Good morning, everyone, and welcome to the Full Year Results for 2022. Let's start with the highlights. Strong financial performance in line with guidance. That's despite challenging macroeconomic conditions. We continue to progress with our four strategic pillars of getting bigger, getting better, getting simpler, and getting cheaper. As you'll see through this presentation, you'll start to see us maximizing the group opportunities as well as how we've previously and continue to maximize the OpCos as well. We continue to accelerate our store opening program, 516 net new stores for FY 2022. Importantly, we've maintained our price leadership position by managing the headwinds through becoming more efficient and more effective in everything that we do across the operations. Finally, we're on track to deliver EBITDA growth in mid-teens for 2023.
If I now move on to the financial highlights. You'll see that sales are up 17.4%, and that's supported by 516 net new stores. Like-for-like is up by 5.2% for the year. Finally, EBITDA is up 13%. I now hand you over to Mat.
If we just move to the key financial highlights, there are six key messages that we'll be discussing today. The first, as you already know from our Q4 update in October, is that we delivered strong revenue growth in the year. That was underpinned through a record number of store openings and a strong like-for-like performance in both of our businesses, with Pepco delivering over 7% and Poundland delivering over 2.5%. That performance was driven through both our Bigger Pillar and our Better Pillar, but also through our continued focus and investment in price. That is evident through our gross margin performance, where the decline year-on-year is driven to that price leadership and offsetting the inflationary pressures that the business faces.
Pleasingly, though, however, when we talk about our Simpler and Cheaper Pillars delivering on our cost initiatives, our performance at an EBITDA level was delivered through a significant improvement in our cost of doing business, with a 1.6 percentage point improvement year-on-year. That is delivered through a broad-based set of initiatives across our stores, DCs and central offices, and is one that we anticipate to continue into the future. Fourthly, importantly, to continue to deliver for our customers, the business invested significantly in stock for the year. We continue to see significant levels of disruption in supply chain across the globe and to ensure that the business is well set up to fund our growth in stores and proposition development. In addition to trading Christmas successfully, we made a decision to invest in stocks earlier this year to ensure availability.
That, however, is in the context of a continued prudent performance, with net debt remaining at a 1.6 times on an IFRS 16 EBITDA basis. As Trevor has described, our EBITDA growth for the full year remains on track with our previous guidance, continuing the strong performance of our business. If I turn to the summary of our profit and loss on the next slide, you'll see our strong top line and our strong like-for-like revenue translates strongly to underlying EBITDA. With that gross profit margin moving 2.1 percentage points, representing a roughly EUR 125 million investment in price across this year.
That decision on price was made around 12 months ago. We believe absolutely was the right one, both 12 months ago and even more so today, as customers facing a cost of living crisis and challenges to their household finances are seeking value. It's one that we believe will support our growth into FY 2023. The improvement in our cost of doing business and the broadly stable EBITDA margins that we reported is through a number of notable cost of doing business initiatives through the Simpler and Cheaper Pillars that we have. We've described this on a number of occasions. To give some examples, through our DCs, we've been able to implement more effective processes through investment in systems to have a consistent set of warehouse management infrastructure, digital infrastructure across all of our DCs.
In addition to delivering more effective allocations, reducing the pallets, the distance our pallets travel. Pleasingly, not only has our EBITDA margin performed strongly, but our underlying PBT and EPS grew more strongly than EBITDA, with the underlying PBT growing by 23% and EPS by 19%. In the year, you will also notice non-underlying fees of around EUR 75 million. This is a combination of factors, but the most meaningful being the IFRIC pronouncement on IAS 38, which means that our ERP investment, which is a cloud-based system, is now a non-underlying item given the change in the accounting year, which represents just around EUR 35 million or around half of the cost in the year. The balance reflects a combination of restructure costs that we've already described in Spain, alongside the previously flagged VCP costs, which remain underlying.
If I turn now to the segment performance and initially focus on Pepco over the slide. The business performed strongly, opening almost 450 stores in the year, with revenue growth on a constant currency basis of almost 29%. This is clearly an exceptionally compelling financial performance through a trading lens and is a testament to the strong performance and strong strategy that the team is executing. Under that, you will also see the performance of our LFL. This clearly demonstrates the impact and degree of impacts to COVID throughout the year, with our quarter one being significantly impacted by restrictions impacting the customers' shopping behaviors and ability to shop with us. In Q2, we saw those restrictions ease, albeit in the prior year, they had not yet, and we saw a significant gain before a more normalized performance.
That normalized performance of 7% and subsequently 8% is in the context of the long run rate LFL that the Pepco business have of around 6%. This gap is a testament to the continued investment in proposition that the business is making alongside the initial refits that the business has begun to undertake. Underlying EBITDA, while somewhat impacted through the investments in gross margin, continues to perform strongly at 19.1%, which again is a testament to the effectiveness of the growth program that we have in growing more effectively and offsetting some of the gross margin effects that we see. Moving on to Poundland over the page.
The shape and performance of the Poundland business follows broadly similar levels, with 70 store growth in the year, principally driven through our Dealz fascia in Poland, 5% revenue growth and just over 2.5% LFL growth, with the profile of that being similar, with impacts to COVID restrictions in Q1 easing throughout the year. The business continues to perform strongly, and that is demonstrated through the growth in EBITDA percentage year-on-year from 10% to 10.2%, even given the significant headwinds that exist in the environment. This is predominantly through a combination of the better pillar that we are charting, which you've seen continued proposition refits. Over 340 stores have now been refit.
These refits are coming at exactly the right point in terms of presenting the Poundland proposition in a new light, including expanding the proposition to areas like clothing, frozen food, and greater levels of chilled food, which absolutely is what our customers are desiring from a business and puts it in a good position to take advantages of the growth over the coming year. Moving over the page to describe the gross margin and cost of doing business trends. What you will see here is that the gross margin compression that we've seen in FY 2022 has been broadly similar in both H1 and H2.
This is hopefully what we described, that we've seen, you know, the investments in price at a broadly equal weighting throughout the year. They're clearly now beginning to see early sign of easing in the environment, which Trevor will come on to describe in a little bit more detail. Pleasingly, though, underneath that chart is our cost of doing business to sales, where you can see continued gains year-on-year and half-on-half sequentially through that as we begin to deliver on the significant set of programs in all of our businesses. If we turn on to cash flow. What you'll see in the year is what we've already flagged in terms of the stock investment.
We're absolutely clear that stock is the lifeblood of the growth opportunities that we have, both in terms of delivering on our existing store estate, where we anticipate a strong performance into Christmas, also funding our store growth. It is more important for the business at this stage to guarantee the availability of stock for our customers and for our growth plans, therefore, we've made judicious decisions to invest cash around EUR 300 million in the year in ensuring that we have the availability of stock that we need. Underneath that, you'll continue to see investment in stores. In the year, that's principally as due to new store investment, we anticipate that accelerating as we grow our store base, as we grow the store opening program, also begin to invest into new stores.
Pleasingly in the year, we've begun to see the benefits of the refinanced debt at time of the IPO, delivering the annualized benefits that we forecast, alongside a continuing prudent debt position with the underlying EBITDA on a pre-IFRS 16 continuing at 0.6, which we believe gives us capacity to explore further growth opportunities or continue to make the right decisions to fund the growth in our business and operate for our customers. On the final slide on stock, what we've sought to do here is describe the position of stock in terms of the performance over the past four years. What you will see is through FY 2019 and FY 2020, the business performed at broadly similar levels of stock to sales.
In FY 2021, as the global disruption to supply chain began to affect flow of stock, that % decreased. As you'll see into FY 2022, the business has made a very deliberate decision to invest into stock to ensure we guarantee availability for our peak trading. As we have already described, we've ensured we are performing strongly into this quarter. A lot of that is due to pulling forward stock to ensure availability. I'll now hand back to Trevor to talk through the strategic update.
Thank you, Mat. Well, we'll start with the strategic update. We continue to focus on our four strategic pillars of bigger, better, simpler, and cheaper. These are real programs. They're big programs. The combination of these programs has allowed us to continue to maintain our price leadership position in these important times for the customers. What's pleasing is these programs have also allowed us to maintain our EBITDA margins. Let's start with the first and most important pillar, the biggest value driver for the Pepco Group, which is new store openings. We've opened 516 net new stores in FY 2022, and that's ahead of our upgraded target of 450. We opened 163 in our strategically important Western markets, and pleasingly, these Western markets continue to perform very well.
We opened up one new country in FY 2022, which is the very strategically important market of Germany, and we opened up in Greece in October of this year. We're gonna continue to accelerate our net new store openings, and we're planning to open 550 net new stores for FY 2023. Let's move on to the next program, which is our better program. What I've done this time is I'm gonna split what are we doing to maximize each and every one of the OpCos by getting better and also start to talk about how we intend to maximize the overall group. I'll discuss both of those programs. Looking at how we're maximizing the OpCos. When in Pepco, we continue with our new look programme.
We've refitted our stores in Wrocław, we refitted our stores in Warsaw, they continue to perform exceptionally well for the customers, both in terms of as well as sales and in profit. In quarter two, starting in January, in the 12-week period, we plan to refit 225 Pepco stores to the new look. That's 225 stores in quarter two alone. In Poundland, we continue with the important Diamond Programme, which remains very potent for our customers. We carried out 129 refits in full year 2022, we're planning to continue that program and do 250+ refits in full year 2023. There were a couple of programs where we're maximizing the OpCos. What are we doing to maximize the group?
What I've previously described what we're doing in Spain, we're taking our Dealz format and our Pepco format and combining them into 1 Pepco format. That's putting together two businesses into one. The infrastructure work will be completed by the end of March, and all of the Dealz refits into Pepco will be completed also by the end of March. Pleasingly, the stores that we've refitted continue to trade exceptionally well, again, both in terms of sales as well as early indications of profit, and customer sentiment is exceptional. Finally, in terms of the infrastructure, the putting the two infrastructures into one means it will be far simpler and far cheaper in our overall running of the Spanish business. If we move on to Ireland, we talked at the Valencia Capital Markets Day about testing the same work that we've done in Spain into Ireland.
We've now completed five of the six refits. We've got one more store to do, and we're still in the test phase, and the early customer response has been very, very positive. As I said, we're still in the test phase. We've got one more store to refit, and we will start to evaluate post-Christmas, and then we decide what we want to do sometime in the new calendar year. The next program I'd like just to chat through is quite important, and it's a program that is better, simpler, and cheaper all put together. This is the recent announcement where we've decided that in Poundland, we will actually put in the Pepco range of GM and the Pepco range of Clothing.
It's worth saying that the overall sales of Pepco GM and clothing is significantly bigger than the overall sales of Poundland, clothing and GM. There's some potentially some significant margin benefits. Just to simplify this, currently in the business, we operate with Pep&Co Clothing, we operate with Pep&Co GM, and we operate with Poundland GM, and also Pepco GM and Pepco Clothing. Going forward, we will just have one range of GM across the whole group and one range of clothing across the whole group. This is a far simpler customer offer. It's gonna be a far simpler infrastructure. We're gonna be able to maximize, truly maximize the group sourcing in our Asian arena. Finally, we'll just, over time, have one team managing the one product range of GM and clothing.
As I said, that will be better for the customers and massively simpler and cheaper for the overall group. Just to finish off on two of the other strategic pillars, simpler and cheaper. Well, I've mentioned before, we started an end-to-end analysis in Pepco three years ago. It's a five-year program, and we're now three years into the program. As Mat said, you can really start to see the benefits when you look at our cost of doing business. We've made significant progress over the past three years, and we've still got a good two years to come. There's much, much more to do. Pleasingly, we've started the interim process in Poundland.
We're gonna review the Plan-B uy-M ove-S ell process, we're gonna identify what we want it to be in the future, and we should start to see some benefits at the latter part of FY 2023. We think that program will also last around between three and five years. What's the summary? What would I like you to take away from today's presentation? Well, most importantly, we continue to deliver on price leadership, which is so crucial to our customers in these tough times. We've accelerated our biggest value driver, which is net new stores, and we're planning to open up 550 net new stores in FY 2023. Importantly, we're continuing with our new look programme in Pepco, and as I said, we will refit 225 stores in quarter two alone.
Please remember that program is about two to two point five years, where we'll refit 2,000 stores to our new look Pepco. I think it's important to note that previously we've always had plans to maximize each and every one of the OpCos, and hopefully you can start to see our plans of how we want to maximize the OpCos and more importantly, start to maximize the overall group as well. The macroeconomic conditions remain challenging, so whilst they remain challenging, we maintain our EBITDA guidance. Thank you very much.
We'll take the first question from James Anstead from Barclays. Please go ahead.
Yes. Morning, Trevor and Mat. Two quick questions, please. Firstly, on inventory, it's obviously risen from 15%-20% of sales in the last year or so. Should we think 20% is a central kind of rule of thumb going forward? Or do you think that will come down as you hopefully sell the stocks you held over from last Christmas? That would be one question. Just with reference to your target of delivering EUR 1 billion of EBITDA in less than 5 years, is it reasonable to interpret that as... Kind of slightly rephrasing it, EUR 1 billion of EBITDA by FY 2026? Is that a fair way of interpreting that guidance? Thank you.
Thanks, James. I'll start on both of those, and I'm sure Trevor will build. In terms of the stock, we absolutely anticipate that coming down. You know, this is a very deliberate set of actions, which one, as you recognize, yes, we had some holdover stock from last year that we've that we'll sell this quarter. Secondly, bringing in new stock for this quarter earlier than we typically would have done, around two weeks earlier. That is as a consequence of the disruption that we're seeing in terms of flow of goods and that, you know, many other retailers are seeing as well.
Clearly, it is connected to that disruption that we're seeing and very much the, you know, we will target a more normalized level, but it will be contingent on when we feel confident the performance of global supply chains will enable us to move back to that. I'll let Trevor build on that.
Yeah. I think the other, the other point, just to add to what Mat said, is that when we look at the business, we've had, you know, two to three years worth of disrupted sales. We made a deliberate decision that we wanted to maximize the sales in quarter one and quarter two to give us a really strong base going forward. To do that, we needed to make sure that we're really in good position on stock. There's no threat around the stock because if I look at the Christmas sell-through, we're in a very good position in terms of Christmas sell-through. This stock is all continuity, so that will burn off nicely through the quarter two period.
Yeah, just in terms of the billion target. Look, we're not gonna be committing to a precise year, you know, on that. You know, what we're committing to is, you know, we understand, you know, we have a very meaningful opportunity in this business, you know, through a combination of the store growth we have and the strategic levers that we're delivering. It's about articulating the fact that we will achieve that longer term target more quickly than we previously described. At this stage, we're not gonna be committing to that, you know, to a specific time point on that. It is to say that we're absolutely confident we can more quickly deliver on that long-term ambition.
Very helpful. Thank you.
We'll now take the next question from Simon Bowler from Numis.
Hi. Apologies, I missed the first few minutes of the call, sorry if any of this has been touched on. Three quick questions. Firstly, I'm just wondering if there's anything I recognize the comments you made on Christmas sell-through. Just any other color or comments you can give around kind of shape of current trading. Secondly, you've been quite explicit on your guidance for revenue and EBITDA for the year ahead. I was wondering if you could just help us with the moving pieces below EBITDA to get down to PBT. Thirdly, just one other one on the stock.
can you comment on to what extent that's spread across kind of Poundland and Pepco, or, are really we just talking about kind of Pepco dynamic when you talk about kind of the deliberate trading decisions being made?
Sure. Simon, I'll start with the first one initially. In terms of the Christmas trading, look, what we said in the statement is it's strong, and as you probably can hear, you know, we have stocked to have a strong Q1. This is clearly about our FY 2022 results, and we'll come out with our Q1 performance in January. You know, more broadly, though, in terms of the trends, you know, what we are seeing with the customers is, you know, they do want to have a Christmas. You know, I think customers are finding ways to have a Christmas this year following the fact that, you know, there's been two years of disruption to celebrating. You know, we are seeking to, you know, maximize that opportunity at the moment.
You know, at this stage, won't be committing to specific numbers. We'll come back in January, but it's been strong. You know, we're certainly seeing our customers react, you know, react well to the ranges that we have across the business. In terms of the kind of revenue EBITDA piece. Look, you know, where we've performed today, you know, whether that's... You talking about the non-underlying piece, you know, that's something we'll need to come back on in regards to the SaaS accounting, and that's... We'll give some specific guidance on that.
Clearly, you know, at this stage we've already begun to indicate some of the other transformation programs we have in the business in terms of the one GM, one clothing, that Trevor's described. You know, there is the potential for some more of that. And again, that is something that we'll update on across the course of the next few months.
Yeah. In terms of the stock, where is it, Pepco, Poundland? Essentially, the decision was mainly made in Pepco because Pepco has probably suffered more of the, the issues of store closures, restrictions, et cetera, given the you know, Central Europe and how COVID was handled. It's predominantly a Pepco decision, and one that's as Mat says, so far, has played out well with the customers in the first quarter.
Great. Thank you.
We will now take the next question from Michał Potyra from UBS.
Hi. Good morning. It's Michał Potyra from UBS. Thank you for taking my questions. I have 2. The first one is, could you please comment on the gross margin trends expected during the next year, please? That's the first question. The second question is on your like-for-like sales. Solid, but also below the headline inflation. If you could, maybe give us a little bit more color on the volume component, traffic, and perhaps stick over the last period. Thank you.
Sure. Look, in some ways, those two questions are very much intertwined. I'll give an answer which I hope kind of covers both, which is. The way that we have sought to course the current kind of environment is, you know, we have not based or benchmarked our pricing on inflation. It has been benchmarked on the best possible price that we can deliver to our customers. That in many regards then, therefore, has led to the gross margin compression that we've described. In terms of, you know, the chart that we described in terms of H1, H2, you know, that's at a lower level than prior year but is relatively static and, you know, broadly, we would expect a similar kind of profile into FY 2023.
That being said, what we've always sought to do as a business is make the right decision at the right moment, and continue to deliver on our profit in the right way through the levers that we have. You know, in last year, that was about, you know, investing in price and then delivering on our cost of doing business. Whilst, you know, I'm sort of giving an indication that, you know, it's broadly at that level that we reported in H2, you know, we still will reserve the right that if we believe that the right thing to do is to invest more heavily or that we will continue to, We'll make that decision and deliver on our profit growth through pushing hard on our cost of doing business. At this stage, given where we are, broadly static.
In terms then of that LFL, as you say, you know, what we're primarily seeing is that, you know, the LFL growth in the business is through a combination of volume growth in terms of new customers, probably around between a third and a half of the Pepco LFL and similar in Poundland is through traffic, and the balance is through average basket growth. That average basket growth is principally being driven through our proposition transformation and not through inflation. What we have done in both of our businesses, in Poundland through the introduction of frozen, extended chilled, and clothing, and in Pepco through the introduction of affluent ranges, through the introduction of good, better, and best product hierarchy, is grow our share of wallet with our existing customers through the value of our proposition.
That's how we're looking at it, and as I said, you know, we are not benchmarking our prices against inflation or our sales performance. It's absolutely rooted in doing the right things for our customers.
Just to add to that, you talked about trends. There's a couple of things that are starting to go in our favor in terms of commodities and containers. There's a couple of things that we've still got to work through in terms of FX and inflation, you know, the effect on wages, et cetera. What we are absolutely committed to, as Mat says, is we will always hold our price position. You know, we're a discounter. We've got to be a discounter every day and not just when it suits us. We will maintain the price position, and we'll do that by continuing what I said in terms of the bigger, better, simpler, cheaper program. We've still got plenty of opportunities to get simpler and cheaper.
We will maintain our price leadership, and we will continue to focus on the simpler and cheaper programs that allows us to hold our final EBITDA margins.
Thank you.
If there are no further questions, I would like to hand the call back over to Trevor for any closing remarks.
Thank you very much. Look, thank you everyone for joining us on the call today and really appreciate your time and look forward to seeing many of you over the next two coming days. Thank you very much. Bye-bye.