Poundland faces profit plunge after delayed takeover of 99p Stores last September

Francesca Washtell
Follow Francesca
Poundland took over its rival 99p Stores last September (Source: Getty)

Discount retailer Poundland might need a few quid as it braces for a plunge in profits this week. The company’s full-year results have been dragged down by its delayed takeover of high-street rival 99p Stores.

Earnings per share are forecast to fall almost 43 per cent, from 15.01p to 8.58p per share, when the company announces its results on Thursday.

Analysts expect the company to post underlying pre-tax profits, which will not include losses from 99p Stores, of between £35.3m and £39.1m, with an average consensus estimate of £37.6m, according to Reuters. Last year, underlying pre-tax profits reached £43.7m.

In a trading update in mid-April, the company announced a fall in like-for-like sales of 3.9 per cent, with a steeper drop of 4.9 per cent in the second half of the year.

Poundland Poundland | mobile image

However, it reported sales growth of 29.8 per cent, largely thanks to extra income from its £55m acquisition of 99p Stores.

The takeover, which was delayed by a six-month investigation by the Competition and Markets Authority, was finally approved in late September. During the delay, 99p Stores lost its credit insurance and led to stock shortages.

Read more: Billion Poundland: Profits up 18.6 per cent in first year since IPO

By the end of the fourth quarter, Poundland said it had converted 190 99p Stores into Poundland sites.

The company announced in March it had appointed former B&Q boss Kevin O’Byrne to take over from former chief executive Jim McCarthy. O-Byrne will take on the full reins on 1 July.

McCarthy joined Poundland in 2006, growing the retailer from a £310m business with 146 stores to one with more than 900 stores by the end of the last financial year, adding more than £1bn sales in the process.

Poundland ended the year with 906 stores, up from 593 in 2015, including 843 stores in the UK, up from 547 in 2015.