RNS Number : 5018I Mccoll's Retail Group Plc 12 August 2021 THIS
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RNS Number : 5018I McColl's Retail Group plc 12 August 2021 THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN MCCOLL'S RETAIL GROUP PLC OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF MCCOLL'S RETAIL GROUP PLC. THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. 12 August 2021 McColl's Retail Group plc ("McColl's", the "Company", or the "Group") Proposed Firm Placing and Open Offer to raise up to £35 million at a price of 20 pence per New Ordinary Share Background McColl's, the leading neighbourhood retailer, with an estate of over 1,200 managed convenience stores and newsagents, today announces, further to the separate announcement of its H1 2021 interim results today, its intention to conduct a capital raising to accelerate the Company's growth strategy (the "Capital Raising"). The Capital Raising will comprise: i. a non-pre-emptive firm placing of 150,000,000 new ordinary shares of £0.001 each in the capital of the Company (the "New Ordinary Shares") at the Offer Price (as defined below) per New Ordinary Share to raise up to £30 million (the "Firm Placing") and ii. a pre-emptive open offer of up to 25,000,000 New Ordinary Shares at the Offer Price to certain holders of existing ordinary shares of the Company who are registered on the Company's register of members as at 6.00 p.m. on 10 August 2021 (the "Record Date") at the Offer Price to raise up to £5 million (the "Open Offer"). The Board believes the Capital Raising is in the best interest of the Company and Shareholders as a whole and intends to use the net proceeds of the Capital Raising to: 1. Increase the number, and accelerate the pace of rollout, of Morrisons Daily stores, from 56 to 350 by the end of the financial year ending November 2022 (an increase of 50 stores against the Group's previous target of 300 stores by the end of December 2023); 2. Improve the grocery infrastructure in the Morrisons Daily sites, thus enhancing the standard of the refit and expanding the chilled offer with more refrigeration, adding further profit potential; 3. Further invest in the store estate, including the potential to extend the rollout of Morrisons Daily beyond 350 stores; and 4. To reduce the Group's financial leverage. Further details as to the background to, and reasons for, the Capital Raising are set out in Appendix III of this Announcement, together with further details on the intended use of net proceeds. Jonathan Miller, Chief Executive of McColl's, said: "Today's Capital Raising represents a transformational opportunity to accelerate our strategy and capitalise on the growth opportunity available to us in food-led convenience." "We are delighted with the progress we have made so far with the roll-out of Morrisons Daily conversions within our store estate. We have a supermarket-quality offer and now also a proven blueprint that offers a strong return on investment, delivering double-digit sales uplifts and fast payback." "The proceeds of the Capital Raising will enable us to build on this foundation by accelerating the pace of the roll-out of our Morrisons Daily conversions to deliver 50 additional conversions on top of the original 300 planned, and to complete the roll-out a year earlier than current plans. The Capital Raising will also enable us to further improve the grocery infrastructure of these sites to enhance profit potential, as well as further invest in our wider estate and reduce leverage." "Morrisons' core grocery proposition, with its brand, quality and product range, is perfectly complemented by McColl's' neighbourhood store locations, strengths in core impulse sales categories, and expertise in running services such as Post Offices." "Convenience is a growing market and the Covid-19 pandemic has served to expedite structural customer trends that play to our competitive strengths and that we believe are here to stay, including more frequent top-up shops alongside a focus on fresh food and groceries at great value." "We have a clear plan for growth and the Capital Raising will enable us to drive long-term sustainable growth to drive shareholder returns." Details of the Capital Raising The Firm Placing will be conducted through an accelerated bookbuild (the "Bookbuild") which will be launched immediately following this announcement. The Firm Placing is subject to the terms and conditions set out in Appendix IV of this announcement (which forms part of this announcement, such announcement and its Appendices together being this "Announcement"). The timing of when the Bookbuild will close and allocations will be at the discretion of the Joint Bookrunners in consultation with the Company. Details of the results of the Firm Placing will be announced as soon as practicable after the close of the Bookbuild. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares. The offer period for acceptances by Qualifying Shareholders is expected to commence on Friday 13 August 2021 and is expected to end on Friday 27 August 2021. The Capital Raising is subject to approval by Shareholders at a General Meeting which is expected to be held at Ground Floor West, One London Road, Brentwood, Essex, England, CM14 4QW at 11.00 a.m. on Wednesday 1 September 2021. The Capital Raising is conditional and dependent upon the Resolutions being passed. Pursuant to the terms and conditions of the Placing and Sponsor Agreement, the Joint Bookrunners have agreed to underwrite the settlement risk in the event that, following completion of the Bookbuild, any Firm Placees fail to take up their allocation of the New Ordinary Shares under the Firm Placing. The Joint Bookrunners will not underwrite settlement risk in respect of the Open Offer. Each Director who is a Shareholder, who hold in aggregate 12,090,353 Existing Ordinary Shares, representing in aggregate approximately 10.49 per cent. of the issued share capital of the Company as at the Reference Date, has irrevocably committed to vote in favour of the Resolutions to be proposed at the General Meeting (except for Jonathan Miller and his associates in respect the Fourth Resolution (as defined below) who, because of his status as a related party under the Listing Rules, must abstain from voting on that Resolution). In addition, all of the Directors have irrevocably committed to participate in the Capital Raising via the Firm Placing. Each Director has irrevocably committed to not take up any of their Open Offer Entitlements. A combined prospectus and circular (the "Prospectus") setting out full details of the Capital Raising is expected to be published on the Company's website on 13 August 2021 following completion of the Bookbuild. Qualifying Shareholders are being given the opportunity to subscribe for New Ordinary Shares under the Open Offer ("Open Offer Shares") at the Offer Price pro rata to their existing shareholdings. Qualifying Shareholders who take up their Open Offer Entitlements in full may apply to subscribe for Excess Shares using the Excess Application Facility. The Company's unaudited interim accounts for the twenty six weeks ended 30 May 2021 have also been published today and are available on the Company's website. Current trading and outlook Current trading Total revenue for the twenty six week period ending 30 May 2021 was £572.7 million and like-for-like sales growth for the period was +1.0%, building on top of the exceptional sales performance during the same period last year (H1 2020 LFL +8.3%). The third national lockdown in the UK saw trading patterns revert to those seen previously, with customers favouring lower-margin take home rather than higher-margin impulse products, and a preference for multi- buys and value packs, resulting in a reduction in the gross margin rate of 140 basis points. This margin dilution was partly offset by continued cost discipline and business rates relief leading to an adjusted EBITDA (before IFRS 16) decline of £2.8 million to £10.3 million. Outlook Like-for-like sales increased 1.0% in the period, this was achieved against the strong comparative period in Q2 last year as a result of the onset of the pandemic. On a two year view, like-for-like sales were up 7.4% in the first half, highlighting the continued momentum the business has seen, growing on top of last year's exceptional sales. As social distancing restrictions have eased, the Group has started to see a stabilisation in underlying gross margin trends as customers revert to pre-pandemic buying patterns. This includes more frequent visits with lower basket sizes and increased sales of higher-margin impulse products. Despite this, the Group has seen revenues impacted by availability issues in stores over recent months due to supply chain disruption. This has been caused by the widely publicised nationwide shortage of delivery drivers due to a combination of external factors. The Group has put in place a number of temporary mitigating actions and continue to work closely with its supply chain partner to resolve these challenges as quickly as possible.