Good afternoon, everyone. Welcome to the Eurocash 2024 Annual Results Conference. Thank you for joining us today, either here in person or online. Thank you for your time, and we appreciate your continued interest in our company. For those who do not know me, my name is Jan Domanski. I am an Investor Relations Director at Eurocash. Let me introduce our speakers today: our CEO , Mr. Paweł Surówka, who will give us a short overview of our performance and strategic direction, and Mr. Piotr Nowjalis, our CFO , who will guide us through the financial results in more detail. With that, let me hand over to Paweł.
Thank you very much, Jan, and hello, everybody. I am very happy to have the first yearly result together here with Piotr Nowjalis. I am again so happy that we have you on the team here. Thank you very much, everybody, for coming. As Jan pointed out, we wanted to start this presentation with a short recap of the strategy and a couple of words about what this year was about, what the next year is about, and where we are heading, after which we will obviously present the next year's result and this year's result. If you allow, I will start just with one word of auto marketing, but it is a little bit more than that. As you might know, yesterday was our 13th anniversary. For that purpose, we have tried to kind of position ourselves on the map again.
We have asked Deloitte to certify something that we were pretty certain was the case, but just wanted to be sure, namely that Eurocash, based on the stores that we have as franchise partners and own stores, is the biggest franchise organizer in Poland. We are ahead of our second biggest retail competitor, who, not by coincidence, is green and has a lot of stores, and then a red one as well. When you just look at retailers who are based on franchise, we are the biggest one, both in terms of store count. We have over 15,000 stores that are linked to us one way or the other, so either in a soft or hard franchise system or a partnership system or our own stores, and also in retail sales.
The stores that are connected to us represent PLN 35 billion of retail sales, which means they account for around 11% of the retail market in Poland. We do not try to show this only to kind of have a nice number to be proud of. I am saying this because over the next quarters and years, you will be hearing more about this part of our business as we try to really recalibrate and refocus our business on the franchise business. We believe that whatever we do, we should make sure to increase the market share and increase the attractiveness and the strength of these franchise stores. We will work very strongly on two kind of directions.
One is a stronger integration of us to those franchise stores, both in terms of digital integration, but also in actual cooperation on the buying side, but also on the retail side, and then an increase in the number of those stores, so an active and aggressive expansion of this franchise business. I think in this clarity and in this focus, we have not been thinking about our wholesale business in the past, and we would like to continue to do this in the future. We thought that it might be helpful to just break down the market as we see it and what we consider to be our addressable market on the occasion of this yearly report. We wanted to indulge you in a couple of slides here, but first of all, so that you understand how we see the world.
Obviously, PLN 421 billion is the Polish FMCG market, and it has grown by four percentage points in the last year in 2024. When you take the stores that we trade with, which is to the biggest extent the dark green independent and soft franchise stores, and then a portion of the organized proximity stores, here you would have retailers like Delikatesy Centrum, who belong to us but are part of the so-called organized proximity chains, and you have Żabka, and you have Inmedio. We count all this together as what we define as the wholesale relevant market, or like we call it to our clients, we call it the independent market. These are the stores that are to the most extent led by independent franchisees or independent store owners. As you can see, this market today represents 26% of the entire FMCG market.
Yes, it is true, this market share is declining. You can see in 2023, this was 28%, in 2022, it was 30%. It is a portion of the market that is losing market share. Having said that, it is still a very important part of the Polish FMCG market. Very importantly, this 28%, as these are the smaller local and, I would say, closer to home stores, they represent around 40% of transactions in Poland. These are the stores that Poles visit the most often. This is something that we would like to leverage on also when we come later to the point of retail media, for example, which I think is not without sense. Yes, it is a market that is declining.
Our assumption and our investment thesis is that this market, while probably losing still a couple of percentage points of market share, will consolidate, will integrate, and will maintain its position on the market, but in a more integrated and a more organized way. We see our role in this market as being the integrator of this market because we believe, looking at our markets in Europe, that in every market that is developed, you have a mission and you have a need, a client, a consumer need for a proximity supermarket or a proximity convenience store that is mostly based on franchise. That this mission based on the local store owner is something that is very well represented in most countries. In most countries, those smaller stores that are franchise-based, so owner-led, if you want, normally outperform the centralized operating stores.
We believe that with the Polish consumer also resembling more a Western European consumer when it comes down to convenience, valuing their time, etc., the proximity supermarket and convenience stores will become more relevant, but they will have to transform. This transformation is something that we would like to do. Okay. Now, let's zoom in into this market. As you have seen, these are 28% or 26% now of the Polish market, so PLN 111 billion that you can see in the top corner. These have declined by 3% in the last year. In the red dotted line, you can see Eurocash's market share on that market. It is something that we are looking at all the time. As you can see, over the last two years, we have built our market share on the market.
Obviously, it's a declining market, but our goal is to be growing faster than the market declines. It's both for us, but it's also for the independent stores. It's for the franchise stores that we work with. On the other hand, what you can see is that a decline in number of stores, which is more significant than the decline in sales and the decline in market share. You have seen that the number goes down from 55,000- 51,000. That shows you that the stores that are disappearing are the smaller stores, are the less competitive stores. There are bigger, more organized stores to pick up the bill. Therefore, you can see that the decline in sales and in market share is lower than the decline in stores.
What is most important for us is that the decline in store count is the lowest among the stores that are connected to us, that are our franchise stores that have our POS systems, which we see as a proof of what we're doing, is that when we invest into franchise, when we connect to those stores, when we integrate with them, it is not only to work well for Eurocash because those stores are more loyal and they have more business with us, is that by giving them the tools to compete on the retail market, they become more competitive, and their chance of surviving in this market just grows. That's why we see a very strong mission of ours to continue expanding our franchise.
When speaking about the franchise, once again, a reminder, most of you know it, but it's the first time we've tried to put this on the map in this way. We have in our franchise portfolio several banners, some of which we've tried to already combine into a more, I would say, umbrella brand, which is Moje Sklepy, which by now already combines Groszek, Euro Sklep, and ABC. We are working more and more together. As some of you have mentioned, yes, this started more as a kind of back office tool, and it's more of an application, and it's more of a way how we manage the structure. We want this to become more and more also a consumer-facing brand, something that really builds the recognizability and the way how those stores interact. We have our biggest soft franchise banners, Gama, ABC, Euro Sklep, Groszek, and Lewiatan.
We have our hard franchise model, Delikatesy Centrum, which is a mixed model because we have two-thirds franchise stores, one-third own stores. We have our Duży Ben, which is mostly agent stores, and obviously Frisco coming on top of that. When you take all of these together, this is how we come to the 15,600 stores that you have seen on the first slide that represent together some PLN 35 billion of retail sales. Obviously, our goal now is to make the cooperation between those franchise stores bigger and our integration with them more robust. There are two principal ways of how we integrate them. One of them is digitalization. It is the rollout of our POS system.
By now, a vast majority of our stores are now connected with us in a way that we see and can analyze their retail sales, but more importantly, we can negotiate on their behalf and program online retail promotions that they have. Once they accept it, they have it in their system. Out of those 15,600 stores, 13,000 are connected to us one way or the other, either through their bespoke cashier system or our POS system, which gives us a possibility to be speaking on behalf of those stores and working with those stores like a virtual retail network in a way that we have not been able to do before.
The other element, you've probably seen the announcement that we've also launched a dedicated buying group for all those stores that allows us to represent them vis-à-vis the producers and the own brand producers to be able to also increase their negotiation power. These are two vectors of how we want to drive this integration. The other element, obviously, for running those stores is expansion. Now, as you can see, we are also tracking more and more the market share of our franchise stores in the total market. Yes, you can see that in 2024, their market share declined. It declined to 10.8%.
Having said that, it declined by 0.4, which if you put this together with the decline of the entire market, which was 2 percentage points, you see the variable, how those stores are more competitive and how this network performs much, much better than the entire market that surrounds it. We will be now very much focused on making sure that we increase this 10.8 percentage points number, that we work stronger in a way to keep the market share of this retail organization that we represent. One of those, obviously, most important tools is expansion, something that we have not been doing enough in the past quarters because we focused more on integration. We focused more on building the foundations and also on the cost-cutting side.
Going forward, we will be pushing more the accelerator in terms of growing the store count of our stores, both in the hard franchise and in the soft franchise that you can see being split down here. Okay. You can see the first fruits of that in the second half of 2024. In the first half, as those of you who have followed us, you remember we have very much focused on the cost side of things. Obviously, like most retailers, we were hit by the 20% minimum wage increase. That was something that really pushed us to, again, go back to our cost structure and review what we can do. Therefore, for a certain moment, we were not expanding our store count so strongly, something that we have reversed in the second half of last year.
Only in the last month of last year, we have added 240 stores to our network. We have still accelerated that in the beginning of this year. We have increased more than 150 stores only in the first two months of this year. We will continue driving this number because we believe that now adding the stores to our network is the biggest value creation that we can deliver. We have one important asset when we are doing this expansion: the fact that the stores that are working together with us have better like-for-like sales than the ones that do not. When we talk to the store owners, we can now statistically prove that the stores that are connected to our digital POS systems that are running our promotions have, on average, a couple of percentage points higher like-for-like sales than those who do not.
We just see that the stores, that this is a strong argument for those stores to join us, together with the fact that, obviously, a franchise gives them better cost efficiency, better buying power, etc., etc. As I mentioned, one of the important tools that we now have in both expanding our franchise network and running our franchise network is our digital platform, our Eurocash platform that we are developing together with Comp and that we have merged with the EMS Kleppy that you know from the past, have been now around, and they count more than 13,000 stores. We see this as a very, very strong competitive advantage of Eurocash because it is generally accepted, not only by us, but also by the producers in the market, that in the independent market, only the digital stores can, over the future, survive.
We are the only ones who can really provide a digital tool for all stores that is viable, that is out there, that is plug and play, and it really functions. It functions both ways. It gives a very, very strong retail advantage for those stores connected. On the other hand, it is also a great tool for producers who understand their sales in the independent market much better, who have much better online feedback loops on what sells and what does not sell. Therefore, they are much more inclined to invest in promotions and prices on those elements that go through the platform because they know that whatever they do on the platform actually reaches the consumer versus the independent market where you never really know.
This is a great, this is the actual selling element why this digital tool is so helpful in connecting the dots here, obviously, the consumer being the only one, the endpoint. Two metrics, one of which I've already mentioned. On the top chart, you can see the uptick of execution of promotions by store format. You can see that over the last two years, we've been able to increase the execution of our retail promotions. Promotions that we have negotiated with suppliers and that we have rolled out nationwide and programmed into the cashiers as a consumer promotion have grown significantly by two-digit percentage point numbers over the last 12 and 24 months. You can see, for example, that in the supermarket space, we've gone from 77%- 91% of all stores that execute our promotions.
I think that is quite remarkable. I cannot stress enough that we're speaking about a soft franchise system, which is really based on the fact that it's an association of independent store owners. Still, 91% of them execute our promotions. That gives us, on the one hand side, a huge credibility when negotiating with suppliers on their behalf. On the other hand, it gives us a much bigger space than we ever had when it comes down to driving consumer benefits because only when you can build a consumer benefit, communicate a consumer benefit, and he or she sees it in the store, do you have actually something that you can put on a billboard or put on an ad.
That was always the biggest problem of the independent store, on the independent market, that you could market a lot of benefits, but you did not have the standards. You did not have the execution. Now, through virtual ways, we are doing this, and we are doing this in the supermarket space. We are doing this also in the pink space, which is the stores which are not associated with our franchise but are just running our POS systems. We see this as a way of building our footprint not only in our franchise network, but also in the stores that are outside of our franchise. Below, you can see what I mentioned before, which is the outperformance of the stores that execute our promotions versus the ones that do not.
As already mentioned, this is, I think, one of the biggest selling arguments that we have for the stores to join our network. What were the milestones and what were the focus of 2024? What do we want to achieve in 2025? As a general comment, I would just say 2024, for us, even though it was a brutal year in terms of macroeconomics, and obviously, we were hit with everything from cost inflation, sales deflation, and price war, it was, within our company, mostly about building the foundations and really building the basis of the strategy that we've announced, which is, first and foremost, integration of our wholesale businesses, rolling out of our digital network, transforming our retail stores, and developing of our projects, our growth platforms. I would say that we are coming to an end of this transformation phase.
I think that the bulk of the work that we had to do internally is done. In 2025 and going forward, we will focus much more on using whatever we've built in order to really drive the business. In what we call the omnichannel wholesaler, there's only, as I mentioned, two directions now that we focus. One is increase the store count, aggressive expansion, and adding as many of the independent stores to our network, just in order to just remind the numbers. In the independent market, there are 50,000 stores, with practically all of which are some way our clients. We are dealing on an active daily basis with 40,000 stores. You can assume that we have some kind of working relationship with most of the independent stores in Poland. Fifty thousand independent stores are out there. Fifteen thousand out of those are our franchise stores.
We are now going for those that are not our franchise stores. We want to expand as much as possible. That is one direction of our growth. The other direction is the loyalty of our stores, really driving the integration of the stores, both in the retail element, but also, very simply, driving the share of their sales that they buy from us. This loyalty is now becoming a key focus of our wholesale. It is entrenched in everything we do. We really try to align the company on a very, very simple direction. Are we increasing the store count? Are we increasing the loyalty? Really simplifying our business model as much as we can. The digital and data platform, as I mentioned, is a tool to enable just that. It is our sales argument to the stores that gives them an advantage.
There is another aspect that is important for us, which is the retail media side of things. As already mentioned, our stores represent a huge part of transactions in Poland. That means a lot of eyeballs go through our stores. As you know from the other retail companies that you cover, retail media becomes and has become an important issue in most retail companies as a profit booster. We are now very much engaged in rolling out our retail media platform, both within our own stores and our franchise stores. We will communicate the fruits of that very soon. On the retail franchise, obviously, we are very much focused on, on the one hand side, optimizing our own store portfolio with the rollout of our DC2.0 concept.
We are also transforming most of our own stores into agent stores in line with our belief that our market is our franchise and agent market. We are also very strongly driving our growth platforms, first and foremost, Frisco, that has been really checking every KPI that we have given them so far. It is very, very well set to become not only the market leader that it is, but leveraging its position to finally become a profitable company. The same is true for Duży Ben. One last element that we have really added to the strategy and had to focus on in the last year, which is our cost discipline, we are going to see in the results.
We have been able to keep our entire cost base almost flat, increased by 1.9%, taking into account the cost inflation that we had and the fact that we are driving expansion. That is relatively limited. We are going to continue that path. Piotr and I, we are really very dedicating ourselves here to really drive more profitability of the sales that we already have. In a nutshell, when you just want to break it down into four very easy pillars: sales, margin, additional income, and cost, what are we doing on those fronts? As mentioned, on the sales side, we have simplified our model, and we are now simply going for more stores in our franchise system, more loyalty from our stores. Already, the franchise systems that we work with represent 70% of our sales overall, our wholesale sales overall.
I expect this % to grow, and I expect the sales of this franchise network to grow strongly in line with their higher like-for-like sales, their higher store count, and our loyalty with them. On the margin front, he is not with us here today, but I can only say that Marcin Sulejowski, our new Head of Buying, is doing a fantastic job. Around him, we have built a new unit, which is called revenue management, that you know from most retailers. I can only say that we have done a very, very good job in the last months and quarters to understand better how our margin is built and how we are looking in the different client segments in the different clusters.
Already now, and you are going to see this stronger in this quarter, we have been able to be very disciplined with our margin, understanding of where we are really building margin, where we are losing margin, and being much more smart about how we allocate the investments and prices. The revenue management is an important part of making sure that we keep profitable as a wholesaler. Marcin has also been very key in building our buying group, so the one that I mentioned that associates our retail stores. We continue being data-driven so that when we speak about building our loyalty, we really measure the investment that we give into each store, and we really understand what is the profitability that we gain in return.
Additional income, as I mentioned, we have now a new member in our Eurocash family, which has been around for some time. It is time to kind of come to the podium, which is IPH, our data company that is now fully becoming the owner of everything data-related in Eurocash. We have now worked in a way that all the data streams from our stores, from us, end up in IPH. We want IPH to really become sort of the agent of understanding the independent market. For the time being, IPH, which is analyzing both our wholesale sales, but mostly the retail sales and the consumer side of things on the independent market, is a tremendous source of knowledge for us within, obviously, the boundaries that we have.
More and more, it is becoming a source of knowledge for other players in the market, notably suppliers and store owners. We have been working together with Deloitte. We have partnered with them to be working the insights based on the data that we have to, on the one hand side, be able to provide insights to suppliers of how they can improve the return on their investments in the independent market, how they can improve their price points, improve their marketing spend based on real-time online data that they have from the independent market. On the other side, just as important or even more importantly, give insights to our store partners of what kind of assortment, what kind of price points they should have in order to have more retail sales. We have this data.
We have very good data scientists now on board in this additional company, IPH. I believe today it is a company that makes us smarter. I expect that in the future, it is going to be a company that makes us more profitable. On the cost side of things, again, the one part is the projects that we are now running both on the cost side. We have now, together with an external consultant, run a zero-based budgeting program where we are reviewing not only the FTE part of things, but really our entire cost base. We are continuing taking costs out this year, and that will build profitability also for the next years. We are also reviewing our logistic costs, taking a very hard look at activity-based costs. I expect that also on that front, we will become more efficient.
Obviously, very importantly on the cost side is that we have two business units that have been contributing negatively to our EBITDA through their growth expansion, Frisco and Duży Ben. They are now coming more and more to the break-even point. As they are approaching their break-even point, they are obviously going to increase our profitability overall. With that, I would like to end this first strategy part. Obviously, I'm more than available for any questions that you would have, both on this and the result at the end of this session. I would now pass it over to my friend Piotr, who will take you through last year's results, and I'll take some comments later.
Thank you, Paweł. It's a hard job to do the presentations right now after such an exciting story that Paweł developed, but I will do my best.
In terms of 2024 performance and sales and overall results, we'll focus today on sales, gross margin, EBITDA, and of course, working capital and net debt, which are very important for every trading company. As concerns sales performance, basically, it was a flat year for the company with 70 basis points down in terms of 2024 performance. As concerns gross margin, I cannot be as positive saying about that it was only 40 basis points because it resulted in a significant deterioration of our results. However, in Q4, it was just a three basis points difference between Q4 2024 and Q4 2023. As concerns working capital, we did our best, especially in Q4, driving down the net debt level to 0.63. It will remain our top priority to keep our net debt as low as possible and to optimize in terms of financial costs. We are in the flight.
Okay. As concerns the segments and business units we operate, as you all know, Eurocash is extremely strong in its wholesale segment. Out of this segment, there are three units we can identify and discuss about. It's our tobacco and impulse product segment, Eurocash Distribution, and Eurocash Cash and Carry. While the first one was positive last year, driving the sales to the number of PLN 11.5 billion, the other two were negative. They moved into negative territory with -3% and -5%. The whole segment delivered PLN 23.1 billion in sales. For a couple of years, it's not only the wholesale segment that drives Eurocash results and sales performance. It's also the retail part and projects. As concerns retail, we identified three separate segments. It's a segment of own and joint venture stores. As concerns Delikatesy Centrum, it's a Delikatesy Centrum franchise business.
We also have the interest in Inmedio and Archeon. As concerns our growth platforms or projects, as we used to call them, we are quite happy about the performance with 15% overall growth in sales. I think we'll deliver some more comments in the future on the prospects of those two. To be honest, we expect some questions dedicated to those projects too.
We'll be disappointed if we don't get them.
As concerns the structure of EBITDA, group EBITDA—oh, thank you, Paweł. You're so helpful. Paweł was better prepared for this presentation than me. As concerns EBITDA by segments, we had some deterioration of this profitability measure in respect of 2024 in comparison to 2023. Last year—sorry, last was 2024. In 2023, we had PLN 648 million EBITDA, while in last year, it was PLN 561 million.
As you may see in the chart, the reason for deterioration last year was mainly through the projects, which brought us with PLN 100 million negative impact last year. Retail EBITDA, however, declined by PLN 58 million. If I may deliver some comments on the future growth and future expectations, as concerns 2025, we built some strong and solid belief in improvement of all the company segments in terms of profitability.
If I may just one word of comment here, I think that this chart illustrates it quite well because most of the time when I get questions from investors, they are growth-oriented questions, like, "Where do you get growth?" Obviously, they are very important because investors try to invest in growth markets and in growth companies. In my view, Eurocash doesn't have a growth problem.
First and foremost, it has a profitability problem because, as you have seen, out of PLN 32 billion, we've been able last year to squeeze out PLN 3 million of net income. That is why we, as a board, are not only focused very strongly on outgrowing our number in terms of franchise count, but also making sure that we squeeze out more profitability out of the sales that we already have. I think this shows you quite well that on the one hand side, the wholesale business is profitable, and our job is to make sure that the profitability stays. The retail business is still way below average in terms of its profitability, measured mostly and coming mostly from the own stores, which is something that we've been working on a couple of quarters now.
I hope we can see the end of the light of the transformation of those stores as we are running the DC2 program and the agent program under our new Chief Operating Officer and CEO of the own stores, Krzysztof Trojanowski, who has joined us from our most comparable competitor, which is Stokrotka. Stokrotka, who by the way, has a much higher EBITDA margin than us. I think it's a little bit in this format, the relative benchmark. You can see also what has been weighing us down in terms of profitability. The one is the growth platforms that we are now really focused on driving to break even. Out of the huge portfolio of projects and smaller companies that Eurocash in the past had, we only kept the two that we are confident that we can drive to full profitability.
As you know, we have closed down Contigo. We have closed down a lot of projects that we were not really sure that we can really drive home. Now we are really focused only on Frisco and Duży Ben. We are committed to making sure that we get this red bar that you can see here over the line. The other element why you hear Piotr and me speaking so much about ZBB is that we simply believe that our CHO is too heavy. We spend way too much on CHO. That is, in a certain way, also a legacy because we used to be a much more complicated company covering much more space, doing much more things.
As we now simplify the business, pretty much going down onto wholesale, retail, and the two growth platforms that we have, I think we do not need that much of a CHO. We are now reviewing the processes. We do not want to be making dumb cuts, but we are reviewing the processes of what is the actual amount of head office and central head office costs that we need to be really supporting the business and to drive it. By any benchmark, I think we still have space here. That is why I am just putting this point because every time we speak about cost cuts, etc., I see that investors are kind of, "Yeah, yeah, okay. This is hard.
This is your homework, but tell me about the growth." You just do the math and try to think about what would happen if we would add one percentage points of our net income margin out of the profitability measures that I just mentioned, how much sales growth we would need to generate to generate the same amount of net income. You just can see why we are so committed to looking at the profitability sides of things that is really driving the needle here.
Thank you, Paweł. Out of all the achievements of last year, I think it's worth to highlight what the company did with the costs. Although it was very tough year in terms of increase of minimum wages and the overall cost of external services for the companies, including gas, electricity, and so on, our total cost grew only by 1.9%.
If we exclude depreciation, it was only 1.7. It was an enormous effect, I need to emphasize. We will try to focus on the cost sides, especially my team, in 2025 and next years because the cost discipline, once introduced, should be with us for a longer period. The top priority, however, of me as a new CFO will be the working capital and the overall deleveraging of the company. We know, and you see it in our balance sheet, in our P&L, in our balance sheet, how important the debt is, and in our P&L, how heavy the interest costs are. We did a lot in Q4 and in the whole 2024. I would like to thank my whole team for the efforts put, especially our Treasury Director, also present in this very room. Martin, thank you. Ho, ho, ho. Yeah.
The four days in terms of cash cycle optimization was a big effort. It is not the last word from the side of Eurocash. We will work heavily in terms of the rotation measures, day sales outstanding, and day payables outstanding, of course. In terms of the most crucial part of the working capital for us, stock, it is an internal program implemented, launched this quarter. We will be more than happy to deliver some comments and results on how we're doing with the overall level of stock in the company in the coming months, quarters, and hopefully years.
I would just add that this is the other part of the, I would say, profitability program of Eurocash that we really want to tackle. Yeah. I mean, I mentioned the CHO and the overall heaviness of the entire structure.
I mentioned the cost of the growth products. The other element is obviously the financial cost. There are a lot of elements that go inside here. I'm very confident that Piotr will be able to connect the dots to make sure that we bring this down as we become more efficient. That covers a lot of space. That covers both, obviously, work with suppliers, but that also works very strongly on work on inventory. We have now a whole system on a project on our logistical side where we just try to review how much stock do we actually need to keep. I know that we've always been communicating and telling you guys that Eurocash is a world champion when it comes down to working on working capital. We believe we can be better still.
The more we can drive down these financial costs, the more we can drive the profitability of the group.
We are fully transparent in terms of the measures we reveal and we provide you with. We do not focus only on the pre-IFRS 16 net debt EBITDA level. We also quite openly can discuss net debt to EBITDA after IFRS 16. While the first one was extremely fantastic for the company, it was 0.63, while the other that includes all the trade finance instruments and all interest-bearing debt in fact the company had in 2024 is on the very satisfactory level of 2.53. Of course, we will work hard on both of them to push them down. As concerns the key financials of 2024, let me summarize what we have achieved and what we will refer to in the coming quarters and years.
We had a drop in revenue, 0.7%, from PLN 32.4 billion to PLN 32.2 billion last year. As concerns gross profit on sales margin, it was, in nominal terms, PLN 4.3 billion in relation to PLN 4.4 billion in year 2023. The profitability in percentage points on sales was 17.4% in relation to 13.6% in 2023. The drop of 20 basis points. EBITDA, the EBITDA post-IFRS 16, the full accounting EBITDA, PLN 933 million in relation to PLN 650 million in year 2023. In terms of percentage points margin, it was a drop from 3.3%- 2.9%. As discussed earlier, it was like a 40 basis points decrease, which we find, of course, disappointing. It leads us to provide you maybe not the guidance. It's too early to give anyone with a guidance, but to strong belief and determination of the management board not to have the results similar to 2024 in the future.
We'll work very hard and we'll focus on bringing this gross margin higher and keeping the costs down. That's my credo as a new CFO. I will work very hard to prove it's doable and achievable. In terms of Q4 results, the quarterly results, we, of course, provided you with the results in the presentation. To most extent, they reflect, they mirror the results the company achieved in the whole 2024. If you don't mind, we would prefer to keep the time we have for Q&A session to have this meeting as productive and as fruitful as possible for all sides. Of course, we'll be very happy to answer all the questions related to Q4 only, as there is nothing to hide, as you see in the presentation.
We would just one slide maybe because it was at the end of Q4, and it is probably worth mentioning, and that is Frisco and Duży Ben. I think we cannot emphasize enough how satisfactory their growth has been, being given the challenges and growth that we have seen in the market overall and that we have seen other parts of the market. Particularly, Frisco is a company that we really now see on the best path to break even. As you know, we have invested in the automated warehouse last year. We have also done some changes in the management board of Frisco. New CEO, Magda Surczkiewicz, who joined us from Spain, she was running Gorilla there and then was associated with Dia.
We have now a new board there, and together with the team, I'm really confident that they have everything they need in order to get this format to be one of the most recognizable brands in Poland. We see tremendous acquisitions in all cities that we are present. This is particularly visible in what we call VIP clients. These are clients who buy with Frisco every week. These are clients who have chosen Frisco as their number one store. They make their main grocery shopping through Frisco. That is something that is a measure that we really wanted to focus on because these are the people who drive Frisco, and they drive also the profitability of Frisco. We continue expanding that.
We are going to be much more consumer-focused as we do to understand those customers, to grow their number, and increase our share of wallet of those clients. We have also launched, which has been extremely positive, a cross-dock from Warsaw to Poznań, so a different way to deliver satellite cities through a logistical warehouse in Warsaw. We see a tremendous uplift in Poznań. That shows us a different way of how we can expand. As already mentioned, I believe that Frisco and Duży Ben are now on a good path to become break-even, that you're going to see this red bar coming up. Okay. Q&A.
We encourage you to ask questions in Polish. I address it to the people gathered together in this very room. Of course, we will wait for the online questions.
If you do not speak English, then you must have been very bored in the last hour.
Adam Kucza, do you have any questions?
Yes, we do. We wanted to give a chance to people in the room to ask.
Do we pass around mics?
We do have one.
Okay.
Could we ask you? We have already one person. I think hero is number one. I just want to be fair.[Foreign language].
The question was, the current Frisco sales current level is at around PLN 500 million.
The question was, what is the amount that we need for break-even and what is the CAGR that we expect going forward? First answer is yes. We assume that around PLN 800 million-ish we are break-even as a company. Just to remind you, Warsaw is already profitable. Around that space, the company, that level of sales, Frisco becomes profitable, so just under PLN 1 billion. We expect that Frisco will continue with the CAGR that we have seen in the last year. We can already see this quarter that it continues the growth path that it has shown us last year, so 20% plus CAGR, which is remarkable because, as you know, the growth path of last year was also boosted by the fact that Barbora left the market. We picked up clients from Barbora. Even so, we've been able to convert clients.
I think this is linked to the fact that, first of all, there is no one in town anymore. We have also been able to really acquire new clients through better marketing. Here in Warsaw, you do not see that much because Frisco is such a known brand. When you drive around Poznań, Wrocław, Kraków, you are going to see a lot of billboards on Frisco. We really want to drive home the awareness now. We are working also much more to be working on the retail side of Frisco, understanding and addressing missions of the consumers that buy with us every day. 800 is the break-even that we need. At the CAGR that we now drive, I expect somewhere around end of next year, beginning of the following year, we should get there.
[Foreign language]
The question refers to the central head office costs. PLN 150 million last year, PLN 150 million, PLN 150 million, PLN 150. It's, of course, a lot. The optimization and effectiveness programs that Paweł discussed just a few minutes ago, they refer to a decrease in these costs. It's zero-based budgeting, but also the other two ones. I think you would like to speak about them because you are the author of both of them.
Yeah, that doesn't address CHO. By the way, we've shown you CHO, but we also have head offices in the other. I think it's difficult to pin a number on that one, but I would say that I think that this cost can be reduced by at least a third. At least a third. We have two other projects.
Thank you, Frisco, for mentioning them. Again, on the cost side, one is the logistic program. We are now really reviewing all of our logistical network to be reducing both our fixed and variable costs. Fixed costs, obviously, is reviewing all of our logistical centers. We have 15 of those. They have grown organically, but also through M&A. We are now looking at whether all of them are really optimal. I think it has been some time that we have not really done that exercise to understand, do we need all those centers? Can we make a better job also in line with planning the transports? There is the variable cost that, for me, is also mostly a function on the kind of assortment that we have.
We have now taken an external advisor who's helping us to really make an activity-based cost assessment of how much stock and how much assortment we need to fulfill the needs of our most important clients. Our most important clients are our franchise clients. We are trying to simplify a little bit both the client segment that we address and the assortment needed to address it. I expect that out of that, we will come with a tremendous improvement in stock levels and significant improvement on logistical costs as a percentage of sales. How much exactly, it's too early to tell. I cannot tell you yet. The third element that you mentioned is the revenue management. I spoke about it briefly in the presentation. That is something that is under Marcin Sulejowski.
It is driven by a team that has really focused on combining the sales and the buying part to really segment our clients by profitability, understanding what makes a client profitable in the first place and how can we build the right incentives for our clients to become more profitable. We can see the outcomes of this work already. You are going to see it in the first quarter of this year as well.
[Foreign language]
Okay. The question was about our price policy. The question was whether after the Q3 we have relaxed somehow our approach to trying to close the gap between the independent market and the discount market.
That was the question. The short answer is no, we have not reduced our ambition. It is true that around Q3, there is a lot of promotions going on. We had to review the efficiency of promotions, particularly as you know, as normally is the case, around the beginning of the year, we have a lot of suppliers coming in with price increases and increases of regular prices. It was somehow, and that's always a moment, at least for us, to understand where is the market heading. As you remember, we had a price war going on during all of 2024. It was a little bit of a question of, as suppliers are increasing prices, is the market going to follow or not? We took some time to understand it.
Currently, I'm speaking only from the stores where we control the prices, particularly Delikatesy Centrum and the promotions that we run through the POS systems. I would reckon to say that we have been never closer to the discount market than we are now on the part that we control the prices. On those elements, we are just as competitive as we were last year, if not more. Obviously, it takes two to tango. That's not only a question of our price policy. It's also the question of the margin that we get from suppliers. Our most important job is to make sure that we get this margin from suppliers. It is true that over 2022 and 2023, most suppliers have increased their regular prices on the back of inflation of costs, etc., etc.
It is true that most of these costs have come down, but the prices have not come down. It is our job as a retailer and wholesaler to make sure that we, let's say, engage very actively with our producer partners to reduce costs and prices where we can, which is what we're trying to do. It does not always work. Sometimes it takes time. You are right to say that around Q4, we might have relaxed the prices a little bit. As we go into the new year, our price policy is just as competitive as it was before. It is an important factor. I mean, by the last research, still over 70% of Polish consumers said that they look at promotions and they look at prices when they do their shopping. We cannot leave our stores out of price.
You have a follow-up question.
[Foreign language]
No. Okay. The question was, to paraphrase it, how should I think about the relation between price policy and margin policy? Is that your question? Yeah, that's a question. No, when I say that we try to increase our margin and build on revenue management, we do not want to sacrifice our price policy. We base on the assumption that we have to give competitive prices to our independent stores. For those of you who were on the strategy event in 2022, when we announced the strategy, the gap between the independent market and the discounters was at 8 percentage points at that time.
It has now gone down quite significantly, thanks to also the investments and the promotions that we have done. Obviously, we will never get to discount prices. That is not the point because the independent market is also about convenience. A Żabka does not have Biedronka prices neither. There is a certain price policy, price point that consumers accept. It needs to be in a certain level. It can be four to five percentage points, and that is acceptable. Our approach is we keep the price points of our stores. Then our margin, we need to work on the one-hand side by better negotiations with suppliers.
One of the tools to do that is the buying group that we have just built that gives us a possibility to represent the volume that those stores have and to negotiate with the suppliers in the same way that a Biedronka and a Dino and a Żabka does. As I tried to show on the first slide, we represent a higher sales volume than Żabka or Dino. That's why we should have the same buying power as the biggest retail players in this country. One very important element is the producers. The second element on the revenue management side, it's not so much the price points, but it's really working on the way of how our margin mix functions.
Particularly on the wholesale side, obviously, it makes a huge difference between a client who only buys from you cigarettes and maybe strong alcohol, where our margin is relatively low, to a client who buys the entire portfolio where we can mix our margin much better. The revenue management element helps us to understand client segmentations in a way that we can build a mix of margin better and to not subsidize margin where not needed. I hope I answered your question.
[Foreign language]
The question was about the excise tax in the tobacco field. There are two elements that this excise has done, and that are quite unusual about it. I can speak about both.
The first thing that is unusual about the excise tax this year is its timing. Because rather than to come in in the beginning of the year, it's rolled out. Effectively, consumers can buy old cigarettes with old excise tax until the end of April. That has created some shifts in the market because both the stores and us, we are not used to this. What you need to understand is that there's a fine art of calibration that the stores do in order to maintain the old cigarettes as long as possible to have a competitive price, but then do not stock enough to not end up having old excise tax cigarettes that after the end of April, you can no longer sell. The stores absolutely need to avoid sitting over on old stock at the end of April.
Normally, there was a kind of system that every end of the year, everybody kind of knew what they have to buy. Now that this is pushed to the end of April, everybody is trying to test the market. As an effect, what we have seen is that the stock up, the selling down of the old stock, and the building up of new stock has been shifted from end of year, December, January, to now March, April. It has had an effect on our tobacco distributor service in the sense that we can see that there's a lot of sales that is now pushed towards April as stores try to sell down as much of their stock before the end of April, and they will stock up only just before. We can see this as a shift.
You will see in the first quarter that SAS will have less sales than you could have expected by their growth rate, which is an effect of that. It is going to flat out over the next quarter as stores stock up again. I would say that is one element. The other element, as you know, is that the excise tax has not been proportionate around all categories. There have been some categories that have been particularly hit, particularly the one-time electronic cigarettes that have been hit with a huge excise tax that all but kills this category, more or less. I mean, this becomes extremely expensive for consumers. And to be honest, the jury is out there how consumers will react.
The expectation of the market, as far as I can understand, is that whatever supply is taken out of this throwaway electronic cigarettes will kind of get shifted to the more classical kind of vaping instruments. There is also some innovation going on in new other instruments that try to replace it. We do not know where consumers are going to go. We expect that there will be some drop in volume and drop in consumer demand because of the higher prices. Overall, we believe that the excise tax will net-net turn up positive for Eurocash so that the drop in consumption will be lower than the increase in price. In PLN terms, our sales will grow, our market share will grow, and we should be able to maintain margin. That is our assumption for the time being.
I cannot really guarantee you that this is going to happen because nobody knows what the consumers will do. There might be that consumers will end up not smoking at all, or they might end up smoking something different. Obviously, that has an impact on margin because not all of the products have the same margin.
[Foreign language
I'm not sure whether this is something that we can achieve in.
The question was, because at some point I just said, just imagine if we were able to just increase the net income profitability of Eurocash by one percentage point, what would come out in terms of net income and how much sales growth we would need if we wanted to do that just by sales growth. The question here is, okay, how seriously are you about this one percentage point, and can I put this in my model for 2025? I'm not sure you can put this directly in 2025, but this is definitely where we are heading at. Because at the end of the day, a wholesale model should be—our wholesale model is working around an EBIT margin of around 3%-4% and should be able to run on that margin.
A normal retailer on a proximity supermarket scale should be working at an EBIT margin of also roughly 4%, 4%- 5%- 6%. That's not unusual. Our growth platform should get there as well. There is absolutely no reason why the entire group should not be able to reach the 4%-5% EBIT margins so that we would then end up in that space. Domanski.
Okay. Let us go to the questions from online participants. We gave quite a big handicap to the people here with us. We have lots of questions, actually, coming here. Just to remind you, one set of questions basically refers to the outlook for 2025, first quarter, first half. Also, if you could just please recap, let's say, the most tough question regarding the guidance. That would serve quite a bunch of questions which we're getting.
Okay.
Obviously, the short answer is we normally don't guide, and we particularly don't guide in that short frame. I can tell you that, obviously, we as a management, we are committed to break the tendency that we have unfortunately entered in 2024, where before 2024, I've been able to stand in front of you and say we have a very good streak of delivering each quarter a better result than the result before. We were a little bit like Bayern Munich or something like that, where we would have a winning streak by every match. Unfortunately, we had our 2024 that didn't help. We would really like to come back to that tendency where we improve each quarter year on year.
That is not only to make sure that our new CFO is satisfied with us, but because we have option programs, etc., and we think that we can get there. Our minimum assumption and what we are fighting for as a management is to improve quarter on quarter and show a positive tendency year on year going forward as we transform this company. Obviously, everything that I have just said that we are doing should end up building more net income. Obviously, the first quarter of this year is particular. Please bear that in mind. Obviously, the first quarter of each of our years is always the worst quarter because seasonally, that is always where we end up in negative turnout. We build ourselves back at the end of the year. This quarter is particular because we have a quite unfavorable calendar effect.
We have Easter, which is extremely late in the cycle this year. While last year, most of our Easter sales have been actually realized in March, this year, the dominant part of Easter sales will end up in April. It becomes a little bit uncomparable. If you flatten it out and you just look at H1, the first half of 2025, we obviously do everything in what we can to make sure that the results of the first half will be better than the year before. I have no reason, based on what we see now, to believe that this is not going to happen. Let's leave it there. This is as much of a guidance as I can give.
Okay. A set of questions regarding, let's say, the growth potential of Europlatform, M-Platform, Moje Sklepy, Moje Sklepy app.
If you could give a quick recap where we are coming from and what is the objective and what is the potential which we see here with this integration of the stores.
When we first spoke about our POS systems, that was in 2022 when I joined when we launched the strategy. We were at 2,000 or 3,000 of the POS systems. We have now 13,000. That shows, on the one hand side, that we have a very good capacity as a team, as an expansion team, to go out and connect stores. That is also thanks to the fact that we have been, I think, pretty smart because we made a JV with Comp, whose job it is and who is really good in running that technology. I think that we combined forces that we have our sales force that knows the stores.
We have their sales force who knows the technology. Together, we've been pretty good in rolling this out. For the time being, we have focused on connecting our franchise stores because the first priority for me was to be able to say all of our franchise stores are connected and we work with our franchise as if it was a network. Going forward, we are going to focus on connecting the non-franchise stores for two reasons. First, because it's a fantastic way to convert them into franchise. Second, it is a fantastic way to be working more with them because if they're connected, we know what their needs are. We know what they're buying. We know what they're selling. We can much better address them as wholesale clients. We can give them more competitive advantage thanks to the promotions that we have.
I assume that rolling up Europlatform will be quicker for us than rolling out our franchise banners because becoming a franchise store of us means that you have to fly our banner. You have a price policy that you have to accept. There are certain investments in your store that you have to do. As I already mentioned, we've accelerated that, but that's a process that takes some time. The rollout of the POS system is much quicker because all you have to do is accept our cashier. As a matter of fact, in the last quarters, we've been giving those around for free. We pretty much financed this cashier through the promotions that we are being able to run. It is a relatively easy choice for store owners. That's why we will be doing this quite aggressively.
We see strong support not only from our store owners who see this as an advantage, but as I mentioned, also for suppliers. Please do not forget that the independent market is an extremely expensive channel for all of the suppliers. If you are not connected to a store, you have no idea what is going on in that store as a supplier, as a producer. What is the price of my products? Are my products there? Does this store have the entire variety? Obviously, the only way for suppliers to be measuring that is by sending their physical sales force and checking those stores, which is the most expensive way of how you can do merchandising. When we are connecting those stores, they have online data, store by store, of, "Was your product there? What was the price when it was sold?
Is the promotion being driven? For suppliers, it's such a much more efficient way to be working with those stores. That's why they are willing to be paying for those promotions because it's just much more bang for the buck for them. That's why we see that in a certain way, the stars align. I heard it from a lot of suppliers who actually say, "We really think that only the digitized stores can survive. You guys are the only ones who have the tool to digitize them. Just go out and do it." That's why I believe it's going to be a huge lever. Now, in terms of how many couple of thousand of stores we'll be able to connect this year, I cannot give a guidance on that.
I can only tell you that we're going to be really laser-focused on continuing rolling this out because we see this as a kind of avant-garde to then continuing building our franchise on top of that. Again, we have a blue ocean of 35,000 stores that are not connected with us in a franchise in our independent market that we trade with on wholesale. This is where we want to go forward.
Thank you very much. Being conscious of time, the set of last, let's say, three questions or group, you have three assets, mainly Delikatesy Centrum-owned stores, Frisco, and Duży Ben. If you could give us some more light regarding the plans for the three, do you intend disposal of those assets or, on the other side, investment and growth here? That would be the final set of questions.
Let me start with the business side of things of what we think. On stores, as I mentioned, has been always our Achilles heel in a certain way. We are a company that is very good in driving franchise. For the time being, we've not been so great in running our own stores. We have considered, and as you know, we have all the time a strategic option review ongoing. We will be always opportunistic about those stores. Our base assumption for the time being is that we will make those stores profitable, and we will get them to shine eventually. With Krzysztof Trojanowski now as the person really dedicated to those own stores, I'm pretty confident that we will do it, particularly as we have two main projects how to do it.
The first one is DC2Zero, which is on the concept side, just to make sure that we really nail this proximity supermarket concept that we so much believe in in the owned stores. The other concept and the other project, which is more on the operational side, is to convert all of our owned stores into agent stores. We have now converted over 100 stores from owned to agent. We can see that all of those stores are performing better. They have better cost efficiency. They have less losses. They have more like-for-like sales. The same is true for DC2Zero. We are now rolling out both of those projects in the owned stores. Our base assumption is that that is what's going to be needed for making sure that those stores get into an acceptable profitability.
Therefore, thereafter, we can go really forward driving the expansion of our franchise Delikatesy Centrum network. Duży Ben, it's now all about getting it to break even. There are two ways to do it. The one inside, obviously, we are driving the sales. As you can see, we have had double-digit sales in the last quarter. They continued their growth path. We are making sure to be growing that. As we are now, as in sports, you grow volume, but then you have to grow shape. Now we are also committed to driving shape and particularly making sure that on the existing store network level, we also drive more profitability. We are now reviewing the assortment.
We are reviewing margin per category to make sure that we get all of the stores not only on that break-even point in terms of sales, but also on the break-even point in terms of margin and cost. Overall, Duży Ben now is about driving it to break even. Frisco, I think, is really right now our number one consumer brand. As I already mentioned, it's a fantastic acquisition. We are super happy with it. This year, we're just making sure that we run it and we continue to make it shine. As we go forward, I think we will have to ask ourselves the question of how we actually leverage this asset because I'm absolutely certain that within our portfolio, it's undervalued. We will have to see what options we take in order to make sure to realize the actual value that is sitting with Frisco.
Yeah. Do you feel like I answered the question?
Yes. Thank you very much.
Okay. If you feel that, then
that would be the final remarks on your side. We will closely finish the session.
I can only say that we've had a fantastic pick in Piotr Nowjalis, who ever since he joined us, made our share price jump by 30%. That is actually true. That is actually true. Now he raised expectations. I think that I hope that every quarter he will continue doing that. In that, it is going to be harder and harder. You continue doing your magic. In that space, I thank you very much for being here.
Thank you very much.
Thank you.