Hostile takeover bid looms as Poundland profits plunge

RETAIL group Poundland is at the centre of a hostile takeover bid by a South African company.

Steinhoff, which owns the Harveys furniture group and Bensons for Beds, acquired a £125m stake in the Black Country group, nearly 23% of the retailer.

Confirmation of the share deals came at the end of 24 hours of speculation that began with a major hike in Poundland shares on Tuesday afternoon.

It was followed by a statement to the London Stock Exchange on Wednesday morning when Steinhoff said it was “considering a possible offer”, and that its statement had been made without the consent of Poundland. It later told the markets that any offer, if it was made, for Poundland would be made in cash.

The Willenhall-based group’s shares closed on Monday at 159p, but had risen by one-quarter to close last night at 200p.

In a statement of its own, Poundland said it noted the move by Steinhoff but it has advised shareholders to take no action.

“The company will issue a further statement if and when appropriate. There can be no certainty that a firm offer will be made, nor as to the terms on which any firm offer might be made,” it said.

The Steinhoff business model, which specialises in retailing, sourcing and manufacturing household goods and general merchandise in Europe, Africa and Australasia, suggests that an acquisition of Poundland would be complementary to the business.

Poundland has this morning announced its results for the year to March 27, which show the business being impacted by its protracted £55m acquisition of the 99p Stores chain.

The group said: “It’s been a challenging yet transformative year for Poundland. Accelerating the 99p Stores conversion programme, combined with our own organic growth, naturally placed a strain on the core business. However, we expect to see some improvement, now that all 99p Stores have been converted to the Poundland banner.”

Sales were up 9.7% on a constant currency basis to £1.21bn, although like-for-like sales were down 3.9%.

EBITDA, which is a measure of profitability was down 4.1% to £56.9m, but excluding the 99p Stores, it was down 9.4%.

In terms of statutory results, total sales were up 18.7% to £1,326.0m (2015: £1,116.9m), with pre-tax profits down 83.7% to £5.9m (2015: £36.2m).

It has also converted a cash surplus of almost £14m this time last year into a £12m debt.

Poundland has proposed a final dividend of 2p per share, giving a total dividend payment for the year of 3.65p per share, compared with 4.50p last year.

In the year ahead, the company said it expected to open 20 to 30 net new stores in the UK & Republic of Ireland, with a focus its Dealz operation in the Republic of Ireland and retail parks. It expects to re-site around 10 stores in the UK, with a small mumber of store openings in Spain.

Jim McCarthy, who steps down as the group’s chief executive in September, said: “After a period of significant change, including an unprecedented integration programme at pace, Poundland now has a unified estate of over 900 stores.  

“The retail environment remains challenging, but with our significantly enlarged store portfolio, greater scale and ability to focus fully on trading our stores, I believe we are well placed to make progress in the year ahead.”