McColl s Retail Group plc At the heart of your neighbourhood

Transcription

1 McColl s Retail Group plc At the heart of your neighbourhood Preliminary Results 53 weeks to 30 November 2014

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 preliminary results for the 53 weeks ended 30 November 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 or opinions. 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 of 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 comes should inform themselves about, and observe, any such restrictions. Preliminary Results 53 weeks to 30 November

3 McColl s executive team James Lancaster Chief executive Jonathan Miller Chief financial officer David Thomas Chief operating officer Preliminary Results 53 weeks to 30 November

4 Agenda 1 Delivering on our promises 2 Record financial performance 3 Good strategic progress 4 Growing convenience market 5 Summary Preliminary Results 53 weeks to 30 November

5 1 Delivering on our promises Preliminary Results 53 weeks to 30 November

6 1 Delivering on our promises Record financial performance Total revenue +6.1% to 922.4m Operating profit before exceptional items +13.2% to 25.5m Adjusted EBITDA +9.0% to 37.3m Pro forma earnings per share 16.9p Proposed final dividend 6.8p per share Underlying net debt reduced to 25.7m Preliminary Results 53 weeks to 30 November

7 1 Delivering on our promises Good strategic progress Accelerated expansion strategy Biggest ever year for development 800 th convenience store opened December 2014 Enhanced chilled and fresh offer Post office modernisation completed Preliminary Results 53 weeks to 30 November

8 1 Strong track record Revenue ( m) Operating profit before exceptional items ( m) Adjusted EDITDA ( m) Convenience store numbers Preliminary Results 53 weeks to 30 November

9 2 Record financial performance Preliminary Results 53 weeks to 30 November

10 2 Financial highlights restated Increase Revenue 922.4m 869.4m 6.1% Like for like sales 0.7% (1) 2.2% Operating profit before exceptional items 25.5m 22.5m 13.2% Adjusted EBITDA 37.3m 34.2m 9.0% Profit after tax 9.9m 5.1m 92.7% Pro forma earnings per share 16.9p n/a Dividend per share 8.5p (2) n/a Underlying net debt 25.7m 86.2m (1) Adjusted for 53 rd week Preliminary Results 53 weeks to 30 November 2014 (2) Comprising 1.7p paid and 6.8p proposed 10

11 Increased revenue driving operating 2 profit growth Summary income statement m unless stated restated Revenue % Like for like sales 0.7% 2.2% Gross profit % Gross profit margin 24.2% 24.3% Growth driven by store acquisitions and developments Slight change in margin due to mix Administrative expenses (223.0) (213.0) 4.7% Administrative expenses/revenue 24.2% 24.5% Other operating income % Operating profit before exceptional items % Adjusted EBITDA % Adjusted EBITDA margin 4.0% 3.9% Continued control of costs Positive impact of post office developments Preliminary Results 53 weeks to 30 November

12 2 Positive sales growth Current period sales growth % Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total year LFL sales growth (adjusted for 53rd week) Total sales growth (adjusted for 53rd week) Preliminary Results 53 weeks to 30 November

13 Reduced finance costs boost net 2 profit Summary income statement m restated Operating profit before exceptional items Net exceptional items (3.4) - Operating profit Net finance costs (6.2) (13.0) Net exceptional finance costs (3.2) (5.6) IPO costs (1.8m), share based payment (5.5)m, property provisions (2.4)m, net PO income 6.3m Significant reduction post IPO Profit before tax Taxation (2.7) 1.3 Profit after tax effective tax rate 21.6% Preliminary Results 53 weeks to 30 November

14 2 Shareholder returns Earnings and dividend per share Basic earnings per share 10.2p 6.9p Adjusted basic earnings per share 15.6p 12.6p Pro forma earnings per share (A) 16.9p n/a Full year earnings per share pro forma for new capital structure Interim dividend paid 1.7p n/a Final dividend proposed 6.8p n/a Total dividend for period 8.5p n/a Full year equivalent (B) 10.2p n/a Current period dividend paid pro rata for the period post IPO Pay out ratio (B/A) 60.0% n/a Preliminary Results 53 weeks to 30 November

15 2 Strong cash flow funding increased capex Cash flow m restated Adjusted EBITDA Cash impact of exceptional items Tax paid (2.4) (3.6) Change in working capital (2.3) (2.2) Operating cash flow Net capital expenditure (20.7) (10.9) Net interest paid (4.2) (10.4) Dividend paid (1.8) - Net cash generated Net changes to capital structure (20.0) (35.8) Net cash flow (12.1) (28.7) Working capital inflow of 9.4m adjusting for impact of 53 rd week Significant reduction in cash interest Primary IPO proceeds utilised in current period to repay mezzanine loan Preliminary Results 53 weeks to 30 November

16 2 Increased capex reflecting accelerated development Capital expenditure m Acquisition of businesses Freehold property Store conversions and refits Maintenance capex Other Disposal proceeds (11.3) (5.3) Net capital expenditure Less: inventory acquired within business acquisitions (1.4) (0.3) new stores acquired Includes acquisition refits as well as premium convenience, food and wine and PO conversions Principally disposal of acquired freeholds on sale and leaseback Preliminary Results 53 weeks to 30 November

17 2 Balance sheet restructured Summary balance sheet m unless stated Non-current assets Current assets Current liabilities (116.9) (128.7) Net current liabilities (61.9) (114.4) Net assets Underlying net debt (25.7) (86.2) Underlying net debt: Adjusted EBITDA 0.7x 2.5x Return on capital employed 14.6% 13.9% Net assets significantly increased following IPO Current period comprises working capital drawings of 46.0m, cash of 23.1m adjusting for week 53 and unamortised issue costs of 1.1m Preliminary Results 53 weeks to 30 November

18 2 Current trading 13 week period ended 1 March 2015 Challenging trading environment Like for like sales -1.2% Continued progress on store development with 6 new store acquisitions and 5 food and wine conversions Total revenue growth 3.8% Preliminary Results 53 weeks to 30 November

19 3 Good strategic progress Preliminary Results 53 weeks to 30 November

20 3 Our strategy and business model Progress Acquisition programme accelerated th C-store opened December 2014 New look and feel to all new stores Plus loyalty card launch Enhanced fresh and chilled offer driving higher basket spend in premium stores Working in a smarter way to support our growing business PO modernisation secures our no. 1 partner status We focus on growing our convenience store business to strengthen and extend our position as the UK s leading independent neighbourhood retailer To implement our strategy we have a simple business model that puts the neighbourhood at the heart of everything we do. Preliminary Results 53 weeks to 30 November

21 3 Growing our convenience business November ,273 stores November ,315 stores November ,396 stores Premium convenience Standard convenience Food & wine Newsagents Total store base by type (1) 2016 store numbers are targets as at financial year end (November). These are illustrative only and should not be seen as an indication of expected or actual store numbers. Preliminary Results 53 weeks to 30 November

22 3 Busiest ever year for development Number achieved Development New store acquisitions including 6 in existing locations Newsagents converted to food and wine format with focused ranges Convenience stores converted to premium format introducing Nisa ranges Existing post offices converted to new local model Existing post offices converted to new main model Preliminary Results 53 weeks to 30 November

23 3 Doubled the rate of acquisitions Large number of sites across the country 2014 UK convenience stores: 47,294 (1) Stringent location criteria to focus on opportunities with significant uplift potential Experienced execution team with strong track record of successfully closing deals Good investment criteria with positive return on investment in just over 2 years 60 new store acquisitions completed and 800 th convenience store opened December 2014 Store numbers Tesco (Express/One Stop) 1,978 2,196 McColls Sainsbury s Local M&S Simply Food Checkers Express (Sandpiper Cl) Whistlestop (SSP) Jones Convenience Stores (JCS) Morrisons Waitrose 1 18 Other Total 3,320 3,771 (1) Source: Grocery Retail Structure 2014, IGD Research and William Reed Business Media Limited (as at April 2014). Preliminary Results 53 weeks to 30 November

24 3 Acquisition types Individual acquisitions: usually from a symbol branded store such as Spar, Costcutter, Premier etc. Adjacent acquisitions: e.g. Stevenage Saint Nicholas gross takings in the newsagent were 21k p.w. and in the Londis next door were 15k p.w. Combined store takes 45k p.w. Group acquisitions: e.g. 5 stores recently acquired in Exeter trading under the Nisa fascia. Preliminary Results 53 weeks to 30 November

25 3 Good progress on food and wine Grocery and alcohol ranges added to converted newsagents New look and feel 45 newsagents converted during the period Tailoring the range and trading hours to the locality Preliminary Results 53 weeks to 30 November

26 3 New ideas for newsagents Martin s Plus concept store: addition of new products such as DVD s, sandwiches, food to go, discount grocery and frozen food. Beers, wines and spirits trial in 100 newsagents at competitive prices. Preliminary Results 53 weeks to 30 November

27 Premium convenience roll out 3 completed Conversion to premium format introduces better product ranges and improves utilisation of store space 2014 CTP survey showed basket spend improved in McColl s to 6.22 compared to Nisa average of further conversions completed Preliminary Results 53 weeks to 30 November

28 3 Range extension- concept store New concept store currently being trialled in greenfield location New look and feel Much wider range of fresh food, grocery, food to go and frozen Stronger promotional activity to drive higher sales Plans to extend trial to one existing store and one acquisition Preliminary Results 53 weeks to 30 November

29 3 Range extension - food to go Preliminary Results 53 weeks to 30 November

30 Modernising and growing our post 3 office business New local model Provides 95% of services without requirements for dedicated staff 192 converted during period New main model Post Office investment of up to 45k per store 85 converted during period 26 brand new post offices added to network Preliminary Results 53 weeks to 30 November

31 3 Growing range of services Preliminary Results 53 weeks to 30 November

32 4 Growing convenience market Preliminary Results 53 weeks to 30 November

33 4 Growing grocery market UK grocery forecast to grow 3.1% per annum to 203bn in 2019 from 175bn in 2014 UK grocery sales (1) bn (1) Source: IGD Research 2014, years are to April Preliminary Results 53 weeks to 30 November

34 4 Shift in buying channels Share of total UK grocery (1) 42.2% 34.9% 20.4% 17.6% 24.1% 21.4% 6.2% 10.5% 4.4% 8.3% 5.4% 4.6% Superstores and hypermarkets Small supermarkets Convenience Discount Online Other (1) Source: IGD Research 2014 Preliminary Results 53 weeks to 30 November

35 4 Convenience outpacing market UK convenience forecast to grow 5.5% per annum to 49bn in 2019 from 37bn in 2014 UK convenience sales (1) bn (1) Source: IGD Research 2014, years are to April Preliminary Results 53 weeks to 30 November

36 4 Multiples propelling convenience forwards 2014 Sales ( bn) 2014 Sales (Change YoY) 2014 Stores 2014 Stores (Change YoY) Symbol groups % 17, % Convenience multiples % 3, % Unaffiliated independents % 18, % Co-operatives % 2, % Convenience forecourts % 5, % Total % 47, % Source: IGD Research and William Reed Business Media 2014, store numbers as at April 2014 and year to April 2014 Preliminary Results 53 weeks to 30 November

37 4 Changing shopper behaviour Ageing population Longer working hours Single households/ buying for one Shopping little & often (to reduce food waste) Availability, quality & presentation of fresh produce Access to other services Stronger price, promotion & private label offering Lower disposable income / staying in more Sources: HIM Shopper Profiles report May 2014, ONS 2014, Eurostat 2013,IGD Research Preliminary Results 53 weeks to 30 November

38 4 Market outlook We will see more and better quality convenience stores We will see the development of more convenient channels, e.g. click and collect And a focus on offering customers better value for money Already experiencing UK food deflation And reduced pump prices for petrol Preliminary Results 53 weeks to 30 November

39 5 Summary Preliminary Results 53 weeks to 30 November

40 5 Summary: delivering on our promises Record financial performance despite tougher second half conditions Total revenue +6.1% Adjusted EBITDA 37.3m Pro forma earnings per share 16.9p Good strategic progress 800 th convenience store opened December 2014 Post office transformation and premium rollout completed Growing convenience market Market growing at c5% per annum Competitive landscape changing Customers shopping around for value Preliminary Results 53 weeks to 30 November

41 Glossary of key terms Preliminary Results 53 weeks to 30 November

42 Term Definition Adjusted basic earnings per share Basic earnings per share adjusted to remove the net of tax impact of exceptional items Adjusted EBITDA Earnings before interest, tax, depreciation, amortisation, impairment, profit on disposal of fixed assets, negative goodwill and exceptional items Adjusted EBITDA margin Adjusted EBITDA divided by revenue Capex Capital expenditure CTP Convenience Tracking Programme: annual research undertaken by him! research & consulting, part of William Reed Business Media Ltd IGD Institute of Grocery Distribution IPO Initial public offering Like for like sales 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, adjusted to remove the impact of the 53 rd week in the period to 30 November 2014 Pro forma earnings per share Adjusted basic earnings per share adjusted to reflect a full year of the post IPO capital structure and removal or the effect of the 53 rd week of trading in the current period ROCE Return on capital employed calculated by dividing operating profit before exceptional items by average total assets less current liabilities for the year Underlying net debt Net debt adjusted for the impact on cash flow of additional payments and receipts in the 53 rd week of the period Preliminary Results 53 weeks to 30 November