Poundland secures crucial loan

Image source, Reuters

Poundland has secured a key investment to reduce its dependence on scandal-hit parent, South Africa's Steinhoff.

Pepkor Europe, which owns Poundland in Europe, said it had received a £180m loan from US investment firm Davidson Kempner.

The loan will replace investment Pepkor Europe expected to be granted by owner Steinhoff to help with expansion plans.

Steinhoff is under investigation by German authorities for an estimated $7bn (£5.3bn) accounting scandal.

'New confidence'

As well as Poundland, the loan will help to support UK furniture brands Bensons for Beds and Harveys, which are also owned by Pepkor.

Pepkor Europe chief executive Andy Bond said the money meant the division was no longer dependent on financial support from Steinhoff.

He said all of Pepkor's brands were "independent, profitable [and] delivering positive cash flows".

"Because of this strength, despite the ongoing issues faced by our parent company, we have been able to work quickly over Christmas to activate new sources of funding that will enable us to reassure suppliers, implement our investment plans and secure the future of these successful businesses," he added.

Poundland reported on Wednesday that sales rose 5.6% in the 12 weeks to 24 December.

Managing director Barry Williams said the discount retailer was "significantly outperforming the market [and] entering the new year with great confidence."

Image source, Bensons
Image caption,
Bensons for Beds is one of the retailers to benefit from the loan arrangement

Stuart Machin, group chief executive for Harveys and Bensons for Beds, also said Pepkor's loan means the two brands could face the year with "new confidence".

"Harveys, Bensons for Beds and our manufacturing businesses have always been run independently and for British customers," he added.

Management shake-up

Steinhoff has seen its share price fall by nearly 90% since early December when news of the accounting scandal emerged.

The conglomerate has admitted to accounting irregularities as far back as 2015 and has made sweeping changes to its management team in an attempt to calm investors.

The group owns 40 local brands in more than 30 countries.

As well as Poundland, Bensons for Beds and Harveys in the UK, its brands include Conforama in Europe, Pep and Ackermans in South Africa and Snooze in Australia.

Steinhoff derives about 60% of its earnings from Europe and 34% from Africa.

But ratings agency Moody's warned last week that Steinhoff might not have sufficient funds to "sustain its European operations".