3rd Dec 2018 09:37
LONDON (Alliance News) - McColl's Retail Group PLC on Monday issued a profit warning, blaming lower-than-expected conversion of sales to profit, transitional challenges, and difficult trading conditions.
Shares in the company lost more than a quarter of the value on the back of the warning and were trading 26% lower at 87.40 pence each Monday morning.
The British convenience shop and newsagent chain, trading under the trading names McColls, Martins and RS McColl, said it now expects adjusted earnings before interest, taxes, depreciation and amortisation for the 52-week period ended November 25 to be around GBP35 million, down from GBP44.0 million adjusted Ebitda recorded in the comparative year-ago period.
The company also predicted adjusted Ebitda for 2019 financial year to be no more than a modest improvement on financial 2018 due to continued consumer uncertainty, as well as cost pressures due to the increase in the national living wage.
McColl's said it experienced significant supply-chain disruption because of the collapse of wholesaler Palmer & Harvey and was forced to accelerate the rollout of Wm Morrison Supermarkets PLC-branded products to its 1,300 stores.
The speed of the transition created significant challenges and severely disrupted plans for the launch of a Safeway range of products in stores, the retailer said. It blamed a stronger performance in tobacco relative to other categories for lower sales conversion into profit.
"2018 has been a very difficult year for the business, marked by unprecedented supply chain disruption and ongoing challenges. Looking ahead, we expect competition in the grocery retail sector to remain intense, and we face into significant cost pressures," said Chief Executive Jonathan Miller.
The UK listed company recorded a 1.4% drop in full-year like-for-like sales. Same store sales for the final quarter of 2018 financial year were flat.
Total revenue was up 8.3% for the full-year, reflecting the annualisation of the 2017 acquisition. Fourth-quarter total revenue was down 0.5% year-on-year.
The company closed 66 under-performing stores during the year and generated GBP25 million proceeds in fourth quarter from sale and leaseback deals.
McColl's anticipates year-end net debt to be materially lower than its estimates at around GBP100 million. It is slated to release its results for 2018 financial year on February 18.
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