Pepkor backs Poundstretcher

Brown & Jackson, the troubled Poundstretcher discount store group that was rescued from collapse by the South African group Pepkor last summer, yesterday announced a capital reconstruction and a £10m rights issue.

Under the deal Pepkor, the largest discount retailer in South Africa, is further committing itself to the group by injecting at least £20m in addition to the £12m invested last July. A further £10m will be raised via a seven-for-three rights issue. A share consolidation will result in 100 existing shares being consolidated into one new ordinary share priced at 10p.

The directors warned shareholders that if they did not approve the proposals the company was likely to cease trading.

A spokesman for Pepkor said: "The South Africans dipped their toe in the water last year and have now decided to commit to Poundstretcher. They see the company as their vehicle for expansion here and in western Europe."

Since taking control of the company, Pepkor has closed nearly 40 stores and will close a further 20, taking the chain down to between 180 and 200 stores. Peripheral businesses have been sold to concentrate solely on the Poundstretcher format.

Results for the year to December were announced yesterday, showing that losses including exceptional items increased from £12.7m to £16.3m. Sales increased slightly to £151.8m, with sales in the second half improving strongly. In the 15 weeks since the year-end, like-for-like sales were up 9 per cent on improved profit margins.