Poundland has secured £180m of independent financing that will reduce its reliance on its troubled South African owner Steinhoff International after bumper Christmas trading.
Pepkor Europe, the European owner of Poundland, the Pep&Co clothing business and two other chains, has arranged a two-year loan facility from US investment firm Davidson Kempner Capital |Management. Pepkor is owned by Steinhoff.
The loan money will be shared with Harveys and Bensons for Beds, the two British furniture chains owned by Steinhoff.
Andy Bond, the chief executive of Pepkor Europe, said that as a result of the deal the group was no longer dependent on working capital from Steinhoff, which is facing criminal and tax investigations relating to an estimated $7bn (£5.3bn) hole in its accounts.
“Our European Pepkor businesses – Poundland, Dealz, Pep&Co and Pepco in eastern Europe are firing on all cylinders, adding customers and growing market share,” said Bond. “They are all independent profitable, delivering positive cash flows.”
It is hoped the financing will help improve Poundland’s rating with credit insurers, who reduced cover for the chain’s suppliers in the light of Steinhoff’s financial problems. There had also been concerns that credit facilities for Poundland, Harveys and Bensons for Beds would be cut back, affecting their ability to trade.
Barry Williams, Poundland’s UK and Ireland managing director, described the finance package as a “big vote of confidence” that would provide stability.
He said Poundland had enjoyed a record performance over the festive season. Sales rose 5.6% in the 12 weeks to 24 December as it sold more than 5m rolls of wrapping paper, and almost 250,000 items from its new Nooky sex toy range. “We had a banging Christmas,” said Williams.
The retailer sold all 500,000 of its initial run of Toblerone copycat Twin Peaks bars while increasing sales of the original by more than 10%. After a legal battle with Toblerone’s owner Mondelēz, Poundland agreed to change the shape of its bar.
There have been rumours that Steinhoff, which bought Poundland for £610m just over a year ago, will be forced to sell the retailer as part of efforts to resolve its financial difficulties.
Williams said any decision on the future ownership of Poundland would not be taken by the retailer’s board, but said Poundland was among a group of “very attractive assets to Steinhoff based on our performance”.
Williams said he could not speculate on how long it would take to resolve Steinhoff’s issues, which were not related directly to Poundland or Pepkor Europe’s accounts or leadership team.
Steinhoff’s shares have fallen more than 80% since it revealed the financial woes and credit ratings agency Moody’s downgraded the company’s debt to junk status. Earlier this week, Steinhoff admitted its accounts dating back to 2015 could not be relied upon.