Poundland’s share price plummets as profits slump against “exceptional period last year” while 99p Stores conversion begins
Poundland's share price plummeted more than 20 per cent this morning as it revealed a slump in first year profits.
The figures
Poundland's total sales rose 5.6 per cent on a constant currency basis, but like-for-likes were down 2.8 per cent.
However it was the EBITDA and pre-tax profits that really took a hit, with the former down 18.5 per cent to £16.8m, while the latter plummeted 26.3 per cent to £9.3m.
On a statutory basis, the figures look even worse: pre-tax profits were down 43.5 per cent to £5.3m while diluted EPS was down 47 per cent to 1.51p.
Investors were unimpressed: Poundland's share price was down 20.9 per cent in early trading and was continuing to tumble towards 9am.
Why it's interesting
The period included Poundland's acquisition of 99p Stores for £55m, which was completed on 28 September.
The deal gives Poundland 252 stores across the UK, significantly boosting its domestic portfolio. Poundland said it would "convert these assets to the Poundland format at a pace".
"The acquisition structure gives us a robust balance sheet, enabling us to overcome the challenges of rapid conversion and restructuring of the acquired portfolio, whilst giving us the flexibility to exploit any further opportunities that may emerge such as investing in efficiencies to counter the impact of the National Living Wage as well as opportunities that may arise in Europe," the firm added.
It has already identified "incremental EBITDA of at least £25m" as the transfer takes place, through improved sales performance, which will be driven by Poundland's "superior product offer and range". Savings will also come from being part of a larger group.
What they said
Chairman Darren Shapland said: "We traded through the first half against an exceptional period last year. We opened a net new 52 shops in the half and are well placed for our critical third quarter, in addition 99p Stores will be an excellent accretive acquisition."
Chief executive Jim McCarthy added: "The sales comparables in the second half are softer and our Christmas range is our best ever. However, we have seen highly volatile trading conditions so far in the third quarter. The quarter's performance therefore depends more than ever upon the last six weeks' trading towards Christmas."