McColl's Retail Group plc
FULL YEAR 2021 TRADING UPDATE
for the 52-week period ended 28 November 2021 (“FY21”)
Significant strategic progress achieved with Morrisons Daily roll-out
despite impact of COVID-19 and UK supply chain disruption
Jonathan Miller, Chief Executive, said: “FY21 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. 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. These Morrisons Daily stores are generating strong sales growth and 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.
“None of this could be achieved without our brilliant colleagues, who have been working incredibly hard to keep supplying our community stores with the food, goods and services they need, as well as the support from existing and new shareholders through the capital raise last August.”
Financial highlights
- Total FY21 revenue declined by 11.2% to £1.11bn (FY20: £1.25bn), principally reflecting supply chain disruption in the second half and the conclusion of our store optimisation programme
- Two-year like-for-like (LFL)1sales growth of 9.1%, with sales retained at a higher level than pre-COVID. On a one-year basis, LFL sales declined by 3.3% (FY20: 12.0%)
- Top-line growth moderated in the fourth quarter due to industry-wide availability issues across the estate, with one-year LFL revenues in the period down by 5.0%
- Adjusted EBITDA pre IFRS 16 is expected to be between £20m to £22m (FY20: £29.1m). Post IFRS 16, adjusted EBITDA is expected to be between £46m to £48m (FY20: £57.9m)
- Net debt impacted by availability and timing of working capital outflows. Year-end position (pre IFRS 16) expected to be c. £97.0m (FY20: £89.6m)
- Lending banks remain supportive with ongoing discussions towards an agreement for FY22 and the balance of the facility. Discussions are expected to conclude by the publication of FY21 results in March 2022
Morrisons Daily store conversion programme
- Total of 185 Morrisons Daily stores trading at year-end, ahead of schedule, with 154 conversions completed during FY21
- Increased target of Morrisons Daily conversions from 350 to 450 stores by the end of FY22, with significant potential to further increase stores being explored across all store sizes
- Proven capability of 12 conversions per week, materially ahead of original forecasts
- H2 conversions delivering 24.8% 2-year LFL sales growth despite availability issues and 2-year cash payback, with significant upside opportunity
Operational highlights
- Format, space and range changes launched across 30% of McColl's estate, to meet local customer needs whilst delivering stronger sales and a more profitable mix
- Uber Eats partnership progressing well across 400 stores, with trials in Morrisons Daily stores driving an even higher online basket spend
- Store rationalisation programme now largely complete with 100 stores divested during the year, leaving 1,165 stores at end of year (FY20: 1,265)
Outlook
Working with our wholesale partner Morrisons, we have taken steps to improve availability in our stores. This includes a full review of product substitutions to address manufacturer led product shortages, which remains the major constraint. With these measures we are seeing early signs of recovery, but we expect revenues to continue to be affected as we start the new financial year.
The accelerated expansion of Morrisons Daily format stores across the estate remains on track and is delivering strong improvements in performance versus pre-conversion trading. Our target of 450 stores in a year's time will fundamentally re-shape the business, representing 40% of stores and over half our sales. These stores are delivering a step change in performance with higher sales growth and strong investment returns, whilst attracting new customers to the higher grocery mix, wider breadth of product choice and own label value proposition. The Board remains confident in our strategy as we position ourselves for sustained profitable growth in the coming years.
Preliminary Results for the 52-week period ended 28 November 2021 are expected to be announced in late March 2022. The reporting date will be communicated in due course.
Analyst and Investor Presentation
A presentation will be held for analysts and investors today at 8.30am (GMT) to provide greater insight into the performance of the Morrisons Daily format and to give more detail on the supply chain disruption experienced during the year. All presentation materials will be available on our website. A webcast of the presentation will be available via the following link: