Poundland on the brink
Shares sink 84pc as boss quits in accounting scandal Banks fear they could lose billions
THE future of Poundland was in doubt last night amid a deepening scandal at its south african owner.
shares in the budget store’s parent company steinhoff plunged another 20pc yesterday after ratings agency moody’s slashed its credit rating and raised doubts over how it is run.
That took losses at its primary listing in Germany to 84pc this week – with more than £9.7bn wiped off its value as it faces further probes into accounting irregularities.
south african retail tycoon Christo Wiese, 76, who owns 23pc of the company, has lost more than £2.2bn in the share price slump. He is no longer a billionaire, having seen his fortune shrink to an estimated £552m.
The crisis raises questions over the future of Poundland and steinhoff’s other UK businesses, including furniture stores Harveys, Bensons For Beds and budget clothing firm Pep & Co, as they battle for customers in the crucial Christmas trading period.
Fears are mounting for the High street this Christmas as shoppers go online.
steinhoff has racked up debts of around £16bn.
It is thought that some of the world’s biggest banks, including HSBC, Goldman sachs, Citigroup, Nomura and BNP Paribas, face hefty losses in the fallout from the crisis.
malusi Gigaba, south africa’s finance minister, said the scandal was a ‘grave concern’.
Poundland, which has 896 stores in the UK employing 18,000 people, was bought last year by steinhoff for £610m from private equity firm Warburg Pincus.
But the south african company was plunged into crisis on Wednesday when chief executive markus Jooste, 56, quit as it delayed its financial results, announced a probe into its accounts, and said it may restate previous financial statements.
It is already under investigation in Germany over accounting irregularities but has denied any wrongdoing.
last night experts warned that steinhoff may not survive the crisis – possibly triggering the sale of its UK businesses.
steinhoff, which has grown rapidly from a furniture chain into an international retail empire, has said that it is considering selling assets worth around £896m.
simon Brown, a trader at south african investment website Just One lap, said: ‘What’s happened to steinhoff has been unprecedented in my years of market watching. It was our seventh biggest company and now it’s around 50th.
‘I do think it’s incredibly hard to come back from this. If you look at the individual assets – Conforama in France, Poundland in the UK – these might get sold and continue operations with new buyers. I think Poundland would find a buyer quickly – it’s a good business.’
UK retail analyst Nick Bubb said: ‘Poundland is about the only UK business that steinhoff can sell reasonably easily, so private equity funds will be crawling all over it after Christmas.’ Retail analyst Richard Hyman said: ‘Poundland would be one of the more attractive opportunities out there.’ Following the announcement on Wednesday, moody’s downgraded the firm by three notches. a lower credit rating means a company usually has to pay more to borrow from investors and can reduce the value of its existing debt, forcing some holders to sell. a spokesman for Poundland said: ‘It’s business as usual for us. We are focused on serving our customers over Christmas.’ steinhoff said it had postponed a meeting with bankers in london to December 18, but made no further comment.