McColl s Retail Group plc

Transcription

1 McColl s Retail Group plc Interim Results 26 Weeks to 28 May 2017

2 Important notice This presentation has been prepared by McColl s Retail Group plc (the Company ) in connection with the publication of the Company s interim results for the 26 weeks ended 28 May This presentation does not constitute an invitation, offer to sell or any solicitation of any offer to buy or subscribe for any securities in the company or any of its subsidiaries or associated companies or its or their affiliates (the Group ). No reliance may be placed for any purpose whatsoever on the completeness or accuracy of the information or opinions contained in this presentation and no member of the group or any of their respective officers, directors, employees, representatives, agents or advisers take any responsibility for, or accepts any liability in respect of, the accuracy or completeness of such information. This presentation is directed at and is only being distributed (A) in member states of the European Economic Area to persons who are qualified investors within the meaning of Article 2(1)e of the Prospectus Directive (Directive 2003/71/EC, as amended); (B) in the United Kingdom to persons who have professional experience in matters relating to investments and who fall within the definition of investment professionals in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ) or are high net worth companies, unincorporated associations or partnerships or trustees of high value trusts as described in Article 49(2) of the Order and investment personnel of any of the foregoing (each within the meaning of the Order); and (C) otherwise to persons to whom, or at which, it may otherwise be lawfully made, supplied or directed (each a Relevant Person ). No other person should act or rely on this presentation and by accepting this presentation you represent, warrant and agree that you are a Relevant Person. This presentation may include statements, estimates, opinions and projections with respect to anticipated future performance of the group ( forward-looking statements ) which reflect various assumptions concerning anticipated results taken from the group s current business plan or from public sources which may or may not prove to be correct. Such forward-looking statements reflect current expectations based on the current business plan and various other assumptions and involve significant risks and uncertainties and should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. As a result, recipients of this presentation, should not rely on such forward-looking statements due to the inherent uncertainty therein. Forward-looking statements speak only as of the date such statements and, except as required by the Financial Conduct Authority, the London Stock Exchange or applicable law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation is not for distribution, directly or indirectly, in whole or in part, in or into the United States of America, Canada, the Republic of South Africa, Australia, Japan or any jurisdiction where it would be unlawful to do so. The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it should inform themselves about, and observe, any such restrictions. 2

3 2017 H1 highlights H building momentum Slide 4 A multi-part growth strategy Slide a year of change and an evolving sector Slide 14 McColl s well positioned Slide 17 Growing convenience offer Slide 19 Increase neighbourhood presence Slide 22 Excellent customer service Slide 24 Maximising opportunities for growth Slide 26 3

4 2017 H1 building momentum Revenue ( million) +7.6% vs Adjusted EBITDA (1) ( million) % vs p Interim dividend per share (pence) Maintained vs p Underlying adjusted earnings per share (2) (pence) -2.3% vs (1) Before exceptional items and excluding property gains and losses (2) Before exceptional items and 1.3m pre-opening costs 4

5 1 Financial Review

6 1 Strong revenue and margin growth Summary income statement ( million, unless stated) H H Revenue Like-for-like sales (1) 0.2% (2.2%) Gross profit Gross profit margin 25.4% 24.5% Administrative expenses (2) (131.5) (118.0) Administrative expenses/revenue 26.0% 25.2% Other operating income, including property profits (2) Operating profit (2) Year on year growth principally driven by on-boarding of stores acquired from the Co-op Supported by favourable weather and an improving mix of products Increased mix of convenience stores and margin accretive products, and improvement in trading terms Legislative wage inflation and higher cost (but also profit) of operating convenience stores Reflects lower contribution from property profits and lower number of Post Office conversions Adjusted EBITDA (3) Adjusted EBITDA (3) margin 3.3% 3.4% After absorbing 1.3m pre-opening costs for the Co-op stores, therefore underlying adjusted EBITDA 17.8m (increase of 11%) (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

7 Change, rolling 3m on same 3m year before (%) 1 Resilient performance in light of 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 Change in CPI vs change in average weekly earnings % 1.7% -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

8 1 Continued improvement in LFL 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) LFL sales Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q2 H1 Convenience stores 1.4% 0.2% Newsagents 1.4% 0.4% Recently acquired or converted stores 1 3.8% 2.8% Total 1.4% 0.2% (1) Like-for-like sales in stores acquired or converted in which have traded for over 12 months 8

9 1 Material increase in asset base Summary balance sheet ( million, unless stated) H H Non-current assets Current assets Current liabilities (174.8) (132.0) Non-current liabilities (151.0) (71.9) Net assets Increase reflects the on-boarding of around two thirds of the stores acquired from the Co-op in the first half Movement in current assets and liabilities driven by impact of growth on working capital and payment timing differences versus prior year Increased borrowings to support the acquisition Net debt (110.7) (42.3) Partial draw down of 100m term loan to support acquisition, remainder in H2 9

10 1 Significantly cash generative operations Cash flow ( million) H H Adjusted EBITDA (1) Cash impact of exceptional items (1.4) (0.0) Tax paid (2.6) (2.0) Change in working capital 21.5 (7.3) Operating Cash flow Net capital expenditure (96.9) (8.8) Net interest paid (3.0) (1.3) Dividend paid (7.8) (7.1) Net cash generated (73.7) (10.5) Relates to legal and professional fees associated with the acquisition Driven by benefits to working capital cycle from increased scale and a temporary payroll timing benefit Significant investment in the business for future growth acquisition of around two thirds of Co-op stores completed in H1 Consistent pence per share, but with (final) dividend paid on c10% increased share capital Net position through operations, and acquisition principally funded through debt, in-line with managements expectations (1) Before exceptional items and excluding property gains and losses 10

11 1 Recap capital allocation principles Management focus is to strike right balance between capital investment, deleveraging and dividends Debt reduction Dividend payments Capex investment 100m term loan, with quarterly repayment commencing in H2 Maintained at 3.4 pence per share in H1 Dividend pence per share expected to increase as earnings increase Forward annual capital spend anticipated of c 20m, broadly split: 30% run and maintain 70% expansion 11

12 1 A multi-part growth strategy Return to acquisitions convenience stores Refresh of existing estate Over 20 stores Further expansion of Subway partnership 4 new units Continued optimisation of the estate 19 closures/disposals in H1 Further sales in H2 12

13 2 Market Review

14 a year of significant change +0.2% First price inflation recorded for over 2 years Jan Feb March April May June Tesco-Booker merger announced Aldi overtakes Co-op as the 5th largest grocer Article 50 triggered All major grocery retailers in growth for first time in 3.5 years New tobacco regulations come into force General election results in hung parliament Sainsbury s reported as exclusive bidder for Nisa 14

15 2 A growing, evolving sector Convenience channel forecast to grow 18% to 47.1bn by 2022 (1) Operates 1,740 Tesco Express c-stores Operates 780 One Stop c-stores plus 185 franchised stores Proposed merger with Booker Operates c. 800 c-stores Exploring franchise convenience model via trial with Euro Garages forecourt franchise (7 trading) Reportedly preferred bidder for Nisa Exploring wholesale/franchise options Trial with MRH forecourt franchise Trial with McColl s Co-op products in 24 stores Sold convenience business My Local in 2015 Relaunching Safeway brand Trial with Rontec, Morrisons Daily forecourt franchise c. 575 c-stores 60% franchised stores Increasing rate of openings Announced 250 new food stores by 2020 Wholesalers Booker proposed merger with Tesco Nisa reportedly seeking a buyer P&H reportedly seeking a buyer Independents remain c.75% of stores, c.55% of sales (1) IGD Channel forecast June

16 3 Strategy and operations update

17 3 McColl s well positioned to succeed Growing estate of 1,292 convenience stores, as well as 358 newsagents Opportunity for organic growth through investment in existing stores Fully managed estate One of UK s largest wholesale accounts 90% of stores in neighbourhood locations and most frequently compete with independent retailers 17

18 3 A clear strategy for growth Slide 19 Slide 24 Slide 22 18

19 3 Growing convenience offer wholesale supply opportunity Reviewing our route to market Leveraging our increased scale Improving our customer offer Highly competitive wholesale sector Multiple interested parties Timeline First stage completed end of June Second stage underway Partner selection in H2 19

20 3 Growing convenience offer developing fresh food credentials Focus on fresh and chilled Significant learnings from acquired stores Over 30% growth in chilled foods and 60% growth in fruit and vegetables Key categories for top-up Investing in fresh food training Trialling a recognised own-brand offer Three month pilot with Co-op launched in June Fresh, chilled, ambient grocery, wine 24 stores McColl s Pudsey Co-op conversion McColl s Borehamwood Co-op trial 20

21 3 Growing convenience offer driving growth in existing stores Designed to meet customer needs Improved ranges Layouts to suit different shopping missions Environment fit for fresh foods First two project refresh stores trading well LFL sales up 10% Further 20 stores in H Potential future opportunity for hundreds of stores Before McColl s West Horndon After McColl s West Horndon 21

22 3 Increasing neighbourhood presence a very successful integration Integration of 298 stores completed Opened on time Minimal operational issues Successful retention of colleagues Good customer feedback 800 interviews conducted Net promoter scores on all metrics Performance in-line with management s expectations Phase II of integration underway Further develop offer in all stores Consider opportunities for FTG, parcel collections, Post Office, Subway Before The Co-op Bushey Heath After McColl s Bushey Heath 22

23 3 Increasing neighbourhood presence growing scale and visibility Acquisition programme restarted Typically single store, independently owned New acquisition criteria Creating a more visible brand in the community Brand review underway Initial results in August 23

24 3 Excellent customer service understanding customers through insight Investing in bespoke customer insight IGD research into the value of time 800 customer interviews for former Co-op stores Customer feedback on trial of Co-op own brand 2017 him! convenience tracking programme shows consistently high ratings Colleague friendliness/helpfulness Ease of shop Speed of shop Plus card driving bigger baskets c.700,000 members Re-launched in former Co-op stores, double-digit basket penetration 24

25 3 Excellent customer service services driving satisfaction Four in ten trips to McColl s involve services Compared to convenience average of 25% Services drive incremental purchases Over 40% also buy fresh food Customers highly satisfied with services missions 96% satisfaction rate % of most recent trips using services Any services National lottery PayPoint Cashpoint Parcel pick-up/return Post office Mobile top-up Café/restaurant Takeaway e.g. Subway McColl's Convenience 25

26 3 Outlook a business that is maximising its opportunities for growth Co-op stores acquisition complete, significant growth in sales and profit expected Benefits of scale to be further realised through wholesale retender Increased free cash flow to invest in new stores and existing estate A clear strategy in a grocery channel that is supportive of growth 26

27 McColl s Retail Group plc Appendix business background Interim Results 26 Weeks to 28 May 2017

28 A long and rich history The Group was founded in vending operations The Martin s chain of newsagents and convenience stores was acquired The Group consolidated its store fascia McColl s for convenience and Martin s or RS McColl for newsagents The Group met its target of operating 1,000 convenience stores Robert Smyth McColl sets up the first RS McColl Retail operations were added to the Group The Group sold its vending interests to focus entirely on retail operations. The Group successfully floated on the London Stock Exchange 28

29 A leading neighbourhood retailer Convenience stores Our 1,292 convenience stores provide a great range of everyday products and local services to our customers living in neighbourhoods across the UK. Our change in focus convenience is the future Summer ,292 1,650 stores ,001 1,375 stores 374 Where we operate in the UK Over 22,000 colleagues Over 5 million customer transactions per week Growing average basket spend of 5.62 in H (2016: 5.24) Newsagents With 358 newsagents across the country, we are the UK s No. 1 specialist confectioner, tobacconist and newsagent ,263 stores 675 Convenience stores Newsagents 29

30 Over 150 years of retail experience Jonathan Miller Chief Executive Dave Thomas Chief Operating Officer Simon Fuller Chief Financial Officer David Archibald Development Director Neil Hodge IT Director Peter Miller Trading Director Steve Goswell Retail Operations Director Karen Bird HR Director Steve Green Retail Finance Director 30

31 The McColl s difference A well managed and efficient supply chain Supplying our growing retail network Delivering great products and services at the heart of the neighbourhood 1,292 Convenience stores Newsagents

32 A loyal and local customer base Our customers live locally and shop frequently 90% of our stores are in neighbourhood locations 53% of our customers live within 400m of our shops 31% of our customers visit every day They fulfil a variety of missions Top-up is fundamental planned and distress Services are a key footfall driver Food-to-go is rapidly growing Newsagent mission remains important Our customers rate us highly on: Staff friendliness/helpfulness Ease of shop Speed of service Community involvement The staff are very helpful They do do a really good selection of fruit and veg If I lost this store it would be an astronomical effect on our family life 32

33 Our clear and progressive strategy 33

34 A highly fragmented sector Unaffiliated Independents 34