Discount retailer Poundland took a shares hit after warning over half-year profits as it also revealed takeover target 99p Stores was in weaker financial health than previously thought.

The news emerged as Poundland announced details of a £50m share placing to fund the £55m takeover, now expected to complete next Monday after it was cleared by competition authorities.

It said it found signs that 99p Stores' financial position 'has weakened somewhat' since it originally looked at the company's books at the start of this year ahead of the extended regulatory process.

Poundland will report results for the six months to September 27 in November, but revealed like-for-like sales for the 25 weeks so far had fallen by 2.9pc - having previously warned of a tough comparison with a strong period last year.

It also counted the cost of expansion with the opening of 55 stores in the first half of the financial year, although this helped increase total sales by 4.9pc to £532.1m.

The group said pre-tax profit for the six months was expected to be lower than in the first half of 2015.

Shares fell 7pc, taking the stock below its 300p offer price at the time of its float in March last year.

The recent like-for-like sales fall marks a sharp reversal of the 4.7pc hike seen a year earlier.

The group expects to have 638 stores in the UK and Ireland at the end of the half year, with net growth of 50 over the period and 70 for the financial year. It will open a 10th store in Spain by the end of 2015.

Following the completion of the 99p Stores deal it will immediately add its support to the chain of 251 sites going into the key trading period between Halloween and Christmas, the group said.

It will then focus on 'rapidly converting the stores to the Poundland formula'.