STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS
IMPORTANT: You must read the following disclaimer before continuing. This electronic transmission applies to the attached document and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached prospectus (the ‘‘Prospectus’’) relating to Poundland Group plc (the ‘‘Company’’) dated 12 March 2014 accessed from this page or otherwise received as a result of such access and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of the attached document. In accessing the attached document, you agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time you receive any information from us as a result of such access. You acknowledge that this electronic transmission and the delivery of the attached document is confidential and intended for you only and you agree you will not forward, reproduce or publish this electronic transmission or the attached document to any other person. The Prospectus has been prepared solely in connection with the proposed offer to certain institutional and professional investors (the ‘‘Global Offer’’) of ordinary shares (the ‘‘Ordinary Shares’’) of the Company. The Prospectus has been published in connection with the admission of the Ordinary Shares to the premium listing segment of the Official List of the UK Financial Conduct Authority (the ‘‘Financial Conduct Authority’’) and to trading on London Stock Exchange plc’s main market for listed securities (together, ‘‘Admission’’). The Prospectus has been approved by the Financial Conduct Authority as a prospectus prepared in accordance with the Prospectus Rules made under section 73A of the FSMA. The Prospectus has been published and is available from the Company’s registered office and on the Company’s website at poundlandcorporate.com. Pricing information and other related disclosures have also been published on this website. Prospective investors are advised to access such information prior to making an investment decision.
THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT MAY ONLY BE DISTRIBUTED IN ‘‘OFFSHORE TRANSACTIONS’’ AS DEFINED IN, AND IN RELIANCE ON, REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) OR WITHIN THE UNITED STATES TO QUALIFIED INSTITUTIONAL BUYERS (‘‘QIBs’’) AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) IN RELIANCE ON RULE 144A OR ANOTHER EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THE ATTACHED DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. NOTHING IN THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
THE ORDINARY SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QIB AS DEFINED IN, AND IN RELIANCE ON, RULE 144A, OR ANOTHER EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED STATES.
This electronic transmission and the attached document and the Global Offer when made are only addressed to and directed at persons in member states of the European Economic Area who are ‘‘qualified investors’’ within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (‘‘Qualified Investors’’). In addition, in the United Kingdom, this electronic transmission and the attached document is being distributed only to, and is directed only at, Qualified Investors (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘‘Order’’) and Qualified Investors falling within Article 49(2)(a) to (d) of the Order, and (ii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as ‘‘relevant persons’’). This electronic transmission and the attached document must not be acted on or relied on (i) in the United Kingdom, by persons who are not relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, by persons who are not Qualified Investors. Any investment or investment
activity to which this Prospectus relates is available only to (i) in the United Kingdom, relevant persons, and (ii) in any member state of the European Economic Area other than the United Kingdom, Qualified Investors, and will be engaged in only with such persons.
This Prospectus and the information contained herein does not constitute a public offer or advertisement of the Ordinary Shares in the Russian Federation and is not an offer, or an invitation to make offers, to sell, purchase, exchange or otherwise transfer any Ordinary Shares to or for the benefit of any persons or entities in the Russian Federation. Neither the Ordinary Shares nor this Prospectus or other documents relating to them have been or are intended to be registered in Russia, with the Central Bank of the Russian Federation or with any other state authorities that may from time to time be responsible for such registration, and the Ordinary Shares are not intended for ‘‘public placement’’ or ‘‘public circulation’’ in the Russian Federation (as defined under Russian law), unless otherwise permitted under Russian law. Any information relating to the Ordinary Shares in this Prospectus is intended for, and addressed only to persons outside of the Russian Federation. The Ordinary Shares are not being offered, sold or delivered in the Russian Federation or to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation except as may be permitted by Russian law.
Confirmation of Your Representation: This electronic transmission and the attached document is delivered to you on the basis that you are deemed to have represented to the Company, Credit Suisse Securities (Europe) Limited, J.P. Morgan Securities plc which conducts its UK investment banking activities as J.P. Morgan Cazenove, Canaccord Genuity and Shore Capital Stockbrokers Limited (collectively, the ‘‘Banks’’) and N M Rothschild & Sons Limited (‘‘Rothschild’’) that (i) you are (a) a QIB acquiring such securities for its own account or for the account of another QIB or (b) outside the United States; (ii) if you are in the UK, you are a relevant person, and/or a relevant person who is acting on behalf of, relevant persons in the United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or entities in the UK or the EEA; (iii) if you are in any member state of the European Economic Area other than the UK, you are a Qualified Investor and/or a Qualified Investor acting on behalf of, Qualified Investors or relevant persons, to the extent you are acting on behalf of persons or entities in the EEA or the UK; and (iv) you are an institutional investor that is eligible to receive this Prospectus and you consent to delivery by electronic transmission.
You are reminded that you have received this electronic transmission and the attached document on the basis that you are a person into whose possession this Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliver this Prospectus, electronically or otherwise, to any other person. This Prospectus has been made available to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Company, the Banks, Rothschild nor any of their respective affiliates accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version. By accessing the attached document, you consent to receiving it in electronic form. None of the Banks, Rothschild nor any of their respective affiliates accepts any responsibility whatsoever for the contents of the attached document or for any statement made or purported to be made by it, or on its behalf, in connection with the Company or the Ordinary Shares. The Banks, Rothschild and each of their respective affiliates, each accordingly disclaims all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of such document or any such statement. No representation or warranty express or implied, is made by any of the Banks, Rothschild or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information set out in the attached document.
The Banks and Rothschild are acting exclusively for the Company and no one else in connection with the Global Offer. They will not regard any other person (whether or not a recipient of this Prospectus) as their client in relation to the Global Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients nor for giving advice in relation to the Global Offer or any transaction or arrangement referred to in the attached document.
This Prospectus comprises a prospectus (the ‘‘Prospectus’’) for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended (the ‘‘Prospectus Directive’’) relating to Poundland Group plc (the ‘‘Company’’) prepared in accordance with the Prospectus Rules of the Financial Conduct Authority (the ‘‘FCA’’) made under section 73A of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’). The Prospectus will be made available to the public in accordance with the Prospectus Rules.
Application has been made to the FCA for all of the ordinary shares of the Company (the ‘‘Ordinary Shares’’) issued and to be issued in connection with the Global Offer to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange plc (the ‘‘London Stock Exchange’’) for all of the Ordinary Shares to be admitted to trading on London Stock Exchange’s main market for listed securities (the ‘‘Main Market’’) (together, ‘‘Admission’’). Conditional dealings in the Ordinary Shares are expected to commence on the Main Market of the London Stock Exchange at 8.00 a.m. on 12 March 2014. It is expected that Admission will become effective, and that unconditional dealings in the Ordinary Shares will commence at 8.00 a.m. on 17 March 2014. All dealings before the commencement of unconditional dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application is currently intended to be made for the Ordinary Shares to be admitted to listing or dealt with on any other exchange.
The directors of the Company, whose names appear on page 46 of this Prospectus (the ‘‘Directors’’), and the Company accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information.
Prospective investors should read this Prospectus in its entirety. See ‘‘Risk Factors’’ in Part 1 for a discussion of certain risks and other factors that should be considered prior to any investment in the Ordinary Shares.
Poundland Group plc (Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 08861243)
Global Offer of 125,000,000 Ordinary Shares of 170 pence each at an Offer Price of 300 pence per Ordinary Share
and admission to the premium listing segment of the Official List and to trading on the Main Market of the London Stock Exchange
Joint Global Co-ordinators, Joint Bookrunners and Joint Sponsors
Credit Suisse J.P. Morgan Cazenove Co-Lead Managers
Canaccord Genuity Shore Capital Financial Adviser to the Company
Rothschild
ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION Issued and fully paid
Number Nominal Value
250,000,000 170 pence
In connection with the Global Offer, J.P. Morgan Cazenove, as Stabilising Manager, or any of its agents, may (but will be under no obligation to), to the extent permitted by applicable law, over-allot Ordinary Shares or effect other stabilisation transactions with a view to supporting the market price of the Ordinary Shares at a higher level than that which might otherwise prevail in the open market. The Stabilising Manager is not required to enter into such transactions and such transactions may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be undertaken at any time during the period commencing on the date of the commencement of conditional dealings of the Ordinary Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter. However, there will be no obligation on the Stabilising Manager or any of its agents to effect stabilising transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if commenced, may be discontinued at any time without prior notice. Except as required by law or regulation,
neither the Stabilising Manager nor any of its agents intends to disclose the extent of any over-allotments made and/or stabilisation transactions conducted in relation to the Global Offer.
In connection with the Global Offer, the Stabilising Manager may, for stabilisation purposes, over-allot Ordinary Shares up to a maximum of 15 per cent. of the total number of Ordinary Shares comprised in the Global Offer. For the purposes of allowing the Stabilising Manager to cover short positions resulting from any such overallotments and/or from sales of Ordinary Shares effected by it during the stabilising period, the Over-allotment Shareholders have granted to the Stabilising Manager the Over-allotment Option, pursuant to which the Stabilising Manager may purchase or procure purchasers for additional Ordinary Shares up to a maximum of 15 per cent. of the total number of Ordinary Shares comprised in the Global Offer. The Over-allotment Option will be exercisable, in whole or in part, upon notice by the Stabilising Manager, at any time on or before the 30th calendar day after the commencement of conditional dealings of the Ordinary Shares on the London Stock Exchange. Any Over-allotment Shares made available pursuant to the Over-allotment Option will rank pari passu in all respects with the Ordinary Shares, including for all dividends and other distributions declared, made or paid on the Ordinary Shares, will be purchased on the same terms and conditions as the Ordinary Shares being sold in the Global Offer and will form a single class for all purposes with the other Ordinary Shares.
Each of Credit Suisse, J.P. Morgan Cazenove and Rothschild, which are each authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom, and each of Canaccord Genuity and Shore Capital, authorised and regulated by the FCA in the United Kingdom, is acting exclusively for the Company and no one else in connection with the Global Offer. None of the Underwriters or Rothschild will regard any other person (whether or not a recipient of this Prospectus) as a client in relation to the Global Offer and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for the giving of advice in relation to the Global Offer or any transaction, matter, or arrangement referred to in this Prospectus. Apart from the responsibilities and liabilities, if any, which may be imposed on the Underwriters or Rothschild by FSMA or the regulatory regime established thereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Underwriters or Rothschild nor any of their respective affiliates accepts any responsibility whatsoever for the contents of this Prospectus including its accuracy and completeness or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Ordinary Shares or the Global Offer. Each of the Underwriters, Rothschild and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have in respect of this Prospectus or any such statement. No representation or warranty express or implied, is made by any of the Underwriters, Rothschild or any of their respective affiliates as to the accuracy, completeness or sufficiency of the information set out in this Prospectus, and nothing in this Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future.
This Prospectus does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities other than the securities to which it relates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, such securities by any person in any circumstances in which such offer or solicitation is unlawful.
Notice to overseas shareholders
The Ordinary Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the ‘‘Securities Act’’). The Ordinary Shares offered by this Prospectus may not be offered or sold in the United States, except to qualified institutional buyers (‘‘QIBs’’), as defined in, and in reliance on, the exemption from the registration requirements of the Securities Act provided in Rule 144A under the Securities Act (‘‘Rule 144A’’) or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Prospective investors are hereby notified that the sellers of the Ordinary Shares may be relying on the exemption from the provisions of section 5 of the Securities Act provided by Rule 144A. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizen of any jurisdiction, including Australia, Canada, Japan or South Africa. This Prospectus does not constitute an offer of, or the solicitation of an offer to subscribe for or purchase any of the Ordinary Shares to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.
The Ordinary Shares have not been and will not be registered under the applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Ordinary Shares may not be offered or sold in Australia, Canada, Japan or South Africa, or to or for the account or benefit of any national, resident or citizen in Australia, Canada, Japan or South Africa. The Ordinary Shares have not been approved or
disapproved by any US federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not passed upon or endorsed the merits of the Global Offer nor confirmed the accuracy or determined the adequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States.
The distribution of this Prospectus and the offer and sale of the Ordinary Shares in certain jurisdictions may be restricted by law. No action has been or will be taken by the Company, the Selling Shareholders, the Underwriters or Rothschild to permit a public offering of the Ordinary Shares under the applicable securities laws of any jurisdiction. Other than in the United Kingdom, no action has been taken or will be taken to permit the possession or distribution of this Prospectus (or any other offering or publicity materials relating to the Ordinary Shares) in any jurisdiction where action for that purpose may be required or where doing so is restricted by law. Accordingly, neither this Prospectus, nor any advertisement, nor any other offering material may be distributed or published in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus comes should inform themselves about and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.
Notice to investors in the Russian Federation
This Prospectus should not be considered as a public offer or advertisement of the Ordinary Shares in the Russian Federation and is not an offer, or an invitation to make offers, to sell, purchase, exchange or otherwise transfer any Ordinary Shares to any persons in the Russian Federation. Neither the Ordinary Shares nor this Prospectus or other documents relating to them have been or are intended to be registered in Russia, with the Central Bank of Russia (the ‘‘CBR’’) or with any other state bodies that may from time to time be responsible for such registration, and the Ordinary Shares are not intended for ‘‘public placement’’ or ‘‘public circulation’’ in the Russian Federation (as defined under Russian law), unless otherwise permitted under Russian law. Any information on the Ordinary Shares in this Prospectus is intended for, and addressed only, to persons outside of the Russian Federation. The Ordinary Shares are not being offered, sold or delivered in the Russian Federation or to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation except as may be permitted by Russian law.
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (‘‘RSA421-B’’) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
Available information
For so long as any of the Ordinary Shares are in issue and are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is not subject to section 13 or 15(d) under the US Securities Exchange Act of 1934, as amended (the ‘‘US Exchange Act’’), nor exempt from reporting under the US Exchange Act pursuant to Rule 12g3-2(b) thereunder, make available to any holder or beneficial owner of an Ordinary Share, or to any prospective purchaser of an Ordinary Share designated by such holder or beneficial owner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
CONTENTS
PART 2 PRESENTATION OF FINANCIAL AND OTHER INFORMATION . . . . . . . . . . 22
PART 3 DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PART 4 EXPECTED TIMETABLE OF PRINCIPAL EVENTS AND GLOBAL OFFER STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PART 5 INFORMATION ON THE COMPANY AND ITS GROUP . . . . . . . . . . . . . . . . . 30
PART 6 DIRECTORS, SENIOR MANAGEMENT AND CORPORATE GOVERNANCE . 46
PART 7 SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
PART 8 OPERATING AND FINANCIAL REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
PART 9 CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
PART 10 HISTORICAL FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
PART 11 DETAILS OF THE GLOBAL OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
PART 12 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
PART 13 DEFINITIONS AND GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
SUMMARY INFORMATION
Summaries are made up of disclosure requirements known as ‘‘Elements’’. These Elements are numbered in Sections A—E (A.1—E.7).
This summary contains all the Elements required to be included in a summary for this type of security and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements.
Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of ‘‘not applicable’’.
Section A—Introduction and warnings Element Disclosure Requirement Disclosure
A.1 Warning This summary should be read as an introduction to the prospectus (the ‘‘Prospectus’’).
Any decision to invest in the securities should be based on consideration of the Prospectus as a whole by the investor. Where a claim relating to the information contained in the Prospectus is brought before a court, the plaintiff investor might, under the national legislation of the Member States, have to bear the costs of translating the Prospectus before the legal proceedings are initiated.
Civil liability attaches only to those persons who have tabled the summary including any translation thereof, and applied its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Prospectus or it does not provide, when read together with the other parts of the Prospectus, key information in order to aid investors when considering whether to invest in such securities.
A.2 Subsequent resale of Not applicable. No consent has been given by the Company or any securities or final person responsible for drawing up this Prospectus to the use of the placement of securities Prospectus for subsequent resale or final placement of securities by through financial financial intermediaries. intermediaries
Section B—Issuer Element Disclosure Requirement Disclosure
B.1 Legal and commercial Poundland Group plc (the ‘‘Company’’) name
B.2 Domicile and legal form The Company is a public limited company, incorporated on 24 January 2014 as a private company limited by shares in the United Kingdom and re-registered as a public limited company on 14 February 2014 with its registered office situated in England and Wales. The Company operates under the Companies Act 2006.
B.3 Current operations and Poundland is the largest single price value general merchandise principal activities retailer in Europe by both sales and by number of stores.
Poundland opened its first store in 1990 and has grown to operate a network of over 500 stores across the UK and Ireland. Stores are located in convenient locations, typically with high footfall, across a mixture of high streets, shopping centres and retail parks.
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In September 2011, Poundland successfully entered Ireland under the ‘‘Dealz’’ brand, where it sells the vast majority of products for A1.49. The operations in Ireland became profitable in their first full year of operation. As at 29 December 2013, Poundland operated 33 Dealz stores, of which 31 are in Ireland, one is in the Isle of Man and one is in the Orkney Islands.
Poundland has established its market-leading position in the UK by continuously focusing on delivering amazing value to its customers every day. The Directors believe that this is achieved by selling a wide range of great products and top brands, offering many new exciting lines each week, with all products in the UK selling at a price point of £1, offering customers good value for money.
The average Poundland store carries approximately 3,000 core range SKUs including over 1,000 third-party branded products from popular brand names such as Cadbury, Mars, Heinz, Nestle and Colgate. Third-party branded products represent an important footfall driver and account for the majority of sales (approximately 63 per cent. of total sales in the 2013 financial year). Poundland also has strong in-house product development capabilities, offering over 50 own label brand families, which typically have higher margins than third-party branded products, including Silk Soft paper products, Sweet Heaven confectionery, Kitchen Corner, Allura (Health & Beauty), Beautiful Garden and Toolbox (DIY). Poundland works closely with suppliers to develop innovative and exclusive products to offer a relevant and attractive value offering. Its sourcing office in Hong Kong is an important part of its buying strategy with particular focus on new product development, logistics and product quality assurance and control.
Poundland has generated strong revenue and Underlying EBITDA growth over each of the last three financial years, with revenue having increased from £641.5 million in the 52 weeks ended 27 March 2011 to £880.5 million in the 2013 financial year, and Underlying EBITDA having increased at a faster rate, reflecting the positive operational leverage within the Group, growing from £31.1 million in the 52 weeks ended 27 March 2011 to £45.5 million in the 2013 financial year. This strong growth historically has been driven by:
• a consistent track record of successful store openings, having increased its store portfolio by 64, 62 and 69 net new stores in the 52 weeks ended 27 March 2011 and the 2012 and the 2013 financial years, respectively, and by 59 net new stores in the 39 weeks ended 29 December 2013;
• maintaining stable gross margins in the 52 weeks ended 27 March 2011, the 52 weeks ended 1 April 2012 and the 2013 financial year, despite cost increases, changes in product mix and other external factors such as an increase in VAT rates. This has been achieved by using a number of initiatives including managing its product range, re-engineering of pack sizes, re-negotiating rates, changing suppliers, increasing the number of direct suppliers and altering product mix;
• well-invested systems, supply chain and distribution infrastructure, creating efficiencies and underpinning a scalable business model;
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• consistently achieving high returns on invested capital with a new store typically recovering all costs associated with its opening, including capital expenditure and all pre-opening costs, in around 12 months of trading. Furthermore, a new Poundland store has a rapid maturity profile, with stores trading approximately 22 per cent. above the long-term average in their first full six weeks; and
• an attractive customer proposition with broad appeal resulting in high brand awareness. In a recent survey by YouGov, Poundland scored 95 per cent. prompted brand awareness, significantly above its key competitors in the UK value general merchandise retail market and in line with large UK grocery chains. Poundland has built a strong customer base with the average Poundland store serving over 10,000 customers per week. In addition, the Directors believe that the customer proposition appeals to an increasingly wide range of consumers, with 22 per cent. of Poundland’s UK customers being from the affluent AB socio-demographic group based on a survey conducted in 2013.
This historical track record of strong growth and high returns has been delivered by Poundland’s strong and entrepreneurial senior management team who have significant retail experience. Poundland aims to build on this track record for the future by continuing to deliver amazing value every day to its customers through product innovation and range and mix management. The Directors believe that there is potential for more than 1,000 stores in the UK, making it possible to more than double its existing UK portfolio, and plans to open approximately 60 net new stores per year. The Directors believe that, building on the successful entry into Ireland in 2011, continental Europe could be an attractive opportunity providing a platform for longer term growth, and are currently developing plans for a low-cost pilot launch in Spain in the 2015 financial year.
B.4a Significant recent trends Poundland operates in an attractive sub-sector of the overall UK affecting the Group and retail market, being the value general merchandise retail market. the industry in which it The total retail market in the UK amounted to approximately operates £310 billion in 2012, with value general merchandise representing
approximately £5.2 billion of this. The key trends and features of the UK value general merchandise market are listed below:
• One of the fastest growing sectors within UK retail, having grown at a CAGR of approximately 15 per cent. since 2007, predominantly driven by rapid store roll out.
• Established sector that continues to benefit from a structural shift in consumer behaviour towards value retailing.
• Significant long-term growth potential with the market forecast by PwC to grow at a CAGR of approximately 9.3 per cent. per year between 2012 and 2017, driven by a combination of supply and demand factors, and also supported by evidence in the more mature US value general merchandise market.
• While the value general merchandise market has primarily been targeted towards less affluent consumers, there is an increasing penetration in the more affluent customer base. While many new consumers entered the value retail market during difficult economic times, research suggests that the majority of these consumers have indicated they will continue to use value retailers even as the economy improves and they have higher disposable income (source: PwC, ‘‘The UK Value General Merchandising Market’’, November 2013).
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B.5 Group description Prior to the Reorganisation and Admission, the Company is a non-trading and wholly-owned subsidiary of WP X, which is a fund managed by Warburg Pincus LLC (‘‘Warburg Pincus’’). Immediately prior to Admission, the Company will become the holding company of the Group. Prior to completion of the Reorganisation, the term ‘‘Group’’ refers to Poundland Group Holdings Limited and each of its consolidated subsidiaries and subsidiary undertakings; thereafter, the term ‘‘Group’’ refers to the Company and its consolidated subsidiaries (including Poundland Group Holdings Limited) and subsidiary undertakings from time to time. The term ‘‘Admission’’ refers to admission of the ordinary shares of the Company of 170 pence each (‘‘Ordinary Shares’’) to the premium listing segment of the Official List of the FCA (the ‘‘Official List’’) and to trading on the London Stock Exchange’s main market for listed securities.
B.6 Major shareholders As at the date of this Prospectus, to the extent known by the Company, the Company is owned or controlled by WP X, which holds 100 per cent. of the voting rights attached to the issued share capital of the Company (and 77.0 per cent. upon completion of the Reorganisation). Immediately following the Global Offer and Admission, it is expected that the Warburg Pincus Funds will hold approximately 37.9 per cent. of the voting rights attached to the issued share capital of the Company, assuming no exercise of the Over-allotment Option, and 30.4 per cent., assuming the Over-allotment Option is exercised in full.
The Ordinary Shares owned by the Company’s major shareholders rank pari passu with other Ordinary Shares in all respects.
On 12 March 2014, the Company and the Warburg Pincus Funds entered into the Relationship Agreement which will, conditional upon Admission, regulate the ongoing relationship between the Company and the Warburg Pincus Funds. The principal purpose of the Relationship Agreement is to ensure that (i) transactions and relationships with the Warburg Pincus Funds (including any transactions and relationships with any member of the Group) are at arm’s length and on normal commercial terms, (ii) the Warburg Pincus Funds or any of their associates do not take any action that would have the effect of preventing the Company from complying with its obligations under the Listing Rules, and (iii) the Warburg Pincus Funds or any of their associates do not propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules.
The Directors believe that the terms of the Relationship Agreement will enable the Group to carry on an independent business as its main activity.
Following Admission, the Articles allow the election of independent directors to be conducted in accordance with any requirements of the Listing Rules.
In all other circumstances, the Company’s major shareholders have and will have the same voting rights attached to the Ordinary Shares as all other shareholders.
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B.7 Key financial information The selected financial information set out below has been extracted and narrative description without material adjustment from the Historical Financial of significant changes to Information relating to the Group included in Part 10—’’Historical financial condition and Financial Information’’. operating results of the The audited financial statements for the 2011 financial periodGroup during or reflect the shorter period of 41 weeks, representing the tradingsubsequent to the period performance of the Group from the date of the acquisition of thecovered by the historical Group by the Warburg Pincus Funds. The 2012 financial year was akey financial information 53 week period and the 2013 financial year was a 52 week period.
Consolidated Statement of Profit and Loss 41 weeks 53 weeks 52 weeks 39 weeks endedended ended ended 27 March 1 April 31 March 30 December 29 December
2011 2012 2013 2012 2013
£000 Unaudited
Revenue . . . . . . . . . . . 518,372 780,147 880,491 671,100 758,340 Cost of sales . . . . . . . . (327,613) (492,165) (556,980) (424,540) (479,022)
Gross profit . . . . . . . . . 190,759 287,982 323,511 246,560 279,318 Distribution expenses . . . (153,532) (232,086) (263,196) (196,482) (220,579) Administrative expenses . (21,530) (27,712) (30,264) (22,650) (25,658)
Operating profit . . . . . . 15,697 28,184 30,051 27,428 33,081 Financial income . . . . . 52 192 371 268 240 Financial expenses . . . . (7,200) (5,065) (3,945) (3,001) (2,728)
Net financing expense . . (7,148) (4,873) (3,574) (2,733) (2,488)
Profit before tax . . . . . . 8,549 23,311 26,477 24,695 30,593 Taxation . . . . . . . . . . . (3,433) (5,800) (3,092) (6,606) (7,566)
Profit for the period . . . 5,116 17,511 23,385 18,089 23,027
Non-underlying items . . . (6,547) (575) 1,604 (1,882) (982)
Underlying profit for the period(1) . . . . . . . . . . 11,663 18,086 21,781 19,971 24,009
EBITDA(2) . . . . . . . . . . 24,090 39,457 43,131 36,805 44,025 Non-underlying items . . . (4,154) — (2,319) (1,995) (1,198)
Underlying EBITDA(1) . . 28,244 39,457 45,450 38,800 45,223
(1) Underlying profit for the period and Underlying EBITDA exclude the impact of non-underlying items.
(2) The Group defines EBITDA as profit for the period before finance costs, finance income, tax and depreciation and amortisation.
Balance Sheet As at
27 March 1 April 31 March 30 December 29 December 2011 2012 2013 2012 2013
£000 Unaudited
Total current assets . . . . 106,126 125,780 148,811 173,705 192,605
Total assets . . . . . . . . . 321,075 345,730 372,795 399,297 418,618
Liabilities Total current liabilities . . (75,714) (97,667) (101,166) (137,634) (156,665)
Total non-current liabilities . . . . . . . . . (75,703) (74,685) (71,046) (71,394) (66,022)
Total liabilities . . . . . . . (151,417) (172,352) (172,212) (209,028) (222,687)
Net assets . . . . . . . . . . 169,658 173,378 200,583 190,269 195,931
Total equity . . . . . . . . . 169,658 173,378 200,583 190,269 195,931
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Cash Flow Statements 41 weeks 53 weeks 52 weeks 39 weeks endedended ended ended 27 March 1 April 31 March 30 December 29 December
2011 2012 2013 2012 2013
£000 Unaudited
Net cash from operating activities . . . . . . . . . 14,107 42,918 33,417 45,584 58,319
Net cash from investing activities . . . . . . . . (184,886) (16,253) (16,438) (14,717) (13,232)
Net cash from financing activities . . . . . . . . 201,772 (21,742) (10,034) (7,681) (24,915)
Net increase in cash and cash equivalents . 30,993 4,923 6,945 23,186 20,172
Cash and cash equivalents at end of period . . . . . . . . . . 30,993 35,916 42,861 59,102 63,033
Certain significant changes to the Group’s financial condition and results of operations occurred during the 2011 financial period and 2012 and 2013 financial years and to the 39 weeks ended 30 December 2012 and 29 December 2013. These changes are set out below.
Revenue increased by £362.1 million, or 69.8 per cent., from £518.4 million in the 2011 financial period to £880.5 million in the 2013 financial year, and increased by £87.2 million, or 13.0 per cent., from £671.1 million in the 39 weeks ended 30 December 2012 to £758.3 million in the 39 weeks ended 29 December 2013, primarily driven by new store openings.
Profit for the period increased by £18.3 million from £5.1 million in the 2011 financial period to £23.4 million in the 2013 financial year, and increased by £4.9 million, or 27.1 per cent., from £18.1 million in the 39 weeks ended 30 December 2012 to £23.0 million in the 39 weeks ended 29 December 2013.
There has been no significant change in the financial position or results of operations of the Group since 29 December 2013, the date to which the last audited consolidated financial information of the Group was prepared.
Key Performance Indicators
In addition to the selected financial information set out above, the Board monitors the Group’s performance by regularly reviewing the following key performance indicators (‘‘KPIs’’), as the Group considers these measures to give greater understanding of the drivers of the Group’s performance. Some of the measures described below are not measures of financial performance under generally accepted accounting principles, including IFRS, and should not be considered in isolation or as an alternative to the Group’s IFRS financial statements. The table below represents the KPIs that the Group believes significantly affect the Group’s results of operations and financial condition during the periods under review.
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52 weeks 52 weeks 52 weeks 39 weeks 39 weeks ended or ended or ended or ended or ended or
as at as at as at as at as at 27 March 1 April 31 March 30 December 29 December
2011 2012 2013 2012 2013
Number of stores at end of period . . . . . . . . . 327 389 458 456 517
Number of new stores (net) . . . . . . . . . . . . 64 62 69 67 59
Revenue (£ millions) . . . 641.5(6) 765.4(8) 880.5 671.1 758.3 Gross margin (%) . . . . . 36.7(6) 36.9(8) 36.7 36.7 36.8 Underlying EBITDA
(£ millions)(1) . . . . . . . 31.1(6) 38.7(8) 45.5 38.8 45.2 Underlying EBITDA
margin (%)(1) . . . . . . . 4.8(6) 5.1(8) 5.2 5.8 6.0 Underlying profit for the
period (£ millions) . . . 12.0(6) 17.7(8) 21.8 20.0 24.0 Operating cash flow less
maintenance capital expenditure (£ millions)(2) . . . . . . . —(7) 47.5(8) 37.6 51.6 64.5
Cash conversion (% of Underlying EBITDA)(3) —(7) 120.4(8) 82.7 133.0 142.7
Operating cash flow less maintenance and expansion capital expenditure (£ millions)(4) . . . . . . . —(7) 33.5(8) 23.2 38.6 53.6
Net debt/(cash)(5) . . . . . . 29.6 22.5 9.2 (6.2) (14.0)
(1) The Group defines Underlying EBITDA as profit for the period before finance costs, finance income, tax, non-underlying items and depreciation and amortisation, and Underlying EBITDA margin as Underlying EBITDA divided by revenue.
(2) Operating cash flow less maintenance capital expenditure is defined as Underlying EBITDA plus/minus changes in working capital minus capital expenditure on stores opened in the prior period or earlier. Changes in working capital is defined as the sum of the changes in trade and other receivables, inventories, trade and other payables and provisions.
(3) Cash conversion is defined as the operating cash flow metric (defined in footnote (2) above) divided by Underlying EBITDA.
(4) Operating cash flow less maintenance and expansion capital expenditure is defined as Underlying EBITDA plus/minus changes in working capital minus all capital expenditure including investment on existing stores, the roll out of new stores and investments in extensions, IT, warehouses and property. Changes in working capital is defined as the sum of the changes in trade and other receivables, inventories, trade and other payables and provisions.
(5) Net debt is total debt minus cash and cash equivalents. Net debt as at 1 April 2012 is stated after the redemption of preference shares of £14.0 million and net debt as at 29 December 2013 is stated after the redemption of preference shares of £20.0 million.
(6) The unaudited adjusted financial information relating to revenue, gross margin, Underlying EBITDA, Underlying EBITDA margin and underlying profit for the 52 week period ended 27 March 2011 has been derived from the audited UK GAAP financial information for Poundland Limited, the principal trading company of the Group, for the 52 week period ended 27 March 2011, with UK GAAP-to-IFRS adjustments and adjustments for consolidation of the results of the Company and its non-trading subsidiaries and subsidiary undertakings. This unaudited 52 week adjusted financial information has been prepared for illustrative purposes only and has not been prepared in accordance with Regulation S-X of the Securities Act, the Prospectus Directive or generally accepted accounting standards.
(7) Unavailable for the 52 weeks ended 27 March 2011. (8) Figures for the 52 week period ending 1 April 2012 have been calculated by
dividing the 2012 financial year figures by 53 and multiplying by 52 to allow for comparability. No such adjustment has been made in respect of the cash flow metrics.
B.8 Key pro forma financial Not applicable. There is no pro forma financial information. information
B.9 Profit forecast Not applicable. There is no profit forecast or estimate.
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B.10 Description of the nature Not applicable. There are no qualifications to the accountant’s of any qualifications in the report on the historical financial information. audit report on the historical financial information
B.11 Insufficient working capital In the opinion of the Company, taking into account the facilities available to the Group, the working capital available to the Group is sufficient for the Group’s present requirements, that is for the next 12 months following the date of this Prospectus.
Section C—Securities Element Disclosure Requirement Disclosure
C.1 Type and class of securities Pursuant to the Global Offer, approximately 125,000,000 Ordinary Shares are expected to be sold by the Selling Shareholders (the ‘‘Offer Shares’’). In addition, a further 18,750,000 Ordinary Shares are being made available by the Over-allotment Shareholders (the ‘‘Over-allotment Shares’’) pursuant to the Over-allotment Option.
When admitted to trading, the Ordinary Shares will be registered with ISIN number GB00BJ34VB96 and SEDOL number BJ34VB9.
C.2 Currency United Kingdom pounds sterling.
C.3 Number of securities to be As at the date of this Prospectus, the issued share capital of the issued Company is £50,000.7 comprising 1 Ordinary Share of 170 pence
and 49,999 Preference Shares of £1 each (all of which are fully paid or credited as fully paid). Following the Reorganisation and immediately prior to Admission, the issued share capital of the Company is expected to be £425,049,999 comprising 250,000,000 ordinary shares of 170 pence each and 49,999 preference shares of £1 each (the ‘‘Preference Shares’’) (all of which will be fully paid or credited as fully paid).
C.4 Description of the rights The rights attaching to the Ordinary Shares will be uniform in all attaching to the securities respects and they will form a single class for all purposes, including
with respect to voting and for all dividends and other distributions thereafter declared, made or paid on the ordinary share capital of the Company.
Subject to any rights and restrictions attached to any shares, on a show of hands every Shareholder who is present in person shall have one vote and on a poll every Shareholder present in person or by proxy shall have one vote per Ordinary Share.
Except as provided by the rights and restrictions attached to any class of shares, Shareholders will under general law be entitled to participate in any surplus assets in a winding up in proportion to their shareholdings.
C.5 Restrictions on the free Save as described in the paragraphs below, there are no restrictions transferability of the on the free transferability of the Ordinary Shares. securities
Transfer restrictions under the Companies Act 2006
The Company may, under the Companies Act 2006, send out statutory notices to those it knows or has reasonable cause to believe have an interest in its shares, asking for details of those who have an interest and the extent of their interest in a particular holding of shares. When a person receives a statutory notice and fails to provide any information required by the notice within the time specified in it, the Company can apply to the court for an order directing, among other things, that any transfer of shares which are the subject of the statutory notice is void.
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Transfer restrictions under the Articles
The Company’s board of directors (the ‘‘Board’’) can decline to register any transfer of any share which is not a fully paid share. The Board may also decline to register a transfer of a certificated share unless the instrument of transfer:
• is duly stamped or certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty and is accompanied by the relevant share certificate or such other evidence of the right to transfer as the Board may reasonably require;
• is in respect of only one class of share; and
• if to joint transferees, is in favour of not more than four such transferees.
Registration of a transfer of an uncertificated share may be refused in the circumstances set out in the uncertificated securities rules (as defined in the Articles) and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated share is to be transferred exceeds four.
C.6 Admission Application has been made to the FCA for all of the Ordinary Shares to be admitted to the premium listing segment of the Official List of the FCA and to London Stock Exchange for such Ordinary Shares to be admitted to trading on London Stock Exchange’s main market for listed securities.
C.7 Dividend policy The Directors intend to adopt a dividend policy which reflects the long-term earnings and cash flow potential of the Group targeting a level of annual dividend cover of 2.5 to 3.5 times based on earnings. Subject to sufficient distributable reserves being available, the Directors intend that the first dividend to be declared by the Group following Admission will be the interim dividend in respect of the first half of the 2015 financial year, payable in January 2015.
Section D—Risks Element Disclosure Requirement Disclosure
D.1 Key information on the The Group operates in a highly competitive environment and faces key risks specific to the competition from a diverse group of retailers. Changes that issuer and its industry continue to affect the high street, including the collapse of high
street retailers, may result in an increased supply of available sites which could lead to an increase of store openings by competitors near to Poundland stores. This could lead to decreased sales at the affected stores or across the Group.
As a single price retailer, the Group relies on a range of commercial tools aside from price increases to maintain profitability in response to increased costs due to, for example, inflation or changes in laws, or in response to weak sales during peak selling seasons or as a result of adverse events or poor economic conditions. There can be no assurance that such measures, such as managing its product range, re-engineering of pack sizes or renegotiating with suppliers, will be as effective or available in the future, and Poundland may need to change its pricing strategy, which may not gain widespread customer acceptance and may damage its brand. This could have a material adverse effect on its business, results of operations and financial condition.
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The Group may not be able to grow as planned, such as by not being able to open profitable new stores in the UK and Ireland, increase sales in existing stores or expand into continental Europe. The Group’s failure to grow in line with its planned goals could negatively impact the Group’s ability to achieve its targeted returns.
The Group’s business depends on its ability to select, obtain, distribute and market merchandise attractive to customers at prices that allow it to profitably sell such merchandise, and its ability to do so could be adversely affected by, for example, an inability to identify or develop new products or damage to the brands of its merchandise, including third-party and own label brands. If Poundland is unable to select products attractive to customers, obtain such products at costs that allow it to sell such products profitably or distribute and market such products effectively to consumers, Poundland’s sales or profitability could be adversely affected.
The Group depends on an uninterrupted supply chain and functional distribution capabilities to source products from suppliers (in the UK and overseas) and to distribute them to stores. If the Group is unable to maintain a functional supply chain process, the Group may suffer inventory shortages or increased costs to obtain such inventory, resulting in reduced profit.
D.3 Key information on the There is no existing market for the Ordinary Shares and an active key risks specific to the trading market for the Ordinary Shares may not develop or be securities sustained.
Moreover, even if a market develops, the Ordinary Shares could be subject to market price volatility and the market price of the Ordinary Shares may decline in response to developments that are unrelated to the Company’s operating performance, or as a result of sales of substantial amounts of Ordinary Shares, for example, following the expiry of the lock-up period, or the issuance of additional Ordinary Shares in the future, and shareholders could earn a negative or no return on their investment in the Company.
Finally, shareholders in the United States or other jurisdictions may not be able to participate in future equity offerings.
Section E—Offer Element Disclosure Requirement Disclosure
E.1 Net proceeds and costs of Pursuant to the Global Offer, the Selling Shareholders will receive the offer aggregate proceeds of approximately £364,687,500 from the sale of
Offer Shares, net of underwriting commissions and other estimated fees and expenses of approximately £10,312,500.
The aggregate expenses of, or incidental to, Admission and the Global Offer incurred and to be borne by the Company are estimated to be approximately £7,600,000 (inclusive of amounts in respect of VAT), which the Company intends to pay out of existing cash resources (to the extent they have not already been paid). No expenses will be charged by the Company or the Selling Shareholders to any investor who purchases Ordinary Shares pursuant to the Global Offer.
E.2a Reasons for the offer and The Directors believe that the Global Offer will: use of proceeds • enable the Selling Shareholders to partially monetise their
holding, also allowing for a liquid market for their shares going forward;
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• enhance Poundland’s profile with investors, business partners and customers;
• further enhance the ability of Poundland to attract and retain key management and employees; and
• enable access to capital markets if necessary for future growth.
No proceeds will be received by the Company pursuant to the Global Offer.
E.3 Terms and conditions of The Global Offer consists of an institutional offer only. In the the offer Global Offer, Ordinary Shares will be offered (i) to certain
institutional investors in the United Kingdom and elsewhere outside the United States and (ii) in the United States only to QIBs in reliance on an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
The Ordinary Shares allocated under the Global Offer have been underwritten, subject to certain conditions, by the Underwriters. Allocations under the Global Offer will be determined by the Joint Global Co-ordinators following agreement with the Company and the Warburg Pincus Funds. All Ordinary Shares sold pursuant to the Global Offer will be sold, payable in full, at the Offer Price.
It is expected that Admission will become effective, and that unconditional dealings in the Ordinary Shares will commence on the London Stock Exchange’s main market for listed securities, at 8.00 a.m. (London time) on 17 March 2014. Settlement of dealings from that date will be on a three-day rolling basis. Prior to Admission, conditional dealings in the Ordinary Shares are expected to commence on London Stock Exchange’s main market for listed securities at 8.00 a.m. on 12 March 2014. The earliest date for such settlement of such dealings will be 17 March 2014.
E.4 Material interests There are no interests, including conflicting interests, that are material to the Global Offer, other than those disclosed in B.6 above.
E.5 Selling Shareholders and The Selling Shareholders comprise (i) the Warburg Pincus Funds Lock-up and (ii) certain Directors, members of Senior Management, the
ESOP Trustee and other individuals.
Pursuant to the Underwriting Agreement, the Company and the Warburg Pincus Funds have each agreed, subject to certain customary exceptions, during the period of 180 days from the date of Admission, not, without the prior written consent of the Joint Global Co-ordinators, to issue (in the case of the Company only), offer, lend, sell or contract to sell, grant any option, right or warrant to subscribe or purchase or allow any encumbrance to be created over or otherwise dispose of, directly or indirectly, or announce an offer of any Ordinary Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as, or agree to do, any of such things, or publicly announce any intention to do any of the foregoing.
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Pursuant to the Underwriting Agreement, the Directors, members of Senior Management and certain other Shareholders have agreed that, subject to certain customary exceptions, during the period of 365 days from the date of Admission, not, without the prior written consent of the Joint Global Co-ordinators, to offer, lend, sell or contract to sell, grant any option, right or warrant to subscribe or purchase or allow any encumbrance to be created over or otherwise dispose of, directly or indirectly, or announce an offer of any Ordinary Shares (or any interest therein or in respect thereof) or enter into any transaction with the same economic effect as, or agree to do, any of such things, or publicly announce any intention to do any of the foregoing.
E.6 Dilution Not applicable. No new Ordinary Shares are to be issued under the Global Offer.
E.7 Expenses charged to the Not applicable. No expenses will be charged by the Company or the investor Selling Shareholders to any investor who purchases Ordinary
Shares pursuant to the Global Offer.
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PART 1
RISK FACTORS
Any investment in the Ordinary Shares is subject to a number of risks. Prior to investing in the Ordinary Shares, prospective investors should carefully consider risk factors associated with any investment in the Ordinary Shares, the Group’s business and the industry in which it operates, together with all other information contained in this Prospectus including, in particular, the risk factors described below.
Prospective investors should note that the risks relating to the Group, its industry and the Ordinary Shares summarised in the section of this Prospectus headed ‘‘Summary Information’’ are the risks that the Directors and the Company believe to be the most essential to an assessment by a prospective investor of whether to consider an investment in the Ordinary Shares. However, as the risks which the Group faces relate to events and depend on circumstances that may or may not occur in the future, prospective investors should consider not only the information on the key risks summarised in the section of this Prospectus headed ‘‘Summary Information’’ but also, among other things, the risks and uncertainties described below.
The risk factors described below are not an exhaustive list or explanation of all risks which investors may face when making an investment in the Ordinary Shares and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Group, or that the Group currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Group’s business, results of operations and/or financial condition and, if any such risk should occur, the price of the Ordinary Shares may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in the light of the information in this Prospectus and their personal circumstances.
Risks relating to the Group’s business and industry
The Group operates in the highly competitive value general merchandise retail market.
The retail industry, including the value general merchandise retail market, is highly competitive, particularly with respect to price, product selection and quality, store location and design, inventory, customer service and advertising. Poundland competes at national and local levels with a diverse group of retailers of varying sizes and covering different product categories and geographic markets. These competitors include other single price value general merchandise retailers, multi-price value general merchandise retailers, supermarkets and certain high street retailers in particular categories, such as health and beauty. Some competitors may have greater market presence, name recognition, financial resources and economies of scale or lower cost bases than Poundland and may be able to withstand or respond more swiftly to changes in market conditions, any of which could give them a competitive advantage over Poundland. In addition, like many other retailers, because Poundland does not have exclusive rights to many of the elements that comprise its in-store experience and product offering, competitors may seek to copy or improve on its business strategy, which could significantly harm Poundland’s competitive position.
The changes that continue to affect the high street in many towns across the UK, including the collapse of high street retailers, may result in an increased supply of available sites. This could lead to an increase of store openings by competitors near to Poundland stores, including by an existing chain-wide competitor or by a new entrant to a particular market competing on a store-by-store basis, which could lead to decreased sales at the affected stores. This impact may be exacerbated if an existing chain-wide single price competitor were to open new stores near to Poundland stores. Other value general merchandise retailers might also consolidate, therefore achieving significant economies of scale in buying, distribution and logistics. If Poundland cannot respond adequately to these multiple sources and types of competition, including online competition whether from existing retailers or new entrants, it could have a material adverse effect on the Group’s business, results of operations and financial condition.
Inflation or other factors may affect Poundland’s ability to keep pricing at £1 in the UK and F1.49 for the majority of its products in Ireland, which could have a material adverse effect on its business, results of operations or financial condition.
Poundland’s current pricing strategy is predicated on providing a wide range of merchandise for profitable resale at a single price point of £1 in the UK or A1.49 for the vast majority of products in Ireland. As such, Poundland currently relies on a range of commercial tools aside from price increases to maintain profitability in response to increasing costs such as inflation, energy rates, wage rates, lease and utility costs, taxation (including VAT increases) and other laws and regulations, such as statutory changes relating
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to labour laws including minimum wage or pensions. Whilst Poundland has been able to profitably maintain its current UK £1 single price strategy for nearly 24 years by managing its product range (such as by introducing new higher margin branded and own label products or discontinuing low margin products), re-engineering of pack sizes, moving sources of supply to lower cost economies and renegotiating with suppliers, there can be no assurance that such measures will be as effective or available in the future. Consequently, Poundland may in the future change its pricing strategy. Any such change may impact customer acceptance and may damage its brand, which could have a material adverse effect on its business, results of operations and financial condition.
The Group may not be able to open profitable new stores on a timely basis or at all.
Part of Poundland’s growth strategy is to open new stores across the UK and Ireland, and Poundland is also developing plans to trial Dealz stores in continental Europe, with a low-cost pilot launch planned for Spain in the 2015 financial year. Poundland’s ability to open profitable new stores in line with its strategy depends on many factors, including its ability to:
• identify and secure attractive locations for new stores, including selecting the right store formats;
• gain experience and name recognition and identify customer demand in new markets;
• successfully compete against localised competition on a store-by-store basis;
• maintain or improve sourcing and distribution capacity, information systems and other operational system capabilities;
• hire, train and retain qualified store management and other personnel;
• achieve sufficient levels of cash flow and obtain financing on favourable terms, if needed, to support its expansion; and
• manage additional expenses and costs.
The opening of new stores could also result in the diversion of sales away from existing stores. If Poundland does not open new stores on a timely or profitable basis, it may not realise its growth strategy.
The Group’s business requires that it leases substantial amounts of retail space and it may be unable to secure suitable locations or leases on favourable terms or renew its leases.
All of Poundland’s stores are leased from third parties and, therefore, Poundland is subject to risks, as is typical for retailers, associated with periodically negotiating or re-negotiating lease terms. Poundland has benefitted from the recent favourable conditions created by changes to the high street, including the collapse of high street retailers, by being able to lease new stores on attractive terms. However, Poundland’s results of operations may be affected in the future by changes in the property rental market, such as a decrease in available sites or increases in market rents. Any inability to renew existing leases may result in, among other things, significant alterations to rental terms, the closure of stores in desirable locations or failure to secure sufficient real estate in attractive locations. The location of Poundland stores, their design (both internally and externally), store surroundings and the other types of retailers adjacent to Poundland’s store locations are among the variety of factors that impact the quality of Poundland’s store portfolio in the eyes of customers and thus their level of sales. In addition, Poundland’s ability to open new stores depends upon the availability of sites that meet its criteria, its ability to negotiate terms that meet its financial targets and its ability to obtain planning consent on satisfactory terms with local planning authorities. Furthermore, if Poundland chooses to close one of its stores prior to the expiry of its lease, it would need to terminate the lease or assign the lease to a third-party if permitted, either of which might take a long time and may require the payment of a financial penalty. Any of these factors could have a material adverse effect on Poundland’s business, results of operations and financial condition.
Poundland may not be able to increase sales in existing stores.
Poundland’s growth from existing stores is dependent upon its ability to increase sales, manage costs and improve the efficiencies and effectiveness of its operations. Increases in sales in existing stores are dependent on factors such as competition, merchandise sourcing and selection, store operations and customer satisfaction. Higher store costs or any failure to achieve targeted results associated with the implementation of operational programmes or initiatives could adversely affect Poundland’s operating results. If Poundland fails to realise its goals of successfully managing its store operations and increasing its
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customer retention and recruitment levels, its sales may not increase and its growth may be impacted adversely.
The Group’s business may be adversely affected by economic conditions and other factors in the UK, Ireland and globally.
Poor economic conditions in the UK, Ireland and globally, as well as economic factors such as unemployment levels, consumer debt levels, lack of available credit, fuel costs, inflation, interest and tax rates may adversely affect the disposable income of Poundland’s customers, which could result in lower sales. In particular, in times of economic uncertainty or recession, there may be a decrease in higher margin ‘‘impulse purchases’’ or discretionary purchases generally, which could have a material adverse effect on the Group’s business, results of operations and financial condition. Global economic conditions and uncertainties may also impact Poundland’s suppliers in ways that would adversely affect Poundland’s business and results of operations, including, for example, supplier plant closures or increases in costs of merchandise. Under positive economic conditions, when consumers have more disposable income, the Directors believe (based on consumer surveys and trading performance) that consumers will continue to shop in Poundland’s stores, and may spend more in Poundland’s stores, including on higher margin discretionary products. However, there is a risk that positive economic conditions may not lead to consumers spending more or shopping as frequently in value general merchandise retailers.
The Group’s business is dependent on its ability to identify, obtain, distribute and market merchandise attractive to customers at prices that allow it to profitably sell such merchandise. In addition, the Group’s profitability is affected by the mix of products it sells.
Poundland derives a significant amount of its revenue from the sale of products that are subject to rapidly changing consumer demand. Accordingly, the success of its business depends in part on its ability to identify and respond promptly to evolving trends in consumer preferences and demographics, and to translate these trends into appropriate, saleable merchandise. In addition, Poundland seeks to change and refresh its product offering continually in order to drive traffic through its stores. Historically, Poundland generally has been able to obtain sufficient quantities of attractive merchandise at commercially viable prices. However, if Poundland is unable to identify and in some cases develop products attractive to customers, obtain such products at costs that allow it to sell such products profitably, or distribute and market such products effectively to consumers, Poundland’s sales or profitability could be materially adversely affected.
In recent years, as part of the Group’s strategy to drive sales growth, the proportion of Poundland’s sales arising from fast-moving consumer goods (‘‘FMCG’’) products has increased. While this shift to high volume products in the mix of sales has had a dilutive impact on gross margins, this has been offset by increased gross margins within most other product categories. As a result, Poundland has achieved stable gross margins over the last three years. If in the future Poundland is unable to continue to balance the impact of changes in sales mix and individual categories’ gross margins, Poundland’s profitability could be materially adversely affected.
A failure to adequately manage its product inventory, maintain its level of innovation or anticipate accurately the changes in consumer preferences and spending patterns could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s success is dependent on its logistics and distribution infrastructure.
The success of Poundland’s business depends on its ability to transport goods from its three distribution centres to its stores throughout the UK and Ireland in a timely and cost-effective manner. Any unexpected delivery delays, such as due to severe weather or disruptions to the national or international transportation infrastructure, or increases in transportation costs, such as due to increased fuel costs, could materially adversely affect Poundland’s business. Although Poundland delivers the majority of its goods from its distribution centres to its stores, it also relies to a certain extent on third-party transportation providers, such as AM Nexday and DHL. Poundland’s use of third-party delivery services is subject to risks of those third parties, such as labour shortages and work stoppages, and any disruption, unanticipated expense or operational failure related to these services could negatively affect store operations. If Poundland is required to change transportation providers, Poundland may not be able to obtain terms as favourable as its current terms, which could increase its costs. If Poundland changes transportation providers, it could face unanticipated logistical difficulties that could adversely impact deliveries and Poundland could incur
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costs and expend resources in connection with that change. Any disruption or any increase in costs related to distribution could have a material adverse effect on the Group’s business, results of operations and financial condition.
In addition, Poundland needs to ensure that its distribution infrastructure is able to adequately support its anticipated growth and increased number of stores, both in the UK and Ireland and as it expands as currently planned into continental Europe. In late 2014, Poundland plans to replace its Hoddesdon distribution centre with one seven miles away in Harlow. This change to Poundland’s current distribution network adds risk, including the potential for delay in opening and the risk of disruption during the early phases of new warehouse operations. In the future, the cost of any enhanced distribution infrastructure could be significant and any delays to such expansion could materially adversely affect Poundland’s growth strategy.
Poundland relies on third-party suppliers, and if it fails to identify, develop and maintain relationships with a significant number of qualified suppliers, or if there is a significant interruption in its supply chains or increases in the costs of its products, its business, results of operations and financial condition could be adversely affected.
Like many retailers, Poundland is dependent on being able to source suitable products from suppliers at a sufficiently low cost and in a timely manner. Poundland may not be able to identify and develop relationships with qualified suppliers who can satisfy its standards for price, quality, safety and its quantity requirements. This risk may increase as Poundland expands, as it will need to source significantly greater quantities from suppliers in order to realise its growth strategy. Although Poundland has long-term relationships with many suppliers, purchasing is done, as is common for retailers, on a purchase-order basis rather than pursuant to a long-term supply arrangement. Therefore, suppliers could seek to end their relationship with Poundland or vary the terms from one purchase order to the next. Poundland’s sales, operating results and inventory levels could suffer if it is unable to promptly replace a supplier who is unwilling or unable to satisfy its price, quality, safety standards or quantity requirements. The loss of, or substantial decrease in the availability of, products from its suppliers, or the loss of a key supplier, could have a material adverse effect on the Group’s business, results of operations and financial condition.
Supply interruptions could arise from shortages of raw materials, labour disputes or weather conditions affecting products or shipments, transportation disruptions or other factors beyond Poundland’s control. A disruption in the timely availability of Poundland’s products by key suppliers would result in a decrease in Poundland’s sales and profitability. Like other retailers, Poundland has in the past and may in the future experience product shortages, such as if a supplier fails to deliver on its commitments due to financial or other difficulties, which could lead to lost sales or increased costs if alternative sources must be found.
The Group is exposed to the risk of damage to the brands of its merchandise, including its own label brands, and a decline in customer confidence in the Group or its products.
Poundland’s sales are dependent in part on the strength and reputation of the brands it offers, including both third-party brands and own label brands, and are subject to consumers’ perceptions of the Group and its products. For third-party brands, which accounted for approximately 63 per cent. of Poundland’s sales in the 2013 financial year, Poundland is dependent on its suppliers’ investment in marketing and promoting their brands in order for consumers to purchase their products rather than those of the brands’ competitors. The Group has also improved its offering of own label items which are important for future growth prospects as own label items offer a significant means of competitor differentiation and also generally offer more attractive margins. Maintaining broad market acceptance of its own label items depends on many factors, including value, quality and customer perception. The Group may not in the future achieve or maintain its expected sales of its own label products, which could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s business and competitive position is subject to the risk of weak sales during peak selling seasons, which could materially adversely affect its operating profit and results of operations.
Poundland’s retail business is subject to seasonal peaks associated with, in particular, Christmas and Halloween in the third quarter of the Group’s financial year. Poundland also has seasonal peaks associated with other annual events, such as Easter, the back-to-school period and the gardening season. These seasonal peaks may pose risks regarding Poundland’s inventory management. Poundland incurs additional expenses in advance of these peaks in anticipation of higher sales during such periods, including the cost of additional inventory, advertising and employees. If revenue during its peak selling seasons is significantly
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lower than expected, the Group may be unable to adjust its expenses in a timely manner and be left with a substantial amount of unsold inventory, especially in seasonal merchandise, which will generally be stored away to be sold at a later point in time rather than be written off. Similarly, if the Group fails to purchase a sufficient quantity of merchandise in advance of a peak selling season, it may not have an adequate supply of products to meet consumer demand, which could have a negative impact on customer loyalty and cause lost sales.
Any adverse events, such as poor economic conditions, higher unemployment, higher fuel prices, public transportation disruptions, prolonged unseasonal or severe weather or civil unrest, which occur during Poundland’s peak trading seasons could have a greater impact on Poundland, which could have a material adverse effect on the Group’s business, results of operations and financial condition.
An increase in the cost or a disruption in the flow of Poundland’s imported goods may significantly affect its sales and profits.
Although Poundland sources the majority of its merchandise from UK suppliers, it also purchases products from overseas. Imported goods are generally less expensive than goods sourced in the UK and therefore increase the Group’s profit margins. Any disruption affecting the flow of the Group’s imported merchandise, including delays in delivery or failure to maintain quality standards, or an increase in the cost of importing those goods, such as through changes in foreign exchange rates, the imposition of taxes, custom duties or other charges or costs associated with the transportation and delivery of products, may significantly decrease its profits. Any of these risks could restrict the availability of merchandise or significantly increase the cost of Poundland’s merchandise, which could have a material adverse effect on Poundland’s business, results of operations and financial condition.
In addition, imported goods usually have longer lead times (up to nine months) than products sourced from the UK. Therefore, there is a risk that Poundland misjudges future consumer demand, and, as a result, over-orders or under-orders stock, which could lead to lost sales or increased costs.
The Group depends on Senior Management and other highly qualified employees to manage its business and brands and the loss of a material number of any such individuals could adversely affect its business.
The success of Poundland’s strategy depends on the continuing services of Senior Management and the Group’s ability to continue to attract, motivate and retain other highly qualified employees. Retention of Senior Management and other highly qualified employees is especially important in the Group’s business due to the limited availability of experienced and talented retail executives. If Poundland were to lose the services of a material number of its Senior Management or other highly qualified employees and were unable to find suitable replacements in a timely manner, or at all, its business, results of operations and financial condition could be materially adversely affected.
Failure to attract and retain qualified employees while controlling labour costs could adversely affect the Group’s business and financial results.
The Group’s future growth and performance depends on its ability to attract, retain and motivate qualified employees, many of whom are in positions with historically high rates of turnover such as in retail operations and in distribution centres. The Group’s ability to meet its labour needs, while controlling its labour costs, is subject to many external factors, including competition for and availability of qualified personnel in a given market, unemployment levels within those markets, prevailing wage rates, minimum wage laws, health and other insurance costs, union membership levels and activity among its employees and changes in employment and labour laws or other workplace regulation. Any failure by Poundland to recruit and retain qualified employees could impact its sales performance, increase its wage costs and adversely affect its business, results of operations and financial condition.
Any interruption or failure of the Group’s information t