The half-year results from UK-based convenience group McColl's mark an "inflection point in the underlying performance of the business", a leading analyst has said.
Adam Tomlinson of Liberum Research was commenting following the publication of half-year results that showed total like-for-like sales at the business rising by 8.3%, with growth accelerating in the second quarter of the year.
Total revenue for the period was down 1.0% to £604.8 million, due to store closures and lower services revenue, however this was offset due to 'stronger demand' since the outbreak of the COVID-19 pandemic, the group said.
In a briefing note, Tomlinson wrote, "The H1 results reflect an inflection point in the underlying performance of the business. Despite 185 sites closed in the last 12/18 months (c.10% of the estate), as well as a reduction in services during lockdown, H1 revenue was relatively flat y/y driven by LFLs of +8.3%.
"While product mix resulted in gross margin pressure, tight control on costs saw EBITDA flat y/y. Net debt has fallen by c.10% in H1, and now sits at 2.5x leverage (LTM) and is on track to hit the target of c.2x by FY22E. Progress against key strategic initiatives has been made amidst the COVID-19 disruption, which should continue to drive positive momentum as we move through the year."
For its part, McColl's has sought to maintain its 'strategic change' programme despite the challenge of the pandemic, by revitalising its customer offer, implementing a 'fundamental reset' to its operating model, 'enhancing the quality' of its estate, and re-organising its employee structure.
It said that while it remains challenging to predict the full impact and duration of the coronavirus situation, it expects 'continued margin pressure and ongoing cost headwinds reflecting the need to keep customers and colleagues safe'.
Commenting on the business' performance, Jonathan Miller, McColl's chief executive, said, "We have seen an extraordinary change since the onset of the crisis. Strong demand, reaching double digit like-for-like sales in recent months, has been accompanied by a significant shift in the pattern of trade.
"Food grocery and alcohol sales have been particularly strong, in line with our longer-term strategy to grow these categories as part of our total sales mix. Meanwhile, customers have been spending less on impulse and buying more multipack products."
Looking ahead, Miller added that he "remains confident" in the business' long-term prospects, and that the COVID-19 situation has "reinforced our conviction" to maintain its strategic change programme.
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