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UPDATE 2-Everything one pound, except the Poundland share listing

* The first British discount retailer to seek public listing

750 million pound flotation planned for March

* Wanted to offer shares for a pound each but too complicated

By James Davey

LONDON, Feb 18 (Reuters) - Poundland, Europe's largest single-price discount retailer, plans a 750 million pound ($1.25 billion) flotation on the London Stock Exchange, cashing in on the recession-proof allure of goods that sell for just one pound ($1.67).

The 500-store Poundland chain, which sells more than 3,000 products, including about 1,000 branded goods from firms such as Cadbury, Heinz, Coca Cola and Kodak, said on Tuesday it would list its shares in March.

British discount retailers bought up properties left vacant in the economic downturn by failed store groups such as Woolworths and have outperformed the market as consumers tightened their belts in the face of flat wages and rising inflation.

Though the UK economy is slowly improving, the habit of thrift has stuck, and Poundland says nearly a quarter of its 4.5 million weekly customers now come from the more affluent "AB" demographic.

"We're very good in austere times, but we're even better in good times," said Poundland Chief Executive Jim McCarthy, highlighting a track record of profit growth and aggressive store opening plans for both the UK and overseas.

According to consultancy PwC, the UK value general merchandise retail sector was worth 5.2 billion pounds in 2012.

Poundland, the first British discount retailer to seek a public listing, was founded in 1990 at Burton-upon-Trent, central England, by Dave Dodd and Stephen Smith. Private equity firm Advent International bought the firm for 50 million pounds in 2002 and sold it on to Warburg Pincus for 200 million pounds in 2010.

Poundland's share offer will comprise a partial sale to institutional investors of Warburg Pincus's 76 percent stake, as well as a partial sale of the balance held by 155 Poundland employees, including McCarthy, a former Sainsbury's executive and 30-year veteran of the UK retail sector. The free float will be at least 25 percent of Poundland's equity.

The firm, which will not be issuing any new shares to investors in the offer, would seek a valuation of 700-750 million pounds, a person familiar with the matter told Reuters.

LISTING PIPELINE

The listing of Poundland is one of many expected in Britain's retail sector in 2014. Russian hypermarket chain Lenta, newsagent and convenience store McColl's and online domestic appliances retailer AO have all said in recent weeks that they plan to float.

Pets at Home, Fat Face, House of Fraser, Boohoo.com and B&M are also expected to come to market later this year.

While the UK is short of quoted plays on discounters, in the United States there is a well-established discount sector on the stockmarket, with Dollar Tree, Family Dollar and Dollar General all huge chains, nibbling away at the market share of Wal-Mart and the drugstores.

Independent retail analyst Nick Bubb said it remained to be seen how investors would differentiate between all the various UK discount players as and when they go public.

"Given the weak profits at the fast-growing 99p Stores and Poundworld, Poundland is obviously the best of the 'pound shops', but Poundland is not as big as chains like Home Bargains and B&M, whose incursion into markets such as homewares and toiletries has even put pressure on the sales of the likes of B&Q and Superdrug," he said.

Poundland's revenue base - up 15 percent to 880 million pounds in the 2012-13 year - means it can negotiate deals direct with suppliers, who often reformulate sizes to accommodate the firm's single price point.

"I come here because there's a variety of items that are lower price, especially household stuff," Richard Ogundeko, 46, told Reuters when shopping at Poundland's store in Hoxton, east London.

"There is some stuff that you can't find in Tesco or other places, but here you know that everything is 1 pound," added Khadija Radi, 43.

Critics argue Poundland products can be more expensive than similar products in supermarkets if compared on a weight basis. Rising inflation can also challenge the business model.

Poundland made underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of 45.4 million pounds in the 2012-13 year, up from 39.3 million in the previous year, and last month it posted record Christmas sales.

The firm is targeting a doubling of its UK stores to more than 1,000 as well as further international expansion after a profitable first full year of trading at its multi-price format Dealz business in Ireland, with Spain next on the list.

Poundland, chaired by former Tesco finance director Andrew Higginson, also strengthened its board, with trading director Richard Lancaster named as an executive director and four independent non-executive directors appointed, including former Carpetright CEO Darren Shapland.

Though the listing price for the Poundland offer has not yet been decided, purists expecting to pick them up for a pound will be disappointed.

"It would be very nice indeed if it was a pound ... but it's a bit difficult to arrange that," said CEO McCarthy.