McColl's first-half hit by demise of P&H, CFO resigns

Convenience retailer McColl's was under the cosh on Monday as it posted a drop in first-half like-for-like sales following the demise of cigarette wholesaler Palmer & Harvey, said full-year adjusted earnings would be in line with the previous year and announced the resignation of chief financial officer Simon Fuller.

In a trading update for the 26 weeks to 27 May, the company said total revenue rose 19.2% to £601.7m thanks to the acquisition of around 300 convenience stores, but like-for-like revenue was 2.7% lower as availability was hit by supply chain disruption following the failure of Palmer & Harvey.

Meanwhile, adjusted earnings before interest, taxes, depreciation and amortisation ticked down to £16m from £16.5m in the first half of last year and pre-tax profit slipped to £2.3m from £4.5m.

The company kept its interim dividend steady at 3.4p per share.

Chief executive Jonathan Miller said: "I am incredibly proud of our team and the extraordinary efforts they have shown in dealing with one of the most challenging six months the business has ever faced. During the first half we experienced unprecedented supply chain disruption following the collapse of P&H last November. This temporary upheaval has inevitably impacted sales and margin performance in the circa 700 stores that were formerly supplied by P&H, and has also had knock-on effects on the rest of the estate.

"However, the switch to Morrisons supply in the 1,300 stores intended for this year has been accelerated, and will now be completed in early August, ahead of schedule. At the same time we have relaunched the Safeway brand at McColl's, providing our customers with a more competitive and higher quality food offer. We will therefore have a progressively stronger and simpler operational position with a more compelling offer as we move through the second half and into 2019."

McColl's said the early part of the second half has seen an improvement in sales, but it now expects full-year adjusted EBITDA at a similar level to 2017 following the challenging first half.

Also on Monday, the group announced that CFO Simon Fuller has decided to resign to take up the same role at Reach. The search for a successor will begin "without delay", the company said, and Fuller will remain at McColl's in his current role until a replacement has been appointed and an orderly handover has taken place. The exact date of his departure will be announced once confirmed.

Liberum downgraded the stock to 'hold' from 'buy' and slashed the price target to 200p from 300p as it cut its forecasts following the "disappointing" H1 numbers. The brokerage lowered its EBITDA forecasts by around 14% across FY18 to FY20 and said it now assumes a flat dividend per share for FY18 of 10.3p.

At 0910 BST, the shares were down 13.8% to 181p.