18th Jun 2015 13:50
LONDON (Alliance News) - Poundland Group PLC Thursday reported a rise in profit in its recently-ended financial year as sales broke through the GBP1 billion mark for the first time.
But the discount retailer saw its shares fall, as its profit slightly missed analyst expectations, it revealed slower growth in the first quarter of its current financial year compared with the prior year, and it said consensus figures for full-year profit will be lowered.
Poundland shares were trading down 3.4% at 300.40 pence Thursday afternoon, the second worst performer in the FTSE 250.
The retailer reported a pretax profit in the year to March 29 of GBP36.2 million, a rise of more than half the GBP21.5 million made the year before. However, the underlying pretax profit of GBP43.7 million was lower than the analyst forecast of GBP44.0 million.
Revenue was GBP1.1 billion, up 12% on the GBP997.8 million reported the prior year, which it said was driven by contributions from both its store-opening programme and like-for-like sales growth.
Poundland said that sales in the 11 weeks to June 14 increased 3.5% to GBP228.9 million from GBP221.3 million in the same period the prior year, although this was significantly lower than the 18% growth it achieved in the first quarter of the prior year.
The retailer said that the first quarter of the current year faced a tough comparative from last year, which benefited from a later Easter, good weather and the craze of the 'loom band', the latter which Chief Executive Jim McCarthy described as a "phenomenon" and a "once in a decade occasion". Loom bands are coloured rubber bands for weaving into bracelets.
Poundland added that it faces a number of headwinds in the current financial year, the most significant being the weak euro, which will make it difficult to match the sales growth it made last year. In the first half of the prior year, sales increased 15% which it described as an "exceptional period" and said it expects the first half of the current year to be "relatively subdued" in comparison, although it expects business in the second half to pick up during the important Halloween and Christmas trading period in its third quarter.
Poundland said that the third quarter represents around 50% of its earnings before interest, tax, depreciation and amortisation, and should benefit even more from the opening of 40 stores in time for the start of that quarter.
Chief Financial Officer Nick Hateley also told journalists that the full-year consensus figure for underlying profit will be reduced slightly from GBP48.6 million to between GBP47 and GBP48 million.
Analysts at Shore Capital forecast an underlying pretax profit of GBP47.5 million for the current financial year and GBP55 million for the year after, saying they expect "very strong growth to return".
"Our forecasts take into account the slow start to 2016 trading and guidance for a GBP4 million adverse hit from currency headwinds, though do not include any contribution from the proposed 99p Store acquisition or confirmation of the Spanish trial being rolled out," Shore Capital said.
Poundland opened 60 new stores in the UK and Ireland in the year, growing the estate to 588 stores. It plans to open at least a further 60 stores in the region in the current financial year, with a minimum of 40 to be opened by the end of the first half. In Spain it opened five trial stores and said it expects to meet its 10-store target by the end of the first half of the current financial year. It will decide whether or not to proceed with a full roll-out in Spain by the end of the financial year.
Earlier in the year, Poundland agreed a GBP55 million cash and shares deal to buy its smaller - and slightly keener priced - rival 99p Stores Ltd, paying GBP47.5 million in cash and a further GBP7.5 million in shares. The deal is now undergoing a phase two review by the UK's Competition and Markets Authority, with a decision expected in October, Poundland said on Thursday.
"I am pleased to report a record year of sales and profit growth for Poundland. We saw strong trading in the UK and Ireland and our international expansion plans in Spain are proceeding well with seven multi-price Dealz stores now open. 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," McCarthy said in a statement.
Poundland will pay a final dividend of 3 pence for a total dividend of 4.5p. It did not pay a dividend the year before, having listed in March 2014.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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