McColl s Retail Group plc At the heart of your neighbourhood - - PowerPoint PPT Presentation

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McColl s Retail Group plc At the heart of your neighbourhood - - PowerPoint PPT Presentation

McColl s Retail Group plc At the heart of your neighbourhood Preliminary Results 53 weeks to 30 November 2014 IMPORTANT NOTICE This presentation has been prepared by McColl's Retail Group plc (the " Company ") in connection with


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McColl’s Retail Group plc

Preliminary Results 53 weeks to 30 November 2014

At the heart of your neighbourhood

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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 2014. 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.

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Preliminary Results 53 weeks to 30 November 2014 3

James Lancaster Chief executive Jonathan Miller Chief financial officer David Thomas Chief operating officer

McColl’s executive team

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Preliminary Results 53 weeks to 30 November 2014 4

1 Delivering on our promises 2 Record financial performance 3 Good strategic progress 4 Growing convenience market 5 Summary

Agenda

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Preliminary Results 53 weeks to 30 November 2014 5

Delivering on

  • ur promises

1

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Preliminary Results 53 weeks to 30 November 2014 6

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

Delivering on our promises

1

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Preliminary Results 53 weeks to 30 November 2014 7

Good strategic progress Accelerated expansion strategy Biggest ever year for development 800th convenience store opened December 2014 Enhanced chilled and fresh offer Post office modernisation completed

Delivering on our promises

1

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Preliminary Results 53 weeks to 30 November 2014 8

Strong track record

1

Revenue (£m) Operating profit before exceptional items (£m) Adjusted EDITDA (£m) Convenience store numbers

804.8 844.7 869.4 922.4

2011 2012 2013 2014

19.0 21.3 22.5 25.5

2011 2012 2013 2014

31.2 33.3 34.2 37.3

2011 2012 2013 2014

588 655 707 799

2011 2012 2013 2014

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Preliminary Results 53 weeks to 30 November 2014 9

2

Record financial performance

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Preliminary Results 53 weeks to 30 November 2014 10

Financial highlights

2

2014 2013 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 53rd week (2) Comprising 1.7p paid and 6.8p proposed

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Preliminary Results 53 weeks to 30 November 2014 11

Increased revenue driving operating profit growth

2

Summary income statement £m unless stated 2014 2013 restated Revenue 922.4 869.4 6.1% Like for like sales 0.7% 2.2% Gross profit 222.8 211.0 5.6% Gross profit margin 24.2% 24.3% Administrative expenses (223.0) (213.0) 4.7% Administrative expenses/revenue 24.2% 24.5% Other operating income 25.7 24.5 4.9% Operating profit before exceptional items 25.5 22.5 13.3% Adjusted EBITDA 37.3 34.2 9.1% Adjusted EBITDA margin 4.0% 3.9%

Growth driven by store acquisitions and developments Positive impact of post office developments Slight change in margin due to mix Continued control of costs

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Preliminary Results 53 weeks to 30 November 2014 12

Positive sales growth

2

Current period sales growth

1.0 3.2

  • 0.5
  • 1.0

0.7 2.2 5.1 4.3 4.8 4.1

  • 2.0
  • 1.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total year LFL sales growth (adjusted for 53rd week) Total sales growth (adjusted for 53rd week)

%

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Preliminary Results 53 weeks to 30 November 2014 13

Reduced finance costs boost net profit

2

Summary income statement £m 2014 2013 restated Operating profit before exceptional items 25.5 22.5 Net exceptional items (3.4)

  • Operating profit

22.0 22.5 Net finance costs (6.2) (13.0) Net exceptional finance costs (3.2) (5.6) Profit before tax 12.6 4.4 Taxation (2.7) 1.3 Profit after tax 9.9 5.1

IPO costs £(1.8m), share based payment £(5.5)m, property provisions £(2.4)m, net PO income £6.3m Significant reduction post IPO 2014 effective tax rate 21.6%

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Preliminary Results 53 weeks to 30 November 2014 14

Shareholder returns

2

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 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 Pay out ratio (B/A) 60.0% n/a

Full year earnings per share pro forma for new capital structure Current period dividend paid pro rata for the period post IPO

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Preliminary Results 53 weeks to 30 November 2014 15

Strong cash flow funding increased capex

Cash flow £m 2014 2013 restated Adjusted EBITDA 37.3 34.2 Cash impact of exceptional items 2.0 0.0 Tax paid (2.4) (3.6) Change in working capital (2.3) (2.2) Operating cash flow 34.6 28.4 Net capital expenditure (20.7) (10.9) Net interest paid (4.2) (10.4) Dividend paid (1.8)

  • Net cash generated

7.9 7.1 Net changes to capital structure (20.0) (35.8) Net cash flow (12.1) (28.7)

2

Working capital inflow of £9.4m adjusting for impact of 53rd week Significant reduction in cash interest Primary IPO proceeds utilised in current period to repay mezzanine loan

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Preliminary Results 53 weeks to 30 November 2014 16

Increased capex reflecting accelerated development

Capital expenditure £m 2014 2013 Acquisition of businesses 16.8 5.4 Freehold property 2.1

  • Store conversions and refits

8.2 7.3 Maintenance capex 3.7 3.1 Other 1.2 0.4 Disposal proceeds (11.3) (5.3) Net capital expenditure 20.7 10.9 Less: inventory acquired within business acquisitions (1.4) (0.3) 19.3 10.6

60 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

2

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Preliminary Results 53 weeks to 30 November 2014 17

Balance sheet restructured

Summary balance sheet £m unless stated 2014 2013 Non-current assets 208.7 198.5 Current assets 87.3 100.5 Current liabilities (116.9) (128.7) Net current liabilities (61.9) (114.4) Net assets 117.2 55.9 Underlying net debt (25.7) (86.2) Underlying net debt: Adjusted EBITDA 0.7x 2.5x Return on capital employed 14.6% 13.9%

Current period comprises working capital drawings of £46.0m, cash

  • f £23.1m adjusting for week 53 and

unamortised issue costs of £1.1m

2

Net assets significantly increased following IPO

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Preliminary Results 53 weeks to 30 November 2014 18

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%

Current trading

2

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Preliminary Results 53 weeks to 30 November 2014 19

3

Good strategic progress

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Preliminary Results 53 weeks to 30 November 2014 20

Our strategy and business model

3

Progress Acquisition programme accelerated - 800th 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.

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Preliminary Results 53 weeks to 30 November 2014 21

Growing our convenience business

3

566 516 396 90 156 246 284 154 154 333 489 600

Total store base by type

Premium convenience Standard convenience Food & wine Newsagents

November 2013 1,273 stores November 2014 1,315 stores November 2016 1 1,396 stores

(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.
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Preliminary Results 53 weeks to 30 November 2014 22

Busiest ever year for development

60 45 102 192 85

Development Number achieved

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

3

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Preliminary Results 53 weeks to 30 November 2014 23

Doubled the rate of acquisitions

3

■ Large number of sites

across the country

■ Stringent location criteria to focus on

  • pportunities 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

800th convenience store opened December 2014

Store numbers 2013 2014

Tesco (Express/One Stop) 1,978 2,196 McColls 664 719 Sainsbury’s Local 498 585 M&S Simply Food 84 84 Checkers Express (Sandpiper Cl) 22 22 Whistlestop (SSP) 22 21 Jones Convenience Stores (JCS) 17 16 Morrisons 14 105 Waitrose 1 18 Other 10 10 Total 3,320 3,771

2014 UK convenience stores: 47,294

(1) Source: Grocery Retail Structure 2014, IGD Research and William Reed Business Media Limited (as at April 2014).

(1)

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Preliminary Results 53 weeks to 30 November 2014 24

Acquisition types

3

■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.

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Preliminary Results 53 weeks to 30 November 2014 25

Good progress on food and wine

3

■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

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Preliminary Results 53 weeks to 30 November 2014 26

New ideas for newsagents

3

■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.

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Preliminary Results 53 weeks to 30 November 2014 27

Premium convenience roll out completed

3

■ 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 £6.69

■ 102 further conversions

completed

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Preliminary Results 53 weeks to 30 November 2014 28

Range extension- concept store

3

■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

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Preliminary Results 53 weeks to 30 November 2014 29

Range extension - food to go

3

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Preliminary Results 53 weeks to 30 November 2014 30

Modernising and growing our post

  • ffice business

3

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

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Preliminary Results 53 weeks to 30 November 2014 31

Growing range of services

3

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Preliminary Results 53 weeks to 30 November 2014 32

Growing convenience market

4

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Preliminary Results 53 weeks to 30 November 2014 33

Growing grocery market

4

50 100 150 200 250

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (1) Source: IGD Research 2014, years are to April

UK grocery forecast to grow 3.1% per annum to £203bn in 2019 from £175bn in 2014 UK grocery sales (1)

£bn

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Preliminary Results 53 weeks to 30 November 2014 34

Shift in buying channels

4

Share of total UK grocery (1)

42.2% 20.4% 21.4% 6.2% 4.4% 5.4% 34.9% 17.6% 24.1% 10.5% 8.3% 4.6%

Superstores and hypermarkets Small supermarkets Convenience Discount Online Other

2014 2019

(1) Source: IGD Research 2014

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Preliminary Results 53 weeks to 30 November 2014 35

Convenience outpacing market

4

10 20 30 40 50 60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (1) Source: IGD Research 2014, years are to April

£bn

UK convenience forecast to grow 5.5% per annum to £49bn in 2019 from £37bn in 2014 UK convenience sales (1)

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Preliminary Results 53 weeks to 30 November 2014 36

Multiples propelling convenience forwards

4

2014 Sales (£bn) 2014 Sales (Change YoY) 2014 Stores 2014 Stores (Change YoY)

Symbol groups 15.5 +5.1% 17,080 +2.8% Convenience multiples 7.3 +16.3% 3,771 +13.6% Unaffiliated independents 6.5

  • 0.1%

18,630

  • 1.0%

Co-operatives 4.1 +2.3% 2,680 +1.6% Convenience forecourts 4.0

  • 0.5%

5,133

  • 1.6%

Total 37.4 +5.2% 47,294 +1.0%

Source: IGD Research and William Reed Business Media 2014, store numbers as at April 2014 and year to April 2014

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Preliminary Results 53 weeks to 30 November 2014 37

Changing shopper behaviour

4

Ageing population Longer working hours Single households/ buying for

  • ne

Shopping little & often (to reduce food waste) Availability, quality & presentation

  • f fresh

produce Access to

  • ther

services Stronger price, promotion & private label

  • ffering

Lower disposable income / staying in more

Sources: HIM Shopper Profiles report May 2014, ONS 2014, Eurostat 2013,IGD Research

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Preliminary Results 53 weeks to 30 November 2014 38

Market outlook

4

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

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Preliminary Results 53 weeks to 30 November 2014 39

Summary

5

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Preliminary Results 53 weeks to 30 November 2014 40

Summary: delivering on our promises

5

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 – 800th 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

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Preliminary Results 53 weeks to 30 November 2014 41

Glossary of key terms

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Preliminary Results 53 weeks to 30 November 2014 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