Discount Retail Chain Poundstretcher (family owned) has bounced back in the space of just one year since being forced to enter a CVA in 2020.
The discounter made pre-tax profits of £30 million (US$42 million) in the 12 months to March thanks to renegotiating onerous leases, closing loss-making stores and making around 250 redundancies.
In 2020, with the approval of 95% of the company’s creditors, Poundstretcher carried out a CVA which has led to the company returning to profit after it made losses of £49.5million (US$ 69million) in the financial year ending 31 March 2020.
The CVA saw the company restructure its cost base and since the change and in spite of the CVA, Covid and Brexit, the company, which is debt free, has been trading at profit with an average of £20million (US$28 million) cash in the bank each week. The restructure means that for the financial year ending in March 2021 the company has an (unaudited) EBITDA of £46.7million (US$65 million).
Aziz Tayub, co-owner and chief executive of the chain believes this figure would have been higher were it not for £8 million (US$11 million) additional costs, including fees of £3 million (US$4.1 million) to KPMG for the CVA, and the cost of closing its former Huddersfield base.
He said: “We talked to the landlords before the CVA about reduced rent or rent holidays. Some agreed to talk, but it was unfortunately not enough to save the company. With the CVA, we planned on closing 75 loss-making stores, which rose to 90, taking the total down to 360.”
The business employs nearly 5,500 staff, and the turnaround came despite sales falling from £434 million (US$600 million) to £325 million (US$450 million) in the space of two years.
Poundstretcher was able to keep trading through lockdown as an essential supplier and remained stable for the first time in years, with £200 million (US$277 million) worth of stock split between its stores and main Kirby Muxloe warehouse in Leicestershire. Twenty-one new stores were opened in the six months from December 2020.
Mr Tayub attributes the success of the business to his supportive staff and management team, including his son Shehzad, the company’s operations director.
“The CVA gave us time to breathe, we could not have afforded paying rents on closed stores. Literally every store is profitable now. We felt that a CVA offered us the best solution to the issues we had faced in 2019/20. Since we restructured our cost base, we have traded at a profit every week.”