McColl's sales grow above pre-Covid levels despite supply crunch
By Josh White
Date: Wednesday 08 Dec 2021
(Sharecast News) - Convenience retailer McColl's said in a trading update on Wednesday that total revenue for the financial year just ended had declined 11.2% to £1.11bn.
The London-listed firm put that down to supply chain disruption in the second half, and the conclusion of its store optimisation programme.
It said two-year like-for-like sales growth came in at 9.1%, with sales retained at a higher level than pre-pandemic, while on a one-year basis, like-for-like sales declined by 3.3% given 2020's results were inflated by changes to more local shopping amid Covid-19 lockdowns.
Top-line growth moderated in the fourth quarter due to industry-wide availability issues across the estate, McColl's said, with one-year like-for-like revenues in the period down by 5.0%.
Adjusted EBITDA, pre IFRS 16, was expected to be between £20m and £22m for the 52 weeks ended 28 November, down from £29.1m year-on-year.
Post IFRS 16, adjusted EBITDA was expected to be between £46m and £48m, compared to £57.9m in 2020.
Net debt was impacted by the availability and timing of working capital outflows, with the company's year-end position pre IFRS 16 expected to be about £97.0m, widening from £89.6m year-on-year.
McColl's said its lending banks remained "supportive", with ongoing discussions towards an agreement for the 2022 financial year and the balance of the facility.
Discussions were expected to complete by the time the firm released its 2021 results in March.
Looking ahead, McColls said that alongside its wholesale partner Morrisons, it had worked to improve availability in its stores.
That included a full review of product substitutions to address manufacturer-led product shortages, which remained its major constraint.
With those measures, McColl's said it was seeing early signs of recovery, but expected revenues to continue to be affected as it started the new financial year.
The accelerated expansion of the 'Morrisons Daily' format stores across the estate remained on track, and was delivering "strong improvements" in performance compared to pre-conversion trading.
Its target of 450 stores in a year's time would "fundamentally re-shape" the business, the board said, representing 40% of stores and over half of its sales.
The stores were delivering a "step-change" in performance, with higher sales growth and strong investment returns, while attracting new customers to the higher grocery mix, wider breadth of product choice and own-label value proposition.
McColl's board said it was confident in its strategy as it positioned the company for sustained profitable growth in the coming years.
"The 2021 financial year has undoubtedly been a tough year for the business, starting with the impact of Covid-19 restrictions and ending with the widely reported and ongoing supply chain challenges," said chief executive officer Jonathan Miller.
"Although we have been able to partly mitigate these external factors, they have still had a significant impact on underlying trading.
"Despite this, we have made excellent progress on the strategic initiatives which are firmly within our control, including the accelerated roll-out of Morrisons Daily conversions within our estate, which is ahead of our expectations."
Miller said the Morrisons Daily stores were generating strong sales growth and an enhanced return on investment.
"In less than a year's time we expect over half our revenues to be delivered by this fascia, bringing branded, supermarket-quality convenience to our customers, with material scope to deploy further into our estate."
At 0959 GMT, shares in McColl's Retail Group were up 6.112% at 12.68p.
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