Poundland owner picks Warsaw over London for Pepco listing

LONDON: South African conglomerate Steinhoff has chosen Warsaw over London to list shares in its Pepco Group discount retailer business, in what could become Poland's biggest initial public offering (IPO) this year.

The choice of Warsaw will be a boost to the Polish capital's stock market which has seen an uptick in listings, but was passed over by parcel delivery company InPost, which chose to list in Amsterdam in January.

"Pepco was started in Poland, it is our home market, it is our largest market... it is our most profitable market and it is our emotional home," CEO Andy Bond told reporters when asked why the company opted for Warsaw.

Asked whether a listing in zlotys would deter foreign investors, CFO Nick Wharton said that the company took into account the currency impact of being listed on any of the European bourses and concluded that it was still the right place to be.

Pepco trades from more than 3,200 stores across 16 countries and is led by Bond, a former chief executive of Britain's Asda supermarket chain. In Poland, it trades from more than 1,000 stores.

Earlier this month, Reuters cited sources saying that Pepco, which owns Poundland in the United Kingdom as well as the PEPCO and Dealz brands in Europe, was valued at around 5 billion euros ($6 billion).

Pepco had said in March it was considering a listing in either London or Warsaw.

Steinhoff is still battling the fallout from a 2017 accounting scandal and since 2019 the company and its creditors have been evaluating options for Pepco.

It said it would sell at least 15% of Pepco's shares.

"We are strongly positioned to deliver significant long-term growth, given our market leading customer proposition in the most attractive sector of retail," said Bond.

He also highlighted opportunities to expand across the whole of Europe and investment in infrastructure in recent years.

Pepco is targeting more than 1 billion euros in core earnings within five to seven years by trebling its number of stores.

The group does not, however, trade online.

Pepco has appointed Richard Burrows, chairman of British American Tobacco, as its chair and will appoint four other non-executive directors.

It also gave a trading update.

For the six months to March 31, revenue growth was 4.4%, reflecting the opening of 225 net new stores.

However, like-for-like revenue fell 2.1%, due to COVID-19 pandemic related store closures.

Finance chief Wharton told reporters that the company planned to introduce a "cautious" dividend policy in the future.

Bond said that Pepco was "open-minded" about M&A, but did not have any specific plans.