Billion Poundland: Profits up 18.6 per cent for budget retailer in first year since IPO

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Poundland’s profits soared 18.6 per cent in the 12 months to 29 March as it passed £1bn in sales for the first time.

Read more: Poundland brings forward competition probe into 99p Stores deal

The figures

Underlying pre-tax profit hit £43.7m, an 18.6 per cent increase on 2014’s £36.8m. Total sales rose 11.9 per cent to £1.1bn, from £997m in the previous financial year. Like for like sales were up 2.4 per cent on a constant currency basis.

This allowed Poundland to propose a dividend of 3p a share (4.5p for the year) for the first 12 months since its IPO.

The company opened 60 new stores, meaning it now was a total of 588 in the UK and Ireland, and plans to open 60 more in the current financial year. It is also trialling five “Dealz” stores in Spain.

Why it’s interesting

Poundland debuted on the market on 12 March last year, so its first full-year results as a listed company have been keenly watched.

The company is planning to cash in with a £55m takeover of serial undercutter 99p Stores.

The acquisition has hit some snags, with the Competition and Markets Authority (CMA) blocking the move after the first phase of its investigation. Poundland siad it is fully cooperating, and a (phase two) decision is expected from the CMA in October. If successful, the deal could add 250 stores to Poundland's network.

Paul Thomas of consultancy Retail Remedy said the figures would turn supermarkets green with envy.

Such blistering rates of growth are the sort of thing the mainstream supermarkets can only dream of. Poundland clearly didn’t get the memo about price deflation and squeezed margins.
 
He said, however, that Poundland could soon face threats from discount supermarkets Aldi and Lidl.
With their marketing focusing on quality, Aldi and Lidl have so far proved less of a threat to Poundland than they have to the Big Four grocers. The German discounters’ growing firepower could soon be turned on Poundland. And after having things its own way for so long, this is may prove one of the toughest tests of Poundland’s defences in its 25 year history.

What Poundland said

Jim McCarthy, chief executive, added:

Notwithstanding a challenging start to the year, I expect to see a year of growth for Poundland as we have a very strong opening programme and we will continue to be the standard bearer for genuine and amazing value on the UK's high streets and retail parks.

In short

All eyes will be on the CMA and its decision on the 99p stores acquisition. Another 250 shops would fortify Poundland's position and bolster it against competition from Aldi and Lidl.