Poundstretcher returns to profit as CVA reaps rewards

A cost-cutting restructure at Poundstretcher has seen the business return to profit despite tumbling revenues, latest accounts at Companies House have revealed.

Turnover was down by £86.3m to £325.3m in the year to 31 March 2021, while operating profit rose to £88.3m, up from a £45.3m loss the previous year.

Gross profit climbed from £5.1m to £66.9m as the business closed loss-making stores in a company voluntary arrangement restructuring process.

The CVA, launched in June 2020, made the fate of many of the variety discounter’s stores dependent on landlords agreeing to rent reductions.

The company traded from 371 stores at the end of the latest accounting period, compared with 451 a year earlier.

“The CVA gave the company the opportunity to close a number of loss-making stores which had a drag on profits,” said the strategic report in the accounts.

“The CVA continues to be hugely successful and the company plans to exit the CVA by end of July 2022. The company has now restructured significant parts of its cost base and is now trading every week at a profit and adding to cash reserves every week.

“The average weekly cash in hand position of the company during 2021-2022 was £20m; the group is also debt-free.”

Income during the period included £890,000 in government grant funding, according to the accounts, compared with zero from government grants the previous year.

The average number of staff employed during the year was 4,978, down from 5,921 in the previous period. Payroll costs were £52.3m, down from £62.7m.

Director remuneration also fell, from £878,000 to £691,000. Aggregate remuneration of the highest paid director in respect of qualifying services rose from £128,000 to £143,000.

The strategic report said: “Household incomes are being squeezed by increases in food, energy and fuel, however Poundstretcher is well situated as a discount retailer who will deliver exceptional everyday value to customers with their flight to value retailers like us.”