Poundland — Europe’s largest single-price discount retailer — has unveiled plans for a £750m flotation on the London Stock Exchange. It is the first of seven other high street and internet companies expected to go public this year.
The Poundland chain, which sells more than 3,000 branded and look-a-like items through its 500 stores, confirmed it would list its shares in March. Owned by private equity group Warburg Pincus and chaired by the former Tesco executive Andy Higginson, Poundland says it hopes to raise as much as £400m to fund an expansion of its UK and European network.
The City is now waiting on a similar announcement, expected by the end of the week, from Pets at Home, the pet supplies retailer. It is expected to offer between 30 and 40 per cent of the company to new investors after institutions made it clear they wanted the current owners to retain a majority share. Pets at Home, which has 345 stores and 209 vet practices, reported annual sales of £598m last year despite interest debt payments forcing a pre-tax loss.
The Poundland listing is one of many expected in Britain’s retail sector this year. Russian hypermarket chain Lenta and newsagent and convenience store McColl’s have both said they plan to float before the summer. Other companies expected to come to the market this year include the online domestic appliances retailer AO, Fat Face, B&M and the online clothing store boohoo.com. Perhaps the biggest name to declare its interest in an initial public offering (IPO) is House of Fraser.
Most analysts are predicting that as many as 20 firms could be floated by December. By comparison, there were 13 IPOs in the whole of last year, including Royal Mail, Merlin Entertainments and Conviviality Retail.
Poundland was founded in 1990 at Burton-upon-Trent by Dave Dodd and Stephen Smith. Private equity firm Advent International bought the firm for £50m in 2002 and sold it on to Warburg Pincus for £200m eight years later. It has grown rapidly since the recession and snapped up 85 former Woolworth properties. “We are very good in austere times, but we’re even better in good times,” said Poundland chief executive Jim McCarthy.
Its flotation, expected to value the company at more than £700m, will offer 76 per cent of its shares to institutional investors of Warburg Pincus, as well as a partial sale of the balance held by 155 Poundland employees. McCarthy confirmed the money will go to doubling the number of UK shops from 517 to 1,000 and open 10 stores in Spain within the next two years.
Independent retail analyst Nick Bubb said it remained to be seen how investors would differentiate between all the various UK discount players as and when they go public. “Given the weak profits at the fast-growing 99p Stores and Poundworld, it is obvious Poundland is the best of the ‘pound shops’,” he said. “But Poundland is not as big as the likes Home Bargains and B&M, which are putting pressure on the sales of the likes of B&Q and Superdrug.”
Though the listing price for the Poundland offer has yet to be announced, those expecting to pick them up for a pound will be disappointed. “It would be very nice indeed if it was a pound … but that’s a bit difficult to arrange,” said McCarthy.
