Poundworld facing administration: 355 stores risk closure and 5,300 jobs threatened

The budget retailer, which has stores in Shrewsbury and Telford, is low on cash and is filing the notice because it will give the business protection from its creditors for two weeks.

It is believed the notice will give Poundworld time to structure a deal, which could be undertaken through a pre-pack administration, with private equity firm R Capital, former owner of Little Chef.

The administration will be handled by Poundworld's advisers Deloitte.

Poundworld, which is owned by TPG Captial, had previously rejected offers to sell through a pre-pack but all options are now being considered.

Management has so far failed to sell the retailer as a solvent business, after turnaround specialists Alteri Investors walked away from sales talks this week.

Deloitte has been preparing contingency plans for an administration in the event of talks collapsing.

Any takeover would nevertheless involve the closure of well over 100 stores and lead to thousands of job losses.

Poundworld's losses widened in 2016-17 to £17.1 million, from £5.4 million of losses the year before.

The retailer was hit with a £5.7 million charge for onerous leases, a provision retailers make when the cost of a lease is no longer covered by the income of the store.

Now competing with rivals such as Poundland and Poundstretcher, Poundworld was set up in the 1970s by Chris Edwards, who left the company last year.

Mr Edwards, who pocketed an estimated £75 million from the deal with TPG, has since been appointed to run Poundstretcher, which has also experienced difficult trading.

The company has opened a distribution centre in west Yorkshire which consolidated its logistics functions into a single 500,000 square foot facility.

Poundworld has also expanded its product range in a bid to keep pace with rivals.

While Poundland appeared to have enjoyed a robust festive period, with like-for-like sales up six per cent in the three weeks to Christmas Day, it too has faced challenges.

Several retailers have shown significant financial distress this year, with both Maplin and Toys R Us disappearing from the high street.