McColl’s Retail Group has issued an update on current trading, outlook and discussions with its lenders and key commercial partner.
Current trading
The company has experienced mixed trading since the last update on 28 February 2022. While a recovery in trading performance had continued during the first half of March, the business has since experienced softer trading through the Easter period, impacted by reduced consumer spending and continued supply chain disruption across the industry.
McColl's is working closely with its wholesale supplier to mitigate product availability issues. Despite this, the Group’s Morrisons Daily stores continue to perform strongly, delivering like-for-like sales growth that is at least 20% better than non-converted, comparable stores, and ahead of the total convenience market.
All Morrisons Daily conversions in 2022 have benefited from the introduction of a Morrisons food-to-go (FTG) proposition, offering customers a broadened range at a compelling price point.
The Morrisons Daily store conversion programme continues at pace with 69 stores opened in FY22 so far, and the Group continues to work on the previously communicated programme of Morrisons Daily store conversions.
The move to convert stores to the Morrisons Daily format is fundamentally reshaping the business into a more profitable and sustainable model in the medium term.
Outlook
As a result of the challenges outlined above, including a weaker than expected Easter performance and the widely reported impact of cost inflation pressures, the Board now expects adjusted EBITDA for the current financial year (FY22) to be no higher than the level achieved in FY21 (£20m on a pre IFRS 16 basis).
McColl's continues to review costs across all parts of the business in order to help mitigate the challenging trading conditions, as well as being even more targeted in its capital deployment. Update on key stakeholder engagement The Group acknowledges and appreciates short term credit support received from its commercial partners and senior lenders.
A potential financing solution is under active discussion with its key commercial partner and lenders which would resolve the short term funding issues and create a stable platform for the business going forward. It should be noted that even if such a successful outcome is achieved it is increasingly likely to result in little or no value being attributed to the Group's ordinary shares.
The company warns that it expects to delay the publication of full year results until the resolution of the financing discussions. This may mean that the publication of the full year results is delayed beyond the end of May 2022, which is the current deadline for filing under the Listing Rules.