McColl’s IPO: Convenience store chain outlines £50 million flotation plans

on Jan 28, 2014
Updated: Apr 9, 2020
Listen, Tuesday, January 28: McColl’s Retail Group, one of Britain’s largest convenience store chains, will kick off a raft of initial public offerings (IPOs) from UK retailers this year after announcing plans to join the London Stock Exchange next month.

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McColl’s said yesterday that it plans to raise £50 million in a main market listing which would value the business at around £225 million. The company’s management, led by its founder James Lancaster, owns 80 percent of the company and will sell down some of its holding, while Cavendish Square Partners, a fund controlled by the private equity firm Caird Capital, also plans to sell some of its shares.

Lancaster, who founded McColl’s in 1973 and serves as CEO and chairman of the group, said it was a “long-term ambition” to be a quoted company. He said: “The market seemed to be receptive and there seems to be good investor appetite.”
McColl’s stated that it would use the proceeds from the float to reduce its £900 million debt-pile and to take advantage of the fast-growing convenience sector by converting around 300 of its 562 newsagents into convenience stores and acquiring up to 50 new sites a year.

McColl’s IPO is expected by the end of February, leading a number of private-equity owned retailers, including Pets at Home (Fat Face IPO: Fashion retailer dresses up for London flotation) and House of Fraser

(House of Fraser IPO: Retailer to push for float as sale talks end), which are all considering a flotation amid a revival in consumer confidence and a recovering UK economy.
***Convenience drives sales growth***

Revenues at McColl’s rose to £869 million last year with underlying earnings (adjusted EBITDA) of £35 million. McColl’s revealed earlier this month that over the Christmas period, total sales rose 2.6 percent, with like-for-like sales up 1.5 percent in the six weeks to January 5. The retailer attributed the recent increase in sales and profit to its convenience business, hence its decision to focus on this segment.
“I’m very pleased with our performance during this period given the continuing tough market environment. Consumers are increasingly shopping at convenience stores and McColl’s is well placed to benefit. These trading figures are very encouraging and place us in a good position going into 2014 to continue to take advantage of the wider growth being seen in the convenience sector,” CEO Lancaster said.
Convenience stores have become the latest battleground for British grocers – with Tesco (LON:TSCO), Sainsbury’s (LON:SBRY) and Morrisons (LON:MRW) all focused on boosting their market share in the fast growing sector.
According to the Institute of Grocery Distribution (IGD), convenience stores make up a fifth of the UK’s grocery industry and are growing at more than five percent a year. IGD forecasts that the convenience store sector will increase from £35.6 billion last year to £46.2 billion in 2018.
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