McColl Retail : Preliminary Results

Preliminary audited results and trading update

Building foundations for success

26 February 2020 - McColl's Retail Group plc, the UK convenience retailer, ('McColl's' or 'the Group') today announces its preliminary results for the 52 week period ended 24 November 2019 (FY19), and a trading update for the 11 week period to 9 February 2020.

FY19 review:

· Total revenue down 1.8% to £1.22bn (2018: £1.24bn), reflecting store closures and divestments as part of store optimisation programme

· Total like-for-like (LFL) sales¹ level at 0.0% (2018: down 1.4%)

· Adjusted gross margin² broadly level at 25.9% (2018: 26.0%), with a stronger year-on-year performance through H2

· Adjusted EBITDA³£32.1m (2018: £35.0m), reflecting softer market conditions through the summer, partially offset by gross margin improvement in H2

· Adjusted profit before tax²£7.3m (2018: £10.5m)

· One-off, non-cash goodwill impairment charge of £98.6m together with other adjusting items leading to statutory loss before tax of £98.6m (2018: profit before tax £7.9m)

· Statutory basic loss per share 83.3p (2018: profit per share 6.0p); adjusted basic earnings per share² 5.6p (2018: 6.7p)

· In light of the Group's deleveraging priority, the Board has reached the decision to suspend the final dividend and keep the policy under review. The Board's priority is to reduce leverage with a target of 2.0x by the end of 2022

· Net debt reduced to £94.1m (2018: £98.6m)

· Discussions with our lending banks to amend and extend the existing debt facility are well advanced, with an announcement expected shortly

Current trading and outlook:

Sales in early FY20 have been encouraging, with the Group delivering a LFL sales improvement of 0.5% for the 11 week period ended 9 February 2020. Total sales decreased by 4.2% reflecting the annualisation of the ongoing store optimisation programme.

2020 will be a transitional year with the implementation of our strategic change programme, as outlined below, and as a result we expect adjusted EBITDA for FY20 to be broadly in line with FY19.

Strategic change programme:

The Group is embarking on a customer-focused, medium-term strategic change programme addressing the opportunity of segmenting our store estate to better meet the needs of the communities we serve on a 'neighbourhood by neighbourhood' basis

The key initiatives of the change programme are:

o A revitalised customer offer, informed by better insight, addressing store segmentation, range development, space allocation and value positioning;

o A fundamental reset of the operating modelto make stores easier to operate and easier to shop, harnessing new technology, and offsetting continued inflationary pressures; and

o Enhancing the quality of our estatethrough accelerated store optimisation. Over the medium term, as a result of further divestments and net of future acquisitions, we anticipate an optimised estate of around 1,100 larger, more convenience focused stores.

We will continue to monitor and appropriately balance the capital requirements of the Group by building capital resilience and deleveraging the balance sheet through our ongoing cash management initiatives

Jonathan Miller, Chief Executive, said:

'We have stabilised the business and refocused on retail execution in 2019, in line with our key priorities for the year. Against challenging trading conditions we have made good operational progress, whilst reducing debt and making appropriate levels of investment.

Looking ahead to FY20, we are embarking on a strategic change programme, refining our model and better tailoring our offer to the customers and communities we serve, using the learnings to build the foundations for future growth.

The fundamentals of the convenience sector remain strong and, with our improving customer proposition, I am confident indelivering sustainable returns for shareholders over the long term.'

Notes:

The business uses a number of non-statutory measures (for example, LFL, adjusted EBITDA and adjusted EPS) because management believe that these - placed with equal prominence alongside other statutory measures - help to better explain the underlying performance of the business and its key dynamics. These are kept under continuous review and are defined and used consistently, or explained otherwise.

1. LFL sales reflect sales from stores that have traded throughout the current and prior financial periods, and include VAT but exclude sales of fuel, lottery, mobile phone top up and travel tickets.

2. The Group has defined and outlined the purpose of its alternative performance measures, including its key measures, in the glossary of terms.

3. Full details of adjusted EBITDA can be found in note 6 of the 2019 Annual Report and Accounts, and note 4 herein.

Results presentation

A copy of this announcement is available atwww.mccollsplc.co.uk/investor.

A meeting for analysts will be held today at 9.30am at Numis Securities, London Stock Exchange, 10 Paternoster Square, London EC4M 7LS. Access will be by invitation only. All presentation materials will be available on our website.

Enquiries

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

McColl's Retail Group plcMedia enquiries:

Jonathan Miller, Chief Executive Officer Headland

Robbie Bell, Chief Financial Officer Ed Young, Rob Walker, Charlie Twigg

[phone] [phone]

Notes to editors

McColl's is a leading neighbourhood retailer, with an estate of over 1,400 managed convenience stores and newsagents. We operate McColl's branded convenience stores as well as newsagents branded Martin's across the UK, except in Scotland where we operate under our heritage brand, RS McColl. Our dedicated colleagues serve five million customers every week, and we are 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. Neither we nor any of our officers, Directors or employees provide any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur and undue reliance should not be placed on these forward-looking statements which only speak as of the date of this announcement. 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.

No statement in this announcement is intended as a profit forecast or a profit estimate and past performance cannot be relied on as a guide to future performance. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities.

Chairman's statement

Dear shareholder

Following a challenging year in 2018, we have rebuilt momentum in 2019 and focused our efforts on preparing the business to maximise the opportunities ahead.

Focus on customers, people and the fundamentals of retail

Our Chief Executive, Jonathan Miller, and his team were tested by the issues that affected our supply chain throughout 2018. The residual effects of the disruption, combined with weak consumer confidence and political uncertainty, created a challenging trading environment for McColl's as we entered 2019.

That's why this year has been a year in which our teams have worked hard to stabilise the business and deliver sound retail execution. We have renewed our focus on our customers, supported our people and concentrated hard on the fundamentals of retail, especially the areas that are most important in the convenience sector. With our distribution network now in a much better place we can continue to make progress on enhancing our offer.

The strenuous, and often meticulous, efforts we have made in 2019 are helping us develop an optimal range and promotional proposition that is beginning to bear fruit. Whilst much hard work lies ahead, I believe they will also provide a strong platform for the future growth of McColl's.

Continuing financial discipline

Good capital discipline and maintaining a flexible balance sheet are the basis on which we build our business, enabling us to explore opportunities to invest sensibly for growth, while always looking to take further action to reduce leverage.

Despite difficult conditions, the business achieved level like-for-like sales, maintained gross margin and generated reduced net debt. Our proposed test stores with optimised range, display and pricing and innovative food-to-go and last mile delivery trials, are a small part of the overall picture today, but have potential for driving sales growth, as we expand our range of products and services into new areas.

We continued to realise proceeds both from the disposal of non-core assets, and from the sale and leaseback of the remaining freeholds we acquired as part of our acquisition in 2016. This has helped us to meet our commitment to reducing net debt, while investing in strategic initiatives to drive future growth. We have also continued with our store optimisation programme, acquiring a small number of high-potential convenience stores, while closing or disposing of smaller or less efficient stores.

All of this has contributed to the strengthening of our base this year, a crucial factor in our resilience as a business and our ability to grow sustainably. Having engaged with our banking syndicate in the latter part of 2019, I am pleased to report that significant progress has been made regarding the renewal of the current debt facility, which will give us more certainty and flexibility to execute our strategic initiatives in 2020, and beyond.

Dividends

We always consider our cash allocation carefully, balancing the need to invest in our technology, people and the fabric of our stores, reduce our debt and provide returns to shareholders.

Deleveraging the balance sheet is one of our key priorities for 2020 so, in combination with a number of cash management initiatives implemented by the Executive team, the Board has taken the difficult but prudent decision to suspend the final dividend for the 2019 financial year. The Board recognises that dividend payments are an important part of the Group's returns to shareholders and will keep the dividend policy under review with the aim of reinstating the payment of dividends at an affordable and sustainable level, once our strategic change programme gathers momentum and the Group deleverages.

Organising for the future

I'd like to take this opportunity to thank all of our people for their contributions this year - from the Board, Jonathan and his team, through to all our colleagues who either serve customers on the front line, or make it easier for them to do that every day.

It's been a great team effort, and I'm also delighted to welcome two key appointments, who have not only strengthened our executive team but have been instrumental in invigorating our strategic drive. Robbie Bell joined the Board as Chief Financial Officer in January 2019, bringing his extensive experience and expertise in finance and retail to the business. Joining us in September 2019, Richard Crampton is our new Chief Commercial Officer. Richard brings extensive experience in convenience and food retail and is already heavily engaged in our evolving commercial strategy.

We have recently announced two further changes to the Board. Sharon Brown, who has been Chair of the Audit Committee for the last six years, has announced her intention to step down in the summer, and a search for her replacement is at an advanced stage.

Dave Thomas, who has provided long and valuable service to McColl's, most recently as Chief Operating Officer, has also announced his intention to retire in April. As we move forwards, we will continue to assess the suitability of the Board structure, bolstering it with the relevant skill and experience as and when necessary. I'd like to give my thanks on behalf of the Board to both Sharon and Dave for the immense contributions they have made to McColl's, and my own personal thanks for the support they have given me throughout the recent challenging times for the business.

Whilst Jonathan says more about organisational changes to his team within his review, I'd like to mention just one of those changes here. I am delighted that Karen Bird, our Colleague Director, has accepted a role which gives her additional responsibility for Operations, and I am confident that she will be able to draw on her extensive operational experience at Tesco and elsewhere to ensure we are organised for future success.

Looking forward

We approach 2020 with cautious optimism, confident in the groundwork we have laid down this year and ongoing reshaping of the business. The convenience market continues to grow, and we will compete for a greater share of that market, with the momentum borne of improved product ranges, new services and innovative store concepts.

Concerns remain over the impact of Brexit and the uncertainty for businesses and consumers that may arise during 2020 and beyond. However, the food and grocery retail sector remains resilient to economic downturn, while the long-term social and lifestyle trends we see in the UK continue to support growth in the convenience channel.

The Board remains committed to our strategy and we will maintain focus on deleveraging, as we position ourselves for growth in the coming years. We will continue to improve the business and forge ever greater links with the communities we serve, as we strive to fulfil our ambition to become everybody's favourite neighbourhood shop.

Angus Porter

Chairman

Chief Executive's Review - Building foundations for success

We have stabilised the business and re-focused on retail execution in 2019. The market remains highly competitive, with challenging trading conditions, but we have made good progress while maintaining strong capital discipline, reducing net debt and making appropriate levels of investment.

Period of stabilisation

The last few years have seen different pressures on our business, with the acquisition of 298 shops in 2016, their integration in 2017, and then supply chain disruption in 2018. This meant that a period of stabilisation was required, and I am encouraged by the performance we have delivered this year, as we regain greater operational stability, in what has remained an uncertain economy.

Total revenue was slightly down primarily due to closures and store divestments as part of our continuing optimisation programme. LFL sales were level in 2019, an improvement on the decline seen in 2018, but were held back by the general retail market slowdown over the summer, as the UK experienced a prolonged period of poor weather compared to the previous year's long hot summer. We also arrested the decline in margin, and achieved strong cost control, broadly offsetting inflationary pressures, including rent, wages and general inflation.

This steady performance reflects a deliberately calm year for McColl's. A year in which we have gone back to basics, focused on good retail execution, and given the business a chance to breathe. We have taken time to look at our strategy and purpose, to understand our business better and to improve our thinking around improving and growing our convenience offer. At the same time, I am immensely proud that our store colleagues have continued to deliver first class customer service, improving on almost every metric in the annual HIM Convenience 2019 Report.

Strengthening our team

To increase momentum in the business, we have made some changes to the McColl's leadership team structure. We now have a smaller executive team of four, who focus not just on delivering results but also on long-term strategic direction, and, in place of the previous Retail Board, we now have a senior leadership team of 12 people who take more responsibility for running the business and executing our strategy.

Having brought in Robbie Bell, our highly experienced Chief Financial Officer, back in January, I was delighted to also welcome Richard Crampton as our new Chief Commercial Officer in September. Richard brings extensive experience in convenience and food retail to our business, and will play a key role in paving the way for our journey in 2020 and beyond. After 23 years in the business, Dave Thomas has stood down from his role as COO and I am delighted that Karen Bird will now take on operational management for stores in addition to her responsibilities as Colleague Director. Karen has extensive experience in senior operational roles within the retail sector and will be an invaluable leader as we navigate difficult economic conditions whilst seeking to implement operational, structural and cultural change within our business.

These senior appointments are just a small part of the new personnel coming into the business - we have also recruited new people with excellent technical experience to look at our range and space models and property portfolio. This creates a positive tension with long-term McColl's people, blending our established company experience with new ideas and energy.

Strategic review

The new leadership team has taken the opportunity during the year to fully review our strategy. Our vision to be your favourite neighbourhood shop remains unchanged, but our mind-set more than ever needs to be focused on delivering a great customer experience.

We are therefore embarking on a medium-term strategic change programme, centred on the customer, and recognising the need to segment the estate to better meet the needs of the communities we serve. Our strategy is built on four key pillars; strong customer offer, easy to run stores, improving our stores and a great place to work.

Strong customer offer

Informed by better customer insight, we are segmenting our stores by location, performance, size and demographics, as we strengthen our targeting of products, promotions and services to local audiences and shopping missions. To support these changes we have recently strengthened our space, range and format team.

Our range reviews have already enhanced our product offers and are helping us respond better to customer needs. The full review of our beer and cider range by the end of April saw an increase in the number of lines and space allocated to growing categories such as craft and world beers, resulting in a significant improvement in our performance in this category. With full reviews in soft drinks, confectionery, wine and healthy snacks, and several other categories completed by the end of the year, I am delighted with the results and expect to see continued uplifts in 2020 as we tackle the remaining product categories.

As well as improving range, we will continue to develop our offer using greater customer insight to optimise our brand and value position. It's early days, but there are changes ahead on food-to-go at many stores, with growing opportunities in breakfast, coffee and hot food, and with the trial of a new format launched in our new Coventry store. Our recent trial with Uber Eats is another example of how we are evolving to meet the needs of today's customers.

Easy to run stores

We made great progress during the year in establishing a more stable distribution platform and better on-shelf availability. We intend to continue to refine our operating model to make our stores easier to run and easier to shop, and have embarked on an end-to-end review of ways of working across the business but primarily focused on stores.

Increasingly, technology will be an enabler in improving our operating model so that we can use the hours we have to serve customers better. We are investing in a new Electronic Point of Sale (EPOS) system that will bring many benefits, including making self-scanning a reality at our stores in the near future. We will also be launching a new Enterprise Resource Planning (ERP) software system in 2020 to give us more visibility into performance.

In early 2020, we will be trialling new ideas on price, range, brand, layout and cost to serve, using a modified operating model in a small number of stores that we believe will be simpler to operate. We will be looking for quick wins that we can rollout immediately, as well as medium-to long-term benefits that can become part of our new store model. We will adapt our ideas as we go and use them to drive improvements across the whole estate.

Improving our stores

Building the foundations for long-term success means not only delivering on our purpose of making life easier for our customers and colleagues, but also optimising stores by continuing to improve the quality of our estate. This work will continue into next year, but we have made good progress and our colleagues have already delivered against these priorities in 2019.

We opened 10 new convenience stores this year, relocating some existing stores to better sites, and we will continue to explore opportunities to add new stores in 2020.

We have also accelerated our store optimisation programme for underperforming stores as we continue to evolve towards a smaller, convenience focused and more profitable estate, having closed or sold 120 stores during the year.

In addition, the trial stores planned in 2020, as well as testing our future operating model, will also update our thinking for our future refit programme. We still have 400-500 stores that require updating, so there remains a positive refurbishment opportunity ahead.

This year we completed 23 store refreshes in the year, including ten stores as part of a trial of the Morrisons Daily fascia. This trial is helping us with range development and is also an opportunity to explore the potential for this type of format. Sales are strong, the response from customers has been positive, and we are expanding into an additional 20 stores to further evaluate.

Great place to work

We fundamentally believe that the route to great customer service is through our colleagues, ensuring that they enjoy working with us and are engaged with our plans for the business.

We have made fantastic progress with our plans for colleagues during the year. We have launched and embedded a new performance framework, launched our six key leadership skills, developed a model to identify and develop talent and succession pipelines, as well as progressing with our listening and responding plans, connecting with our colleagues through various forums.

I am delighted that in our most recent engagement survey 80% of respondents rated McColl's as a great place to work.

We will build on the successes of 2019 with a number of new initiatives planned, with the aim of better supporting our colleagues to do a great job, and listening and responding to ensure that we are all engaged in the future success of this great business.

Exciting times ahead

As we came into 2019, we recognised that the business needed to change - that's why we've strengthened our management structures, hired people into key roles, focused on our purpose and sharpened our strategy. With the market as competitive as ever, there will be challenges ahead, but we are well positioned and confident in our plans for long-term growth.

The convenience sector remains supportive, with lifestyle changes underpinning growth forecasts for at least the medium-term. Customers will always need top-up shops and food-for-now and later, while the convenience sector complements online ordering.

We will continue to reshape the business, developing our strong neighbourhood convenience offer to meet the changing needs of customers. I am confident that by making life easier for our customers, colleagues and their communities, and by maintaining the cash generative and profitable nature of our business, we will deliver sustainable returns for shareholders over the long-term.

Finally, I would like to take this opportunity to thank all of my colleagues at McColl's for their continued hard work and commitment.

Jonathan Miller

Chief Executive Officer

Financial Review - Building capital resilience

Our financial priorities in 2019 included strengthening our balance sheet, improving working capital, rebuilding gross margin, mitigating cost inflation and further optimising our estate. While there remain a number of challenges, we have demonstrated our resilience this year with a robust underlying performance.

Solid revenue performance

Full year revenue was down by 1.8% to £1.22bn (2018: £1.24bn) primarily driven by the closure or divestment of 120 under-performing newsagents and smaller convenience stores as part of our store optimisation programme.

LFL sales performance was level in the year (2018: -1.4%), with LFL growth affected in the summer months in particular as the whole sector suffered from strong year-on-year comparatives coupled with colder weather this year and lower consumer confidence. This was a relatively good performance and a recovery from 2018 levels which were impacted by the collapse of Palmer & Harvey.

Tobacco continues to perform strongly, benefitting from inflation as a result of manufacturer and duty rises. Other traditional categories such as news and confectionery, where we still over-index as a result of our heritage, continue to steadily decline and impact LFL sales.

LFL sales were supported by good growth in beers, wines and spirits, where our performance is improving following our range review in the first half of the year; soft drinks, which have been helped by some great innovation as well as inflation; and food-to-go, which remains a small category for McColl's but has great potential to grow as we continue to extend our offer.

Gross profit margin stabilised

Gross margin before adjusting items² was broadly level at 25.9% (2018: 26.0%). Margin improved in the second half, year on year, as we continue to make progress, both through self-help initiatives such as improved promotional investment planning, and by working together with Morrisons. As in previous years, profit delivery was weighted towards the second half of the year due to the seasonal sales mix, and further supported by year-on-year margin improvement.

In terms of overall value, adjusted gross profit fell by 2.1% to £315.7m (2018: £322.5m) reflecting the decline in total sales.

Good cost control mitigates cost pressures and wage inflation

Although we experienced a number of cost pressures and wage inflation was a challenge during the year, our administrative expenses fell year-on-year as a result of good cost control and the impact of our store optimisation programme. The business was focused on mitigating the National Living Wage driven inflation of around 5%, while further head-winds came from the additional rent as a consequence of our sale and lease back programme (£3m in total). Adjusted administrative expenses as a percentage of revenue remained broadly flat at 25.2% (2018: 25.1%).

With continuing cost pressures, we will keep our estate under review to ensure that we maintain a sustainably profitable network of stores. We are improving the quality of the estate through both the acquisition of high potential convenience stores and the planned closure or disposal of under-performing stores. During the year, we acquired 10 convenience stores and closed or disposed of 120 newsagents and smaller convenience stores.

We are pleased with the implementation of the store optimisation strategy so far, moving away from low margin newsagents and focusing on convenience and the more efficient newsagents.

Adjusting items

Adjusted operating profit (see note 5 of the Annual Report for the definition of adjusting items, or note 3 herein) decreased to £15.3m (2018: £18.3m).

After adjusting items, the Company incurred a statutory operating loss of £90.4m (2018: £15.9m profit).

In total there were £105.8m of adjusting items within the statutory operating loss for 2019.

The most significant item was a one-off, non-cash goodwill impairment charge of £98.6m. In accordance with IAS 36 we have performed an annual impairment review of goodwill, and the write-down was required following a rebasing of financial projections, based on lower (albeit improving) underlying gross margin, National Living Wage and retail cost inflation pressures.

Other small adjusting items within administrative expenses includes £0.2m of professional fees relating to a health and safety breach, £0.4m relating to an old asbestos claim and £0.6m relating to business reorganisation.

Net property-related adjusting items of £6.0m included £9.2m of costs associated with closures and impairment and a net gain of £3.3m in property profits from the final tranche of sale and leaseback transactions arising from the major acquisition in 2017. As well as releasing immediate value through this programme, the proceeds have allowed us to continue our capital investment programme including store refreshes, as well as reduce net debt.

Finance costs relating to the store closures included within adjusting items were £0.2m.

Before adjusting items, profit before tax was £7.3m (2018: £10.5m). After adjusting items, loss before tax was £98.6m (2018: profit of £7.9m).

EBITDA (adjusted)

Adjusted EBITDA decreased to £32.1m (2018: £35.0m), reflecting the softer market conditions in the second half reducing revenue for the year, despite the recovering gross margin rate in H2. The adjusted EBITDA margin of 2.6% (2018: 2.8%) has been broadly maintained due to the good cost control measures in place.

Interest and tax

Net finance costs before adjusting items increased slightly year-on-year to £8.0m (2018: £7.9m) reflecting slighter higher interest rate, partly offset by a reduction in the term loan.

The tax credit for the year was £2.7m (2018: £1.0m charge). The comparable effective tax rate in 2019 excluding the impact of non-deductible adjusting items was 12.4% (2018 26.6%). The difference between this and the current statutory rate of 19.0% in the period is due principally to goodwill impairment which had limited tax relief.

Earnings per share

Basic losses per share was 83.3 pence (2018: earnings 5.95 pence). Adjusted basic earnings per share were 5.6 pence (2018: 6.7 pence).

Balance sheet and net debt

Total shareholder funds at the end of the year were £38.7m (2018: £141.5m). The book value of non-current assets fell by £112.5m to £246.9m (2018: £359.3m), reflecting the goodwill and store asset impairment, completion of our sale and leaseback programme and divestment or closure of underperforming stores.

Current assets at the end of the period increased to £163.4m (2018: £150.3m) as a result of a net increase in stock and trade receivables, plus an increase in cash and cash equivalents of £8.5m.

As explained in note 14, the management team has undertaken a review of certain balance sheet classifications. The 2018 balance sheet has been restated for errors in two areas. Firstly, £10m of the term loan has been disclosed as a current liability in line with the term loan agreement and repayment schedule. Secondly, a £2.6m accrual previously classified against the carrying value of inventory has been reclassified as a current liability. Neither reclassification has any impact on the statement of comprehensive income or total shareholder funds as reported in the prior year.

Current liabilities decreased to £229.3m (2018: £233.4m), reflecting lower trade and other payables, borrowings, tax and provisions. Non-current liabilities increased to £142.3m (2018: £134.7m) due to increased loans and borrowings, payables and provisions.

Net debt (total borrowings less cash and cash equivalents) at the end of the year was £94.1m (2018: £98.6m). The business remains focused on working capital and cash management to reduce business leverage, with a number of initiatives currently underway. At the end of the year our net debt to EBITDA ratio was 2.9x on a rolling 12-month basis, with a two-year target to be at or below 2.0x.

Pension schemes

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 defined benefit pension schemes operated by the Group decreased to £7.9m (2018: £11.9m). The last actuarial review of the two schemes in June 2017 concluded that the combined funding deficit was £12.6m, and the Group currently contributes approximately £2.1m per year, inclusive of fees and levies.

Cash flow and capital expenditure

We continue to invest in the business for growth, including our programme of store acquisitions and refreshes, alongside the development and extension of our services and food-to-go offer. Cash generation continues to support this investment, while continuing to reduce net debt levels.

Net cash provided by operating activities in the year was £20.0m (2018: £61.8m), with the prior year seeing a one-off cash flow benefit from the inception of improved payment terms immediately following our transition to a new wholesale supplier.

Gross capital expenditure was £14.4m (2018: £19.7m). Net capital expenditure, including property proceeds from the sale and leaseback of freehold properties, reduced to £2.9m (2018: £7.7m inflow).

Interest paid is slightly lower at £7.4m, due to a reduction in the term loan, offset by a slighter higher interest rate on last year. The interim and final dividends paid in the period totalled £2.2m (2018: £11.9m).

Banking facilities

The current banking facilities mature in July 2021, so I am pleased to report that supportive discussions with our bank syndicate to amend and extend certain of the terms therein are well advanced and we expect to announce shortly. See the Directors Report in the Annual Report for a further explanation of going concern in relation to the facilities agreement.

Financial outlook

We will continue to develop our customer proposition to leverage our brand recognition within the growing convenience sector. This will be combined with an equal focus on cost mitigation and cash generation; with the combined strategy to produce a growing customer proposition with a healthy and robust balance sheet and debt level.

I am very much looking forward to working with Jonathan and the team to further our strategic plans in 2020 and beyond.

Robbie Bell

Chief Financial Officer

Responsibility statement

The responsibility statement has been prepared in connection with the Company's full Annual Report for the period ended 24 November 2019. 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

Robbie Bell

25 February 2020

McColl's Retail Group

Consolidated Income Statement for the 52 week Period from 26 November 2018 to 24 November 2019

	Note	Adjusted 2019 £ 000	Adjusting items 2019 Note 3 £ 000	Total 2019 £ 000	Adjusted 2018 £ 000	Adjusting items 2018 Note 3 £ 000	Total 2018 £ 000
Revenue	2	1,218,700	-	1,218,700	1,241,539	-	1,241,539
Cost of sales		(902,968)		(902,968)	(919,003)	(1,428)	(920,431)
Gross profit/(loss)		315,732	-	315,732	322,536	(1,428)	321,108
Administrative expenses		(306,684)	(99,805)	(406,489)	(311,442)	(7,118)	(318,560)
Other operating income	2	6,255	-	6,255	6,811	-	6,811
Profits/(loss) arising on property-related items		39	(5,977)	(5,938)	416	6,109	6,525
Operating profit/(loss)	4	15,342	(105,782)	(90,440)	18,321	(2,437)	15,884
Finance costs		(8,043)	(160)	(8,203)	(7,859)	(158)	(8,017)
Profit/(loss) before tax		7,299	(105,942)	(98,643)	10,462	(2,595)	7,867
Income tax (charge)/credit	5	(902)	3,608	2,706	(2,778)	1,762	(1,016)
Profit/(loss) for the period		6,397	(102,334)	(95,937)	7,684	(833)	6,851
Earnings/(losses) per share (pence)	7	5.55p		(83.30)p	6.67p		5.95p
Diluted earnings/ (losses) per share (pence)	7	5.55p		(83.30)p	6.66p		5.94p

The above results were derived from continuing operations.