High-street favourite to float

Last Tuesday was one of the busiest days for stock-market flotations since the credit bubble. Companies lined up to announce initial public offerings (IPOs) worth over $10bn.

European markets accounted for the lion’s share of new IPOs, reflecting gradually growing confidence in the European economy among companies and their private-equity backers, who are also encouraged by stock markets’ recent buoyancy.

British mobile games maker King, behind the popular game Candy Crush Saga, is to float in New York. Danish cleaning company ISS and Pets at Home are other eye-catching names coming to market. Warburg Pincus, which bought Poundland for £200m three years ago, is now bringing it to market for about £700m.

What the commentators said

Poundland is “a well-run company and a promising investment if the price is right”, said Jonathan Guthrie in the Financial Times. It has been growing sales and underlying earnings by a respective 17% and 21% and plans to double UK store numbers to 1,000.

Like the other discounters, the company has benefited from middle-class consumers increasingly opting for budget stores. Poundland is all “about the cost culture consumer”, said Hargreaves Lansdown’s Richard Hunter. “Right place. Right time.” But will consumers still be so bargain-conscious once real incomes start to rise this year?

Even if they are, said The Daily Telegraph, “the major supermarkets are unlikely to sit idly by and watch discounters take their customers”. The real challenge for Poundland may be “maintaining its gimmicky premise”, said James Moore in The Independent.

There will come a time when £1 “won’t buy a penny chew” and no matter how cleverly the firm manages its costs, it will have to “change tack”.

• Stay up to date with MoneyWeek: Follow us on TwitterFacebook and Google+

MoneyWeek magazine

Latest issue:

Magazine cover
Paying by mobile

Why your phone will replace your wallet

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues
Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.