Interim Results for the 26 weeks ended 28 September 2014 STRONG FIRST HALF RESULTS

Transcription

1 27 November 2014 Interim Results for the 26 weeks ended 28 September 2014 STRONG FIRST HALF RESULTS Financial Highlights Underlying Results for the 26 weeks ended 28 September 2014 Total sales +15.0% to million (2013*: million), +15.4% on a constant currency basis Like-for-like sales +4.7% (2013: +0.8%) on a constant currency basis Underlying EBITDA +17.5% to 20.7 million (2013: 17.6 million) Underlying pre-tax profits % to 12.6 million (2013: 9.4 million) Net cash from operating activities, before tax and IPO costs +31.4% to 20.8 million (2013: 15.8 million) Underlying adjusted diluted EPS % to 3.84p (2013: 2.73p) Statutory Results for the 26 weeks ended 28 September 2014** Pre-tax profits +11.7% to 9.3 million (2013: 8.4 million)** Net cash from operating activities before tax unchanged at 15.8 million (2013: 15.8 million) Net debt of 4.4 million (2013: 26.8 million) Interim dividend of 1.5 pence per share Operational Highlights for the 26 weeks ended 28 September net new stores in UK and Ireland, growing the estate to 556 stores (2013: 490) Retail Park stores now total 72 (2013: 46) On track to open planned 60 net new stores in UK and Ireland in FY2015 Strong store opening pipeline in place in UK and Ireland for FY2016 First Dealz store opened in Spain; we now have three, including our first store in Madrid; on track to open 10 stores in Spain by the end of FY2016 New 350,000 square foot warehouse open in Harlow, replacing temporary 200,000 square foot Hoddesdon facility Over five million customers served each week, including almost 250,000 in Ireland * 26 weeks ended 29 September 2013 ( 2013 ) ** after non-underlying charges

2 Darren Shapland, Chairman of Poundland, said: The strong momentum we reported in July has continued through the first half and we have made a good start to the year. Our future store opening programme is robust and I am confident in our plans for taking the Poundland and Dealz offer to even more customers in the UK and abroad. Jim McCarthy, Chief Executive of Poundland, said: I am pleased to report further growth in both sales and profits in the first half of the year. In addition to strong trading in the UK, our international expansion plans are well underway with three multi-price Dealz stores now open and trading well in Spain. As the structural changes in UK retail continue to redraw the landscape, we are building our reputation for offering amazing value every day to our customers and substantially broadening our appeal. While our full year outcome, as always, is dependent on delivering a good Christmas for our customers, I remain confident of further progress throughout the year. Results Presentation A presentation for analysts and investors will be held today at 9am. Please use the following conference call details to listen to the presentation: Dial in: +44 (0) Password: Poundland For further information please contact Enquiries: Nick Hateley, Chief Financial Officer +44 (0) Philip Dorgan, Head of Investor Relations +44 (0) Media Enquiries: Citigate Dewe Rogerson Simon Rigby +44 (0) Angharad Couch +44 (0)

3 FINANCIAL SUMMARY Sales grew by 15.0% and, due to strong margin management and cost control, this translated into a 17.5% increase in underlying EBITDA and a 40.7% increase in underlying adjusted diluted EPS. Net debt was 22.4 million lower over the 12 month period, despite a strong store expansion programme, the opening of our new 350,000 sq.ft. Harlow distribution centre and the payment of 9.9m of IPO-related costs over the 52 week period. GUIDANCE FOR FY2015 Our guidance for the full year is unchanged from that presented at our preliminary results in July which we set out below. Store rollout: UK & Ireland: We plan to open a net new 60 Poundland and Dealz stores. Spain: The low cost, low risk pilot plans to deliver 10 stores over two years. Underlying costs: After the impact of the costs of being a listed company, we expect our EBITDA margin will be broadly unchanged. Non-underlying charges: We incurred double running costs of 1.2 million associated with our new distribution centre at Harlow in the first six months of the financial year and expect to be in line with full year guidance for between 1.0 million and 1.5 million. We will also incur pilot store costs in Spain of between 1.25 million and 1.75 million. In the first half of the 2015 financial year, we incurred costs of 1.1 million. Capital investment: We will spend around 20.0 million, depending on the pace, development and cost of the Dealz trial in Spain.

4 CHIEF EXECUTIVE S REVIEW I am pleased to report a good first half trading performance at Poundland, with significant growth in sales, profit and store numbers. We also continued to be strongly cash generative and have virtually no net debt on our balance sheet. During the first six months of our 2015 financial year, we opened a total of 34 stores (28 net) across the UK and Republic of Ireland. We also opened our first Dealz store in Spain taking our total store estate to 557 (2013: 490), including 34 Dealz stores in Ireland. This helped to drive sales higher by 15.0%, supported by strong like-for-like sales growth (4.7% on a constant currency basis) and, within this, increasing average transaction values. The continuing expansion of our retail estate within the United Kingdom, Ireland and now in Spain has led us to invest in a third, purpose built 350,000 sq.ft. distribution centre at Harlow, which opened in September, replacing the 200,000 sq.ft temporary facility at Hoddesdon. The adjacency of the new site means that we have transferred the majority of our existing experienced colleagues to the new operation. Poundland is a value general merchandise retailer and our product offer stretches across 17 different product categories. We constantly drive high levels of innovation through our product offer, especially across our non-food ranges. We introduced our first celebrity-endorsed product range at the start of our financial year, Jane Asher s Kitchen and this has been one of our most successful launches ever. In August, we launched our new jewellery range, under the Purple Ivy label. This has started well and we have recently introduced our Make-Up Gallery brand, bringing affordable quality cosmetics to millions of our customers. These developments, together with others in the pipeline, reinforce the treasure trove experience in Poundland where customers can buy a wide range of own label products alongside over 1,000 top FMCG brands, all at amazing value. In common with other retailers we benefited from a number of tail winds in the first half of our financial year, including a late Easter and more favourable weather conditions. However, unlike many retailers, we continued to offer amazing value every day and this, together with significant improvement to our product offer across both brands and own label, helped to drive good like-for-like sales growth. Our commitment to value and the build-up of consumer trust and confidence over many years, means that both Poundland and Dealz now offer universal appeal across all ages, demographics and socio-economic groups. We are increasing our share among all socio-economic groups, but our share of ABC1 s has increased over the last few years and now stands at around 54%. We are also benefiting from the structural change in consumer shopping behaviour. Consumers shop more often and use social media and the internet to look for and to compare value. The honesty, integrity and transparency of our single price offer continues to serve us well. We think that our value proposition, coupled with our attractive stores, located in prime sustainable shopping venues and our opportunity for new store development across the UK and Europe means that we expect to see many years of future growth.

5 Our consumer surveys and market research indicate that our customers intend to shop with us even when they become financially better off. We know that Poundland is a good business in a recession and we believe it is an even better business in improving economic conditions. It is now seen as smart to save money and Poundland will continue to benefit from changing consumer shopping behaviour. Our brand is popular amongst UK and Ireland consumers. In a recent YouGov BrandIndex survey, consumers ranked us in the Top 5 high street retailers in terms of having recently shopped and in offering value for money. Besides our store roll out in the UK and Ireland, we believe that we have an opportunity to grow in Continental Europe. Our entry into Ireland in 2011 under the Dealz brand demonstrated that we are not only capable of generating attractive financial returns but also of rapidly establishing a successful brand in a new geography. Following extensive market research we have exported the Dealz format into Spain with a low cost, low risk entry plan. We opened our first store in Torremolinos in July and we have since opened a further two stores, including our first store in Madrid. These stores are trading in line with our plans and we will open two more stores before the calendar year end. It is clear that consumers across the globe increasingly appreciate and understand value for money and we remain confident that Continental Europe offers the Group substantial future growth opportunities. Looking Ahead Manufacturers recognise the increased demand for value amongst consumers and are working hard to deliver products that meet these requirements. Many forward thinking suppliers are also changing their sales, account structures and supply chains to adapt to these changes. We will continue to work with our supplier partners to bring amazing value, brands, new products and innovation to our valued customers. Our strong pipeline of new stores and exciting product innovation will bring the unique Poundland retail proposition to hundreds of thousands more consumers each week by the end of the current financial year. We are planning to open 60 net new stores during the year, including a number of new Dealz stores in Ireland. We will also open further Dealz stores in Spain. As a result, we will create over 2,000 new jobs. Our single price point in Poundland and multi price format in Dealz continue to help consumers plan their household budgets with certainty and confidence. As our first half sales performance demonstrates, we have had a good start to the year carrying the strong momentum from the second half of last year. With around 50% of our EBITDA generated in our third quarter, a successful Christmas period is key to delivering a strong result for the year as a whole. We are confident that we are well placed to meet consumer needs and that Poundland s amazing value offer remains strong in this competitive trading environment. We therefore look forward to the second half with confidence.

6 Our next scheduled update on trading will be the release of our Q3 sales statement in January 2015.

7 CHIEF FINANCIAL OFFICER S INTERIM REPORT REVENUE Group revenue for the 26 weeks ended 28 September 2014, was million (2013: million), which represents growth on the prior half year of 15.0%, or 15.4% on a constant currency basis. This improvement was driven by contributions from both a strong opening programme and like-for-like sales growth. We grew like-for-like sales during the six month period by 4.7% on a constant currency basis (2013: 0.8%), which was driven by our continued focus on providing our customers with amazing value every day, as well as some favourable tail winds including a late Easter and more favourable weather patterns in the first quarter. Our new store opening programme was back-end loaded, with the result that new store weeks were around 20% lower than in the same period last year. However, we have a strong opening programme for the rest of the year and remain on track to open 60 net new stores for the year as a whole, with a strong pipeline emerging for FY2016. GROSS MARGIN Gross profits increased by 15.2% to million (2013: million) and gross margins were broadly maintained at 36.5% (2013: 36.4%) as we re-invested the benefits from our improved buying power and the greater mix within our estate of Dealz and retail parks to offset price inflation. We offer our supplier base genuine volume growth and this means that we are attractive partners for them. The number of Dealz and retail park stores increased by 30 from the comparable 26 week trading period to 29 September 2013 to 103 (2013: 73). OPERATING COSTS Underlying operating costs ( m) 26 weeks ended 28 September weeks ended 29 September 2013 Growth Growth Ex PLC costs Distribution expenses % +14.2% Administrative expenses % +14.8% Total overhead % +14.2% Underlying depreciation and amortisation % % of sales Distribution expenses bp Administrative expenses bp Total overhead bp Underlying depreciation and amortisation bp Total overhead exc. PLC costs bp

8 Underlying operating costs in the financial year increased by 15.0% to million (2013: million). This increase in the cost base in the period was primarily a result of the greater number of stores in our estate, but also reflects the additional costs of being a PLC, which were 1.26 million in the half year. Despite this, we kept operating costs as a percentage of sales flat at 34.00% (2013: 34.00%). In order to aid a better understanding of the underlying growth of the business, for this year only, we have added a column to a number of tables to show the effect of the additional costs of being a PLC. As we show in the table above, excluding these additional costs, operating costs as a percentage of sales fell by 24 basis points to 33.76%, which reflects the leverage to our income statement from strong top line growth. EBITDA AND EBIT Reconciliation to underlying EBITDA( m) 26 weeks ended 28 September weeks ended 29 September 2013 Growth (%) Reported EBITDA Adjustments : Distribution centre Strategic initiatives IPO costs Underlying EBITDA We report non-underlying items in our income statement to show one-off items and to allow investors to better understand the underlying performance of the business. In relation to the first half of our 2015 financial year, these included double running costs associated with our new warehouse at Harlow ( 1.2 million) and strategic initiatives in launching our pilot stores in Spain ( 1.1 million). In the first half of the last financial year, we incurred costs related to strategic initiatives in ecommerce and in international development ( 0.6 million). Underlying EBITDA therefore grew by 17.5% to 20.7 million (2013: 17.6 million), driven by the strong top line growth of the Group. 26 weeks ended 28 September weeks ended 29 September 2013 Growth (%) Growth ex PLC costs (%) ( m) Underlying EBITDA % Underlying depreciation and amortisation Underlying EBIT % Underlying EBITDA margin (%) bp +32 bp Underlying EBIT margin (%) bp +28 bp

9 The table above shows the movement in underlying EBIT and in underlying margins. Underlying EBIT is calculated after stripping out brand amortisation of 0.6 million (2013: 0.6 million) from depreciation and amortisation expenses. Underlying EBIT grew by 17.0% to 12.9 million. Group margins increased slightly at both the underlying EBITDA and the underlying EBIT level, by 8 basis points to 3.91% in the case of the former (2013: 3.83%) and by 4 basis points to 2.45% in the case of the latter (2013: 2.41%). Once again, these numbers are distorted by the additional costs of becoming a PLC. Stripping these costs out, then the underlying growth in EBITDA and EBIT was 24.6% and 28.3% respectively. NET FINANCE COSTS In the first half of our 2015 financial year, the Group saw its underlying net finance cost reduce significantly, by 77.6% ( 1.3 million), to 0.4 million. This was a consequence of the Group s strong trading performance, lower financing charges related to the new loan facility and high cash conversion rates. STATUTORY PROFIT BEFORE TAX Reconciliation to underlying profit before tax ( m) 26 weeks ended 28 September weeks ended 29 September 2013 Reported profit before tax Adjustments : Amortisation Distribution centre Strategic initiatives IPO costs Interest 0.2 (0.1) Underlying profit before tax Underlying profit before tax was 12.6 million, which represented an increase of 34.2% on last year (2013: 9.4 million). Statutory profit before tax increased by 11.7% to 9.3 million (2013: 8.4 million), as a consequence of higher non-underlying charges in the first half of the FY2015 financial year (2014: 3.2 million; 2013: 1.0 million). TAXATION The underlying tax charge for the period was 2.9 million (2013: 2.5 million). The half year underlying effective tax rate was 23.5% (2013: 27.1%). The main reasons for the fall were that UK corporation tax rates fell from 23% to 21% over the period and the fact that the growth in disallowable expenditure has not kept pace with underlying profit before tax.

10 PROFIT AFTER TAX Underlying profit after tax was 9.6 million, which represented an increase of 40.9% on last year (2013: 6.8 million). Statutory profit after tax increased by 12.7% to 7.1 million (2013: 6.3 million). EARNINGS PER SHARE Underlying adjusted diluted earnings per share increased by 40.7% to 3.84p per share (2013: 2.73p per share). Statutory diluted earnings per share increased from (1.54)p to 2.85p per share. The weighted average number of diluted shares in issue during the period was 250.1m. CAPITAL EXPENDITURE ( m) 26 weeks ended 28 September weeks ended 29 September 2013 New stores Existing stores Other Total % of sales During the first six months of our 2015 financial year, we invested 9.9 million in capital expenditure, primarily related to the opening of new stores. We continued to roll out the Poundland format in the UK and the Dealz format in Ireland. We also opened our first store in Spain and a new distribution centre in Harlow. We opened a total of 35 stores in the half year, or 29 net of closures and resites. We ended the half year with 557 stores (2013: 490), including our first Dealz store in Spain, 520 Poundland stores in the UK and 36 Dealz stores, including 34 in Ireland and 2 in the Isle of Man and Orkney. We have a long-term target for 1,000 stores in the UK and 70 in Ireland. We plan to open 60 net new stores a year in the UK and Ireland and our pipeline is strong for the remainder of the current year. We continue to invest in our infrastructure to support our planned growth and we opened our new purpose-built 350,000 sq. ft. distribution centre in Harlow in September.

11 NET DEBT AND CASHFLOW ( m) 26 weeks ended 28 September weeks ended 29 September 2013 EBITDA Other Change in net working capital 1.9 (1.2) Operating cashflow pre-tax, pre-ipo costs IPO costs (4.9) - Operating cashflow Tax paid (5.3) (4.8) Net cash from operating activities Capital expenditure (9.5) (7.3) Acquisition of intangible assets (0.4) (0.2) Net cash from investing activities (9.9) (7.5) Repayment of borrowings - (3.6) Redemption of preference shares - (20.0) Net financial expenses paid (0.3) (0.7) Net cash from financing activities (0.3) (24.2) Net increase/(decrease) in cash 0.3 (20.8) Net debt (4.4) (26.8) Cash conversion (%) Operating cash flow of 20.8 million, excluding tax, pre-ipo costs represented an increase of 31.4% on last year (2013: 15.8 million). This reflects the Group s strong trading performance and our continued focus on day to day cash management. Working capital was well managed, with a small inflow of 1.9 million, reflecting an improvement in supplier terms as the Group added scale (2013: outflow 1.2 million), despite a build in stock as the new warehouse at Harlow opened. Cash conversion during the half year was strong, at 76.8% (2013: 84.9%). Net debt at the half year was 4.4 million (2013: 26.8 million). Over the last 12 months we have reduced net debt by 32.3m, stripping out IPO costs. INTERIM DIVIDEND The Directors are pleased to announce an interim dividend of 1.5p per share, which will be paid on 30 January 2015 to shareholders whose names are on the Register of Members at the close of business on 16 January The ordinary shares will be quoted ex dividend on 15 January As set out at IPO, we intend to adopt a dividend policy which reflects our long-term earnings and cash flow potential, targeting a level of annual dividend cover of 2.5 to 3.5 times based on earnings.

12 Condensed Consolidated Income Statement For the period ended 28 September 2014 (2013: period ended 29 September 2013) Note 26 weeks ended 28 September 2014 Unaudited 26 weeks ended 29 September 2013 Unaudited 52 weeks ended 30 March 2014 Audited Underlying Non- Non- Non- Underlying Total Underlying Underlying Total Underlying Underlying (Note 5) (Note 5) Total '000 '000 '000 '000 '000 '000 '000 '000 '000 Revenue 528, , , , , ,803 Cost of sales (335,622) - (335,622) (292,023) - (292,023) (629,279) - (629,279) Gross profit 192, , , , , ,524 Distribution costs (160,781) (1,404) (162,185) (140,836) - (140,836) (296,979) - (296,979) Administrative expenses (18,805) (1,597) (20,402) (15,286) (1,146) (16,432) (31,500) (12,343) (43,843) Operating profit 12,946 (3,001) 9,945 11,067 (1,146) 9,921 40,045 (12,343) 27,702 Financial income Financial expenses (420) (236) (656) (1,858) 140 (1,718) (3,488) (2,982) (6,470) Net financing expense (383) (236) (619) (1,709) 140 (1,569) (3,236) (2,982) (6,218) Profit before tax 12,563 (3,237) 9,326 9,358 (1,006) 8,352 36,809 (15,325) 21,484 Taxation 2 (2,949) 749 (2,200) (2,533) 503 (2,030) (9,556) 1,932 (7,624) Profit for the period 9,614 (2,488) 7,126 6,825 (503) 6,322 27,253 (13,393) 13,860 Earnings per share (p) basic (1.27) (1.54) 5.20 (1.82) diluted (1.27) (1.54) 5.20 (1.82) Adjusted earnings per share (p) basic diluted All activities were continuing throughout the current and preceding period. Non-underlying items include brand amortisation and non-recurring exceptional costs and income.

13 Condensed Consolidated Statement of other Comprehensive Income For the period ended 28 September 2014 (2013: period ended 29 September 2013) 26 weeks ended 28 September 2014 Unaudited 26 weeks ended 29 September 2013 Unaudited Non- Underlying Underlying Total Underlying Non- Underlying Total Underlying 52 weeks ended 30 March 2014 Audited Non- Underlying Total '000 '000 '000 '000 '000 '000 '000 '000 '000 Profit for the period 9,614 (2,488) 7,126 6,825 (503) 6,322 27,253 (13,393) 13,860 Other comprehensive income Items that are or may be recycled subsequently to the income statement: Foreign currency translation differences - foreign operations (31) (31) - (47) (47) Effective portion of changes in fair value of cash flow hedges - 9,515 9,515 - (10,149) (10,149) - (14,154) (14,154) Net change in fair value of cash flow hedges recycled to the Income statement - (2,302) (2,302) - 1,738 1,738-3,791 3,791 Income tax on items that are or may be recycled subsequently to the income statement - (1,443) (1,443) - 1,809 1,809-2,203 2,203-5,784 5,784 - (6,633) (6,633) - (8,207) (8,207) Other comprehensive income for the period, net of income Tax - 5,784 5,784 - (6,633) (6,633) - (8,207) (8,207) Total comprehensive income attributable to equity holders of the parent 9,614 3,296 12,910 6,825 (7,136) (311) 27,253 (21,600) 5,653

14 Condensed Consolidated Statement of Financial Position at 28 September September September March 2014 Unaudited Unaudited Audited Note '000 '000 '000 Non-current assets Property, plant and equipment 43,811 39,200 41,607 Intangible assets and goodwill 183, , ,711 Trade and other receivables Other financial assets 1, Deferred tax asset Total non-current assets 229, , ,388 Current assets Inventories 112,247 93,495 89,561 Other financial assets 1, Tax receivable Trade and other receivables 49,160 40,515 24,960 Cash and cash equivalents 25,574 22,069 25,268 Total current assets 188, , ,673 Total assets 418, , ,061 Current liabilities Other interest-bearing loans and borrowings - (2,257) - Trade and other payables (163,238) (125,548) (120,571) Tax payable (2,067) (2,407) (3,807) Provisions (568) (514) (787) Other financial liabilities (2,178) (1,939) (5,110) Total current liabilities (168,051) (132,665) (130,275) Non-current liabilities Other interest-bearing loans and borrowings (30,000) (46,619) (30,000) Other payables (20,037) (17,473) (18,617) Provisions (138) (138) (138) Other financial liabilities (189) (2,551) (1,556) Deferred tax liabilities - (753) - Total non-current liabilities (50,364) (67,534) (50,311) Total liabilities (218,415) (200,199) (180,586) Net assets 199, , ,475 Equity attributable to equity holders of the parent Share capital 7 2, , ,050 Merger reserve (259,642) - (259,642) Reserves ,028 (4,849) Retained earnings 456,156 18,334 25,916 Total equity 199, , ,475

15 Condensed Consolidated Statement of Changes in Equity for the period ended 28 September 2014 (unaudited) Share capital Merger Capital redemption Translation Cash flow hedge Retained earnings Total equity reserve reserve reserve reserve '000 '000 '000 '000 '000 '000 '000 Balance at 1 April ,474-12, ,349 32, ,583 Total comprehensive income for the period Profit for the period ,322 6,322 Other comprehensive income (31) (6,602) - (6,633) Total comprehensive income for the period (31) (6,602) 6,322 (311) Transactions with owners recorded directly in equity Redemption of preference share capital subsidiary (14,564) - 14, (20,000) (20,000) Issue of shares subsidiary Total transactions with owners (14,525) - 14, (20,000) (19,961) Balance at 29 September ,949-27,303 (22) (3,253) 18, ,311 Share capital Merger reserve Capital redemption reserve Translation reserve Cash flow hedge reserve Retained earnings Total equity '000 '000 '000 '000 '000 '000 '000 Balance at 31 March ,050 (259,642) - (38) (4,811) 25, ,475 Total comprehensive income for the period Profit for the period ,126 7,126 Other comprehensive income ,770-5,784 Total comprehensive income for the period ,770 7,126 12,910 Transactions with owners recorded directly in equity Court approved reduction in share capital (422,500) ,500 - Share based payment transactions Total transactions with owners (422,500) , Balance at 28 September ,550 (259,642) - (24) , ,999

16 Condensed Consolidated Cash Flow Statement for the period ended 28 September weeks weeks weeks 2014 Unaudited Unaudited Audited Note '000 '000 '000 Cash flows from operating activities Profit for the year, before non-underlying items 9,614 6,825 27,253 Costs in respect of IPO 5 (161) - (9,954) Other non-underlying items 5 (2,327) (503) (3,439) Profit for the year 7,126 6,322 13,860 Adjustments for: Depreciation and amortisation 8,305 7,084 15,096 Financial income (37) (149) (252) Financial expense 656 1,718 6,470 Equity settled share based payment transactions Taxation 2,200 2,030 7,624 18,864 17,005 42,842 Increase in trade and other receivables (24,544) (19,755) (3,645) Increase in inventories (22,687) (12,492) (8,557) Increase in trade and other payables excluding IPO costs 49,177 30,883 22,537 Increase/(decrease) in provisions (219) (Decrease)/increase in payable in respect of IPO costs (4,779) - 5,012 15,812 15,789 58,611 Tax paid (5,275) (4,846) (10,409) Net cash from operating activities 10,537 10,943 48,202 Costs in respect of IPO 4,940-4,942 Net cash from operating activities before IPO costs 15,477 10,943 53,144 Cash flows from investing activities Acquisition of property, plant and equipment (9,456) (7,290) (16,563) Acquisition of other intangible assets (434) (209) (1,062) Net cash from investing activities (9,890) (7,499) (17,625) Cash flows from financing activities Proceeds from new loan ,268 Repayment of borrowings - (3,552) (54,914) Redemption of preference shares - subsidiary - (20,000) (20,000) Net financial expenses paid (341) (684) (2,524) Net cash from financing activities (341) (24,236) (48,170) Net increase/(decrease) in cash and cash equivalents 306 (20,792) (17,593) Cash and cash equivalents at start of period 25,268 42,861 42,861 Effects of exchange rate changes on cash held Cash and cash equivalents at end of period 25,574 22,069 25,268 Net debt 4,426 26,807 4,732

17 1.1 Basis of preparation and significant accounting policies Poundland Group plc (the Company) is a company incorporated in the United Kingdom. The condensed consolidated interim financial statements as at and for the 26 weeks ended 28 September 2014 comprise the Company and its subsidiaries (together referred to as the Group). The consolidated financial statements of the Group as at and for the 52 weeks ended 30 March 2014 are available on request from the Company s registered office at Wellmans Road, Willenhall, West Midlands WV13 2QT. All values are stated in thousands ( 000 s) except where otherwise indicated. Statement of compliance These condensed consolidated interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the 52 weeks ended 30 March Going concern The Group financial statements are prepared on a going concern basis as the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has considerable financial resources, together with a strong ongoing trading performance. On 17 March 2014, the Group entered into a new revolving credit and working capital facility of 55 million with a syndicate of banks. The former and new borrowing facilities contain financial covenants which have been met throughout both periods. The Group s forecasts and projections show that the new facility provides adequate headroom for its current and future anticipated cash requirements. Significant accounting policies The accounting policies adopted in the preparation of these condensed consolidated interim financial statements to 28 September 2014 are consistent with the policies applied by the Group in its consolidated financial statements as at and for the 52 weeks ended 30 March Basis of consolidation On 17 March 2014, the Company obtained control of the entire share capital of Poundland Group Holdings Limited via a share for share exchange. There were no changes in rights or proportion of control exercised as a result of this transaction. Although the share for share exchange resulted in a change of legal ownership, in substance these financial statements reflect the continuation of the pre-existing group, headed by Poundland Group Holdings Limited.

18 As a result, the 26 week comparatives to 29 September 2013 presented in these financial statements are the consolidated results of Poundland Group Holdings Limited. For details of the impact on the earnings per share calculation see note 3. The statement of financial position at 29 September 2013 reflects the share capital structure of Poundland Group Holdings Limited. The statements of financial position at 30 March 2014 and 28 September 2014 present the legal change in ownership of the Group, including the share capital of Poundland Group plc and the merger reserve arising as a result of the share for share exchange transaction. Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. 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. 1.3 Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted EPS, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares. As explained in the basis of consolidation accounting policy, the Group s financial statements reflect the continuation of the pre-existing group headed by Poundland Group Holdings Limited. The Company had preference shares, the holders of which were entitled to a cumulative dividend at the discretion of the Directors. In accordance with IAS 33, for the comparative periods (26 weeks to 29 September 2013 and the 52 weeks to 30 March 2014 to the date of the share restructure), the accrued preference share dividend has been deducted from profit for the period to compute the earnings attributable to ordinary shareholders. The conversion factor applied in the share for share reorganisation has been applied to calculate the number of ordinary shares of Poundland Group Holdings Limited used to compute the weighted average number of ordinary shares for the comparative periods. In this way the impact of the preference shares has been excluded from both earnings and the weighted average number of shares. As a precursor to the share for share exchange, the preference shares in Poundland Group Holdings Limited were converted to ordinary shares and any entitlement to a dividend on these shares was forfeited. For the periods reported, the Group has chosen to present an adjusted EPS calculation to aid comparability and to provide a consistent measure of performance, by excluding the impact of the preference shares from both earnings and the weighted average number of shares. For this adjusted measure, in both reported periods, the weighted average number of shares is based on the share capital

19 structure of Poundland Group plc and assumes that this structure was in place from 1 April 2013 (i.e. the beginning of the prior period). For both EPS measures (statutory and adjusted), the Group has also presented an alternative version with profit adjusted for non-underlying items. A reconciliation of the adjusted and alternative measure to the statutory measure required by IFRS is given in note Non underlying items Non underlying items are those items that are unusual because of their size, nature or incidence. The Directors consider that these items should be separately identified to ensure a full understanding of the Group s results. 1.5 Accounting estimates and judgements The preparation of interim financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from those estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by the Directors in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the 52 week period ended 30 March IFRS 13 Fair Value Measurement IFRS 13 has been applied prospectively from the period beginning 31 March The standard provides a definition of fair value, sets out a framework for measuring fair value and requires disclosure about fair value measurements. Fair value is defined as 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. The additional disclosures resulting from the introduction of IFRS 13 are provided in note 8.

20 2. Taxation Recognised in the income statement 26 weeks ended 26 weeks ended 28 September September 2013 '000 '000 Current tax expense Current period 3,222 2,958 Deferred tax expense Origination and reversal of temporary differences (1,112) (898) Adjustment for prior periods 90 (30) Total deferred tax (1,022) (928) Total tax charge for the period 2,200 2,030 Income tax is recognised based on management s best estimate of the weighted average annual income tax rate expected for the financial year applied to the pre-tax income of the interim period. The Group s consolidated effective tax rate in respect of continuing operations for the 26 weeks ended 28 September 2014 was 23.6% (26 weeks ended 29 September 2013: 24.3%).

21 3. Earnings per share Statutory earnings per share 26 weeks ended 26 weeks ended 28 September September 2013 No of shares No of shares Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share 250,000, ,599,437 Effect of share options on issue 105,940 - Weighted average number of ordinary shares in issue for calculating diluted earnings per share 250,105, ,599, weeks ended 26 weeks ended 28 September September 2013 '000 '000 Profit for the period 7,126 6,322 Non-accrued preference share dividends - (3,782) Premium paid on preference share capital redeemed - (5,436) Basic earnings attributable to ordinary equity shareholders 7,126 (2,896) Non-underlying items (see note 5) Operating expenses and finance costs 3,237 1,006 Tax on non-underlying items (749) (503) Underlying earnings before non-underlying items 9,614 (2,393) Earnings per share is calculated as follows: 26 weeks ended 26 weeks ended 28 September September 2013 p p Basic earnings per ordinary share 2.85 (1.54) Diluted earnings per ordinary share 2.85 (1.54) Basic earnings per ordinary share before non-underlying items 3.85 (1.27) Diluted earnings per ordinary share before non-underlying items 3.84 (1.27)

22 Adjusted earnings per share 26 weeks ended 26 weeks ended 28 September September 2013 No of shares No of shares Weighted average number of ordinary shares in issue, being weighted average number of shares for calculating basic earnings per share 250,000, ,000,000 Effect of share options on issue 105,940 - Weighted average number of ordinary shares in issue for calculating diluted earnings per share 250,105, ,000, weeks ended 26 weeks ended 28 September September 2013 '000 '000 Profit for the period, being basic earnings attributable to ordinary equity shareholders 7,126 6,322 Non-underlying items (see note 5) Operating expenses and finance costs 3,237 1,006 Tax on non-underlying items (749) (503) Underlying earnings before non-underlying items 9,614 6,825 Earnings per share is calculated as follows: 26 weeks ended 26 weeks ended 28 September September 2013 p p Basic earnings per ordinary share Diluted earnings per ordinary share Basic earnings per ordinary share before non-underlying items Diluted earnings per ordinary share before non-underlying items Operating segment The Group has one reportable segment, discount retailing of a variety of products. The Chief Operating Decision Maker ( CODM ) is the Board of Directors. Internal management reports are reviewed by the CODM on a monthly basis. Key measures used to evaluate performance are Revenue and EBITDA. Management believes that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.

23 All material operations of the reportable segment are carried out in the United Kingdom and the Republic of Ireland. The Group s revenue is driven by the consolidation of individually small value transactions and, as a result, Group revenue is not reliant on a major customer or group of customers. All revenue is generated from external customers. 5. Non-underlying items In the 26 weeks ended 28 September 2014, the Group incurred 1,072,000 of expenditure related to strategic initiatives (international expansion) (26 weeks 2013: 590,000). These costs include the new store trial in Spain, which was announced in February 2014 and is planned to continue until the end of FY2016, and include the profit earned in the one store opened for the period under review. The Group incurred 1,212,000 (26 weeks 2013: Nil) of one-off costs relating to the relocation of the distribution facility in the South East of England and the anticipated costs to dispose of the existing facility. On the acquisition of Poundland Holdings Limited in June 2010, the Group recognised an intangible asset relating to the Poundland brand. This is being amortised over 20 years and the amortisation expense is presented as a non-underlying item (26 weeks 2014: 556,000, 26 weeks 2013: 556,000). The Group incurred further fees relating to its listing of 161,000 in the 26 weeks ended 28 September 2014 (26 weeks 2013: Nil). The ineffective portion of foreign exchange hedging contracts is recognised as a financial expense and disclosed as a non-underlying item (26 weeks 2014: 236,000 expense, 26 weeks 2013: 140,000 income). The associated tax implications of the above items are presented as a non-underlying item (26 weeks 2014: 749,000 credit, 26 weeks 2013: 503,000 credit).

24 26 weeks ended 26 weeks ended 28 September September 2013 '000 '000 Distribution expenses Relocation of distribution facility in the South East 1,212 - Strategic initiatives 192-1,404 - Administrative expenses Amortisation expense (brand) Strategic initiatives Costs in respect of IPO 161-1,597 1,146 Financial income and expenses Financial instruments 236 (140) 236 (140) Taxation Non-underlying items tax impact (749) (503) Total non-underlying items 2, Seasonality Due to the seasonal nature of the UK retail market, higher revenues and operating profits are usually expected in the second 26 weeks than the first 26 weeks. 7. Called up share capital On 14 May 2014, the Company reduced its share capital, via a court approved process. The nominal value of each ordinary share was reduced from 1.70 to 1p. Following the reduction, the nominal value of share capital is 2.5 million. 8. Financial instruments The fair value of the Group s derivative financial instruments is calculated using the market forward rates at the reporting date and the outright contract date. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments. IFRS 13 Fair Value measurements requires the Group s derivative financial instruments to be disclosed at fair value and categorised in three levels according to the inputs used in the calculation of their fair value:

25 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; 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 held by the Group are: 26 weeks ended 28 September weeks ended 29 September 2013 Carrying Fair Carrying Fair Value value Value value '000 '000 '000 '000 Cash and cash equivalents 25,574 25,574 22,069 22,069 Trade and other receivables 49,160 49,160 40,515 40,515 Derivative contracts used for hedging (assets) 3,197 3, Total financial assets 77,931 77,931 63,020 63, Trade and other payables 183, , , ,021 Borrowings at amortised cost 30,000 30,000 48,876 48,876 Derivative contracts used for hedging (liabilities) 2,367 2,367 4,490 4,490 Total financial liabilities 215, , , , Related Party Transactions At 28 September 2014, 50,000 is owed by Warburg Pincus Private Equity X, L.P. in respect of its initial share capital. This balance is included within trade and other receivables. 10. Events after the reporting date An interim dividend of 1.5p per share (2013: nil) was proposed by the Board of Directors on 26 November In line with the requirements of IAS 10 Events after the Reporting Period, the

26 dividend has not been recognised within these results. It will be recognised in shareholders equity in the 52 weeks to 29 March Following the judgment passed by an Employment Appeal Tribunal on 4 November 2014 regarding the inclusion of overtime in holiday pay calculations, the Directors consider that any potential liability for claims made by employees for underpayment of holiday pay would not be significant. 11. Risks and uncertainties The Directors consider that the principal risks and uncertainties which could have a material impact on the Group s performance in the remaining 26 weeks of the financial year remain the same as those stated on pages 20 to 21 of our Annual Report and Accounts for the 52 weeks to 30 March 2014.

27 Responsibility Statement of the Directors in Respect of the Interim Report We confirm that to the best of our knowledge: The condensed set of consolidated financial statements has been prepared in accordance with IAS 34 Interim Reporting as adopted by the EU; The interim management report includes a fair value of the information required by: (a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first 26 weeks of the financial period and their impact on the condensed set of consolidated financial statements; and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial period; and (b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first 26 weeks of the current financial period that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last Annual Report that could do so. By order of the Board Jim McCarthy Chief Executive Officer 26 November 2014 Nick Hateley Chief Financial Officer 26 November 2014

28 Independent Review Report to Poundland Group plc Introduction We have been engaged by the Company to review the condensed set of financial statements in the halfyearly financial report for the 26 weeks ended 28 September 2014, which comprises the condensed consolidated income statement, condensed consolidated statement of other comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (the DTR) of the UK s Financial Conduct Authority (the UK FCA). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. Directors responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. As disclosed in note 1.1, the annual financial statements of the Group are prepared in accordance with IFRS s as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently