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McColl's Retail Group dampens down full-year expectations

Published: 08:59 23 Jul 2019 BST

McColl's retail store
"We expect to be broadly in line with expectations for the full year"

Recovery play McColl's Retail Group PLC (LON:MCLS) has seen a deceleration in like-for-like sales growth in recent months.

Management said results for the full-year would be “broadly in line” with expectations, which the market seems to have interpreted as a mild profit warning, as the shares were down 3.4% at 67.6p in the first hour of trading.

The convenience stores operator said like-for-like (LFL) sales in the 26 weeks to 26 May were up 1.0% year-on-year; at the time of its full-year results announcement in February it had boasted a 1.2% increase in LFL sales in the first 11 weeks of the current fiscal year.

READ McColl’s surges as hangover from Palmer & Harvey collapse starts to lift

Total revenue in the first half of the current fiscal year was up 0.1% at £611.1mln from £610.4mln the year before.

The adjusted gross margin deteriorated to 25.4% from 26.1% in the corresponding period a year earlier.

Profit before tax slumped to £213,000 from £2.34mln the previous year while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) eased to £13.0mln from £16.0mln the previous year.

Debt narrowed to £89.7mln from £112.6mln a year earlier.

The interim dividend has been cut back to 1.3p from 3.4p in 2018.

"The key priorities that we outlined for this year were to stabilise the business and to refocus on retail execution following a challenging 2018. We have made good progress on both of these fronts whilst also maintaining strong capital discipline, reducing debt whilst sustaining appropriate levels of investment,” claimed Jonathan Miller, the chief executive of McColl’s.

The business was hit hard in 2018 by the collapse of groceries wholesaler Palmer & Harvey and put out three profit warnings last year.

"I am encouraged by the performance we have delivered as we regain greater operational stability, but we still have more work to do in the second half of the year. The market remains highly competitive, with challenging trading conditions, given the unseasonable weather and uncertain economic climate,” Miller cautioned.

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