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McColl's set for growth

RESULTS: Convenience retailer McColl's has reported a robust half-year, and it looks as if the company is set for further growth.
July 22, 2014

Convenience chain McColl's (MCLS) has somewhat struggled to attract investor interest since going public in February. But judging by its first set of results, this might begin to change.

IC TIP: Buy at 170p

The retailer delivered 2 per cent like-for-like sales growth in the first six months of its financial year, while the reported pre-tax loss displayed in the table below came after £6.2m of costs related to the IPO. Strip these out and profit actually totalled £2.2m, compared with a £2.5m loss last year.

This positive result reflects the company's growth strategy, which saw it open its 750th convenience store in June. It continued to acquire stores and convert its newsagents - of which it runs 544 - into convenience outlets, offering food and wine. It also upgraded 98 'standard' convenience stores into 'premium' outlets, which contain a wider range of fresh foods and tend to have higher sales. The target is for 1,000 convenience stores by end-2016.

Under an agreement signed this year, McColl's is also making its Post Office services available at retail counters in its stores, offering customers much longer opening hours. Post Offices drive footfall, particularly as online retailing grows stronger and people use them to collect and return parcels.

Numis Securities expects adjusted pre-tax profit of £22.5m for the full year, up from £4.8m last year, giving EPS of 17p.

MCCOLL'S RETAIL GROUP (MCLS)
ORD PRICE:170pMARKET VALUE:£178m
TOUCH:168-172p12-MONTH HIGH:191pLOW: 156p
DIVIDEND YIELD:1%PE RATIO:28
NET ASSET VALUE:100p*NET DEBT:35%

Half-year to 25 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013429-2.5-30
2014**444-4.0-41.7
% change+4---

Ex-div: 30 Jul

Payment: 29 Aug

**Interim dividend adjusted pro-rata for proportion of period post-IPO

*Includes intangible assets of £136m or 130p a share