Poundworld has fallen into the red despite sales growing another £40m last year as new private equity owner TPG Capital invested in future growth.

One-off charges of £8.9m, including £2.5m of transaction and legal fees related to the May 2015 £150m takeover by TPG and £6m in provisions for onerous leases, dragged the discount retail chain to a loss in the year ended 31 March 2016.

Poundworld also paid the new owner £1.2m in management and consulting fees and registered a £4.8m loss on foreign exchange contracts, which because of the adoption of FRS 101 accounting standards, can no longer be hedged, accounts filed at Companies House showed.

The costs, along with investment in new stores, recruitment of senior management and IT systems and supply chain infrastructure, resulted in pre-tax losses of £5.4m for the year, compared with a £22m profit in 2014/15.

Underlying operating profits, before exceptional items, also slipped from £13.3m to £10.6m during the period.

Revenues at the retailer leapt 9.6% to £462.7m, mostly driven by stores opened in the past two years, including 39 net new shops in 2015/16.

Poundworld finished the financial year with 319 stores in the estate. In July 2015, following the TPG acquisition from the Edwards family who started the business from a Wakefield market stall in 1974, Poundworld revealed plans to open 200 new stores and create 4,000 jobs in the next three years.

Founder Christopher Edwards stepped down from helm in March last year to be replaced as CEO by former Tesco UK board member and COO Gerry Gray.

“The financial year ending 31 March 2016 was one of consolidation and investment for the business against the backdrop of continuing change for the value retail sector,” a Poundworld spokesman said.

“Under TPG Capital’s ownership, significant investment was made to ensure that the business will continue to grow sustainably in the future.

“This included the recruitment of senior management and investment into IT systems and supply chain infrastructure, as well as the opening of 42 new stores [and the closure of three sites] during the reporting period. This investment programme has continued into the current year.”

Bank debt fell £7.1m to £2m by the year end thanks to additional working capital funding by TPG.

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