Pepkor Global Sourcing Arm Benefits From New £180m Two-Year Loan Facility

SHANGHAI, February 23, 2018 /PRNewswire/ --

Shanghai-based Operation Is Key Partner To PEPCO, Poundland, Dealz & PEP&CO   

PGS Now Fully Part of Pepkor Europe Ownership Structure  

Pepkor Global Sourcing (PGS) has been brought formally into Pepkor Europe ownership. PGS, which procures for Pepkor retailers in Africa, South East Asia and Europe is being restructured to reflect the fact that around 70 per cent of its sourcing is for Pepkor Europe retail brands such as PEPCO and Poundland.

The structure change comes in the same month Pepkor Europe secured a two-year independent loan facility of £180m from a financial institution to replace planned investment from Steinhoff in full.

Shanghai-based PGS is a key partner to Pepkor Europe brands Poundland, Dealz, PEP&CO & PEPCO with significant on-the-ground sourcing teams in China, India and Bangladesh.

PGS, which already sources and manages around USD $600m of goods from China to Europe has ambitious plans to grow to support Pepkor Europe's own development plans.

The loan facility, which supports Pepkor Europe's ongoing capital expenditure and investment plans for its retail brands - Poundland, Dealz, PEP&CO & PEPCO - and Steinhoff UK retailers Harveys and Bensons - has been welcomed by Chinese suppliers and their credit insurers, who have been briefed in a series of meetings.

Sean Cardinaal, Chief Operating Officer of Pepkor Europe and responsible for PGS said:

"Our Sourcing operation PGS has played a vital role in the success of our European brands- Poundland, Dealz & PEP&CO in Western Europe & PEPCO in Eastern Europe.  

"All these brands are all independent, profitable and delivering positive cash flows.  

"Because of this strength, we have worked quickly to bring PGS into direct ownership and activate new sources of funding to reassure Chinese suppliers, implement our investment plans and secure the future of these successful businesses."  

Pepkor Europe is not dependent on working capital support from parent company, Steinhoff International N.V. It also confirmed this new two-year independent loan finance facility provided stability for its the retail brands and that it was business-as-usual in its stores and for its 29,000 employees across Europe.

PGS currently manages over 100 Chinese clothing and footwear suppliers and 300 general merchandise suppliers linked to over 700 factories. It also manages 40 vendors in Bangladesh and 32 in India.

Editors' Notes  

About Pepkor Global Sourcing  
PGS aims to be the number one sourcing partner for the retail brands in the group and will be responsible for over 55 per cent of non-domestic group sourcing by the end the 2018 financial year.

Headquartered in Shanghai, PGS employs around 320 sourcing experts in 5 countries across the world, with a significant focus on China, Hong Kong, Bangladesh and India.

Over the course of the current year it expects significant growth in support of growing retail brands within the Pepkor Europe group. It expects to double exports from China to almost USD $600m, triple trade with India to over USD $75m and ship over USD $118m more goods - a 60 per cent rise - from Bangladesh.  

About Pepkor Europe  
Pepkor Europe's mission is to provide its core shopper - "a mum on a budget" - with all of her regular household replenishment needs across volume consumables (FMCG), general merchandise and apparel. Its vision over the next five years is to build Europe's largest discount variety retailer with a target aspiration of 4,000+ stores across all major European geographies.

In Western Europe , Brands include Poundland (UK) and Dealz (Ireland, France and Spain), and PEP&CO (Pepkor Europe's clothing brand operating largely from "shop-in-shop" concessions). Poundland & Dealz have 879 stores across four countries, serving c7m customers per week and serving over half of UK households through Poundland. It has 18,000 colleagues.  

In Eastern Europe , it operates 1,266 PEPCO stores in eight countries, employing 11,000 colleagues and serving 11m customers a month. PEPCO was established in 2004 in Poznan, Poland and has 769 stores in its home country. It now also operates stores in the Czech Republic, Slovakia, Romania, Hungary, Croatia, Slovenia & Lithuania.

Pepkor Europe Investment Plans  
Pepkor Europe investor & CEO Andy Bond provided an update on planned investment at Steinhoff's rescheduled meeting with lenders in London on 19 December 2017

Pepkor Europe which is responsible for Poundland, Dealz and PEP&CO in Western Europe and Pepco in Eastern Europe operates over 2,100 stores in 12 European markets.

Key highlights from his presentation included confirmation that:

• Poundland/Dealz plans to open 180+ PEP&CO shop-in-shops in UK & Western Europe in FY18 and will launch its Dealz brand in Poland in February 2018
• Pepco will open 250-300 stores per annum over the next three years
• Pepkor Europe's vision over the next five years is to build Europe's largest discount variety retailer with a target aspiration of 4,000+ stores across all major European geographies

He also confirmed the strength of current trading within Pepkor Europe retail businesses:

• In FY17, PEPCO's like-for-like sales growth is in excess of 20 per cent and the retailer has recently expanded into two new territories (Croatia & Slovenia)
• In the current financial year (YTD18), like-for-like sales are in a range between 8 & 25 per cent depending on the territory.  Expansion continues with 50 new stores and one new territory
• In Poundland following a strong turnaround in FY17, like-for-like sales growth in YTD18 is currently tracking at +4 per cent.  A further 21 PEP&CO shop-in-shops have been added, which are helping deliver an average of over 11 per cent LFL growth for Poundland stores with a PEP&CO

He also outlined why Pepkor Europe was well positioned for future growth.

• Pepco and Poundland operate in some of Europe's largest economies with a total population of 236m across the UK, France, Spain, Poland & Romania
• These businesses are also exposed to Europe's highest growth economies, including Romania, Poland, Slovakia, Croatia and Ireland
• It has first mover advantage vs. key competitors (e.g. Action) in key growth regions, e.g. CEE.
• It has a natural "Brexit" hedge with UK and EU exposure
• The discount sector in which Pepco and Poundland operate is growing much faster than the market as a whole.  
• It has a competitive edge through price leadership, integrated Far East sourcing and operating cost efficiencies through shared systems & services
• It has a differentiated product offer with expertise in discount apparel a unique point of competitive difference
• It has a flexible store model with complementary format types to flexibly maximise market penetration
• "Plug & play" growth platform that can quickly integrate new acquisitions, e.g. PEP&CO into Poundland