Relationship banking enables successful retailer to reach even greater heights

Santander enabled a successful value retailer with national reach to achieve even greater growth

In Brief

  • Company turnover: £340 million
  • Sector: Retail
  • Over 5,000 employees
  • Poundworld is a large, successful and growing chain of full-line discount stores located across the UK.
  • The company’s existing finance package wasn’t fully able to accommodate both Poundworld’s growth and its trade cycle, which in turn put pressure on working capital and cashflow.
  • Santander took the time to understand the company and its aspirations and delivered a tailored solution that properly reflected the complexity, scale and potential of Poundworld’s operations.
  • Through Santander’s personal approach to banking, the team took a significant amount of time to understand and evaluate what the business needed and what facilities would allow it to grow.
  • As well as delivering significant cost and operational savings, Santander’s support has provided a firm financial footing to enable management to focus on strategy and growth.
  • Santander’s relationship approach, tailored solutions and three-year committed facilities are helping the company to negotiate better contracts and establish new growth channels.

Santander had a relationship with Yorkshire-based value retailer Poundworld, providing cash-handling services to a small number of the business’ shops. Two years ago this relationship took a new turn. “Poundworld had relationships with other banks,” explains Paul Watkin, Relationship Director, Large Corporate Group, at Santander UK. “But I felt there was an opportunity for us to spend some time with management and see if we could help with their financing needs.”

“Through speaking with Chris we found Poundworld’s banking facilities didn’t mirror the cashflow of the business, the international profile of its purchasing and working capital cycle, or the needs of a rapidly growing £340 million turnover business. We felt that the company would benefit from more certainty with its funding and thought that the ideal solution would be to replace the historic overdraft arrangements with committed facilities.

Maintaining success

As a successful chain, Poundworld keeps costs low by importing the majority of its stock from abroad. After paying for goods, the business has to endure long periods during which those goods are packed, shipped and stored before being imported to outlets for sale. “We had to build a solution around that timeframe,” adds Mark Lonsdale, Regional Director for Trade Finance at Santander. “Historically, Poundworld’s facilities had been structured around a 90-day trade cycle, which did not fully reflect the actual working capital cycle of about 135 days.”

As an established business with between 30 and 40 new outlets opening every year, Poundworld required a sophisticated package of tailored support. Cue 18 months of discussions that culminated in the facilities being made available in March this year.

Providing the best

“We were looking at a few banking options, but we got a strong impression that Santander wanted to do their best for us,” says Poundworld CEO Chris Edwards. “We soon realised that this was the bank for us and we have been more than happy with that decision.” He adds, “With every meeting we gained more and more confidence in them. To get to the point of the offer, they had to calculate all the different financial aspects of the business, from trade loans to foreign exchange to credit cards.”

“What I liked about Santander was they put faces behind the names. Everybody got to know everybody and it really worked. They did their homework properly, so when they made us an offer it was obviously the best.”

The package

That package supports both Poundworld’s current requirements and future growth. Santander’s facilities included a £5 million committed credit facility; a $30 million trade import loan; a group-wide overdraft; and facilities to accommodate foreign exchange requirements; in addition to the Day-to-Day banking facilities for the shops and head office. 

“All businesses have specific and different needs,” says Paul Watkin. “So we got to know Poundworld, their industry and how the two connect. Given the scale of this business, Santander’s approach is to create a deal team. This includes not only the Relationship team and our International colleagues but also, importantly, a Credit Partner. This way, ideas are considered well ahead of our final credit approval stage.”

Santander’s approach has delivered immediate bottom-line benefits to Poundworld. The credit facility committed for three years, for example, gives Poundworld’s suppliers extra confidence in the business and is helping to bring down the premiums it pays to trade insurers, landlords and suppliers. “When you’re talking about a business like this operating on fine margins, a 0.5% or 1% difference is significant on £340 million of turnover,” Mark says.

Seeing the light

The new banking arrangements have led to savings in other areas too. Poundworld’s managers now have an opportunity to take a step back to review the business’ operations in a bid to find new centres of profit and cost-reduction. This new approach has resulted in a lighting refit that will save the business millions of pounds over time.

“We can now concentrate on the business instead of worrying about money-admin problems,” says Chris. “The relationship with Santander has made it a lot easier to grow. For example, we took the decision to install 76,000 six-foot LED tubes in our shops. The total cost was approaching £1.8 million and we get a return on that investment in about 18 months because of the energy savings. When you’re actually running the business you have time to plan these things; it’s great to be free to do the job.”

All lending is subject to status.

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Where Next?

Relationship Director Comments


Knowing that we are committed to supporting his business over the long-term, Chris is now free to focus on strategic planning and growth.

Paul Watkin, Relationship Director