Poundland Group PLC (OTC:PDLDF) Q4 Trading Update Analyst Call April 14, 2016 3:00 AM ET
Jim McCarthy - CEO
Nick Hateley - CFO
Phil Dorgan - Head, IR
Jonathan Pritchard - Peel Hunt
Alex Mees - JPMorgan
Charlie Muir-Sands - Deutsche Bank
David Jeary - Canaccord Genuity
Pradeep Pratti - Credit Suisse
Caroline Gulliver - Jefferies
Andrew Porteous - HSBC
Good morning, ladies and gentlemen, and welcome to the Poundland Q4 Trading Update Analyst Call. My name is Fay, and I'll be your coordinator for today's conference. [Operator Instructions]
I will now hand you over to your host, Jim McCarthy, CEO, to begin today's conference. Thank you.
Thank you. Good morning everyone. I think this morning we'll go through the statement here and then we'll take questions and answers. I hope the whole thing will take no more than 45 minutes. So, hope you bear with me on this and if there are any questions that remain unanswered at the end of 45 minutes Phil Dorgan will be available on the phone to take those at a personal level. So let me repeat. Good morning everyone and thanks for joining the call. As usual I have Nick Hateley our CFO and Phil Dorgan, our Head of Investor Relations here with me.
I'm going to run through the results briefly and then it's over to you for questions. Our fourth quarter sales excluding Spain increased by 29.5% on a constant-currency basis, benefitting from the addition of the 99p Stores' portfolio. However trading was tough and we were impacted by both the continuing difficult market conditions and by the disruption caused by the accelerated pace of the 99p Stores conversion program. For the year as a whole total sales growth was 18.4% and again that's on a constant-currency basis. We disclose like-for-like sales every six months and in the second half they were down by 5%.
Now this has been a transformative year for Poundland with the acquisition of 99p Stores. We ended the year with 843 stores in the UK, 53 deal stores in Ireland and 10 in Spain. By the end of Q4 we have converted 190 of the 99p Store estates and the program will finish at the end of this month well ahead of the original plan. That means that we will then have eliminated the trading losses from the 99p brand. We remain very confident of the £25 million incremental EBITDA that this deal will bring us and we expect to see about two thirds of that in the 2017 financial year.
In the year the Poundland estate in the UK and Ireland grew by around 60% or put another way, 331 stores. Now as a consequence of that we think it's right to have fewer new stores opening in the current year whilst we work very hard to focus on generating value from the significantly larger estates. So, now that we are through what has been a testing year with so much change and disruption we are rapidly approaching the points which we will have one company of over 900 stores with one brand, one supply chain and one mission to bring our customers amazing value every day. And when we reach that point I'm confident that we will see the significant benefits of a large cohesive unified retail operation begin to materialize.
So, that's pretty much it from me. It's over to you now for questions. As I said to you at the start I'm aware it's a very busy day for you as well. So, we aim to finish this call at the latest at 8.45 and we are very grateful for your interest and if -- as I said before to you if there are any unanswered questions please do not hesitate to contact Phil Dorgan who will be happy to take those on an individual basis. So, guys over to you for Q&A.
Thank you. [Operator Instructions] And our first question is from the line of Jonathan Pritchard, Peel Hunt. Please go ahead.
Two from me. Firstly on the new store openings program, back to I think 30 this year. Do we rebound back to 60/70 the year after, or is this a more sort of fundamental statement? Secondly, in terms of a little bit of guidance for next year, do you think, given that we're at minus 5% like-for-like, it's credible to be in positive territory in the first half like-for-like for Poundland core next year?
I'll take the second part of that first, Jonathan, new store openings, yes it is a reduced program. The -- I think that's really sensible -- such a huge amount of new stores in such a short space of time and effectively we said a year, this large number of new stores, well over 300 as you know, if you include the organic and the 99p thing, but actually in reality most of that was in seven or eight months. So, very-very challenging but very welcome addition of new stores but our job is to focus now on getting those absolutely right and we think to be able to do that and get everybody's attention here back on the call under one company and one brand it is sensible just to slow that program down temporarily, I used that word absolutely clearly temporarily for one year, whilst we undertake this work. After that, we will return to the normal types of organic growth that you’ve seen historically from us. So that will be my absolute response to your, second part of your question. In terms of like-for-like, historically we run between 1% and 2%. The minus 5 is a disappointment. We have explained I think in part through this announcement that the disruption from the program and the market conditions of reduced shopping missions reduced footfall across the piece, and referred to by several retailers, so I’m not in isolation on this. That has been difficult. We expect that to be recently challenging during the first half, but we would expect, or anticipate, and expect things to improve by the second half after all of this stuff is really bedded in and cemented and we have the benefit, perversely I suppose in one respect, of much softer comparables. But we’re setting ourselves up, I think for that sort of shape for the year and I expect Poundland to restore its traditional and historic like-for-likes going forward having explained H1 and H2 to you.
Thank you. Our next question is from the line Alex Mees from JPMorgan. Please go ahead.
Morning, Jim. A couple of questions, please, just firstly on 99p and the quarter that’s just happened. I just wonder if you could give us a bit more color as to how the core business has been distracted by the 99p conversion program, just to help us understand the pressure on the like-for-likes. And then secondly, as we go through FY17, obviously, we’re hoping to see better like-for-likes in the second half of the year. I just wonder if you could highlight any store level improvements that you’re putting through to try and help get back to positive like-for-likes.
Yes. On the 99p impacts, what I can tell you is that a large number of colleagues, core Poundland colleagues circa 100 of those, have been out on this program. That’s not counting in people like the new store opening teams and what not, we’ve been converting at a rate of three a day. So this has been a huge task. As you know, when we acquired the business very late-September, there was no stock in it, so we had some disruption on stock early on. We had to restore the supply chain both from the imported, who had stopped supplying, but also UK. And we left 99p as separate business for all the right reasons and so restoring the supply even though Poundland was the owner of the business, was quite a long process and there was definitely, I mean absolutely disruption to our supply chain. We have to order a lot of stock when that supply chain was restored and without a lot of detailed information on actually what was moving out and what was correct and what was not.
So in terms of availability across the piece that had a big impact obviously we were trying to get stock into those stores to stem the losses as quickly as we possibly could and that caused a ripple effect really across the rest of the estate. So our availability during the last four months in particular has been very, very challenged, some of our best brains and best people have been in the process of transitioning the estate, aligning the ranges. A massive amount of work there getting the warehouse systems and all of that, all aligned huge amounts of work, I mean, I know all of you guys understand the sort of quantum of effort and difficulty with such a program, four months is effectively replaced the original 15-month program, which was caused, the acceleration was caused by the accelerated losses in 99p. So we absolutely wanted to stem those. And it’s great that by the end of this month they will have stopped and we will be into profit on 99p and well underway on the 25 million of EBITDA with the split, as we’ve explained.
So a lot of stuff going on that and I think, and we shouldn’t underestimate this either, the 99p store managers in many cases there were big vacancies, a lot of the store managers have been put in other positions more in keeping with their skill set whilst we develop them. And we found an estate that was literally 1,000 people short on the service side in the stores themselves, so, just under a thousand it was, in fact. So huge recruitment in HR efforts as well, so wherever I look within that business, we had challenges and all of that disruption has impacted on our like-for-like. So I think the first half of the year, this current year, we’ll continue to be, I use this word sort of advisedly, relatively subdued, but I expect it to be improving as we fix these things and we get the benefits of that, the benefits of the scale, the benefits of a better colleague recruitment and people in the right places, the availability of product across the piece has already improved, still a little bit to do on that but it has been improved quite dramatically over the last four to five weeks and that's great.
And we get down to do what we do best which is delivering amazing value everyday to over 7 million people, but I do think that the second half will be when those bedded-in benefits start to come through in a tangible way in the like-for-likes. And whilst I wouldn't for a minute be so silly as to forecast the exact time we get into positive, I believe that the second half will be a much more encouraging for the reasons I've outlined and the sort of perverse benefit of softer comparables.
Thank you. And our next question is from the line of Charlie Muir-Sands from Deutsche Bank. Please go ahead.
I've got quite a lot of questions but I'll give you one by one. The first one is that on…
We only got 30 minutes, Charlie, okay.
Well, you keep your answer short.
First one is on the integration of 99p Stores and the minimum 25 million EBITDA, can you just give us some more color at this stage as to whether you need to get sale densities to Poundland levels, whether you need to get sales per store to Poundland levels, or what kind of improvement in performance do you need from the acquired estate? That's the first one.
Hi, Charlie it's Nick. I think I explained this last time, we haven't really used sales density as a basis for our business case and our business planning on 99 pence, I mean what we have effectively done is -- and this is an asset play for us and an asset deal, so what we've effectively done is looked at each location in turn, considered what that particular store would do as a Poundland store and use that to built the basis for the sales estimates and from that obviously the rest of the cost base has been taking into account. So, what we haven't done is assumed -- that the sales density improvement on a location-by-location basis. And just a couple of points, I mean this is not a exactly meaningful measure but I think it's quite interesting to maybe explain why we accelerated the process of conversion to the extent that we did. And what we found with the 99p estate was they were running at circa minus 20, minus 25 before that we took ownership of them and during the early stages of that ownership. We tried to repair that position by pouring stock in and we didn't really see the improvements that we would have anticipated.
And as soon as we convert those stores, they go from that sort of minus 20/25 to positive 20. So, there's a significant improvement in a day or two once the brand, the Poundland brand is put into that side of that business. So, that's why we of course seeing those results we decided to accelerate with all the consequences that Jim has talked about. But that's not really a fair comparison if you look into -- to model the improvement that we're expecting and what we expect to get over the period, once things have bedded in a little bit. So, what we're doing is we're looking as I said on a store-by-store basis, we're putting a budget down for those stores. And at the moment I'm very comfortable in saying that we're getting very close to those numbers, that's how we're quite encouraged at the moment. I think there's more to come actually, I think once we get the right store managers in place with the one that will have experience to improve our stores, I think we'll see some uplift on that.
And just another thing that Jim didn't touch on actually when he went through his explanation around some of the issues we saw early in the quarter but I think again the reason to believe that we can see even further improvements is that the area manager structure was actually very strained through this process and we've done with our business managers running around opening stores whilst trying to maintain the core estates as well. And what we've done from the beginning of the financial year was actually reassess all of the areas across the business. So, now that gives us the right number of stores in the right areas and you imagine there were certain 99p Stores very close to Poundland stores that meant some area managers were seeing quite a significant number of stores in their patch to operate through this transitionary period, that's now changed and everyone's got a sensible number of stores to look after.
So, I think all in all I think we're very confident on the 25, I think there's possibly a bit of upside on the numbers that we've seen so far in the conversions for the reasons that I spoke about. There's a bit more work to do, we've got some bedding in to do over the next few months, but hopefully you'll see some uplifts.
And when you talk about at least 25 million, what would be your blue-sky ambition?
Nowhere near 71 million, Charlie.
I think -- Charlie I don't blame you for asking the question, of course I wouldn't. But we're very confident in the 25 million and the split of that, if it's more than that, then we would be absolutely delighted but our absolute firm view is it won't be less than that.
I think Charlie just to add I mean some of the locations were absolutely fantastic locations, some of the locations, not quite as good, so the sales density depends on the location and the local circumstances associated with that. So, I think applying a blanket sales density improvement is quite a difficult one really to think through it.
But for our modeling purposes, how can we think about the contribution to sales from the acquisition on a full-year basis?
I think the guidance on that Charlie is that is the 25 I'd use that and it's lots of moving parts in this equation, there's the store contributions this cannibalization and that will obviously be experienced by some of the Poundland shops. Then the purchasing and trading synergies are they coming through which obviously a commercially sensitive we're not going to give those numbers out there is still some more work to do on that there is property synergies and it can wrap the other way that was obviously incremental head office cost having to occur and for the larger estate and you know the costs of running this fixed warehouse for a period of time. Obviously we're still working through our supply chain, our supply chain strategy at the moment but lots of moving parts I think rather than we go through them all and confuse and upset everybody. I think the guidance to 25 is pretty clear actually.
Okay. And if I may, one quick follow-up on multi-price. Two components. Firstly, I've seen more multi-price products, at least on the website. I don't know if it's going into some of the Poundland stores. And secondly, I think you said by April you would have your multi-price format store right up and running. I wondered if you could just confirm that and where those stores are and what they're called.
Okay, Charlie. I'll led jump in there and the first I think we ought to say that this we said April it will be April but it is only six store trial and so relatively insignificant against the 900 plus stores that we operate and really shouldn’t take in my view too much focus off the core business right most of that but virtually all of that profit is made of course, so it is an interesting test, it does launch in six stores from April or June and April. And one or two of those are going to be, well the majority of those will be in the south and we're making good progress in terms of our prep on that. So that will be there for all to see very shortly but I wouldn’t want anybody to be too distracted by what is a relatively small trial on something that has got potential and but our absolute focus is on the core business of Poundland and there will be some read across I think from some of the data as that comes out. What's you are seeing on the website is probably slightly more well, in fact, it is I think more than you would probably see in store whether it is a conditional spended store and spend a pound and you get one of these higher price single price but amazing value on our price products. And so we’ve done as for about three years now and that works well and I think this trial will give us some data which would help us with that identifying the winners across the broader base, particularly on the general merchandize side where traditionally and historically we excel so I think there's some upside that I wouldn’t want to if you get too excited at the moment about that because most of our attention quite likely and properly and sensibly is focusing on the core business absolutely getting these 99p stores benefits through and making sure that we provide a super retail preposition for 7 million customers a week and that is really about getting it back to basics and doing what we do best.
Thank you. And the question is from the line of David Jeary from Canaccord Genuity. Please go ahead.
I think Charlie's managed to hog most of the very interesting questions that I was going to ask, but a couple coming out of that. One, yes, on the multi-price small trial, I wondered what was happening to the other larger stores you've inherited from the 99p portfolio, because from memory, there are about 30 in total. And secondly, in terms of cannibalization and closures and overlap, can you give a bit more insight into potential numbers of closures that you're anticipating at this stage, either Poundland or indeed 99p?
Yes. I'll take the first part of that and I'll ask Nick and let Nick take the second part as he referred to cannibalization earlier on. And in terms of the multi-price trial six stores starting in April and that will happen in terms of the estate for 99p there were 27 family bargain stores which average somewhere between 13,000 and 15,000 square feet so these are roughly 2.5 to 3 times larger than the average Poundland so very different and very different types of location so the balance of the stores having tested six which leaves us 21 there are number of things that are happening there, we are using some of those stores to clear older stock from the 99p estate. You would expect us to do that and that's a lovely way of doing it so a bit we're underway with that at the moment, there are one or two or three or four where we think there maybe some value by disposing. We have to work all of that through yet and negotiate and so and so forth and where we can get and more values then by trading it over the period than you would expect us to take advantage of that and concentrate on what we do in this core stores.
So there's 27 there, we do have a number of larger stores we referred to last time in the Poundland estate and but I think before we get excited about all of that it's six store trial and the 27 Family Bargains in one respect to another are either being traded, either being used as clearance stores, or in one or two cases, they are in terms of negotiation part of a disposal process. That’s a relatively small number.
Yes. Sorry, David. Was there a follow-up on that, or shall I move on to…
Yes. No, I was just intrigued, Nick, to know where you are in terms of numbers of closures as well, because there are always going to be some. I just wondered if you could clarify a little bit more, if that’s the case. Thanks.
Yes, sure. I mean where we are at the moment is the, you’ll remember the CMA process and the fact there are about 100 stores or so that were within a mile of an existing Poundland store. But of course the level of cannibalization totally depends on the location itself. So I can give you an example of Camden, where we’ve got two stores, obviously, this is a London base so you can all pop down and see this. But we got two stores within 100 yards or so of each other operating on Camden High Street and the Poundland store's in growth and the 99p store once converted to a Poundland has seen a 30% improvements in its sales base.
So we are actually seeing in some locations the opposite of cannibalization, whatever that might be. However, in other locations, of course, it makes sense where perhaps we’ve got two shops in the same shopping center that we find a way where we can to improve the overall EBITDA from those sites by closing one of them. And one of the examples that we have already closed is in Dumfries. So this year so far, we have four 99p store closures and seven Poundland closures, so about 11 in total related to the 99p deal, but in Dumfries, it was quite interesting. We’re in the same shopping center within spitting distance of each other and the landlord is part of the negotiations, because remember what we’re doing here is we’re assigning leases from the 99p business into the Poundland business and there is some value for landlords in doing that. Sometimes we talk to them about re-gearing, reducing the rents, maybe taking a longer term and as far as those negotiations in Dumfries, the landlord was willing to take back the Poundland store leaving this with the large 99p Store. The conclusion of that, actually, was an improvement in EBITDA of over 150K for us in that location.
So in some instances it makes sense to do that. In other instances obviously it makes sense to operate both stores. And as you know we’ve got a record of operating multiple stores in lots of different locations. What I would say in terms of cannibalization, we’ve obviously got a few more stores that we’re considering at the moment and we may end up closing them. But we don’t want to do that until we’ve completed all of the negotiations with landlords because in some instances we’re seeing some very favorable rent deals, which mean that it’s much better to keep a store running than actually close it and move the trade across.
So I don’t want to say at the moment how many stores we’ll end up closing. There will be some more, I’m sure there will be. But that really depends on the negotiations that we have with the landlords. Just to finish the point on cannibalization, at the moment, the numbers that we’re seeing actually slightly better than we anticipate in our business model. Not far off, actually, I think our experience is pretty good at estimating these things. As I said, this is the first time we’ve run two shops in a town, but actually just slightly on the right side of it at the moment in terms of our expectations.
Can I squeeze in one cheeky last one, if that’s okay? Ireland, obviously, there’s been a double whammy of euro/sterling currency transaction and translational this year. Obviously, the euro is now down at lower levels, or rather higher levels versus the pound. What? That should have a beneficial impact going forward. I mean can you, A, remind what the impact actually was in FY16 and what your best view is of the FY17 impact, please?
Yes. In the last financial year, the hit was about 5 million or so. Now that’s because we mitigated some of that through some of that other actions, 5 million sterling we mitigated that through some of the actions that we’ve taken. You remember as well that we’ve been pushing really hard to try and correct more of a natural hedge through purchasing more euro products. We’re very successful in doing that and this financial year that we’re in at the moment, we think we’ll be circulated to 85 million of euro purchases going through the books, which helps us. But you’re absolute right David. Of course if the euro stays at the levels that it is today, it will be a much better position than we saw last year, I guess the caution around this and the reason why we’re not hanging our hat on this is the currency is very volatile at the moment. Obviously, we’ve got the referendum coming up in June and nobody really knows which way that’s going to go. If it stays at the levels that it’s staying at the moment, yes it will be helpful for us and of course the consequence are pretty natural hedge is you don’t see all of the upside benefit and we pretty much had all of the downside risk last year, because we didn’t have that hedge in place. But no, it could be very helpful, but I’m not betting on that until we see where we get to after the referendum in June.
In terms of the dollar, David, as you know, and Nick’s explained several times before. We do cover ourselves on a forward basis by around about 12 months. So you’ve also seen some volatility in the dollar, but we are somewhat insulated from the short-term impacts of that with our hedging policies on the dollar.
Thank you. And our next question is from the line of Pradeep Pratti from Credit Suisse. Please go ahead.
Two questions from me, please. First one, can you give us a breakdown of the 30 new stores? I think in the past you've said that 20 of the new stores should be opened in Ireland. So if you could give us some split on how many in UK and how many in Ireland and how many in high streets versus retail parks, that would be helpful. The second question is on Dealz in Ireland. Can you give us a little bit of color on the trading there, whether like-for-likes are positive? And also, we've noticed that….
Sorry we missed that question. Would you mind just repeating that one? The phone jumped a bit.
Yes. On Dealz in Ireland, could you give us some color on trading there, whether like-for-likes are positive or negative? And also, we've noticed that most of the pricing on the website in Dealz and in store seem to be at €1.49. There hardly seem to be any multi-price, bigger ticket items there. So what's the pricing strategy? If you could remind us, that would be helpful.
Yes, well I'll take a couple of those. And we don't split out the like-for-likes for Dealz and Poundland. But directionally if I said to you that -- Ireland is running slightly differently to this country, there's a bit of inflation in there and so on and so forth. Dealz is a multi-price operation or offer. We've just got over 50 stores there, as indicated in the release. And I think if you look at our ambition on new stores, we've said around 20 new stores in Ireland. And we've said 40 net for this current year in overall terms. So that rather suggests that 20 or so will be in the UK and the split is -- our concentration is in retail parks and in the south but if there are diamonds that appear elsewhere we wouldn't be hesitant at all in taking those whether there are high streets and there are some very good, successful high streets, and there are some that are less so. So, it really is about as Nick sort of said a few minutes ago, the quality of location, the number of people, the tenants that you're surrounded by and their longevity and sustainability, you've to take all that into account on a 10 year lease basis.
So, 20 odd in Ireland, the balance in the UK, about 40 net so a less exacting or demanding program than in previous years, it's a one year pause for breath, take the best opportunities and then go back into the normal pattern of organic growth from the following year. So, that's what I would say on that part of the question.
Just on I think your question on the pricing strategy in Ireland. Yes, look, the vast majority of products are sold at €1.49, there's some commodity products that are sold at €1 and then in each of the Dealz store, there's a zone clearly identified, we use -- some vinyls on the floor and some different points of sale -- where products are sold at round price points of maybe €3 or €4 or €5 or €6. So, people have the opportunity unlike additional spend when you have to buy product in order to qualify, people have an opportunity in Dealz in Ireland to pick up products that are above the €1.49, it represents 10% or so of our sales base, obviously coming into the seasons, Christmas and actually Halloween, people spend a little bit more and the percentages shift a little bit. But that's a sort of model that we operate in Ireland, but lots of people refer to us as the 1.49 shop. So, psychologically I think the customers, they see us single price, despite the fact that the proportion of the store is given over to the multi-price offer.
Thank you. And our next question is from the line of Caroline Gulliver from Jefferies. Please go ahead.
You'll be pleased to know that most of my questions have been answered, so just one left. In terms of the minus 5% or so like-for-like in the second half and into the fourth quarter, are you able to try and break that down for us between how much of it you think has been self-inflicted and is the distraction from the 99p Stores integration and how much of it is to do with the decline in high street footfall that you talked about? And I just wondered within that if you can talk about if there're any significant trends and differences between food and the general offer, or indeed, between high street stores and some of your retail park stores.
That's really difficult to be precise and I know that you're not expecting a precise number, more a feel. We believe that the market conditions probably account to 2.5% to 3% of the impact, that's our belief. And the other part of that, the disruption and things that we haven't got quite right, I would say -- to 2%, 2.5% something like that and so I think on both counts we can improve as I've outlined previously. And certainly those things and things like the stock availability which was impacted quite considerably for periods of time and in some categories worse than others, but were now getting to the normalized position on that, much better position. I think that's within our own advance I think that's fine I think the other stuff we've got to do is even if shopper numbers are reducing and you have a reduced footfall and we can't take a greater share by doing what we do better and in the more clear way than we've done in the last sort of six to 9 months. So were pleasing with that.
So I think both are addressable and our job is to get more customers through to make that 7 million considerably ahead of that. We do just to repeat myself we do expect quietly continuation of challenging conditions during half one but were bedding in all of these things so for example it's very easy to say bedding in and what does that mean? Well doing the process of I think it's 204 stores actually as we talk that has now being converted you are doing that at pace so there's the tiding up that you have to go back and do and absolutely get the things just right so things like bulk stacks and stuff like that which are synonymous with discounters and some of that has been missed we've been concentrating on the lay outs and the categories splits and getting the availability across each category in line and in fact take just to be fair take and invested both because some of those 99p lines that were really-really good and are being moved into the Poundland core assortment as well. So lot and lots of stuff going on I think that's a sort of split and I think just to repeat myself 2.5% to 3% probably the market conditions that so many retailers have been referring to so I'm not in isolation on that but I think certainly 2% to 2.5% has been self inflected as a result of the disruption of this 60% stores in actually what is about 7 months to 8 months we've added 60% of new stores and I'm sure everybody on this call will realize the scale and challenge of that, the impact that that would have on the business and but we are moving on that. One company by the end of April one focus and get it to back to basics and the footprint to the futures I've described.
That's great. Thanks very much, and well done for converting it all so quickly.
Thank you. And our final question is from the line of Andrew Porteous from HSBC. Please go ahead.
Just a couple from me. Most of them have been answered already. Just in terms of the speed of what you've done in terms of conversions, it sounds like you've put a bit more stock in there. It sounds like perhaps the CapEx has been brought forward. Could you perhaps make some comments around the cash flow and where you would expect net debt to come out for the end of the year?
Yes, absolutely. Is that the question?
Well, the other one was around Spain. You talked about pushing back on new stores for the next year. Would that delay any ambitions that you have in Spain? I can see the store trial is going quite well over there.
Okay. I'll get cash flow and I'll let Jim maybe answer the Spanish question. Yes, I mean you are absolutely right Andrew it's highly surprising with the acceleration in the opening program for these conversion that the cash is going to be a little bit of where we initially expected when of course we had expected this project to take 15 to 18 months. So I'm expecting the cash at the end of the year would be around 34 million of debt in the business and really the reasons are as follows. An acceleration on the CapEx an acceleration on the non-underlying integration costs but the largest elements of it was really around stock and if I explain the process that we've undertaken to get these stores converted at the speed that we have it will might give you bit more on understanding. What we have effectively done as we go into converted store is that we close the store down for a period of time and what we do as we remove the vast majority of the stock from that store from the 99p store. What we then after two to three days it's brush cleaned so that's a new store opening team can go in and actually put in all of the Poundland stock. So for a period of time you are effectively duplicated the amount of stock you've got in the business. So that's caused us to put some more working capital in.
Now of course this is for us to do, we have to deliver this over the next few months. Well what we would expect is that's would why in this financial year and for us to deal with that duplication of stock to obviously adjust our supply chain accordingly and to see the benefits come through this financial year that's for us to deliver there's some work to do on that so that's where the cash is coming at.
Jim on Spain?
If I could just give you a little better color on that I mean the main thing is that we've said we will get it for of the prices in there so the June announcements but we are pleased with the progress that the Spain has made. There's 10 stores there now we've have a strong like-for-like growth and sales 15 million just over 15 million in fact it's 5 million in the year before so that's 10 million up. We've said at the interims I think that we'd update at April into June, nothing has changed since then but we are learning all the time as you would expect we're fine tuning the economic model and we look forward to giving you more color, more information in June but proceeding well 10 store trial is showing us lots and lots of things that we can improve so that when we do decide what we’re going to do, if that is a program of expansion, we’re in much better shape to do so.
And we have got a really good team out there that is very ambitious and it’s delivering the things that we would expect from this trial. So I think good progress overall, good growth within the like-for-like stores. And we are making progress on the mix and things like that. The FX that you referred to earlier, that’s eased a little bit. But if we normalize some of those impacts as well, we are very pleased with the progress that we’re making to date and we will give a full update and more information about what we’re doing there and what we intend to do in June.
Thank you. And we have no further questions so I’ll hand you back to your host.
Well, that’s marvelous. I think it’s about two minutes short of the 45. So thank you very much indeed everybody for your questions. Thank you for being so tight on the time as well. Really appreciate that. If there are any questions that people want to ask subsequent to this call then Phil Dorgan will be available to take those on an individual basis. So thank you very much indeed and cheerio. Bye, bye.
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