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McColl’s (MCLS) has said this morning in its annual results that the foundations for “transformational” growth have been laid.
Revenues at the group in the year to 27 November 2016 increased 1.9% to £950.4m – the sixth consecutive year of growth. However, like-for-like sales continued to decline, down 1.9% in the year, with its newsagents and standard convenience stores down 3.3% and the premium convenience and food and wine stores down 1%.
The group has sold off the majority of its newsagents as it attempts to transform into a convenience retailer. McColl’s finished the year with 1,001 convenience stores in the estate and said the integration of the almost 300 stores it bought from Co-op last year was on track in 2017.
The growing convenience mix, including the fresh food and food-to-go offering, helped drive margin expansion in 2016, with gross margins up 70 basis points to 25.1%.
Adjusted EBITDA slipped £1m to £36.7m despite the fatter margins on the back of cost pressures and £500k incurred in advance of the Co-op integration.
Pre-tax profits fell from £21.1m in 2015 to £17.7m after the group was hit with £3.1m of exceptional costs related to the exit from legacy properties, asset write-offs and the Co-op deal.
Current trading in the first quarter of 2017 continued to show improvement as total revenue grew 2.1%. Like-for-like sales in the 13 weeks to 26 February fell 1.3%, but this represented the fourth consecutive quarter of improvement.
The first of the 298 Co-op stores opened on 31 January in Canvey Island, with more than 20 stores now trading as McColl’s.
CEO Jonathan Miller said: “2016 has been a pivotal year for McColl’s during which we were firmly established as a leading convenience retailer, delivered good financial performance in line with expectations and laid the foundations to deliver significant growth in the years ahead.
“With new appointments to our management team and a refreshed strategy in place, we are ready to begin the next stage of our journey to become your neighbourhood’s favourite shop.
“We are pleased to have recorded our sixth successive year of revenue growth and to have met our target of operating 1,000 convenience stores, which truly marks the completion of our journey to become first and foremost a convenience business.
“Our transformational acquisition of 298 quality convenience stores from the Co-op substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers. We have a long history and proven track record of successfully integrating convenience stores into our estate, and are encouraged by the progress we have made in converting the stores so far.
“2017 promises to be an exciting year for McColl’s. We remain very confident about achieving further progress against our strategy.”
Shares in McColl’s are up a healthy 2.7% so far this morning to 181.8p.
Morning update
Associated British Foods (ABF) is expecting a significant increase in first-half profits as the sugar business continues to recover. The group said in a trading update for the six months to 4 March 2017 that it expected excellent progress in adjusted operating profit and adjusted earnings per share for the group. However, all the forecasted jump in profits for the year is expected to be generated in the first half as the £50m currency benefits in the past six months from overseas business has faded with the weakening of the pound and the full effect of sterling weakness against the US dollar on Primark’s purchases will result in a greater margin decline in the second half because hedges were at more advantageous exchange rates in the first half.
ABF reported that revenues and operating profits in the first half in the grocery are expected to be ahead of last year at constant currency and substantially ahead at actual exchange rates, with margins expected to make further progress.
Sugar revenues from continuing operations will be well ahead of last year on a comparable basis, with higher prices, increased production in Africa and further benefit from the performance improvement programme set to deliver a substantial increase in profit.
Sales at Primark are expected to be 11% ahead of last year at constant currency, driven by increased retail selling space, and 21% ahead at actual exchange rates.
Shares in ABF opened higher but have since slipped 0.2% to 2,607p.
Elsewhere, the FTSE 100 has nudged up 0.3% to 7,267.72 points as Unilever (ULVR) continues to grow in value to get closer to the £40 Kraft Heinz offer price. The group’s shares are up another 1.5% to 3,828.5p as speculation about the sale of its food business grows.
Sainsbury’s (SBRY) is among the early risers, up 1.2% to 268.6p, along with PZ Cussons (PZC), up 1% to 319p, and Tesco (TSCO), up 0.7% to 191.4p.
Ocado (OCDO) is one of the few stocks in the red so far, down 0.3% to 250p.
This week in the City
After a busy start to the week, Greggs (GRG) follows up tomorrow with its full-year results. The food-to-go operator has enjoyed booming sales in 2016 as changes to its menu have proved a success with consumers.
South African retailer Steinhoff also reports first quarter results tomorrow, which will give some insight in how Poundland has been trading since being snapped up by the group.
Soft drinks supplier Nichols (NICL) releases its latest annual figures on Thursday. The Vimto owner has managed solid growth in recent years as it has reformulated its range, backed by big marketing campaigns.
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