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McColl’s confirms talks with banks as it fights insolvency

McColl’s confirms it remains in ongoing discussions with its lending banks towards a longer-term agreement in relation to the balance of the facility

McColl’s Retail Group plc is reportedly trying to secure new funding to prevent its collapse, with millions of pounds of its bank debt being sold to hedge funds, according to Sky News.

The outlet said McColl’s is working with advisers on attempts to find a buyer or third parties willing to inject fresh capital into the business.

In an update McColl’s confirmed it remains in ongoing discussions with its lending banks, as previously announced on 29 November 2021, towards a longer-term agreement in relation to the balance of the facility.

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Additionally, the group revealed that it recently received an approach for the whole business, which has subsequently been withdrawn and there are no further discussions with that party or any other party in relation to an offer for the whole business. 

Also part of the announcement, McColl’s has announced its revenues fell 11% to £1.11bn for the 52-week period ending 28 November 2021 (FY21), compared to £1.25bn in FY20.

The group’s financial results were in line with its previous guidance, including adjusted EBITDA pre IFRS16 of £20m, down 31% year-on-year from £29.1m, and net debt pre IFRS 16 of £97m, down 7% from £89.6m in FY20.

Since the start of the new financial year, McColl’s has reported an improvement of product availability in stores. However, the business saw a drop in footfall due to Omicron over the Christmas period which impacted trading. 

While demand has reportedly picked up, revenues in the first quarter are behind expectations. Meanwhile, the group delivered two-year like-for-like sales growth of 5.9% in the 11 weeks to 13 February 2022. 

As a result of the difficult market conditions in the first quarter, the board now expects FY22 adjusted EBITDA to be slightly behind current market expectations, and net debt in the region of £100m at the end of FY22.

In September 2021, the group successfully completed a placing and open offer, raising net proceeds of £30m. Two-thirds of these net proceeds were raised to accelerate the Morrisons Daily store rollout in FY21 and FY22, and the balance of these funds was to be used to enhance the group’s working capital headroom.

Morrisons Daily stores are delivering like-for-like sales growth that McColl’s said is at least 20% better than non converted, comparable stores, and ahead of the total convenience market.

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