TIDMMCLS
RNS Number : 5954Q
McColl's Retail Group plc
01 March 2021
1 March 2021
McColl's announces key strategic developments with new Morrisons
supply partnership agreed and bank facility extended
-- Morrisons wholesale partnership extended for a further three years to 2027
-- Acceleration of successful Morrisons Daily format, with 300
store conversions planned over next 3 years
-- Extension of bank facility to February 2024 with additional headroom to execute strategy
McColl's Retail Group ("McColl's" or "the Company"), the UK's
leading neighbourhood retailer, is pleased to announce terms have
been agreed on a new supply arrangement with Wm Morrison
Supermarkets plc ("Morrisons"). The agreement represents a
significant milestone in McColl's' strategic goal of becoming a
food-led convenience retailer, giving even greater access to
Morrisons grocery expertise and brand.
This partnership is supported by McColl's existing banking
syndicate, who have amended the existing debt facilities to provide
increased headroom in order to support the McColl's strategy and
extended the maturity of the facility to February 2024.
Extension of Morrisons supply partnership
Under the terms of the new agreement, Morrisons will supply the
entire McColl's estate of over 1,200 stores with a best-in-class
convenience range for a further three year period to January 2027,
giving continuity of supply for the next six years. McColl's will
continue to have access to a supermarket-quality fresh food and
grocery offer through the Safeway brand, where further range
extensions are planned.
Morrisons is now the single wholesale supplier across the entire
McColl's estate. This enables the Company to work in partnership
with Morrisons to seek continuous improvement and further simplify
its operations, whilst ensuring the best value across an enhanced
product range for customers.
Morrisons Daily conversions
The 31 existing Morrisons Daily stores in the McColl's estate
have consistently delivered positive like-for-like sales
performance, driven by their higher mix of grocery sales, breadth
of offer and value proposition. These stores have performed
strongest during the pandemic and are in the best position to meet
customer demand in the future.
Under the terms of the new agreement Morrisons will support on
the conversion of 300 McColl's convenience stores to the Morrisons
Daily fascia and format - selling Morrisons own-brand products -
over the next three years. The conversion includes the existing 31
Morrisons Daily stores currently in operation.
New banking arrangements
McColl's is pleased to announce the support of its banking
syndicate in order to execute its strategy. The existing banking
arrangements have been amended to offer improved headroom against
covenants, a realigned amortisation schedule and an extended
maturity date to February 2024. The updated facility consists of a
GBP100m revolving credit facility and an amortising GBP67.5m term
loan.
Jonathan Miller, Chief Executive of McColl's, said:
" I am delighted to extend our partnership with Morrisons by a
further three years, ensuring the continued supply of a
supermarket-quality offer across our entire estate, as well as the
planned conversion of additional Morrisons Daily stores. Today's
important milestone has been achieved with the welcome support of
our banking syndicate, enabling us to execute our strategy to
deliver sustainable profitable growth.
"In Morrisons we retain a long-term partner with best-in-class
sourcing and manufacturing capabilities and a leading convenience
offer for the local neighbourhood communities we serve across the
country.
"Despite the challenges presented by COVID-19, the new
partnership represents another significant step forward in
achieving our strategic goal of increasing our fresh food offering
in our store estate, while offering the best value for money for
our customers. We are well positioned to continue enhancing our
convenience offer and improving the quality of our estate at a time
when the importance of neighbourhood stores has never been
greater."
David Potts, Chief Executive of Morrisons, said :
"Today's agreement is another example of Morrisons extending the
reach of our popular brand. In doing so, we are building a broader,
stronger Morrisons for customers, and leveraging our existing
assets to achieve capital light, profitable growth.
"We are delighted to be further expanding our successful
partnership with McColl's and look forward to growing together for
many years to come."
Current trading
The trading trends exhibited in FY20 have continued into the new
financial year, driven by the third national UK lockdown. Strong
demand for the Company's local convenience offering led to
like-for-like sales(1) growth of +7.9% in the 12 weeks to 21
February 2021, whilst a shift in the pattern of trade away from
higher-margin impulse categories continues to generate lower gross
margins overall.
Looking ahead, the significant uncertainty over the
macroeconomic and consumer environment, make it difficult to
accurately forecast sales patterns and margin mix changes. However,
as lockdown restrictions ease through the course of the year, the
Company would expect the sales mix to normalise. Regardless,
McColl's will adapt its business to changing customer demand,
whilst focusing on its strategy to become a grocery-led convenience
retailer.
1. Like-for-like sales reflect sales from stores that have
traded throughout the current and prior financial periods, and
sales include VAT but exclude sales of fuel, lottery, mobile phone
top up and travel tickets.
Forthcoming announcement date
McColl's intends to announce its full year results for the
53-week period ended 29 November 2020 on 23 March 2021.
Enquiries
Please visit www.mccollsplc.co.uk or for further information,
please contact:
Analyst & Investors: Tej Randhawa, McColl's +44 (0)1277 372916
Media: Ed Young, Headland +44 (0)203 805 4822
Rob Walker, Headland mccolls@headlandconsultancy.com
Charlie Twigg, Headland
Notes to editors
McColl's is a leading neighbourhood retailer, with an estate of
over 1,200 managed convenience stores and newsagents. We operate
McColl's branded convenience stores as well as newsagents branded
Martin's across the UK, except in Scotland where we operate under
our heritage brand, RS McColl.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014
LEI: 213800R1TLR536P8YJ67
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END
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