It's amazing what a possible takeover offer can do. Shares in discount chain Poundland (PLND) remained remarkably resilient despite a less-than-stellar set of annual results. This comes after a rather exciting preceding 48 hours during which the Poundland share price gained a whopping 26 per cent as rumours emerged of a possible takeover bid. The mystery shopper was eventually revealed as South African retail group Steinhoff, which has been on the hunt for a foothold in the European retail market since the beginning of the year. Having failed to buy Argos owner Home Retail Group (HOME) or French electricals retailer Darty (DTY), it has set its sights on the discount end of the market. It has already increased its stake in Poundland to approximately 23 per cent, close to the 30 per cent level needed to trigger an automatic bid offer.
That helps explain why Poundland shares moved northward despite a 3.9 per cent slump in like-for-like sales and a 9.4 per cent crash in adjusted cash profits for the year ending 27 March. Net earnings were decimated and the dividend – only fully instated last year – was cut by nearly a fifth in order to maintain the appropriate payout ratios.
It's no secret Poundland has struggled to integrate its acquisition of 99p Stores – a deal which was finally completed last September. Costs to rebrand and restock its former rival's outlets have escalated, while poor footfall data from the high street and tough comparatives have impinged on trading figures across the existing estate. The group's long-standing chief executive Jim McCarthy also announced his retirement in March, so much of the turnaround effort will fall to his successor, Kevin O'Byrne, who takes up the reins in two weeks. To end on a positive note, group sales did rise by 9.7 per cent on a constant currency basis, helped mainly by a significant increase in store numbers from 588 to 896 as at the period end.
Analysts at Shore Capital expect pre-tax profit of £44m for the year ending March 2017, giving EPS of 12.7p, compared with £31m and 9.1p in FY2016.
| POUNDLAND (PLND) | ||||
|---|---|---|---|---|
| ORD PRICE: | 201p | MARKET VALUE: | £540m | |
| TOUCH: | 201-202p | 12-MONTH HIGH: | 369p | LOW: 129p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 335 | |
| NET ASSET VALUE: | 98p* | NET DEBT: | 5% | |
| Year to 27 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012** | 0.78 | 23.3 | na | nil |
| 2013 | 0.88 | 26.5 | 2.3 | nil |
| 2014 | 1.00 | 21.5 | -1.8 | nil |
| 2015 | 1.12 | 36.2 | 11.4 | 4.5 |
| 2016 | 1.33 | 5.9 | 0.6 | 3.7 |
| % change | +19 | -84 | -95 | -19 |
Ex-div: 9 Sep Payment: 7 Oct *Includes intangible assets of £287m or 107p a share **Pre-IPO figures | ||||
