Shares in McColl’s Retail (MCLS) crashed 53% to just 3.3p after the convenience store operator posted yet another profit warning and confirmed that a bid for the whole business has been withdrawn.
In response to media speculation that it is at risk of collapse, the ‘community retailer’, which raised £30 million from shareholders in a cash call just six months ago, said it is remains in funding talks with its lenders after supply chain constraints squeezed its cash balances.
However, the operator of McColl’s and Morrisons Daily convenience stores continues to believe that ‘a financing solution will be found that involves its existing partners and stakeholders’.
BID HOPES FADE
In today’s statement, McColl’s confirmed that it recently received an approach for the whole business, but this offer has subsequently been withdrawn and there are ‘no further discussions with that party or any other party in relation to an offer for the whole business’.
According to the City rumour mill, EG Group, the petrol stations giant controlled by Mohsin and Zuber Issa and private equity firm TDR Capital, held discussions about making an offer for McColl’s but decided against it in the end.
McColl’s wholesale partner Morrisons, which has been taken over by private equity giant Clayton, Dubilier & Rice, is also thought to be interested in buying some of McColl’s stores should it lurch into administration.
McColl’s added that it has also received indications of interest for parts of the business and will consider all options ‘with the aim of maximising value for all stakeholders’.
FIRST QUARTER DISAPPOINTS
McColl’s warned adjusted earnings for the year to November 2022 are now expected to be ‘slightly behind’ market expectations, with year-end net debt in the region of £100 million, due to difficult market conditions experienced in the first quarter, ‘some of which are expected to continue through the first half’.
While product availability has improved since the start of the new financial year, McColl’s saw a ‘material step-down in footfall’ due to the Omicron outbreak over Christmas and while demand has since picked up, first quarter revenues are ‘behind expectations’.
On the positive side, margins are starting to strengthen as impulse product sales recover and McColl’s Morrisons Daily stores are delivering like-for-like sales growth that is ‘at least 20% better than non-converted, comparable stores, and ahead of the total convenience market’.
