TIDMMCLS
RNS Number : 3383G
McColl's Retail Group plc
23 July 2019
23 July 2019 - convenience retailer McColl's Retail Group plc
("McColl's" or "the Group") today announces its Interim Results for
the 26 week period ended 26 May 2019.
REBUILDING OPERATIONAL MOMENTUM
Financial highlights:
-- Total revenue up 0.1% to GBP611.1m (2018: GBP610.4m(1) )
-- Like-for-like (LFL) sales(2) up 1.0%
-- Adjusted gross margin 25.4% (2018: 26.1%), with year-on-year decline moderating
-- Adjusted administrative expenses as a percentage of revenue reduced to 25.2% (2018: 25.5%)
-- Adjusted EBITDA(3) GBP13.0m (2018: GBP16.0m)
-- Profit before tax GBP0.2m (2018: GBP2.3m)
-- Basic earnings per share 1.2p (2018: 1.3p); Adjusted earnings
per share(4) 0.3p (2018: 2.3p)
-- Net debt reduced to GBP89.7m (2018: GBP112.6m), in line with
expectations due to disciplined capital management and successful
completion of sale and leaseback programme
-- Interim dividend per share of 1.3p (2018: 3.4p)
Operational and strategic highlights:
-- Work to improve gross margin continues following supply chain transition in 2018
-- A focus on operational standards is driving further progress
across customer satisfaction ratings
-- Investment in estate continued, with 17 convenience store refreshes completed
-- Opened three new convenience stores and divested 41
underperforming newsagents and smaller convenience stores as we
continue to reshape and optimise the estate
-- Trial of 'Morrisons Daily' fascia underway at 10 refresh stores
-- Further strengthened leadership team with the appointment of
Richard Crampton to the newly created position of Chief Commercial
Officer
Jonathan Miller, Chief Executive, said:
"The key priorities that we outlined for this year were to
stabilise the business and to refocus on retail execution following
a challenging 2018. We have made good progress on both of these
fronts whilst also maintaining strong capital discipline, reducing
debt whilst sustaining appropriate levels of investment.
"I am encouraged by the performance we have delivered as we
regain greater operational stability, but we still have more work
to do in the second half of the year. The market remains highly
competitive, with challenging trading conditions, given the
unseasonable weather and uncertain economic climate.
"Despite this, we expect to be broadly in line with expectations
for the full year and we are confident that our strategy, combined
with the cash generative and profitable nature of our business,
will deliver sustainable returns for shareholders in the long
term."
The business uses a number of non-statutory measures (for
example, LFL, adjusted EBITDA and adjusted EPS) 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. Adjusting items are described in note 5.
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
2018 half year revenue, gross margin, gross profit and other
operating income have been restated.
2 Like-for-like 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 Adjusted EBITDA is defined in note 6.
4 Adjusted earnings per share is defined in note 9.
Results presentation
A copy of this announcement is available at
http://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 Edward Young, Rob Walker, Charlie
Officer Twigg
Naomi Kissman, Head of Investor +44 (0)20 3805 4822
Relations
+44 (0)1277 372916
Notes to editors
McColl's is a leading neighbourhood retailer, with an estate of
c.1,500 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.
Strategic and operational review
After a challenging 2018, characterised by supply chain
disruption, we set out a number of priorities for the year to
rebuild operational momentum and get back on track to deliver our
strategic plans.
Our focus on retail execution has included improving
availability, implementing full range reviews, developing the
Safeway range and continuing to invest in our estate through
Project Refresh. Although there is more to do, we are making good
progress and delivering against these priorities.
In the first half of the year the business continued to grow and
we achieved positive like-for-like sales. This was despite sales
falling in May which was a challenging month for the whole sector,
as the UK experienced a prolonged period of poor weather compared
to the start of last year's long hot summer.
As previously described, we are experiencing some challenges
with higher than anticipated cost prices. Some progress has been
made, as we've worked with Morrisons on addressing this, which has
helped to moderate the decline in gross margin year-on-year, and we
expect to see further improvement in the second half of the year as
it remains a key area of focus.
Developing a convenience focused estate
We have continued to invest in the estate, completing 17
refreshes in the first half of the year, including 10 stores as
part of a trial of the Morrisons Daily fascia. This trial is
helping to inform our thinking in terms of range development and is
an opportunity to explore the potential for this type of format.
The early response from customers has been positive and we will
continue to evaluate the trial over the coming months.
We have also opened three new convenience stores, in each case
relocating an existing store, and we are building a pipeline of
acquisitions for the second half of the year. The financial
performance of acquisitions remains strong, particularly those with
a larger footprint and greater participation of grocery and
alcohol. We are targeting a slightly higher number of openings in
the second half of the year. This, alongside our established
closure programme for underperforming stores, will support the
development of a convenience focused and more profitable
estate.
Enhancing our convenience offer
We have commenced our programme of range reviews to enhance our
offer and respond better to customer needs. For example, we
completed a full review of our beer and cider range at the end of
April, increasing the number of lines and space allocated to
growing categories such as craft and world beers. As a result we
have seen an encouraging improvement in our performance in this
category. This work will continue in the months ahead, with full
reviews underway for soft drinks, confectionery, wine and healthy
snacks, and by the end of the year we expect to have made
improvements to our range across all categories.
We are also working with Morrisons to refine the Safeway range,
looking to introduce new products to enhance the offer. As we
continue to establish the range we have introduced some long-term
multi-buys on key fresh products such as beef burgers and sausages
as part of a 'Taste of Summer' campaign.
Focusing on operational standards and on shelf availability
With our supply chain stabilised the operations team have been
able to refocus on retail execution and making sure that we deliver
excellent customer service.
This work has supported a good year-on-year improvement across
key customer satisfaction ratings, including staff
friendliness/helpfulness, speed of service, ease of shop, and
cleanliness of store(1) .
Satisfaction with availability has also increased as we have
seen inbound stabilise and our team have prioritised on shelf
availability. However, there are still opportunities to improve on
this, particularly in chilled and fresh availability.
Building a strong team
We have made two key appointments this year, Robbie Bell who
joined the business as Chief Financial Officer in January and
Richard Crampton who will join us on 30 September in the newly
created role of Chief Commercial Officer. We are confident that
both hires will significantly enhance the capability of the
leadership team.
Outlook
Our priorities for the second half of the year are unchanged as
we continue to stabilise the business and focus on good retail
execution. We expect the market to remain competitive as all
grocery retailers face the challenge of strong year-on-year
comparatives following a very hot summer last year. These weaker
trading conditions over the summer will continue to form a
challenging backdrop, but we expect to be broadly in line with
expectations for the full year.
As we move forward we remain committed to our long-term
strategy. We will continue to reshape the business, developing a
strong neighbourhood convenience offer that meets the changing
needs of today's customers.
[1] HIM! 2019 Convenience Tracking Survey
Financial review
At the start of the year we described our financial priorities
which included strengthening our balance sheet, improving working
capital, rebuilding gross margin, mitigating cost inflation and
further optimising our estate. Whilst there remain a number of
challenges, we have made good progress in the first half of the
year, maintaining sales growth and reducing debt, and the gross
margin decline we experienced last year has moderated as we work
with Morrisons to improve cost prices.
Revenue growth maintained, with positive LFL
LFL sales were up 0.4% in the second quarter, giving a total LFL
increase of 1.0% for the 26 weeks to 26 May 2019. The rate of LFL
growth fell significantly in the final month of H1 as the whole
sector suffered from strong year-on-year comparatives coupled with
colder weather this year.
Tobacco continues to perform strongly, benefitting from
inflation as a result of manufacturer and duty rises. Other
traditional categories such as news and confectionery, where we
still over-index as a result of our heritage, continue to steadily
decline and impact LFL sales.
LFL sales were supported by good growth in beers, wines and
spirits where our performance is improving following our recent
range review, soft drinks, which have been helped by some great
innovation as well as inflation, and food-to-go which, whilst still
a small category for McColl's, has great potential to grow as we
continue to extend our offer and improve our operational
delivery.
Total revenue increased by 0.1% to GBP611.1m (2018: GBP610.4m),
following the impact of the positive LFL performance offset by the
closure/sale of 41 underperforming newsagents and smaller
convenience stores.
Gross margin decline moderating
In the first half of the year adjusted gross margin decreased to
25.4%, (2018: 26.1%), principally as a result of higher cost prices
(as indicated in our 2018 Preliminary Results) following the
transition to our new wholesale supply contract. In addition, gross
margin has been impacted by the diluting effect of a stronger
tobacco mix and softer sales of a number of higher margin impulse
lines, driven by the poor weather and strong prior year
comparatives in May.
The reduction in gross margin has moderated (following a c.100
basis point decline in the second half of 2018) as we continue to
make progress, both through self-help initiatives such as improved
promotional investment planning, and by working with our wholesale
partner to leverage our combined scale and experience. We expect to
see further improvements in gross margin in the second half of the
year.
As in previous years, we anticipate that profit delivery will be
weighted towards the second half of the year due to the seasonal
sales mix, and further supported by year-on-year margin improvement
given the prior year shape, as described above.
In terms of overall value, total gross profit before adjusting
items fell by 2.8% to GBP155.0m (2018: GBP159.5m).
Margin challenges drive lower profits despite good cost
control
Operating profit after adjusting items decreased to GBP4.4m
(2018: GBP6.4m), and operating profit before adjusting items fell
by GBP2.8m to GBP4.6m, impacted by the decline in our gross
margin.
Adjusting items of c.GBP(0.3)m comprised GBP(0.5)m restructuring
costs relating to a review of retail support and field team
structures, GBP(0.2)m of adjustments relating to fines for an
historic health and safety incident, GBP0.1m of finance costs and
GBP1.9m of other costs associated with our ongoing store closures
programme, and GBP2.5m in property profits following the completion
of our sale and leaseback programme.
Adjusted EBITDA decreased to GBP13.0m (2018: GBP16.0m).
Although we are experiencing a number of cost pressures and wage
inflation continues to be a challenge, administrative expenses fell
year-on-year as a result of good cost control and the impact of our
closure programme. In particular, the impact of c.5% inflation in
the National Living Wage has been substantially mitigated. Adjusted
administrative expenses as a percentage of revenue were 25.2%
(2018: 25.5%). Net finance costs were broadly flat year-on-year at
GBP4.1m (2018: GBP4.0m)
Profit before tax for the period was GBP0.2m (2018: GBP2.3m),
reflecting a lower level of operating profit.
Taxation
The tax credit for the period was GBP(1.2)m (2018: GBP0.9m
charge) due to a large credit for the release of a deferred tax
liability due to our sale and leaseback programme. The comparable
effective tax rate in 2019 excluding the impact of non-deductible
adjusting items was 21.0% (2018 19.8%). The difference between the
current statutory rate of 19.0% and the effective tax rate
excluding the impact of non-deductible adjusting items is due
principally to the depreciation of assets not qualifying for tax
relief.
Adjusted earnings per share
Basic earnings per share were 1.2p (2018: 1.3p). Adjusted
earnings per share were 0.3p (2018: 2.3p).
Dividend
The Board has declared an interim dividend of 1.3 pence per
share (2018: 3.4 pence). The interim dividend will be paid on 6
September 2019 to those shareholders on the register at the close
of business on 9 August 2019.
Balance sheet and net debt
Shareholders' funds at the end of the period were GBP142.9m
(2018: GBP147.1m).
The book value of goodwill and other intangibles, property,
plant and equipment fell by GBP11.6m to GBP339.2m (2018:
GBP350.8m), reflecting the completion of our sale and leaseback
programme and closure of underperforming stores.
Net debt at the end of the period was GBP89.7m (2018: GBP112.6m)
(see note 11). This is in line with management expectations and
driven by a focus on working capital and successful completion of
our sale and leaseback programme. Our net debt to EBITDA ratio is
currently 2.8x on a rolling 12-month basis. We expect to reduce net
debt further in the second half of the year and we remain on track
to deliver net debt to EBITDA of c.2.5x by the end of the year.
Pensions
The combined accounting surplus on the two defined benefit
pension schemes operated by the Group increased to GBP12.7m (2018:
GBP10.5m).
The last actuarial review of the two schemes in June 2017
concluded that the combined funding deficit of our two pension
schemes was GBP12.6m, and the Company currently contributes
approximately GBP1.6m per year, inclusive of fees and levies.
Cash flow and capital expenditure
Net cash provided by operating activities was GBP13.1m (2018:
GBP37.7m), with the prior year benefitting from improved payment
terms following our transition to a new wholesale supplier.
Gross capital expenditure was GBP8.2m (2018: GBP10.0m). Net
capital expenditure, including property proceeds from the sale and
leaseback of freehold properties, reduced to GBP1.7m (2018:
GBP4.0m).
Financial priorities
For the remainder of the year we will continue to focus on
strengthening our balance sheet, improving working capital,
rebuilding gross margin, mitigating cost inflation and optimising
the estate. This will ensure that the business ends the year in a
stronger position from which to build.
Cautionary statement
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.
McColl's Retail Group plc
Statement of Directors' responsibilities
26 week period ended 26 May 2019
Responsibility statement
We confirm that to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months of the year); and
The interim management report includes a fair review of the
information required by DTR.4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board,
Chief Executive
Jonathan Miller
Chief Financial Officer
Robbie Bell
Date: 22 July 2019
McColl's Retail Group plc
Consolidated Income Statement
for the 26 week Period ended 26 May 2019
26 weeks to 26 May 2019 26 weeks to 27 May 2018
restated
GBP 000 GBP 000
(unaudited) (unaudited)
----------------------------------------- ------------------------------------
Note Before Adjusting After adjusting Before Adjusting After
adjusting items items adjusting items adjusting
items items items
Note 5 GBP 000 Note 5
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Revenue 4 611,057 - 611,057 610,417 - 610,417
Cost of sales (456,021) - (456,021) (450,891) (694) (451,585)
----------- ---------- ---------------- ----------- ---------- -----------
Gross profit 155,036 - 155,036 159,526 (694) 158,832
Administrative
expenses (153,837) (772) (154,609) (155,424) (1,304) (156,728)
Other operating
income 4 3,198 - 3,198 3,373 - 3,373
Profit / (loss)
arising on property-related
items 156 575 731 (75) 962 887
----------- ---------- ---------------- ----------- ---------- -----------
Operating profit 6 4,553 (197) 4,356 7,400 (1,036) 6,364
----------- ---------- ---------------- ----------- ---------- -----------
Finance income - - - 9 - 9
Finance costs (4,063) (80) (4,143) (4,035) - (4,035)
----------- ---------- ---------------- ----------- ---------- -----------
Net finance
cost (4,063) (80) (4,143) (4,026) - (4,026)
----------- ---------- ---------------- ----------- ---------- -----------
Profit before
tax 490 (277) 213 3,374 (1,036) 2,338
Income tax (expense)/
credit 7 (103) 1,318 1,215 (669) (181) (850)
----------- ---------- ---------------- ----------- ---------- -----------
Profit for the
period 387 1,041 1,428 2,705 (1,217) 1,488
=========== ========== ================ =========== ========== ===========
Earnings per
share (pence) 9 0.3 1.2 2.3 1.3
=========== ========== ================ =========== ========== ===========
The above results were derived from continuing operations.
McColl's Retail Group plc
Consolidated Statement of Comprehensive Income
for the 26 week Period ended 26 May 2019
26 weeks to 26 weeks to
26 May 27 May
2019 2018
GBP 000 GBP 000
(unaudited) (unaudited)
Profit for the period 1,428 1,488
Items that will not be reclassified
subsequently to profit or loss
Actuarial loss on defined benefit
pension schemes before tax (74) (406)
Tax effect of items in other comprehensive
income 26 83
Total comprehensive income for the
period 1,380 1,165
============== ==============
McColl's Retail Group plc
Consolidated Statement of Financial Position
as at 26 May 2019
Note 26 May As restated As restated
2019 27 May 25 November
GBP 000 2018 2018
(unaudited) GBP 000 GBP 000
(unaudited) (audited)
Assets
Non-current assets
Property, plant and equipment 85,550 101,122 92,314
Intangible assets 253,641 249,699 252,747
Deferred tax assets 97 - 97
Retirement benefit asset 15,490 13,073 14,122
Investments 36 36 36
-------------- -------------- -------------
Total non-current assets 354,814 363,930 359,316
-------------- -------------- -------------
Current assets
Inventories 77,088 75,037 77,146
Trade and other receivables 36,576 43,105 41,984
Income tax asset 513 - -
Cash and cash equivalents 36,906 39,283 28,547
Assets classified as held - 436 -
for sale
-------------- -------------- -------------
Total current assets 151,083 157,861 147,677
-------------- -------------- -------------
Total assets 505,897 521,791 506,993
============== ============== =============
Equity and liabilities
Current liabilities
Trade and other payables (212,358) (196,813) (213,337)
Loans and borrowings 10 (11,246) (11,672) (12,148)
Income tax liability - (653) (673)
Provisions (5,433) (5,014) (4,627)
Liabilities directly associated - (471) -
with assets classified as
held for sale
-------------- -------------- -------------
Total current liabilities (229,037) (214,623) (230,785)
-------------- -------------- -------------
Net current liabilities (77,954) (56,762) (83,108)
============== ============== =============
Non-current liabilities
Loans and borrowings 10 (115,356) (140,199) (114,989)
Other payables (9,845) (8,198) (9,552)
Provisions (326) (692) (1,042)
Deferred tax liabilities (5,637) (8,475) (6,895)
Retirement benefit obligations (2,836) (2,531) (2,250)
-------------- -------------- -------------
Total non-current liabilities (134,000) (160,095) (134,728)
-------------- -------------- -------------
Total liabilities (363,037) (374,718) (365,513)
-------------- -------------- -------------
Net assets 142,860 147,073 141,480
============== ============== =============
McColl's Retail Group plc
Consolidated Statement of Financial Position
as at 26 May 2019 (continued)
Note 26 May As restated As restated
2019 27 May 25 November
GBP 000 2018 2018
(unaudited) GBP 000 GBP 000
(unaudited) (audited)
Equity
Share capital (115) (115) (115)
Share premium (12,580) (12,579) (12,580)
Retained earnings (130,165) (134,379) (128,785)
-------------- -------------- -------------
Equity attributable to owners
of the Company (142,860) (147,073) (141,480)
============== ============== =============
These financial statements of McColl's Retail Group registered
number 08783477 were approved and authorised for issue by the Board
on 22 July 2019 and signed on its behalf by:
Robbie Bell
Chief Financial Officer
McColl's Retail Group plc
Consolidated Statement of Changes in Equity
for the 26 week Period ended 26 May 2019
Share Share Retained Total
capital premium earnings equity
GBP GBP 000 GBP 000 GBP 000
000
At 26 November 2018 (audited) 115 12,580 128,785 141,480
Comprehensive income:
Profit for the period - - 1,428 1,428
Remeasurement of defined benefit
pension scheme - - (74) (74)
Deferred tax 26 26
Total comprehensive income - - 1,380 1,380
--------- --------- ---------- ---------
At 26 May 2019 (unaudited) 115 12,580 130,165 142,860
Share Share Retained Total
capital premium earnings equity
GBP GBP 000 GBP 000 GBP 000
000
At 27 May 2018 (unaudited) 115 12,579 134,379 147,073
--------- --------- ---------- ---------
Comprehensive income:
Profit for the period - - 5,363 5,363
Remeasurement of defined benefit
pension scheme - - 1,032 1,032
Deferred tax - - (127) (127)
--------- --------- ---------- ---------
Total comprehensive income - - 6,268 6,268
--------- --------- ---------- ---------
Transactions with shareholders:
Dividends - - (11,862) (11,862)
New share capital subscribed - 1 - 1
--------- --------- ---------- ---------
Total transactions with shareholders - - (11,862) (11,861)
--------- --------- ---------- ---------
At 25 November 2018 (audited) 115 12,580 128,785 141,480
========= ========= ========== =========
McColl's Retail Group plc
Consolidated Statement of Cash Flows
for the 26 week Period ended 26 May 2019
26 weeks to 26 weeks to 52 weeks to
26 May 27 May 25 November
2019 2018 2018
GBP 000 GBP 000 GBP 000
Note (unaudited) (unaudited) (audited)
Cash flows from operating activities
Profit for the period 1,428 1,488 6,851
Depreciation and amortisation 8,630 7,842 17,054
Profit on disposal of property,
plant, equipment and software (2,628) (2,409) (14,994)
Finance income - (9) -
Finance costs 4,143 4,035 8,017
Income tax (credit) /expense 7 (1,215) 850 1,016
Impairment losses - 247 3,297
------------- ------------- -------------
10,358 12,044 21,241
Decrease/(increase) in
inventories 58 928 (737)
Decrease/(increase) in
trade and other receivables 5,408 (3,300) (1,593)
(Decrease)/increase in
trade and other payables (650) 30,751 48,082
Decrease in retirement
benefit obligation net
of actuarial changes (782) (691) (906)
Increase in provisions 90 605 568
------------- ------------- -------------
Cash generated from operations 14,482 40,337 66,655
Income taxes paid (1,374) (2,628) (4,811)
------------- ------------- -------------
Net cash flow from operating
activities 13,108 37,709 61,844
Cash flows from investing
activities
Interest received - 9 -
Acquisition of property,
plant, equipment and software (8,172) (8,755) (21,295)
Proceeds from sale of property,
plant and equipment 8,042 5,953 27,410
Acquisition of businesses,
net of cash acquired - (1,219) (4,513)
------------- ------------- -------------
Net cash flows from investing
activities (130) (4,012) 1,602
------------- ------------- -------------
McColl's Retail Group plc
Consolidated Statement of Cash Flows
for the 26 week Period ended 26 May 2019 (continued)
26 weeks to 26 weeks to 52 weeks to
26 May 27 May 25 November
2019 2018 2018
GBP 000 GBP 000 GBP 000
Note (unaudited) (unaudited) (audited)
Cash flows from financing
activities
Interest paid (4,012) (3,935) (7,928)
Proceeds from issue of
ordinary shares, net of
issue costs - - 1
Repayment of bank borrowing 11 (265) (4,500) (29,000)
Payment of finance lease
creditors (255) (187) (235)
Interest payment to finance
lease creditor (87) (65) (148)
Dividends paid 8 - - (11,862)
------------- ------------- -------------
Net cash flows from financing
activities (4,619) (8,687) (49,172)
Net increase in cash and
cash equivalents 8,359 25,010 14,274
Cash and cash equivalents
at beginning of period 28,547 14,273 14,273
------------- ------------- -------------
Cash and cash equivalents
at end of period 36,906 39,283 28,547
============= ============= =============
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
1 General information
The Group is a public company limited by share capital,
incorporated in England and Wales and domiciled in the United
Kingdom.
McColl's Retail Group plc
McColl's House
Ashwells Road
Brentwood
Essex
CM15 9ST
United Kingdom
Principal activity
The Group engages in one principal area of activity, as an
operator of convenience and newsagent stores.
2 Significant accounting policies
Basis of preparation
The interim financial statements for the 26 week period ended 26
May 2019 have been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS
34, 'Interim Financial Reporting' as adopted by the European Union.
They have been prepared in accordance with the recognition and
measurement criteria of IFRS. They do not include all the
information required for full annual financial statements to comply
with IFRS, and should be read in conjunction with the consolidated
financial statements of the Group as at and for the period ended 25
November 2018 as applied in the Group's Annual Report and Accounts
2018 (the "Annual Report 2018").
The accounting policies applied by the Group in these
consolidated results are the same as those applied by the Group in
its Annual Report 2018 for the period ended 25 November 2018 with
the exception of IFRS 9 'Financial Instruments' and IFRS 15
'Revenue from Contracts with Customers'.
The Annual Report 2018 is available at
https://www.mccollsplc.co.uk/investors/.
The financial information for the period ended 26 May 2019 does
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The Group has filed statutory accounts for the
period ended 25 November 2018. The Auditor has reported on these
accounts; their report was unqualified, did not include a reference
to any matters to which the Auditor drew attention by way of
emphasis of matter and did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
Basis of measurement
The consolidated financial information has been prepared on a
historical cost basis, except for the net defined benefit pension
asset or liability, (refer to individual accounting policy for
details).
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
Business Combinations
On acquisition, the assets, liabilities and contingent
liabilities are measured at their fair values at the date of
acquisition.
Any excess of the cost of acquisition over the fair value of the
identifiable net assets acquired, including separately identifiable
assets, is recognised as goodwill. Any discount on acquisition,
i.e. where the cost of acquisition is below the fair values of the
identifiable net assets acquired, is credited to the income
statement in the period of acquisition.
Going concern
In making their going concern assessment the Directors have
considered the Group's business activities, its financial position,
the market in which it operates and the factors likely to affect
its future development.
The Directors have reviewed the Group's forecasts, taking into
account a range of sensitivities, and how they impact headroom
against its bank facilities, and its ability to meet its capital
investment and operational needs. In July 2016, the Group completed
a GBP100m term loan and an amended GBP100m revolving credit
facility with a GBP50m accordion. The Group has net current
liabilities of GBP78m at the period end. The Directors have
additionally considered this position to determine if it presents
any going concern issues. The Group is profitable and cash
generative and is supported by the revolving credit facility
alongside an amortising GBP100m term loan. The current facility
drawn as at 26 May 2019 is GBP125m against the combined facility,
and therefore there is sufficient headroom to meet the Group's
debts as they fall due.
The Directors believe the Group has adequate resources to
continue in operation for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
Changes in accounting policy
Adoption of new IFRSs
The Group has adopted IFRS 9 'Financial Instruments' and IFRS 15
'Revenue from Contracts with Customers' effective for the period
commencing 26 November 2018.
IFRS 9 has been applied using the modified retrospective
approach to transition. Any transition differences will be
recognised as an adjustment to the opening balance sheet.
Management have assessed the impact of changes under the new
standard. Given that the Group does not hold significant financial
assets and liabilities other than borrowings, payables and
receivables, the Group operates under the 'hold to collect'
business model, and the Groups trade debtors are very short term
and all customers pay in cash or by credit card, the adoption of
IFRS 9 has not had a material impact on its accounting policies or
classification and measurement of financial instruments.
IFRS 15 has been applied using the modified retrospective
approach to transition. Any transition differences will be
recognised as an adjustment to the opening balance sheet. Due to
the straightforward nature of the Group's revenue streams with the
recognition of revenue at the point of sale and the absence of
significant judgement required in determining the timing of
transfer of control, the adoption of IFRS 15 has not had a material
impact on the timing or nature of the Group's revenue recognition.
The point at which control passes is in line with when risks and
rewards are transferred under IAS 18. The Group recognises revenue
only when it satisfies a performance obligation by transferring
control of a promised good or service to the customer.
The Group have not restated any comparative amounts as the
impact of IFRS 9 and IFRS 15 is not material.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
New standards, interpretations and amendments not yet
effective
The following newly issued but not yet effective standards,
interpretations and amendments, which have not been applied in
these interim financial statements, will or may have an effect on
the company financial statements in future:
IFRS 16 'Leases'
IFRS 16 'Leases' replaces IAS 17 'Leases'. The standard was
published in January 2016 and is effective for the Group from the
period commencing 25 November 2019. The standard represents a
significant change in the accounting and reporting of leases for
lessees. The standard provides a single lessee accounting model,
and as such, requires lessees to recognise a right-of-use asset and
lease liabilities for all leases unless the underlying asset has a
low value or the lease term is 12 months or less.
The Group has a portfolio of over 1,600 property leases and the
accounting treatment for each lease will change significantly.
The standard offers two different transition methods and both
result in significant changes to the income statement, balance
sheet and disclosure. Management are assessing the transition
methods in conjunction with reviewing our current data and new
systems processes.
Management continues to assess the impact of IFRS 16 and has
therefore not concluded on which transition method to follow as
yet. As such it is not practicable to quantify the impact of IFRS
16. From work performed to date, it is expected that implementation
of the new standard will have a substantial impact on the income
statement, balance sheet and the alternative performance measures
used by the Group.
Alternative Performance Measures
In reporting financial information, the Directors have presented
various Alternative Performance Measures ("APMs") of financial
performance, position or cash flows, which are not defined or
specified under the requirements of International Financial
Reporting Standards ("IFRS"). On the basis that these measures are
not defined by IFRS, they may not be directly comparable with other
companies' APMs, including those in the Group's industry.
The Group believes that these APMs, which are not considered to
be a substitute for or superior to IFRS measures, provide
stakeholders with additional useful information on the performance
of the business. These APMs are consistent with how the business
performance is planned, reported and analysed between reporting
periods within the internal management reporting to the Board. Some
of these measures are also used for the purpose of setting
remuneration targets and covenant calculations.
The key APMs that the Group uses include: adjusted EBITDA,
adjusted operating profit, adjusted profit before tax,
like-for-like sales ("LFL"), net debt and adjusted earnings per
share. Each of the APMs, and others used by the Group, are set out
in the Glossary including explanations of how they are calculated
and how they can be reconciled to a statutory measure where
relevant. These measures have remained consistent with the prior
year.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of these APMs. The Group's policy
is to exclude items that are considered to be significant in nature
and/or quantum. Treatment as an adjusting item provides
stakeholders with additional useful information to assess the
trading performance of the Group.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
Revenue recognition
Revenue represents the amounts receivable for goods and services
sold through retail outlets in the period which fall within the
Group's principal activities, stated net of value added tax.
Revenue is shown net of returns. Revenue is recognised when
performance obligations are satisfied and control has transferred
to the customer. For the majority of revenue streams, there is a
low level of judgement applied in determining the transaction price
or the timing of transfer of control.
Commission from the sale of lottery tickets, travel tickets,
electronic phone top-ups and products sold through the Post Office
in store is recognised net within turnover, when transactions
deriving commissions are completed, as the Group acts as an
agent.
In the opinion of the Directors, the Group engages in one
principal area of activity, that of operators of convenience and
newsagent stores. Turnover is derived entirely from the United
Kingdom.
Cost of sales
Cost of sales consists of all direct costs to the point of sale
including warehouse and transportation costs. Supplier incentives,
rebates and discounts are recognised as a credit to cost of sales
in the period in which the stock to which the discounts apply is
sold. The accrued value at the reporting date is included in
prepayments and accrued income.
Adjusting items
Adjusting items relate to costs or incomes that derive from
events or transactions that fall within the normal activities of
the Group, and are excluded from the Group's adjusted profit before
tax measure due to their size and nature in order to better reflect
management's view of the performance of the Group. The adjusted
profit before tax measure (profit before adjusting items) is not a
recognised profit measure under IFRS and may not be directly
comparable with adjusted profit measures used by other companies.
Details of adjusting items are set out in note 5.
Other operating income
Rental income and ATM commissions are recognised in the
consolidated income statement when the services to which they
relate are earned.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
Tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in profit or loss, except that a charge
attributable to an item of income or expense recognised as other
comprehensive income is also recognised directly in other
comprehensive income.
Current tax is provided at amounts expected to be paid using the
tax rates and laws that have been enacted or substantively enacted
at the balance sheet date. Current tax is charged or credited to
the income statement, except when it relates to items charged to
equity or other comprehensive income, in which case the current tax
is also dealt with in equity or other comprehensive income
respectively.
Deferred tax is accounted for on the basis of temporary
differences arising from differences between the tax base and
accounting base of assets and liabilities.
Deferred tax is recognised for all temporary differences, except
to the extent where a deferred tax liability arises from the
initial recognition of goodwill or from the initial recognition of
an asset or a liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
accounting profit nor taxable profit. It is determined using tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised only to the extent that the
Directors consider that, on the basis of all available evidence, it
is probable that there will be suitable future taxable profits from
which the future reversal of the underlying differences can be
deducted.
Deferred tax is charged or credited to the income statement,
except when it relates to items charged or credited directly to
equity or other comprehensive income, in which case the deferred
tax is also dealt with in equity or other comprehensive income
respectively.
Goodwill
Goodwill represents the excess of the fair value of the
consideration of an acquisition over the fair value of the Group's
share of the net identifiable assets of the acquired subsidiary at
the date of acquisition. Goodwill is recognised as an asset on the
Group's balance sheet in the year in which it arises. Goodwill is
not amortised but is tested for impairment at least annually and is
stated at cost less any provision for impairment. Any impairment is
recognised in the income statement and is not reversed in a
subsequent period.
Borrowings
All borrowings are initially recorded at the amount of proceeds
received, net of transaction costs. Borrowings are subsequently
carried at amortised cost, with the difference between the
proceeds, net of transaction costs, and the amount due on
redemption being recognised as a charge to the income statement
over the period of the relevant borrowing.
Interest expense is recognised on the basis of the effective
interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
2 Significant accounting policies (continued)
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds.
Defined contribution pension obligation
Contributions to defined contribution pension schemes are
charged to the income statement in the year to which they
relate.
Defined benefit pension obligation
The Group operates two defined benefit pension schemes in
addition to several defined contribution schemes, which require
contributions to be made to separately administered funds.
Defined benefit scheme surpluses and deficits are measured
at:
-The fair value of plan assets at the reporting date; less
-Scheme liabilities calculated using the projected unit credit
method discounted to its present value using yields available on
high quality corporate bonds that have maturity dates approximating
to the terms of the liabilities; less
-The effect of minimum funding requirements agreed with scheme
trustees.
A surplus is recognised where the Group has an unconditional
right to the economic benefits in the form of future contribution
reductions or refunds.
Any difference between the interest income on scheme assets and
that actually achieved on assets, and any changes in the
liabilities over the year due to changes in assumptions or
experience within the scheme, are recognised in other comprehensive
income in the period in which they arise.
Costs are recognised separately as operating and finance costs
in the income statement. Operating costs comprise the current
service cost, any income or expense on settlements or curtailments
and past service costs.
Finance items comprise the interest on the net defined benefit
asset or liability.
Share based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value determined at
the grant date of the equity-settled share-based payments is
expensed on a straight-line basis over the vesting period, based on
the Group's estimate of equity instruments that will eventually
vest, with a corresponding increase in equity. Where applicable at
the end of each reporting period, the Group revises its estimate of
the number of equity instruments expected to vest. The impact of
the revision of the original estimates, if any, is recognised in
the income statement.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
3 Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, the
Directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
Critical accounting judgements
Critical judgements, apart from those involving estimations,
that are applied in the preparation of the consolidated financial
statements are discussed below:
Adjusting items
During the period certain items are identified and separately
disclosed as adjusting items. Judgement is applied as to whether
the item meets the necessary criteria as per the accounting policy
disclosure. This assessment covers the nature of the item, cause of
occurrence and the scale of impact of that item on reported
performance. Note 5 provides information on all of the items
disclosed as adjusting in the current period financial
statements.
Sources of estimation uncertainty
Estimates and underlying assumptions are reviewed on an ongoing
basis. Sources of estimation and uncertainty are discussed
below:
Impairment
Where there are indicators of impairment, management performs an
impairment test. Recoverable amounts for cash-generating units are
the higher of fair value less costs of disposal, and value in use.
Value in use is calculated from cash flow projections based on the
Group's three year internal forecasts. The forecasts are
extrapolated to perpetuity with nil growth rate.
Supplier income
Supplier income is recognised as a credit within cost of sales.
For some sources of supplier income, management is required to make
estimates in determining the amount and timing of recognition of
income. These estimates are based on documented evidence of
agreements with suppliers.
In determining the amount of volume-related allowances
recognised in any period, management estimate whether the Group
will meet contractual target volumes, based on historical and
forecast performance.
For promotional funding relating to investment in the customer
offer by a supplier, there is limited estimation required as
funding is pre-agreed and collected throughout the year shortly
after promotions have ended.
Outcomes within the remainder of the financial year that are
different from management's assumptions could require an adjustment
to the carrying amount of the affected asset.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
3 Critical accounting judgements and key sources of estimation
uncertainty (continued)
Pensions
The liabilities of the defined benefit pension schemes operated
by the Group are determined using methods relying on the actuarial
estimates and assumptions, including rates of increase in
pensionable salaries and pensions, net defined benefit asset or
liability, life expectancies and discount rates. The Group takes
advice from independent actuaries relating to the appropriateness
of the assumptions and the recognition of any surplus. Changes in
the assumptions used may have a significant effect on the Group
Statement of Comprehensive Income and the Group Statement of
Financial Position.
4 Revenue and other income
In accordance with IFRS 8 'Operating segments' an operating
segment is defined as a business activity whose operating results
are reviewed by the chief operating decision maker and for which
discrete information is available. The chief operating decision
maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the
Board of Directors. The principal activities of the Group are
currently managed as one segment. Consequently all activities
relate to this segment, being the operation of convenience and
newsagent stores in the UK.
The analysis of the Group's revenue for the period from
continuing operations is as follows:
26 weeks As restated
to 26 weeks
26 May to
2019 27 May
GBP 000 2018
GBP 000
Revenue
Sale of goods 611,057 610,417
--------- ------------
Other operating income (a)
Property rental income 1,570 1,647
Other income 1,628 1,726
--------- ------------
3,198 3,373
--------- ------------
Finance income
Finance income - 9
--------- ------------
614,255 613,799
========= ============
(a) During the prior year management performed a review of all
revenue streams. As a result of the review all income from the Post
Office is now classified as revenue. This treatment has continued
in the current 26 week period. The comparator has been restated
reclassifying, for the first 26 weeks of 2018, GBP8.7m from other
income to revenue, which has increased gross profit margin by 1%
from 25.0% to 26.0%. This has had no impact on reported Group
profit.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
5 Adjusting items
Due to their significance or one-off nature, certain items have
been classified as adjusting as follows:
26 weeks As restated
to 26 weeks
26 May to
2019 27 May
GBP 000 2018
GBP 000
Cost of sales
Supplier administration (a) - 694
--------- ------------
- 694
--------- ------------
Administrative expenses
Fines (Health and Safety) (b) 233 611
Restructuring (c) 539 -
Supplier administration (a) - 693
--------- ------------
772 1,304
--------- ------------
(Profits)/losses arising on
property-related items
Sale and leaseback (d) (2,470) (2,484)
Unprofitable store closure programme
(e) 1,895 1,522
--------- ------------
(575) (962)
--------- ------------
Finance costs
Unprofitable store closure programme 80 -
(e)
--------- ------------
Total adjusting items before tax
effect 277 1,036
--------- ------------
Tax effect on adjusting items (1,318) 181
--------- ------------
1,041 1,217
========= ============
a. Supplier administration
The administration of P&H, our primary supplier to c.700
newsagents and small convenience stores, on 28 November 2017
created stock availability issues in store. To address this stock
availability and to minimise disruption we entered into a
short-term contract with Nisa, a short-term contract with Fresh to
Store, brought forward the commencement of the Morrisons contract,
and introduced a new supply chain solution for tobacco, via Clipper
Logistics. As such, the Group incurred additional one-off costs,
which are not reflective of ongoing costs and therefore management
have classified these as adjusting items. There was no cash impact
in this 26 week period.
b. Fines (Health and Safety)
In this reporting period, the Group was found guilty of a health
and safety breach at a store in Harlow, and subsequently a fine and
associated costs of GBP233k were issued to the Group. This
liability has now been settled in full. Management classify this
fine as an adjusting item due to the exceptional circumstances
giving rise to the fine and materiality of costs incurred. This
resulted in a net cash outflow of GBP233k in this 26 week period
(2018 comparator GBP611k: a separate health and safety breach
relating to contractor works).
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
5 Adjusting items (continued)
c. Restructuring costs
During the period the Group has been reviewing its operations,
and has been focusing on improving productivity and efficiency.
This has in turn led to material costs associated with
restructuring, predominantly the cost of redundancies, resulting in
a net cash outflow in this 26 week period of GBP539k.
d. Profit from Sale & leaseback of former Co-op stores
acquired in 2016
During the period the Group undertook a number of sale and
leaseback transactions on its freehold properties. Consistent with
year-end 2018 accounts it was concluded that the profits relating
to the sale and leaseback of the stores in the former Co-op
portfolio were not in line with ordinary business and should
therefore be treated as adjusting. This resulted in a net cash
inflow in the reporting period of GBP6.5m.
The profit from sale and leaseback for the prior comparative
period has been restated and is now within adjusting items to align
with the current period's treatment.
e. Unprofitable store closure programme
Management continue to review the store portfolio and made the
decision to close stores which are not economically viable to
continue trading. The majority of these stores are either near
lease expiry or lease break date. The closure costs in the
reporting period consist of stores which have closed in 2019 or are
expected to be closed in the near future. Management have adjusted
for material onerous lease provisions, dilapidations, impairment,
and other costs in relation to the closures. These closures are not
part of the ordinary store exit process due to the material number
of stores included in the enhanced programme. This resulted in a
net cash outflow in the reporting period of GBP537k.
6 Adjusted EBITDA excluding property- related items
In order to provide shareholders with a measure of the
underlying performance of the business which is more aligned with
the way that management monitor and manage the business, the Group
makes adjustments to profit before tax. Adjusting items relate to
costs or incomes that derive from events or transactions that fall
within the normal activities of the Group, but which are excluded
from the Group's adjusted profit before tax measure due to their
size and nature in order to better reflect management's view of the
performance of the Group. The adjusted profit before tax measure
(profit before adjusting items) is not a recognised profit measure
under IFRS and may not be directly comparable with adjusted profit
measures used by other companies. Details of adjusting items are
set out in note 5.
26 weeks to 26 weeks
26 May to
2019 27 May
GBP 000 2018
GBP 000
Adjusted EBITDA excluding property-related items
Operating profit before adjusting items 4,553 7,400
Depreciation and amortisation 8,630 8,479
Profit/(loss) arising on property-related
items (156) 75
------- ---------
13,027 15,954
======= =========
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
7 Income tax
The tax credit for the 26 week period was GBP1,215,000 (2018:
tax charge of GBP850,000) representing a rate of -570% (2018:
36.4%). The tax credit relates to the release of deferred tax
liabilities due to the sale and leaseback transactions in the
period. The comparable effective tax rate in 2019 excluding the
impact of adjusting items was 21.0% (2018: 19.8%). The difference
between the current statutory rate of 19.0% and the effective tax
rate excluding the impact of non-deductible adjusting items is due
principally to the depreciation of assets not qualifying for tax
relief.
8 Dividends
The Board has declared an interim dividend of 1.3 pence per
share (2018: 3.4 pence). The interim dividend will be paid on 6
September 2019 to those shareholders on the register at the close
of business on 8 August 2019. The payment of this dividend will not
have any tax consequences for the Group. The final dividend for
2018, paid on 6 June 2019 was, 0.6 pence per share (2017: 6.9
pence).
9 Earnings per share
Basic and diluted earnings per share are calculated by dividing
the profit for the period attributable to shareholders by the
weighted average number of shares.
26 May 27 May
2019 2018
(unaudited) (unaudited)
-------------- --------------
Basic weighted average number of
shares 115,173,145 115,172,774
-------------- --------------
Diluted weighted average number of
shares 115,324,030 115,724,645
-------------- --------------
Profit attributable to ordinary shareholders
(GBP000) 1,428 1,488
-------------- --------------
Basic earnings per share 1.24p 1.29p
============== ==============
Diluted earnings per share 1.24p 1.29p
============== ==============
Adjusted earnings per share:
Profit attributable to ordinary shareholders
(GBP000) 1,428 1,488
Adjusting items (note 5) 277 1,036
Tax effect of adjustments (1,318) 181
-------------- --------------
Profit after tax and before adjusting
items 387 2,705
============== ==============
Basic adjusted earnings per share 0.34p 2.35p
============== ==============
Diluted adjusted earnings per share 0.34p 2.34p
============== ==============
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
9 Earnings per share
The difference between the basic and diluted average number of
shares represents the dilutive effect of share options in
existence.
The diluted weighted average number of ordinary shares is
calculated using the following:
26 May 27 May
2019 2018
(unaudited) (unaudited)
Ordinary shares in issue at the start
of the period 115,173,515 115,172,774
Effects of shares issued during the - -
period
-------------- --------------
Total shares in issue at the end
of the year 115,173,515 115,172,774
============== ==============
Effect of shares to be issued for
the Long Term Incentive Plan (LTIP) 150,515 551,871
-------------- --------------
Weighted average number of ordinary
shares at the end of the period 115,324,030 115,724,645
============== ==============
10 Loans and borrowings
26 May As restated As restated
2019 27 May 25 November
GBP 000 2018 2018
(unaudited) GBP 000 GBP 000
(unaudited) (audited)
Current
Finance lease liabilities 1,766 1,672 2,148
Term loan 9,480 10,000 10,000
-------------- -------------- -------------
11,246 11,672 12,148
============== ============== =============
Non-current
Revolving credit facility 43,000 57,500 38,000
Term Loan 72,500 82,500 77,500
Unamortised issue costs (1,218) (1,324) (1,458)
Finance lease liabilities 1,074 1,523 947
-------------- -------------- -------------
115,356 140,199 114,989
============== ============== =============
The long term loans are secured by a fixed charge over the
Group's head office property together with a floating charge over
the Group's assets. The Group has an amortising GBP81,980,000 term
loan and a GBP100,000,000 revolving facility with a GBP50,000,000
accordion. The current facility drawn as at 26 May 2019 is
GBP124,980,000 (25 November 2018: GBP125,500,000).
The element of the term loan that is due within the next 12
months is now included in current liabilities. This change has been
restated in all comparative periods.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
10 Loans and borrowings (continued)
Details of loans and hire purchase obligations repayable within
two to five years are as follows:
26 May 27 May 25 November
2019 2018 2018
GBP 000 GBP 000 GBP 000
(unaudited) (unaudited) (audited)
Term Loan and revolving credit
facility available until July
2021 115,500 140,000 115,500
Finance lease liabilities 1,074 1,523 947
-------------- -------------- ------------
116,574 141,523 116,447
============== ============== ============
11 Net debt
26 May 27 May 25 November
2019 2018 2018
GBP 000 GBP 000 GBP 000
(unaudited) (unaudited) (audited)
Cash at bank and in hand 36,906 39,283 28,547
-------------- -------------- ------------
36,906 39,283 28,547
============== ============== ============
Term Loan and revolving facility
available until July 2021 (124,980) (150,000) (125,500)
Less: unamortised issue costs 1,218 1,324 1,458
-------------- -------------- ------------
(123,762) (148,676) (124,042)
============== ============== ============
Amounts due under finance lease
obligations (2,840) (3,195) (3,095)
-------------- -------------- ------------
Net debt (89,696) (112,588) (98,590)
============== ============== ============
Analysis of net debt
25 November 26 May
2018 2019
Other non-cash
GBP 000 Cash flow movements GBP 000
(audited) GBP 000 GBP 000 (unaudited)
Analysis of net debt
Cash and short-term
deposits 28,547 8,359 - 36,906
Bank borrowings (124,042) 265 15 (123,762)
Finance lease liabilities (3,095) 255 - (2,840)
----------- --------- -------------- -------------
(98,590) 8,879 15 (89,696)
=========== ========= ============== =============
There were no other material transactions or balances between
the Group and its key management personnel or members of their
close family.
McColl's Retail Group plc
Notes to the Interim Financial Statements
for the 26 week Period ended 26 May 2019
12 Related party transactions
Only the Directors are deemed to be key management personnel.
All transactions between Directors and the Group are on an arm's
length basis and no period end balances have arisen as a result of
these transactions.
Salaries and other short term employee benefits for the
Directors for period ending 26 May 2019 totalled GBP704,000.
McColl's Retail Group plc
Principal risks and uncertainties
The Directors do not consider the principal risks and
uncertainties to have significantly changed since the publication
of the Annual Report for the period ended 25 November 2018. A
detailed explanation of the risks summarised below, and how the
Group seeks to mitigate these risks, can be found on pages 34 to 38
of the Annual Report and Accounts 2018.
Business strategy
If the Board either adopts the wrong strategy or does not
implement it effectively the aims of the business, its performance
and reputation may suffer.
Competition
We operate in a highly competitive market, which is continually
changing and has been subject to ongoing consolidation. Failure to
maintain market share could have an adverse effect on our core
business.
Customer offer
Customer shopping habits are influenced by a wide range of
factors. If we do not respond to their changing needs they are more
likely to shop with a competitor, resulting in falling
revenues.
Supply chain
We rely on a small number of key distributors and may be
adversely affected by changes in supplier dynamics and
interruptions in supply.
Supply chain transition
During 2018, we transitioned the wholesale arrangements for the
majority of the estate to a new supplier. The accelerated timeline
introduced additional complexity and risk.
Information technology
We depend on the reliability and capability of key information
systems and technology. A major failure, a breach, or prolonged
performance issues with store or head office systems could have an
adverse impact on the business and its reputation.
Financial and treasury
The main financial risks are the availability of short- and
long-term funding to meet business needs, fluctuations in interest
rates, movements in energy prices and other post-Brexit
impacts.
Economy
All our revenue is generated in the UK. Any deterioration in the
UK economy, for example as a consequence of Brexit, could affect
consumer spending and cost of goods, which in turn would impact our
sales and profitability.
Operational cost base
We have a relatively high cost base, consisting primarily of
salary, property rental and energy costs. Increases in these costs
without a corresponding increase in revenues could adversely impact
our profitability.
Regulation
We operate in an environment governed by strict regulations to
ensure the safety and protection of customers, colleagues,
shareholders and other stakeholders. Regulations include alcohol
licensing, employment, health & safety, data protection and the
rules of the Stock Exchange. Failure to comply with relevant laws
and regulations could result in sanctions and reputational
damage.
McColl's Retail Group plc
Glossary of Terms
Introduction
In the reporting of financial information, the Directors have
adopted various Alternative Performance Measures (APMs) of
financial performance, position or cash flows other than those
defined or specified under International Financial Reporting
Standards (IFRS).
These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those in
the Group's industry.
APMs should be considered in addition to IFRS measures and are
not intended to be a substitute for IFRS measurements.
Purpose
The Directors believe that these APMs provide additional useful
information on the underlying performance and position of
McColl's.
APMs are also used to enhance the comparability of information
between reporting periods by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid the user
in understanding McColl's performance.
Consequently, APMs are used by the Directors and management for
performance analysis, planning, reporting and incentive-setting
purposes and have remained consistent with prior period.
The key APMs that the Group has focused on this period are as
follows:
Like-for-like sales (LFL): This is a widely used indicator of a
retailer's current trading performance and is a measure of growth
in sales from stores that have been open for at least a year.
This measure represents sales from stores that have traded
throughout the whole of the current and prior periods, and
including VAT but excluding sales of fuel, lottery, mobile top-up,
gift cards and travel tickets.
Adjusted EBITDA excluding property-related items: This profit
measure shows the Group's Earnings Before Interest, Tax,
Depreciation and Amortisation adjusted for both Property gains and
losses and other adjusting items.
Property gains and losses: are incomes and costs that arise from
events and transactions in relation to the Group's property and not
from the principal activity of the Group, i.e. that of an operator
of convenience and newsagent stores.
Adjusting items: relate to costs or incomes that derive from
events or transactions that fall within the normal activities of
the Group but which, individually or, if of a similar type, in
aggregate, are excluded from the Group's adjusted profit measures
due to their size and nature in order to reflect management's view
of the performance of the Group.
Adjusted Operating Profit: Operating Profit before the impact of
adjusting items as explained above.
Adjusted Earnings per share: Earnings per share before the
impact of adjusting items.
APM Closest Reconciliation / note Definition and purpose
equivalent reference for reconciliation
IFRS measure
--------------- ------------------------------
Income statement
Revenue measures
---------------------------------- ------------------------------ -----------------------------
Sales mix No direct Not applicable The relative proportion
equivalent or ratio of products
sold compared to
the same period in
the prior year.
----------------- --------------- ------------------------------ -----------------------------
Like-for-like IFRS Revenue Revenue 2019 611.1m Like-for-like is
(LFL) Add VAT 74.8m a measure of growth
Excl. non store revenue in Group sales from
(8.8m) stores that have
Excl. petrol & commissions been open for at
(78.7m) least a year (but
Excl. acq/closures excludes prior year
(7.9m) sales of stores closed
LFL sales 590.5m during the year).
Revenue 2018 610.4m It is a widely used
Add VAT 74.5m indicator of a retailer's
Excl. non store revenue current trading performance
(8.7m) and is important
Excl.petrol & commissions when comparing growth
(74.9m) between retailers
Excl. Acqn/closures that have different
(16.8m) LFL sales profiles of expansion,
584.5m disposals and closures.
LFL% 1.0%
----------------- --------------- ------------------------------ -----------------------------
Profit measures
----------------- --------------- ------------------------------ -----------------------------
Adjusted EBITDA Operating Note 6 This profit measure
Profit shows the Group's
Earnings Before Interest,
Tax, Depreciation
and Amortisation
adjusted for both
Property profits
and losses and other
adjusting items,
in order to provide
shareholders with
a measure of true
underlying performance
of the business.
----------------- --------------- ------------------------------ -----------------------------
Basic adjusted Basic earnings Note 9 This relates to profit
Earnings per per share after tax before
share (EPS) adjusting items divided
by the basic weighted
average number of
shares, in order
to provide shareholders
with a measure of
true underlying performance
of the business.
----------------- --------------- ------------------------------ -----------------------------
Diluted adjusted Diluted Note 9 The difference between
earnings per earnings basic and diluted
share per share metric is the impact
of the dilutive effect
of share options
and warrants in existence.
----------------- --------------- ------------------------------ -----------------------------
Balance sheet measures
---------------------------------- ------------------------------ -----------------------------
Net debt Borrowings Note 11 Net debt comprises
less cash bank and other borrowings,
and related finance lease payables,
hedges and net interest
receivables/ payables,
offset by cash and
cash equivalents
and short-term investments.
It is a useful measure
of the progress in
generating cash and
strengthening of
the Group's balance
sheet position and
is a measure widely
used by credit rating
agencies.
----------------- --------------- ------------------------------ -----------------------------
Other
Capital expenditure (Capex): The additions to property, plant
and equipment and intangible assets.
Grocery lines: This includes ambient, fresh, frozen and
household groceries, and food-to-go, but excludes impulse
categories (including confectionery, crisps and snacks, soft drinks
and ice cream), general merchandise, news and magazines, and
services.
Quarter: The "first quarter" refers to the thirteen week period
from 27 November 2018 to 24 February 2019, and "second quarter"
refers to the thirteen week period from 25 February 2019 to 26 May
2019.
Profits/(losses) arising on property-related items: This relates
to the Group's property activities including; profits and losses on
disposal of property assets, sale and lease back of freehold
interests; costs resulting from changes in the Group's store
portfolio, including pre-opening and post-closure costs; and
income/(charges) associated with impairment of non-trading property
and related onerous contracts. These items are disclosed separately
to clearly identify the impact of these items versus the other
operating expenses related to the core retail operations of the
business. They can be one-time in nature and can have a
disproportionate impact on profit between reporting periods.
INDEPENDENT REVIEW REPORT TO McColl's RETAIL GROUP PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
twenty six weeks ended 26 May 2019 which comprises the Consolidated
Income Statement, Consolidated Statement of Comprehensive Income,
Consolidated Statement of Financial Position, Consolidated
Statement of Changes in Equity, Consolidated Statement of Cash
Flows and the related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the twenty six weeks ended
26 May 2019 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted by
the European Union, and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Manchester
22 July 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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July 23, 2019 02:00 ET (06:00 GMT)
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