financing • Term Loan B of €250m, that matures in April 2026, remains with a syndicate of strong and supportive relationship banks at competitive interest rates. • Cost control • Fraud and Losses as a result of physical or financial crime, Group wide fraud risk assessment mapping exposure to fraud risks across financial crime both internally and externally, which result in key processes. financial losses, reputational damage and cross • Suite of Group compliance policies covering topics including anti-bribery Link to strategy: functional investigations. and corruption, due diligence, conflicts, sanctions etc. • Fraud • Group-wide mandatory training programme for core, high-risk regulatory areas. Risk movement: • Anti-bribery and corruption • Specific training programmes for senior managers. • Corporate Criminal Offences • Whistleblowing reporting line for colleagues and suppliers to report concerns re. non-compliance. • Theft and physical security • Payment processing restrictions, defined delegated authority levels and segregation of duties. • Group treasury function oversight and approvals. • Collaborative working between Finance and Technology to refine security controls. Operations and customer • Health and safety Harm to colleagues, customers or third parties Health and safety Committee structure and business unit action plans. caused by product design or operating failures • Link to strategy: Health and safety data collected and monitored locally with centrally could result in business disruption, loss of assets, reported Group stats tracked. enforcement action, and reputational loss. • Moving to a more integrated model with the introduction of standardised • Fire safety Risk movement: policies and procedures. • Food safety • Aligning Group wide model, with input from local representatives and industry specialists. • General health and safety standards in store and at distribution centres/factories • Targeted, data driven, improvement programmes focusing on key areas of risk and compliance. • Third party suppliers delivering in line with Pepco • and regulatory standards Continue to identify and respond to regulatory changes and standards. • Assets and premises are acquired to Pepco and regulatory standards • Violence to colleagues and shop workers Strategy key: Change key: Optimising and expanding our Driving cost and operational Increased Unchanged Decreased New Risk store network efficiency Deliver stronger cash generation Enhancing the customer offer through disciplined investment R Read more about our strategy on page 12 to 19 57 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Principal risks and uncertainties continued Principal risks continued Risk Description and key drivers Risk mitigation Operations and customer continued • Supply chain Disruption of the logistics and distribution network Experienced buying and supply chain teams responsible for maintaining an effective and efficient supply chain. disruption resulting in inability to maintain sufficient inventory – logistics levels to meet growing customer demands without • Regular end-to-end supply chain and distribution network and and inventory allowing levels to increase to an extent that causes cost mapping. excessive markdowns. Link to strategy: • Scalable and repeatable supply chain design, maximising standardisation • Impacted global supply routes for all elements (distribution centres and warehouse management systems) of the supply chain. • Third party supplier insolvency Risk movement: • Consistent, seasonally relevant, levels of stock cover by product category • Availability of suppliers which meet operational are maintained and regularly reviewed. and ethical standards • Shipping product earlier, optimising shipping routes , diversification of • Efficient product lifecycle and carrier base and shipping modes, selectively utilising faster carrier options. inventory management • Customer demand planning • Supply chain Failure to identify, develop or maintain relationships Integrated in-house sourcing operation, PGS, sources in excess of 80% disruption with a significant number of reputable suppliers, to of own label goods across clothing and general merchandise through its operations in mainland China, Hong Kong, Bangladesh and India. – sourcing source high-quality, low-cost, safe products, may impact the Group’s financial position or reputation. • In-house sourcing model leverages our scale to drive benefits on pricing Link to strategy: • and agree long-term partnerships with strategic vendors. Loss of key suppliers or decrease in available product • Diversification and expansion of sourcing footprint to reduce the risk of over-reliance on any single country and increase flexibility through Risk movement: • Inflation pressures on product margin near-shore sourcing in European countries and additional Asian countries. • Human rights • Policies are in place to protect the integrity of our supply chain, including • a Group-wide Supplier Code of Conduct and ethical and social audit Labour regulations and ethical standards programme, managed by our Group ethical sourcing team. • Inadequate product quality or safety • Established Global Quality Assurance and Quality Control policy with strict quality control measures to bring low prices and value to our customers while protecting our brand integrity. Strategy key: Change key: Optimising and expanding our Driving cost and operational Increased Unchanged Decreased New Risk store network efficiency Deliver stronger cash generation Enhancing the customer offer through disciplined investment R Read more about our strategy on page 12 to 19 58 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Going concern Going concern The FY24 consolidated financial statements have been prepared on the basis that the Group will continue as a going concern for at least 12 months subsequent to the authorisation of the consolidated financial statements for the period under review. The Group has continued to show resilience in FY24 despite the challenging economic conditions. Underlying EBITDA growth of 25.2% to €944m illustrates the strong continued profit delivery. In addition the Group has continued to execute its growth strategy through the opening of 392 net new stores through self-funded investment. Cash has increased year-on-year at €363m (FY23: €330m) which also includes repayment of a portion of the Group’s debt of €120m. The Group’s net debt to underlying EBITDA ratio of 1.7x on an IFRS 16 basis (0.5x pre-IFRS 16 basis) has improved remains low, and well within the targeted range. The Group also remains well financed with expiry of term loans not until at least April 2026 and retains significant liquidity headroom, and covenant headroom, should any further unforeseen volatility arise. Based on the Group’s cash flow forecasts and financial projections, alongside assessment of a robust set of plausible but aggressive downside stress test scenarios, the Directors are satisfied that the Group will be able to operate within the levels of its facilities and resources for the foreseeable future and deem it appropriate to adopt the going concern basis in preparing the financial statements. 59 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Introduction to governance Introduction to Governance Dear Shareholders, This section of the report outlines the Group's corporate governance structure and addresses key governance matters relevant to the Company during the reporting period. As Non-Executive Chair, I am responsible for ensuring that we have the right structure in place to uphold high standards of corporate governance. This year we have continued to make changes to our Board. In particular, we have hired a new CEO, Stephan Borchert, and a new Chair of the Audit Committee, Frederick Arnold. Our recruitment process has been led by the Nomination Committee, working with external search providers to ensure we considered candidates from a wide pool. We continue to ensure the Board has the appropriate range of skills, knowledge and experience to act effectively. We will continue to review our governance structures in FY25 to ensure we have the most effective Board possible as we manage change within the business. I would like to thank our Board and our colleagues for their continued commitment to the success of the Group for the benefit of all our customers, colleagues, investors and other stakeholders. Andy Bond Non-Executive Chair Pepco Group N.V. (the Company) is a public limited liability the Articles of Association, the Board of Directors Rules of company incorporated under the laws of the Netherlands on Procedure (Board Rules), and the terms of reference of the 14 May 2021, having been converted from Pepco Group B.V, Board’s Committees, as well as applicable laws and incorporated on 17 February 2021. Its shares are listed on the regulations. The Articles of Association, Board Rules and Warsaw Stock Exchange (Giełda Papierów Wartościowych terms of reference of the Board’s Committees can be viewed w Warszawie) (WSE). on the Company’s website at www.pepcogroup.eu. The Company is registered in the commercial register of the As the Company is incorporated under the laws of the Chamber of Commerce and Industry for Amsterdam under Netherlands and listed on the Warsaw Stock Exchange, the number 81928491. The corporate seat of the Company is in Company complies with the Code of Best Practice for GPW Amsterdam and the registered office is 14th Floor, Capital Listed Companies 2021 (the Warsaw Code) and with the Dutch House, 25 Chapel Street, London, NW1 5DH, United Kingdom. Corporate Governance Code 2022 (the Dutch Code). The Company is organised in a one-tier Board structure, under The full text of the Warsaw Code is available at www.gpw.pl/ which managing and supervisory duties are performed by the best-practice2021 and the full text of the Dutch Code can be Board of Directors of the Company (the Board). The Board is viewed at www.mccg.nl. Deviations from the Dutch Code and responsible for the direction and oversight of the Company Warsaw Code are explained in this report in accordance with and is accountable for all aspects of the Company’s business. the “comply or explain” principle. The Company’s corporate governance structure is based on 60 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 The Board Eight Non-Executive Directors Two Executive Directors Our eight Non-Executive Directors provide independent oversight Our CEO and CFO are appointed to the Board and constructive challenge to the Executive Directors. as Executive Directors. Board Committees Audit Committee Nomination Committee Remuneration Committee Key responsibilities: Key responsibilities: Key responsibilities: • • • reviewing the integrity of the financial leading the process for Board recommending the Remuneration statements and any formal appointments and succession planning; Policy and Executive and senior announcement relating to the leadership remuneration framework • undertaking the Board evaluation Group’s financial performance; of the Company; including an externally led evaluation • • providing oversight of the Group’s at appropriate times; and advising on the structure and target internal control and risk management setting of performance-based • making recommendations to the systems; and incentive plans; and Board on the Board’s policy on • • assisting the Board with reviewing risk diversity and inclusion. reviewing all share incentive plans. management, policies and exposures, and ESG strategies, reporting, and goals. Membership: Membership: Membership: • • • Frederick Arnold (C) María Fernanda Mejía (C) Brendan Connolly (C) • • • María Fernanda Mejía Brendan Connolly Grazyna Piotrowska-Oliwa • • • Brendan Connolly Neil Brown Paul Soldatos • • • Neil Brown Paul Soldatos Neil Brown • • • Sean Mahoney Sean Mahoney Frederick Arnold • Andy Bond Executive Committee The Executive Committee, composed of key leaders, directs the Company’s strategies, ensuring alignment with objectives and fostering sustainable growth through collective expertise and decisive leadership. Senior leadership team 1 This diagram shows the structure of the Board and its Committees as at the date of publication. 2 Whilst Andy Bond is formally a Non-Executive Director, he temporarily had Executive duties in his role of Executive Chair until 1 October 2024. 61 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Board of Directors We have a strong, experienced Board, with a diverse range of professional backgrounds, skills and perspectives. The collective experience of the Directors and the diverse skills and experience they possess, supported by independent thought and constructive debate, enable the Board to reach decisions in a focused and balanced way, which is crucial to ensuring the continued long-term success of the Company. Andy Bond Stephan Borchert Neil Galloway María Fernanda Mejía Non-Executive Chair Chief Executive Officer Chief Financial Officer Independent British, Male, 59 German, Male, 55 British, Male, 56 Non-Executive Director Appointed 2 February 2023; Appointed 1 July 2024; Appointed 1 April 2023; American, Female, 61 first term expires in 2026 first term expires in 2027 first term expires in 2026 Appointed 24 May 2021; second term expires in 2027 N N A Andy has an extensive retail Stephan has a strong track Neil joined Pepco Group as María Fernanda has broad career, focused on the record of leading CFO in April 2023. He has experience and expertise in discount sector, having been international companies worked as a public company general management CEO of Pepco Group until his across various sectors CFO in senior finance and including strategy retirement from the role in including fashion, beauty, commercial roles at development, operations, January 2022. Prior to this, pharmacy and healthcare multi-national businesses supply chain and talent Andy was COO and later services. His extensive over the last 15 years. development. In February CEO of Asda between 2005 experience in leading Previously Neil spent 18 years 2024, María Fernanda was and 2010, and chair from 2011. complex, multi-brand retail working in investment appointed as independent Earlier in his career, businesses globally and in banking. Prior to Pepco, Neil non-executive director and Andy acted as corporate EMEA made him the was executive vice president member of the audit marketing director and stand-out candidate in the at IWG plc and led the committee of Avery Dennison managing director of George search process. Stephan corporate finance and Corporation. Until February clothing. Andy has been the served from 2018 to 2022 as business development 2023, she was CEO non-independent Chair of CEO of GrandVision, the activities. From 2013 to 2019, International at Newell the Pepco Group Board since global leader in optical retail Neil was group finance Brands. Until February 2020, his appointment in February operating in over 7,400 stores director at DFI Retail Group, she served for more than 2023. From 12 September in more than 40 countries the international multi-format eight years as corporate 2023 he also adopted the worldwide under 33 different retailer based in Hong Kong officer and executive role of interim Executive Chair retail banners. Prior to and operating across 11 committee member at the until 1 October 2024. GrandVision, Stephan was markets in Asia. Prior to that Kellogg Company, with her President of Sephora he was group finance director final roles being senior vice EMEA on the Global of The Hongkong & Shanghai president and president of Executive Committee. Hotels Limited. He is also a Kellogg Latin America. Prior to non-executive director of AVI this, María Fernanda spent 23 Global Trust plc, a FTSE 250 years at the Colgate- investment trust. Palmolive Company in global marketing and senior management roles within developed and emerging markets. Maria Fernanda previously held non- executive roles at Bunzl plc, Grocery Outlet and International Consolidated Airlines Group. 62 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Committee membership A Audit Committee N Nomination Committee R Remuneration Committee Chair of Committee Brendan Connolly Grazyna Piotrowska-Oliwa Neil Brown Paul Soldatos Independent Independent Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director British, Male, 65 American, Male, 75 British, Male, 68 Polish, Female, 55 Appointed 17 February 2021; Appointed 4 May 2021; Appointed 24 May 2021; Appointed 24 May 2021; second term expires in 2027 second term expires in 2027 second term expires in 2027 second term expires in 2027 R A N R A N R N R Brendan brings operational, Grazyna has board Neil has global experience in Paul is a board member and commercial and strategic experience across corporate restructurings, senior advisor in the expertise. He is a non- government and business private equity and dispute industrial, service and executive director at Victrex both in Poland and Central resolution including wide consumer/retail sectors. He and Applus. Brendan has and Eastern Europe. At the international commercial has international experience more than 30 years start of her career, Grazyna board roles. He has held a in M&A, strategic assessment, experience in the oil and gas spent four years at the Polish number of chairman, director, organisational transformation and the testing and Ministry of the State Treasury, and committee positions in and financial restructuring inspection industries. He was where she headed two international organisations with a focus on the US and a senior executive at Intertek different divisions. With a including Magma Fincorp Europe. Paul has served and Group, having been CEO of proven track record in some India, Gategroup, Iceland is serving as chairman or Moody International, which of Poland’s WIG20 Foods, and Islandsbanki. member of the audit, was acquired by Intertek in companies, Grazyna worked Earlier in his career Neil remuneration, governance, 2011. Brendan was managing for 20 years at C-level for helped to build the successful and nomination committees director of Atos in the UK Telekomunikacja Polska and financial services arm of for a number of companies. after spending more than PTK Centertel (now Orange Apax Partners. He acted as a Paul previously was a partner 25 years with Schlumberger Polska), PZU (on the special advisor to the Senior and member of the in various senior supervisory board), PKN Orlen Oversight Committee of the management committee of international roles. and PGNiG, as well as CEO Asset Protection Scheme, AEA Investors LP in AEA’s and president of the operated by an executive London office. management board of Virgin arm of HM Treasury. Neil is a Mobile Poland/CEE, following qualified Chartered a period advising private Accountant and a former companies and private corporate finance partner at equity funds. Grazyna is PwC and Deloitte. co-owner and CEO/chair of renowned e-commerce platforms Grupa Modne Zakupy and RentPlanet. 63 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Board of Directors continued Committee membership A Audit Committee N Nomination Committee R Remuneration Committee Chair of Committee Board and Board Committee changes post year end • Stephan Borchert was appointed as Executive Director and CEO on 1 July 2024 with a three-month induction to allow for a smooth transition from Andy Bond’s interim role as Executive Chair. Andy Bond reverted to the role of Non-Executive Chair on 1 October 2024. Frederick Arnold Sean Mahoney Board changes in FY24 Independent Non-Executive Director • Helen Lee Bouygues resigned on 2 October 2023 Non-Executive Director American, Male, 62 American, Male, 70 (appointed 4 May 2021). Appointed 15 March Appointed 6 June 2024; 2024; first term expires • Pierre Bouchut resigned on 15 March 2024 (appointed first term expires in 2027 in 2027 24 May 2021). Served as Chair of the Audit Committee until 15 March 2024. A R A N • María Fernanda Mejía was appointed as Chair of the Nomination Committee on 2 October 2023. Fred is an experienced Sean is a private senior financial investor and has served • Neil Brown, Paul Soldatos and Brendan Connolly were executive who has as a board director for appointed as members of the Nomination Committee on served on the boards of public and private 13 November 2023. numerous public and companies in Europe • Sean Mahoney was appointed as member of the Board private UK and US and the US including and a member of Audit and Remuneration Committees companies. He has Aptiv plc, Howmet on 15 March 2023. experience serving as Aerospace Inc., Alcoa board chair, audit Inc., Lehman Brothers • Frederick Arnold was appointed as a member of the committee chair and Holdings (post- Board, Chair of the Audit Committee and a member the chair of a variety of bankruptcy), Formula of the Remuneration Committee on 6 June 2024. transactional and other One Holdings, and special committees. Tailored Brands Inc. He Fred has led the global worked in investment finance functions of a banking for over 20 series of private equity years, primarily at owned portfolio Goldman Sachs & Co., companies. Prior to this, where he was a partner Fred accrued 20 years and head of the of investment banking Financial Sponsors experience, primarily at Group. Sean contributes Lehman Brothers and expertise in business Smith Barney (where he and financial strategy, was managing director, private equity, capital head of European markets, financing investment banking). He and M&A. has extensive experience in M&A and in global equity and debt capital markets. 64 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Corporate governance statement Board of Directors Appointment and composition of the Board Stephan Borchert was appointed as an Executive member of the The role of the Board is to supervise and manage the general Board and CEO, effective 1 July 2024. Andy Bond remained in his affairs of the Company and its affiliated enterprises (the Group). role as Executive Chair during the transition period, reverting to The Board is collectively responsible for supervising the strategy the role of Non-Executive Chair on 1 October 2024. and long-term success of the Company to achieve its objectives, Prior to this reporting period and in accordance with Article 15.5 of and for ensuring that there is an effective system of internal the Company’s Articles of Association, the Board appointed Neil controls within the Group for the assessment and management of Brown as Vice Chair of the Board. key risks. In discharging its role, the Board ensures that the Group takes into account the interests of all the Company’s stakeholders. The general meeting appointed Sean Mahoney as a Non- Executive Director at the Company’s AGM in March 2024. Frederick In supervising the strategy of the Company, the Directors also Arnold was appointed as a Non-Executive Director and Stephan take into account the following matters: Borchert as an Executive Director and CEO at the Company’s • the implementation and feasibility of the strategy; EGM in June 2024. Following the EGM, at the end of the reporting period the Board comprised ten members. As at the end of the • the appropriateness of the Company’s business model and the reporting period, four of the Non-Executive Directors – Brendan markets in which the Group operates; Connolly, María Fernanda Mejía, Frederick Arnold, and Grazyna • the opportunities and risks for the Company; Piotrowska-Oliwa – are considered to be independent in accordance with best practice provisions of the Warsaw Code • the Company’s operational and financial goals and their and the Dutch Code. The remaining four Non-Executive Directors impact on the Group’s future operations in its markets; – Andy Bond, Neil Brown, Paul Soldatos and Sean Mahoney – are • compliance with the Company’s legal and regulatory not considered to be independent within the best practice obligations; and provisions of the applicable Codes. Andy Bond, as former CEO and Executive Director of the Company, does not qualify as • ESG and employee-related matters, the Group’s supply chain independent. Neil Brown, Paul Soldatos and Sean Mahoney are and respect for human rights. not independent due to their position as directors of the The tasks, responsibilities and internal procedures for the Board Company’s principal shareholder. are addressed in the Articles of Association and Board Rules. Board members are appointed for an initial period of three years and may then be reappointed for two subsequent three-year terms. Roles and responsibilities All Directors are subject to formal appointment by shareholders The Executive Directors are responsible for the day-to-day at the AGM and to reappointment after a three-year term in management of the Company. The Non-Executive Directors are office, following a binding nomination of the Board and in responsible for supervising and advising the Executive Directors. accordance with the Articles of Association of the Company. The positions of the Chair and CEO are distinct, each with their The general meeting of shareholders may reject a binding own areas of responsibility, conferred by and accountable to the nomination of the Board by a resolution passed by two-thirds Board as a whole. This distinction is explained below, and further of the votes cast, representing more than half of the Company’s details are set out in the Articles of Association and the Board issued share capital. Rules of Procedure available on the Company’s website. The general meeting of shareholders can dismiss and suspend The Chair of the Board is a Non-Executive Director and is members of the Board (other than on the proposal of the Board) responsible for leading the Board and ensuring its effectiveness, upon a majority of two-thirds of the votes cast, representing setting its agenda and maintaining high standards of corporate more than half of the Company’s issued share capital. If the governance. The Chair facilitates the effective contribution of the proposal is made by the Board, a simple majority of the votes Non-Executive Directors and constructive relations between them cast is sufficient. and the Executive Directors. The Chair of the Board and the Board itself are supported by The CEO is responsible for the day-to-day management of the Company Secretary, who is appointed by the Board and the Group and implementation of the strategy and other available for advice and assistance to all Board members. Board decisions. The Company Secretary is responsible for ensuring that proper procedures are followed and that the Board acts in accordance With effect from 12 September 2023, Andy Bond, the Chair of the with its statutory obligations as well as its obligations under the Board, stepped into the role of Executive Chair to temporarily lead Articles of Association. the Executive team and overall management of the Company. Whilst both roles were being performed by the Executive Chair, Where Board members have external appointments, the Board is this did not amend the respective roles and responsibilities of the satisfied that such appointments do not impact on the individual Chair and CEO. Board member’s ability to devote adequate time and sufficient attention to the concerns of the Company. As of 1 July 2024, Stephan Borchert was appointed as CEO of the Group following recommendation by the Nomination Committee. Andy Bond stepped down as Executive Chair on 1 October 2024 Diversity following a three-month transition period. Our Board Diversity Policy has been in place since December 2021, and addresses the legal and regulatory requirements to set Prior to the reporting period, the Board established an Executive appropriate and ambitious targets to achieve a more balanced Committee. The Executive Committee, composed of key leaders ratio between men and women. Our Board Diversity Policy seeks including the Group CFO and business Managing Directors, directs at least 30% representation of men and women on the Board. As the Company’s strategy, ensuring alignment with objectives and at year end, the Board comprised eight Non-Executive Directors: fostering sustainable growth through collective leadership. six are male (75%) and two are female (25%). 65 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Corporate governance statement continued Board of Directors continued Board and Committee meetings and attendance All Directors are expected to attend each Board meeting and Diversity continued each Committee meeting for which they are members, unless there are exceptional circumstances preventing them from When considering nominations of new Board members, the Board participating. Attendance at Board and Committee meetings takes account of the following diversity aspects: nationality, work was as follows: background, gender, age, and qualifications (including education and expertise). The Board is committed to promoting diversity Audit Remuneration Nomination within the Group and ensuring any barriers identified are removed. Board Committee Committee Committee This remains a key consideration in succession planning at both Directors (15) (14) (6) (6) Board and senior management level. Andy Bond (Executive Chair)1 15 n/a n/a 5 Induction, training and development Neil Brown When appointed to the Board, Directors are provided with (Vice Chair) 15 12 6 4 induction training and information about the Group, the role of Paul Soldatos 13 n/a 6 4 the Board and the matters reserved for its decision, the terms of Brendan Connolly 14 12 6 5 reference and membership of the Board Committees, and the María Fernanda latest financial information about the Group. This is supplemented by meetings with the Company’s professional advisors, and, Mejía 15 13 n/a 5 where appropriate, visits to key locations and meetings with Grazyna certain senior Executives to develop the Directors’ understanding Piotrowska-Oliwa 14 n/a 6 n/a of the business. Neil Galloway 15 n/a n/a n/a Helen Lee Throughout their period of office, Non-Executive Directors are Bouygues2 — — — — continually updated on our business, markets and other changes Pierre Bouchut3 3 7 1 n/a affecting the Group and sector in which we operate, including changes to the legal and governance environment and the Stephan obligations on themselves as Directors. Specific updates this Borchert4 3 n/a n/a n/a year included an externally facilitated Board risk workshop. Frederick Arnold5 3 2 2 n/a Sean Mahoney6 6 4 n/a 3 Board Committees The Board operates the following principal Committees: the 1 Andy Bond was appointed as Non-Executive Director and Chair of the Board with effect from 2 February 2023. He was appointed as Executive Chair on Audit Committee, the Remuneration Committee, and the 12 September 2023 until 1 October 2024. Nomination Committee. The function of these Committees is 2 Helen Lee Bouygues was appointed as a Non-Executive Director of the Board to prepare the decision making of the Board. on 4 May 2021. She resigned on 2 October 2023. 3 Pierre Bouchut was appointed as a Non-Executive Director of the Board on Each Committee of the Board has established terms of reference 24 May 2021. He resigned on 15 March 2024. which prescribe the role and responsibility of the relevant 4 Stephan Borchert was appointed Executive Director of the Board with effect Committee, its composition, and the process through which the from 1 July 2024. Committee discharges its duties. These terms of reference are 5 Frederick Arnold was appointed as a Non-Executive Director of the Board on 6 June 2024. available on the Company’s website: www.pepcogroup.eu. 6 Sean Mahoney was appointed as a Non-Executive Director of the Board on During the reporting period, more than half of the members of 15 March 2024. the Audit Committee (including its Chair) and the Remuneration 7 n/a - not formally a committee member but may have been in attendance at a meeting as an observer. Committee were independent within the meaning of the applicable best practice provisions of the Warsaw Code and Board meetings, attendance and decision making Dutch Code with due observance to the Dutch Decree on Implementation. According to the Board Rules, the Board meets in principle once every two months and at least once each financial quarter. Each Director is entitled to cast one vote. In the event of a tie, the Chair Risk workshop has the casting vote. During FY24, meetings of the Board were held both in person and virtually via Microsoft Teams, as permitted by Article 16.6 of the Articles of Association. A series of risk workshops and Committee meetings have taken place throughout the year, resetting the Most decisions of the Board require a simple majority of the votes enterprise-wide view of risk and shaping the roadmap cast. For Board decisions on matters which cannot be resolved for further improvements. upon by the Non-Executive Directors due to a direct or indirect conflict of interest and for Board decisions to approve a related • November 2023 – Board risk workshop to review and party transaction, the majority of votes cast must include at least validate the output from a series of bottom-up, business a majority of the votes of the independent Non-Executive risk workshops. Provided an opportunity for the Board to Directors. share their top-down perspectives. When determining how many votes are cast by members of the • December 2023 – Review and approval of a roadmap Board, no account shall be taken of Board members who are not to mature the risk approach across the Group permitted to take part in the discussions or decision making due and enhance risk management capabilities and to a conflict of interest. response activity. Decisions of the Board may be taken in writing, provided that all • May 2024 – Board risk workshop to confirm a refined set Board members (in respect of whom no conflict exists) have of principal risks and response plans, as well as review, consented in writing. stress testing and approval of an initial risk appetite framework and corresponding levels. 66 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Areas of focus in FY24 Remuneration The Board focused on the below areas during the reporting period: In line with the Remuneration Policy of the Company, the remuneration of the Executive members of the Board is Strategy and operational determined by the Non-Executive members of the Board, upon • Scrutinised operational and business performance in the recommendation of the Remuneration Committee. The context of the Company’s business plan and long-term Non-Executive Directors appointed via the Relationship strategy, including the status of key projects. Agreement (being Neil Brown, Paul Soldatos and Sean Mahoney) • do not receive remuneration from the Company or its affiliated Reviewed the Group’s strategy and approved the five-year business plan for FY24 to FY28. enterprises. The remuneration of the Non-Executive members of the Board is determined by the Non-Executive members of the External stakeholder engagement Board in accordance with the Remuneration Policy applicable to • Reviewed the agenda for the Capital Markets Day. the Non-Executive Directors, including the Chair of the Board. • Reviewed the content of the Company’s external announcements. The Remuneration Policy and the elements of the remuneration Financial performance and risk of Board members are set out in the Remuneration report and • note 8 to the financial statements. Reviewed financial performance and forecasts. • Evaluated and approved the FY24 budget. Conflicts of interest • Approved the Company’s Annual Report and Consolidated The Articles of Association and Board Rules prescribe how Financial Statements for FY23, together with the letter of conflicts of interest between the Company and Board members representation in connection with the Annual Report 2023. must be managed. • Reviewed approach to risk and risk management framework. Transactions between the Company and a Board member who has a conflict of interest must be entered into on arm’s length Governance terms. A Board member who has a conflict of interest cannot • Approved the terms of reference of the Audit Committee, participate in deliberations and decision making relating to the Remuneration Committee, and Nomination Committee. subject matter of the conflict of interest. • Approved the appointment of the new CEO, Stephan Borchert, In FY24, payments totalling £63,932.10 were made to Woodcliffe on the recommendation of the Nomination Committee. Associates Limited, a company that Andy Bond has a related • Approved the appointment of the new Non-Executive Directors, party interest in. Frederick Arnold and Sean Mahoney. Any decision to enter into a transaction under which a member of • Approved the external appointments held by Executive Directors. the Board has a conflict of interest that is of material significance to the Company and/or the relevant Board member requires the • Approved the updated UK tax strategy. approval of the Board. • Approved the updated Board profile as required by the There were no material transactions which gave rise to conflicts of 2022 Dutch Code. interest with any Board members reported during the reporting • Approved the external evaluation of the Board, on the period. Reference is made to note 24 (Related party transactions) recommendation of the Nomination Committee. of the consolidated financial statements for a description of any related party transactions. • Approved the FY24 Internal Audit Plan. • Recommended to the shareholders the appointment of Forvis Risk management activities of the Board Mazars as the Company’s external auditors for FY24. The Board has the overall responsibility for ensuring that the Group maintains a strong system of internal controls. • Approved the Agenda and Convocation Notice for the 2024 AGM and EGM. The system of internal controls is designed to identify, manage and evaluate, rather than eliminate, the risk of failing to achieve • Reviewed and approved the updated Bank Mandates business objectives. It can therefore provide reasonable but not for Treasury Activities. absolute assurance against material misstatement, loss or failure • Approved changes to the Board Rules. to meet objectives of the business, due to the inherent limitations of any such system. • Approved the renewal of the Directors and Officers insurance policy. Internal audit activities are consolidated into one independent Group internal audit function to provide assurance over key risks in all operating companies. A Group risk management framework is in place and updates to risk registers are presented to the Board. The Board is satisfied that the key risks to the business and relevant mitigating actions are acceptable for a business of the type, size and complexity as that operated by the Group. 67 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Corporate governance statement continued Board of Directors continued Convocation The AGM is convened by publication of a notice on the Company’s Risk management activities of the Board continued website at least 42 days prior to the AGM. Shareholders are entitled to propose items for the agenda of the AGM provided The key elements of the Group’s system of internal controls are that, alone or jointly, they hold at least 3% of the issued share as follows: capital of the Company. Proposals for agenda items must be • Financial reporting: Monthly management accounts are submitted at least 60 days prior to the date of the meeting. A provided to members of the Board that contain current request of a shareholder for an item to be included on the financial and operational reports. Reporting includes an agenda of the AGM must be explained in writing. The principles of analysis of actual versus budgeted performance and overviews reasonableness and fairness may permit the Board to refuse of reasons for significant differences in outcomes. The annual the request. budget is reviewed and approved by the Board. The Group reports half yearly. Voting rights • Risk management: A risk profile has been created and is The authorised share capital of the Company is €17,250,000.00 regularly updated and monitored. Each risk identified is and is divided into 1,725,000,000 shares with a nominal value of allocated an owner and the action required. €0.01 each. The issued share capital is €5,760,273.42 divided into 576,027,342 shares. Each share carries one vote. The shares are • Monitoring of controls: The Audit Committee receives regular listed on the WSE. reports from the external auditors and internal audit. There are formal policies and procedures in place to ensure the integrity All shares carry equal rights and are freely transferable. and accuracy of the accounting records of the Group and to Shareholders who hold shares on a statutory record date safeguard its assets. (i.e the 28th day prior to the AGM) are entitled to attend and • Staff policies: There are formal policies and processes in place vote at the AGM. within the Group supported by third-party technology in Shareholders may exercise their rights if they are the shareholders relation to anti-bribery and corruption and anti-slavery, as well of the Company on the record date and they or their proxy have as whistleblowing polices and independent reporting notified the Company of their intention to attend the AGM in mechanisms to facilitate the reporting of any suspected writing or by any other electronic means that can be reproduced wrongdoing or malpractice. on paper ultimately at a date set for that purpose by the Board, R Information on the key risks and uncertainties of the Group is set out which may not be earlier than the seventh day prior to the AGM. on pages 54 to 58 Each share in the issued share capital of the Company confers General meetings the right to cast one vote at the AGM. The Articles of Association require that the AGM be held in the Adoption of resolutions Netherlands within six months of the end of the financial year. Subject to certain exceptions provided by Dutch law or the Additional general meetings may be convened at other times by Articles of Association, resolutions of the AGM are adopted by the Board as necessary. The Company’s FY24 AGM was held at a simple majority of the votes cast at the meeting. the Hilton Amsterdam Airport Schiphol on 15 March 2024. Shareholder votes can be cast either in writing or electronically. Shareholders were invited to attend the AGM in person, and the AGM was broadcast via the Company’s website. The right to vote at the AGM could be exercised by an electronic voting proxy with Amendment of Articles of Association voting instructions to a civil law notary or submitting the voting The Articles of Association can be amended by resolution of the instructions by means of a proxy form via the Company’s website. AGM. A resolution to amend the Articles of Association can only Shareholders were entitled to submit questions about agenda be adopted at the proposal of the Board. items prior to the AGM. Appointment and dismissal of Directors The FY25 AGM will be held prior to 31 March 2025. The Articles of The Company has a one-tier system of management that means Association provide that the agenda for the AGM shall at least be that managing and supervisory duties are carried out by the as follows: Board. Appointment and/or dismissal and/or suspension of the • advisory vote in respect of the Remuneration report; members of the Board is the prerogative power of the general meeting of the shareholders. Each Executive Director may also, at • discussion of the Annual Report; any time, be suspended by the Board. Pursuant to the Articles of • discussion and adoption of the annual accounts; Association, the number of Directors shall be determined by the Board. Following a binding nomination by the Board, with due • discharge of the Board members from their liability; observation of the provisions under the Articles of Association, the • (if put on the agenda) designation of the Board as competent Directors are appointed at the general meeting. If and when to issue shares; selecting and nominating candidates for the Board, the Diversity Policy is taken into consideration. • (if put on the agenda) appointment of external auditors; and • (if required) authorisation of the Board to permit the Company to acquire its own shares. 68 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Substantial shareholdings c) transactions and arrangements between the ITBV group of companies and the Group will be conducted at arm’s length Pursuant to the Financial Supervision Act (Wet op het financieel and on normal commercial terms; and toezicht) and the Dutch Decree on Disclosure of Major Holdings d) no member of the ITBV group of companies will propose or and Capital Interests in Issuing Institutions, the Company has procure the proposal of a member resolution which would been notified of the following substantial shareholdings regarding prevent the Company from complying with its legal and the Company as at 30 September 2024: regulatory obligations. Shares Percentage Issuance of shares, acquisition of own shares, Total free float on WSE, of which: disapplication of pre-emption rights and transfers Non-substantial shareholdings 155,698,955 27.03 of shares Andy Bond 3,745,301 0.65 The Articles of Association provide that the general meeting may Independent Non-Executive Directors 101,915 0.02 issue shares (or delegate that authority to the Board). Any IBEX Retail Investments (Europe) Limited 415,594,616 72.15 delegation to the Board to issue shares must specify the Pepco Group Employee Benefit Trust 886,555 0.15 maximum number of shares that can be issued under the delegation and the duration of the delegation cannot exceed five Total 576,027,342 100.00 years. The designation can be extended for periods not exceeding five years. * Including shares held via Kent Road Investments 2019 Limited and Kent Road Investments 2020 Limited. A resolution by the general meeting to issue shares or to ** Includes shares held by the previous Audit Committee Chair, Pierre Bouchut. designate such authority to the Board can only be taken at the *** Shares are held on trust for the benefit of current and former employees and proposal of the Board. the trust operates for the fulfilment of the VCP and LTIP, as described in the Remuneration report. The Articles of Association permit the general meeting to restrict 72.15% of the Company’s issued share capital is ultimately owned or exclude the pre-emption rights of shareholders at the proposal by IBEX Topco B.V. (ITBV), with 0.02% owned by the independent of the Board. A resolution to exclude shareholders’ pre-emption Non-Executive Directors, 0.65% owned by Andy Bond, Non- rights requires a majority vote of at least two-thirds of votes cast Executive Chair, and the remaining 27.03% traded on the WSE. Of if less than half of the Company’s issued and outstanding share the shares traded on the WSE, no shareholder owns more than 5%. capital is present at the general meeting. At the time of the Company’s initial listing on the WSE, the Under the Articles of Association, the Company may acquire its Company entered into a relationship agreement with Steinhoff own shares if the general meeting authorises the Board to do so. International Holdings N.V. and certain of its affiliate enterprises. An authorisation for the Board to acquire shares in the Company Following the implementation of the Steinhoff reorganisation, the is limited to eighteen months. Such authorisation was obtained at rights of Steinhoff International Holdings N.V. were transferred to the AGM in March 2024, and will be requested at the AGM in March ITBV, resulting in an amended and restated agreement between 2025. ITBV and certain of its affiliate enterprises (the ITBV Affiliates) to No authorisation of the general meeting is required for the regulate the relationship between the Company and the IBEX Company to acquire its own shares for the purpose of transferring group of companies (the Relationship Agreement). The terms of such shares to employees of the Group under an applicable share the Relationship Agreement comply with the requirements of plan. principle 2.7.5 of the Dutch Code. There are no restrictions on the transferability of the shares in the The Relationship Agreement provides that: Articles of Association or under Dutch law. a) for so long as the ITBV Affiliates hold, in aggregate, more than 30% of the voting rights of the Company, the ITBV Affiliates will Lock-up arrangements jointly be entitled to nominate three Non-Executive Directors to Independent Non-Executive Director the Board. This nomination right is reduced to two Non- In respect of work undertaken by them in relation to and in Executive Directors when the ITBV Affiliates hold, in aggregate, preparation for roles as Board members, in the period prior to less than 30% of the voting rights of the Company. This the Company’s listing on the WSE one-off fees were paid to nomination right is further reduced when the ITBV Affiliates hold, Richard Burrows, Brendan Connolly, María Fernanda Mejía, in aggregate, less than 20% of the voting rights of the Company. Grazyna Piotrowska-Oliwa and Pierre Bouchut which were used by If the ITBV Affiliates hold, in aggregate, less than 10% of the these individuals to subscribe for shares in the Company on voting rights of the Company, they will no longer have the admission to the WSE (at the admission offer price). entitlement to nominate any members of the Board; Shares acquired by these Board members on admission must be b) subject to compliance with applicable laws and regulations, held until the later of: (i) 26 May 2024; or (ii) the first anniversary of including the Market Abuse Regulation, the Company will: the date on which the relevant Board member ceases his or her i. provide certain information to the ITBV Affiliates to enable the directorship of the Company. Richard Burrows stepped down as ITBV group of companies to fulfil its regulatory and legal Non-Executive Director and Chair of the Board following the obligations and to facilitate the preparation of the accounts conclusion of the AGM on 2 February 2023. On 25 May 2024, the of the ITBV Affiliates and connected enterprises for so long as shares held by Richard Burrows were released from the such provision is reasonably required by generally applicable lock-up provisions. accounting principles; and ii.provide reasonable assistance and access to Company management in connection with any planned disposal of shares in the Company that are held by the ITBV Affiliates; 69 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Audit Committee report Providing oversight and promoting integrity Dear Shareholders, On behalf of the Audit Committee, I am delighted to present the Committee’s report for the year ended 30 September 2024. This marks my first report since joining the Board and being appointed Chair of the Audit Committee in June 2024, after Pierre Bouchut stepped down from his role both as an independent Non-Executive Director and as Audit Committee Chair at the AGM in March 2024. On behalf of the Audit Committee, I would like to express our gratitude to Pierre for his three years of service as Chair and for his commitment and contribution to the Group as a whole. In March 2024, The Committee also welcomed Sean Mahoney to its ranks, contemporaneous with his appointment as a Non-Executive Director. My onboarding as Chair of the Committee has been greatly facilitated by the Committee, who have spent many hours acquainting me with the details of the Company’s accounting judgements, control environment, and financial and control processes. I have engaged in in-depth discussions with the Company’s external auditors, our finance team and our internal audit team. These included a review of the Group’s internal and management controls, risk framework and the charter and effectiveness of the internal audit function, which now reports directly to me. In addition, I have participated in a wide range of excellent initiatives already underway well before my arrival, including, of particular importance to me, the adoption of a new Frederick Arnold Group Accounting Policy Manual, together with the Group-wide Audit Committee Chair harmonisation of the chart of accounts and policies and procedures for various accounting provisions and judgements. Finally, I have undertaken a diverse range of specific workstreams including a review of the accounting treatment for our discontinued operations in Austria, the assessment of goodwill and impairment related to Poundland, our foreign currency hedging processes, and the investigation related to last February’s fraud in Hungary, among others. As to our internal functions, the Group is continuously improving these areas and it is very much worth noting the addition in FY24 of a new Group Financial Controller and a new Group Senior Risk Manager focused on our enterprise risk management programme, who complement our new Head of Internal Audit who joined at the tail end of FY23. This report sets out the ongoing responsibilities and objectives of the Committee and provides an overview of the main activities during FY24, the highlights of which are set out below. I am particularly pleased that the Committee has an open and constructive relationship with management, with the internal audit function and with our external auditors, whom I thank for their assistance over the year. I would also like to thank my fellow Committee members for their diligence and engagement during the year. I look forward to continuing our work in FY25. Frederick Arnold Audit Committee Chair 20 December 2024 70 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Role of the Audit Committee The formal role of the Committee, as delegated by the Board, is Committee membership and meetings set out in written terms of reference, which are reviewed annually The Committee concluded the year with five members, with by the Committee and are available on our website. a minimum requirement of three members constituting a The Committee’s responsibilities include, but are not limited to, quorum. The Committee must have at least one member the following matters: with recent and relevant financial experience, and the Committee as a whole shall have competence relevant to • financial and sustainability reporting and compliance with the sector. The Board is satisfied that all Committee relevant accounting standards and other legal and regulatory members have the required experience to enable the requirements; Committee to fulfil its duties. Committee member • reviewing the Group’s accounting policies and, in particular, biographies and attendance at meetings during the year any major accounting issues of a subjective nature are are set out on pages 62 to 66. Three members of the Audit discussed by the Committee; Committee are considered to be independent Non- Executive Directors within the meaning of the Dutch Code • reviewing the Group’s half-yearly and annual financial and Warsaw Code (Frederick Arnold, María Fernanda Mejía statements (including clarity and completeness of disclosure) and Brendan Connolly) and two members are not and the quarterly trading updates; considered to be independent Non-Executive Directors • providing oversight of the Group’s internal control and risk (Sean Mahoney and Neil Brown) due to their relationship management systems and considering reports on their with our major shareholder. effectiveness from the Group CFO, Group Financial Controller At the invitation of the Chair of the Committee, the Chair of and Group Head of Internal Audit; the Board, the Group CEO, the Group CFO and the external • assisting the Board with the development and execution of the audit lead partner from Forvis Mazars are invited to attend risk management strategy, risk policies and current risk all Audit Committee meetings. The Company Secretary acts exposures, including maintenance of the Group’s risk register; as secretary to the Committee. significant risk issues are referred to the Board for consideration; Other regular attendees include the Group Financial • reviewing ESG strategies, reporting, goals and targets, Controller and the Group Head of Internal Audit; in addition, monitoring progress and advising the Board as appropriate; the Group Treasurer, Head of Tax, Group Chief Information Officer, Head of Sustainability, Group Chief Compliance • monitoring the scope of work, quality, effectiveness and Officer (including whistleblowing) and Head of Group independence of the external auditors and recommending to Reporting are invited to attend all or part of any meetings the Board their appointment, reappointment and fees; and and are available to meet on a one-to-one basis as and • reviewing the engagement of the external auditors to ensure when required to support the Audit Committee fulfilling its role. that the provision of non-audit services by the external audit At the conclusion of each meeting, Forvis Mazars and the firm is in accordance with the Group’s policy which seeks to Group Head of Internal Audit invariably are each given the ensure that their independence is not impaired. opportunity to discuss matters with the Committee without management being present. Similar private sessions are regularly held with our Group CFO, with our Group Financial Controller and with our Head of Financial Reporting, among others. The Audit Committee has a schedule of regular, structured meetings throughout the year, but meets as often as is required for its proper functioning and to respond to matters requiring oversight as they arise. The timing of meetings is agreed in advance and set to accommodate a regular cadence of matters and key dates in the financial calendar and, on behalf of the Board, to provide oversight of the Group’s risk management and internal control processes. In addition to the regular scheduled meetings, the Committee consults with our external auditors, advisors and management on an ad hoc basis. R Details of attendance of all Board and Committee meetings by Directors are set out on page 66. 71 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Audit Committee report continued Key judgements and financial reporting matters The Committee continually assesses the ongoing effectiveness and quality of the external auditor and the audit process, which Financial statements includes discussing details of the audit process with our senior The financial statements are prepared in accordance with financial team, the auditors, and a variety of staff throughout the Dutch law, and the audit of the Group’s financial statements is organisation. We seek and encourage feedback from the performed by Forvis Mazars. members of the Committee and stakeholders at all levels across Prior to their publication, the Committee reviews the quarterly the Group on our auditors’ objectivity, appropriate mindset and trading updates, the interim results announcement and financial professional scepticism. statements, the Annual Report and associated results Audit of the annual accounts announcement, together with the external Auditors' report. Forvis Mazars are engaged to express an opinion on the financial In particular, in FY24, the Audit Committee considered the statements. The Committee held independent meetings with the following in relation to the financial statements: external auditors during the year and reviewed, agreed, discussed and challenged their proposed FY24 audit plan, including the • the accounting principles, policies and practices adopted materiality applied, their scope, and their assessment of the and the adequacy of related disclosures in the reports; financial reporting risk profile of the Group. • the significant accounting issues, estimates and judgements The Committee discussed the views and conclusions of Forvis of management in relation to financial reporting; Mazars regarding audit and accounting matters, together with • whether any significant adjustments were required as a result management’s treatment of significant transactions and areas of the audit; of judgement during the year. The Committee considered these • the assessment of goodwill and, in particular, the procedures and is satisfied with the treatment in the financial statements. performed by management to assess whether goodwill Independence and objectivity recognised on the purchase of Poundland should be impaired; The Committee is responsible for the annual assessment of the • the classification of Pepco Austria as a discontinued operation; external auditors’ independence, taking into account the Group’s relationship with the auditors' as a whole, including any threats to • the classification and presentation of non-underlying items; the auditors' independence and the safeguards applied to mitigate those threats including the provision of any non-audit • the restatement of prior year balances; services. • compliance with statutory tax obligations; Auditor independence is maintained by reviewing Forvis Mazars’ • whether the information set out in the Annual Report and the and PwC’s confirmation of their independence and their financial statements are fair, balanced, comprehensive, clear, procedures to safeguard independence and objectivity and and understandable and covered both positive and negative monitor the nature and value of non-audit services performed. aspects of performance; and Audit fees and non-audit services • whether the use of APM obscured IFRS Accounting Standards Payments made to Forvis Mazars in the financial year ended measures. 30 September 2024 for audit, audit-related and other services Going concern are set out in note 5 to the consolidated financial statements. The Committee assessed and confirmed the appropriateness of The Group’s policy prevents the external auditors from providing adopting the going concern basis of accounting in preparing the any services designated as prohibited within the Dutch Code or Annual Report and Consolidated Financial Statements. The the Warsaw Code and requires Committee approval of their Committee considered the Group’s liquidity and available credit provision of any other services regardless of their magnitude. Any facilities, including the revolving credit facility, and reviewed the non-audit services will be subject to tender processes, with the liquidity impact of a severe, but plausible, management downside allocation of work made on the basis of competence, cost scenario. effectiveness, regulatory requirements, potential conflicts of interest, and knowledge of the Group’s business. Non-audit fees True and fair view paid to our external auditors as a percentage of audit fees At the request of the Board, the Committee considered whether totalled 7.8% over the last three years. the financial statements and the elements of the Annual Report that are relevant to the financial statements, as a whole, is fair, balanced and understandable and whether it provides the Risk management and internal controls assurance necessary information to shareholders to assess the Group’s Risk management systems position, performance, business model and strategy. The Board has overall responsibility for oversight of individual risks and ensuring that the Group maintains a sound system of internal To form its opinion, the Committee reviewed the financial statements control. There are inherent limitations in any system of internal set out in the Annual Report and interim results, together with control and no system can provide absolute assurance against management and the external auditor’s assessment of items material misstatements, loss, or failure. Equally, no system can included in the financial statements and the prominence given guarantee elimination of the risk of failure to meet the objectives to them. The Committee, and subsequently the Board, is satisfied of the business. The Board delegates oversight responsibility for that, taken as a whole, the Annual Report and Consolidated risk to the Audit Committee. Financial Statements is fair, balanced, and understandable. Against that background, the Committee reviewed the Group’s External auditors overall approach to enterprise risk management and control, and its processes, outcomes, and disclosure. The Audit Committee has Forvis Mazars have been the Group’s auditors since the financial approved the rollout of an enterprise risk management approach year ended 30 September 2021 and, at our AGM in March 2024, across the business in 2025, building on the team’s progress in 2024. shareholders approved their reappointment as the Group’s external auditors for the financial year ended 30 September 2024. The Group is proactive in ensuring that Group and operational The partner responsible for the Group audit opinion is Onno risks are consistently identified and managed within each Opzitter. operating company. In addition, the Group risk appetite is Forvis Mazars use PwC as component auditors in several countries regularly assessed and our risk register is maintained with to perform the work on local entities. Forvis Mazars review all of attention to: the auditors’ audit files and are involved throughout the audit • the risks and the impact they may have; process in accordance with ISA auditing standard 600. 72 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 • actions to mitigate risks; and governance by providing valuable insights and recommendations that would help safeguard the organisation’s assets, reputation, • ownership of risks. and sustainability. A description of the key risks is set out on pages 52 to 58. The Internal Audit Charter was approved by the Committee in The Board has confirmed that it has conducted an assessment October 2023 and updated in September 2024. This defines the of the principal risks facing the Group, including those which purpose, authority, and responsibility of the function within the threaten its business model, future performance, solvency or organisation and establishes its independence and authority. The liquidity. The Board considers that the processes undertaken by governance structure of the internal audit function was reviewed the Committee are appropriately robust and effective. in FY24. To ensure the independence of the function and that it remains objective in its evaluations, the Group Head of Internal Internal control framework Audit reports functionally to the Audit Committee Chair and During the year, the Board has not been advised by the organisationally to the Group CFO. Committee of, nor has it identified itself, any failings, fraud, or weaknesses in internal control which it has determined to be The Group Head of Internal Audit informs the Group CFO and the material in the context of the financial statements, other than as Audit Committee Chair without delay if, during the performance of described below. its duties, the function discovers or suspects an instance of material misconduct or irregularity. If the actual or suspected As reported on 27 February 2024, The Group was the target of material misconduct or irregularity pertains to the functioning of a sophisticated fraudulent phishing attack in its Hungarian business, one or more of the Executive Directors, the internal audit function resulting in a loss of approximately €15.5m in cash. The investigation reports this to the Chair of the Board of Directors. Records are into the fraud by various national and international authorities, kept of how the Committee is informed by the internal audit function. including the pursuit of any potential recovery, is ongoing. The Company has also undertaken a full investigation including a review The Committee reviewed the FY25 Internal Audit Plan and of its phishing training and procedures throughout the Group, which approved a risk-based approach to audit planning, focusing on have been fully re-communicated throughout the business with the areas of highest risk to the organisation. The Committee mandatory assessments. reviewed and discussed the quarterly internal audit reports, assessing the results of audit activities, together with the Additional actions have also been taken to strengthen cash and completion status of agreed actions. The Committee oversees in other controls across the business based on specific learning from detail the design and ownership of processes to resolve this incident. This included engaging external forensic specialists to outstanding issues or actions. leverage industry best practice and subject matter expertise and During the year, the Committee or Committee Chair met initiating a comprehensive analysis of balance sheet positions. This, frequently with internal audit without executive management together with a review of the accounting policies across the Group, being present and discussed the results of the audits performed identified some instances of non-compliance with procedures and and any additional insights of the Group Head of Internal Audit. accounting rules in some of the historical accounting, including related to supplier discounts, although the financial impact was not Internal audit effectiveness material. Any issues identified were remediated and corrected as During the year, the internal audit team performed an part of year-end reporting. effectiveness self-assessment against compliance with Dutch The Committee continues to promote and support the ongoing Code and Warsaw Code requirements. Based on this we are strengthening of controls throughout the Group and believes that compliant with all internal audit requirements in the Dutch the Group has a well-defined organisational structure with clear Code and all but one Warsaw Code requirement (which states lines of responsibility and a comprehensive financial reporting best practice is for no compensation for internal audit or system including internal audit reporting to the Committee. compliance teams to be based on company results, while noting that all variable compensation is based on achieving Regulation minimum financial targets). The Group operates within an increasingly regulated environment, including regulations concerning controlling bribery and The internal audit self-assessment confirms that the function is effective in fulfilling its core responsibilities. The assessment corruption, the importation of goods, data protection, and health highlights significant improvements made in the past year and and safety. The Group endeavours to comply completely with all several areas of focus for FY25. There is confidence that the Group such regulations and strives to continuously improve our internal audit function will continue to evolve, maintaining its Compliance function. For example, to that end, in FY24 we effectiveness whilst better serving the needs of our stakeholders refreshed all our relevant policies and brought into the Group a new Chief Compliance Officer based in Hong Kong. and contributing to the organisation’s success. Policies and compliance Environmental, social and governance (ESG) On an annual basis, the Committee reviews the Group’s Treasury The ESG strategy is set at Group level and pulls together the Policy (covering risk management, treasury governance and ESG plans and actions of our operating companies. Within the internal controls, systems and practices) and Tax Strategy, and business, ESG actions and initiatives are directed and prioritised receives reports to confirm compliance with the policies. by an ESG Committee, which is chaired by the Group CFO and The Group has policies and processes in place for whistleblowing meets monthly to review progress. The Audit Committee and the Committee encourages an environment where reviews ESG strategies, goals and targets, and monitors progress colleagues have the opportunity to raise concerns about possible on a quarterly basis, advising the Board as appropriate. fraudulent activity and any other concerns that arise within the We continue to monitor that the Group is compliant with ESG organisation. Following the developments discussed on Page 50 regulatory reporting requirements today and in the future and the Committee is also satisfied that arrangements are in place for keep ourselves updated on the changing regulatory requirements proportionate investigation of such matters, including appropriate in this area, for example reporting according to the ESRS for the follow-up action. first time in FY25, as noted on page 35. A quarterly ESG report is provided to the Audit Committee providing an update on the ESG Internal audit goals, the carbon emissions roadmap, and the net zero transition As alluded to above, following an external search process, the strategy 2050 cost projections. Committee appointed a new Group Head of Internal Audit and R For further information on the Group's approach to ESG, please see established the Group internal audit team in Q4 of FY23. The team our report on pages 49 - 51. was developed in FY24 with a key objective to strengthen 73 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Nomination Committee report Shaping Board excellence Dear Shareholders, On behalf of the Nomination Committee, I am pleased to present our FY24 Committee report. I would like to thank the members of the Nomination Committee for their continued support and hard work during the financial year. We have managed change at the most senior level of the business in FY24 and can look forward to further progress in FY25. Key area of focus in FY24 The Committee’s principal focus for FY24 has been the appointment of our new CEO, Stephan Borchert, the appointment of Frederick Arnold as a Non-Executive Director and Audit Committee Chair, the appointment of Sean Mahoney as Non-Executive Director, the externally led Board evaluation and the further development of our succession plan, as outlined below. In addition, we have: • recommended to the Board revisions to the policy on diversity and inclusion (the D&I Policy); • reviewed and approved the structure, size and composition of the Board; • approved the Directors’ Retirement Schedule; • reviewed and approved the Board Committees’ membership; and • approved updated Nomination Committee terms of reference. María Fernanda Mejía Nomination Committee Chair Talent and succession The Committee recognises that having the right Directors and senior management, with the right capabilities, experience and industry knowledge, is fundamental to the Group’s long-term, sustainable success. Accordingly, the Committee has dedicated significant time and resources to enhancing succession planning and building on the talent currently in the business. CEO appointment An important part of our work this year was the appointment of our new CEO, Stephan Borchert. The Committee worked with an external search firm to identify and interview suitable CEO candidates from across the retail sector, including an in-depth selection process to ensure the candidate recommended to the Board had the right expertise to fulfil the role. The Committee oversaw the preparation and implementation of Stephan’s tailored induction programme, capturing the priorities of the Group. The programme provided insight to the business operations, governance and controls, and included an opportunity to meet colleagues across the Group. We would like to thank Andy Bond for returning to an executive leadership role and acting as Executive Chair during FY24, as well as for his guidance during Stephan’s three-month induction period. Audit Committee Chair appointment One of the key responsibilities of the Committee is to consider the skills, knowledge and experience of prospective candidates. In our search for an Audit Committee Chair, a detailed role specification was prepared by the Committee and an external search firm was appointed to lead the process to identify potential candidates. The appointment followed a thorough process to ensure the candidate would help meet the strategic ambitions of the business. We welcomed Frederick Arnold as an independent 74 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Board evaluation Non-Executive Director of the Board and as Audit Committee Chair following his appointment at the EGM on 6 June 2024. One of the roles of the Committee is to oversee the Board evaluation process, which for FY24 was externally facilitated. Succession planning The key areas of focus for the review were: role, responsibilities The Committee dedicated time to ongoing succession planning. and performance of the Board and its individual members. This We reviewed the adequacy and effectiveness of the succession evaluation was made through in-depth one-on-one interviews planning processes. The Committee oversaw management’s with all the Directors. The findings were presented back to the "Talent and Succession Strategy", recognising the need to focus Board during an externally led session. Key strength areas were on enhancing senior leadership and to manage the available identified including Board culture and contribution and the talent pool within the Group. This has resulted in a clearer effective use of time and information. The report also identified understanding of talent and skills within the business and a opportunities for Board development, including the successful stronger pipeline for succession. induction of the incoming CEO, the evolution of Board composition and its approach to succession planning. The Committee has prepared an action plan which it will review Committee composition and organisation and track progress against this evaluation through FY25. Our Committee comprises six members, each of whom is a Non-Executive Director of the Company. On 2 October 2023 Profile of the Board Andy Bond stepped down as interim Chair of the Committee The Board has prepared a profile of its size and composition, and María Fernanda Mejía was appointed by the Board as taking into account the nature of the business and its relevant the new Chair of the Committee. The Committee is delighted activities. The combined experience, expertise, background that Sean Mahoney was appointed as one of its members and independence of the Board members enables the Board to following his appointment as Non-Executive Director at the carry out its duties and responsibilities effectively in relation to EGM held on 6 June 2024. the Company and its stakeholders. The Committee currently consists of Brendan Connolly, Paul The appointments of Brendan Connolly, Grazyna Piotrowska-Oliwa, Soldatos, Neil Brown, Sean Mahoney, Andy Bond, and María Frederick Arnold and me to the Board comply with the independence Fernanda Mejía. Brendan Connolly and María Fernanda requirements of the Dutch Code and the Warsaw Code. The Mejía are independent Non-Executive Directors within the appointments to the Board of Neil Brown, Sean Mahoney and Paul meaning of the Dutch Code and the Warsaw Code. The Soldatos comply with the terms of the Relationship Agreement. other four members of the Committee are Non-Executive Directors who are not considered to be independent. The Diversity and inclusion Company Secretary acts as secretary to the Committee. The Company has a D&I Policy, which underscores the commitment to promoting equality, diversity and inclusion for both The Committee has a strategic work plan and meets at the Board and the senior leadership team. A diverse and inclusive least three times a year and otherwise as required. workplace continues to be a priority for the Board and the Committee meetings are scheduled in advance. The Committee. Please see pages 65 and 66 of the corporate quorum for the transaction of business by the Committee is governance section for more information. two members. The Committee makes recommendations to the Board on any area within its remit that it deems appropriate. Key areas of focus for FY25 The Committee, together with the Board, will continue to support and encourage the leadership of the Group to ensure its Key responsibilities continued long-term growth and success. The Committee will The Committee’s main duties are: focus on the following priorities in the forthcoming year: • to lead the process for Board appointments including • ensuring a smooth and effective transition for our new CEO; selection criteria and appointment procedures; • continued focus on expertise and skills of key leaders in • to review the structure, size, and composition of the Board; the business; • to make recommendations to the Board on the profile of • reviewing the evolution of Board composition and effectiveness; the Board; and • • to make recommendations to the Board on the D&I Policy; continued focus and monitoring of the risk and control environment. • to manage succession planning for the Board and senior Executives of the Company; and María Fernanda Mejía • to review the Board evaluation process. Nomination Committee Chair 20 December 2024 The Committee held six meetings during the year. More detail on the role and duties of the Committee can be found in the terms of reference for the Committee, which are published on the Company’s website. 75 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Remuneration Committee report Rewarding performance Dear Shareholders, I would like to thank you for your continued support in 2024 during which time we have faced many changes as a business. We amended our Remuneration Policy at the AGM in March 2024 to further align with our strategy and have continued to operate within this policy during 2024. As a Dutch company listed on the WSE we have multiple reporting requirements which we have chosen to supplement with additional information. The Remuneration report on pages 79 to 83 will be presented for an advisory vote at our next AGM. Introduction The Remuneration Committee's purpose is to develop a reward package for Executive Directors and senior leadership that supports the Company's vision and strategy, and to ensure that rewards are performance based, encourage long-term shareholder value creation and take into account the remuneration of the whole workforce. More detail on the role and duties of the Committee can be found in the terms of reference on the Company's website. Brendan Connolly Remuneration Committee Chair 76 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Committee activities in FY24 During the reporting period, the Committee focused on the areas Committee composition as set out below: The Committee comprises five members, each of whom is a Non-Executive Director of the Company. Three members • reviewed remuneration for the Executive Directors and selected constitutes a quorum. Frederick Arnold, Grazyna senior Executives; Piotrowska-Oliwa and I are members of the Committee who • reviewed and approved salary levels for the Executive Directors are independent Non-Executive Directors within the and selected senior Executives; meaning of the Dutch Code and Warsaw Code. Paul Soldatos and Neil Brown are not considered to be • reviewed and approved the terms of the restricted share independent. The Chair of the Board may not be a member awards made to executives in place of the Company’s VCP; of the Remuneration Committee. The Company Secretary • reviewed and approved the remuneration package for our acts as secretary to the Committee. Other individuals, incoming CEO; including senior Executives and external professional advisors to the Committee, may be invited to attend when • reviewed and approved the introduction of the Share Match appropriate and necessary. No individual will be present Plan along with the performance measures and targets in when their own remuneration is discussed. relation to the award for the newly appointed CEO; The Remuneration Committee meets at least three times • reviewed and agreed the terms for the awards for Executives each year and is responsible for preparing the decision in the Group Long Term Incentive Plan (LTIP); making of the Board on the remuneration of members of the • reviewed and approved performance against FY24 Short-Term Board and selected senior Executives. Incentive Plan (STIP) targets for the Executive Directors; The Committee is also responsible for reporting to the • reviewed and approved the FY24 STIP measures, weightings Board on the implementation of the Remuneration Policy in and targets; each year in the context of the achievement of the Company's long-term strategy and objectives. • reviewed and approved appropriate measures, weightings and targets for the Group LTIP for the FY25 award; • considered workforce remuneration approach and policies; • considered the Executive remuneration market update Responsibilities provided by the Committee’s advisors; The main duties of the Remuneration Committee are • reviewed and approved the terms of reference to ensure as follows: alignment with the Dutch Code and Warsaw Code; • to recommend to the Board the Remuneration Policy • updated the Remuneration Committee's terms of reference; of the Company; • reviewed Executive Directors’ shareholdings against • to advise on and recommend to the Board the shareholding requirements; remuneration framework for the Executive Directors • reviewed the 2024 AGM shareholder and proxy voting and selected senior Executives and to advise the AGM agency feedback; on the remuneration of the Non-Executive Directors; • • considered alignment of Executive pay with Company to advise on the structure of target setting for culture; and performance-based incentive plans of the Company, including monitoring performance against any targets; • reviewed and approved the Remuneration Report. • to review all share incentive plans for approval by the Board and shareholders; and • to prepare the Remuneration Report. 77 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Remuneration Committee report continued Board changes The FY25 PSP plan will consist of: adjusted EPS (45%), a ROIC measure (45%), which is the same as reported in the financial Incoming CEO section of the Annual Report, and 10% for the same ESG measures Stephan Borchert was appointed as an Executive Director and as 2024 with adjusted and more challenging targets. CEO with effect from 1 July 2024. He commenced with a three- month induction allowing for a smooth transition from Andy Bond’s As mentioned above, we introduced a Share Match Plan which interim period as Executive Chair which commenced in September was approved at the EGM held in June 2024. 2023. Andy Bond remained in his role as Executive Chair during the Long Term Incentive Plan transition period, reverting to the role of Non-Executive Chair on 1 October 2024. At the AGM held in January 2022 we received support for the introduction of a new LTIP. Until the VCP concludes, the new LTIP On appointment to the Board, Stephan’s salary was set at is intended to be used alongside the VCP for senior Executives. £900,000 with a pension allowance of 13% of his salary. Some Chair and Non-Executive Director fees assistance for living expenses and relocation was granted for eighteen months. Stephan is eligible for a maximum bonus of 150% Non-Executive Director fees are the remit of the Chair and CEO, of salary and a Group LTIP award of 300% of salary. In addition, and an amended scale of payment was put in place for all independent Non-Executive Directors. The Chair fee, which is the Stephan will also participate in the Share Match Plan allowing remit of the Remuneration Committee remains the same for FY25. him to invest up to two times his annual salary in shares in the Company. In return the Company will award matching shares. As disclosed in last year’s report Andy Bond took on the role of Executive Chair until our new CEO completed his induction period Remuneration outcomes in FY24 on 1 October 2024; therefore, Andy has reverted from his base In terms of remuneration outcomes in FY24, Andy Bond and Neil salary of £835,000 in relation to the Executive Chair role to his Galloway did not receive salary increases. Stephan Borchert Chair’s fee of £400,000. He will retain his 1.0% participation right and Neil Galloway received a pension allowance of 13% of salary. in the VCP. Andy Bond did not receive a pension allowance. Alignment to Group strategy The STIP (bonus plan) for the Executive Directors consisted of To ensure alignment to Group strategy, summed up as profitable a financial goal of €517m for the Group's underlying EBITDA and share price growth in a sustainable manner, we have centred delivery on an IAS 17 basis, representing 80% of the annual bonus the targets around these themes in the various long-term and opportunity, with the balance based on achieving strategic short-term incentives. goals. The strategic goals comprised of LFL growth targets, strategic plans for specific areas, defining the ERP strategy and Conclusion implementation, organisational changes, and implementing a In summary, in FY24 we have continued the move towards a supplier financing plan. more standardised and recognisable structure of STIPs and Bonus plan LTIPs as outlined in last year’s report. The move away from the VCP has continued with only one participant remaining. Following an assessment by the Committee of the personal contributions during the year of the Executive Directors, the After due consideration and debate, we believe the remuneration following cash bonuses have been awarded. outcomes to be fair in terms of alignment to the stakeholder • Andy Bond received a cash bonus of £821,640. experience and, no discretion was applied. I would like to thank the Committee for their work, debate, and input during the year • Stephan Borchert received a pro-rated cash bonus of £221,400 and look forward to interacting with our stakeholders in the for the three months between 1 July and 30 September, forthcoming year. based on the same goals as Andy Bond. • Neil Galloway received a cash bonus of £617,400. Brendan Connolly For FY25, the maximum bonus opportunity for the CEO and Remuneration Committee Chair CFO will remain at 150% of salary and the bonus opportunity will 20 December 2024 continue to be divided into 80% for underlying Group EBITDA on an IAS 17 basis and 20% for strategic goals. This financial performance metric is aligned with senior management’s bonus plan. Due to the commercial nature of the targets these will be published in the FY25 Annual Report. Value Creation Plan We had previously mentioned that the VCP was being phased out in favour of the LTIP (Performance Share Plan (PSP)) with only one remaining individual in the VCP being our Chair, Andy Bond. The plan is capped at €14m and concludes in FY26. The PSP was originally approved at the AGM held in January 2022. The plan was introduced for the first time FY24 so as yet we do not have any outcomes for this plan. The CEO and CFO are eligible for 300% and 250% respectively. The PSP awarded in 2024 consists of the following targets: an IAS17 EBITDA less net debt measure (60%), an EBIT measure (30%) and ESG targets of a 10% reduction in Scope 1 and 2 emissions and 100% coverage for factory audits. 78 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Remuneration report The following section provides details of how Board members were paid during the financial year to 30 September 2024. The Remuneration Committee members, activities and meetings during the year are set out on pages 62 and 66 along with the Committee’s purpose, roles and responsibilities, and are thereby included in this part of the report by reference. The Remuneration Committee took scenario analyses into account when initially setting the Remuneration Policy and continues to take them into account when operating the Remuneration Policy. Payout opportunities in different scenarios were conducted when setting remuneration. None of the Directors received any remuneration from entities within the Group other than as disclosed in this report. The Remuneration Committee did not deviate from the Remuneration Policy in the year. No concerns or issues were raised with respect to the advisory vote of the AGM approving the 2023 Remuneration Report. Advisors Korn Ferry is a signatory to the UK Remuneration Consultants Group Code of Conduct (the Code of Conduct) and was appointed by the Remuneration Committee in 2021 having submitted a proposal which demonstrated its skills and experience in executive remuneration both in the UK and across Europe. Korn Ferry provides advice to the Committee on matters relating to Executive remuneration. The Committee was satisfied that the advice provided by Korn Ferry remains objective and independent, having noted its commitment to the Code of Conduct. Single total figure of remuneration table Salary/ Taxable Total fixed Total variable fees benefits Pension Bonus LTIP Other Total remuneration remuneration remuneration € € € € € € € € € € € € € € € € € € FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 FY24 FY23 Executive Directors Andy Bond 976,432 327,335 4,852 9,659 — — 960,809 — 2,881,008 — — — 4,823,101 336,994 981,284 336,994 3,841,817 — Neil Galloway 701,628 344,610 27,082 8,937 91,212 44,799 721,975 689,220 — — — — 1,541,896 1,087,566 819,921 398,346 721,975 689,220 Stephan Borchert 263,111 — 83,656 — 34,204 — 258,901 — — — 643,915 — 1,283,786 — 380,971 — 902,815 — Trevor Masters 78,380 731,423 — 48,148 — 133,869 — — — 3,115,308 — 625,109 78,380 4,653,857 78,380 913,440 — 3,740,417 Non-Executive Directors Brendan Connolly 113,284 89,024 — — — — — — — — — — 113,284 89,024 113,284 89,024 — — Frederick Arnold 55,058 — — — — — — — — — — — 55,058 — 55,058 — — — Grazyna Piotrowska- Oliwa 86,534 71,219 — — — — — — — — — — 86,534 71,219 86,534 71,219 — — Helen Lee Bouygues — — — — — — — — — — — — — — — — — — María Fernanda Mejía 104,075 71,219 — — — — — — — — — — 104,075 71,219 104,075 71,219 — — Neil Brown — — — — — — — — — — — — — — — — — — Paul Soldatos — — — — — — — — — — — — — — — — — — Pierre Bouchut 46,044 89,024 — — — — — — — — — — 46,044 89,024 46,044 89,024 — — Sean Mahoney — — — — — — — — — — — — — — — — — — * FY24 Committee Chair. ** Pierre Bouchut resigned as Chair of the Audit Committee on 15 March 2024. Frederick Arnold was appointed as Chair of the Audit Committee on 6 June 2024. Notes to the table 1 Stephan Borchert was appointed as permanent CEO with effect from 1 July 2024. His remuneration in the table is pro-rated for the proportion of the year in which he performed the role. 2 Andy Bond has not formally been appointed as an Executive Director, but for the purpose of comprehensive disclosure, his remuneration will be expressed as an Executive Director in order to reflect his Executive Director duties within his Executive Chair role. Andy was appointed Chair on 2 February 2023, before becoming Executive Chair on 12 September 2023 and returning to his role as Chair on 1 October 2024. Andy’s fees for FY24 are therefore reflective of the salary he received as Executive Chair of £835,000. Andy did not receive any payments under the annual bonus plan during his time as Chair. 3 Andy Bond did not receive a separate pension payment within his role of Executive Chair. Stephan Borchert pension is in the form of a cash equivalent payment. Neil Galloway’s pensions is split, part contribution to a pension scheme, and part cash equivalent payment. 4 Salary/fees, taxable benefits, and bonus are all short-term employee benefits. 5 The Company has not revised or clawed back the remuneration of any Directors in the year. 6 No loans, advances or guarantees have been provided to any Director. 7 Neil Brown, Helen Lee Bouygues, Paul Soldatos and Sean Mahoney did not receive payment from the Company in FY24. 8 "LTIP" in respect of Andy Bond relates to 600,000 unexercised share options vested under the Chair Award in FY24 at a closing share price of 20.52 PLN. 9 "Other" remuneration in respect of Stephan Borchert includes a single payment in relation to a forfeited bonus from a previous role prior to joining the Company. 10 Trevor Master’s received salary from the period 1 September 2023 to the termination date 12 October 2023. 79 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Remuneration report continued FY24 annual bonus performance against targets As discussed in the Remuneration report, 80% of the maximum payout is conditional upon the delivery of the Group’s EBITDA target and 20% is conditional upon strategic KPIs. Given the EBITDA outcome on an underlying IAS17 basis at constant currency this has resulted in a payment of 68.2% of the maximum in relation to this element. Andy Bond was eligible for a bonus in FY24 in his role as Executive Chair. Neil Galloway received a bonus for the full year and Stephan Borchert received a pro-rated bonus for the period he was in role of CEO from 1 July 2024. Directors’ share option plans in Pepco Group The table below details outstanding share awards previously granted to the Executive Chair and the current CFO. Save for Andy Bond, no share awards have been granted to the Non-Executive Directors. Share Share Share Share awards awards awards Total share price held at Awarded Vested lapsed held at value at Award Exercise used 30 Sept during the during the during the 30 Sept award Vesting Exercise Scheme date price (PLN) 2022 year year year 2024 (EUR) date period Andy Bond VCP 14/2/22 Nil 46.35 2,389,162 — — — 2,389,162 24,119,000 See 2/3/32 notes Andy Bond Special 11/4/24 Nil 20.52 — 1,600,000 (600,000) (200,000) 800,000 7,682,688 See On award notes vesting Neil Buy-out 12/10/23 Nil 30 156,888 — — — 156,888 738,598 See 1/4/26 Galloway notes Neil VCP 30/09/23 Nil 22.42 181,600 — — — 181,600 861,523 See 30/9/25 Galloway transfer notes Neil NCOs 22/12/23 Nil 25.42 — 322,714 — — 322,714 1,886,780 See 30/9/26 Galloway notes Notes to the table 1 The VCP award of nil-cost options granted to Andy Bond will be fully offset at vesting against founder shares. 2 The nil-cost options are capable of being granted under the VCP over various years, subject to annual hurdles up to early 2027 (further details are included in the Remuneration Policy). Vesting is determined following the year end. Where the annual hurdle has been reached, awards may continue to vest until the eighth vesting date. 3. VCP awards are also subject to a holding period which ends two years from the first vesting date for that award. 4. Andy Bond was granted the “Chair Award” in April 2024 which vests according to performance conditions in FY25 and FY26. 5. Following appointment, in acknowledgement of the forfeited short-term incentives from Neil’s past employment, Neil was granted nil-cost options equivalent to 150% of his annual base salary. The grant was approved prior to 30 September 2023 and was formally documented on 12 October 2023. 6. The VCP opportunity granted to Neil Galloway is exchanged for RSUs as detailed in this table, alongside participation in the Group LTIP. The grant will vest in two years, subject to financial performance measures, and has a one-year hold period. 7. Neil Galloway was awarded 322,714 share awards in relation to nil cost options which will vest in FY26 as long as certain performance conditions are met. Awards granted during the financial year to 30 September 2024 There have been no nil-cost options granted in the financial year under the VCP as the performance threshold was not met. No new awards have been granted under the Equity Award Plan (EAP) during the financial year. Andy Bond – one-off share award In recognition of the role that Andy Bond undertook as the Executive Chair he was granted a one-off share award of 1,600,000 shares. This award of shares was split into two tranches, with the first half vesting at the end of FY24 and second at the end of FY25, with both having an EBITDA performance condition. Date of grant Number of share options Vesting date Performance conditions 11 April 2024 Base award - 600,000 Additional award - 200,000 30 September 2024 FY24 EBITDA (IAS 17) Base award - 600,000 Additional award - 200,000 30 September 2025 FY25 EBITDA (IAS 17) Neil Galloway – LTIP awards Under the LTIP, approved at the AGM in January 2022, Neil was granted an award of shares of 250% of his salary in December 2023 using a share price of PLN 24.66 to calculate the number of shares. This award has performance conditions over the three years to the vesting of the award at the end of FY26 of an IAS 17 EBITDA less net debt measure (60%), an EBIT measure (30%) and ESG targets of a 10% reduction in Scope 1 and 2 emissions and 100% coverage for factory audits. Date of grant Number of share options Vesting date Performance conditions 22 December 2023 322,714 30 September 2026 As outlined above 80 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Statement of Directors’ shareholding and share interests Under the share ownership guidelines set out in the Remuneration Policy, the CEO and CFO are encouraged to build and maintain a shareholding equivalent to at least 300% and 200% of their base salaries respectively. The 300% level also applied to the Executive Chair whilst in role. Shares are valued using the Company’s closing middle market share price on 29 September 2024 of 20.52 PLN, the PLN/EUR exchange rate of 0.2308, and the GBP/EUR exchange rate of 1.1694. The following table shows how each Executive Director complies with the shareholding guidelines and the current holdings by Non-Executive Directors as at 30 September 2024: Unexercised and/ or unvested and Shares Shares subject to a held at held by service and Current 30 September connected performance Shareholding shareholding Requirement 2024 persons requirement requirement % of salary met Executive Directors Neil Galloway 25,000 — 661,202 200% of salary 17% No Stephan Borchert 427,518 — — 300% of salary 192% No Non-Executive Directors Andy Bond 3,745,301 — 3,989,162 — — — Brendan Connolly 26,700 — — — — — Frederick Arnold — — — — — — Grazyna Piotrowska-Oliwa 20,651 — — — — — María Fernanda Mejía 18,067 — — — — — Neil Brown — — — — — — Paul Soldatos — — — — — — Sean Mahoney — — — — — — 1 Stephan Borchert was appointed to the Board on 1 July 2024. The shareholdings in the table represent his holdings that he has purchased, where these shares count towards the Investment Shares within the Share Match Plan. 2 Shares held by Andy Bond include shares held by investment vehicles. 3 The nil-cost options issued to Andy Bond under the VCP in February 2022 when he was CEO will be offset against his founder shares, and underpinned, in line with the VCP underpin mechanism approved by the AGM in February 2023. The shareholding requirements under the Remuneration Policy apply to Executive Directors. Andy Bond is not an Executive Director; his information has been included to reflect his Executive Director duties as part of his Executive Chair role until 1 October 2024. 4 Neil Galloway has nil-cost options over 156,888 shares due to vest on 1 April 2026, and 181,600 unvested restricted shares when vested the holding of these shares would result in a shareholding of 245%. Directors’ and employees’ remuneration table The information below is in respect of the financial year ended 30 September 2024 against the prior year comparison. Total Total remuneration remuneration 2024 2023 € € Executive Directors Andy Bond (Executive Chair and previously NED Chair) 4,823,101 336,994 Neil Galloway (CFO) 1,541,896 1,087,566 Stephan Borchert (CEO) 1,283,786 — Non-Executive Directors Brendan Connolly (Committee Chair) 113,284 89,024 Frederick Arnold (Committee Chair, appointed June 2024) 55,058 — Grazyna Piotrowska-Oliwa (NED) 86,534 71,219 Helen Lee Bouygues (NED, resigned October 2023) — — María Fernanda Mejía (Committee Chair) 104,075 71,219 Neil Brown (NED) — — Paul Soldatos (NED) — — Pierre Bouchut (Committee Chair, resigned March 2024) 46,044 89,024 — Sean Mahoney (NED, appointed March 2024) — 81 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Remuneration report continued Change in Director and employee remuneration The following table outlines the percentage change from one year to the next for Director and employee remuneration, reported in line with the regulations. Executive pay ratio The Dutch Code requires the executive pay ratio and the trend to be disclosed in the annual Remuneration Report. The basis of the pay ratio comparison uses the Dutch methodology of average employee remuneration. The chart below summarises the five-year history of total remuneration for the Executive Directors, being the CEO and CFO, alongside the average remuneration per FTE (excluding Executive Directors). Also shown is the remuneration ratio of the CEO versus the average employee remuneration. Note, whilst the table has been shown in Euros to reflect the reporting currency of the Group, the Executive Directors were paid in GBP. In FY24, Neil Galloway received a salary of £600,000 per annum, Stephan Borchert received a salary of £900,000 per annum, and Andy Bond received a salary of £835,000 which have been pro-rated in the table below to reflect the portion of the year in which they were in the role. FY20 FY21 FY22 FY23 FY24 € € € € € CEO1,4, 6 total remuneration (A) 584,918 801,970 1,103,330 4,079,370 4,823,101 YoY % (25%) 37% 38% 270% 18% CFO1,3 total remuneration 697,906 964,442 710,005 1,087,566 1,541,896 YoY % 80% 38% (26%) 53% 42% Average employee (FTE) total remuneration costs2 (B) 17,986 20,640 21,309 21,395 22,817 YoY % (1%) 15% 3% 0% 7% Ratio (A) versus ratio (B) 33:1 39:1 52:1 191:1 211:1 1 Remuneration of the CEO and CFO reflects the total remuneration by year including base salary, taxable benefits, Company pension contributions, STIPs and LTIPs (where received). The GBP amounts have been converted to Euros based on FX rates used for consolidating the Group’s results. 2 Average employee remuneration is based on the total employee costs across the Group divided by average number of employees on a “full time equivalent” basis by year. 3 The previous CFO retired with effect from 1 May 2022 so the 2022 figure reflects the pre-retirement remuneration. The current CFO joined the Group on 1 April 2023. therefore, the 2023 figure reflects a partial year only. 4 The former CEO (Trevor Masters) was appointed to the role in May 2022; therefore, the 2022 figure reflects an aggregated figure for the retired CEO (Andy Bond) up to his retirement in March 2022 and the former CEO from his appointment in May 2022. 5 Andy Bond’s remuneration in his role as Executive Chair has been included in the CEO line for FY24. No amounts have been included in the CEO line for Stephan Borchert in FY24. 6 Remuneration for Trevor Masters includes unexercised share options and excludes severance payments. Relative importance of spend on pay The table below shows the Company’s expenditure on employee pay compared to distributions to shareholders between 1 October 2023 and 30 September 2024. FY24 FY23 €m €m Distributions to shareholders — — Total employee pay 863.9 724.5 82 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Implementation of Policy from 1 October 2024 to 30 September 2025 Policy element Stephan Borchert (CEO) Neil Galloway (CFO) Base salary £900,000 £618,000 Benefits Pension of 13% of base salary, private Pension of 13% of base salary, private medical insurance, life assurance, income medical insurance, life assurance, income protection, and car allowance protection, and car allowance Annual bonus (payable in cash following Maximum entitlement of £1,350,000 Maximum entitlement of £927,000 completion of the annual audit) (150% of salary) (150% of salary) LTIP Grant of performance share awards Annual grant of 300% of salary of Annual grant of 250% of salary of with a three-year performance period and performance share awards performance share awards additional two-year holding period (see below) Share Match Plan Investment in shares in the One-time award of matching shares N/A Company. In return the Company awards matching shares Malus and clawback Provisions apply Provisions apply Shareholding requirement (whilst employed) 300% of salary 200% of salary LTIP performance conditions Awards granted to the CEO and CFO in FY25 will be subject to the following performance conditions which will be assessed by the Remuneration Committee following the end of FY27. The performance conditions comprise of a 45% EPS growth measure, a 45% ROIC measure, and 10% ESG measures. The Share Match Plan allows the investment of up to two times salary where the Company then provides an award of matching shares of up to six times the investment dependent on the achievement of share price growth targets that range between PLN 28 and PLN 48. Directors’ Remuneration Policy This Remuneration Policy is available on our website. It was amended following shareholder approval at the June 2024 EGM and has not changed since then. The changes approved were: • to allow a notice period of up to twelve-months' from either party under Executive Directors’ service contracts (previously this was six-months); • to enable Executive Directors to participate in the Share Match Plan; • to introduce relocation support for Executive Directors who relocate to perform their role; and • to reflect the then current position of the VCP and LTIP. The Remuneration Policy permits deviation from the Policy in the event that it is required for the long-term interests and stability of the Company or for its profitability. There has been no deviation from the Remuneration Policy (or the malus and clawback provisions contained within it) to report for the period 30 September 2024. The proportion of fixed and variable remuneration To support the Policy’s objectives to deliver long-term sustainable success of the Company, the remuneration package of our Executive Directors includes a mix of fixed and variable remuneration. The proportion for FY24 is approximately 29% for fixed pay and 71% for variable remuneration on a target basis. For Andy Bond the fixed element of pay is 20%, 80% variable, for Stephan Borchert is 30% fixed, 70% variable and for Neil Galloway is 53% fixed, 47% variable. Brendan Connolly Remuneration Committee Chair On behalf of the Board 83 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Deviation from the Dutch Corporate Governance Code and Warsaw Code As the Company is listed on the WSE and incorporated under the laws of the Netherlands, the Company applies the Code of Best Practice for WSE Listed Companies (the Warsaw Code) and complies with the Dutch Code by applying principles and best practice provisions that are applicable or explaining why the Company deviates from them. As the principles set out in the Warsaw Code are similar to the principles of the Dutch Code, the Company complies with a majority of the principles and best practice provisions of the Dutch Code. The Company currently does not apply the following provisions of the Dutch Code: 2.1.5 Policy on diversity and The Company has a D&I policy which focuses on diversity and inclusion within the Board. The Board inclusion (D&I policy) recognises the importance of diversity and inclusion within the organisation as a whole (including at senior management level) and established goals and baselines as part of our 2030 ESG strategy. It is currently being considered whether the D&I policy should be amended to broaden the policy's scope in accordance with the Dutch Code. 2.1.6 Reporting on diversity Consequently, the Company's reporting with respect to the implementation of the D&I policy is and inclusion limited to the level of the Board. It is currently being considered whether the D&I policy should be amended to broaden the policy's scope. More generally however, the Company's reporting with respect to diversity and inclusion is not limited to the D&I policy and the Company is working to improve its reporting capabilities across the Group. 2.1.7 Independence of the The Company operates a one-tier Board which complies with principle 2.1.7(i). supervisory board Following Andy Bond stepping in as Executive Chair in September 2023, Stephan Borchert was appointed as an Executive member of the Board on 6 June 2024. He was also appointed CEO, to begin on 1 October 2024, with a three-month transition period, beginning on 1 July 2024. Andy Bond remained in his role as Executive Chair during the transition period, reverting to the role of Non- Executive Chair on 1 October 2024 The Board consists of three Non-Executive Directors, four independent Non-Executive Directors, and three Executive Directors. With regard to principle 2.1.7(iii), three Non-Executive Directors are appointed to the Board pursuant to arrangements between the Company’s majority shareholder (which holds more than 10% of the shares of the Company) and certain of its creditors. This arrangement was entered into before the Company listed on the WSE. The conditions of appointment of the shareholder-nominated Non-Executive Directors are set out in a Relationship Agreement between the Company and certain affiliates of the Company’s majority shareholder. A summary of the key terms of the Relationship Agreement is available on the Company’s website. Given the nature of the Relationship Agreement, the independence of the supervisory board is not expected to change in the short term. 2.1.9 Independence of the chairman Andy Bond was formerly CEO and Executive Director of the Company. Therefore Andy Bond is of the supervisory board non-independent Chair of the Board. From 12 September 2023 he was interim Executive Chair and resumed his role as non-independent Chair on 1 October 2024. 2.2.2 Appointment and Members of the Board are appointed for a period of three years and may then be reappointed reappointment periods – twice for three-year periods. These appointment arrangements are common in the UK, and supervisory board members permitted under the Warsaw Code to which the Company is subject to. For these reasons, the status of compliance with 2.2.2 is not expected to change. 2.2.4 Succession The term of appointment for the creditor-appointed Non-Executive Directors is determined by the Relationship Agreement, and the independent Non-Executive Directors have been appointed for a term of three years, capable of extension for a further two three-year terms. A retirement schedule is in place and has been published on the Company's website. 2.5.2 Code of Conduct The Company does not currently have a Group-wide Code of Conduct. Most of the subject matter which is traditionally included in a Code of Conduct is included in established policies and procedures in place across the Group. However, the Company intends to introduce a group-wide Code of Conduct in the new fiscal year. 2.5.4 Accountability regarding culture The Company does not currently have a Group-wide Code of Conduct. Most of the subject matter which is traditionally included in a Code of Conduct is included in established policies and procedures in place across the Group. However, the Company intends to consider the introduction of a group-wide Code of Conduct in the new fiscal year. 3.3.2 Remuneration of supervisory In respect of work undertaken by them in relation to, and in preparation for, roles as Board members, board members in the period prior to the Company’s listing on the WSE, one-off fees were paid to Brendan Connolly, María Fernanda Mejía, Grazyna Piotrowska-Oliwa and Pierre Bouchut which were used by these individuals to subscribe for shares in the Company on admission to the WSE (at the admission offer price). Shares acquired by these Board members on admission must be held until the later of: (i) 26 May 2024; or (ii) the first anniversary of the date on which the relevant Board member ceases his or her directorship of the Company. 5.1.3 Independence of the chairman Andy Bond was formerly CEO and Executive Director of the Company. Therefore, Andy Bond does of the board of directors not qualify as independent within the meaning of best practice provision 2.1.8. 84 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 The Company currently does not apply the following provisions of the Warsaw Code: 1.5 Disclose amounts expensed by Any such expenses have been reported internally, disclosure and assessment as to the rationality the group in support of culture, of such expenditures will be considered in the new fiscal year. sports, charities, media, social organisations, trade unions, etc. 2.11.5 The supervisory board Any such expenses have been reported internally, disclosure and assessment as to the rationality prepares a report to the AGM of such expenditures will be considered in the new fiscal year. once per year to include an assessment of the rationality of expenses referred to in principle 1.5 3.4 Basis of remuneration for Risk and compliance are managed by the Group General Counsel and the Head of Internal Audit. those responsible for risk, The remuneration of these individuals is primarily dependent on the performance of delegated compliance and internal audit tasks. However, consistent with all employees of the Company, a proportion of these individuals’ respective annual bonuses is dependent on the Company achieving specific financial targets for the relevant financial year. The financial targets for the Company’s annual bonus scheme are set by the Company’s Remuneration Committee. 3.7 Group remuneration for risk, The remuneration of employees who work in risk and compliance roles and internal audit roles compliance and internal across the Group comprises a salary and eligibility to receive an annual bonus. A proportion of audit roles the annual bonus is dependent on the Company achieving specific financial targets. The financial targets for the relevant company’s annual bonus scheme are set by the relevant company’s remuneration committee and are aligned with the financial targets set by the Company’s Remuneration Committee. The risk, compliance and internal audit functions of businesses within the Group report organisationally to the CFO. Managers within the risk, compliance and internal audit functions of the Group’s businesses attend the meetings of the local board’s audit committee. 6.3 Company incentive schemes The Company established an incentive scheme (the Value Creation Plan) for senior management of the Group in March 2020, which was 12 months prior to the Company’s admission to the WSE. The Value Creation Plan incentive scheme complies with the majority of the requirements of principle 6.3 except that the incentive scheme does not include non-financial targets and share options will be issued to participants at nil cost. Andy Bond was granted a one-off “Chair Award” in April 2024 which complies with some of the requirements of principle 6.3 but it is a two-year award, does not include non-financial targets and the exercise price is nil. 85 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Directors’ report The Board presents its report, together with the Ethical conduct The Board is committed to ensuring that all employees, audited consolidated ﬁnancial statements, for customers and suppliers act in an ethical manner. The Group the year ended 30 September 2024. has policies in place relating to anti-bribery and corruption, anti-money laundering, insider trading, child labour, human rights Indemnity provisions and sanctions. The Company indemnifies all Directors within its Articles R See further detail on pages 49 to 51. of Association. Going concern In addition, the Company holds: (i) Directors’ and Officers’ liability insurance, which provides cover for liabilities incurred by Directors The Board is satisfied that the Group will be able to operate within in the performance of their duties or powers; and (ii) Public the levels of its facilities and resources for the foreseeable future Offering of Securities Insurance, to ring-fence any exposure and deems it appropriate to adopt the going concern basis in arising from the Initial Public Offering in May 2021. preparing the financial statements. This is outlined in more detail in the Going concern statement on page 59. No payments were made as a result of the indemnity or by the insurer during the reporting period. Additional information Political donations Conflicts of interest No political donations were made and no political expenditure Group-wide processes are in place to review potential conflicts was incurred during the year (FY24:£Nil). The Company has an of interest held by senior management, including the Board. established policy of not making donations to any political party. Conflicts are routinely raised at Board meetings and recorded as appropriate. Dividends The Board has recommended a full year dividend of 6.2 cents per Audit information share subject to the approval of shareholders at the FY25 AGM. The Board confirms that: (i) to its knowledge there is no relevant Significant post-balance sheet events audit information of which the auditors are unaware; and (ii) the There are no post-balance sheet events to report for FY24. Board has taken all reasonable steps to ascertain any relevant Articles of Association audit information and ensure that the auditors are aware of such information. The Company’s Articles of Association may only be amended by a resolution of the general meeting. Information contained in the Strategic report Rules of Procedure The Strategic report on pages 4 to 59 contains certain information The Rules of Procedure provide for an internal division of tasks, required to be included within this Directors’ report. This relates to procedures, and decision-making of the Board of the Company. In employee matters, future developments, risk management, and performing their duties, the Directors shall comply with these rules. how the Board considers the views of stakeholders. On 12 September 2023, Andy Bond was appointed as interim To the extent that the reports contain forward-looking Executive Chair with the responsibility for leading the Executive statements, these are made by the Board in good faith based on team and the overall management of the Company until a the information available at the time of the Annual Report. successor CEO was appointed. This is a deviation from the Rules of Procedure, in particular the responsibilities of the Chair and Financial instruments CEO. This statement is made in accordance with clause 20 of Details of the Group’s objectives and policies on financial risk the Rules of Procedure. management and of the financial instruments currently in use are On 1 July 2024, Stephan Borchert was appointed as CEO and set out in note 17 to the consolidated financial statements which Executive Director and Andy Bond reverted to the role of form part of the report. Non-Executive Chair on 1 October 2024 following a three-month transition period. Employees Research and development Diversity and inclusivity The Group designs products for sale in stores and has The Company is fully committed to the elimination of unlawful arrangements with suppliers for the development of goods. and unfair discrimination and values the difference that a diverse Further, the Group has invested in the use of more sustainable workforce brings to the Company. The Company has policies products and packaging (see ESG section on pages 34 to 51 for applicable to all colleagues in furtherance of these commitments further details). and will continue to focus on developing these in the next financial year. Change of control Disabled people The Senior Facilities Agreement provides that if the Company is delisted or otherwise removed from the WSE, or all or substantially The Group seeks to ensure that disabled people, whether all of the assets of the Group are sold in a single transaction or a applying for a vacancy or already in employment, receive equal series of transactions, the Company is required to notify the opportunities in respect of job vacancies that they are able to finance agent. Following a negotiation period, lenders have a fulfil. They are not discriminated against on the grounds of their right to cancel their commitments upon giving 30 days’ notice. disability and are given full and fair consideration of applications, continuing training while employed, and equal opportunity for career development and promotion. Where an existing colleague suffers a disability, it is our policy to retain them in the workforce where that is practicable. 86 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Board of Directors’ statement The Board is responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. The Board of Directors hereby represents, to the best of its knowledge, that the statutory financial statements of the Company, and its consolidated subsidiaries for the year ended 30 September 2024 are prepared in accordance with the applicable accounting standards and that they give a true and fair view of the assets, liabilities, financial position, and results of the Company and its consolidated subsidiaries, and that the report of the Board of Directors for the year ended 30 September 2024 gives a true and fair view of the position of the Company and its consolidated subsidiaries as at 30 September 2024 and of the development and the performance of the Company and its consolidated subsidiaries during the year ended 30 September 2024, including a description of the key risks that the Company is confronted with. The Board confirms that: i. the report provides sufficient insights into any failings in the effectiveness of the internal risk management and control systems; ii. the aforementioned systems provide reasonable assurance that the financial reporting does not contain any material inaccuracies; iii. based on the current state of affairs, it is justified that the financial reporting is prepared on a going concern basis; and iv. the report states those material risks and uncertainties that are relevant to the expectation of the Company’s continuity for the period of 12 months after the preparation of the report. Stephan Borchert Neil Galloway Chief Executive Officer Chief Financial Officer 20 December 2024 20 December 2024 87 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Financial statements Financial statements Other information 89 Consolidated income statement 140 Independent auditor's report 90 Consolidated statement of 146 Articles of Association provisions other comprehensive income governing the distribution of profit 91 Consolidated statement of financial position 147 List of branches 92 Consolidated statement of 148 Statutory list of all subsidiaries changes in equity and affiliated companies 93 Consolidated statement of 150 Glossary of terms cash flows 152 Shareholder information 94 Notes to the consolidated financial statements 129 Separate income statement 130 Separate statement of financial position 131 Separate statement of changes in equity 132 Separate statement of cash flows 133 Notes to the separate financial statements 88 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Consolidated income statement for the year ended 30 September 2024 Year to Year to 30 September 30 September 2023 2024 (Restated) Note €000 €000 Continuing operations Revenue 3 6,166,749 5,595,664 Cost of sales (3,460,720) (3,356,213) Gross profit 2,706,029 2,239,451 Administrative expenses (2,371,764) (1,997,171) (724,824) Goodwill impairment 11 - Other non-financial assets impairment 10,11,12 (54,578) (3,130) Operating (loss) / profit from continuing operations 5 (445,137) 239,150 Financial income 6 31,803 10,245 Financial expense 7 (140,785) (90,550) (Loss) / Profit before taxation from continuing operations for the year (554,119) 158,845 Taxation 9 (107,520) (50,481) (Loss) / Profit from continuing operations for the year (661,639) 108,364 Loss on discontinued operations 25 (48,530) (11,733) (Loss) / Profit for the year (710,169) 96,631 Earnings per share 30 Basic earnings per share from continuing operations (114.9c) 18.8c Basic earnings per share from discontinued operations (8.4c) (2.0c) Basic earnings per share (123.3c) 16.8c Diluted earnings per share from continuing operations (114.9c) 18.7c Diluted earnings per share from discontinued operations (8.4c) (2.0c) Diluted earnings per share (123.3c) 16.7c The notes on pages 94 to 128 form part of these financial statements. 89 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Consolidated statement of other comprehensive income for year ended 30 September 2024 Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 (Loss) / Profit for the year (710,169) 96,631 Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Foreign currency translation differences – foreign operations 48,942 46,909 Effective portion of changes in fair value of cash flow hedges 121,518 (38,060) Net change in fair value of cash flow hedges reclassified to profit or loss (85,240) (128,442) Deferred tax on items that are or may be reclassified subsequently to profit or loss (8,238) 34,924 Other comprehensive income / (loss) for the year, net of income tax 76,982 (84,669) Total comprehensive income for the year (633,187) 11,962 The notes on pages 94 to 128 form part of these financial statements. 90 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Consolidated statement of ﬁnancial position at 30 September 2024 30 September As at 1 October 30 September 2023 2022 2024 (Restated) (Restated) Note €000 €000 €000 Non-current assets Property, plant and equipment 10 742,833 746,437 524,550 Right-of-use asset 12 1,304,678 1,225,683 1,018,240 Goodwill and other intangible assets 11 107,316 847,477 814,238 Trade and other receivables 14 52 46 2,422 1,766 Derivative financial instruments 17 6,232 5,186 Deferred tax asset 18 106,434 113,414 91,296 2,263,079 2,939,289 2,455,932 Current assets Inventories 13 1,235,457 1,119,547 942,894 Tax receivable 253 865 3,735 Trade and other receivables 14 102,874 143,132 71,417 Derivative financial instruments 17 32,741 42,106 165,216 Cash and cash equivalents 363,336 330,417 343,933 1,734,661 1,636,067 1,527,195 Total assets 3,997,740 4,575,356 3,983,127 Current liabilities Trade and other payables 15 1,380,519 1,270,302 927,884 Current tax liabilities 21,683 - 47,944 Lease liabilities 12 346,594 304,794 310,484 - Borrowings 16 118,794 68,339 51,259 Derivative financial instruments 17 91,045 37,040 Provisions 19 20,504 2,254 16,749 1,820,559 1,787,189 1,408,440 Non-current liabilities Trade and other payables 15 3,396 21,763 37,733 Lease liabilities 12 1,034,395 988,377 823,060 Borrowings 16 612,980 610,270 546,203 Derivative financial instruments 17 1,227 1,730 8,122 Provisions 19 13,767 28,319 31,016 1,665,765 1,650,459 1,446,134 Total liabilities 3,486,324 3,437,648 2,854,574 Net assets 511,416 1,137,708 1,128,553 Equity attributable to equity holders of the parent Share capital 20 5,760 5,760 5,750 Share premium reserve 20 13 13 13 Cash flow hedge reserve (4,351) (32,391) 99,187 Merger reserve (751) (751) (751) Translation reserve 25,535 (23,407) (70,316) Share-based payment reserve 39,908 33,013 35,830 Retained earnings 445,302 1,155,471 1,058,840 Total shareholders’ equity 511,416 1,137,708 1,128,553 The notes on pages 94 to 128 form part of these financial statements. 91 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Consolidated statement of changes in equity for the year ended 30 September 2024 Cash flow Share-based Share Share hedge Translation Merger payment Retained capital premium reserve1 reserve2 reserve3 reserve4 earnings Total equity €000 €000 €000 €000 €000 €000 €000 €000 Balance at 1 October 2023 5,760 13 (32,391) (25,784) (751) 33,013 1,177,285 1,157,145 Impact of correction of errors (note 26) - - - 2,377 - - (21,814) (19,437) Restated balance at 1 October 2023 5,760 13 (32,391) (23,407) (751) 33,013 1,155,471 1,137,708 Total comprehensive income for the period Loss for the year - - - - - - (710,169) (710,169) Other comprehensive income for the period - - 28,040 48,942 - - - 76,982 Total comprehensive income for the period - - 28,040 48,942 - - (710,169) (633,187) Transactions with owners, recorded directly in equity Issue of share capital - - - - - - - - Equity-settled share-based payments (see note 21) - - - - - 6,895 - 6,895 Total contributions by and distributions to owners - - - - - 6,895 - 6,895 Balance at 30 September 2024 5,760 13 (4,351) 25,535 (751) 39,908 445,302 511,416 1 The cash flow hedge reserve represents the cumulative effect of fair value gains and losses on cash flow hedges in the Group. 2 The translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group’s foreign operations from their functional currency to the presentation currency of the parent. 3 The merger reserve represents the difference between the cost of the Company’s investment in its subsidiaries acquired using the principles of merger accounting and the aggregate carrying value of assets and liabilities of the subsidiaries acquired. 4 The Group provides equity settled share based payment awards; see note 21. The notes on pages 94 to 128 form part of these financial statements. Consolidated statement of changes in equity for the year ended 30 September 2023 Cash flow Translation Share-based Retained Share Share hedge reserve2 Merger payment Earnings Total equity capital premium reserve1 (Restated) reserve3 reserve4 (Restated) (Restated) €000 €000 €000 €000 €000 €000 €000 €000 Balance at 1 October 2022 5,750 13 99,187 (70,316) (751) 35,830 1,075,041 1,144,754 Impact of correction of errors (note 26) - - - - - - (16,201) (16,201) Restated balance at 1 October 2022 5,750 13 99,187 (70,316) (751) 35,830 1,058,840 1,128,553 Total comprehensive income for the period Profit for the year - - - - - - 96,631 96,631 Other comprehensive income for the period - - (131,578) 46,909 - - - (84,669) Total comprehensive income for the period - - (131,578) 46,909 - - 96,631 11,962 Transactions with owners, recorded directly in equity Issue of share capital 10 - - - - - - 10 Equity-settled share-based payments (see note 21) - - - - - (2,817) - (2,817) Total contributions by and distributions to owners 10 - - - - (2,817) - (2,807) Balance at 30 September 2023 5,760 13 (32,391) (23,407) (751) 33,013 1,155,471 1,137,708 1 The cash flow hedge reserve represents the cumulative effect of fair value gains and losses on cash flow hedges in the Group. 2 The translation reserve represents the cumulative foreign exchange differences on the translation of the net assets of the Group’s foreign operations from their functional currency to the presentation currency of the parent. 3 The merger reserve represents the difference between the cost of the Company’s investment in its subsidiaries acquired using the principles of merger accounting and the aggregate carrying value of assets and liabilities of the subsidiaries acquired. 4 The Group provides equity settled share based payment awards; see note 21. The notes on pages 94 to 128 form part of these financial statements. 92 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Consolidated statement of cash ﬂows for the year ended 30 September 2024 30 September 30 September 2024 2023 Note €000 €000 Cash flows from operating activities (Loss)/Profit for the period from continuing operations: (661,639) 108,364 Adjustments for: Depreciation, amortisation and impairment 10,11,12 972,430 160,092 Right-of-use asset depreciation 12 364,757 302,940 Financial income 6 (31,803) (10,245) Financial expense 7 140,785 90,550 Profit on sale of property, plant and equipment (270) (477) Equity-settled share-based payment expenses 21 6,895 (2,817) Taxation 9 107,520 50,481 898,675 698,888 Decrease/(Increase) in trade and other receivables 42,459 (57,660) Increase in inventories (49,514) (175,075) Increase in trade and other payables 11,932 321,239 Decrease in provisions and employee benefits (3,993) (17,208) Settlement of derivatives 6,802 (38,099) Cash generated by operations 906,361 732,085 Tax paid (85,449) (75,424) Net cash from operating activities in discontinued operations (1,909) (3,946) Net cash inflow from operating activities 819,003 652,715 Cash flows used in investing activities Proceeds from sale of property, plant and equipment 2,290 1,445 Interest received 22,960 2,897 Disposal of a subsidiary net of cash disposed (8,465) - Additions to property, plant and equipment 10 (204,559) (356,664) Additions to other intangible assets 11 (7,189) (25,815) Net cash from investing activities in discontinued operations (78) (7,159) Net cash outflow used in investing activities (195,041) (385,296) Cash flows from financing activities Proceeds from the issue of share capital - 10 Proceeds from borrowings net of fees incurred - 431,215 Repayment of borrowings (120,000) (315,000) Interest paid (56,184) (18,809) Payment of interest on lease liabilities 12 (77,311) (60,188) Repayment of lease liabilities 12 (364,274) (319,992) (2,970) Net cash from financing activities in discontinued operations (6,781) Net cash outflow from financing activities (620,739) (289,545) Net increase/(decrease) in cash and cash equivalents 3,224 (22,146) Cash and cash equivalents at beginning of period 330,417 343,933 Effect of exchange rate fluctuations on cash held 29,695 8,630 Cash and cash equivalents at end of period 363,336 330,417 The notes on pages 94 to 128 form part of these financial statements. 93 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies Pepco Group N.V. (the Company) is a public limited liability company incorporated in the Netherlands (registration number 81928491) and domiciled in the United Kingdom . The Company has a primary listing in on the Warsaw Stock Exchange. The registered address is 14th Floor, Capital House, 25 Chapel Street, London, NW1 5DH, United Kingdom . Pepco Group operates a European multi-format discount retail chain, specialising in apparel, homeware, and fast-moving consumer goods, serving value-conscious customers. The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the Group). The parent company financial statements present information about the Company as a separate entity and not about its Group. The Group financial statements have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU (Adopted IFRS Accounting Standards), and also comply with the statutory provisions of part 9 of Book 2 of the Dutch Civil Code. The parent company financial statements have been prepared in accordance with IFRS Accounting Standards as endorsed by the EU and with part 9 of Book 2 of the Dutch Civil Code; these are presented on pages 128 to 138. The accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in these Group financial statements. 1.1 Measurement convention The financial statements have been prepared on the historical cost basis except for derivatives which are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair val ue for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of IFRS 2 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36. 1.2 Going concern In determining the appropriate basis of preparation of the 2024 consolidated financial statements, the Board of Directors are required to consider whether the Group and the Company can continue in operational existence for the foreseeable future. At the time of signing the consolidated financial statements, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operation for the foreseeable future, which is not less than 12 months from signing these financial statements. The Group undergoes a rigorous and comprehensive annual budgeting and long-term planning process which is reviewed and challenged by various stakeholders across management and the Board. This financial plan, which is ultimately approved by the Board, is then utilised to measure business performance and it also forms the ‘base case’ upon which the going concern analysis has been based. In assessing going concern, the Group has considered a 2-year period to the end of FY26, beyond the minimum requirement of 12 months form the date of signing the financial statements. The Directors have considered a severe but plausible downside sensitivity and a reverse stress test. The analysis suggested that despite the harsh scenario assumptions, which the management judge to be very unlikely, the Group still retains sufficient headroom across the assessment period and is able to meet all the requirements of its lending covenants. Further information regarding the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Executive Chair's and CFO’s reports. Since the going concern assessment uses a base case which has been built on the financial plan, careful consideration has been given to the current macroeconomic environment and the future implications and impacts it may have. Given the above, the Directors have deemed the application of the going concern basis for the preparation of these consolidation financial statements to be appropriate. 1.3 Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Acquisitions from entities under common control In accounting for Group reorganisation as a business combination under common control, the following principles have been adopted: Where investments are acquired in exchange for consideration and the transactions have economic substance the Group has chosen to account for these transactions at fair value by applying acquisition accounting in accordance with the principles of IFRS 3 as discussed in the accounting policy for business combinations. Where businesses are acquired in exchange for the issue of shares, the Group has chosen to account for these transactions using the transferor’s book values (pooling of interest method) with the difference between the value of the net assets acquired and nominal value of the shares issued being recognised within a merger reserve in equity. Notes to the consolidated ﬁnancial statements • • 94 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.3 Basis of consolidation continued Change in subsidiary ownership and loss of control Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Unless otherwise indicated, the consolidated and parent company financial statements are prepared on the accruals basis in thousands of Euro (€000). The Euro is the Group’s presentation currency and the Company’s functional currency. Group reorganisation The Group undertook a Group reorganisation exercise during 2021. As part of this process, Pepco Group N.V. (formerly Pepco Group B.V.) was inserted above Pepco Group Limited in the Group’s structure. On 13 May 2021, Pepco Group N.V. (the Company) acquired the entire shareholding of Pepco Group Limited and its related subsidiaries, by a way of a share for share exchange with Flow Newco Limited, becoming the Group’s immediate parent company. The insertion of the Company on top of the existing Pepco Group Limited does not constitute a business combination under IFRS 3 “Business Combinations” and instead has been accounted for as a Group reorganisation. Merger accounting has been used to account for this transaction. 1.4 Foreign currency Transactions in foreign currencies are translated to the Group’s presentation currency at the monthly average foreign exchange rate. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. Foreign exchange differences arising on translation are recognised in the income statement except for differences arising on the retranslation of qualifying cash flow hedges, which are recognised in other comprehensive income. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentation currency, the Euro, at foreign exchange rates ruling at the statement of financial position date. The revenues and expenses of foreign operations are translated at the average rate during the month in which they were incurred. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in the translation reserve. 1.5 Classification of financial instruments issued by the Group Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and b) where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Group’s own shares, the amounts presented in this consolidated historical financial information for share capital exclude amounts in relation to those shares. 1.6 Non-derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Financial assets – classification, subsequent measurement and gains and losses On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or fair value through profit or loss (FVTPL). The Group makes an assessment of the objective of the business model in which a financial asset is held because this best reflects the way the business is managed and information is provided to management. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group does not have any financial assets accounted for at FVOCI. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets which are accounted for in accordance with the accounting policy (note 1.7) for derivative financial instruments and hedge accounting . All financial assets are recognised at the trade date. 95 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.6 Non-derivative financial instruments continued Financial liabilities – classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held for trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in the income statement. See the accounting policy 1.7 regarding derivative financial instruments and hedge accounting for further information. Derecognition Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which either substantially all of the risks and rewards of ownership of the financial asset are transferred, or the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount derecognised and the consideration received is recognised in the income statement. Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in the income statement. 1.7 Derivative financial instruments and hedging Derivative financial instruments (comprising foreign currency forward contracts and commodity hedges) are used to manage risks arising from changes in foreign currency exchange rates (primarily relating to the purchase of overseas sourced products) and fuel price fluctuations. The Group does not hold or issue derivative financial instruments for speculative trading purposes. The Group uses the derivatives to hedge highly probable forecast transactions and, therefore, the instruments are mostly designated as cash flow hedges. Derivatives are recognised at fair value on the date a contract is entered into and are subsequently remeasured at their fair value. The effective element of any gain or loss from remeasuring the derivative instrument is recognised directly in the cash flow hedge reserve. The associated cumulative gain or loss is reclassified from the cash flow hedge reserve in equity and recognised in the income statement in the same period or periods during which the hedged transaction affects the income statement. Any element of the remeasurement of the derivative instrument which does not meet the criteria for an effective hedge is recognised immediately in the income statement within financial income or financial expenses. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in other comprehensive income at that time remains in other comprehensive income and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss which was reported in other comprehensive income is recognised immediately in the income statement. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months or as a current asset or liability if the remaining maturity of the hedged item is less than 12 months from the reporting date. 1.8 Property, plant and equipment Property, plant and equipment are stated at purchase cost (together with incidental costs of acquisition) less accumulated depreciation and accumulated impairment losses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Leasehold property improvements – Over the term of the lease Fixtures and equipment – 3 to 25 years (dependent upon lease term) Buildings – 10 to 40 years Land – No depreciation is charged Depreciation methods, useful lives and residual values are reviewed at each reporting date. Notes to the consolidated ﬁnancial statements continued 96 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.9 Business combinations When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. 1.10 Intangible assets and goodwill Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired. Goodwill is initially measured at cost, being the excess of the acquisition cost over the Group’s interest in the assets and liabilities recognised. Goodwill is not amortised, but is tested for impairment annually or whenever there is an indication of impairment. For the purposes of impairment testing, goodwill acquired is allocated to the cash-generating unit (CGU) that is expected to benefit from the synergies of the combination. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed. Brand Brand is stated at cost less any accumulated amortisation and accumulated impairment losses. Brand is amortised over 40 years on a straight-line basis from 1 October 2018. Other intangible assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Software Capitalised software costs include both external direct costs of goods and services, and internal payroll-related costs for employees who are directly associated with the software project. Development costs are recognised as intangible assets when the following criteria are met: • It is technically feasible to complete the software so that it is available for use. • Management intends to complete the software for use in the business. • It can be demonstrated how the software will generate probable economic benefits in the future. • Adequate technical, financial and other resources are available to complete the project. Capitalised software development costs are amortised on a straight-line basis over their expected economic lives. Computer software under development is held at cost less any recognised impairment loss. Any impairment in value is recognised within the income statement. Amortisation Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life and goodwill are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Trademarks – 5 years Software – 3–7 years 1.11 Inventories Inventories are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving inventory. Cost is calculated on a weighted average basis. The Group estimates a slow-moving inventory provision based on prior stock performance and current market conditions. The Group also provides for obsolete inventory. Inventory cost includes all direct costs and an appropriate proportion of fixed and variable overheads. 97 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.12 Impairment excluding inventories and deferred tax assets Financial assets (including receivables) The Group is not exposed to large amounts of credit risk due to the nature of its operations as a direct to customer retailer; however, the Group recognises an allowance for expected credit losses for all financial assets measured at amortised costs. These losses are calculated with reference to the difference between contractual cash flows and cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit (CGU)). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 1.13 Cash and cash equivalents Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. 1.14 Employee benefits Defined contribution plans A defined contribution plan is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement in the periods during which services are rendered by employees. Share-based payment transactions The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity for equity-settled schemes or liabilities for cash-settled schemes, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using an option valuation model where appropriate, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service and non-market performance vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting and/or market performance conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. 1.15 Provisions A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability and current market assessment of the time value of money. 1.16 Revenue Revenue comprises the consideration paid for products by external customers at the point of sale in stores, net of value added tax and promotional discounts. Revenue is recognised on the sale of goods when the product is sold to the customer. It is the Group’s policy to sell its products to customers with a right of return. The Group uses the expected value method to estimate the value of goods that will be returned, because this method best predicts the amounts of variable consideration to which the Group will be entitled. However, the level of returns is not considered material; therefore, no right of return asset or refund liability is recognised. On the basis of materiality revenue is therefore recognised at the full value of the consideration received. This is assessed on an ongoing basis. Notes to the consolidated ﬁnancial statements continued 98 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.17 Cost of sales Cost of sales consist of costs related to purchase price of consumer products sold to customers and inbound shipping charges to distribution centres. Shipping charges to receive products from suppliers are included in inventory and recognised as cost of sales upon sale of products to customers. In addition, warehouse reception and storage costs are not incorporated into inventory valuation on the balance sheet but directly expensed through the income statement as distribution costs. Supplier discounts and contributions to common marketing or advertising campaigns are measured based on contracts signed with suppliers and are considered as a reduction of the prices paid for the products and, therefore, recorded as a reduction of the inventory cost. 1.18 Distribution costs (included within operating expenses) Distribution costs consist of costs incurred in operating and staffing distribution centres and stores and transporting inventory from distribution centres to stores. They consist of warehousing and store employee salaries and wages, store expenses, advertising costs and other selling expenses. 1.19 Administrative expenses (included within operating expenses) Administrative expenses consist of support office employees’ salaries and wages, impairment losses and reversals, gains and losses on the sale of non-current assets and disposal groups held for sale, restructuring costs and other general and administrative expenses. 1.20 Lease accounting The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (such as personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Lease liability – initial recognition The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date. The lease payments are discounted at the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise: • fixed lease payments (including in-substance fixed payments), less any lease incentives; • variable lease payments that depend on an index or rate (such as RPI), initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options where the Group is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient. The lease liability is presented as a separate line in the Consolidated statement of financial position, split between current and non-current liabilities. Lease liability – subsequent measurement The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. Lease liability – remeasurement The lease liability is remeasured where: • there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate; or • the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments’ change is due to a change in a floating interest rate, in which case a revised discount rate is used); or • the lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset unless its carrying amount is reduced to zero, in which case any remaining amount is recognised in profit or loss. Right-of-use asset – initial recognition The right-of-use asset comprises the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Where the Group has an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. The right-of-use asset is presented as a separate line in the balance sheet. 99 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.20 Lease accounting continued Right-of-use asset – subsequent measurement Right-of-use assets are amortised over the shorter of the lease term and useful life of the underlying asset. Impairment The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the “Impairment – non-financial assets” policy. 1.21 Taxation Tax on the profit or loss for the year comprises current and deferred tax recognised and measured in accordance with IAS 12. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. The Group has adopted International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12) upon their release on 23 May 2023. The amendments provide a temporary mandatory exception from deferred tax accounting for the top-up tax, which is effective immediately, and require new disclosures about the Pillar Two exposure for accounting periods beginning on or after 1 January 2023. IAS 12.15 and 24 require that deferred tax liabilities and assets be recognised for all taxable and deductible temporary differences (subject to recoverability requirements for deferred tax assets) unless the deferred tax liability or asset arises from the initial recognition of an asset or liability in a transaction that: (i) is not a business combination; (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); and (iii) at the time of the transaction, does not give rise to equal taxable and deductible temporary differences. 1.22 Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board that makes strategic decisions. 1.23 Government grants Grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attached to them and that the grants will be received. 1.24 Events after the balance sheet date The consolidated financial statements are adjusted to reflect events that occurred provided they give evidence of conditions that existed at the balance sheet date. Events that are indicative of conditions that arose after the balance sheet date are disclosed where significant, but do not result in an adjustment of the consolidated financial statements themselves. 1.25 Supplier income Rebate income Rebate income consists of income generated from volume-related rebate agreements and other supplier funding received on an ad hoc basis for in-store promotional activity. The income received is recognised as a credit against cost of sales. Volume-related income is recognised based on the expected entitlement at the reporting date based on agreed and documented contractual terms. Where the contractual period is not yet complete, the Group will estimate expected purchase volumes taking into account current performance levels to assess the probability of achieving contractual target volumes. Other supplier funding is recognised as invoiced to the suppliers, subject to satisfaction of any related performance conditions. To minimise the risk arising from estimate, supplier confirmations are obtained at the reporting date prior to amounts being invoiced. Promotional funding Promotional pricing income relates to income received from suppliers to invest in the customer offer. It is recognised as a credit against cost of sales. Timing of invoicing of amounts due is agreed on an individual basis with each supplier. Uncollected supplier income at the reporting date is presented within the financial statements as follows: Where there is no practice of netting commercial income from amounts owed to the supplier, the Group will present amounts due within trade receivables. Where commercial income is earned but not invoiced to the supplier at the reporting date, the amount due is included within prepayments and accrued income. Notes to the consolidated ﬁnancial statements continued • • 100 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.26 Financial income and expenses Financial expenses comprise interest payable and the ineffective portion of change in the fair value of cash flow hedges that are recognised in the income statement. Financial income comprises interest receivable on funds invested and the ineffective portion of changes in the fair value of cash flow hedges. Interest income and interest expense are recognised in the income statement as they accrue, using the effective interest method. 1.27 Reserves Share capital Called-up share capital represents the nominal value of shares that have been issued. Share premium represents the difference between the issue price and the nominal value of the shares issued. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax from the proceeds. Cash flow reserve The cash flow hedge reserve represents the effective portion of cash flow hedges where the contract has not yet expired. The reserve is stated net of the associated tax. The effective portion is recycled to the income statement upon expiry of the contract or when the hedged future cashflows affect profit or loss. Translation reserve The translation reserve represents the cumulative translation differences for foreign operations. This is a legal reserve. Merger reserve The merger reserve arose on consolidation as a result of the acquisition of the Pepco Group companies and Pepkor Import BV on 4 May 2016 and also the acquisition of Fully Sun China Limited and its subsidiaries on 18 January 2018 and the share for share exchange transaction that took place on 13 May 2021. It represents the difference between the cost of the Company’s investment in its subsidiaries acquired using the principles of merger accounting and the aggregate carrying value of assets and liabilities of the subsidiaries acquired. 1.28 New standards and amendments Standards adopted by the Group for the first time A number of new and revised standards, including the following, are effective for annual periods beginning on or after 1 January 2023: • IFRS 17 Insurance Contracts, including amendments Initial Application of IFRS 17 and IFRS 9 – Comparative Information (effective 1 January 2023) • Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Accounting Estimates (effective 1 January 2023) • Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements – Disclosure Initiative: Accounting Policies (effective 1 January 2023) • Amendments to IAS 12 Income Taxes – Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (effective 1 January 2023) Adoption of these standards has not had an impact on the Group’s financial statements. Standards and interpretations to existing standards which are not yet effective and are under review as to their impact on the Group. The following standards and interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning on or after 1 October 2024 or later periods but which the Group has not early adopted: • Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback (effective 1 January 2024) • Amendments to IAS 1 Presentation of Financial Statements – Non-current Liabilities with Covenants, Classification of liabilities as current or non-current (effective 1 January 2024) • Amendments to IAS 7 and IFRS 7 regarding supplier finance arrangements (effective 1 January 2024) • Amendments to IAS 21 to clarify the accounting when there is a lack of exchangeability (effective 1 January 2025) • IFRS 18 Presentation and Disclosures in Financial Statements (effective 1 January 2027) • IFRS 19 Subsidiaries without Public Accountability: Disclosures (effective 1 January 2027) No other new standards, new interpretations or amendments to standards or interpretations have been published which are expected to have a significant impact on the Group’s financial statements. In relation to the published standards and interpretations above, the Group is continuing to assess the impact on the financial statements for future periods and expects there to be no significant material impact other than IFRS 18 which the Group is currently performing an assessment. 101 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.29 Accounting estimates and judgements The preparation of these financial statements requires the exercise of judgement, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and various other factors, including expectations of the future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period impacted. The Group makes estimates and assumptions concerning the future. By definition, the resulting accounting estimates will seldom equal the related actual results. The Directors continually evaluate the estimates, assumptions and judgements based on available information and experience. Key sources of estimation uncertainty The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. Impairment of intangible assets (goodwill and other intangible assets) and right-of-use assets The Group assesses whether there are any indicators of impairment as at the reporting date for all intangible assets and right-of-use assets. Goodwill is tested for impairment annually and at other times when such indicators exist. Other intangible assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, the Directors must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. The key sources of estimation uncertainty are the future business performance over the forecast period (five years), projected long-term growth rates and the discount rates applied. When fair value less costs to sell calculations are used, level 2 and 3 fair value inputs are used. See note 11 for detailed disclosures. Life of brand asset The useful life is considered to be 40 years which represents management’s best estimate of the period over which the brand will be utilised based on the trading history of the business, future financial projections and ongoing investment in the business, along with the retail segment occupied by Poundland and the active proposition development happening within the business. The brand is amortised on a straight-line basis. See note 11 for detailed disclosures. Key judgements The judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. Lease discount rate Where a rate implicit to the lease is not available, the selection of a discount rate for a lease is based upon the marginal cost of borrowing to the business in relation to the funding for a similar asset. Management calculates appropriate discount rates based upon the marginal cost of borrowing currently available to the business as adjusted for several factors including the term of the lease, the location and type of asset and how often payments are made. Management considers that these are the key details in determining the appropriate marginal cost of borrowing for each of these assets. See note 1.20 for detailed disclosures. Leases Management exercises judgement in determining the lease term on its lease contracts. Within its lease contracts, particularly those in respect of its retail business, break options are included to provide operational and financial security should store performance be different to expectations. At inception of a lease, management will typically assess the lease term as being the full lease term as such it is reasonably certain that break options will not be exercised. As stated in the accounting policies, the discount rate used to calculate the lease liability is based on the incremental borrowing rate. Incremental borrowing rates are determined quarterly and depend on the lease term, currency and start date of the lease. The incremental borrowing rate is determined based on a series of inputs including the risk-free rate based on government bond rates, country specific risk and entity specific risk. See note 12 for detailed disclosures. 1.30 Non-underlying items Management exercises judgement in determining the adjustments to apply to IFRS Accounting Standards measurements. Management believes these measures provide additional useful information to illustrate the underlying trends, performance and position of the Group. Non-underlying adjustments constitute material, exceptional, unusual and other items. In determining whether events or transactions are treated as non-underlying items, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Examples of charges or credits meeting the above definition and which have been presented as non- underlying items in the current and/or prior years include: • • • • • Business restructuring programmes; Hungary fraud incident; and Impairment of Goodwill and Brand asset. IFRS 2 charges in respect of management Value Creation Plan; Notes to the consolidated ﬁnancial statements continued In the event that other items meet the criteria, which are applied consistently from year to year, they are also treated as non-underlying items. Further information about the determination of non-underlying and other items in financial year 2024 is included in note 4. The non-underlying items are not defined by IFRS Accounting Standards. 102 Cost relating to implementation of Software-as-a-Service IT solutions and expensing significant ERP programme costs incurred; Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 1. Significant accounting policies continued 1.31 Alternative performance measures (APMs) Management exercises judgement in determining the adjustments to apply to IFRS Accounting Standards measurements in order to derive suitable APMs. As set out in note 27, APMs are used as management believes these measures provide additional useful information on the underlying trends, performance and position of the Group. These measures are used for performance analysis. The APMs are not defined by IFRS Accounting Standards and therefore may not be directly comparable with other companies’ APMs. These measures are not intended to be a substitute for, or superior to, IFRS Accounting Standards measurements. 2. Segmental analysis Operating segments are defined as components of the Group about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (CODM), or decision-making group, in deciding how to allocate resources and in assessing performance. Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors, which is considered the group’s chief operating decision maker. The Group has identified three significant revenue-generating operating segments. One being business trading under the Pepco banner, one being business trading under the Poundland banner, and the final being business trading under the Dealz banner. In previous reporting periods, the Group referred to two significant revenue-generating operating segments therefore this represents a change and a restatement has been made to ensure results are provided on a comparative basis. A final “other” operating segment includes the Group’s sourcing operations, Group functions and other activities that do not meet the threshold requirements for individual reporting. EBITDA is the primary profit metric reviewed by the CODM and has been presented by operating segment with a reconciliation to operating profit. EBITDA is defined as operating profit before depreciation, amortisation, impairment, profit/loss on disposal of tangible and intangible assets. Tax and interest are not reviewed by the CODM on an operating segment basis. Segment assets and liabilities are measured in the same way as in the consolidated historical financial information. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset. Investments in subsidiaries within the Group, along with relevant consolidation adjustments and eliminations are allocated to the relevant segment. Assets and liabilities included within the “other” segment relate to balances held by the Group’s sourcing operations. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 External revenue Pepco 3,853,169 3,374,980 Poundland UK & ROI 2,006,333 2,000,633 Dealz Poland 307,247 220,051 Group external revenue 6,166,749 5,595,664 Underlying EBITDA Pepco 785,292 554,768 Poundland UK & ROI 153,319 195,325 Dealz Poland 24,166 6,535 Other (18,750) (3,089) Group underlying EBITDA 944,027 753,539 Reported EBITDA Pepco 743,029 523,355 Poundland UK & ROI 147,169 174,231 Dealz Poland 22,348 2,453 Other (20,766) 1,899 Group EBITDA 891,780 701,938 Less reconciling items to operatingprofit Depreciation of right-of-use asset (364,757) (302,940) Impairment of right-of-use asset (6,104) — Depreciation of property, plant and equipment (182,382) (147,390) Impairment of property, plant and equipment (9,767) (3,130) Impairment of goodwill (724,824) — Amortisation of other intangibles (10,646) (9,572) Impairment of other intangibles (38,707) — Profit on disposal of property, plant and equipment 270 477 Other expenses — (233) Group operating (loss) / profit from continuing operations (445,137) 239,150 All income statement disclosures are for the continuing business only. The total asset, total liability and capital expenditure disclosures are for the entire Group. 103 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 2. Segmental analysis continued Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Depreciation and amortisation Pepco 367,587 283,845 Poundland UK & ROI 156,295 152,480 Dealz Poland 32,352 22,102 Other 1,551 1,475 Group depreciation and amortisation 557,785 459,902 Impairment of property, plant and equipment, goodwill, intangible and right of use assets Pepco 4,362 3,130 Poundland UK & ROI 12,128 — Dealz Poland — — Other 762,912 — Group Impairment of property, plant and equipment, goodwill, intangible and right of use assets 779,402 3,130 Total assets Pepco 2,802,349 2,591,652 Poundland UK & ROI 999,492 1,774,542 Dealz Poland 172,474 154,102 Other 23,425 55,060 Group total assets 3,997,740 4,575,356 Total liabilities Pepco 2,047,329 1,793,047 Poundland UK & ROI 679,969 786,055 Dealz Poland 94,321 97,108 Other 664,705 761,438 Group total liabilities 3,486,324 3,437,648 Additions to non-current assets Pepco 439,790 561,587 Poundland UK & ROI 143,942 196,524 Dealz Poland 29,273 70,577 Other 1,946 946 Group additions to non-current assets 614,951 829,634 3. Revenue and Geographical segments Revenue comprises the consideration paid for products by external customers at the point of sale in stores, net of value added tax and promotional sales discounts. The Group’s disaggregated revenue recognised relates to the following geographical segments: Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 UK and Republic of Ireland 2,006,333 2,000,633 Poland 1,617,790 1,413,973 Rest of Central and Eastern Europe 1,950,271 1,816,043 Rest of Western Europe 592,355 365,015 6,166,749 5,595,664 Notes to the consolidated ﬁnancial statements continued 104 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 3 . Revenue and Geographical segments continued The Group’s disaggregated non-current assets recognised relates to the following geographical segments: Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 UK and Republic of Ireland 601,910 1,376,697 Poland 597,935 524,444 Rest of Central and Eastern Europe 582,408 574,497 Rest of Western Europe 480,826 463,651 2,263,079 2,939,289 4. Non-underlying items The Group believes underlying profit, an alternative profit measure, is a valuable way in which to present business performance as it provides the users of the accounts with a clear and more representative view of ongoing business performance. Non-underlying items, which are removed from the reported IFRS Accounting Standards measures, are defined as material, exceptional, unusual and other items. Underlying performance measures should be considered in addition to IFRS Accounting Standards measures and are not intended to be a substitute for them. The Group also uses underlying financial performance to improve the comparability of information between reporting periods and geographical units and to aid users in understanding the Group’s performance. Consequently, the Group uses underlying financial performance for performance analysis, planning, reporting and incentive setting. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Reported EBITDA from continuing operations 891,780 701,938 Group Value Creation Plan (VCP) 893 (1,905) Impact of implementation of IFRIC interpretation on SaaS arrangements 29,661 42,351 Restructuring costs 5,450 11,155 Hungary Fraud Incident 16,243 — Underlying EBITDA from continuing operations 944,027 753,539 Reported operating (loss) / profit from continuing operations (445,137) 239,150 Group Value Creation Plan (VCP) 893 (1,905) Impact of implementation of IFRIC interpretation on SaaS arrangements 29,159 43,493 Restructuring costs 3,689 14,285 Hungary Fraud Incident 16,243 — Impairment of Goodwill and Brand 775,051 — Underlying operating profit from continuing operations 379,898 295,023 Reported (loss) / profit before taxation from continuing operations for the year (554,119) 158,845 Group Value Creation Plan (VCP) 893 (1,905) Impact of implementation of IFRIC interpretation on SaaS arrangements 29,159 43,493 Restructuring costs 3,689 13,473 Hungary Fraud Incident 16,243 — Impairment of Goodwill and Brand 775,051 — Underlying profit before tax from continuing operations 270,916 213,906 IFRS 2 charge: A Value Creation Plan (“VCP”) was approved by the Board of Directors in March 2020 as a reward tool to incentivise the top management of the Pepco Group and to retain them post an IPO. The Group treat the VCP associated costs as Non-Underlying Costs on the basis; • the VCP was specific IPO related incentive which is not a typical share based payment scheme; and • the scheme was implemented prior to the IPO and the total cost of the scheme (€45.3m) is already reflected in the share price achieved at IPO. Management believe it is beneficial for the users of the financial statements to understand the underlying operational performance without it being skewed by the impact of the VCP charges. See note 21 for more details on the VCP. 105 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 5. Operating profit from continuing operations Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Operating (loss)/profit for the period has been arrived at after charging: Expense relating to short-term, low-value and variable leases 57,316 53,704 Depreciation of tangible fixed assets and other items: Owned 182,382 147,390 Depreciation of right-of-use assets 364,757 302,940 Impairment of property, plant and equipment 9,767 3,130 Amortisation of other intangibles 10,646 9,572 Impairment of Goodwill 724,824 — Impairment of other intangible assets 38,707 — Impairment of Right of Use Assets 6,104 — Cost of inventories recognised as an expense 3,419,474 3,273,908 Write downs of inventories recognised as an expense 92,201 67,203 Year to Year to 30 September 30 September 2024 2023 €000 €000 Auditors’ remuneration Fees payable to the Company’s auditors and their associates for the audit of the Company’s annual accounts1 538 540 Fees payable to the Company’s auditors and their associates for the audit of the Company’s subsidiaries1 1,182 960 Fees payable to other auditors and their associates for the audit of the Company’s subsidiaries 782 867 Fees payable to other auditors and their associates in the current year in relation to prior year audit 128 244 Total audit fees 2,630 2,611 Audit related services 165 147 Other services — 132 Total auditors’ remuneration 2,795 2,890 1 6. Financial income Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Bank interest income 22,960 2,897 Foreign exchange gains 8,843 7,348 31,803 10,245 Audit fees are payable to Forvis Mazars Accountants N.V. the auditors of the Company. Notes to the consolidated ﬁnancial statements continued 4. Non-underlying items continued Impact of implementation of IFRIC interpretation on SaaS arrangements and expensing significant ERP programme costs incurred: Following the IFRIC interpretation on accounting for SaaS costs, the Group has expensed previously capitalised costs in relation to certain SaaS projects as part of the retrospective application of the new accounting policy. In FY23 and FY24, the Group has specifically expensed costs related to significant ERP programmes. Restructuring costs: The Group undertook strategic decision in the year to restructure the Poundland business. The non-underlying costs relate to head office cost reduction and strategic change to rationalise costs across the business. Hungary fraud incided: During FY24, the Group incurred a loss due to a fraud incident which occurred in Pepco Hungary. The loss to the business is a non-underlying expense as it was material, exceptional and unusual in nature. All costs have been captured that relate to this issue and classified as non-underlying. Impairment in Goodwill and Brand: During FY24 the Group have impaired goodwill and brand assets recognised on the acquisition of Poundland. The Group have also impaired Right of use assets and Property, Plant and Equipment relating to Poundland. These are all considered to be non-underlying as they are material, exceptional and unusual in nature. 106 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 7. Financial expense Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Interest on bank loans and amortisation of capitalised finance costs 67,789 35,684 Interest on lease liabilities 77,311 60,188 Ineffective element of hedging (263) 1,918 Unrealised foreign currency losses on borrowings (4,052) (7,240) 140,785 90,550 8. Staff numbers and costs The average number of persons employed by the Group (including Directors) during each year was as follows: Year to Year to 30 September 30 September 2024 2023 Administration 17,780 2,458 Selling and distribution 31,287 43,871 49,067 46,329 The Group does not have any staff employed in the Netherlands. The aggregate payroll costs of these persons were as follows: Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Wages and salaries 822,196 701,527 Social security costs 109,602 91,997 Other pension costs (note 23) 34,761 23,607 Share-based payments expense (note 21) 6,912 1,093 973,471 818,224 Key management remuneration The amounts for remuneration include the following in respect of the key management personnel: Other Post- Short-term short-term employment Basic annual bonus Company pension remuneration paid contributions contribution LTIP1 Total €000 €000 €000 €000 €000 €000 2024 3,068 1,942 116 125 6,184 11,435 2023 3,367 689 85 227 5,499 9,867 1 Long Term Incentive Plan; this includes IFRS 2 charges. See note 21 for more details and see Remuneration report (on pages 79 to 83 for Directors’ remuneration in detail. 107 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 9. Taxation Analysis of tax (charge)/credit for the year Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Current tax (charge)/credit Current tax on (loss)/profits for the year (110,944) (37,451) Adjustments in respect of prior periods (3,127) 2,502 Total current tax (114,071) (34,949) Deferred tax (charge)/credit Origination and reversal of temporary differences 37,313 (13,590) De-recognition of previously recognised temporary differences (28,106) — Adjustments in respect of prior periods (2,656) (1,942) Total deferred tax 6,551 (15,532) Total tax charge for the year (107,520) (50,481) Factors affecting the tax charge for the year The tax charge for the year differs from the standard rate of corporation tax in the UK of 25% (2023: 22.0%). The differences are explained below. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 (Loss)/profit before tax – continuing operations (554,119) 158,845 Expected tax credit/(charge) at the UK statutory rate of 25% (2023: 22.0%) 138,530 (34,946) Effects of: Movement in unrecognised temporary differences (60,920) (10,363) Expenses not deductible for tax purposes (7,546) (10,966) Fixed asset differences** (183,866) (2,270) Overseas tax rate differences 12,065 6,489 Adjustments in respect of prior periods (5,783) 560 Difference in tax rates - 1,015 Total tax charge for the year (107,520) (50,481) * Included within movement in unrecognised temporary differences is €28.1 million relating to the partial de-recognition of deferred tax assets in the UK, Spain and Poland associated with a re-assessment of recognition in the year and probability of future recovery. Other movements relate to temporary differences arising in the current year. ** Included within fixed asset differences is €181.2 million relating to the impairment of goodwill recorded in the current year. *** Included within adjustments in respect of prior periods is a deferred tax charge of €7.2m and a current tax credit of €3.5m relating to transfer pricing. This has been calculated in accordance with IFRIC 23 using the expected value method. The impact results in a reduction in the future deductible temporary differences (deferred tax assets) of the Group, which is partially offset by a current tax credit which should be realisable in the future. Tax (charge)/credit recognised in other comprehensive income Year to Year to 30 September 30 September 2024 2023 €000 €000 Deferred tax (charge)/credit Fair value movements on derivative financial instruments (8,238) 34,924 Total tax charge recognised in other comprehensive income (8,238) 34,924 The Company is UK tax resident based on the Company being managed and controlled in the UK and as such is subject to UK corporation tax with the expected tax charge reconciled to the UK statutory rate. Taxation outside the UK is calculated at the rates prevailing in the respective jurisdictions. Notes to the consolidated ﬁnancial statements continued 108 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 9. Taxation continued Factors that may affect future current and total tax As a mulinational enterprise the Group falls within the scope of the global minimum tax rules (Pillar 2) which are now effective in many jurisdictions in which the Group operates. Relevant legislation was substantively enacted in the UK on 20 June 2023, effective for accounting periods commencing on or after 31 December 2023. In this respect the rules will be effective for the Group's next financial year commencing on 1 October 2024. The Group has operations in Bosnia and Herzegovina, Bulgaria, Hungary, Isle of Man, Republic of Ireland, and Switzerland, all of which currently have a headline tax rate below 15%. Legislation to apply the Pillar 2 rules (including a Qualifying Domestic Top-Up Tax, QDMTT) has been adopted in Bulgaria, Hungary, and Republic of Ireland, which will be relevant for the Group's next financial year commencing on 1 October 2024. Bosnia and Herzegovina was a signatory to the October 2021 OECD Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy but is yet to publish legislation to implement the rules. The Isle of Man announced its intention to introduce new legislation, including a QDMTT on 15 October 2024 with effect from 1 January 2025. Switzerland has introduced parts of the Pillar 2 rules, with a QDMTT effective for the Group's next financial year commencing on 1 October 2024. The Group has performed a preliminary assessment of the impact of the rules. Based on this assessment the rules are not expected to have a significant impact on the Group's financial statements, either as a result of available safe harbours or substance-based exclusions. There is no current tax impact of the rules on the Group's financial statements for the financial year ended 30 September 2024. The Group has applied a temporary mandatory relief from deferred tax accounting for the impacts of the global minimum tax and accounts for it as a current tax when it is incurred. 10. Property, plant and equipment Leasehold Fixtures Land and property and buildings improvements equipment Total €000 €000 €000 €000 Cost Balance at 1 October 2022 60,969 342,615 517,843 921,427 Additions 176 178,908 184,739 363,823 Disposals — (6,029) (31,032) (37,061) Differences on translation 1 11,107 8,686 19,794 Balance at 30 September 2023 61,146 526,601 680,236 1,267,983 Balance at 1 October 2023 61,146 526,601 680,236 1,267,983 Additions 6,988 91,738 105,833 204,559 Disposals (77) (22,590) (33,012) (55,679) Reclassification 29,706 (29,706) — — Differences on translation (11,572) 29,221 19,509 37,158 Balance at 30 September 2024 86,191 595,264 772,566 1,454,021 Depreciation and impairment Balance at 1 October 2022 1,429 121,022 274,426 396,877 Charge for the period 572 59,505 91,730 151,807 Disposals — (6,073) (29,544) (35,617) Impairment — — (3,130) (3,130) Differences on translation 4 1,035 10,570 11,609 Balance at 30 September 2023 2,005 175,489 344,052 521,546 Balance at 1 October 2023 2,005 175,489 344,052 521,546 Charge for the period 2,904 79,876 99,602 182,382 Disposals (125) (10,973) (23,979) (35,077) Reclassification 9,847 (9,847) — — Impairment — 9,767 — 9,767 Differences on translation (2,195) 31,449 3,316 32,570 Balance at 30 September 2024 12,436 275,761 422,991 711,188 Net book value Balance at 30 September 2024 73,755 319,503 349,575 742,833 Balance at 30 September 2023 59,141 351,112 336,184 746,437 An impairment was recognised in the year of €9.8m (2023: €3.1m) as a result of the closure and rebranding of certain stores. A reclassification has been included in the FY24 categories for 'Land and Buildings', and 'Leasehold Property Improvements' as it was identified that certain building assets were not included in the correct category. 109 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 11. Goodwill and other intangible assets Software and Goodwill1 Brand1 trademarks Total €000 €000 €000 €000 Cost Balance at 1 October 2022 803,169 124,423 48,009 975,601 Additions — — 25,815 25,815 Disposals — — (6,853) (6,853) Differences on translation 17,112 2,646 1,942 21,700 Balance at 30 September 2023 820,281 127,069 68,913 1,016,263 Balance at 1 October 2023 820,281 127,069 68,913 1,016,263 Additions — — 7,189 7,189 Disposals — — (1,033) (1,033) Differences on translation 21,164 4,433 3,616 29,213 Balance at 30 September 2024 841,445 131,502 78,685 1,051,632 Amortisation and impairment Balance at 1 October 2022 114,188 12,444 34,731 161,363 Amortisation for the period — 3,284 6,288 9,572 Impairments — — (5,742) (5,742) Differences on translation 2,433 288 872 3,593 Balance at 30 September 2023 116,621 16,016 36,149 168,786 Balance at 1 October 2023 116,621 16,016 36,149 168,786 Amortisation for the period — 3,246 7,400 10,646 Disposals — — (380) (380) Impairments 724,824 38,088 619 763,531 Differences on translation — 854 879 1,733 Balance at 30 September 2024 841,445 58,204 44,667 944,316 Net book value Balance at 30 September 2024 — 73,298 34,018 107,316 Balance at 30 September 2023 703,660 111,053 32,764 847,477 1 Impairment Under IAS 36 “Impairment of Assets”, the Group is required to: • • As part of the annual impairment review, the carrying value of the assets or, if they do not generate independent cash flows individually, the carrying value of the cash-generating unit (CGU) that they belong to is compared to their recoverable amount. CGUs represent the smallest identifiable group of assets that generate cash flows that are largely independent of cash flows from other groups of assets. In accordance with internal management structures, the group of CGUs against which goodwill is monitored comprises the Poundland Group, which is aligned with the level at which the Directors monitor that goodwill. The recoverable amount represents the higher of the CGU’s fair value less the cost of disposal and value in use. The recoverable amount has been determined based on the CGU's fair value less the cost of diposal as using this methodology provides a higher value as required by IFRS accounting standards. Where the recoverable amount is less than the carrying value, an impairment results. Goodwill acquired in a business combination is allocated to groups of CGUs according to the level at which the Directors monitor that goodwill. During the year, all goodwill was tested for impairment and the full goodwill balance has been impaired (2023: €Nil). The key assumptions on which the fair value less the costs of disposal calculations is based on various fair value methodologies such as EBITDA multiples and recent transactions. These are to be level 3 fair value inputs. The range of EBITDA multiples considered appropriate for the fair value calculation were between 8.5x and 9.5x EBITDA (pre-IFRS16). The impairment in the year has largely been driven by the material underperformance in Poundland, along with slower growth prospects and a higher cost outlook in the UK following the recent government budget. This has led to the VIU model producing a lower value than the fair value less cost of disposal model. As a result of the impairment calculation for goodwill, the impairment required exceeded the carrying value of goodwill. The surplus impairment has been allocated to the brand asset given it is part of the CGU and due to the fact that other impairments have been recognised in the year in relation to this CGU within 'Plant, Property and Equipment' and 'Right of use assets'. Brand and goodwill relate to the acquisition of the Poundland Group, Fultons Group and Poundshop.com. review its intangible assets in the event of a significant change in circumstances that would indicate potential impairment; and review and test its goodwill and indefinite-life intangible assets annually or in the event of a significant change in circumstances. Notes to the consolidated ﬁnancial statements continued 110 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 12. Leases Right-of-use assets Buildings Equipment Vehicles Total €000 €000 €000 €000 Cost Balance at 1 October 2022 1,652,389 27,729 23,118 1,703,236 Additions 417,880 17,424 4,692 439,996 Disposals (95) — — (95) Differences on translation 83,688 443 689 84,820 Balance at 30 September 2023 2,153,862 45,596 28,499 2,227,957 Balance at 1 October 2023 2,153,862 45,596 28,499 2,227,957 Additions 393,204 6,040 3,959 403,203 Disposals (52,300) — (150) (52,450) Differences on translation 114,282 1,728 1,163 117,173 Balance at 30 September 2024 2,609,048 53,364 33,471 2,695,883 Depreciation Balance at 1 October 2022 651,065 21,072 12,858 684,995 Depreciation for the period 302,194 4,267 2,539 309,000 Disposals (104) — — (104) Differences on translation 7,370 771 242 8,383 Balance at 30 September 2023 960,525 26,110 15,639 1,002,274 Balance at 1 October 2023 960,525 26,110 15,639 1,002,274 Depreciation for the period 356,955 4,666 3,136 364,757 Disposals (11,625) — (17) (11,642) Impairment 6,104 — — 6,104 Differences on translation 27,085 1,658 969 29,712 Balance at 30 September 2024 1,339,044 32,434 19,727 1,391,205 Net book value Balance at 30 September 2024 1,270,004 20,930 13,744 1,304,678 Balance at 30 September 2023 1,193,337 19,486 12,860 1,225,683 An impairment was recognised in the year of €6.1m (2023: nil) as a result of the expected store closures and impairment reviews on loss makings stores. Lease liabilities Year to Year to 30 September 30 September 2024 2023 €000 €000 At beginning of period 1,293,171 1,133,544 Additions 470,038 469,203 Interest on lease liability 77,311 61,367 Repayment of lease liability (441,585) (386,961) Disposal (35,521) — Differences on translation 17,575 16,018 At end of period 1,380,989 1,293,171 Current 346,594 304,794 Non-current 1,034,395 988,377 1,380,989 1,293,171 111 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 12. Leases continued Amounts recognised in the income statement Year to Year to 30 September 30 September 2024 2023 €000 €000 Interest expenses (included in finance cost) 77,311 61,367 Expense relating to short-term leases (included in cost of goods sold and administrative expenses) 1,840 603 Expense relating to leases of low-value assets that are not shown above as short-term leases (included in administrative expenses) 221 2,153 Expense relating to variable lease payments not included in lease liabilities (included in administrative expenses) 55,256 50,948 Amounts recognised in the statement of cash flows Year to Year to 30 September 30 September 2024 2023 €000 €000 Total cash outflow for leases 441,585 386,961 The Group leases various retail stores, offices and vehicles under non-cancellable operating leases. The leases have varying terms, escalating clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group has recognised right-of-use assets for these leases, except for short-term and low-value leases. Some property leases contain variable payment terms that are linked to sales generated from a store. Variable payment terms’ percentages range from 1.5% to 7.5% of sales. Variable payment terms are used for a variety of reasons, including minimising the fixed cost base for newly established stores. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs. Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. 13. Inventories 30 September 30 September 2023 2024 (Restated) €000 €000 Goods purchased for resale 756,311 724,822 Goods in transit 479,146 394,725 1,235,457 1,119,547 Inventories have been reduced by €64,834k (2023: €70,543k) as a result of the write-down to net realisable value. 1 4 . Trade and other receivables 30 September 30 September 2023 2024 (Restated) €000 €000 Non-current trade and other receivables Other receivables 52 46 52 46 Current trade and other receivables Trade receivables 4,991 2,624 Other receivables 27,184 30,064 Prepayments 70,699 110,444 102,874 143,132 As the principal business of the Group is retail sales made in cash or with major credit cards, the Group’s trade receivables are small and therefore credit risk primarily consists of accrued income and cash and cash equivalents. Accordingly, the Group does not systematically report outstanding receivables analysed by credit quality, in particular with respect to the credit quality of financial assets that are neither past due nor impaired. There is no significant concentration of credit risk with respect to trade receivables, as the Group has a large number of customers that are widely dispersed. As such, any further detailed analysis of the credit risk of the Group’s financial assets by category is not considered meaningful. The carrying amount of trade and other receivables recorded in the financial statements represents the Group’s maximum exposure to credit risk and any associated impairments are immaterial. Notes to the consolidated ﬁnancial statements continued 112 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 15. Trade and other payables 30 September 30 September 2023 2024 (Restated) €000 €000 Current Trade payables1 886,966 770,333 Other taxation and social security 71,724 64,923 Other payables 81,326 141,031 Accruals 340,503 294,015 1,380,519 1,270,302 Non-current Accruals and deferred income 3,396 21,763 3,396 21,763 1 Trade payables includes €383m (FY23: €212m) payable to suppliers utilising the Supply Chain Financing Programme implemented by the Group. 16. Borrowings 30 September 30 September 2024 2023 €000 €000 Current Borrowings from credit institutions — 118,794 Non-current Borrowings from credit institutions 248,230 248,259 Secured bond issuance 364,750 362,011 Included within non-current liabilities are loans from credit institutions of €250m (2023: €250m) and a secured bond of €375m (2023: €375m). Costs incurred in obtaining the loans from credit institutions and the secured bond have been capitalised and are allocated to the Consolidated income statement over the life of the debt facility. At 30 September 2024 borrowings are stated net of unamortised issue costs of €12.0m (2023: €14.7m). Interest is being charged on borrowings from credit institutions at an effective rate of 6.85%. These loans contains financial covenants which are typical for this type of facility and include minimum leverage and interest cover. The Group remained compliant with these covenants for the year ended 30 September 2024. The loans from credit institutions are secured over the shares of material overseas subsidiaries and debentures over other assets of the Group. There has been no significant impact to the Group as a result of interest rate benchmark reform. The secured bond issuance matures in June 2028 and has a fixed interest rate of 7.25%. 17. Financial instruments and related disclosures Financial risk management The Directors have overall responsibility for the oversight of the Group’s risk management framework. A formal process for reviewing and managing risk in the business has been developed. A register of strategic and operational risk is maintained and reviewed by the Directors, who also monitor the status of agreed actions to mitigate key risks. Credit risk Credit risk is the risk of financial loss to the Group if a counterparty to a financial instrument fails to meet its contractual obligation. This risk arises from the Group’s foreign exchange and commodity hedging agreements. As the principal business of the Group is cash sales the Group’s trade receivables are small. The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum exposure to credit risk and any associated impairments are minimal. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures that it has sufficient cash or loan facilities to meet all its commitments when they fall due by ensuring that there is sufficient cash or working capital facilities to meet the cash requirements of the Group for the current business plan. The risk is measured by review of forecast liquidity each month to determine whether there are sufficient credit facilities to meet forecast requirements and by monitoring covenants on a regular basis. Cash flow forecasts are submitted monthly to the Directors. These continue to demonstrate the cash-generating ability of the business and its ability to operate within existing agreed facilities. Market risk Market risk is the risk that changes in the market prices will affect the Group’s income. The Group’s exposure to market risk predominantly relates to interest and currency risk. 113 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 17. Financial instruments and related disclosures continued Interest rate risk The Group’s external borrowings includes loans which incur variable interest rate charges linked to Euribor which are added to the loan. Interest rate risk is measured by sensitivity analysis. The Group’s policy aims to manage the interest cost of the Group within the business plan. The Group does not utilise interest rate swaps to hedge interest rate risks. The table below shows the interest rate risk profile for the Group’s financial instruments: 2024 2023 €000 €000 Cash and cash equivalents 363,336 330,417 Borrowings (612,980) (729,064) Finance lease liabilities (1,380,989) (1,293,171) Total (1,630,633) (1,691,818) Interest rate sensitivity analysis The table below shows the Group’s sensitivity to interest rates on floating rate borrowings (i.e. cash and cash equivalents and bank borrowings which attract interest at floating rates) if interest rates were to change by +/-1%. The following assumptions were made in calculating the sensitivity analysis: • • 2024 2023 2024 2023 (decrease)/ (decrease)/ (decrease)/ (decrease)/ Increase Increase increase increase in income in income in equity in equity €000 €000 €000 €000 +1% movement in interest rates (3,633) (3,304) (2,482) (3,671) -1% movement in interest rates 3,633 3,304 2,482 3,671 Foreign currency risk The Group has a significant transaction exposure to directly sourced purchases from its suppliers in the Far East, with most of the trade being in US Dollars and Chinese Yuan. The Group’s policy allows these exposures to be hedged for up to 18 months forward in order to fix the cost in Polish Zloty and Pound Sterling. Hedging is performed through the use of foreign currency bank accounts and forward foreign exchange contracts. See below for further details on FX hedge accounting. The Group does not hedge either economic exposure or the translation exposure arising from the profits, assets and liabilities of its businesses. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: 30 September 2024 30 September 2023 GBP EUR PLN Others GBP EUR PLN Others €000 €000 €000 €000 €000 €000 €000 €000 Cash and Cash equivalents 163,353 (26,308) 11,718 214,573 21,251 127,634 18,580 162,952 Trade and other receivables 63,769 25,318 4,178 9,661 101,658 25,777 23,415 (7,282) Borrowings — (612,980) — — — (729,064) — — Trade and other payables (294,856) (117,041) (863,693) (108,325) (274,613) (98,088) (707,177) (208,211) Provisions (6,473) (3,944) (22,095) (1,759) (12,501) (4,314) (12,284) (1,474) Finance Lease liabilities (282,436) (900,641) (152,698) (45,214) (286,749) (225,796) (738,329) (42,297) (356,643) (1,635,596) (1,022,590) 68,936 (450,954) (903,851) (1,415,795) (96,312) Significant exchange rates used Year to Year to 30 September 30 September 2024 2023 Average rate for the year Polish Zloty 4.33 4.62 Pound Sterling 0.86 0.87 Statement of financial position rates Polish Zloty 4.28 4.63 Pound Sterling 0.84 0.86 it is assumed interest is receivable on the entirety of the Group’s cash balances; and the impact is reflected on net assets (gross of tax). Notes to the consolidated ﬁnancial statements continued 114 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 17. Financial instruments and related disclosures continued Pension liability risk The Group has no association with any defined benefit pension scheme and therefore carries no deferred, current or future liabilities in respect of such a scheme. The Group operates a number of Group personal pension plans for its employees. Capital risk management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to optimise returns to its shareholders. The Board’s policy is to retain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future growth. The Board regularly monitors the level of capital in the Group to ensure that this can be achieved. Refer to note 16 for loan covenant requirements. The Group monitors capital using net debt. This is because the Group believes this measure provides an indicator of the overall strength of its balance sheet and can be used to assess its earnings as compared to its indebtedness as defined by the Group’s financing agreements. Please refer to note 27 where the calculation of net debt is disclosed. Fair value disclosures The fair value of each class of financial assets and liabilities approximates the carrying amount, based on the following assumptions: Trade receivables, trade payables, short-term The fair value approximates to the carrying value because of the short maturity of these deposits and borrowings instruments. The fair value of bank loans and other loans approximates to the carrying value reported Long-term borrowings in the statement of financial position. • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). All financial instruments carried at fair value have been measured using a Level 2 valuation method. The fair value of financial assets and liabilities are as follows: Year to Year to 30 September 30 September 2024 2023 €000 €000 Financial assets measured at fair value Derivative contracts used for hedging (assets) 34,507 48,338 Financial assets not measured at fair value Cash and cash equivalents 363,336 330,417 Trade and other receivables 32,227 32,734 Total financial assets 430,070 411,879 Financial liabilities measured at fair value Derivative contracts used for hedging (liabilities) 52,486 92,775 Financial liabilities not measured at fair value Trade and other payables 1,383,915 1,292,065 Borrowings at amortised cost 612,980 729,064 Finance lease liabilities 1,380,989 1,293,171 Total financial liabilities 3,430,370 3,407,075 Financial instrument sensitivity analysis In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on its earnings. At the end of each reporting period, the effects of hypothetical changes in interest and currency rates are as follows: 115 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Fair value hierarchy Financial instruments carried at fair value should be measured with reference to the following levels: • Level 1: quoted prices in active markets for identical assets or liabilities; Foreign exchange rate sensitivity analysis The table below shows the Group’s sensitivity to foreign exchange rates for its Polish Zloty and Pound Sterling financial instruments, the major currencies in which the Group’s assets and liabilities are denominated: 2024 increase/ 2023 increase/ (decrease) (decrease) in equity in equity €000 €000 10% appreciation of the Euro against the Polish Zloty 113,621 157,311 10% depreciation of the Euro against the Polish Zloty (113,621) (157,311) 10% appreciation of the Euro against Pound Sterling 39,627 50,106 10% depreciation of the Euro against Pound Sterling (39,627) (50,106) A strengthening/weakening of the Euro, as indicated, against the Polish Zloty at each year end would have increased/(decreased) the equity by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. A strengthening/weakening of the Euro, as indicated, against Pound Sterling at each year end would have increased/(decreased) the equity by the amounts shown above. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. Contractual cash flows The contractual maturity of bank borrowings including interest payments and trade payables, excluding the impact of netting agreements, is shown below: 30 September 2024 Expiring Due in between Expiring less than one to five after five one year years years Total €000 €000 €000 €000 Borrowings 32,261 702,580 — 734,841 Trade and other payables 1,380,518 3,397 — 1,383,915 Lease liabilities 389,038 853,018 258,937 1,500,994 1,801,817 1,558,995 258,937 3,619,750 30 September 2023 Expiring Due in between Expiring less than one to five after five one year years years Total €000 €000 €000 €000 Borrowings 155,804 732,893 — 888,697 Trade and other payables 1,266,195 21,894 — 1,288,089 Lease liabilities 377,379 823,170 347,267 1,547,816 1,799,378 1,577,957 347,267 3,724,602 Notes to the consolidated ﬁnancial statements continued 1 7 . Financial instruments and related disclosures continued 116 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 17. Financial instruments and related disclosures continued Derivatives and hedge accounting The Group uses foreign currency forward contracts and commodity hedges to manage risks arising from changes in foreign currency exchange rates (relating to the purchase of overseas sourced products) and fuel price fluctuations. These have been designated as cash flow hedges with the respective underlying risks identified in accordance with the hedging strategy discussed as part of the financial risk management. Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. Hedge ineffectiveness may occur due to: a) the fair value of the hedging instrument on the hedge relationship designation date if the fair value is not €Nil; b) changes in the contractual terms or timing of the payments on the hedged item; and c) a change in the credit risk of the Group or the counterparty with the hedging instrument. The following table represents the net carrying values and nominal amounts of derivatives in a continued hedge relationship as at 30 September: 30 September 30 September 2024 2023 €000 €000 Derivative financial assets at beginning of period (44,437) 125,240 Recognised in the income statement - cost of sales (85,240) (128,442) Recognised in the income statement - other finance income/(expense) 2,688 (1,427) Recognised in other comprehensive income 121,518 (38,060) Cash flow hedge adjustment to inventory (14,350) — Translation differences 1,842 (1,748) Derivative financial (liabilities)/assets at end of period (17,979) (44,437) The below table illustrates the notional value of the hedged exposure. 30 September 2024 EUR USD CNY Other Total €000 €000 €000 €000 €000 Maturing in less than one year (1,190,314) 683,074 865,745 (324,011) 34,494 Maturing in greater than one year (115,000) 114,862 114,506 (10,000) 104,368 Total (1,305,314) 797,936 980,251 (334,011) 138,862 30 September 2023 EUR USD CNY Other Total €000 €000 €000 €000 €000 Maturing in less than one year (677,764) 683,834 601,071 (367,786) 239,355 Maturing in greater than one year (47,000) 92,505 65,027 (43,370) 67,162 Total (724,764) 776,339 666,098 (411,156) 306,517 The following tables provide an analysis of the anticipated contractual cash flows for the Group’s derivative contracts: 30 September 2024 30 September 2023 Payable Receivable Payable Receivable EUR €000 €000 €000 €000 Due in less than one year (824) 21,957 (10,850) 14,371 Expiring between one and two years (68) 506 (1,014) (1,637) Contractual cash flows (892) 22,463 (11,864) 12,734 Fair value (892) 22,463 (11,864) 12,734 30 September 2024 30 September 2023 Payable Receivable Payable Receivable USD €000 €000 €000 €000 Due in less than one year (25,172) 129 (20,911) 10,165 Expiring between one and two years (952) 81 — 3,258 Contractual cash flows (26,124) 210 (20,911) 13,423 Fair value (26,124) 210 (20,911) 13,423 117 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Derivatives and hedge accounting continued 30 September 2024 30 September 2023 Payable Receivable Payable Receivable CNY €000 €000 €000 €000 Due in less than one year (24,931) 2,697 (55,652) 7,707 Expiring between one and two years (207) 962 — 2,982 Contractual cash flows (25,138) 3,659 (55,652) 10,689 Fair value (25,138) 3,659 (55,652) 10,689 30 September 2024 30 September 2023 Payable Receivable Payable Receivable Other €000 €000 €000 €000 Due in less than one year (333) 7,958 (3,632) 9,863 Expiring between one and two years — 218 (716) 1,629 Contractual cash flows (333) 8,176 (4,348) 11,492 Fair value (333) 8,176 (4,348) 11,492 30 September 2024 30 September 2023 Payable Receivable Payable Receivable Total €000 €000 €000 €000 Due in less than one year (51,260) 32,741 (91,045) 42,106 Expiring between one and two years (1,227) 1,766 (1,730) 6,232 Contractual cash flows (52,487) 34,507 (92,775) 48,338 Fair value (52,487) 34,507 (92,775) 48,338 Changes in liabilities arising from financing activities The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s Consolidated cash flow statement as cash flows from financing activities. Borrowings Total liabilities from credit from financing Lease liabilities institutions activities €000 €000 €000 At 30 September 2023 (1,293,171) (729,064) (2,022,235) Financing cash flows1 364,274 120,000 484,274 Interest cash flows1 77,311 56,184 133,495 Other changes2 (547,206) (60,100) (607,306) Foreign exchange 17,803 — 17,803 At 30 September 2024 (1,380,989) (612,980) (1,993,969) Borrowings Total liabilities from credit from financing Lease liabilities institutions activities €000 €000 €000 At 30 September 2022 (1,133,544) (614,542) (1,748,086) Financing cash flows1 325,594 (116,215) 209,379 Interest cash flows1 61,367 18,809 80,176 Other changes2 (530,570) (17,116) (547,686) Foreign exchange (16,018) — (16,018) At 30 September 2023 (1,293,171) (729,064) (2,022,235) The financing cash flows from borrowings from credit institutions make up the net amount of proceeds from borrowings and repayments of borrowings and are presented in the cash flow statement on a gross basis. Interest cash flows for these liabilities are presented separately. Other changes include interest accruals and additions. Notes to the consolidated ﬁnancial statements continued 17 . Financial instruments and related disclosures continued 1 2 118 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 17. Financial instruments and related disclosures continued Financial assets and liabilities by category as at 30 September 2024 Fair value through Amortised Fair value income cost through OCI statement Non-current financial assets Derivative financial instruments1 — 1,766 — Trade and other receivables 52 — — 52 1,766 — Current financial assets Trade and other receivables 32,175 — — Derivative financial instruments1 — 32,741 — Cash and cash equivalents 363,336 — — 395,511 32,741 — Non-current financial liabilities Borrowings 612,980 — — Lease liabilities 1,034,395 — — Derivative financial instruments1 — 1,227 — Trade and other payables 3,396 — — 1,650,771 1,227 — Current financial liabilities Borrowings — — — Lease liabilities 346,594 — — Derivative financial instruments1 — 51,259 — Trade and other payables 1,380,519 — — 1,727,113 51,259 — 1 Derivative financial instruments relate to cash flow hedge. Financial assets and liabilities by category as at 30 September 2023 Fair value through Amortised Fair value income cost through OCI statement Non-current financial assets Derivative financial instruments1 — 6,232 — Trade and other receivables 46 — — 46 6,232 — Current financial assets Trade and other receivables 32,688 — — Derivative financial instruments1 — 42,106 — Cash and cash equivalents 330,417 — — 363,105 42,106 — Non-current financial liabilities Borrowings 610,270 — — Lease liabilities 988,377 — — Derivative financial instruments1 — 1,730 — Trade and other payables 21,763 — — 1,620,410 1,730 — Current financial liabilities Borrowings 118,794 — — Lease liabilities 304,794 — — Derivative financial instruments1 — 91,045 — Trade and other payables 1,270,302 — — 1,693,890 91,045 — 1 Derivative financial instruments relate to cash flow hedge. 119 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 18. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and (liabilities) are attributable to the following: 30 September 30 September 2024 2023 (Restated) €000 €000 Net deferred tax assets at beginning of period 113,414 91,296 Recognised in the income statement (note 9) 6,551 (15,532) Recognised in other comprehensive income (note 9) (8,238) 34,924 Discontinued operations (9,692) 5,748 Exchange differences 4,399 (3,022) Net deferred tax assets at end of period 106,434 113,414 Deferred tax assets Deferred tax liabilities Net 30 September 30 September 30 September 30 September 30 September 30 September 2024 2023 2024 2023 2024 2023 (Restated) (Restated) (Restated) €000 €000 €000 €000 €000 €000 Property, plant and equipment 34,002 37,443 (1,306) (1,763) 32,696 35,680 Intangible assets — — (18,324) (28,167) (18,324) (28,167) Right of use assets & lease liabilities IFRS16 197,595 201,556 (190,649) (194,857) 6,946 6,699 Provisions 44,709 21,418 — — 44,709 21,418 Financial assets and liabilities 4,533 14,105 — (1,054) 4,533 13,051 Tax losses and other temporary differences 35,874 64,733 — — 35,874 64,733 316,713 339,255 (210,279) (225,841) 106,434 113,414 A deferred tax asset is recognised by the Group where future recoverability is considered probable. Deferred tax assets and liabilities are not discounted. The restatement of prior year figures in the current year is to reflect certain amendments to IAS 12 (Deferred Tax related to Assets and Liabilities arising from a Single Transaction) with respect to IFRS 16. Recognised in 1 October Recognised in other 2023 income comprehensive Discontinued Exchange 30 September (Restated) statement income Operations differences 2024 €000 €000 €000 €000 €000 €000 Property, plant and equipment 35,680 (6,439) — — 3,455 32,696 Intangible assets (28,167) 10,533 — — (690) (18,24) Right of use assets & lease liabilities IFRS16 6,699 296 — (212) 163 6,946 Provisions 21,418 18,284 — — 5,007 44,709 Financial assets and liabilities 13,051 546 (8,238) — (826) 4,533 Tax losses and other temporary differences 64,733 (16,669) — (9,480) (2,710) 35,874 113,414 6,551 (8,238) (9,692) 4,399 106,434 Recognised in Recognised in other 1 October income comprehensive Discontinued Exchange 30 September 2022 statement income Operations differences 2023 €000 €000 €000 €000 €000 €000 Property, plant and equipment 33,794 8,645 — — (6,759) 35,680 Intangible assets (27,985) 411 — — (593) (28,167) Right of use assets & lease liabilities IFRS16 6,158 (681) — — 1,222 6,699 Provisions 41,417 (20,807) — — 808 21,418 Financial assets and liabilities (20,180) (1,397) 34,924 — (296) 13,051 Tax losses and other temporary differences 58,092 (1,703) — 5,748 2,596 64,733 91,296 (15,532) 34,924 5,748 (3,022) 113,414 Deferred tax not recognised Notes to the consolidated ﬁnancial statements continued Deferred tax assets have not been recognised in respect of net temporary differences of €177.7m (2023: €112.7m). Gross temporary differences equate to €734.7m (2023: €465.5m). These temporary differences primarily relate to tax losses and disallowed interest amounts under the Corporate Interest Restriction rules in the UK, recoverability of which is uncertain. In the UK, Germany, Spain, and France, these temporary differences have no expiry date and may be carried forward indefinitely. In Poland and Greece the temporary differences as relating to tax losses may only be carried forward for five consecutive tax years. 120 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 19. Provisions Property provisions Other provisions Total 30 September 30 September 30 September 30 September 30 September 30 September 2024 2023 2024 2023 2024 2023 €000 €000 €000 €000 €000 €000 At beginning of period 12,800 12,502 17,773 35,263 30,573 47,765 Provisions made during the period 476 56 27,120 523 27,596 579 Provisions utilised during the period — — (4,263) (6,039) (4,263) (6,039) Provisions reversed during the period (6,259) (3,576) (15,348) (14,930) (21,607) (18,506) Translation differences 337 3,818 1,635 2,956 1,972 6,774 7,354 12,800 26,917 17,773 34,271 30,573 Current 3,986 1,352 16,518 902 20,504 2,254 Non-current 3,368 11,448 10,399 16,871 13,767 28,319 7,354 12,800 26,917 17,773 34,271 30,573 Provision is made for the exit costs of properties no longer occupied by the Group where there is a contractual obligation to restore the property back to its original condition. The average remaining lease term for these properties is 2.8 years (2023: 1.2 years). Other provisions include long-term employee benefits where cash settlement is based on the Directors’ best estimate of future cash flows of the Pepco business. The utilisation is expected within the following five years. 20. Share capital and premium 30 September 30 September 2024 2023 €000 €000 Ordinary share capital Allotted, Issued, and fully paid 576,027,342 (2023: 576,027,342) A ordinary shares of €0.01 each 5,760 5,760 Share capital Nominal value Share premium Merger reserve € Shares (‘000) €000 €000 €000 At 30 September 2023 €0.01 576,027 5,760 13 (751) At 30 September 2024 €0.01 576,027 5,760 13 (751) 21. Share-based payments Value Creation Plan During the period ended 30 September 2024, the Group operated four equity-settled share-based payment arrangements, summarised as follows: • The Value Creation Plan • The Long Term Incentive Plan • The CFO Award • The Chair Award The estimated weighted average fair value of awards granted in the period was €4.91, and the weighted average exercise price of awards granted in the period was nil. Four individuals exercised nil cost options during the financial year under the Value Creation plan. The awards outstanding as at 30 September 2024 had a weighted average exercise price of nil, and a weighted average remaining contractual life of 5.84 years. No cash-settled share-based payment arrangements were operated in the period. In the period ended 30 September 2024, the Group recognised a total share-based payment expense of €7.9m (2023: €1.1m), including employer’s social security accrual of €1.0m (2023: €0.6m). Value Creation Plan The Value Creation Plan (“VCP”) was adopted on 3 March 2020. The VCP aligns the remuneration of Executive Directors with the value generated for shareholders. The VCP was originally granted by Pepco Group Limited, which was acquired by Pepco Group N.V. on 13 May 2021, and awards novated to Pepco Group N.V. at that time. 121 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the consolidated ﬁnancial statements continued 21. Share-based payments continued Nature of Conditional Award Under the VCP, participants are granted a “Conditional Award” giving the potential right to be granted nil-cost options based on the absolute Total Shareholder Return (TSR) generated above a hurdle (the Threshold TSR) at the end of each plan year (the “Measurement Date”) over a seven-year period. At each Measurement Date, up to 6.5% of the value created above the hurdle may be “banked” in the form of a grant of nil-cost options. For any Measurement Date since 18 April 2023 the maximum value of nil-cost options which may be granted for each performance period is €52m (based on a full 6.5% Conditional Award allocation). The Initial Price for the VCP is based on a proxy for the average valuation for the Group on 1 October 2022. Participants may receive a grant of nil-cost options at the end of each year of the performance period with a value representing a proportion of the Company’s TSR above the Threshold TSR at the relevant Measurement Date. The Threshold TSR or hurdle which has to be exceeded before share awards can be earned by participants is the higher of: • the highest previous measurement of TSR (for any Measurement Date on or after 18 April 2023 the reference point is not earlier than 1 October 2022); and • the Initial Price compounded by 10% p.a. (re-based with effect from 1 October 2022). If the value created at the end of a given plan year does not exceed the Threshold TSR, no nil-cost options will be granted on the Measurement Date following that year under the VCP. The next Measurement Date will be in January 2025, 30 days after publication of the 2024 full year results. Vesting of nil-cost options Under the VCP, nil-cost options may vest in three tranches of 50%, 50%, and 100% (in each case, with the percentage applying to the unvested nil-cost options held). Vesting schedule for nil-cost options granted prior to 18 April 2023 The vesting schedule provides that 50% of the cumulative number of nil-cost options may vest following the third Measurement Date, 50% following the fourth Measurement Date, and 100% following the fifth Measurement Date. At each vesting date, vesting of awards is subject to: a) a minimum Threshold TSR of 10% CAGR on the Initial Price being maintained: • • where the TSR has been achieved at the third Measurement Date, 50% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil- cost options will vest at this point but they will not lapse; • where the TSR has been achieved at the fourth Measurement Date, 50% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil-cost options will vest at this point but they will not lapse; and where the TSR has been achieved at the fifth Measurement Date, 100% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil-cost options will vest at this point and the remaining cumulative balance will lapse; b) shares allocated as a result of the vesting of nil-cost options are subject to a two year post-vesting holding period from the first vesting date; and c) a personal annual cap on vesting of €20m for the CEO and a proportionate limit for other participants: • in the event that in any year vesting as described above would exceed the personal annual cap, any nil-cost options above the cap will be designated as deferred nil-cost options and will be rolled forward and allowed to vest in subsequent years provided the cap is not exceeded in those years, until the VCP is fully paid out or after five years after the fifth Measurement Date when any deferred nil-cost options will vest. Such deferred nil-cost options are not subject to further underpins, performance conditions or service conditions. Vesting schedule for nil-cost options granted on or after 18 April 2023 The vesting schedule provides that 50% of the cumulative number of nil-cost options may vest following the fifth Measurement Date, 50% following the sixth Measurement Date, and 100% following the seventh Measurement Date. At each vesting date, vesting of awards is subject to: a) a minimum Threshold TSR of 10% CAGR on the Initial Price being maintained: • where the TSR has been achieved at the fifth Measurement Date, 50% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil- cost options will vest at this point but they will not lapse; • where the TSR has been achieved at the sixth Measurement Date, 50% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil-cost options will vest at this point but they will not lapse; and where the TSR has been achieved at the seventh Measurement Date, 100% of the cumulative balance of nil-cost options will vest. If the TSR has not been achieved no nil-cost options will vest at this point and the remaining cumulative balance will lapse; b) shares allocated as a result of the vesting of nil-cost options are subject to a two year post-vesting holding period from the first • c) a personal annual cap on vesting of €20m, €14m, and €10m respectively for Trevor Masters, Andy Bond, and any other Executive vesting date; Director (including Neil Galloway): • in the event that in any year vesting as described above would exceed the personal annual cap, any nil-cost options above the cap will be designated as deferred nil-cost options and will be rolled forward and allowed to vest in subsequent years provided the cap is not exceeded in those years, until the VCP is fully paid out or after two years after the seventh Measurement Date when any deferred nil-cost options will vest. Such deferred nil-cost options are not subject to further underpins, performance conditions or service conditions; and d) no nil-cost options may be exercised until 1 October 2025. 122 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 21. Share-based payments continued Valuation of awards The fair value of awards granted under the VCP was initially calculated at €45.3m and employer social security liability of €9.7m spread over the initial five-year period. An expense of €3.5m was recognised during the period (2023: €1.1m). The expense recognised consisted of a credit of nil (2023: €11.5m) in relation to the reversal of charges relating to leavers and unallocated amounts in the VCP. Long Term awards VCP replacement awards On 30 September 2023, the board approved the grant of restricted stock units (“RSUs”) and nil-cost options under the Pepco Group N.V. Long Term Incentive Plan (the “LTIP”) to replace selected existing awards granted under the VCP. These awards were granted on 22 December 2023. The terms of this award are set out in the new LTIP rules approved by the Board on 27 January 2022 and subsequently amended on 15 March 2024. The RSUs are subject to an EBITDA performance condition and a service condition lasting until 30 September 2024 for 50% of the award, and 30 September 2025 for the remaining 50% of the award. The nil-cost options are subject to four non-market based performance conditions (EBIT, EBITDA, CO2 emissions, and ethical sourcing), and a service condition lasting until 30 September 2026. In addition, the shares underpinning the RSU awards granted to an executive director are subject to a holding period running until 30 September 2026 and the shares underpinning the nil-cost option awards granted to executive directors are subject to a holding period running until 22 December 2028. As these holding periods extend beyond the service completion dates, they represent post-vesting restrictions for the purposes of IFRS 2. Management have identified the LTIP awards granted to the holders of VCP awards who agreed to surrender their existing awards as replacement awards and have applied the principles of modification accounting to this transaction. As such, the underlying expense associated with the VCP awards is continuing to be recognised over the original service period. An additional expense is recognised over the vesting period of the replacement awards to reflect the increase in fair value of the replacement awards over the fair value of the VCP awards at the modification date. The VCP replacement awards were valued using a Black Scholes methodology with a discount to reflect the impact of post-vesting holding periods, where applicable. For the purposes of determining the increase in fair value resulting from the modification, the VCP awards were valued as at the modification date using a Monte Carlo methodology. During the period, an expense of €0.2m was recognised in relation to the VCP replacement awards, which reflected the likelihood of the non-market based performance conditions being achieved. Other LTIP awards There have been grants of LTIP awards in the form of RSUs and nil-cost options on 22 December 2023 and 11 April 2024 over a total of 1.5m shares. The RSUs are subject to an EBITDA performance condition and a service condition lasting until 30 September 2024 for 50% of the award, and 30 September 2025 for the remaining 50% of the award. The nil-cost options are subject to four non-market based performance conditions (EBIT, EBITDA, CO2 emissions, and ethical sourcing), and a service condition lasting until either 30 September 2025 or 30 September 2026. The LTIP awards were valued using a Black Scholes methodology which resulted in a fair value equal to the share price on the date of grant. During the period, an expense of €0.3m was recognised in relation to the new LTIP awards, which reflected the likelihood of the non-market based performance conditions being achieved. CFO Award On 12 October 2023, a one-off share-based payment award was granted to the CFO in the form of a nil-cost option over 156,888 shares. The CFO Award is not subject to any performance conditions, but has a service condition lasting until 1 April 2026. The CFO Award was valued using a Black Scholes methodology which resulted in a fair value equal to the share price on the date of grant. During the period, a small credit was recognised to reflect the charge for the period less the reversal of an accrual of approximately €0.3m recognised in the prior period. Chair Award On 11 April 2024, a one-off share-based payment award was granted to the Chair in the form of a nil-cost option over a total of 1.6m shares. The Chair Award is subject to various EBITDA performance conditions and a service condition lasting until 30 September 2024 for 50% of the award, and 30 September 2025 for the remaining 50% of the award. The Chair Award was valued using a Black Scholes methodology which resulted in a fair value equal to the share price on the date of grant. During the period, an expense of €2.6m was recognised in relation to the Chair Award, which reflected the likelihood of the non-market based performance conditions being achieved. 123 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 22. Capital commitments Capital commitments for which no provision has been made in the financial statements of the Group were as follows: 30 September 30 September 2024 2023 €000 €000 Acquisition of property, plant and equipment and intangible assets 74,944 77,746 23. Pension scheme The Group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the Group to the scheme and amounted to €34.8m (2023: €23.6m). Contributions amounting to €2.3m (30 September 2023: €1.1m) were payable to the scheme at the year end and are included in accruals. 24. Transactions with related parties Please refer to note 8 for remuneration paid to key management. In FY24, payments totalling £63,932.10 were made to Woodcliffe Associates Limited, a company that Andy Bond has a related party interest in. 25. Discontinued operations The Group has classified certain operations as discontinued operations in accordance with the requirements of IFRS 5. The financial performance of discontinued operations has been separately disclosed in the consolidated statement of comprehensive income. No related assets and liabilities have been classified as held for sale as the operation has been disposed of during the period. The discontinued operations relate to the Group’s business in Austria. In February 2024, Pepco Group announced the exit out the Austrian market and the liquidation of Pepco Austria. The decision to discontinue these operations was made as part of the Group’s strategic review to focus on profitable markets. The financial results of discontinued operations have been disclosed separately to provide users of the financial statements with clarity regarding the Group’s ongoing operations and its financial performance. The following table highlights the results of the discontinued operation: Year to Year to 30 September 30 September 2024 2023 €000 €000 Discontinued operations Revenue 26,279 53,221 Cost of sales (13,304) (27,328) Gross profit 12,975 25,893 Administrative expenses (21,903) (42,171) Operating loss (8,928) (16,278) Financial income 187 (25) Financial expense (623) (1,178) Loss before taxation for the period (9,364) (17,481) Taxation 7 5,748 Loss for the period (9,357) (11,733) There were no items of other comprehensive income related to discontinued operations during the reporting period. In addition to the results of Pepco Austria highlighted above, in FY24 there have been additional costs and impairments recognised as a result of disposing of the entity. In line with IFRS 5, these costs have also been included within the loss on discontinued operations within the income statement and are categorised as follows: Year to Year to 30 September 30 September 2024 2023 €000 €000 Total costs included in total loss on discontinuedoperations Loss for the period from discontinued operations (as per above) (9,357) (11,733) Impairment of receivables and loans payable to fellow subsidiaries (73,106) — Gain on disposal of discontinued operation 40,633 — Additional costs and provisions associated with the disposal (6,700) — Loss on discontinued operations (48,530) (11,733) Notes to the consolidated ﬁnancial statements continued 124 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 26. Restatement note Year to Year to 30 September 1 October 30 September 30 September 2022 2022 2023 2023 Old Restated Old Restated €000 Adjustment €000 €000 Adjustment €000 Balance Sheet Current assets Inventory 959,094 (16,200) 1,119,547 942,894 (15,071) 1,119,547 Trade and other receivables CA 71,418 (1) 71,417 143,522 (390) 143,132 Current liabilities Trade and other payables CL 927,884 — 927,884 1,266,195 4,107 1,270,302 Non-current liabilities Trade and other payables NCL 37,733 — 37,733 21,894 (131) 21,763 Equity Translation reserve (70,316) — (70,316) (25,784) 2,377 (23,407) Retained earnings 1,075,041 (16,201) 1,058,840 1,177,285 (21,814) 1,155,471 Income Statement Cost of sales N/A — N/A (3,353,740) (2,473) (3,356,213) Gross Profit N/A — N/A 2,241,924 (2,473) 2,239,451 Administrative expenses N/A — N/A (1,997,161) (10) (1,997,171) Impairment in other non-financial assets N/A — N/A — (3,130) (3,130) Earnings per share Basic earnings per share N/A — N/A 17.8c (1.0c) 16.8c Diluted earnings per share N/A — N/A 17.7c (1.0c) 16.7c The prior year balances have been restated and the impact on the relevant financial statement line items have been highlighted above. The restatement has been made as a result of a number of prior period errors that have been noted during the year. The most significant adjustment relates to the incorrect capitalisation of costs into inventory which once corrected reduces inventory and reduces retained earnings, as these costs were incorrectly capitalised in periods prior to FY23. The remaining adjustments relate to releases of debit balances present in receivables and payables which were required to be written off. 27. Alternative Performance Measures (APMs) Introduction The Directors assess the performance of the Group using a variety of performance measures; some are IFRS Accounting Standards and some are adjusted and therefore termed ‘‘non-GAAP’’ measures or “Alternative Performance Measures” (APMs). The rationale for using adjusted measures is explained below. The Directors principally discuss the Group’s results on an ‘‘underlying’’ basis. Results on an underlying basis are presented before non-underlying items (material, exceptional, unusual and other items). The APMs used in this Annual Report are underlying EBITDA, underlying profit before tax, like-for-like revenue growth and net debt. A reconciliation from these non-GAAP measures to the nearest measure prepared in accordance with IFRS Accounting Standards is presented below. The APMs we use may not be directly comparable with similarly titled measures used by other companies. Non-underlying and other items The Directors believe that presentation of the Group’s results on an underlying basis provides a useful alternative analysis of the Group’s financial performance, as non-underlying and other items are identified by virtue of their size, nature or incidence. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and assists in providing a relevant analysis of the trading results of the Group. In determining whether events or transactions are treated as non-underlying and other items, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. The following charges and credits have been included within non-underlying and other items for the year ended 30 September 2024; see note 4 for more details: • business restructuring programmes; • Impairment of goodwill and brand; • Hungary Fraud incident; • Impact of implementation of IFRIC interpretation on SaaS arrangements and expensing significant ERP programme costs incurred; and • IFRS 2 charges in relation to Value Creation Plan award to the management team. 125 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the consolidated ﬁnancial statements continued 27. Alternative Performance Measures (APMs) continued Like-for-like revenue growth In the opinion of the Directors, like-for-like revenue growth is a measure which seeks to reflect the underlying performance of the Group’s stores. The measure is defined as year-on-year revenue growth for stores open beyond their trading anniversary, with stores relocated in a catchment and/or upsized included within LFL provided the enlarged store footprint is less than 50% bigger than the existing store. Year to Year to 30 September 30 September 2023 2024 (Restated) Reported revenue growth 10.2% 16.0% Like-for-like revenue growth (3.2%) 6.0% Underlying (IFRS 16) EBITDA Underlying EBITDA (IFRS 16) is defined as reported EBITDA excluding the impact of non-underlying items. Prior year underlying EBITDA (IFRS 16) also excluded the impact of the discontinued operations. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Reported EBITDA 891,780 701,938 Non-underlying items 52,247 51,601 Underlying EBITDA 944,027 753,539 Underlying profit before-tax Underlying profit before tax is defined as reported profit before tax excluding the impact of non-underlying items. Prior year underlying profit before tax also excludes the impact of the discontinued operations. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Reported profit before tax (554,119) 158,845 Other non-underlying items 825,036 55,061 Underlying profit before tax 270,917 213,906 Free cash flow Free cash flow is defined as cash generated by operations, deducted with tax paid, capex like items, and IFRS 16 cash flows shown by the reconciliation below: Year to Year to 30 September 30 September 2024 2023 €000 €000 Cash generated by operations 906,361 732,085 Tax Paid (85,449) (75,424) Additions to property, plant and equipment (204,559) (356,664) Additions to other intangible assets (7,189) (25,815) Payment of interest on lease liabilities (77,311) (60,188) Repayment of lease liabilities (364,274) (319,992) Free cash flow 167,579 (105,998) Gross margin Gross margin represents gross profit divided by revenue. The Group uses gross margin in its business operations, among other things, as a means of comparing the underlying profitability of the Group from period to period and the performance of its sourcing model. Gross margin is expressed as a percentage. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Gross profit 2,706,029 2,239,451 Revenue 6,166,749 5,595,664 Gross margin % 43.9% 40.0% 126 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 28. Subsequent events There are no reportable subsequent events. 29. Ultimate parent company The Company is a direct subsidiary undertaking of IBEX Retail Investments (Europe) Limited , which is registered in England. IBEX Retail Investments (Europe) Limited’s registered address is The Space (Floor 3), 120 Regent Street, London, W1B 5FE. At the reporting date, the Company’s ultimate parent company was IBEX Topco B.V , an entity registered in the Netherlands. 27. Alternative Performance Measures (APMs) continued Net debt (pre-IFRS 16) The Group uses net debt because the Group believes this measure provides an indicator of the overall strength of its balance sheet and can be used to assess its earnings as compared to its indebtedness as defined by the Group’s financing agreements. 30 September 30 September 2024 2023 €000 €000 Borrowings from credit institutions 612,980 729,064 Obligations under finance leases 6,785 11,884 Gross debt (excluding IFRS 16 lease liabilities) 619,765 740,948 Closing cash balance (363,336) (330,417) Net debt (excluding IFRS 16 lease liabilities) 256,429 410,531 1 IFRS 16 lease liability is excluded from the gross debt definition under the Group’s financing agreement. Underlying EBITDA (pre-IFRS 16) Underlying EBITDA (pre-IFRS 16) is defined as reported EBITDA excluding the impact of non-underlying items and the impact of IFRS 16. Prior year underlying EBITDA (pre-IFRS 16) also excluded the impact of the discontinued operations. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Reported EBITDA 891,780 701,938 Non-underlying items 52,247 51,601 IFRS 16 adjustments (429,516) (351,057) Underlying EBITDA (pre-IFRS 16) 514,511 402,482 Underlying profit before-tax (pre-IFRS 16) Underlying profit before tax (pre-IFRS 16) is defined as reported profit before tax excluding the impact of non-underlying items and the impact of IFRS 16. Year to Year to 30 September 30 September 2023 2024 (Restated) €000 €000 Reported profit before tax (554,119) 158,845 Non-underlying items 825,036 55,061 IFRS 16 adjustments (3,837) (7,916) Underlying profit before tax (pre-IFRS 16) 267,080 205,990 Return on invested capital This provides an annual measure of return based on the capital invested. The calculation is based on the following inputs: NOPAT/IC, where IC (invested capital) = Property, plant and equipment + intangibles (excl. goodwill) + net working capital (current assets – current liabilities excluding IFRS 16 lease liabilities) and where NOPAT is defined as net underlying operating profit after tax. Year to Year to 30 September 30 September 2024 2023 ROIC 22% 17% 127 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 30. Earnings per share Year to Year to 30 September 30 September 2024 2023 (Restated) ¢ ¢ Basic earnings per share Earnings per share from continuing operations (114.9) 18.8 Earnings per share from discontinued operations (8.4) (2.0) Earnings per share (123,3) 16.8 Earnings per share from continuing operations adjusted for non-underlying items 31.1 27.2 Diluted earnings per share Diluted earnings per share from continuing operations (114.1) 18.7 Diluted earnings per share from discontinued operations (8.4) (2.0) Diluted earnings per share (122.4) 16.7 Diluted earnings per share from continuing operations adjusted for non-underlying items 30.9 27.0 1. Given the loss after tax in FY24, the diluted EPS cannot be lower than basic EPS and therefore both at considered equal on a reported basis. Basic earnings per share is based on the profit for the year attributable to equity holders of the Company divided by the number of shares ranking for dividend. Diluted earnings per share is calculated by adjusting the weighted average number of shares used for the calculation of basic earnings per share as increased by the dilutive effect of potential ordinary shares. The only potentially dilutive instrument in issue is share awards under the VCP scheme. Please see note 21 for further details of this scheme. The following table reflects the profit data used in the basic and diluted earnings per share calculations: Year to Year to 30 September 30 September 2024 2023 €000 €000 Profit/(loss) from continuing operations attributable to the ordinary equity holders of the Company (661,639) 108,364 Add back non-underlying items: 825,036 55,061 Add back tax on non-underlying items 15,822 (6,792) Adjusted profit attributable to the ordinary equity holders of the company 179,218 156,633 The following table reflects the share data used in the basic and diluted earnings per share calculations: Year to Year to 30 September 30 September 2024 2023 (Restated) ‘000 ‘000 Weighted average number of shares Weighted average number of ordinary shares in issue 576,000 575,167 Weighted average number of shares for basic earnings per share Weighted average of dilutive potential shares 4,113 4,113 Weighted average number of shares for diluted earnings per share 580,113 579,280 Distribution of profit No dividends were declared by Pepco Group N.V. for the 2024 reporting period. A dividend of 6.2 Euro Cents per share has been recommended by the Board subject to approval of the shareholders at the Annual General Meeting on 12 March 2025. Approval and signatories London (United Kingdom), 20 December 2024 Management Andy Bond, Executive Chair Stephan Borchert, Chief Executive Officer Neil Galloway, Chief Financial Officer Non-Executive Directors Frederick Arnold, Independent Non-Executive Director Maria Fernanda Mejia, Independent Non-Executive Director Brendan Connolly, Independent Non-Executive Director Sean Mahoney, Non-Executive Director Grazyna Piotrowska-Oliwa, Independent Non-Executive Director Neil Brown, Non-Executive Director Paul Soldatos, Non-Executive Director Notes to the consolidated ﬁnancial statements continued 31. Other information 128 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Separate income statement for the year ended 30 September 2024 Period to Period to 30 September 30 September 2024 2023 Note €000 €000 Administrative expenses (658) (630) Operating loss for the year 2 (658) (630) Financial income 3 4 2 Financial expense 4 (6) (8) Loss before taxation for the year (660) (636) Taxation 5 166 310 Loss for the year (494) (326) The above results were derived from continuing operations. There was no other comprehensive income for the period. The notes on pages 133 to 139 form part of these financial statements. 129 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Separate statement of ﬁnancial position at 30 September 2024 30 September 30 September 2024 2023 Note €000 €000 Non-current assets Investment in subsidiary companies 6 709,199 702,304 Trade and other receivables 7 57 53 709,256 702,357 Current assets Trade and other receivables 7 812 762 Cash and cash equivalents 13 13 825 775 Total assets 710,081 703,132 Equity and liabilities Capital and reserves Share capital 9 5,760 5,760 Share premium reserve 663,599 663,599 Share-based payment reserve 39,908 33,013 Accumulated losses (1,760) (1,266) Total shareholders' equity 707,507 701,106 Current liabilities Trade and other payables 8 2,574 2,026 Total equity and liabilities 710,081 703,132 The notes on pages 133 to 139 form part of these financial statements. 130 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Separate statement of changes in equity for the year ended 30 September 2024 Share-based Share Share premium payment Accumulated Total capital reserve reserve losses equity €000 €000 €000 €000 €000 Balance at 1 October 2022 5,750 663,599 35,830 (939) 704,240 Total comprehensive income for the year Loss for the year — — — (326) (326) Total comprehensive income for the year — — — (326) (326) Transactions with owners, recorded directly in equity Equity-settled share-based payments — — (2,817) — (2,817) New shares issued 10 — — — 10 Total contributions by and distributions to owners — — (2,817) — (2,807) Balance at 30 September 2023 5,760 663,599 33,013 (1,266) 701,106 Share-based Share Share premium payment Accumulated Total capital reserve reserve losses equity €000 €000 €000 €000 €000 Balance at 1 October 2023 5,760 663,599 33,013 (1,266) 701,106 Total comprehensive income for the year Loss for the year — — — (494) (494) Total comprehensive income for the year — — — (494) (494) Transactions with owners, recorded directly in equity Equity-settled share-based payments — — 6,895 — 6,895 New shares issued — — — — — Total contributions by and distributions to owners — — 6,895 (494) 6,401 Balance at 30 September 2024 5,760 663,599 39,908 (1,760) 707,507 Refer to note 9 for a description of each reserve held within equity and details of movements in the period. The notes on pages 133 to 139 form part of these financial statements. 131 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Separate statement of cash ﬂows for the year ended 30 September 2024 30 September 30 September 2024 2023 Note €000 €000 Cash flows from operating activities Cash generated by operations 10 1 8 Net cash outflow from operating activities 1 8 Cash flows from investing activities Interest received — 2 Net cash inflow from investing activities — 2 Cash flows from financing activities Proceeds from the issue of share capital — 10 Net cash outflow from financing activities — 10 Effect of exchange rate fluctuations on cash held (1) (9) Cash and cash equivalents at beginning of period 13 2 Net (decrease)/increase in cash and cash equivalents — 11 Cash and cash equivalents at end of period 13 13 The notes on pages 133 to 139 form part of these financial statements. 132 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the separate ﬁnancial statements 1. Significant accounting policies Pepco Group N.V. is a public limited liability company incorporated in the Netherlands (registration number 81928491) and domiciled in the United Kingdom. The Company has a primary listing in on the Warsaw Stock Exchange. The registered address is 14th Floor, Capital House, 25 Chapel Street, London, NW1 5DH, United Kingdom. As part of a Group reorganisation undertaken prior to the IPO, the Company acquired the entire shareholding of Pepco Group Limited from Flow Newco Limited on 13 May 2021 (the acquisition date), in a share for share exchange by issuing its ordinary shares. Consequently the Company became the immediate holding company of Pepco Group Limited. The Group reorganisation has been accounted for as a common control transaction whereby the cost of investment in Pepco Group Limited has been determined based on its net asset value on the acquisition date. Please see note 6 for details of the Group reorganisation. These separate financial statements have been prepared in accordance with IFRS Accounting Standards as endorsed by the EU and with part 9 of Book 2 of the Dutch Civil Code and are presented in addition to the consolidated financial statements of Pepco Group N.V. Unless otherwise stated, the accounting policies applied are the same as those in the consolidated financial statements. 1.1 Measurement convention The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. 1.2 Going concern The separate financial statements have been prepared on a going concern basis. In the 2024 reporting period, the Company’s current liabilities exceed the current assets. Refer to the Going Concern section of the consolidated financial statements for a detailed going concern assessment of the Group, including the Company. 1.3 Investments in subsidiaries Investments in subsidiaries are carried at cost less impairment provisions. Investments in subsidiaries are impaired to their recoverable amount. Where a common control transaction takes place, an investment is recognised at a value equivalent to the net assets of the acquired entity on the acquisition date. Please see note 6 for more details surrounding the common control acquisition made during 2021. 1.4 Shareholders’ equity The reserves are recognised in accordance with the Dutch Civil Code. 1.5 Changes in accounting policies Refer to note 1 of the consolidated financial statements for disclosures regarding new accounting standards adopted by the Company and the Group. 1.6 Accounting estimates and judgements The preparation of these financial statements requires the exercise of judgement, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and various other factors, including expectations of the future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period impacted. The Company makes estimates and assumptions concerning the future. By definition, the resulting accounting estimates will seldom equal the related actual results. The Directors continually evaluate the estimates, assumptions and judgements based on available information and experience. Key sources of estimation uncertainty The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. Impairment of investments The Company assesses whether there are any indicators of impairment as at the reporting date for all investments in subsidiaries. Investments are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, the Directors must estimate the expected future cash flows from the cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. The Company assesses the recoverability of this investment by comparing the recoverable amount to the value of the Group as listed on the stock exchange. Refer to note 1 of the consolidated financial statements for detailed disclosures. Key judgements There are no key judgements made in preparation of these financial statements. 1.7 Standards issued but not effective For a list of new standards issued but not yet effective, please refer to note 1.28 of the consolidated financial statements. 133 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the separate ﬁnancial statements continued 2. Operating loss The Company does not have any employees. Details of Directors’ remuneration can be found in note 8 of the consolidated financial statements. The Company does not receive a charge for these costs as these are borne by another Group entity. Auditors’ remuneration is borne by another Group entity. Please refer to note 5 of the consolidated financial statements for details of total Group auditors’ remuneration. 3. Financial income Year to Year to 30 September 30 September 2024 2023 €000 €000 Interest income on loans to Group undertakings 4 2 Other financial income — — 4 2 4. Financial expense Year to Year to 30 September 30 September 2024 2023 €000 €000 Foreign exchange losses 6 8 6 8 5. Taxation Analysis of tax (charge)/credit for the year recognised in the income statement Year to Year to 30 September 30 September 2024 2023 €000 €000 Current tax credit Current tax on loss for theyear 165 139 Adjustments in respect of prior periods 1 171 Total current tax credit 166 310 Deferred tax (charge)/credit Origination and reversal of temporary differences — — Adjustments in respect of prior periods — — Total deferred tax credit — — Total tax credit for the year 166 310 The current tax credit is recoverable via group relief. Factors affecting the tax (charge)/credit for the year recognised in the income statement The tax credit for the year differs from the standard rate of corporation tax in the UK of 25% (2023: 22.0%). The differences are explained below. Year to Year to 30 September 30 September 2024 2023 €000 €000 Loss before tax (660) (636) Expected tax credit at the UK statutory rate of 25% (2023: 22.0%) 165 140 Effects of: Movements in unrecognised temporary differences — — Adjustments in respect of prior periods 1 171 Expenses not deductible — (1) Total tax credit for the year 166 310 * 134 The Company is UK tax resident based on the Company being managed and controlled in the UK and as such is subject to UK corporation tax with the expected tax (charge)/credit reconciled to the UK statutory rate. Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 5. Taxation continued Deferred tax not recognised The Company has no temporary differences (2023: nil) and therefore no deferred tax assets have been recognised. 6. Investments in subsidiaries Total carrying Issued Shareholding value Country of incorporation share capital % €000 Pepco Group Limited United Kingdom £1,801 100 669,291 On 13 May 2021 the Company acquired the entire share capital of Pepco Group Limited in exchange for issuing its own shares. As a common control transaction, the deemed cost of the investment was the net asset value of Pepco Group Limited on the acquisition date of €669,291,000. 30 September 30 September 2024 2023 €000 €000 Historical cost 669,291 669,291 Contributions to subsidiaries Group share-based payments1 39,908 33,013 709,199 702,304 1 The Company’s subsidiaries recognise the amounts relating to awards to their employees as a share-based payment expense in their financial statements. As Pepco Group N.V. will settle the share awards, this is recognised as an increase in the investment in relevant subsidiaries in accordance with IFRS 2 “Share-based Payment”. For details of the share-based payments which have increased the Company’s investments, see note 21 to the consolidated financial statements. 7. Trade and other receivables 30 September 30 September 2024 2023 €000 €000 Non-current trade and other receivables Loans to Group undertakings 57 53 Current trade and other receivables Interest due from Group undertakings 10 5 Amounts due from Group undertakings 532 384 Prepayments 270 373 812 762 8. Trade and other payables 30 September 30 September 2024 2023 €000 €000 Current trade and other payables Amounts due to Group undertakings 2,445 1,863 Trade payables 129 163 2,574 2,026 135 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the separate ﬁnancial statements continued 9. Share capital and reserves 30 September 30 September 2024 2023 €000 €000 Authorised share capital 1,725,000,000 ordinary shares of €0.01 each 17,250 17,250 Issued share capital 576,027,342 (2023: 576,027,342) ordinary shares of €0.01 each 5,760 5,760 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at the meetings of the Company. Share premium reserve The closing share premium reserve on 30 September 2024 was €663,599,000 (2023 was €663,599,000). Share-based payment reserve This reserve comprises the cumulative value of shares to be issued as a result of the Group equity-settled share-based payment scheme. Upon the issue of any shares resulting from the scheme, a transfer will be made out of the share-based payment reserve to share capital and share premium as applicable. Please see note 21 of the consolidated financial statements for details about the share-based payment scheme. 10. Cash flow information Cash utilised in operations 30 September 30 September 2024 2023 €000 €000 Loss before tax (660) (636) Adjusted for: Net foreign exchange gains — — Financial income (4) (2) Financial expense 6 8 Cash generated from operations before changes in working capital (658) (630) Changes in working capital: Increase in trade and other receivables (54) (181) Increase in trade and other payables 548 509 Impact of group relief not yet received 165 310 Net changes in working capital 659 638 Cash generated from operations 1 8 Net debt reconciliation 30 September 30 September 2024 2023 €000 €000 Cash and cash equivalents 13 13 Loans receivable from Group undertakings 57 53 70 66 136 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 11. Transactions with related parties The following is a summary of transactions with Group companies during the period and balances at the end of the period: Year to Year to 30 September 30 September 2024 2023 €000 €000 Interest income Peu (Fin) Plc 5 2 Expenses recharged Peu (Fin) Plc — 214 Loans receivable Peu (Fin) Plc 57 53 Interest accrued on loans Peu (Fin) Plc 10 5 Amounts due from Group undertakings Peu (Fin) Plc 360 238 Poundland Limited 52 46 Poundland Elgin Limited 77 58 Pepkor Europe Limited 43 42 Amounts owed to Group undertakings Peu (Tre) Limited (958) (903) Pepco Group Services Limited (1,488) (960) Interest is charged on the loans receivable at the gross effective interest rate of the Group’s external debt, plus an appropriate transfer pricing mark-up where appropriate. Loans are unsecured and repayable in line with the maturity of the Group’s external debt. 12. Financial risk management The Management Board and Executive team are responsible for implementing the risk management strategy to ensure that an appropriate risk management framework is operating effectively within the Company. The Company does not speculate in the trading of derivative or other financial instruments. Total financial assets and liabilities 30 September 30 September 2024 2023 €000 €000 Related party loans receivable 57 53 Non-current financial assets 57 53 Related party loans receivable 10 5 Prepayments 270 373 Amounts due from Group undertakings 532 384 Cash and cash equivalents 13 13 Current financial assets 825 775 Amounts owed to Group undertakings (2,445) (1,863) Trade payables (129) (163) Current financial liabilities (2,574) (2,026) No items were classified as “at fair value through profit or loss” or “at fair value through other comprehensive income” during the 2024 and 2023 reporting period. The carrying amount of financial assets and liabilities approximates its fair value. The fair value calculation of the financial assets and liabilities was performed at the reporting date. Between the reporting date and the date of this report, the fair values reported may have fluctuated with changing market conditions and therefore the fair values are not necessarily indicative of the amounts the Company could realise in the normal course of business subsequent to the reporting date. 137 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Notes to the separate ﬁnancial statements continued 12. Financial risk management continued Foreign currency risk The financial assets and liabilities of the Company are denominated in the functional currency except for the following British Pound denominated related party loans receivable, cash and cash equivalents and amounts owed to Group undertakings. 30 September 30 September 2024 2023 €000 €000 Related party loans receivable 52 60 Cash and cash equivalents 1 1 Amounts owed to Group undertakings (316) (364) Trade payables (87) (100) (350) (403) The following significant exchange rates applied during the period and were used in calculating sensitivities: Forecast rate Spot rate Euro:British Pound 1.19 1.16 Sensitivity analysis The table below indicates the Company's sensitivity at the reporting date to the movements in the British Pound that the Company are exposed to on its financial instruments. The percentage given below represents a weighting of foreign currency rates forecasted by the major banks that the Company transacts with regularly. This analysis assumes that all other variables, in particular interest rates, remain constant. The impact on the reported numbers, using the forecast rates as opposed to the reporting date spot rates, is set out below. 30 September 30 September 2024 2023 €000 €000 Through profit/(loss) British Pound strengthening by 10% against the Euro (35) (40) British Pound weakening by 10% against the Euro 35 40 If the foreign currencies were to weaken/strengthen against the Euro, by the same percentages as set out in the table above, it would have an equal, but opposite, effect on profit or loss. Interest rate risk At the reporting date the interest rate profile of the Company's financial instruments was: 30 September 2024 30 September 2023 Variable Non-interest Variable Non-interest bearing Total bearing Total €000 €000 €000 €000 €000 €000 Non-current financial assets 57 - 57 53 — 53 Current financial assets - 23 23 — 18 18 Current financial liabilities - - - — — — 57 23 80 53 18 71 Sensitivity analysis The Directors do not consider the Company to be sensitive to movements in interest rates. A reasonably foreseeable movement in interest rates would not have a material effect on the profit of the Company or the carrying value of the Company’s financial instruments. Credit risk Potential concentration of credit risk consists principally of related party loans receivable. At 30 September 2024, the Company did not consider there to be any significant concentration of credit risk which had not been adequately provided for. The carrying amounts of financial assets represent the maximum credit exposure. The maximum remaining exposure to credit risk at the reporting date, without taking account of the value of any collateral obtained, was €80,000. All exposure to credit risk is within the United Kingdom. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities. Liquidity risk arises because of the possibility that the entity could be required to pay its liabilities earlier than expected. The Company is not exposed to significant liquidity risk on the basis that its only financial liabilities are owed to other Group companies. 138 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 13. Reconciliation of net profit and shareholders’ equity of the Company with the consolidated results 30 September 2024 30 September 2023 Net profit Net profit Total equity for the period Total equity for the period (Restated) (Restated) €000 €000 €000 €000 Shareholders’ equity and net profit for the period according to separate financial statements 707,507 (494) 701,106 (326) Share of subsidiaries’ consolidated (loss)/profit for the period (709,675) (709,675) 96,957 96,957 Share of subsidiaries’ consolidated other comprehensive income for the period 76,982 - (84,669) — Prior period share of subsidiaries’ consolidated total comprehensive income for the period and other reserve movements 436,602 - 424,314 — Equity and profit after tax for the period according to consolidated financial statements 511,416 (710,169) 1,137,708 96,631 This note has been restated for FY23 to reflect the restatements that have taken place in the consolidated financial statements. Please see note 26 in the consolidated financial statements for further details. 14. Subsequent events There are no reportable subsequent events. 15. Principal subsidiaries The statutory list of all subsidiaries and affiliated companies in included on pages 148 to 149. 16. Ultimate parent company The Company is a direct subsidiary undertaking of IBEX Retail Investments (Europe) Limited , which is registered in England. IBEX Retail Investments (Europe) Limited’s registered address is The Space (Floor 3), 120 Regent Street, London, W1B 5FE. At the reporting date, the Company’s ultimate parent company was IBEX Topco B.V. , an entity registered in the Netherlands. 17. Approval and signatories London (United Kingdom), 20 December 2024 Management Andy Bond, Executive Chair Stephan Borchert, Chief Executive Officer Neil Galloway, Chief Financial Officer Non-Executive Directors María Fernanda Mejía, Independent Non-Executive Director Brendan Connolly, Independent Non-Executive Director Fred Arnold, Independent Non-Executive Director Grazyna Piotrowska-Oliwa, Independent Non-Executive Director Paul Soldatos, Non-Executive Director Neil Brown, Non-Executive Director Sean Mahoney, Non-Executive Director 139 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Independent auditor’s report To the shareholders and Board of Directors of Pepco Group N.V. Report on the audit of the financial statements for the year ended 30 September 2024 included in the annual report Our opinion We have audited the accompanying financial statements for the year ended 30 September 2024 (hereafter “financial statements”) of Pepco Group N.V. (hereafter “Company” refers to the legal entity, and “Group” refers to the consolidated level), based in London, United Kingdom. The Company is head of a group of entities (“components”). The financial information of this group is included in the 2024 Consolidated Financial Statements of the Group. The financial statements include the 2024 Consolidated Financial Statements and the 2024 Separate Financial Statements. In our opinion: • The accompanying Consolidated Financial statements give a true and fair view of the financial position of the Group as at 30 September 2024 and of its result and its cash flows for the year ended 30 September 2024 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. • The accompanying Separate Financial statements give a true and fair view of the financial position of the Company as at 30 September 2024 and of its results for the year ended 30 September 2024 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code. The Consolidated Financial Statements comprise: 1. the consolidated statement of financial position as at 30 September 2024; 2. the following statements for the year ended 30 September 2024: the consolidated income statement, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows; and 3. the notes comprising a summary of the material accounting policies and other explanatory information. The Separate Financial Statements comprise: 1. the separate statement of financial position as at 30 September 2024; 2. the following statements for the year ended 30 September 2024: the separate income statement, the separate statement of changes in equity and the separate statement of cash flows; and 3. the notes comprising a summary of the accounting policies and other explanatory information. Basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report. We are independent of the Group and the Company in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics). We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Information in support of our opinion We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion was addressed in this context, and we do not provide a separate opinion or conclusion on these matters. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate, to the financial statements as a whole. Based on our professional judgement we determined the materiality for the financial statements as a whole at €15.4 million (2023: €11.7 million). The materiality is based on 7.5% of profit before tax from continuing operations when normalized for impairments. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons. Audits of group entities (components) were performed using materiality levels determined by the judgement of the group audit team, based on the materiality of the Consolidated Financial Statements We communicated with the Audit Committee that misstatements in excess of €500 Keur, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds. Scope of the group audit The Company is at the head of a group of entities (“components”). The financial information of this group is included in the 2024 Consolidated Financial Statements of the Group. We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole. We used the outputs of our risk assessment, our understanding of the Group, its environment, controls and critical process, to consider qualitative factors in order to ensure that we obtained sufficient audit coverage across all financial statement line items. As part of designing our audit, we assessed the risk of material misstatement in the financial statements whether due to fraud or error and then designed and performed audit procedures responsive to those risks. In particular, we looked at where management made subjective judgement such as making assumptions on significant accounting estimates. 140 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Scope of the group audit continued Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out on the entities. Our group audit is mainly focused on financially large entities in terms of size and financial interest or where significant risks or complex activities were present, leading to full scope audits having been performed on the following two sub groups in scope, Pepco Group CEE and Poundland. We performed audit procedures at group level on areas such as consolidation, financial statement disclosures and impairment testing for intangible assets (including goodwill). Specialist were involved amongst others in the areas of information technology, treasury, forensic and valuation. We also involved component auditors from the Forvis Mazars Network and other audit firms, who are familiar with local laws and regulations. For these component auditors, the group audit team provided detailed written instructions, which include the requirements for component audit teams, the audit approach for significant audit areas, other information obtained centrally and the need for awareness for fraud risks. Our oversight procedures also included a combination of remote and on-site reviews of working papers of the auditors of the significant components in Poland and United Kingdom, (virtual) meetings with component auditors and management of the components, and reviewing deliverables supplied by the component auditors to gain sufficient understanding of the work performed. We varied the nature, timing and extent of these procedures based on both quantitative and qualitative considerations. For smaller components, we have performed review procedures or specified audit procedures. By performing the procedures mentioned above we have been able to obtain sufficient and appropriate audit evidence about the consolidated and separate company financial information and to provide an opinion on the financial statements as a whole. Audit approach fraud risks We refer to section ‘Risk management’ of the Management Board Report for management’s fraud risk assessment. We note that management regularly updates its risk assessment including fraud and updates its risk and control framework. In accordance with Dutch Standards on Auditing, we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatements, whether due to fraud or error. Inherent to our responsibilities for the audit of the financial statements, there is an unavoidable risk that material misstatements go undetected, even though the audit is planned and performed in accordance with Dutch law. The risk of undetected material misstatements due to fraud is even higher, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Also, we are not responsible for the prevention and detection of fraud and non-compliance with all laws and regulations. Our audit procedures differ from a forensic or legal investigation, which often has a more in-depth character. As part of our procedures of identifying fraud risks, we evaluated fraud risks factors with respect to financial reporting fraud, misappropriation of assets and corruption. We identified the following fraud risks and performed the following specific procedures: Fraud risk 1 Our audit work performed Management override of controls Amongst others we have performed the following audit procedures: Management is ordinarily in a unique position to adjust the financial • an assessment of the internal control framework, including statements by overriding controls that otherwise appear to be management integrity, and evaluated the design and operating effectively. implementation of the relevant controls in the financial In this context, we paid attention to: closing process; • • Inquiries of individuals with different levels of responsibility The appropriateness of journal entries and other adjustments involved in the financial reporting process about inappropriate or made in the preparation of the financial statements, such as unusual activity relating to the processing of journal entries and consolidation journals. other adjustments; • Potential biases in estimates, such as impairment of intangible assets (goodwill and other intangible assets) and right-of-use • Test the appropriateness with underlying audit documentation assets, leases and derivatives. of a sample of journal entries and other adjustments made during the year, at the end of the reporting period and • Significant transactions, if any, outside the normal course post-closing entries; of business. • an evaluation of judgements and decisions for bias by • The results of the Internal Audit and external specialists management for key accounting estimates with respect to investigations and the implementation of mitigating measures on goodwill and other intangible assets, leases and derivatives, the Hungary fraud matter as detailed under Cybersecurity (Fraud including retrospective reviews of judgements and assumptions Risk 4) below. related to significant accounting estimates of the prior and current year. Fraud risk 2 Our audit work performed Risk of fraud in revenue recognition Amongst others we have performed the following audit procedures: The disclosure on the accounting principles in relation to • We assessed the internal control framework and evaluated the revenue recognition is set out in Note 3 of the consolidated design and implementation of the relevant controls in the financial financial statements. closing process and other processes. The risk of fraud in revenue recognition is a presumed audit risk. • We assessed the IT environment and relevant systems. For the Company this has been assessed as a risk for overstatement • We performed audit procedures on non-standard journal entries of revenue through the occurrence of inappropriate manual based on fraud risk criteria. transactions (non-standard transactions). • We tested the reconciliation point of sales systems to cash. 141 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Independent auditor’s report continued To the shareholders and Board of Directors of Pepco Group N.V. Audit response to the risks of fraud continued Fraud risk 3 Our audit work performed Risk of fraud / bribery through use of agents (sourcing) Amongst others, we have performed the following audit procedures The company uses agents in its sourcing process which creates a • We obtained an understanding of the design and implementation potential risk of fraud / bribery through the use of agents. The of the processes and controls in place with regards to the majority of the products are sourced from factories in China, India procurement cycle. and Bangladesh which are considered to have a higher risk of • corruption and bribery. We tested the operating effectiveness of the controls implemented over the onboarding of new suppliers in the procurement process. • We identified at risk suppliers based on an inspection of external forensic reports issued in prior years and substantively tested the identified transactions with these suppliers during the current financial year. • We obtained the internal audit department reports issued during the year and inspected these to determine whether there were any matters that we needed to be aware of in terms of the procurement process. Fraud risk 4 Our audit work performed Cybersecurity Amongst others we have performed the following audit procedures: In February 2023, the Company was targeted by a significant fraud Our audit procedures included the following: in Hungary, executed through a sophisticated social engineering • We reviewed the scope, methodology, and findings of the forensic scam. This incident prompted a comprehensive review of both the financial and IT control environments to mitigate the risk of similar specialists engaged by the Board of Directors to ensure the future occurrences. Despite proactive collaboration with relevant thoroughness and accuracy of their analyses. authorities, the recovery of the misappropriated funds is deemed • With the involvement of our own forensic specialists, we held unlikely. meetings with the external lawyers and specialists engaged by The fraud incident had substantial implications for the Company’s the Board of Directors to obtain explanations about the control environment. The Board of Directors, in collaboration with current developments. Internal Audit, undertook additional procedures over key risks in all • We assessed the adequacy and effectiveness of the additional operating entities. Some instances of non-compliance with procedures and improvements implemented by the Board of procedures and accounting rules were discovered, including related Directors and internal audit. to supplier discounts. • We evaluated the mitigating measures put in place to ensure Additional internal Audit activities were performed together with they are robust and sufficient to prevent future occurrences of external forensic specialists to leverage industry best practice and similar fraud. subject matter expertise. These efforts included performing a comprehensive analyses of balance sheet positions and • We obtained the results of the Internal Audit procedures on the implementing measures to prevent future occurrences. phishing attack and the resulting process improvements made, and determined any additional work required. On the basis of Internal Audit and its external specialists’ • investigations the Company took appropriate remediation We assessed the work performed by the component auditors on measures. highlighted focus areas. In light of the significant financial impact of the unrecovered funds, comprehensive analyses of balance sheet positions and the subsequent changes to the control environment, this was considered as areas of focus during our audit. In addition, we also performed the following more general procedures: • we assessed the whistleblowing and compliance matters followed up by management; • we evaluated whether transactions, both usual and unusual, with related parties have been identified and appropriately disclosed; and • we have incorporated an element of unpredictability in the selection of the nature, timing and extent of our audit procedures Our response to the risk of non-compliance of laws and regulations We have obtained an understanding of the relevant laws and regulations. We have identified the following laws and regulations that have an indirect effect on the financial statements: anti-bribery and corruption laws & regulations, competition and data privacy laws, and human rights laws and regulations. We held enquiries with management and the audit committee if the entity is compliant with laws and regulations which directly or indirectly have a material impact on the financial statements. We also inspected relevant correspondence with regulatory and supervisory authorities. We also inspected lawyers’ letters and remained alert to indications of identified and suspected non-compliance throughout the audit, held enquiries with legal counsel, and obtained a written representation from management that all known instances of identified and suspected non-compliance with laws and regulations were disclosed to us. Observations The aforementioned audit procedures have been performed in the context of the audit of the financial statements. Consequently they are not planned and performed as a specific investigation regarding fraud and non-compliance with laws and regulations, except for the instances mentioned under Cybersecurity. Our audit procedures have not led to any findings. 142 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Audit approach going concern Our responsibilities, as well as the responsibilities of the Board of Directors, related to going concern under the prevailing standards are outlined in the “Description of responsibilities regarding the financial statements” section below. The Board of Directors has performed its going concern assessment and has not identified any going concern risks. Our main procedures to assess the Board of Directors assessment were: • we considered whether the Board of Directors assessment of the going concern risks includes all relevant information of which we are aware as a result of our audit; • we evaluated the consistency of information used in the Board of Directors going concern assessment (including cash flow projections and stress test scenarios) and information obtained through auditing other areas such as impairment assessments; • we analyzed the Company’s financial position as at year-end and compared it to the previous financial year in terms of indicators that could identify going concern risks; • we inquired with the Board of Directors on the key assumptions and principles underlying the Board of Directors assessment of the going concern risks; • we inspected agreements in terms of conditions that could lead to going concern risks. Based on these procedures, we did not identify any reportable findings related to the Company’s ability to continue as going concern. Our key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Board of Directors. The key audit matters are not a comprehensive reflection of all matters discussed. These matters were addressed in the context of the audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key Audit Matter How our scope addressed this matter Impairment testing of goodwill We involved our valuation specialists during our audit procedures. The group accounting policies in respect of Our audit procedures included the following: goodwill and impairment are set out in the • We evaluated the design effectiveness of controls related to the impairment accounting policy notes of the consolidated assessment including the appropriateness of management’s assessment of the CGUs, financial statements (Note 1.10). The disclosure on the ‘Accounting estimates and judgements’ indicators of impairment, discount rates and forecasts. in relation to impairment of intangible assets • We assessed and evaluated the reasonableness of key assumptions in the fair value (goodwill) is set out in Note 1.29 of the less cost of disposal and value in use calculations, including the received offer(s) consolidated financial statements. supporting the fair value less cost of disposal and the projected revenue growth, For purposes of impairment testing, goodwill is operating margin, discount rates and growth rates used in the value in use model. allocated and monitored on a (group of) Cash • We benchmarked key assumptions against external data and challenged Generating Unit (‘CGU’) level. Other intangibles management by comparing the assumptions to historic performance of the company and property, plant, and equipment are and local economic developments, taking into account the sensitivity test of the grouped to CGUs. For goodwill, management goodwill balances for any changes in the respective assumptions; is required to assess the recoverable amount • We engaged with our internal valuation experts to assist us in evaluating the of the respective CGUs. appropriateness of the fair value less cost of disposal and value in use impairment In view of the inherent uncertainties, including models, including the key assumptions and supporting documentation, and conclude those related to the current macro-economic on the overall reasonableness.; environment, the projection of sales volumes, • revenues, margins, and discount rates in We audited management‘s sensitivity analysis to assess the impact of potential management's impairment tests, involved an changes in assumptions; increased level of judgement for CGUs. As a • We verified the mathematical accuracy of the models and agreed these models with result of impairment testing for the current relevant data; year, management concluded on impairment • We evaluated the reasonableness of the disclosures made in the financial statements loss of €771 million, relating to Poundland. in relation to the carrying value of goodwill. Given the high level of judgement made by Our observations management to estimate the recoverable amounts used in management’s impairment Applying the aforementioned materiality, we did not identify any reportable findings in tests for intangible assets (including goodwill) management's assessment of the recoverability of intangible assets (including goodwill) and property, plant and equipment, the and property, plant and equipment impairments recorded in Notes 10 and 11. impairment testing was a key audit matter. 143 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Independent auditor’s report continued To the shareholders and Board of Directors of Pepco Group N.V. Report on the other information included in the Annual Report 2024 In addition to the financial statements and our auditor’s report thereon, the Annual Report 2024 contains other information that consist of: • Introduction to governance; • Report of the Board of Directors; • Corporate governance Statement; • Audit Committee report; • Remuneration report; • Annexures – Other information. The annual report contains other information, in addition to the financial statements and our auditor's report thereon. Based on the following procedures performed, we conclude that the other information: • is consistent with the financial statements and does not contain material misstatements; and • contains all the information regarding the management report and the other information as required by Part 9 of Book 2 of the Dutch Civil Code. We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements. By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements. Management is responsible for the preparation of the other information, including the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code. Report on other legal and regulatory requirements and ESEF Engagement We were engaged by the Board of Directors as statutory auditor of the Company on December 8, 2021 for the audit for the year ended 30 September 2021 and have operated as statutory auditor ever since that financial year. No prohibited non-audit services We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. European Single Electronic Format (ESEF) The Company has prepared its annual report in ESEF. The requirements for this are set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF). In our opinion the Annual Report prepared in XHTML format, including the partly marked-up Consolidated Financial Statements as included in the reporting package by the Group, complies in all material respects with the RTS on ESEF. The Board of Directors is responsible for preparing the Annual Report including the financial statements in accordance with the RTS on ESEF, whereby management combines the various components into one single reporting package. Our responsibility is to obtain reasonable assurance for our opinion whether the Annual Report in this reporting package complies with the RTS on ESEF. We performed our examination in accordance with Dutch law, including Dutch Standard 3950N 'Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van een digitaal verantwoordingsdocument' (assurance engagements relating to compliance with criteria for digital reporting). Our examination included among others: • obtaining an understanding of the Group’s financial reporting process, including the preparation of the reporting package; • identifying and assessing the risks that the Annual Report does not comply in all material respects with the RTs on ESEF and designing and performing further assurance procedures responsive to those risks to provide a basis for our opinion, including: • obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance document and the XBRL extension taxonomy files have been prepared in accordance with the technical specifications as included in the RTS on ESEF; • examining the information related to the 2024 Consolidated Financial Statements in the reporting package to determine whether all required mark-ups have been applied and whether these are in accordance with the RTS on ESEF. 144 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Description of responsibilities regarding the financial statements Responsibilities of the Board of Directors for the financial statements The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Directors is responsible for such internal control as the Board of Directors determine is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the Group’s and the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Directors should prepare the financial statements using the going concern basis of accounting, unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board of Directors should disclose events and circumstances that may cast significant doubt on the Company's ability to continue as a going concern in the financial statements. The Audit Committee is responsible for overseeing the Company's financial reporting process. Our responsibilities for the audit of the financial statements Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion. Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion. We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others: • identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; • obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control; • evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors; • concluding on the appropriateness of the Board of Directors use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause a company to cease to continue as a going concern. • evaluating the overall presentation, structure and content of the financial statements, including the disclosures; and • evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report. We provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the Audit Committee, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest. Rotterdam, 20 December 2024 Forvis Mazars Accountants N.V. O. Opzitter RA 145 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Articles of Association provisions governing the distribution of proﬁt The holders of ordinary shares are entitled to one vote per share and to participate in the distribution of dividends and liquidation proceeds. Pursuant to Article 26 of the Articles of Association, a dividend may be declared provided that the Company's equity exceeds the amount of the paid-up and called-up part of the issued capital, increased by the reserves which must be kept by virtue of the law. The Board shall determine the amount of profits to be reserved. The general meeting is authorised to, in whole or in part, distribute the profits remaining thereafter and to declare a distribution in kind. The Board is authorised to declare interim distributions of profits or on account of a freely distributable reserve. 146 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 List of branches The table below lists all branches of the Company as well as all subsidiaries whose results were consolidated during the reporting period. Branch Place of branch Country of branch Register of branch Origin entity Country of origin entity Fully Sun China Bangladesh Bangladesh TIN- 4404-3933-6667 Fully Sun China China (Hong Kong) Limited – Bangladesh Limited Poundland Limited – Isle of Man Isle of Man Tax reference no: Poundland Limited UK Isle of Man C145894-73 Poundland Limited – Republic of Ireland Republic of Ireland Tax reference no: Poundland Limited UK Republic of Ireland 9798866A 147 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Statutory list of all subsidiaries and aﬃliated companies as at 30 September 2024 This list forms part of the notes to the 2024 separate financial statements and has been referenced therein. Entity name Country of incorporation Registered no. Shareholding Principal place of business Pepco Group Limited UK 09127609 100% 14th Floor, Capital House, 25 Chapel Street, London, United Kingdom NW1 5DH Peu (Fin) Plc UK 11808114 100% 14th Floor, Capital House, 25 Chapel Street, London, United Kingdom NW1 5DH Peu (Tre) Limited UK 11808312 100% 14th Floor, Capital House, 25 Chapel Street, London, United Kingdom NW1 5DH Pepco Group Services Limited UK 10972213 100% 14th Floor, Capital House, 25 Chapel Street, London, United Kingdom NW1 5DH Dealz Retailing Republic of Ireland 541977 100% Unit 3 Westend Retail Park, (Ireland) Limited Blanchardstown, Dublin 15 Poundland International Limited UK 03484379 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Vaucluse Diffusion S.A.S. France RCS 306 487 075 100% 19 Rue du Musée 13001 Marseille, France Dealz España SL Spain B86867512 100% C/Bravo Murillo 192, Madrid, Spain Dealz Poland Sp z.o.o Poland KRS 0000692949 100% Ul. Jasielska 16A, 60-476 Poznan, Wielkopolskie Poundland Limited UK 02495645 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Pepkor Europe Limited UK 09015100 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Pepkor UK Retail Limited UK 09288913 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Viewtone Trading UK 07398652 100% Poundland Csc, Midland Road, Walsall, Group Limited United Kingdom WS1 3TX Viewtone Limited UK 03271182 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Frozen Value Limited UK 01003192 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Jack Fulton Limited UK 02317009 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Viewtone Trustees Limited UK 04560070 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Minaldi Limited UK 09151610 100% Poundland Csc, Midland Road, Walsall, United Kingdom WS1 3TX Pepkor Import B.V. Netherlands KvK 61649112 100% Noord Brabantlaan 265, 5652LD Eindhoven Pepkor France S.A.S. France RCS 805 402 104 100% 1 Place Boieldieu, 75002, Paris, France Pepco Retail España SL Spain B86283751 100% Avda. Baix Llobregat 1-3, Módulo A, Planta Baja Par No., Esc. P, El Prat de Llobregat Fully Sun China Limited China (Hong Kong) CR 1075298 100% Rm 1006-8, 10/F, Sun House, 181 Des Voeux Road Central Sheung Wan, Hong Kong PGS Shanghai Co., Ltd China 913100007914 100% 8th Floor, H Zone (East), 666 Beijing East Road, Huangpu District, Shanghai PGS Partner India India U74999HR2018 100% Unit No-128, Suncity Success Tower Private Limited FTC073537 Sector, 65, Gold Course Extn Road, Gurugram, Gurgaon HR, 122005 Pepco Holdings Sp z.o.o. Poland 0000791461 100% ul. Strzeszyńska 73A, 60-479 Poznań Pepco Germany GmbH Germany HRB 224064 100% c/o WeWork, Kemperplatz 1, DE-10785, Berlin 148 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Entity name Country of incorporation Registered no. Shareholding Principal place of business Pepco Italy S.r.l Italy MI-2568153 100% Via Michelangelo Buonarroti 39, 20145 Milano (MI), Italy Pepco Properties Sp z.o.o. Poland KRS 0000356422 100% ul. Strzeszyńska 73A, 60-479 Poznań Pepco Austria GmbH Austria FN 534293a 100% Gertrude-Fröhlich-Sandner-Straße 2-4/ Turm 9/7. Stock, 1100 Wien Pepco Poland Sp z.o.o. Poland KRS 0000111962 100% ul. Strzeszyńska 73A, 60-479 Poznań Konopacka Holdings B.V. Netherlands KvK 58864504 100% Noord Brabantlaan 265, 5652LD Eindhoven Rawksa Holdings B.V. Netherlands KvK 58864385 100% Noord Brabantlaan 265, 5652LD Eindhoven Cardina Investments Sp z.o.o. Poland KRS 0000424893 100% ul. Strzeszyńska 73B lok. 4, 60-479 Poznań Evarts Investments Sp z.o.o. Poland KRS 0000471011 100% ul. Strzeszyńska 73B lok. 4, 60-479 Poznań Pepco Ingatlan Kft Hungary Cg. 01-09-300734 100% H-1138 Budapest, Váci út 187 Pepkor Europe GmbH Switzerland CHE-194.732.602 100% c/o Kanzlei Pilatushof, Hirschmattstrasse 15, 6003 Luzern Pepco Hungary Kft Hungary Cg. 01-09-192750 100% H-1138 Budapest, Váci út 187 Pepco Czech Republic s.r.o. Czechia 24294420 100% Prague 4 – Nusle, Hvězdova 1716/2b, PSČ 14078 Pepco Retail SRL Romania J40/4655/2013 100% 17 Ceasornicului street, 3rd floor, District 1, Bucharest, Romania Pepco Slovakia s.r.o. Slovakia 46 868 674 100% Nevädzova 6, Ružinov, Bratislava, 821 01, Slovakia Pepco Croatia d.o.o. Croatia MBS 081038164 100% Zagreb (Grad Zagreb), Damira Tomljanovića Gavrana 11 Pepco Lithuania UAB Lithuania 304488450 100% Viršuliškių skg. 34-1, Vilniaus, 05132, Lithuania Pepco Latvia SIA Latvia 40203062113 100% Strelnieku iela 9 – 7, Riga, LV-1010, Latvia Pepco d.o.o. Slovenia 7176457000 100% Tržaška cesta 515, Brezovica pri Ljubljani, 1351, Slovenia Pepco Estonia OU Estonia 14249111 100% Sõpruse Pst 145, Kristiine District, Tallinn, 13417, Estonia Pepco Bulgaria EOOD Bulgaria 205119149 100% Nikola Tesla №5 str., fl. 4, Building BSR 2, Sofia 1574, Bulgaria Pepco d.o.o. Beograd-Novi Serbia 21457345 100% Bulevar Mihaila Pupina 10L, 11000 Novi Beograd Beograd, Serbia Pepco Group UK 14772767 100% 14th Floor Capital House, 25 Chapel International Limited Street, London, United Kingdom, NW1 5DH Poundland Elgin Limited UK 12111238 100% Poundland Csc, Midland Road, Walsall, United Kingdom, England, WS1 3TX Online Poundshop Limited UK 08870575 100% Poundland Csc, Midland Road, Walsall, United Kingdom, WS1 3TX Pepco Greece IKE Greece 162515401000 100% Municipality of Nikaia – Agios Ioannis Renti, at Petrou Ralli Street No 97, PC 18233 Pepco Portugal Unipessoal LDA Portugal 3453-7748-7417 100% Rua Hermano Neves 18, piso 3, E7, 1600-477 Lisbon (Portugal) Pepco B-H d.o.o. Bosnia and Herzegovina 4203144510006 100% Sarajevo, street Skenderpašina no. 1, Municipality Centar Sarajevo, 71 000 Sarajevo, Bosnia Pepco Logistics S.L Spain 773439 100% C/Bravo Murillo 192, Madrid, Spain Pepco Distribution Sp. z o.o. Poland 0001042265 100% ul. Strzeszyńska 75, 60 – 479 Poznań * Whilst we own 100% of this entity, it is no longer under the control of Pepco Group N.V. and is considered to be a discontinued operation in the consolidated financial statements. 149 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Glossary of terms Term Definition AGM Annual General Meeting of shareholders APM Alternative Performance Measure Annual Report Management report (bestuursverslag) as referred to in Section 2:391 of the Dutch Civil Code Articles Articles of Association of the Company, as amended from time to time BCI Better Cotton Initiative Board Directors of the Company Board Rules Board of Directors’ Rules of Procedure CAP Corrective action plan CEE Central and Eastern Europe CEO Chief Executive Officer of the Company CFO Chief Financial Officer of the Company CGU Cash-generating unit CODB Cost of doing business CODM Chief Operating Decision Maker Company/PGNV Pepco Group N.V. Company Secretary Company secretary of the Company Covid-19 The pandemic of coronavirus disease 2019 (Covid-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The pandemic has led to severe global socioeconomic disruption, the closure of a number of businesses and wide-spread shortages of supplies DC Distribution centre Dutch Code Dutch Corporate Governance Code Dealz FMCG-led price-anchored retailer (non-UK) EAP Equity Award Plan EBITDA Operating profit or loss before depreciation and amortisation adjusted for capital and reclassification items EGM Extraordinary general meeting of shareholders EPS Earnings per share ERP Enterprise resource planning ESG Environmental, social and governance EU European Union External auditors Forvis Mazars Accountants N.V FMCG Fast-moving consumer goods Forvis Mazars Forvis Mazars Accountants N.V., the Company’s external auditors Fultons/Fultons Foods Viewtone Trading Group Limited and its subsidiaries FVOCI Fair value through other comprehensive income FVTPL Fair value through profit and loss FY19 1 October 2018 to 30 September 2019 FY20 1 October 2019 to 30 September 2020 FY21 1 October 2020 to 30 September 2021 FY22 1 October 2021 to 30 September 2022 FY23 1 October 2022 to 30 September 2023 FY24 1 October 2023 to 30 September 2024 GM General merchandise GOTS Global Organic Textile Standard 150 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Term Definition Group/Pepco Group The Company and its subsidiaries IAS International Accounting Standards IBEX/ITBV IBEX Topco B.V. IFRIC International Financial Reporting Interpretations Committee IFRS International Financial Reporting Standards IPO Initial Public Offering – on 26 May 2021 the Company was admitted for listing on the Warsaw Stock Exchange LFL Like for like LTIP Long Term Incentive Plan NED Non-Executive Director NOPAT Net underlying operating profit after tax PBT Profit before tax Pepco Apparel-led multi-price retailer PGS Pepco Global Sourcing Poundland FMCG-led price-anchored retailer (UK) Poundland Group Poundland companies RCF Revolving credit facility Relationship Agreement Agreement between affiliates of ITBV and the Company ROIC Return on invested capital SaaS Software-as-a-Service Share A share in the capital of the Company Shareholder Holder of one or more shares Subsidiary Subsidiary of the Company as referred to in Section 2:24a of the Dutch Civil Code VCP Value Creation Plan WE Western Europe WSE Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie) Warsaw Code Code of Best Practice for GPW Listed Companies 2021 YoY Year on year 151 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Shareholder information Contact details The Board values the insight gained from shareholder engagement and places significant importance on maintaining General enquiries close relationships with shareholders, taking account of and 14th Floor, Capital House responding to their views. The Group’s Non-Executive Chair, CFO 25 Chapel Street and investor relations team communicate on a regular basis with London NW1 5DH shareholders and analysts and endeavour to facilitate open United Kingdom engagement. In FY24, frequent investor meetings were held 0203 735 9210 alongside a focused Capital Markets Day post year end. [email protected] The Group has an investor relations website at www.pepcogroup. Investor relations eu/investors where all regulatory news as well as other information [email protected] on the Pepco Group is available. General media enquiries We aim to maintain strong dialogue with our shareholders and [email protected] regularly collect feedback. Please contact investorrelations@ pepcogroup.eu. Financial and corporate media enquiries [email protected] The Company’s Annual General Meeting will be held prior to 31 March 2025. 152 Pepco Group N.V. Annual Report and Consolidated Financial Statements 2024 Pepco Group N.V.'s commitment to environmental issues is reflected in this Annual Report, which has been printed on UPM Finesse Silk, an FSC® certified material. This document was printed by Opal X using its environmental print technology, which minimises the impact of printing on the environment, with 99% of dry waste diverted from landfill. Both the printer and the paper mill are registered to ISO 14001. Pepco Group N.V. 14th Floor, Capital House 25 Chapel Street London NW1 5DH United Kingdom 0203 735 9210 [email protected]

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