McColl’s Retail Group plc Interim Results 26 Weeks to 28 May 2017
Important notice This presentation has been prepared by investments and who fall within the definition and should not be read as guarantees of McColl’s Retail Group plc (the “ Company ”) in of “investment professionals” in Article 19(5) future performance or results and will not connection with the publication of the of the Financial Services and Markets Act necessarily be accurate indications of whether C ompany’s interim results for the 26 weeks 2000 (Financial Promotion) Order 2005 (the or not such results will be achieved. As a “ Order ”) or are high net worth companies, ended 28 May 2017. result, recipients of this presentation, should unincorporated associations or partnerships or not rely on such forward-looking statements This presentation does not constitute an trustees of high value trusts as described in due to the inherent uncertainty therein. invitation, offer to sell or any solicitation of any Article 49(2) of the Order and investment Forward-looking statements speak only as of offer to buy or subscribe for any securities in personnel of any of the foregoing (each within the date such statements and, except as the company or any of its subsidiaries or the meaning of the Order); and (C) otherwise required by the Financial Conduct Authority, associated companies or its or their affiliates to persons to whom, or at which, it may the London Stock Exchange or applicable (the “ Group ”). otherwise be lawfully made, supplied or law, the company undertakes no obligation to directed (each a “ Relevant Person ”). No No reliance may be placed for any purpose update or revise publicly any forward-looking whatsoever on the completeness or accuracy other person should act or rely on this statements, whether as a result of new of the information or opinions contained in this presentation and by accepting this information, future events or otherwise. presentation and no member of the group or presentation you represent, warrant and This presentation is not for distribution, directly any of their respective officers, directors, agree that you are a Relevant Person. or indirectly, in whole or in part, in or into the employees, representatives, agents or This presentation may include statements, United States of America, Canada, the advisers take any responsibility for, or accepts estimates, opinions and projections with Republic of South Africa, Australia, Japan or any liability in respect of, the accuracy or respect to anticipated future performance of any jurisdiction where it would be unlawful to completeness of such information. the group (“ forward-looking statements ”) do so. The distribution of this presentation or This presentation is directed at and is only which reflect various assumptions concerning any information contained in it may be being distributed (A) in member states of the anticipated results taken from the group’s restricted by law in certain jurisdictions, and European Economic Area to persons who are current business plan or from public sources any person into whose possession any “qualified investors” within the meaning of which may or may not prove to be correct. document containing this presentation or any Article 2(1)e of the Prospectus Directive Such forward-looking statements reflect part of it should inform themselves about, and (Directive 2003/71/EC, as amended); (B) in current expectations based on the current observe, any such restrictions. the United Kingdom to persons who have business plan and various other assumptions professional experience in matters relating to and involve significant risks and uncertainties 2 Interim Results 26 weeks to 28 May 2017
2017 – H1 highlights H1 2017 – building momentum A multi-part growth strategy 2017 – a year of change and McColl’s well positioned Slide 4 Slide 12 an evolving sector Slide 17 Slide 14 Increase neighbourhood Excellent customer service Growing convenience offer Maximising opportunities for presence Slide 24 growth Slide 19 Slide 22 Slide 26 3 Interim Results 26 weeks to 28 May 2017
2017 H1 – building momentum £ 504.8 Revenue (£million) 2017 504.8 2016 469.2 2015 459.3 +7.6% vs 2016 Adjusted EBITDA (1) (£million) £16.5 2017 16.5 2016 16.0 2015 16.2 +2.9% vs 2016 3.4p Interim dividend per share (pence) 5.9p Underlying adjusted earnings per share (2) (pence) Maintained vs 2016 -2.3% vs2016 2017 2017 3.4 5.9 2016 3.4 2016 6.1 2015 3.4 2015 6.1 4 Interim Results 26 weeks to 28 May 2017 (1) Before exceptional items and excluding property gains and losses (2) Before exceptional items and £1.3m pre-opening costs
1 Financial Review Interim Results 26 weeks to 28 May 2017
Strong revenue and margin growth 1 Summary income statement (£million, unless stated) H1 2017 H1 2016 Year on year growth principally driven by on-boarding Revenue 504.8 469.2 of stores acquired from the Co-op Like-for-like sales (1) 0.2% (2.2%) Supported by favourable weather and an improving mix of products Gross profit 128.3 115.0 Increased mix of convenience stores and margin Gross profit margin 25.4% 24.5% accretive products, and improvement in trading terms Administrative expenses (2) (131.5) (118.0) Legislative wage inflation and higher cost (but also profit) of operating convenience stores Administrative expenses/revenue 26.0% 25.2% Other operating income, including property profits (2) 12.1 12.6 Reflects lower contribution from property profits and lower number of Post Office conversions Operating profit (2) 8.9 9.6 Adjusted EBITDA (3) 16.5 16.0 After absorbing £1.3m pre-opening costs for the Co-op stores, therefore underlying adjusted EBITDA £17.8m (increase of 11%) Adjusted EBITDA (3) margin 3.3% 3.4% (1) 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 (2) Before exceptional items (3) Before exceptional items and excluding property gains and losses 6 Interim Results 26 weeks to 28 May 2017
Resilient performance in light of 1 macro tensions • Increasing pressure on incomes – Inflation coupled with falling average weekly earnings • National Living Wage – increase to £7.50 April 2017 • Apprenticeship Levy – 0.5% of payroll, introduced April 2017 6 Change, rolling 3m on same 3m year Change in CPI vs change in average weekly earnings 4 2.7% before (%) 2 1.7% 0 -2 May-08 Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13 May-14 Feb-15 Nov-15 Aug-16 May-17 % change in average weekly earnings % change in CPI inflation 7 Interim Results 26 weeks to 28 May 2017
Continued improvement in LFL 1 • Return to positive LFL and another consecutive quarter of improving trend • Prolonged period of good weather (in contrast to prior year) – average temperature in April and May more than 10% higher year-on-year • Well-ordered and well-managed transition to new tobacco regulations (EU TPD2) Q2 H1 LFL sales 2.0 Convenience stores 1.4% 0.2% 1.0 Newsagents 1.4% 0.4% 0.0 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Recently acquired or -1.0 3.8% 2.8% converted stores 1 -2.0 Total 1.4% 0.2% -3.0 (1) Like-for-like sales in stores acquired or converted in 2015-16 which have traded for over 12 months 8 Interim Results 26 weeks to 28 May 2017
Material increase in asset base 1 Summary balance sheet (£million, unless stated) H1 2017 H1 2016 Increase reflects the on-boarding of around two thirds of the Non-current assets 322.4 221.8 stores acquired from the Co-op in the first half Current assets 136.9 106.6 Movement in current assets and liabilities driven by impact of growth on working capital and payment timing differences Current liabilities (174.8) (132.0) versus prior year Non-current liabilities (151.0) (71.9) Increased borrowings to support the acquisition Net assets 133.5 124.5 Net debt (110.7) (42.3) Partial draw down of £100m term loan to support acquisition, remainder in H2 9 Interim Results 26 weeks to 28 May 2017
Significantly cash generative 1 operations H1 2017 H1 2016 Cash flow (£million) Adjusted EBITDA (1) 16.5 16.0 Relates to legal and professional fees associated with the Cash impact of exceptional items (1.4) (0.0) acquisition Tax paid (2.6) (2.0) Driven by benefits to working capital cycle from increased scale Change in working capital 21.5 (7.3) and a temporary payroll timing benefit Operating Cash flow 34.0 6.7 Significant investment in the business for future growth – Net capital expenditure (96.9) (8.8) acquisition of around two thirds of Co-op stores completed in H1 Net interest paid (3.0) (1.3) Consistent pence per share, but with (final) dividend paid on c10% increased share capital Dividend paid (7.8) (7.1) Net cash generated (73.7) Net position through operations, and acquisition principally funded (10.5) through debt, in-line with managements expectations (1) Before exceptional items and excluding property gains and losses 10 Interim Results 26 weeks to 28 May 2017
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