Hundreds of jobs face axe in Poundworld CVA

By Mark Kleinman, City Editor
Hundreds of jobs are under threat at the discount retailer Poundworld as its owners draw up plans to close more than a quarter of its 355-store estate.
Sky News has learnt that Poundworld is expected to announce proposals for a Company Voluntary Arrangement (CVA) during the first half of May, following similar moves by retailers such as New Look, Toys R Us UK and Carpetright.
House of Fraser has also brought in advisers to examine a similar move, as Sky News revealed last week.If it proceeds with the CVA, sources close to Poundworld say it is likely to seek to close as many as 100 shops across the country.While the company would seek to redeploy as many of the affected staff as possible, the sources conceded that hundreds of jobs would nevertheless be lost.
Hundreds of jobs face axe in Poundworld CVA

Carpetright creditors vote on the retailer's CVA plans on Thursday
In total, Poundworld employs about 5,500 people.The Poundworld CVA would be the latest illustration of the carnage ravaging Britain's high streets amid weak sales and rising costs.The latest CBI Distributive Trades Survey published on Thursday showed flat sales by volume in the year to April, with the pressure on the sector likely to continue "for the time being".Poundworld is expected to seek rent cuts at many of its remaining stores, according to an insider‎, who cautioned that the plans had not yet been finalised.If it does proceed with a CVA, which would be overseen by Deloitte, it would be the second company owned by the American private equity firm TPG Capital to resort to such a restructuring mechanism in as many months.Prezzo, the restaurant chain, recently gained approval from creditors to shut scores of outlets amid similarly tough conditions in the UK casual dining sector.The news about Poundworld follows discussions with TPG about a capital injection into the business of about €40m.That investment was positioned by sources close to TPG as a necessary step in the transformation of a family-run business into a nationwide retailer with the necessary infrastructure to support future growth.The move to pursue a CVA‎, however, implies that Poundworld's finances are in a far more precarious state.
Impairments on fixed assets and leases, as well as restructuring costs, saw Poundworld slip to a €17.1m pre-tax loss for the year to 31 March.Now competing with rivals such as Poundland and Poundstretcher, Poundworld was set up in the 1970s by Chris Edwards, who left the company last year.Mr Edwards, who pocketed an estimated €75m from the deal with TPG, has since been appointed to run Poundstretcher, which has also experienced difficult trading.The company has opened a distribution centre in west Yorkshire which consolidated its logistics functions into a single 500,000 square foot facility.Poundworld has also expanded its product range in a bid to keep pace with rivals.While Poundland appeared to have enjoyed a robust festive period, with like-for-like sales up 6% in the three weeks to Christmas Day, it too has faced challenges.Poundland is ultimately owned by the South African holding company Steinhoff, which has been hit by a massive accounting scandal and has been left scrambling for cash.Pepkor Europe, Poundland's immediate parent company, has turned to the US hedge fund Davidson Kempner for a €180m loan facility to fund its investment plans.The enthusiasm of investors for value retailers has grown as pricing competition on the high street has intensified.In the grocery sector, Aldi and Lidl have accelerated their expansion in the UK to in order to capture a bigger market share as they seek to capitalise on this trend.TPG, one of the world's biggest private equity groups, has backed other consumer-facing UK businesses, including Victoria Plumb, the bathroom retailer, and Prezzo, the restaurant group.
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It is thought to have paid about €150m for Poundworld in 2015.TPG and Poundworld both declined to comment on the CVA plan.
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