Poundland chief says retailer won't be distracted by Steinhoff bid

Poundland’s outgoing boss today insisted that a potential takeover bid from South African suitor Steinhoff would not be as big a distraction as its own merger with 99p stores, which he blamed for an 84% plunge in annual profits.

“The team can take whatever comes at them in their stride,” said Jim McCarthy, who will hand over to former B&Q boss Kevin O’Byrne at the end of this month.

Steinhoff, which owns a 23% stake in the business, yesterday said it was considering making an offer for the pound shops chain.

McCarthy said he couldn’t “see anything being more challenging” than Poundland’s recent acquisition of rival 99p Stores.

The company was subjected to a “protracted” investigation by the Competition and Markets Authority and later forced to accelerate the conversion of 99p Stores after finding them in a mess.

That “took a little bit of focus away” at a time when it was also under pressure from fiercer competition from fellow discounters and supermarkets engaged in a price war.

It is also being challenged by changing shopping habits such as a shift to online shopping.

Pre-tax profits sank to £5.9 million in the year ended in March, from £36.2 million a year earlier.

Without the 99p Stores deal, underlying profits were down 13.5% at £37.8 million. Like-for-like sales fell 3.9%.

Poundland expects the first half of this year to remain “challenging”, with negative same-store sales growth and continued disruption related to 99p Stores, but trading should improve in the second half.

McCarthy, who is planning a break from corporate life after a decade leading the firm, said Poundland’s increased scale should help it recover.