GAINING MOMENTUM, WITH SUCCESSFUL INTEGRATION OF NEW CONVENIENCE STORES AND STRONG SALES GROWTH

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1 24 July 2017 McColl s Retail Group plc, one of the UK s leading convenience retailers, ( McColl s or the Group ) today announces its Interim Results for the 26 week period ended 28 May GAINING MOMENTUM, WITH SUCCESSFUL INTEGRATION OF NEW CONVENIENCE STORES AND STRONG SALES GROWTH Financial highlights: Total revenue up 7.6% to 504.8m (: 469.2m) benefitting from the on-boarding of stores acquired from the Co-op, around two thirds of which were trading at the half year and all by the end of July Like-for-like (LFL) sales 2 up 0.2% in H1; LFL sales up 1.4% in Q2, in part supported by favourable weather and our evolving mix of growth products LFL performance in recently acquired and converted stores 3 up 2.8% in H1; 3.8% in Q2 Gross margin improvement trend continues, up 90 basis points to 25.4% (: 24.5%) Adjusted EBITDA 4 increased to 16.5m (: 16.0m), despite being impacted by 1.3m preopening costs relating to the acquisition Profit before tax, impacted by 2.3m exceptional costs 5 and 1.3m pre-opening costs, was 4.5m (: 8.2m) Basic earnings per share 2.8p (: 6.1p); Adjusted earnings per share 6 5.0p (: 6.1p); excluding pre-opening costs stable at 5.9p Net debt 110.8m (: 42.3m). Management remain comfortable that this debt profile is in line with previously described expectations Interim dividend per share maintained at 3.4p (: 3.4p) On track to achieve results for the full year in line with management s expectations, including an expected material increase in sales and profits in H2 driven by the acquired stores Operational and strategic highlights: 1. Increasing neighbourhood presence Successfully integrated 298 quality convenience stores acquired from the Co-op, on time and on budget; early trading performance in line with management s expectations Current store base comprises 1,292 convenience stores and 358 newsagents 7 an 80% increase in convenience stores since the IPO in 2014, with around 10 single convenience store acquisitions planned for H2 2. Growing convenience offer Wholesale retender in progress, providing an opportunity to grow and develop our customer offer, and leverage our increased scale Continued range development and learning opportunities, particularly for fresh foods including through the trial of Co-op branded products in 24 stores Following encouraging early performance, convenience store refresh project to be extended to over 20 stores in H2 Progress on Subway continues with one further outlet opened in H1, four planned in H2 and a broader plan developed for 2018 and beyond 3. Excellent customer service Gained deeper insight into customer needs and preferences, including new research commissioned with IGD to understand how shoppers value time Latest industry research (2017 him! convenience tracking programme) shows consistently high ratings for McColl s on colleague friendliness and helpfulness, ease of shop and speed of service Plus loyalty card customer base continues to grow, with c.700,000 members and double-digit basket penetration in the acquired stores Jonathan Miller, Chief Executive, said: I am encouraged by the performance we have delivered over the first half of the year as our business has continued to gain momentum. We have traded well in a challenging environment and also benefited from the recent hot weather, which has helped to drive sales in key growth categories including grocery and alcohol. We are delighted to have completed the integration of the acquired stores, on time and on budget. We have welcomed over 3,500 new colleagues who have done a great job in supporting customers through the transition, and early trading is in line with our expectations. With all 298 stores now on board, they are expected to make a material contribution to sales and profit in the second half of the year and beyond.

2 Our focus remains on enhancing our convenience proposition through growing market share, developing our product ranges and delivering excellent customer service. As the wider convenience and wholesale sector evolves and continues to grow, McColl s is in a strong position to benefit. We remain confident that our standing as a leading neighbourhood retailer will allow us to continue to achieve further progress against our strategy and deliver sustainable returns for shareholders. The business uses a number of non-statutory measures (for example, LFL, adjusted EBITDA and adjusted EPS) because management believe that these placed with equal prominence alongside other statutory measures help to better explain the underlying performance of the business and its key dynamics. These are kept under continuous review and are defined and used consistently, or explained otherwise. 1 All 298 stores acquired from the Co-op were on-boarded by 15 July Approximately two thirds of these were on-boarded by the end of H 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. 3 LFL sales in stores acquired or converted between which have traded for over 12 months. 4 Adjusted EBITDA (defined in note 5) is stated before exceptional items and property gains and losses. 5 Current year exceptional costs relate to professional fees and write-off of historical banking fees resulting from the acquisition of 298 Co-op stores and associated refinancing (see note 4). 6 Adjusted earnings per share is stated before exceptional items. Details of the calculation of earnings per share can be found in note 8. 7 Store numbers as at 15 July Results presentation A copy of this announcement is available at A meeting for analysts will be held today at 9.30am at Numis Securities, London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. Access will be by invitation only. All presentation materials will be available on our website. Enquiries Please visit or for further information, please contact: McColl s Retail Group plc Media enquiries: Jonathan Miller, Chief Executive Headland Simon Fuller, Chief Financial Officer Lucy Legh, Simon Burton, Ewa Lewszyk Naomi Kissman, Head of Investor Relations +44 (0) (0) Notes to editors McColl's is a leading neighbourhood retailer in the independent managed sector running 1,650 convenience stores and newsagents. We operate 1,292 McColl's branded UK convenience stores as well as 358 newsagents branded Martin's, except in Scotland where we operate under our heritage brand, RS McColl. In addition we are also the largest operator of Post Offices in the UK, with approaching 600 in-store counters/branches.

3 Chief Executive s Review Results overview We have made a strong start to 2017, delivering an encouraging financial performance and successfully completing the integration of 298 quality new convenience stores, with the final stores transferring in July. Our revenue grew 7.6% to 504.8m (: 469.2m) in the to 28 May 2017 as we benefitted from an enlarged estate. We returned to LFL growth, driven by a prolonged period of good weather in the second quarter, in contrast to the prior year, and an improved performance in tobacco as we successfully transitioned to the new regulatory regime. Our recently invested in stores (those acquired or converted between which have traded for over 12 months), continued to perform strongly with LFL sales growth of 2.8% (3.8% in Q2). This endorses our strategy as we embark on the next stage of estate development, including Project Refresh. As we grow the proportion of our estate that is convenience we have continued to improve gross profit margins, with a 90 basis point improvement year-on-year, helped by the higher proportion of grocery sales in the acquired stores alongside an improvement in trading terms. We saw an increase in adjusted EBITDA of 0.5m to 16.5m (: 16.0m), with earnings held back by continuing cost pressures due to legislative wage inflation and 1.3m of pre-opening costs associated with the acquired stores. These pre-opening costs included the recruitment of field teams, training of over 3,500 new colleagues, an increase in support staff, and costs associated with the rebranding and operational transition to McColl s. With all of the 298 acquired stores now part of the Group, they will make a material contribution to sales and profit in the second half of the year and beyond. Strategic objectives We have made significant progress with our strategy, which is focused on enhancing our offering and capturing growth in the convenience channel. There are three key elements to our strategy: Increasing neighbourhood presence; Growing convenience offer; and Excellent customer service. Increasing neighbourhood presence We have significantly increased our neighbourhood presence with the successful integration of the 298 stores we acquired from the Co-op, with the final store conversion opening on schedule. We now operate 1,650 stores, comprising 1,292 convenience stores and 358 newsagents. We began the integration at the end of January and the process has gone very smoothly, with minimal operational issues. The stores have opened on time, having only been closed for a few days and we have been well supported by third party contractors throughout the process. We were delighted to welcome over 3,500 new colleagues. They have embraced being part of the McColl s team and have done a great job supporting customers through the transition. The acquired stores are performing in line with management s expectations and will substantially increase the sales and EBITDA of the Group in the months ahead. The next phase of the integration will begin in the second half of the year, where we will look to further enhance the offer with the addition of new products and services including, food-to-go, Post Offices and parcel collection points. We will also restart our acquisition programme in the second half of the year, and we expect to acquire around 10 new convenience stores by the end of the financial year. Increasing neighbourhood presence is about growing in scale and in visibility. Developing our brand is important and we have recently initiated a piece of work to support this. A programme of significant quantitative and qualitative customer research is underway. Growing convenience offer We are continuing our work to improve our convenience offer, with a particular focus on fresh and chilled foods. These categories have performed well in the first half of the year and we are exploring new ways to improve our fresh food credentials which are very important to the top-up shopping mission. We currently use two main wholesale distribution partners (Nisa and Palmer & Harvey). Having last reviewed these arrangements in 2013 we are now in the process of a formal distribution retender. The wholesale sector is increasingly competitive with several of the large multiple retailers exploring opportunities to distribute through this channel. As one of the largest wholesale accounts available in the UK, we believe the time is right to consider our options. This process is an important part of leveraging the enhanced scale of our business and developing the best offer for our customers. The

4 first stage of this process was completed in June and we expect it to conclude in the second half of the year. We are developing our understanding of what customers want from their local McColl s. As part of this work we are currently running a trial to sell Co-op own brand products in 24 of our stores to see how customers respond to a different range. The products include fresh and chilled lines, ambient grocery and wines, and they will be trialled in these stores for around three months. Following encouraging results from our store refresh pilot, where we have seen significant sales uplifts, we are extending the trial to over 20 stores in the second half of the year. These stores will be completely refreshed to improve the shopping experience for customers. They will benefit from an improved offer as well as new layouts designed to meet the needs of modern convenience shopping missions. Continuing to grow food-to-go, we also opened one new Subway outlet in December and we will open a further four in the second half of the year. We are now developing a broader plan for Subway in 2018, including potential sites in the acquired stores. Excellent customer service We are improving our customer insight to make sure that we develop the best offer for customers and put them at the centre of decisions we make. This year s him! convenience tracking programme, which interviews over 20,000 customers of UK convenience stores, shows that we continue to be rated very highly on colleague friendliness and helpfulness, the cornerstone of excellent customer service. In addition, recent research commissioned by McColl s and conducted by IGD shows that time is becoming an increasingly important part of the value equation for customers and therefore ease and speed of shop are also critical elements of service, particularly in the convenience channel. These are identified by customers as key strengths for McColl s and we continue to improve our in store efficiency, both to free up more time to help customers and improve speed of service. Our services offer continues to grow and strengthen, with four in ten shopping trips to McColl s involving a services mission (e.g. parcel collection, cash machine, bill payment), significantly above the industry average. Not only are these services profitable in their own right, but they are a good way of driving incremental purchases with research showing that over 40% of people using a service in a convenience store also bought fresh food. The majority of the stores we have acquired from the Co-op do not have a substantial services offer and in the months ahead we will identify opportunities to introduce more services and give customers even more reasons to visit these stores. Our Plus loyalty card provides another opportunity to drive increased spend. We now have over 700,000 members and the card has been particularly popular in the stores we have acquired where we have seen double digit basket penetration. Other developments We continue to look for operational improvement through the sale or closure of unprofitable or marginally profitable stores. In the first half of this year we closed or disposed of 19 stores, around half of which were part of the package of 100 newsagents we announced the sale of in October For those newsagents that remain unsold we are currently investigating a range of different options including closure, re-use and a revised financial plan. Outlook The recent outcome of the UK general election and continued uncertainty around the impacts of exiting the European Union continue to weigh on consumer sentiment and the general economic outlook, but McColl s has a good record of trading resiliently through periods of economic instability is proving to be a period of significant activity in the convenience channel with the likelihood of further consolidation in the wholesale sector. It is clear that convenience is an attractive part of the industry with IGD forecasting significant growth of 18% to 47.1bn in the next five years. We are one of the leading convenience retailers, and we believe we are well placed to capture further growth, with considerable opportunity to acquire stores in what is a highly fragmented channel that has a high proportion of independents. We have experienced a small amount of inflation in our business in the first half of the year and we will continue to work with our suppliers to ensure we only pass on input cost increases to customers when absolutely necessary. Our strategy continues to focus on growing our convenience business, both through acquisitions and investment in our existing estate. We will continue to strengthen our range of products and services, as well as unlock further opportunities from our transformational acquisition.

5 Financial review The Group has delivered an encouraging financial performance for the 26 week period ended 28 May Strong revenue growth momentum Total revenue increased by 7.6% to 504.8m (: 469.2m) reflecting the growing scale of the convenience estate as we integrate the acquired stores. LFL sales were up 1.4% in the second quarter, giving a total LFL increase of 0.2% for the to 28 May LFL sales have benefitted from a prolonged period of good weather in Q2 driving strong performances in grocery and alcohol, as well as impulse categories such as soft drinks and snacks. Despite the long-term decline in tobacco we have seen an improved performance in this category in the first half of the year. New regulations came into force in May, banning the sale of smaller pack sizes and price-marked packs and introducing plain packaging for all tobacco products. We have managed this transition very smoothly which has helped us gain market share. LFL sales in convenience stores were up 0.2% and LFL sales in newsagents were up 0.4% in the first half of the year. On a two-year basis, LFL sales remain strongest in convenience. LFL sales in recently acquired or converted stores were up by 2.8% for the year to date, and up 3.8% in Q2, our strongest performance since we began to track this measure in Further improvement in gross margin Our margins are highest in our convenience stores, particularly those that carry bigger ranges of the higher margin categories such as fresh food and grocery. As these stores continue to become a greater proportion of our estate this is reflected in an improvement in our overall gross margin. In the first half of the year gross profit margin increased by 90 basis points to 25.4%, (: 24.5%) driven by favourable mix and an improvement in trading terms. In terms of overall value, total gross profit increased by 11.5% to 128.3m (: 115.0m). Wage inflation and expenses relating to enlarged estate impact underlying operating profit Operating profit before exceptional items decreased by 0.7m to 8.9m, principally reflecting a lower level of property profits year-on-year. Excluding profit on disposal of fixed assets, underlying operating profit fell 0.1m, impacted by legislative wage inflation, increasing central costs required to support a significantly larger business following our acquisition of 298 stores (and without the full benefit of sales and profit in the period), and also 1.3m pre-opening costs relating to the acquisition. Adjusted EBITDA held back by pre-opening costs Adjusted EBITDA increased by 0.5m to 16.5m (: 16.0m), reflecting the impact of a bigger business, but held back by 1.3m pre-opening costs as noted above. Net finance costs impacted by higher level of borrowings and one-off costs Net finance costs were 3.2m (: 1.4m), an increase of 1.8m as a result of the refinancing required to support the acquisition, increased borrowings and one-off exceptional costs relating to the write-off of previous banking fees, and a non-utilisation fee payable prior to full draw down of the term loan. Profit before tax impacted by exceptional costs Profit before tax for the period was 4.5m (: 8.2m), a fall of 3.7m, as a result of 2.3m exceptional costs relating to the acquisition, principally legal and advisory costs and the write-off of banking fees, and 1.3m pre-opening costs. Taxation The tax charge for the period was 1.3m (: 1.9m), representing a rate of 28.3% (: 22.7%). The comparable effective tax rate in 2017 excluding the impact of exceptional items was 21.8%. The difference between the current statutory rate of 20.0% and the effective tax rate excluding the impact of exceptional items of 21.8% in the period is due principally to depreciation of assets not qualifying for tax relief. Adjusted earnings per share stable excluding pre-opening costs Basic earnings per share was 2.8p (: 6.1p). Adjusted earnings per share, stated before exceptional items, reduced to 5.0p (: 6.1p). Excluding pre-opening costs relating to our acquisition adjusted earnings per share remained stable at 5.9p. Dividend maintained The Board has declared an interim dividend of 3.4 pence per share (: 3.4 pence). The interim dividend will be paid on 8 September 2017 to those shareholders on the register at the close of business on 11 August 2017.

6 Balance sheet and net debt Shareholders funds at the end of the period were 133.5m (: 124.5m). The book value of goodwill and other intangibles, property, plant and equipment increased by 100.5m to 312.5m (: 212.0m), largely due to the acquisition of around two thirds of the Co-op stores, including around 100 freeholds. Net debt at the end of the period was 110.8m (: 42.3m) (see note 13). This is following the partial draw down of a 100m term loan to support the acquisition, with the remainder to be drawn down in the second half of the year. Management remain comfortable that this debt profile is in-line with previously described expectations. The combined accounting surplus on the two defined benefit pension schemes operated by the Group was 4.0m (: 6.0m surplus). In June we completed the actuarial review of our pension schemes. The review concluded that the combined deficit of our two pension schemes (the TM Group Pension Scheme and the TM Pension Plan) was broadly similar to that at the previous actuarial valuation. Therefore only a minor incremental cash contribution will be made in the current review period. Cash flow and capital expenditure Net cash provided by operating activities increased to 34.0m (: 6.7m), predominantly driven by improvements to our working capital cycle, where we benefit from the increased scale of our business and a positive stock to trade payables working cycle. We also benefitted from underlying stock improvements, particularly in tobacco, which has undergone a compulsory range rationalisation following new legislation that came into force in May. In addition, there was a 12m timing benefit to other payables relating to this year s payroll dates versus. Net capital expenditure increased to 96.9m (: 8.8m) in the period as a result of the Co-op acquisition (the 298 stores have been purchased in packages as part of the phased integration into the McColl s estate, with around two thirds completing in H1 and the remainder being purchased in Q3). Cautionary statement Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

7 McColl s Retail Group plc Statement of Directors responsibilities 26 week period ended 28 May 2017 Responsibility statement We confirm that to the best of our knowledge: (a) The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting ; (b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months of the year); and (c) The interim management report includes a fair review of the information required by DTR.4.2.8R (disclosure of related parties transactions and changes therein). By order of the Board, Chief Executive Jonathan Miller Chief Financial Officer Simon Fuller Date: 23 July 2017

8 Principal risks and uncertainties The Directors do not consider the principal risks and uncertainties to have significantly changed since the publication of the Annual Report for the period ended 27 November. A detailed explanation of the risks summarised below, and how the Group seeks to mitigate these risks, can be found on pages 36 to 37 of the Annual Report. Business strategy If the Board either adopts the wrong strategy or does not implement it effectively the goals of the business will not be met and our performance may suffer. Acquisitions Failure to successfully integrate the 298 stores acquired from the Co-op, could impact profitability, our reputation and our funding arrangements. Competition We operate in a highly competitive and continually changing market. Failure to maintain market share could have an adverse effect on the Group s performance and profitability. Customer offer Customer shopping habits are influenced by a wide range of factors. If we do not respond to their changing needs they are more likely to shop with a competitor and our revenues could fall. Economy All our revenue is generated in the UK. Any deterioration in the UK economy, for example as a consequence of Brexit, could impact on consumer spending and cost of goods, which would therefore impact our sales and profitability. Financial and treasury The main financial risks are the availability of short- and long-term funding to meet business needs, fluctuations in interest rates, movements in energy prices and other post-brexit impacts. Information technology We depend on the reliability and capability of key information systems and technology. A major failure, a breach, or prolonged performance issues with store or head office systems could have an adverse impact on the business and its reputation. Operational cost base We have a relatively high cost base, consisting primarily of salary, property rental and energy costs. Increases in these costs without a corresponding increase in revenues could adversely impact our profitability. Regulation We operate in an environment governed by strict regulations to ensure the safety and protection of customers, colleagues, shareholders and other stakeholders. Regulations include alcohol licensing, employment, health & safety, data protection and the rules of the Stock Exchange. Supply chain We rely on a small number of key distributors and may be adversely affected by changes in supplier dynamics and interruptions in supply.

9 McColl's Retail Group plc Consolidated income statement 26 week period ended 28 May 2017 Notes ended 28 May 2017 ended 29 May 52 weeks ended 27 November Revenue , , ,403 Cost of sales (376,533) (354,134) (711,752) Gross Profit 128, , ,651 Administrative expenses (131,458) (118,039) (239,443) Other operating income 12,067 11,960 23,147 Profits arising on property-related items ,109 Operating profit before exceptional items 8,876 9,589 23,464 Exceptional items 4. (1,210) - (2,186) Exceptional items relating to losses arising on property-related items - - (757) Operating profit 7,666 9,589 20,521 Finance expense (2,115) (1,382) (2,723) Finance income Exceptional items relating to Finance expense 4. (1,107) - (152) Net finance costs (3,153) (1,373) (2,862) Profit on ordinary activities before taxation 4,513 8,216 17,659 Tax on profit on ordinary activities 6. (1,278) (1,861) (3,743) Profit on ordinary activities after taxation 3,235 6,355 13,916 Adjusted earnings per share p 6.1p 16.0p Basic and diluted earnings per share p 6.1p 12.8p

10 McColl's Retail Group plc Consolidated statement of comprehensive income 26 week period ended 28 May 2017 ended 28 May 2017 ended 29 May 52 weeks ended 27 Nov Profit for the period 3,235 6,355 13,916 Items of other comprehensive income that will not be reclassified to profit or loss: Actuarial loss recognised on pension scheme (2,875) (784) (1,213) UK deferred tax attributed to actuarial gain: Arising from the origination of and reversal of current and deferred tax differences UK corporation tax Other comprehensive loss for the period (2,369) (659) (928) Total comprehensive income for the period 866 5,696 12,988

11 McColl's Retail Group plc Consolidated balance sheet 28 May 2017 Notes 28 May May 27 November Non-current assets Goodwill 214, , ,058 Other intangible assets 1,093 1,534 1,293 Property, plant and equipment 97,101 64,804 66,783 Investments Pension scheme surplus 9,884 9,832 10,946 Total non-current assets 322, , ,098 Current assets Inventories 65,704 50,607 55,041 Trade and other receivables 38,661 33,058 34,609 Cash and cash equivalents 27,802 17,274 3,757 Assets held for sale 9. 4,776 5,662 4,286 Total current assets 136, ,601 97,693 Total assets 459, , ,791 Current liabilities Trade and other payables (167,084) (122,308) (130,021) Provisions (3,097) (2,036) (1,647) Corporation tax (1,253) (2,389) (2,294) Liabilities associated with assets held for sale 9. (3,375) (5,287) (5,137) Total current liabilities (174,809) (132,020) (139,099) Net current liabilities (37,866) (25,419) (41,406) Non-current liabilities Borrowings 12. (133,806) (56,821) (35,961) Other payables (3,205) (3,195) (4,160) Provisions for liabilities (276) (2,115) (365) Deferred tax liabilities (7,876) (5,921) (4,856) Net pension liability (5,864) (3,819) (4,844) Total non-current liabilities (151,027) (71,871) (50,186) Total liabilities (325,836) (203,891) (189,285) Net assets 133, , ,506 Shareholders' equity Equity share capital Share premium account 12,579-12,579 Retained Earnings 120, , , , , ,506

12 McColl's Retail Group plc Consolidated statement of changes in equity 26 week period ended 28 May 2017 Called up share capital Share premium Retained earnings Total Balance at 29 May , ,541 Profit for the period - - 7,561 7,561 Actuarial loss recognised on pension scheme - - (269) (269) Total comprehensive income for the period - - 7,292 7,292 Issue of share capital 10 12,579-12,589 Dividends paid - - (3,916) (3,916) Balance at 27 November , , ,506 Profit for the period - - 3,235 3,235 Actuarial loss recognised on pension scheme - - (2,369) (2,369) Total comprehensive income for the period Dividends paid - - (7,832) (7,832) Balance at 28 May , , ,540

13 McColl's Retail Group plc Consolidated cash flow statement 26 week period ended 28 May 2017 Notes ended 28 May 2017 ended 29 May 52 weeks ended 27 November Net cash provided by operating activities ,046 6,730 21,649 Cash flows from investing activities Acquisition of property, plant and equipment (17,842) (6,278) (15,920) Proceeds from sale of property, plant and equipment 766 5,039 5,874 Acquisition of businesses, net of cash acquired 10. & 11. (79,892) (7,569) (15,656) Finance income Net cash used in investing activities (96,899) (8,799) (25,689) Cash flows from financing activities Repayment of loans - - (7,500) (Repayment of)/new hire purchase loans (67) (186) 1,921 Borrowing issue costs (700) - (517) Drawdown on facility 98,545 13,500 - Proceeds on issue of shares ,076 Dividend paid (7,832) (7,120) (11,036) Finance expense (2,920) (1,285) (2,479) Hire purchase interest paid (128) (97) (199) Net cash from/(used in) financing activities 86,898 4,812 (6,734) Increase/(decrease) in cash and cash equivalents 24,045 2,743 (10,774) Cash and cash equivalents at beginning of period 3,757 14,531 14,531 Cash and cash equivalents at end of period 27,802 17,274 3,757 These financial statements of McColl's Retail Group plc, registered number , were approved and authorised for issue by the Board of Directors on 23rd July Signed on behalf of the Board of Directors Simon Fuller Director

14 McColl's Retail Group plc Notes to the financial statements 26 week period ended 28 May Basis of preparation The Interim Financial Statements for the 26 week period ended 28 May 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union. They have been prepared in accordance with the recognition and measurement criteria of IFRS. They do not include all the information required for full annual financial statements to comply with IFRS, and should be read in conjunction with the consolidated financial statements of the Group as at and for the period ended 27 November as applied in the Group's Annual Report and Accounts (the Annual Report ). The accounting policies applied by the Group in these consolidated results are the same as those applied by the Group in its Annual Report for the period ending 27 November. The Annual Report is available at: The financial information for the period ended 28 May 2017 does not constitute statutory accounts as defined in section 434 of the Companies Act The Group has filed statutory accounts for the period ended 27 November. The auditor has reported on these accounts; their report was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis of matter and did not contain a statement under section 498 (2) or (3) of the Companies Act Basis of measurement The consolidated financial information has been prepared on a historical cost basis, except for the following items (refer to individual accounting policies for details): o o Derivative financial instruments fair value through income statement; and Net defined benefit pension asset or liability - actuarial basis. Business Combinations On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired, including separately identifiable assets, is recognised as goodwill. Any discount on acquisition, i.e. where the cost of acquisition is below the fair values of the identifiable net assets acquired, is credited to the income statement in the period of acquisition. New standards interpretations and amendments not yet effective: IFRS 15 'Revenue from Contracts with Customers' IFRS 16 'Leases' IFRS 9 'Financial Instruments' IFRS 15 is effective for periods beginning on or after 1 January The standard establishes a principles based approach for revenue recognition and is based on the concept of recognising revenue for obligations only when they are satisfied and the control of goods or services is transferred. It applies to all contracts with customers, except those in the scope of other standards. It replaces the separate models for goods, services and construction contracts under the current accounting standards. The Group believes that the adoption of IFRS 15 will not have a material impact on its consolidated results. IFRS 16 represents a significant change in the accounting and reporting of leases for lessees as it provides a single lessee accounting model, and as such, requires lessees to recognise assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12 months or less. Accounting requirements for lessors are substantially unchanged from IAS 17. The impact of the

15 standard on the Group is currently being assessed and it is not yet practicable to quantify the effect of IFRS 16 on these consolidated financial statements. IFRS 9 replaces IAS 39. The standard is effective from 1 January 2018 and introduces: new requirements for the classification and measurement of financial assets and financial liabilities; a new model based on expected credit losses for recognising provisions; and provides for simplified hedge accounting by aligning hedge accounting more closely with an entities risk management methodology. The Group believes that the adoption of IFRS 9 will not have a material impact on its consolidated results. Going concern In making their going concern assessment the Directors have considered the Group's business activities, it's financial position, the market in which it operates and the factors likely to affect its future development. The Directors have reviewed the Group's forecasts, taking into account a range of sensitivities, and how they impact headroom against its bank facilities, and its ability to meet its capital investment and operational needs. In July, the Group completed an amended 100m revolving credit facility and 50m accordion for the Group. The Group has net current liabilities of 37.9m at the period end. The Directors have additionally considered this position to determine if it presents any going concern issues. The Group is profitable and cash generative and is supported by the revolving credit facility alongside a 100m term loan. As at 28 May m was drawn against the combined facility, and therefore there is sufficient headroom to meet the Group's debts as they fall due. The Directors believe the Group is in a strong financial position due to its profitable operations and strong cash generation and that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. 2. Significant accounting policies Revenue Revenue represents the amounts receivable for goods and services sold through retail outlets in the period which fall within the Group s principal activities, stated net of value added tax. Revenue is shown net of returns. Revenue is recognised when the significant risks and rewards of goods and services have been passed to the buyer and can be measured reliably. Commission from the sale of lottery tickets, electronic phone top-ups and travel tickets is recognised net within turnover, when transactions deriving commissions are completed, as the Group acts as an agent. In the opinion of the Directors, the Group engages in one principal area of activity, that of operators of convenience and newsagent stores. Turnover is derived entirely from the United Kingdom. Cost of sales Cost of sales consists of all direct costs to the point of sale including warehouse and transportation costs. Supplier incentives, rebates and discounts are recognised as a credit to cost of sales in the period in which the stock to which the discounts apply is sold. The accrued value at the reporting date is included in prepayments and accrued income. Exceptional items Exceptional items relate to costs or incomes that derive from events or transactions that fall within the normal activities of the Group, but which are excluded from the Group s underlying profit before tax measure due to their size and nature in order to better reflect management s view of the performance of the Group. The underlying profit before tax measure (profit before exceptional items) is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Details of exceptional items are set out in note 4. Other operating income Post Office, rental income, ATM commissions and franchise income are recognised in the consolidated income statement when the services to which they relate are earned.

16 Goodwill Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the Group s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is recognised as an asset on the Group s balance sheet in the year in which it arises. Goodwill is not amortised but is tested for impairment at least annually and is stated at cost less any provision for impairment. Any impairment is recognised in the income statement and is not reversed in a subsequent period. Non-current assets held for sale Non-current assets are classified as assets held for sale only if available for immediate sale in their present condition, a sale is highly probable and expected to be completed within one year from the date of classification. Such assets are measured at the lower of the carrying amount and fair value less costs to sell and are not depreciated or amortised. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Share-based payment arrangements Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in the income statement. Taxation Current taxation Current tax is provided at amounts expected to be paid using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except when it relates to items charged to equity or other comprehensive income, in which case the current tax is also dealt with in equity or other comprehensive income respectively. Deferred taxation Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and accounting base of assets and liabilities. Deferred tax is recognised for all temporary differences, except to the extent where a deferred tax liability arises from the initial recognition of goodwill or from the initial recognition of an asset or a liability in a transaction that is not a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only to the extent that the Directors consider that, on the basis of all available evidence, it is probable that there will be suitable future taxable profits from which the future reversal of the underlying differences can be deducted. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity or other comprehensive income, in which case the deferred tax is also dealt with in equity or other comprehensive income respectively. Pensions The Group operates two defined benefit pension schemes in addition to several defined contribution schemes, which require contributions to be made to separately administered funds. Defined contribution schemes

17 Contributions to defined contribution pension schemes are charged to the income statement in the year to which they relate. Defined benefit schemes Defined benefit scheme surpluses and deficits are measured at: o o o o The fair value of plan assets at the reporting date; less Scheme liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus Unrecognised past service costs; less The effect of minimum funding requirements agreed with scheme trustees. A surplus is recognised where the Group has an unconditional right to the economic benefits in the form of future contribution reductions or refunds. Any difference between the interest income on scheme assets and that actually achieved on assets, and any changes in the liabilities over the year due to changes in assumptions or experience within the scheme, are recognised in other comprehensive income in the period in which they arise. Costs are recognised separately as operating and finance costs in the income statement. Operating costs comprise the current service cost, any income or expense on settlements or curtailments and past service costs where the benefits have vested. Past service costs are recognised directly in income unless the changes to the pension scheme are conditional on the employees remaining in service for a specified period of time. In this case, the past service costs are amortised on a straight-line basis over the vesting period. Finance items comprise the interest on the net defined benefit asset or liability. 3. Segmental analysis and revenue In accordance with IFRS 8 'Operating segments' an operating segment is defined as a business activity whose operating results are reviewed by the chief operating decision maker and for which discrete information is available. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The principal activities of the Group are currently managed as one segment. Consequently all activities relate to this segment, being the operation of convenience and newsagent stores in the UK. An analysis of the Group's revenue is as follows (all continuing operations): ended 28 May 2017 ended 29 May 52 weeks ended 27 November Sale of goods 504, , ,403 Property rental income 1,554 1,392 2,985 Other operating income 10,513 10,568 20,162 12,067 11,960 23,147 Investment revenue Total revenue as defined in IAS , , ,563

18 4. Exceptional items Due to their significance or one-off nature, certain items have been classified as exceptional as follows: ended 28 May 2017 ended 29 May 52 weeks ended 27 November Cost associated with acquiring Co-op stores 1 1,234-1,852 (Income)/Costs relating to closure of non-trading sites (24) ,210-2,186 Finance costs associated with acquiring Co-op stores 1 1, Impairment and onerous lease provisions related to assets held for sale ,317-3,095 Tax effect ,551-3, Cost of acquiring Co-op stores On 13th July the Group entered into an agreement to purchase 298 convenience stores from the Co-op, for an aggregate consideration of 117m. The acquisition will be integrated during 2017 by Martin McColl Limited, a wholly-owned subsidiary of the Group. The acquisition was approved by the Competition and Markets Authority on 20 December. The exceptionalised costs relate to sunk costs which the Group has incurred during the process, such as legal fees and due diligence fees. 2. Assets held for sale Following a review of its portfolio in 2015, the Group decided to sell 97 of its newsagents. The Group continues to focus on the strategy of developing and expanding the convenience business and identified these stores as not being part of its long-term planning. Please refer to note Adjusted EBITDA In order to provide shareholders with a measure of the true underlying performance of the business and to allow a more understandable assessment of its position, the Group makes adjustments to profit before tax. These adjustments are one-off in nature, material by size and are considered to be distortive of the true underlying performance of the business. Exceptional items relate to costs or incomes that derive from events or transactions that fall within the normal activities of the Group, but which are excluded from the Group s underlying profit before tax measure due to their size and nature in order to better reflect management s view of the performance of the Group. The underlying profit before tax measure (profit before exceptional items) is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Details of exceptional items are set out in note 4. Adjusted EBITDA ended 28 May 2017 ended 29 May 52 weeks ended 27 November Operating profit before exceptional items 8,876 9,589 23,464 Depreciation and amortisation 7,599 7,032 14,305 Impairment of property, plant and equipment and onerous leases Less: Profit on disposal of fixed assets (13) (621) (1,422) 16,462 16,000 36,655

19 6. Taxation The tax charge for the period was 1.3m (: 1.9m), representing a rate of 28.3% (: 22.7%). The comparable effective tax rate in 2017 excluding the impact of exceptional items was 21.8%. The difference between the current statutory rate of 20.0% and the effective tax rate excluding the impact of exceptional items of 21.8% in the period is due principally to depreciation of assets not qualifying for tax relief. 7. Dividends The Board has declared an interim dividend of 3.4 pence per share (: 3.4 pence). The interim dividend will be paid on 8 September 2017 to those shareholders on the register at the close of business on 11 August The payment of this dividend will not have any tax consequences for the Group. The final dividend for, declared and paid was 6.8 pence per share (2015: 6.8 pence). 8. Earnings per share ended 28 May 2017 ended 29 May 52 weeks ended 27 November Basic weighted average number of shares 115,172, ,712, ,505,494 Diluted weighted average number of shares 115,172, ,712, ,505,494 Profit attributable to ordinary shareholders 3,235 6,355 13,916 Basic earnings per share 2.8p 6.1p 12.8p Diluted earnings per share 2.8p 6.1p 12.8p Adjusted earnings per share: Profit attributable to ordinary shareholders 3,235 6,355 13,916 Exceptional items (note 4) 2,317-3,095 Tax effect of adjustments Profit after tax and before exceptional items 5,786 6,355 17,348 Prior year deferred tax adjustment - - (282) Adjusted profit after tax and before exceptional items 5,786 6,355 17,066 Adjusted earnings per share (pre tax adjustment) 5.0p 6.1p 16.0p Adjusted earnings per share (post tax adjustment) 5.0p 6.1p 15.7p