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McColl’s has this morning confirmed it is talks with lenders as the c-store chain seeks to raise fresh capital to prevent it falling into administration.
The group, which employs about 16,000 staff and runs 1,100 newsagents across the UK, has been hit hard by supply chain disruption and lack of availability in recent months, issuing a number of profit warnings in 2021.
This morning’s statement follows a Sky News story yesterday that McColl’s is working with advisers to find a buyer for the group or third parties willing to inject fresh cash into the business to stave off insolvency.
McColl’s said, in a statement to the London Stock Exchange, it had received the necessary agreement to roll forward its financial covenant test periodically, and continued to receive credit support from its key commercial partner to enable the discussions with its banks.
“The group continues to believe that a financing solution will be found that involves its existing partners and stakeholders.”
Sky also reported EG Group, the forecourt operator owned by the Issa brothers, held talks to buy McColl’s but decided against it last week.
McColl’s today confirmed it recently received an approach for the whole business, which was subsequently withdrawn. “There are no further discussions with that party or any other party in relation to an offer for the whole business,” the group added. “In addition, the group has also received indications of interest for parts of the business. The board will consider all options with the aim of maximising value for all stakeholders.”
The Times reported that McColl’s wholesale partner Morrisons was also understood to be monitoring the situation with a view to possibly buying hundreds of stores out of administration.
McColl’s raised £30m in a placing in September to accelerate and enhance its Morrisons Daily rollout, with more than 200 of its stores now converted to the format.
The group said since the start of its new financial year on 29 November there had been “a tangible improvment” of product availability in stores.
However, the business saw a material step-down in footfall due to the surge in Covid-19 cases relating to Omicron, particularly over the Christmas period, impacting trading. While demand has since picked up, revenues in the first quarter are behind expectations.
As a result of the difficult market conditions in the first quarter, some of which are expected to continue through the first half, the board now expects FY22 adjusted EBITDA to be slightly behind current market expectations, and net debt in the region of £100m at the end of FY22.
Shares in McColl’s collapsed by 57% to 3p this morning as markets opened.
Morning update
Trading at Kitwave Group has returned close to pre-pandemic levels and the wholesaler said this morning that it is currently trading slightly ahead of market expectations.
Revenues in the year ended 31 October stood at £380.7m in a period when closures in the leisure and hospitality sectors affected trading.
It compares with sales fo £592m in the 18 months to 31 October 2020, with figures slightly behind on an annualised basis.
Adjusted operating profits were £7.1m, compared with £16.5m in the 18-month period, and pre-tax profits increased 63% from £1.3m to £2.1m.
CEO Paul Young said: “While this year has been particularly challenging for our independent customers, who have been forced to close or operate in a reduced capacity for sustained periods of time as a result of Covid-19 restrictions, it is clear that we are nearing a return to some form of normality.
“The majority of our customers have successfully guided themselves through the perils that the pandemic brought upon us and, as a result, trading, which was heavily impacted in the first six months of the year, has returned to pre-pandemic levels over recent months.”
He added the frozen and chilled division was the least hit by lockdowns and remained “extremely resilient” throughout, operating at close to pre-pandemic levels.
“With the worst of the adverse effects brought about by COVID-19 now behind us, and barring any further lockdowns, the outlook for Kitwave is a positive one.”
The results are the first since Kitwave’s £105m IPO in May.
Shares this morning fell 2.1% to 146.9p, slightly below the 150p flotation price.
Associated British Foods has said its expects first-half sales and adjusted operating profits to be strongly ahead of last year.
The trading update for the 24 weeks to 5 March added that figures would also be ahead of the pre-Covid levels achieved in the half year to 29 February 2020.
Primark sales for the first half are expected to be well over 60% ahead of last year as all the stores remained open throughout the period, apart from short periods in Austria and the Netherlands.
It added all the food businesses had experienced increasing inflationary pressures in raw materials, commodities, supply chain and energy.
“We have been taking steps to offset these higher input costs through operational cost savings and where necessary in grocery, ingredients and agriculture, the implementation of price increases,” ABF said.
“However, actions on price inevitably lag input cost inflation. As a result, we expect some margin reduction in these three businesses at the half year but expect our plans to deliver a recovery in the run-rate of these margins by the financial year-end.”
The FTSE 100 has sank by 1.5% to 7,375.46pts this morning as the effects of the war in Ukraine continues to hit markets.
Aside from the dramatic collapse in McColl’s shares, other early fallers include Coca-Cola HBC, down 5.6% to 2,017p, Hotel Chocolat Group, down 4.6% to 440p, and Associated British Foods, down 3.1% to 1,898.7p.
Early risers include Delivery Hero, up 3.7% to €44.80, Deliveroo, up 3.1% to 123.7p, Devro, up 2% to 206.6p, and Ocado Group, up 1.9% to 1,359.5p.
This week in the City
Kantar reveals the latest monthly grocery sales and market share data tomorrow, while HelloFresh releases quarterly results.
A busy Wednesday brings full-year figures from Vimto maker Nichols, interim results from Hotel Chocolat Group and a trading update from Just Eat Takeaway.
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