McColls Retail Group plc Preliminary Results 52 Weeks to 27 - PowerPoint PPT Presentation

McColl’s Retail Group plc Preliminary Results 52 Weeks to 27 November 2016

Important notice This presentation has been prepared by McColl’s the definition of “investment professionals” in will not necessarily be accurate indications of Retail Group plc (the “ Company ”) in connection Article 19(5) of the Financial Services and whether or not such results will be achieved. As a with the publication of the company’s preliminary Markets Act 2000 (Financial Promotion) Order result, recipients of this presentation, should not 2005 (the “ Order ”) or are high net worth results for the 52 weeks ended 27 November rely on such forward-looking statements due to 2016. companies, unincorporated associations or the inherent uncertainty therein. Forward-looking partnerships or trustees of high value trusts as statements speak only as of the date such This presentation does not constitute an invitation, described in Article 49(2) of the Order and statements and, except as required by the offer to sell or any solicitation of any offer to buy or investment personnel of any of the foregoing Financial Conduct Authority, the London Stock subscribe for any securities in the company or (each within the meaning of the Order); and (C) Exchange or applicable law, the company any of its subsidiaries or associated companies or otherwise to persons to whom, or at which, it may undertakes no obligation to update or revise its or their affiliates (the “ Group ”). otherwise be lawfully made, supplied or directed publicly any forward-looking statements, whether (each a “ Relevant Person ”). No other person No reliance may be placed for any purpose as a result of new information, future events or whatsoever on the completeness or accuracy of should act or rely on this presentation and by otherwise. the information or opinions contained in this accepting this presentation you represent, warrant This presentation is not for distribution, directly or presentation and no member of the group or any and agree that you are a Relevant Person. indirectly, in whole or in part, in or into the United of their respective officers, directors, employees, This presentation may include statements, States of America, Canada, the Republic of South representatives, agents or advisers take any estimates, opinions and projections with respect Africa, Australia, Japan or any jurisdiction where it responsibility for, or accepts any liability in respect to anticipated future performance of the group would be unlawful to do so. The distribution of this of, the accuracy or completeness of such (“ forward-looking statements ”) which reflect presentation or any information contained in it information. various assumptions concerning anticipated may be restricted by law in certain jurisdictions, results taken from the group’s current business This presentation is directed at and is only being and any person into whose possession any distributed (A) in member states of the European plan or from public sources which may or may not document containing this presentation or any part Economic Area to persons who are “qualified prove to be correct. Such forward-looking of it should inform themselves about, and investors” within the meaning of Article 2(1)e of statements reflect current expectations based on observe, any such restrictions. the Prospectus Directive (Directive 2003/71/EC, the current business plan and various other as amended); (B) in the United Kingdom to assumptions and involve significant risks and persons who have professional experience in uncertainties and should not be read as matters relating to investments and who fall within guarantees of future performance or results and 2 Preliminary Results 52 weeks to 27 November 2016

A strengthened McColl’s team Jonathan Miller Dave Thomas Simon Fuller Chief Executive Chief Operating Officer Chief Financial Officer David Archibald Neil Hodge Peter Miller Development Director IT Director Trading Director Steve Goswell Karen Bird Steve Green Retail Operations Director HR Director Retail Finance Director 3 Preliminary Results 52 weeks to 27 November 2016

2016 – a year of significant progress Further investment in estate Project Refresh Growth in Subway franchise Operational efficiency 1,000 convenience stores West Horndon pilot 13 units now trading LED lighting roll out Amazon lockers roll out Expansion of Post Office Improving customer experience Transformational acquisition 183 units 559 branches Contactless roll out 298 quality convenience stores 4 Preliminary Results 52 weeks to 27 November 2016

2016 – a transformational acquisition • Acquisition of portfolio of 298 quality convenience stores from the Co-op • Well invested and profitable stores in complementary neighbourhood locations • Excellent strategic fit for McColl’s • Attractive and deliverable deal “McColl’s transformation on • Acquisition expected to be significantly track.” earnings enhancing – 2015 illustrative combined revenue £1.3bn and EBITDA £54m The Herald 28 July 2016 • Straightforward transition with further synergy opportunities to be unlocked over time 5 Preliminary Results 52 weeks to 27 November 2016

2016 – a good financial performance Revenue (£million) £ 950.4 2016 950.4 2015 932.2 2014 904.4 +1.9% vs 2015 Adjusted EBITDA (1) (£million) £36.7 2016 36.7 2015 37.7 2014 36.6 -2.8% vs 2015 Adjusted earnings per share (2) (pence) Dividend per share (pence) 10.2p 16.0p Maintained vs 2015 +0.9% vs 2015 2016 2016 10.2 16.0 2015 10.2 2015 15.9 2014 2014 8.5 15.6 (1) Before exceptional items and excluding property gains and losses (2) Before exceptional items 6 Preliminary Results 52 weeks to 27 November 2016 All 2014 comparatives are on a 52 week basis, where applicable

1 Financial Review Preliminary results 52 weeks to 27 November 2016

Sixth successive year of sales growth, 1 significant increase in gross margin Summary income statement (£million, unless stated) 2016 2015 Year on year growth principally driven by on- Revenue 950.4 932.2 going store investment programme Like-for-like sales (1) (1.9%) (1.9%) Consistent trend, traditional category decline Gross profit 238.7 227.5 Improved mix of stores and introduction of higher margin products, alongside decline in Gross profit margin 25.1% 24.4% lower margin traditional categories e.g. tobacco Administrative expenses (2) (239.4) (226.9) Legislative wage inflation and higher cost (but also profit) of operating convenience stores Administrative expenses/revenue 25.2% 24.3% Other operating income, including property profits (2) 24.3 23.6 Increased profit on disposal of fixed assets Operating profit (2) 23.5 24.3 Adjusted EBITDA (3) 36.7 37.7 After absorbing £0.5m costs incurred in advance of Co-op store integration; underlying Adjusted EBITDA (3) margin 3.9% 4.0% performance is a 1.3% reduction (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 and mobile phone top-up (2) Before exceptional items (3) Before exceptional items and excluding property gains and losses 8 Preliminary Results 52 weeks to 27 November 2016

Overcoming structural headwinds 1 Structural headwinds Strategic responses • • National Living Wage / Leverage increased scale National Minimum Wage achieved through acquisitions • • Apprenticeship levy Increase mix of higher margin convenience categories • Business rates • Infrastructure improvements • Traditional category declines (e.g. LED lighting) (e.g. tobacco and news) • Operational efficiency • Future food cost price inflation measures 9 Preliminary Results 52 weeks to 27 November 2016

A strengthening balance sheet, 1 double-digit % increase in net assets Summary balance sheet (£million, unless stated) 2016 2015 Programme of investment for future growth Non-current assets 232.1 220.1 Current assets 97.7 99.9 Increase reflects higher trade and other Current liabilities (139.1) (135.8) payables, as business expands Non-current liabilities (50.2) (58.3) Reduction in facility borrowings Net assets 140.5 126.0 Net debt (37.0) (31.6) Efficient funding of expansion and operational improvements e.g. LED lighting roll-out Net debt:Adjusted EBITDA (1) 1.0x 0.8x (1) Before exceptional items and excluding property gains and losses 10 Preliminary Results 52 weeks to 27 November 2016

A year of significant investment in 1 the business 2016 2015 Cash flow (£million) Adjusted EBITDA (1) 36.7 37.7 Cash impact of exceptional items (2.3) (0.6) Payment of Co-op stores acquisition expenses Tax paid (5.1) (4.1) Reversal in 2015 of the 53 rd week impact of c£12m in 2014. 2016: £2.3m cash payment to surrender Woking office Change in working capital (7.7) 10.5 lease, £1.4m impact of Co-op stores acquisition financing and £1m deposit relating to the acquisition of Co-op stores Operating Cashflow 21.6 43.5 Net capital expenditure (25.7) (23.9) Significant investment in the business for future growth: 58 acquisitions, 59 newsagent conversions & 12 Subways Net interest paid (2.7) (2.5) Consistent pence per share, but with interim dividend paid Dividend paid (11.0) (10.7) on c10% increased share capital Net cash generated (17.8) 6.4 Substantial investment but Net debt:Adjusted EBITDA held at 1.0x 11 Preliminary Results 52 weeks to 27 November 2016 (1) Before exceptional items and excluding property gains and losses