Employee Engagement

Takeover target Poundland has posted a slump in annual profits after a “challenging but transformative” year as its suitor stepped up its pursuit with a 23% stake in the business.

South African retail group Steinhoff – which owns UK furniture firm Harveys and Bensons for Beds – revealed late on Wednesday that it had bought 61.2 million ordinary shares in the budget retailer and confirmed any potential offer would be made in cash.

Its bid interest comes after a testing time for Poundland, which had seen its shares slump by a third in a year following tough trading and a difficult takeover of rival 99p Stores.

Annual results laid bare the group’s sales woes as underlying pre-tax profits fell 13.5% to £37.8 million in the year to March 27. Bottom-line pre-tax profits crashed 83.7% to £5.9 million, but this includes converted 99p Stores.

Poundland has advised shareholders to “take no action” following Steinhoff’s announcement on Wednesday that it is considering a bid. The move marks the latest takeover attempt by Steinhoff, after it lost out in a battle with Sainsbury’s to buy Argos owner Home Retail Group in March and was outbid for London-listed white goods retailer Darty.

Steinhoff has until 5pm on July 13 to make a firm bid for Poundland or walk away under City takeover rules.

Jim McCarthy, outgoing chief executive at Poundland, remained tight-lipped on the Steinhoff interest. He admitted the group had seen “difficult times”, adding the 99p Stores were in a “very poor state” when it finally completed the £55 million takeover after a lengthy competition inquiry.

But he assured the chain would “return to growth” under new boss Kevin O’Byrne, with the disruption of the 99p Stores takeover now behind it and all 235 stores converted.

Mr McCarthy 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.”

Poundland saw like-for-like sales drop 3.9% over the year, but the fall was steeper in the second half, at 4.9%. It warned over profits in January after Christmas trading was hit by poor numbers of shoppers on the high street, and trading has remained under pressure since then.

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