McColl Retail : Final Results

Preliminary audited results and Q1 trading update

27 February 2017 - McColl's Retail Group plc, one of the UK's leading convenience retailers, ('McColl's' or 'the Group') today announces its preliminary results for the 52 week period ended 27 November 2016, and a Q1 trading update for the 13 week period to 26 February 2017.

GOOD FINANCIAL PERFORMANCE

WHILST LAYING THE FOUNDATIONS FOR TRANSFORMATIONAL GROWTH

Financial summary:

· Total revenue up 1.9% to £950.4m (2015: £932.2m); sixth consecutive year of sales growth

· Total like-for-like (LFL) sales down 1.9%, trend consistent with prior year performance:

o LFL sales in premium convenience and food and wine stores down 1.0%

o LFL sales in newsagents and standard convenience stores down 3.3%

· LFL performance in recently acquired and converted stores up 0.8%

· Gross margin up 70 basis points to 25.1% (2015: 24.4%); increase driven by growing convenience mix, including fresh food and food-to-go

· Adjusted EBITDA£36.7m marginally down on prior year (2015: £37.7m), despite structural cost pressures and after £0.5m costs incurred in advance of Co-op store integration

· Profit before tax at £17.7m (2015: £21.1m), includes £3.1m of exceptional costs (2015: £0.6m)

· Basic earnings per share reduced from 15.4p (2015) to 12.8p; adjusted earnings per share, excluding exceptional items, slightly higher at 16.0p (2015: 15.9p)

· Proposed final dividend of 6.8p per share making a total of 10.2p per share (2015: 10.2p), pence per share maintained on enlarged share capital

· Net debt £37.0m, approximately 1.0 times Adjusted EBITDA

Operational and strategic highlights:

Increasing neighbourhood presence

· 298 quality convenience stores being acquired from the Co-op; 2017 integration on track

· 58 new convenience stores acquired during the year, bringing year-end total to 1,001 convenience stores (73% of estate)

Growing convenience offer

· 59 food and wine conversions (formerly newsagents) completed in year

· Excellent progress with food-to-go offering, over 30 new units rolled out and double-digit LFL growth

· Introduced a further 12 Subway franchises, following first successful partnership last year

· Convenience store refresh project piloted and encouraging early performance recorded

Excellent customer service

· 559 Post Offices in operation with over 90% offering extended opening hours

· 183 Amazon lockers now installed across the estate, in addition to 676 Collect+ points

· Contactless payment available in all stores, delivering an improved customer experience

Board appointment:

· Angus Porter to be appointed as Non-Executive Chairman when James Lancaster steps down following the Annual General meeting on 27 April 2017. James is to remain on the Board as a Non-Executive Director.

Jonathan Miller, Chief Executive, said:

'2016 has been a pivotal year for McColl's during which we were firmly established as a leading convenience retailer, delivered good financial performance in line with expectations and laid the foundations to deliver significant growth in the years ahead. With new appointments to our management team and a refreshed strategy in place, we are ready to begin the next stage of our journey to become your neighbourhood's favourite shop.

'We are pleased to have recorded our sixth successive year of revenue growth and to have met our target of operating 1,000 convenience stores, which truly marks the completion of our journey to become first and foremost a convenience business.

'Our transformational acquisition of 298 quality convenience stores from the Co-op substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers. We have a long history and proven track record of successfully integrating convenience stores into our estate, and are encouraged by the progress we have made in converting the stores so far.

'As James Lancaster prepares to step down as Non-Executive Chairman following our AGM I would like to thank him for the great job he has done for the business over the last 40 years. We are pleased that he will remain on the Board, and that Angus Porter, who joined the Board as a Non-Executive Director in April 2016, will be his successor.

'2017 promises to be an exciting year for McColl's. We remain very confident about achieving further progress against our strategy.'

Current trading and outlook

Total LFL sales were down by 1.3% in the 13 week period ended 26 February 2017, representing a fourth consecutive quarter of improvement. Total revenue for the quarter was up 2.1%.

The integration of the 298 Co-op stores is progressing well with the first store opening in Canvey Island on 31 January, and over 20 stores now trading as McColl's. We have been pleased with the early performance of the integrated stores and in the first few weeks they have traded in line with our expectations.

The outcome of the EU referendum last June has created some uncertainty for the sector and the economy as a whole, however we are committed to working proactively with our suppliers to ensure that we remain competitive for our 4.5 million customers. Although we have not so far seen any discernible impact on customer behaviour following the referendum, wider industry data shows that concerns around price have resurfaced and customers continue to shop around, shopping little and often to manage their budgets. As a leading convenience retailer, we have an important role to play for many of the UK's households. We remain confident about the relevance of our strategy and our goal to be your neighbourhood's favourite shop.

1 Like-for-like sales reflect sales from stores that have traded throughout the current and prior financial periods, and sales include VAT but exclude sales of fuel, lottery and mobile phone top up

2 LFL sales in stores acquired or converted between 2014-2015 which have traded for over 12 months

3 Where adjusted measures are used this is in order to more appropriately reflect the underlying performance of the business

4 Adjusted EBITDA is EBITDA before property gains and losses and exceptional items

5 Exceptional items refer to one off costs related to exiting legacy properties, property impairment and, in 2016 the acquisition of 298 Co-op stores

Enquiries

Please visitwww.mccolls.co.ukor for further information, please contact:

McColl's Retail Group plc Media enquiries:

Jonathan Miller, Chief Executive Headland

Simon Fuller, Chief Financial Officer Lucy Legh, Simon Burton,

Naomi Kissman, Head of Investor Relations Rob Walker

[phone] [phone]

[e-mail]

About McColl's Retail Group

McColl's is a leading neighbourhood retailer operating 1,375 convenience stores and newsagents. We operate 1,001 McColl's branded UK convenience stores as well as 374 newsagents branded Martin's, except in Scotland where we operate under our heritage brand, RS McColl. In addition we are also the largest operator of Post Offices in the UK.

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Chairman's statement

It has been a momentous year for McColl's. Not only has the business delivered its sixth successive year of sales growth, and achieved the target of operating 1,000 convenience stores, but we have made a significant acquisition of 298 stores from the Co-op. This will enable McColl's to further cement itself as a leading convenience operator and will drive sales and earnings growth in the future.

Development of the Board

As I announced last year, I will be stepping down as Chairman in April, following the AGM. After consultation with our shareholders and with the unanimous support of the Board, I am happy to accept the invitation to remain on the Board as a Non-Executive Director.

As a founder of the Company in 1973, I have seen the business grow from a standing start to its current position as a leading neighbourhood convenience retailer. Under my leadership, we completed a management buyout of the Company in 1995, a secondary buyout in 2005 and the IPO in 2014.

Angus Porter who joined the Board in April 2016 as a Non-Executive Director, will become our new Chairman. In addition to substantial PLC Board experience, he brings with him tremendous experience and expertise in the fields of brand and marketing.

Having worked with Jonathan Miller for over 20 years, I am happy to hand over the reins to him as the new Chief Executive. He was appointed as CEO in April 2016 following a rigorous selection process and I am confident that he will do a great job of steering McColl's through its next stage of growth.

I would like to thank Sharon Brown and Georgina Harvey for their exemplary chairmanships of the Audit Committee and the Remuneration Committee respectively. They have certainly made my job a lot easier. Georgina should also be congratulated for taking up the role of Senior Independent Director in May 2016.

Jonathan has been succeeded in his role as Chief Financial Officer by Simon Fuller who joined McColl's as Deputy Chief Financial Officer in 2015. Simon brings a wealth of retail financial experience and is a great addition to the Board.

These appointments will ensure that McColl's continues to make further progress in complying with the UK Corporate Governance Code.

Dividend

The business continues to generate strong cash returns which we use to fund the capital investment required to deliver sustainable growth in revenue and profit, alongside dividend payments to shareholders.

The Board is recommending a final dividend of 6.8 pence per share, making a total dividend for the period of 10.2 pence. This dividend will be paid on 24 May 2017, to shareholders on the register at the close of business on 5 May 2017, subject to approval at the forthcoming Annual General Meeting.

From 2017, following the acquisition of the 298 Co-op stores, we expect the pence per share of dividend payments to increase as we integrate the new stores. To maintain the right balance between dividends, capital investment and deleveraging, and because we expect our earnings to significantly increase as a result of the acquisition, in the short-term we will reduce the dividend pay-out ratio from c.60% to c.50% (of annual reported profits after tax, before exceptional gains, but after exceptional costs).

Looking forward

I feel a huge sense of pride when I look at how the business has grown over the last 40 years, from a small vending business to one of the UK's leading convenience retailers. There are exciting times ahead for McColl's and I have every confidence in the new management team. 2017 will be a busy year and whilst the market is still tough, I know our team of over 19,500 colleagues will continue to work hard and we can look forward to further success.

James Lancaster FCA

Chairman, Non-Executive Director

Chief Executive's Review

2016 was a pivotal year for McColl's during which we were firmly established as a leading convenience retailer, and positioned ourselves to deliver significant growth in the years ahead. With a new management team and strategy in place we are ready to begin the next stage of our journey to become your neighbourhood's favourite shop.

The McColl's team

It's over 40 years since James Lancaster founded the Group and through his leadership established McColl's as a real force in neighbourhood retail. My own journey at McColl's started 26 years ago and I feel enormously proud that this year I have been given the opportunity to lead the business.

I would like to thank James for his support and guidance over the years, and I am pleased that, as he steps down from his role as Non-Executive Chairman, we are able to retain the benefit of his experience on the Board. I am also pleased in the appointment of Angus Porter as his successor.

I am equally proud of just how much has been achieved by the business in my first year as Chief Executive. One of my first tasks was to make sure that we had the right executive team in place. I'm delighted that our new management team is such a strong mix of talent, bringing together those of us with deep experience of McColl's with some highly capable new recruits who can bring an outside perspective. Together we have over 150 years of retail expertise.

Sixth successive year of sales growth

Last year was not without its challenges. The market remains very competitive, deflation was a persistent feature in some core categories, and the introduction of the National Living Wage continued to put pressure on costs. We faced into these challenges and I'm pleased that we were able to deliver good growth in sales and significantly increase our gross margin. Whilst profit was down slightly, against the back-drop of structural cost pressures, this was a good performance.

Our total sales were up 1.9%, a slightly lower rate of growth than last year as a result of the timing of our new store opening programme. Like-for-like (LFL) sales were down 1.9% in the year, held back by deflation and the continued decline in traditional categories such as tobacco, news and magazines. However, we saw an improving trend in LFL sales towards the end of the year and we maintained a strong performance in our newly acquired and converted stores, where LFL sales were up 0.8%. This endorses our strategy of investing in our estate to drive growth.

1,000 convenience stores - a significant milestone

In 2014 when we listed on the Stock Exchange we set a target of operating 1,000 convenience stores by the end of 2016. I'm delighted that we have achieved this target, with the opening of our Erdington store in November. In total, we acquired 58 new stores through the year as part of our goal to extend our neighbourhood presence, bringing our number of convenience stores to 1,001 and our total estate to 1,375.

A transformational acquisition

In July we announced that we would acquire 298 convenience stores from the Co-op for a cash consideration of £117m. As I said at the time, this is a truly transformational acquisition for McColl's. It is a rare opportunity to buy a large number of quality, profitable stores that will complement our existing estate. On a full year basis, we expect the new stores to increase our total sales by a third and increase our EBITDA by around 40%. Having received clearance from the Competition & Markets Authority (CMA) in December we have begun the process of converting the stores, with the first conversion opening at the end of January. We expect to complete this programme by August 2017.

Growing our convenience offer

In the last year we have made significant progress developing our convenience offer. We have completed a further 59 food and wine conversions - reformatting our traditional newsagents by introducing a focused range of grocery and alcohol products. We have also continued to make excellent progress with our food-to-go offer with total sales up 19%. We've introduced over 30 new food to go units and following the success of our first Subway unit last year, we now have 13 outlets, with plans for more in the year ahead. For the first time we have introduced a 'free from' range to a number of stores and we have begun our 'focus on fresh' trial, introducing a new fresh offer in over 20 stores.

Excellent customer service

Today's customer expects more from their local shop than just being able to pick up a few essentials like bread and milk. Of course they want a warm and friendly service, but they also want us to help make life easier for them.

We believe a convenience store needs to be just that - convenient. That is why over 90% of our 559 post offices are open from early in the morning until late in the evening. We now have 183 Amazon lockers and over 670 Collect+ points, so that customers can pick up their parcels at a time that suits them. Also this year we've made contactless payment available in all stores making it faster and easier for customers at the till.

A simple and efficient operation

Our business is built on a straightforward, low cost operating model and as you would expect, our focus on cost control has continued. This year we've rolled out LED lighting to all of our stores, creating a better store environment for customers and we expect to reduce our lighting costs by 35%. We continue to focus on automating routines in our stores and, for example, have one of the most efficient news and magazines returns processes in the industry.

Optimising our estate

We continue to review our estate to ensure it makes best use of our capital and cash. This year, in addition to converting 59 of our newsagents into our food and wine format, we closed or disposed of 34 underperforming stores, including 20 as part of our previously announced newsagent disposal programme.

Your neighbourhood's favourite shop

The new management team has taken the opportunity to comprehensively review our strategy. We want to be known as your neighbourhood's favourite shop and we need the right plans in place to achieve this.

Our overall strategic goals remain largely consistent - we will continue to grow our market share by increasing our neighbourhood presence, we will broaden our convenience offer and strive to provide excellent customer service.

We will focus on five key building blocks - brand, offer, customer, stores and colleagues. We have developed comprehensive, deliverable plans behind each of these building blocks, and we will be doing more than ever to communicate these to colleagues, so that everyone from the shop floor to the boardroom understands our goals and their role in achieving them.

Working on our key building blocks

In the year ahead we will begin to execute the next stage of our business plans, making sure that we are working on these key building blocks.

To some we are still perceived as a newsagent business, reflecting our heritage, but as we've grown and become a leading convenience retailer we want all our stakeholders to understand who we are and what to expect from us. Reinforcing the credentials of McColl's as a convenience brand will be a critical area of work in 2017.

We will continue to improve our offer for customers, focusing on top-up areas like fresh and chilled, alongside food-to-go. This will also help us improve our sales mix, moving us away from traditional categories such as news and tobacco that are in decline, and into higher growth, higher margin categories. To reflect the changing shape of our business we have set ourselves a future target, for grocery and alcohol to be our biggest individual sales category.

We'll be developing our customer insight capability to make sure we better understand our customers. We will also explore different ways to engage customers whether that is using our Plus card or new digital channels.

We will continue to improve our stores, reviewing standards across the estate. Following our successful pilot in West Horndon, where we have seen significant sales uplifts in key categories such as fresh, we will commence further work on existing store conversions.

We will be doing more than ever this year to engage our colleagues right across the business and ensure everyone has a voice. We are developing our people plan to support colleagues throughout the business and develop our talent pipeline as the business grows. We also look forward to welcoming our new colleagues from the Co-op stores, I know they'll do a great job in supporting customers through the changes in their store.

Our values

There is a strong supportive culture at McColl's, and as we develop and move forward it's important that we preserve this. Alongside our work to review our strategy we have been listening to colleagues to get a better understanding of our shared values. Being able to talk about our values more clearly will enable us to use them as a guide in all our decisions, and will be critical in our journey to become your neighbourhood's favourite shop.

Our values:

• Put the customer first

• Strive to be simple and consistent in everything we do

• Be caring and compassionate towards our customers and colleagues

• Make a difference to communities by getting involved in local good causes

An exciting year ahead

Our main focus for 2017 will be ensuring that there is a smooth transition of the Co-op stores to the McColl's business. We're a business that has grown through acquisition and we are well-experienced at transitioning stores, which gives us great confidence that the integration will be a success. Once these stores have transferred we will continue to look for other acquisition opportunities. The market remains highly fragmented and we believe there are plenty of opportunities for consolidation - there are after all over 50,000 convenience stores in the UK and multiple retailers such as ourselves only account for around 10% of these. However, more importantly, our stores will continue to be focused in neighbourhood locations - where people live - making them community hubs for so many of our customers.

2017 is going to be an exciting year for the team at McColl's and our store colleagues will have the most important job, serving our customers old and new. I'm looking forward to leading them through the months ahead and I'm confident that they will continue to do a great job.

Jonathan Miller

Chief Executive

Financial Review - Sound fundamentals underpin our future growth ambitions

In a highly competitive industry like grocery retailing, a business such as ours requires a solid base upon which to build for the future.

2016 undoubtedly provides a solid base for McColl's, with our sixth consecutive year of sales growth, a record gross margin and the announcement of a transformational acquisition that will drive significantly increased earnings and value for shareholders.

Revenue grows to record level

I am happy to report that our full year revenue grew to £950.4m (2015: £932.2m), an increase of 1.9%. This year-on-year growth was principally driven by our ongoing store investment programme, with approaching 120 stores acquired or converted (from a newsagent to a small convenience store). However, we continue to be impacted by declines in traditional categories such as tobacco and news, alongside some competitor-driven price deflation, primarily in grocery and fresh areas. This gave rise to a full year like-for-like (LFL) decline of 1.9%, which is a consistent trend with the prior year. Importantly, however, there was a trend of improvement in consecutive quarters from Q2. Additionally, sales in our premium convenience and food and wine stores, the prioritised focus of our recent investment, were up by 0.8% LFL.

Continued gross margin improvement

In line with our strategy to evolve our mix of stores and products, gross profit margins increased significantly year-on-year to 25.1% (2015: 24.4%). We enjoy the strongest overall gross margins in our premium convenience stores, which through our investment programme are becoming an ever-greater proportion of our estate. Also, as lower margin traditional categories decline, we are introducing higher margin products such as fresh food and food-to-go. We expect this margin trend to continue into the future. In terms of overall value, total gross profit grew by 4.9%, from £227.5m to £238.7m.

Operating profit impacted by wage inflation

Operating profit before exceptional items decreased by £0.8m to £23.5m (2015: £24.3m), and underlying operating profit (operating profit excluding property gains and losses, which are not core to our business) was down £1.5m year-on-year. Materially, this reduction is due to legislative wage inflation that was not fully offset by growth in total revenue and gross margin. We also expensed some costs (£0.5m) relating to the early recruitment of field and support teams and setting up of logistics, to support the transition of the Co-op store portfolio. In aggregate, administrative expenses, before exceptional costs, increased as a percentage of revenue from 24.3% to 25.2%. A number of self-help initiatives partly alleviated this, for example the roll-out of LED lighting, and we have more efficiency projects planned for the future. Overall, however, we expect this percentage of revenue to increase in the short-to-medium term, due to further wage inflation and the higher costs (but also higher margins) of operating convenience stores.

Other operating income remained similar to last year at £23.1m (2015: £23.2m).

On the 13th July we announced the £117m acquisition of 298 convenience stores from the

Co-op, and it was given unconditional CMA clearance on the 20th December. In the year we had exceptional charges of £2.0m comprising legal fees, due diligence and other professional adviser costs relating to this transaction. The balance of these costs will fall into 2017. We also had exceptional charges of £0.3m relating to legacy properties, most significantly the costs associated with surrendering the lease for a former office building in Woking. Finally, we have reflected a £0.8m exceptional charge in property costs, relating to our previously announced programme to dispose of 97 marginal newsagents. This is to reflect a lower level of anticipated net proceeds and potential future lease obligations for loss-making stores, given a softening of market conditions compared to our original expectations.

Net finance costs slightly increased

In 2016 we continued to benefit from a lower cost of borrowing, following our 2015 refinancing.

Net finance costs before exceptional items slightly increased to £2.7m. An exceptional charge of £0.2m has also been made relating to undrawn facility fees for the new term loan to support the Co-op stores acquisition.

Profit before tax reduced by exceptional costs

Profit on ordinary activities before taxation reduced to £17.7m (2015: £21.1m). This principally reflects the impact of cost pressures and exceptional costs.

Stable effective rate of tax

The tax charge for the period reduced to £3.7m (2015: £5.0m), representing an effective tax rate of 21.2% (2015: 23.8%). This effective rate compares to the statutory rate for the period of 20.0%. Excluding the current year impact of disallowable costs relating to our acquisition, alongside the effect of FRS 101 transition, and the prior year deferred tax adjustment, the effective tax rate is broadly consistent year-on-year.

Basic earnings per share impacted by exceptional items

Basic earnings per share reduced to 12.8 pence (2015: 15.4 pence). Adjusted earnings per share, stated before exceptional items, increased slightly to 16.0 pence (2015: 15.9 pence).

Dividend per share maintained

I am pleased to confirm that the board has recommended a final dividend of 6.8 pence per share (2015: 6.8 pence). As with the interim dividend, this dividend per share has been preserved despite the additional shares in issue, as a consequence of the July placement of 9.99% of issued share capital. Accordingly, the total dividend for the period has been maintained at the prior year level of 10.2 pence per share.

Balance sheet strengthened through investment

We have continued to grow the business, increasing total shareholders' funds at the end of the period by £14.5m to £140.5m (2015: £126.0m). Our ongoing programme of capital investment increased the book value of goodwill and other intangibles, property, plant and equipment by £10.8m to £221.1m (2015: £210.3m). Current assets at the end of the period marginally reduced to £96.7m (2015: £99.9m). This reduction of £2.2m is explained by a drop in cash and cash equivalents (as we worked to minimise our gross borrowings), partly offset by a growth in stock and debtor balances, as the business enlarged.

Our current liabilities increased to £139.1m (2015: £135.8m), reflecting higher trade and other payables, once again driven by business growth.

Non-current liabilities reduced to £50.2m (2015: £58.3m), as we continued to reduce our facility borrowings, in part supported by the receipt of share placement monies ahead of the final completion of the Co-op stores acquisition.

Pension schemes stable, actuarial review underway

We operate two defined benefit pension schemes, the TM Group Pension Scheme and the TM Pension Plan, both of which are closed to future accrual. The combined accounting surplus in the two schemes at the end of the period was consistent year-on-year at £6.1m.

An actuarial review of the two schemes, which commenced in 2016, will conclude by June 2017.

This assessment will focus on both future funding levels, alongside the broader pension strategy.

The Company currently contributes approximately £1.5m per year, inclusive of fees and levies.

Investing for future growth

The cash generation of McColl's continues to support significant investment in the business and a strong dividend yield for shareholders, whilst also maintaining an appropriate level of debt.

Net cash provided by operating activities reduced in the year to £21.6m (2015: £43.5m). However, within the 2015 performance was an approximately £12m year-on-year working capital benefit from the reversal of the 2014 53 week (which drove additional payments in 2014). The remaining working capital difference is principally explained by the prepayment of acquisition fees (including a deposit of £1m) that contributed to a working capital outflow of £4.6m (2015: underlying £1.2m outflow), and the cash payments to surrender the Woking office lease.

Adjusted EBITDA (see note 4 for definition) reduced by £1.0m to £36.7m (2015: £37.7m), which also part contributed to the year-on-year reduction in cash generated.

Net capital expenditure, which excludes the acquisition of stock, increased by £1.8m to £25.7m (2015: £23.9m). This reflects our continued investment in the business for growth, including our programme of store acquisitions and conversions, alongside the development and extension of our food-to-go offer and the installation of LED lighting across our estate. In the period we added 58 premium convenience stores, completed 59 food and wine conversions and delivered 12 new Subways in our stores.

Net finance expense of £2.7m was slightly higher than the prior year. The interim and final dividends paid in the period totalled £11.0m, up slightly in total cash terms due to the additional shares in issue for the interim payment.

Net debt at the end of the period was £37.0m (2015: £31.6m), representing 1.0 times adjusted EBITDA (2015: 0.8 times adjusted EBITDA).

Debt refinancing to support acquisition

During the period, we renegotiated our debt facilities, to support the £117m acquisition of stores from the Co-op. This was predominantly a debt-supported deal, which will therefore maximise value for shareholders and make best use of the Company's available sources of funding. On the effective date of the transaction, the current £85m working capital facility will be extended to £100m and be supplemented by a £100m repayment term loan. Both of these elements will run through until July 2021, with the borrowing rate reducing as the business deleverages. At the end of the period drawings against the current working capital facility were reduced at £37.0m (2015: £44.5m).

Future outlook

2016 has been a landmark year in the history of McColl's and we have set the foundations to deliver significant growth in 2017. The immediate focus of the business will be to embed our new stores and harmonise their operations, whilst also beginning to deliver synergies and leverage our significantly increased scale. Alongside this, we will continue to focus on self-help measures to alleviate cost inflation and invest in our estate for growth now and into the future. Although the 2016 Brexit decision has created some macroeconomic uncertainty in the UK, we are confident that we have a clear business and financial strategy that will enable us to succeed in 2017 and the years beyond.

Simon Fuller FCA

Chief Financial Officer

Responsibility statement

The responsibility statement has been prepared in connection with the Company's full Annual Report for the period ended 27 November 2016. Certain parts of the annual report are not included in this announcement, as described in note 1.

We confirm that to the best of our knowledge:

· the Financial Statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

By order of the board

Simon Fuller

27 February 2017

Consolidated income statement

52 week period ended 27 November 2016

		52 week period ended 27 November 2016						52 week period ended 29 November 2015
	Notes	Before exceptional items		Exceptional items (note 3)		After exceptional items		Before exceptional items		Exceptional items (note 3)		After exceptional items
		£'000		£'000		£'000		£'000		£'000		£'000
Revenue	2	950,403		-		950,403		932,227		-		932,227
Cost of sales		(711,752)		-		(711,752)		(704,693)		-		(704,693)
Gross Profit		238,651		-		238,651		227,534		-		227,534
Administrative expenses		(239,443)		(2,186)		(241,629)		(226,882)		(625)		(227,507)
Other operating income		23,147		-		23,147		23,182		-		23,182
Profits/(losses) arising on property-related items		1,109		(757)		352		437		-		437
Operating profit		23,464		(2,943)		20,521		24,271		(625)		23,646
Finance expense		(2,723)		(152)		(2,875)		(2,700)		-		(2,700)
Finance income		13		-		13		165				165
Net finance costs		(2,710)		(152)		(2,862)		(2,535)		-		(2,535)
Profit on ordinary activities before taxation		20,754		(3,095)		17,659		21,736		(625)		21,111
Tax on profit on ordinary activities	5	(3,406)		(337)		(3,743)		(5,141)		127		(5,014)
Profit on ordinary activities after taxation		17,348		(3,432)		13,916		16,595		(498)		16,097
Earnings per share	7	16.0p				12.8p		15.9p				15.4p

Consolidated statement of comprehensive income
52 week period ended 27 November 2016
		Notes		52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Profit for the period				13,916		16,097
Items of other comprehensive income that will not be reclassified to profit or loss
Actuarial (loss)/gain recognised on pension scheme				(1,213)		4,000
UK deferred tax attributed to actuarial gain:
Arising from the origination of and reversal of current and deferred tax differences		5		168		(720)
Arising from changes in the tax rate		5		-		26
UK corporation tax		5		117		-
Other comprehensive income for the period				(928)		3,306
Total comprehensive income for the period				12,988		19,403

Consolidated balance sheet
27 November 2016
		Notes		27 November 2016 £'000		29 November 2015 £'000
Non-current assets
Goodwill		8		153,058		144,013
Other intangible assets		8		1,293		1,903
Property, plant and equipment		9		66,783		64,361
Investments				18		18
Pension scheme surplus				10,946		9,806
Total non-current assets				232,098		220,101
Current assets
Inventories				55,041		51,311
Trade and other receivables				34,609		28,538
Cash and cash equivalents				3,757		14,531
Assets held for sale		9		4,286		5,550
Total current assets				97,693		99,930
Total assets				329,791		320,031
Current liabilities
Trade and other payables				(130,021)		(125,371)
Provisions				(1,647)		(2,210)
Corporation tax				(2,294)		(2,519)
Liabilities associated with assets held for sale		9		(5,137)		(5,662)
Total current liabilities				(139,099)		(135,762)
Net current liabilities				(41,406)		(35,832)
Non-current liabilities
Borrowings		11		(35,961)		(43,212)
Other payables				(4,160)		(3,139)
Provisions for liabilities				(365)		(2,238)
Deferred tax liabilities				(4,856)		(6,031)
Net pension liability				(4,844)		(3,684)
Total non-current liabilities				(50,186)		(58,304)
Total liabilities				(189,285)		(194,066)
Net assets				140,506		125,965
Shareholders' equity
Equity share capital		13		115		105
Share premium account		13		12,579		47,836
Retained Earnings				127,812		78,024
				140,506		125,965

Consolidated statement of changes in equity
52 week period ended 27 November 2016
		Called up share capital £'000		Share premium £'000		Retained earnings £'000		Total £'000
Balance at 30 November 2014		105		47,836		69,302		117,243
Profit for the period		-		-		16,097		16,097
Actuarial gain recognised on pension scheme		-		-		3,306		3,306
Total comprehensive income for the period						19,403		19,403
Dividends paid		-		-		(10,681)		(10,681)
Balance at 29 November 2015		105		47,836		78,024		125,965
Profit for the period		-		-		13,916		13,916
Actuarial gain recognised on pension scheme net of tax		-		-		(928)		(928)
Total comprehensive income for the period						12,988		12,988
Dividends paid		-		-		(11,036)		(11,036)
Issue of share capital		10		12,579		-		12,589
Share premium transfer		-		(47,836)		47,836		-
Balance at 27 November 2016		115		12,579		127,812		140,506

1. On 18 May 2016, the Group received court approval for the special resolution, proposed and passed at the AGM, to cancel its share premium account of £47,836,000 and transfer this amount to distributable reserves. This was registered at Companies' House on 23 May 2016.

Consolidated cash flow statement
52 weeks ended 27 November 2016
		Notes		52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Net cash provided by operating activities		14		21,649		43,522
Cash flows from investing activities
Acquisition of property, plant and equipment				(15,920)		(17,593)
Proceeds from sale of property, plant and equipment				5,874		7,940
Acquisition of businesses, net of cash acquired		10		(15,656)		(14,239)
Finance income				13		165
Net cash used in investing activities				(25,689)		(23,727)
Cash flows from financing activities
Repayment of loans				(7,500)		(1,500)
New/(repayment of) hire purchase loans				1,921		(1,658)
Issue costs				(517)		(140)
Proceeds on issue of shares				13,076		-
Dividend paid		6		(11,036)		(10,681)
Finance expense				(2,479)		(2,503)
Hire purchase interest paid				(199)		(178)
Net cash used in financing activities				(6,734)		(16,660)
(Decrease)/increase in cash and cash equivalents				(10,774)		3,135
Cash and cash equivalents at beginning of period				14,531		11,396
Cash and cash equivalents at end of period				3,757		14,531

1. Basis of preparation

McColl's Retail Group plc (the 'Company') is a company incorporated in the United Kingdom under the Companies Act. The address of the Company's registered office is McColl's Retail Group, McColl's House, Ashwells Road, Brentwood, Essex CM15 9ST. The principal activity of the Company and its subsidiaries (collectively, the 'Group') is the provision of convenience and newsagent services in the UK.

The Group financial statements for 2016 consolidate the financial statements of McColl's Retail Group plc and all its subsidiary undertakings drawn up to 27 November 2016. The Group's accounting period covers the 52 weeks ended 27 November 2016. The comparative period covered the 52 weeks ended 29 November 2015. Acquisitions are accounted for under the acquisition method of accounting.

The Group financial statements have been prepared based on the Company's financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU on the going concern basis and in accordance with IFRS and IFRS Interpretations Committee (IFRIC) interpretations, as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reported under IFRS. The consolidated financial information is presented in sterling, the Group's functional currency, and has been rounded to the nearest thousand (£'000).

The financial information set out above does not constitute the Company's statutory accounts for the years ended 27 November 2016 or 29 November 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRSs, this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in March 2017.

The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Going concern

In making their going concern assessment the Directors have considered the Group's business activities, its financial position, the market in which it operates and the factors likely to affect its future development.

The Directors have reviewed the Group's forecasts, taking into account a range of sensitivities, and how they impact headroom against its bank facilities, and its ability to meet its capital investment and operational needs.

In August 2015 the Group completed an amended £85,000,000 revolving credit facility and a £15,000,000 accordion for the Group. This facility extended the Group's existing £85,000,000 plus £15,000,000 accordion facilities which were due to expire in July 2018 until July 2020 at margins of 1.5% above LIBOR. In July 2016, the Group completed an amended £100,000,000 revolving credit facility and £50,000,000 accordion for the Group. The Group has net current liabilities of £43,500,000 at the period end. The Directors have additionally considered this position to determine if it presents any going concern issues. The Group is profitable and cash generative and is supported by the revolving credit facility. As at 27 November 2016 £37,000,000 was drawn against the facility, and therefore there is sufficient headroom to meet the Group's debts as they fall due.

The Directors believe the Group is in a strong financial position due to its profitable operations and strong cash generation and that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.

Adoption of new and revised standards:

In the current financial period, the Group has applied for the first time:

Amendments to IAS32 'Offsetting Financial Assets and Financial Liabilities'

Amendments to IAS36 'Recoverable Amount Disclosures for Non-Financial Assets'

Amendments to IAS39 'Novation of Derivatives and Continuation of Hedge Accounting'

In addition to the above new standards or amendments, there are additional new standards and amendments which will not be applicable to the Group and as such have not been listed.

New standards in issue but not yet effective:

A complete list of standards that are in issue but not yet effective is included with our full accounting policies in an appendix to the Annual Report.

With the exception of IFRS 16, which is under review, the Directors anticipate that the adoption of these standards and interpretations in future periods will have no significant impact of the Group's financial statements when the relevant standards come into effect.

2. Segmental analysis and revenue

In accordance with IFRS 8 'Operating segments' an operating segment is defined as a business activity whose operating results are reviewed by the chief operating decision maker and for which discrete information is available. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. The principal activities of the Group are currently managed as one segment. Consequently all activities relate to this segment, being the operation of convenience and newsagent stores in the UK.

An analysis of the Group's revenue is as follows (all continuing operations):-

		52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Sale of goods		950,403		932,227
Property rental income		2,985		2,693
Other operating income		20,162		20,489
		23,147		23,182
Investment revenue		13		165
Total revenue as defined in IAS 18		973,563		955,574

3. Exceptional items

Due to their significance or one-off nature, certain items have been classified as exceptional as follows:-

		52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Cost of acquiring Co-op stores		2,004		-
Impairment and onerous lease provisions related to assets held for sale		757		-
Costs relating to closure of non-trading sites		334		-
Redundancy and restructuring costs		-		625
		3,095		625
Tax effect		337		(127)
		3,432		498

1 Cost of acquiring Co-op stores

On 13 July 2016 management entered into an agreement to purchase 298 convenience stores from the Co-op, for an aggregate consideration of £117m. The acquisition will be integrated during 2017 by Martin McColl Limited, a wholly owned subsidiary of the Group. The acquisition was approved by the Competition & Markets Authority on 20 December 2016. The exceptional costs relate to costs which the Group has incurred during the process, such as legal fees and due diligence fees.

2 Assets held for sale

Following a review of its portfolio in 2015, the Group decided to sell 97 of its newsagents. The Group continues to focus on the strategy of developing and expanding the convenience business and identified these stores as not being part of its long term planning. Please refer to note 9.

4. Adjusted EBITDA

In order to provide shareholders with a measure of the true underlying performance of the business and to allow a more understandable assessment of its position, the Group makes adjustments to profit before tax. These adjustments are one-off in nature, material by size and are considered to be distortive of the true underlying performance of the business. Exceptional items relate to costs or incomes that derive from events or transactions that fall within the normal activities of the Group, but which are excluded from the Group's underlying profit before tax measure due to their size and nature in order to better reflect management's view of the performance of the Group. The underlying profit before tax measure (profit before exceptional items) is not a recognised profit measure under IFRS and may not be directly comparable with adjusted profit measures used by other companies. Details of exceptional items are set out in note 3.

			52 weeks ended 27 November 2016 £'000				52 weeks ended 29 November 2015 £'000
Operating profit before exceptional items			23,464				24,271
Depreciation and amortisation (note 14)			14,305				13,678
Impairment of property, plant and equipment and onerous leases			308				180
Profit on disposal of fixed assets			(1,422)				(437)
			36,655				37,692

5. Taxation

				52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Income statement
Current tax:
Current tax on profit for the period				5,319		4,556
Adjustments in respect of prior periods				(283)		10
				5,036		4,566
Deferred tax:
Origination and reversal of temporary differences				(955)		(13)
Associated with pension deficit				69		163
Arising from change in tax rate				(125)		(444)
Adjustments in respect of prior periods				(282)		742
				(1,293)		448
Income tax expense for the period				3,743		5,014
Other comprehensive income
Deferred tax in respect of actuarial valuation of retirement benefits				(168)		720
Corporation tax				(117)		-
Arising from change in tax rate				-		(26)
				(285)		694

The tax charge for the period can be reconciled to accounting profit as follows:-

	52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015£'000
Profit before tax	17,659		21,111
Profit before tax multiplied by the blended applicable corporation tax rate for 2016 of 20.00% (2015: 20.34%)	3,532		4,294
Disallowed expenses and non-taxable income	901		412
Adjustments in respect of prior years	(565)		752
Arising from change in rate of tax	(125)		(444)
Total tax expense	3,743		5,014

Changes in tax rates and factors affecting the future tax charge

In July 2015, the UK Government announced its intention to reduce the corporation tax rate to 19% with effect from 1 April 2017. In March 2016, the UK Government announced its intention to reduce the corporation tax rate to 17% with effect from 1 April 2020. These changes were substantively enacted at the balance sheet date and therefore have been reflected in the deferred tax provisions.

6. Dividends

		52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Equity dividends on ordinary shares:
Final dividend for 2015: 6.8p (2014: 6.8p)		7,120		7,120
Interim for 2016: 3.4p (2015 :3.4p)		3,916		3,560
Total dividends paid		11,036		10,680
Proposed for approval by shareholders at the AGM:
Final dividend for 2016: 6.8p (2015: 6.8p)		7,832		7,120

The proposed final dividend is subject to approval by shareholders passing a written resolution and accordingly has not been included as a liability in these financial statements.

			52 weeks ended 27 November 2016		52 weeks ended 29 November 2015
Basic weighted average number of shares			108,505,494		104,712,042
Diluted weighted average number of shares			108,505,494		104,712,042
Profit attributable to ordinary shareholders (£'000)			13,916		16,097
Basic earnings per share			12.8p		15.4p
Diluted earnings per share			12.8p		15.4p

Adjusted earnings per share:
Profit attributable to ordinary shareholders				13,916		16,097
Exceptional items (note 3)				3,095		625
Tax effect of adjustments (note 3)				337		(127)
Profit after tax and before exceptional items (note 5)				17,348		16,595
Prior year deferred tax adjustment (note 5)				(282)		712
Adjusted profit after tax and before exceptional items				17,066		17,307
Adjusted earnings per share (pre prior year deferred tax adjustment)				16.0p		15.9p
Adjusted earnings per share (post prior year deferred tax adjustment)				15.7p		16.5p

			Other intangible assets		Goodwill		Total
			£'000		£'000		£'000
Cost
At 30 November 2014			5,086		141,668		146,754
Additions			620		8,711		9,331
Fair value adjustment on goodwill			-		(1,276)		(1,276)
Disposals			-		(349)		(349)
Transferred to assets held for sale			-		(1,223)		(1,223)
At 29 November 2015			5,706		147,531		153,237
Additions			166		9,662		9,828
Transferred from assets held for sale			-		1,223		1,223
Fair value adjustment on goodwill			-		(1,410)		(1,410)
Deferred tax on fair value adjustment of land and buildings					286		286
At 27 November 2016			5,872		157,292		163,164
Accumulated amortisation and impairment
At 30 November 2014			3,047		4,556		7,603
Movement in provision			756		-		756
Impairment of disposals			-		(322)		(322)
Transferred to assets held for sale			-		(716)		(716)
At 29 November 2015			3,803		3,518		7,321
Amortisation			776		-		776
Net transferred from assets held for sale			-		716		716
At 27 November 2016			4,579		4,234		8,813
Net book value
At 29 November 2015			1,903		144,013		145,916
At 27 November 2016			1,293		153,058		154,351

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units ('CGUs') that are expected to benefit from that business combination. Before recognition of impairment losses, the carrying amount of goodwill had been allocated as follows:-

			27 November 2016		29 November 2015		30 November 2014
			£'000		£'000		£'000
CGU1			95,865		95,628		95,476
CGU2			6,504		6,500		6,525
CGU3			50,689		42,392		35,111
Transferred to assets held for sale			-		(507)		-
			153,058		144,013		137,112

The three Groups are as follows:

CGU1 - Goodwill which arose from a management buy-out in 2005, including all goodwill held at that time;

CGU2 - Goodwill generated on a significant acquisition in 2008;

CGU3 - Goodwill acquired on all other acquisitions after the management buy-out in 2005.

The recoverable amounts of all three CGUs are determined from value in use calculations with a discounted cash flow model used to calculate this amount. The key assumptions for the value in use calculation include the discount rate and long-term growth rates. The value in use calculations use cash flows based on the detailed financial budget for 2017 covering a 12 month period. The budget has regard to historical performance and knowledge of the current market, together with management's view on the future achievable growth. Cash flows beyond this period are extrapolated using a long-term growth rate of nil and discounted with a WACC of 12.1% (2015: 11.9%).

As adjusted EBITDA has been stable over several years management consider a long-term growth rate of zero to be a prudent basis to extrapolate cash flows. The pre-tax discount rate is based on the Group's weighted average cost of capital, taking into account the cost of capital and borrowings, to which specific market-related premium adjustments are made.

The Group has conducted sensitivity analysis on the impairment testing for goodwill. With reasonable possible changes in key assumptions, management have concluded that the carrying amount of goodwill would be likely to still exceed the value in use.

9. Property, plant and equipment

			Land and buildings £'000		Plant and machinery £'000		Total £'000
Cost
At 30 November 2014			24,925		75,214		100,139
Acquisitions			4,731		936		5,667
Additions			5,699		9,970		15,669
Transferred to assets held for sale			(3,655)		-		(3,655)
Disposals			(5,285)		(1,591)		(6,876)
At 29 November 2015			26,415		84,529		110,944
Acquisitions			4,823		858		5,681
Additions			4,945		10,774		15,719
Reallocation			3,655		(3,655)		-
Net transferred from assets held for sale			-		22		22
Disposals			(5,159)		(2,122)		(7,281)
At 27 November 2016			34,679		90,406		125,085
Accumulated depreciation
At 30 November 2014			6,482		30,594		37,076
Charge			3,162		9,760		12,922
Impairment losses			-		180		180
Transferred to assets held for sale			(2,277)		-		(2,277)
Disposals			(52)		(1,266)		(1,318)
At 29 November 2015			7,315		39,268		46,583
Charge			3,655		9,874		13,529
Impairment losses			-		415		415
Reallocation			2,277		(2,277)		-
Net transferred from assets held for sale			-		(466)		(466)
Disposals			(131)		(1,628)		(1,759)
At 27 November 2016			13,116		45,186		58,302
Net book value
At 29 November 2015			19,100		45,261		64,361
At 27 November 2016			21,563		45,220		66,783

The net book value of tangible fixed assets includes an amount of £2,077,000 (2015:£3,421,000) in respect of assets held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the period was £877,000 (2015: £1,668,000). They all relate to plant and machinery. See McColl's Retail Group plc accounts for details of impairment review and assumptions.

Assets held for sale

Following a review of its portfolio in 2015, the Group decided to sell 97 of its newsagents. The Group continues to focus on the strategy of developing and expanding the convenience business and identified these stores as not being part of its long term planning. During 2016, the Group sold 20 of the properties, removed 18 from the list and added 16, leaving 75 remaining at the end of the period.

The Group has treated this disposal under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'.

IFRS 5 requires that the Group must not offset the gains and losses compared to fair value of the individual stores. However, on the basis that it is not practical to disclose the remaining 75 individual assets held for sale, these have been disclosed in aggregate.

			27 November 2016 £'000		29 November 2015 £'000
Assets relating to the properties for sale			4,286		5,550
Liabilities associated with assets held for sale			(5,137)		(5,662)
Analysis:
Goodwill			-		507
Tangible fixed assets			890		1,378
Inventory			2,073		2,192
Trade and other receivables			1,323		1,473
Assets of the business classified as held for sale			4,286		5,550
Trade and other payables			(4,840)		(5,662)
Provisions			(297)		-
			(5,137)		(5,662)
Net liabilities of the business classified as held for sale			(851)		(112)

10. Business combinations

During the period, the Group made 58 acquisitions, none of which was individually considered material to the Group. The cash consideration for these acquisitions and the assets acquired are summarised as follows:

					52 weeks ended 27 November 2016 £'000		52 weeks ended 29 November 2015 £'000
Tangible fixed assets (note 9)					5,681		5,667
Inventory					1,758		1,169
Goodwill (note 8)					7,931		7,591
Deferred tax liability					-		(260)
Deferred tax asset					286		72
Cash consideration					15,656		14,239

11. Borrowings

Details of loans and credit facilities are as follows:

					27 November 2016 £'000		29 November 2015 £'000
Amounts falling due:
In more than two years but not more than five years					37,000		44,500
Total borrowings					37,000		44,500
Less: unamortised issue costs					(1,039)		(1,288)
Non-current borrowings					35,961		43,212

The long term loans are secured by a fixed charge over the Group's head office property together with a floating charge over the Company's assets.

In August 2015 the Group completed an amended £85,000,000 revolving credit facility and a £15,000,000 accordion. This facility extended the Group's existing £85,000,000 plus £15,000,000 accordion facilities which were due to expire in July 2018 until July 2020 at margins of 1.5% above LIBOR. In July 2016, the Group completed an amended £100,000,000 revolving credit facility and £50,000,000 accordion. The current facility drawn as at 27 November 2016 is £37,000,000 (2015: £44,500,000). At the period end the amendment to the facility has not impacted covenant requirements.

Details of loans and hire purchase obligations repayable within two to five years are as follows:

				27 November 2016 £'000		29 November 2015 £'000
Revolving facility available until 31 August 2020 at 1.5% above LIBOR				37,000		44,500
Hire purchase obligations				3,346		1,127
				40,346		45,627

12. Net debt

				27 November 2016 £'000		29 November 2015 £'000
Cash at bank and in hand				3,757		14,531
Loans due:
In more than two years but not more than five years				(37,000)		(44,500)
Total borrowings				(37,000)		(44,500)
Less: unamortised issue costs				1,039		1,288
				(35,961)		(43,212)
Amounts due under hire purchase obligations				(4,815)		(2,894)
				(40,776)		(46,106)
Net debt				(37,019)		(31,575)

13. Authorised, issued and fully paid share capital

				Number of shares		Share capital £'000		Share premium £'000
Issued ordinary shares of £0.001 at 29 November 2015				104,712,042		105		47,836
				104,712,042		105		47,836
				-		-		-
Share premium transfer to retained earnings				-		-		(47,836)
Issued ordinary shares of £0.001 at 18 July 2016				10,460,732		10		12,579
Issued ordinary shares of £0.001 at 27 November 2016				115,172,774		115		12,579

Voting rights

The ordinary shares rank equally for voting purposes. On a show of hands each shareholder has one vote and on a poll each shareholder has one vote per ordinary share held. Each ordinary share ranks equally for any dividend declared. Each ordinary share ranks equally for any distributions made on a winding up of the Group. Each ordinary share ranks equally in the right to receive a relative proportion of shares in the event of a capitalisation of reserves.

14. Notes to the cash flow statement

					27 November 2016 £'000		29 November 2015 £'000
Profit for the period					13,916		16,097
Income and expenses not affecting operating cash flows
Depreciation and amortisation					14,305		13,678
Impairment losses					415		180
Income tax					3,743		5,014
Finance expense					2,875		2,700
Finance income					(13)		(165)
Profit on disposal of fixed assets					(352)		(437)
					34,889		37,067
Changes in operating assets and liabilities (including assets held for sale)
(Increase)/decrease in trade receivables					(252)		89
(Increase)/decrease in other receivables					(5,669)		15
Increase in inventory					(1,853)		(6,581)
(Decrease)/increase in trade payables					(422)		13,857
Increase in other payables					3,629		4,649
Decrease in pensions					(1,025)		(1,784)
(Decrease)/increase in provisions					(2,504)		280
Cash generated by operations					26,793		47,592
Income taxes paid					(5,144)		(4,070)
Net cash provided by operating activities					21,649		43,522

2015 benefited from the reversal of the 2014 53rd week, which had an impact of c.£12m.

Analysis of net debt

		At 29 November 2015		Cash flow		Other non-cash movements		At 27 November 2016
		£'000		£'000		£'000		£'000
Cash and cash equivalent		14,531		(10,774)		-		3,757
Borrowings		(43,212)		7,500		(249)		(35,961)
Amounts due under hire purchase obligations		(2,894)		(1,921)		-		(4,815)
		(31,575)		(5,195)		(249)		(37,019)

15. Contingent liabilities

At 27 November 2016, the Group has the following contingent liabilities:

Certain subsidiaries of the Company have assigned UK property leases in the normal course of business. Should the assignees fail to fulfil any obligations in respect of these leases, members of the Group may be liable for those defaults. The Group cannot reliably quantify the amount of such contingent liabilities due to their uncertain nature. The number of such claims arising to date has been small and the liability, which is charged to the profit and loss account as it arises, has not been material.

Costs contingent upon receipt of Competition and Markets Authority approval of the acquisition of 298 Co-op stores:

Bank arrangement fee (to be paid on first drawdown of new term loan)							447
Broker fee for acquisition to be paid after CMA approval has been obtained							1,170
							1,617

16. Related party transactions

Only the Directors are deemed to be key management personnel. All transactions between Directors and the Group are on an arm's length basis and no period end balances have arisen as a result of these transactions.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS24 related party disclosures.

					27 November 2016		29 November 2015
					£'000		£'000
Short term employee benefits					2,068		1,862
Compensation for loss of office					-		259
					2,068		2,121

There were no material transactions or balances between the Group and its key management personnel or members of their close family.

17. Subsequent events

On 20 December 2016 the Group received a decision by the Competition & Markets Authority to give final and unconditional approval to its £117m acquisition of 298 convenience stores from the Co-op that was announced on 13 July 2016.

The Group began to integrate the stores in late January 2017 and expects all conversions to be completed by the end of August 2017.

Principal risks and uncertainties

We are committed to good corporate governance. To this end, we follow a sound risk management process closely aligned to our strategy.

Principal Risk	Risk	Mitigation/Strategic response	Current changes
Business Strategy (maintained)	If the Board either adopts the wrong strategy or does not implement it effectively the goals of the business will not be met and our performance may suffer.	• Strategic development led by experienced senior management team. • Colleagues views at all levels are sought and influence annual business plans. • Customer and competitor trends analysed and used to shape strategy. • External views and expertise considered. • Annual strategic review takes place alongside budget setting process. • Strategy widely communicated. • Business plans developed, monitored and reviewed against strategic KPIs.	• In 2016 we accelerated our strategy to increase our neighbourhood presence with the acquisition of 298 convenience stores from the Co-op.
Acquisitions (new)	Failure to successfully integrate the 298 stores acquired from the Co-op, could impact profitability, our reputation and our funding arrangements.	• We are highly experienced at integrating acquired stores - the business has already acquired a significant number of stores as part of our ongoing expansion plans. • We have a dedicated and experienced management team with extensive integration experience leading the Co-op acquisition. • We have implemented regular progress reviews with Co-op management. • Clear migration plans have been developed with a phased roll-out schedule. • We produced a specific separate risk register for the acquisition of the Co-op stores which has guided the onboarding plan.
Competition (maintained)	We operate in a highly competitive and continually changing market. Failure to maintain market share could have an adverse effect on the Group's performance and profitability.	• Monitoring competitor activity. • Monitoring customer trends. • Regular meetings with suppliers to develop and enhance our offer. • Ongoing development of the Pluscard loyalty scheme. • Increasing brand awareness through our marketing channels.

Customer Offer (maintained)	Customer shopping habits are influenced by a wide range of factors. If we do not respond to their changing needs they are more likely to shop with a competitor and our revenues could fall.	• Membership of third party organisations (such as the IGD and ACS) gives us greater insight into the convenience sector trends and developments. • Customer trends are regularly reviewed by the Retail Board and trading teams, and are used to drive ranging decisions. • Promotional programmes offer customers great value. • We have a customer loyalty scheme - Pluscard.
Economy (increased)	All our revenue is generated in the UK. Any deterioration in the UK economy, for example as a consequence of Brexit, could impact on consumer spending and cost of goods, which would therefore impact our sales and profitability.	• We sell food and household essentials which are not heavily exposed to discretionary spend categories. • We offer a wide range of products at different price points e.g. value and premium brands. • Our flexible business model allows us to respond to changes in customer behaviour, for example, by adapting our ranges. • Our growing scale enables us to achieve better buying terms, helping to mitigate inflationary pressures.	• Greater economic uncertainty following the European Union referendum may impact future consumer spending.
Financial and treasury (maintained)	The main financial risks are the availability of short- and long-term funding to meet business needs, fluctuations in interest rates, movements in energy prices and other post-Brexit impacts.	• Committed loan facilities are in place, which provide us with headroom to deliver our strategy (see note 11). • Funding requirements are managed through regular forecasting and treasury management. • The Board approves budgets and business plans. • Relationships with lenders are managed through regular meetings. • We manage exposure to fluctuating energy prices by forward buying electricity. We acknowledge that the forward contracts in place are derivatives, they are treated as a pre-agreed price for electricity.	• Revised banking facilities will come into place in 2017, £200m - split between term loan and revolving facility.
Information Technology (maintained)	We depend on the reliability and capability of key information systems and technology. A major failure, a breach, or prolonged performance issues with store or head office systems could have an adverse impact on the business and its reputation.	• All business critical systems are well established and are supported by an appropriate disaster recovery strategy designed to ensure continuity of the business. • Business continuity plans are tested on an annual basis. • Regular reviews assess our vulnerability and our ability to re-establish operations in the event of a failure. • Testing is performed to ensure data is controlled and protected.
Operational cost base (increased)	We have a relatively high cost base, consisting primarily of salary, property rental and energy costs. Increases in these costs without a corresponding increase in revenues could adversely impact our profitability.	• We operate a flexible staff model aligned to revenue levels. • We monitor legislation and developments related to our costs e.g. minimum wage, rents and energy tariffs, to allow us to plan and mitigate increases. • Property management is a key function with regular review processes in place. • We minimise energy costs by combining energy efficiency initiatives and forward purchasing.	• In 2017 wage costs will increase due to rises in the National Minimum Wage and National Living Wage. Business rates will also change.
Regulation (maintained)	We operate in an environment governed by strict regulations to ensure the safety and protection of customers, colleagues, shareholders and other stakeholders. Regulations include alcohol licensing, employment, health & safety, data protection and the rules of the Stock Exchange.	• We have clear accountability for compliance with all laws and regulations. • Our policies and procedures are designed to meet all relevant laws and regulations. • We train colleagues to comply with all relevant rules and regulations. • We have established governance groups, such as our Health and Safety Steering Group to review and manage our compliance.	• Regulatory impacts in 2017 include the Tobacco Products Directive, the Soft Drinks Industry Levy and the Apprenticeship Levy.
Supply chain (maintained)	We rely on a small number of key distributors and may be adversely affected by changes in supplier dynamics and interruptions in supply.	• Our distribution partners are carefully selected and maintain their own contingency planning. • We monitor supplier performance including service level agreements. • We hold regular discussions to discuss performance and monitor financial stability of key partners. • As we grow our business we work with supply chain partners to ensure we leverage our increasing scale.	• We appointed Nisa as our supply partner to service the 298 stores acquired from the Co-op that will be integrated in 2017.