Mccoll's Regulatory News (MCLS)

28 February 2022

McColl's Retail Group plc

Response to media speculation

Further to recent media speculation, McColl's Retail Group ("McColl's" or "the Group"), the UK's leading community retailer, provides the following update.

Update on financing

The Group confirms it remains in ongoing discussions with its lending banks, as previously announced on 29 November 2021, towards a longer-term agreement in relation to the balance of the facility. The Group has received the necessary agreement to roll forward its financial covenant test periodically, and continues to receive credit support from its key commercial partner to enable these discussions. The Group continues to believe that a financing solution will be found that involves its existing partners and stakeholders. A further update will be made as and when these discussions conclude.

In September 2021, the Group successfully completed a placing and open offer, raising net proceeds of £30 million. Two-thirds of these net proceeds were raised to accelerate and enhance the Morrisons Daily store rollout in FY21 and FY22, which is on track. As at the end of the financial year, the Group operated 185 Morrisons Daily stores, and this number has since increased to over 200 stores in operation. The balance of these funds was to be used to enhance the Group's working capital headroom. However, the trading shortfall in the second half of FY21 has absorbed this headroom, driven by the product availability challenges experienced.

Current trading

Further to the Group's Trading Update on 8 December 2021, it confirms that, subject to audit, financial results for the 52-week period ended 28 November 2021 were in line with previous guidance. This includes revenues of £1.11bn (FY20: £1.25bn), adjusted EBITDA pre IFRS 16 of £20m (FY20: £29.1m) and net debt pre IFRS 16 of £97.0m (FY20: £89.6m).

Since the start of the new financial year, there has been a tangible improvement of product availability in stores. However, the business saw a material step-down in footfall due to the surge in COVID-19 cases relating to Omicron, particularly over the Christmas period, impacting trading. While demand has since picked up, revenues in the first quarter are behind expectations.

Despite this, the Group delivered two-year like-for-like sales growth of 5.9% in the 11 weeks to 13 February 2022, in line with the neighbourhood convenience market. The Group is starting to experience strengthening margin as impulse product sales recover, and has taken further mitigating actions, including a full review of pricing and costs.

Morrisons Daily stores are delivering like-for-like sales growth that is at least 20% better than non-converted, comparable stores, and ahead of the total convenience market. The Morrisons Daily store conversion programme re-commenced in early February 2022, following a scheduled pause over the Christmas and New Year period. So far in 2022, the Group has opened 18 Morrisons Daily stores and a further seven will be converted this week with the full support of Morrisons. The Group remains on track to complete 450 Morrisons Daily store conversions by the end of FY22, fundamentally reshaping the business into a more profitable and sustainable model in the medium term.

As a result of the difficult market conditions in the first quarter, some of which are expected to continue through the first half, the Board now expects FY22 adjusted EBITDA to be slightly behind current market expectations, and net debt in the region of £100m at the end of FY22.

Outlook

As previously stated, the Group continues to believe that a financing solution will be found that involves its existing partners and stakeholders. However, there are also other options available to it. The Group confirms that it recently received an approach for the whole business, which has subsequently been withdrawn and there are no further discussions with that party or any other party in relation to an offer for the whole business. In addition, the Group has also received indications of interest for parts of the business. The Board will consider all options with the aim of maximising value for all stakeholders.

Timing of FY21 full year results

The Group is in the process of finalising its full year results, but now expects to publish in May 2022 to allow additional time for banking discussions to conclude.

Enquiries

About McColl's Retail Group

McColl's is a leading neighbourhood retailer, with an estate of over 1,100 managed convenience stores and newsagents. We operate McColl's and Morrisons Daily 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.

LEI: 213800R1TLR536P8YJ67