THE eye-catchingly successful flotation of Poundland is testament to society’s current economic and consumer fabric. As its name blazons, the company is the ultimate discount retailer.
It has gone from strength to strength throughout Britain’s seven lean years since the financial crash. But, even given Poundland’s vigorous business strides against a helpfully challenging backdrop for consumers, few would have expected the stock market float to have been fully 15 times oversubscribed.
The retailer and its advisers had the confidence to price the offer at the top of the range – 300p – and have still been rewarded with the stock shooting up to 370p on the first day of conditional trading yesterday.
Clearly, the flood of investor interest behind the Poundland IPO has little to do with faith in the high street, generally. The sector is seen as intensely problematic, with pretty clear winners and losers.
Retail during the austerity age has been littered with collapses, from Blockbuster UK, HMV, Tie Rack and Woolworths to Barratts Shoes, JJB Sports, Peacocks and many others. A few have been rescued and downsized.
The internet has been the grim reaper of competition for many players. But it looks like investors have decided that Poundland has a proven, economic bricks-and-mortar trading model which is, crucially, virtually impervious to the depredations of digital. The internet will continue to drive down high street prices. But the success of the flotation suggests the City believes Poundland has the artillery to fight back.
It is also likely that investors believe the group’s no-frills trading model will get a helpful tailwind from tough conditions for consumers for years to come. And nothing has come from cross-party politicians to suggest that inference is misguided.
No coincidence that, down the high street, discount food retailer Aldi has just registered year-on-year growth of 33 per cent to give it a record share of that market of 4.3 per cent. The same with Lidl, on 3.2 per cent.
As with Poundland, those companies’ customers are not just the hard-up. The middle classes like a bargain on basics; cynically, it allows them the flexibility to buy luxuries and treats elsewhere.
Yesterday’s debut shows that Poundland has been judged by the City to be one of the most durable of these budget retailers. Its consumer and stock market offers could be summed up in a paraphrased proverb: in for a hundred pennies, in for three pounds.
Asia and US deliver the goods for Prudential
CRISIS, what crisis? Recent market jitters about slowing growth in Asia and other emerging markets are belied by Prudential’s sparkling trading performance.
And Prudential parlayed its winnings in Asia by extending its long-standing bancassurance tie-up with Standard Chartered in that region, and also Africa. The Pru is also looking at exploring growth opportunities in Saudi Arabia.
Together with a decent 2013 trading performance in the United States, the firm has more than made up for a flat operating performance in the UK. This is now a pretty much established template, and must make envious reading for rivals such as Aviva and Standard Life. Those two groups have international operations of their own, but are either comparatively nascent, have slower growth or, in the case of Aviva, being retrenched.
Financially, things look pretty tidy for the Pru as well. A 15 per cent hike in the full-year dividend is the third divi rebasing in the past four years, and with management guiding to a two-times payout cover, there looks plenty of scope for further upgrades. Meanwhile, Pru’s shares hit a record high yesterday and are up a third on the year, buttressing a credible trading growth story.