Preliminary Audited Results and Trading Update 18 February 2019
Total Page:16
File Type:pdf, Size:1020Kb
Preliminary audited results and trading update 18 February 2019 - McColl's Retail Group plc, the UK convenience retailer, ("McColl's" or "the Group") today announces its preliminary results for the 52 week period ended 25 November 2018, and a trading update for the 11 week period to 10 February 2019. Financial Summary: Total revenue up 8.1% to £1.24bn (2017: £1.15bn1) reflecting the annualisation of the 2017 acquisition Total like-for-like (LFL) sales2 down 1.4%, impacted by supply chain disruption, but showing an improving trend through the year, with Q4 FY18 sales flat and Q1 FY19 up 1.2% to date3 Continued progress towards our strategic target of increasing grocery and alcohol sales; now representing 34% of total sales (2017: 32%) Adjusted gross margin4 26.0% (2017: 26.8%, 2018 gross margin 25.9%), reflecting supply chain challenges and mix effect of strong tobacco sales Net cash from operating activities £61.8m (2017: £54.2m) Adjusted EBITDA excluding property-related items5 £35.0m (2017: £44.0m). Net debt materially better at £98.6m (2017: £142.2m) Profit before tax £7.9m (2017: £18.4m) Basic earnings per share 5.9p (2017: 12.3p) Proposed final dividend of 0.6p per share, bringing FY18 total to 4.0p per share (2017: 10.3p) Operational and strategic highlights: Transition to Morrisons supply in 1,300 stores6 completed in mid-August, three months ahead of original schedule Investment in estate continued with 59 convenience store refreshes completed in the year, delivering sustained average sales uplifts above 5%, and 11 new convenience stores added Ongoing estate optimisation programme advanced with 66 under-performing newsagents and smaller convenience stores divested in the year Banking terms revised, providing additional flexibility Appointment of Robbie Bell as Chief Financial Officer; commenced role on 17 January 2019 Jonathan Miller, Chief Executive, said: “2018 was undoubtedly a challenging year, marked by supply chain disruption following Palmer & Harvey’s entry into administration and the accelerated transition to our new supply partner Morrisons. “Despite this disruption, we continued to make progress against a number of our key strategic plans. We completed the rollout of 1,300 stores to Morrisons supply in less than nine months, which represents a considerable achievement and provides us with a more secure supply chain and a higher quality chilled and fresh offer. We also continued to invest in our estate, with 59 convenience store refreshes completed in the year and 11 new stores acquired. “We are a profitable and cash generative business, and our priority for the year ahead is to rebuild operational momentum and we remain confident in delivering our strategic plans.” Current trading and outlook: Early trading in FY19 has seen a sales improvement with total LFL sales for the 11 week period ended 10 February 2019 up 1.2%. Total sales increased 0.4%. In FY19 we expect to acquire a small number of new convenience stores, and plan to complete 20-30 more convenience store refurbishments as part of our successful store refresh programme. We will continue to grow our convenience offer, increase our neighbourhood presence and give great customer service. In line with the financial guidance previously disclosed on 3 December 2018, we continue to expect adjusted EBITDA for FY19 to be a modest improvement on FY18. Notes: The business uses a number of non-statutory or alternative performance measures (APMs) (for example, LFL, adjusted EBITDA, adjusted EPS and net debt) because management believe that these – placed with equal prominence alongside other statutory measures – help to better explain the underlying performance of the business and its key dynamics. These are kept under continuous review and are defined and used consistently, or explained otherwise. The Group has defined and outlined the purpose of its alternative performance measures, including its key measures, in the glossary of terms. Details of the £(2.6)m of gross (pre-tax) adjusting items are set out in note 3 and described in the financial review. 1 To better reflect the core operations of the Group, Post Office revenue, previously included in other operating income, is now recognised in statutory sales. In order to ensure comparability 2017 full year revenue, gross margin, gross profit and other operating income have been restated – see note 2. 2 LFL sales reflect sales from stores that have traded throughout the current and prior financial periods, and sales include VAT but exclude sales of fuel, lottery, mobile phone top up and travel tickets. 3 Q1 LFL sales to date are for the 11 week period ended 10 February 2019. 4 Adjusted gross margin is gross profit before adjusting items divided by revenue – see the glossary of terms. 5 Adjusted EBITDA excluding property-related items shows the Group’s Earnings Before Interest, Tax, Depreciation and Amortisation adjusted for both property gains and losses and other adjusting items. 6 McColl's' total store estate is comprised of c.1,550 stores. The c.300 stores McColl's acquired from the Co-op in 2017 are under a separate supply contract with Nisa. Results presentation A copy of this announcement is available at www.mccollsplc.co.uk/investor. A meeting for analysts will be held today at 9.30am at Numis Securities, London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. Access will be by invitation only. All presentation materials will be available on our website. Enquiries Please visit www.mccollsplc.co.uk or for further information, please contact: McColl’s Retail Group plc Media enquiries: Jonathan Miller, Chief Executive Headland Robbie Bell, Chief Financial Officer Lucy Legh, Rob Walker, Charlie Twigg Naomi Kissman, Head of Investor Relations +44 (0)20 3805 4822 +44 (0)1277 372916 Notes to editors McColl's is a leading neighbourhood retailer, with an estate of c.1,550 managed convenience stores and newsagents. We operate McColl's branded convenience stores as well as newsagents branded Martin's across the UK, except in Scotland where we operate under our heritage brand, RS McColl. Our dedicated colleagues serve five million customers every week, and we are the largest operator of Post Offices in the UK, with c.600 in-store counters/branches. Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Chairman’s statement A year of transition It’s been a challenging year as the McColl’s team have navigated their way through unprecedented supply chain disruption. Having transitioned 1,300 of our stores to a new wholesale supply partner, the business can now look forward to rebuilding momentum and capitalising on the opportunities that lie ahead. The business began the 2018 financial year with great confidence, having successfully integrated a major acquisition and signed a new wholesale supply agreement with Morrisons. However, just days into the new year we experienced a significant setback following the sad failure of Palmer & Harvey (P&H). The loss of supply to 700 stores created major disruption and required us to put in place an interim supply solution for nine months, during which we accelerated the transition of 1,300 stores to Morrisons supply. Moving to a new wholesale supply partner, at a much faster pace than anticipated, created its own challenges and severely disrupted our plans for the launch of Safeway. We are working with our partner Morrisons and remain confident that together we can develop an optimal range and promotional offer for the future. Strong cash performance and new financing arrangements provide flexibility Whilst the considerable supply chain disruption we suffered held back like-for-like (LFL) sales and profit, the business continues to generate very strong cash returns. In the year, we have benefited from significant working capital improvements as we’ve transitioned to our new wholesale supply partner. We have also realised proceeds from the sale and leaseback of a number of freeholds we acquired as part of our acquisition in 2017. This has allowed us to continue to invest in our strategic initiatives that will drive future growth, such as new store acquisitions and our store refresh programme, as well as pay down debt more quickly than anticipated. In addition, in the second half of the year we engaged with our banking syndicate, and have amended our financing arrangements to give us more flexibility to execute our business plans. Dividends We need to give careful consideration to our cash allocation, striking the right balance between investing in the business, reducing our debt and providing returns to shareholders. The Board is recommending a final dividend of 0.6 pence per share, making a total dividend for the period of 4.0 pence, as part of our commitment to provide returns to shareholders. This dividend will be paid on 6 June 2019, to shareholders on the register at the close of business on 26 April 2019, subject to approval at the forthcoming Annual General Meeting. Our policy of a 50% payout ratio to profit after tax (before adjusting gains but after adjusting losses) is unchanged.