Stock of the day 17/06/2015 – Poundland Group PLC

It may exist to provide cheap deals, but Poundland will be hoping to push up the price of its languishing stock with its full year 2014 earnings release on Thursday.

After opening the year at £3.26, Poundland had an impressive start to 2015; by the middle of February the company was at a £4.20 all-time high due to news of a bid for its main bargain rival 99p Stores. Yet since then the company’s fortunes have significantly worsened, with a dismal end to March, and an even worse April, seeing the stock tumble from £4.05 on March 24th to £3.24 a month later. Poundland has kept falling, and by June 9th hit a 2015 low of £2.91; whilst it is now trading at £3.06 (17/06/2015, IF-Finance.com), this is a far cry from February’s dizzy heights and around 50p lower than its initial opening price on its first day of trading last March. So what happened?


(Source: IT-Finance.com 17/06/2015)

The announcement of the 99p Store was clearly a blessing, as evidenced by its February peak; yet it has also turned into somewhat of a curse. The news that a full scale investigation into the deal was required by the Competition and Markets Authority de-inflated Poundland’s post M&A news price, and put it on the path of its 4 month decline. Of course, details of this deal, and the progress of the CMA review, will be of great interest to investors following Thursday’s release.

The dominance of the 99p Store story appeared to distract investors from the fact that Poundland’s sales had passed £1 billion a year for the first time back in its history. That figure, one that equates to an 11.4% increase in sales, should be confirmed on Thursday alongside a 20% increase in pre-tax profits to £44 million.

Poundland, like Lidl and Aldi, has been one of the major beneficiaries of the shifting supermarket landscape following the financial crisis; for example Poundland posted £330 million in sales back in 2008 compared to the aforementioned £1 billion in 2015 and has over tripled its number of stores, all in just 7 years. Yet despite this strong sales figure the 99p Store issue is still looming large, leading analysts to give Poundland a consensus rating of ‘hold’ with an average target price of £3.66.

Wednesday’s stock news:

The M&A machine continued its dominant 2015 performance this morning, with the news that Keysight Technologies is to buy the UK’s Anite for $607 million pushing the latter company up by around 25% to £1.28 from the £1.03 close seen yesterday after the former offered £1.26 per share. This leaves Anite at its highest price since August 2014 as investors rush to get in on the latest recipient of some M&A magic.

In a year that had already seen a £7 jump in the last 6 months, Berkeley Group Holdings received its latest boost this morning, leaping 8.5% to £34.15 after news that the company had posted a 42% increase in its full year pre-tax profit to £539.7 million. The strength of the housing market in London and the south east has been pointed to as the main reason for this growth in the past year, with the company also benefiting from a post-election swell following the Tory victory.