Poundstretcher owner set to issue 'going concern' warning

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The Independent Online

The owner of the discount chain Poundstretcher is today expected to say that its main shareholder remains fully committed to the discount group, but it is likely to issue a "going concern" warning, raising doubts about its ability to continue trading.

Alongside the update, Instore, which also runs the eponymous discount chain, will issue figures for the year to 28 February 2009. The statement will be filed just inside the deadline of four months after its year end, under Stock Exchange rules. Instore declined to comment. While its auditors are likely to issue a going concern warning in the statement, it is understood that Instore is not in danger of becoming the latest casualty on the high street.

Emphasis of matter warnings by auditors have become increasingly common during the recession, as retailers battle tough trading conditions and declining profits. It is understood that Instore has suffered from some suppliers having their insurance cover cut back. Its profit and sales numbers are unclear, but industry watchers expect Poundstretcher to have performed robustly during the recession.

Instore is thought to be the weaker of the two brands, although it too may have benefited from customers trading down.

Speculation has been swirling around Instore – which last issued half-year results for the period to 30 August 2008 – for months about the intentions of its majority shareholder, Seaham Investments, which is a subsidiary of the food wholesaler Crown Crest. The wholesaler is owned by the wealthy entrepreneur Aziz Tayub, who became chief executive of Instore in November 2008. It is understood that Mr Tayub has made a tidy return from the legitimate practice of selling some of Crown Crest's non-perishable goods in both stores. Mr Tayub, who has been a non-executive director of Instore since July 2007, replaced Peter Burdon, who resigned as chief executive last year. For the 53 weeks to 1 March 2008, Instore made a loss before tax and exceptional items of £2.2m.

Over the period, the group grew sales by 6 per cent to £296.8m and group like-for-like sales rose by 2.9 per cent. Instore, which has reduced headcount substantially over the past two years, operates more than 300 Instore and Poundstretcher stores. Last October, in its interim report, Mr Burdon said: "Comparable trading in the first half was tough as a result of the weather being considerably worse than the spring and early summer of last year."