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Bringing convenience
to your neighbourhood
McColl’s Retail Group plc
Annual Report and Accounts 2015
Contents
Strategic report
02 Operational and financial highlights
04 Chairman’s statement
06 Our group at a glance
08 Chief executive’s review
12 The year in review
15 Looking after our customers
16 Market overview
20 Our strategy and business model
22 Our key performance indicators
23 Financial review
26 Corporate responsibility
30 Principal risks
32 Making a difference
in our neighbourhoods
Governance
34 Board of directors
36 Directors’ report
42 Corporate governance report
48 Nomination committee report
49 Audit committee report
52 Remuneration report
68 Statement of directors’ responsibilities
71 Delivering the best
Financial statements
72
Independent auditor’s report
to the members of McColl’s
Retail Group plc
78 Consolidated income statement
78
Consolidated statement
of comprehensive income
79 Consolidated balance sheet
80 Consolidated statement
of changes in equity
Notes to the financial statements
80 Consolidated cash flow statement
81
114 Company balance sheet
115 Notes to the company
financial statements
118 Contacts, addresses and
shareholder information
We are proud to be one of the
UK’s leading neighbourhood
retailers with a growing network
of 1,352 managed convenience
stores and newsagents.
Reflecting our strategic
focus on the neighbourhood,
we continue to add to our
convenience store estate, which
at 893 stores, represents two
thirds of our total network.
01
Operational and financial highlights
Continuing
to grow
• In 2015, we delivered growth across a range
of financial measures – increasing sales, profit
before tax and EBITDA, whilst controlling
costs and reducing debt.
• Our focus on neighbourhood convenience
gained momentum as we moved ever closer
to reaching our target of 1,000 convenience
stores in 2016. To this end, we acquired an
additional 60 convenience stores and
converted a further 45 of our newsagents to
food and wine stores – bringing the period-end
number of convenience stores to 893. In the
multiples convenience store segment, we are
the second biggest player in the UK.
• As well as increasing our number of
convenience stores, we also expanded the
range of products and services our stores
offer. In particular in 2015, we focussed on
strengthening our food-to-go offer – notably
by rolling out 148 new food-to-go modules
across our stores and opening our first
Subway franchise.
• We continued to build on our position as the
UK’s No.1 post office operator. We acquired
72 new post offices, taking our total to 520.
We also continued our programme of
modernising our post offices – around
90% are now in the new format.
02 McColl’s Retail Group Annual Report and Accounts 2015
Financial
highlights
Revenue1 (£million)
Adjusted EBITDA2 (£million)
£932.2m
+3.1%4
2014
2015
2014 (52 weeks’ trading)
2014
2013
932.2
904.4
922.4
869.4
£37.7m
+3.1%4
2014
2015
2014 (52 weeks’ trading)
2014
2013
37.7
36.6
37.3
34.2
Profit before tax (£million)
Net debt (£million)
£21.1m
+70.3%4
2014
£31.6m
-15.6% 2014
2015
21.1
2015
31.6
2014 (52 weeks) 12.4
2014
12.6
2013 4.4
37.4
2014
2013
86.2
Underlying operating
profit3 (£million)
£24.0m
-0.4%4
2014
2015
2014 (52 weeks’ trading)
2014
2013
24.0
24.1
24.6
22.4
1. Total sales for all stores – see note 2 on page 82 for
the definition of revenue.
2. Details of adjusted EBITDA can be found on page 91.
3. Underlying operating profit is operating profit before
exceptional items and property gains and losses.
4. Adjusted for the 53 weeks’ trading in 2014.
03
Strategic report Chairman’s statement
Leading in neighbourhood
convenience
I am pleased to report another
strong year, driven by our desire
to bring ever-greater convenience
to the UK’s neighbourhoods.
Performing well
In 2015, our first full year as a public company, we continued
to grow. Total sales increased by 3.1% and adjusted EBITDA1
also grew by 3.1% (both adjusted for the 53rd week in 2014).
Further details of our trading performance are included
in the financial review on page 23.
Making the most of our listing
We have continued to capitalise on our listing on
the London Stock Exchange’s main market in 2014.
As planned, we have used funds to fuel and accelerate
our performance in neighbourhood convenience,
raising our profile and strengthening our brand by
opening 60 new convenience stores in the year.
Development of our board and governance
In October 2015 John Coleman stepped down as non-
executive chairman in order to focus on new opportunities
and I was appointed interim chairman. We would like to
thank John for his hard work and everything he has done
for McColl’s during a time of great change and progress
for the business.
In November 2015 we announced that, as stated at the
time of the IPO, James Lancaster would step down as chief
executive. We are currently looking to find his replacement.
Once the new chief executive is identified, James will be
appointed as non-executive chairman, until the annual
general meeting (AGM) in 2017.
With a new chief executive and James as non-executive
chairman we will have a strong succession. Building on
the great growth and transformation achieved under the
leadership of James and his experienced team, we will
continue to take the business forward for future success.
Sharon Brown
Interim chairman and
non-executive director
•
1. Excluding exceptional items and property gains and losses.
04 McColl’s Retail Group Annual Report and Accounts 2015
We continue
to extend
the range of
products we
offer to our
customers
As a listed company committed to delivering long-term
shareholder value, we operate to high standards of
corporate governance. This is implemented through our
audit, remuneration and nomination committees and
supported by our non-executive directors, myself included.
Full details of the committees and their duties are contained
in the governance section of this annual report and the
reports from the nomination, audit and remuneration
committees on pages 48, 49 and 52 respectively.
To support the ongoing growth of the business and in line
with best practice, we are also seeking to appoint a further
independent non-executive director, who will also serve on
all three committees.
Making a great difference
I’d like to thank each and every one of our 18,956
colleagues for their outstanding contribution to the
sustained success of our business. As a customer-focussed
retail business, we are dedicated to providing a great,
friendly service in local neighbourhood stores and our
colleagues are the ones who make this happen.
Delivering dividend growth
The business continues to generate strong cash returns
which we use to fund capital investment and a stated
aim of progressive 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 31 May 2016, to
shareholders on the register at the close of business on
29 April 2016, subject to approval at the forthcoming
annual general meeting.
Looking forward
I believe we are on an exciting path at McColl’s;
a path that is seeing us strengthen our position as a
leading UK neighbourhood convenience store business.
The market remains competitive and fast-changing but
we are confident that our position and chosen direction
will continue to stand us in good stead. Looking forward,
we will press on with our growth plans as we make the
most of bringing convenience to the UK’s neighbourhoods.
Sharon Brown
Interim chairman and non-executive director
05
Strategic report Our group at a glance
Great neighbourhood
stores across the UK
Through our network of 1,352 neighbourhood stores, our 18,956 dedicated
colleagues serve 4.6m customers every week. We aim to continue to
strengthen and grow our business by building on the key part our
neighbourhood stores play in many people’s daily lives.
McColl’s Retail Group is the holding
company for a portfolio of convenience
store and newsagent brands.
Convenience
Our 893 convenience stores provide
a great range of everyday products
and services to local people living in
neighbourhoods across the UK.
From a pint of milk in the morning to
an evening meal, from an open-all-hours
post office to a great selection of fresh fruit
and vegetables and food-to-go, from
the newspapers delivered to your door to
internet collection and returns around the
corner – our convenience stores are at the
heart of the UK’s neighbourhoods.
06 McColl’s Retail Group Annual Report and Accounts 2015
Newsagents
With 459 newsagents across
the country, we are the UK’s
No. 1 specialist confectioner,
tobacconist and newsagent.
Our newsagents are not
only a strong and established
part of the business, but also
provide a valuable foundation
for our continued growth
in convenience through
our ongoing programme
of conversions to
convenience stores.
Our stores
893
Convenience
459
Newsagents
1,352
Total
Our change in focus – convenience
is the future (store numbers 2012–2015)
893
459
2015
655
614
2012
Convenience stores
Newsagents stores
Number
of stores
0–50
51–100
101–200
200+
159
Scotland
170
North
West
66
North
East
99
Yorkshire and
Humber
79
East
Midlands
79
West
Midlands
192
East of
England
29
London
257
South East
47
Wales
175
South West
Serving our
customers
We’re deeply committed to
serving our customers across
the UK. Our long-standing
link with the Basildon Triangle
community is a great
example – where a disaster
proved to be the catalyst for
a brand new store.
Being there for
neighbourhoods
We believe what’s good for
the neighbourhood is good
for our business. At our
recently acquired Malton
store for example, offering
more for the neighbourhood
has led to a boost in sales.
Making the most
of food-to-go
We’re putting a big
emphasis on making the
most of food-to-go, for our
customers and our business.
A key highlight here is the
success of our first Subway
franchise, in Tamworth.
Page 14
Page 33
Page 70
07
Strategic report Chief executive’s review
Forging ahead with
neighbourhood convenience
For us, 2015 was a year of continuing
to focus on executing our strategy to
maintain and enhance our position
as a leading UK neighbourhood
convenience business.
Meeting expectations
In terms of the numbers, we delivered in line with
expectations, continuing to grow and improve on
2014. Total revenue, adjusted for the 53rd week in 2014,
increased by 3.1%. Like-for-like sales decreased by
1.9% overall. Like-for-like sales in premium convenience
(with a wider range of products) and food and wine
decreased by just 0.6% – a strong performance in a
challenging market and another confirmation of our
strategic focus on neighbourhood convenience.
Like-for-like sales in standard convenience and
newsagents decreased by 4.0%.
We increased adjusted earnings before interest, tax,
depreciation, amortisation, exceptional items and property
gains and losses to £37.7m, up by 3.1% adjusted for the 53rd
week in 2014. Operating profit before exceptional items
decreased by £1.2m to £24.3m (2014: £25.5m); however,
adjusting for the 53rd week and property gains and losses,
underlying performance remained broadly flat.
Through continued cash generation, we reduced net
debt by £5.8m. At the same time, we increased net capital
expenditure to £22.7m compared to £19.3m in 2014.
We also took the opportunity in August 2015 to refinance
our £85m revolving credit facility and £15m accordion
facility on improved terms. We reduced interest costs and
extended the period to August 2020 to give us even better
medium-term funding security, which will help us execute
our strategy with confidence. The results are covered in
more detail in the financial review on pages 23 to 25.
Expanding the number and nature of our stores
We are well on our way to achieving our target of 1,000
convenience stores by the end of 2016. We acquired 60
new convenience stores and converted 45 newsagents
to our food and wine format, bringing our total number
of convenience stores to 893. With this 1,000 convenience
stores target well within our reach, it’s natural for our
business to look to the next stage in our evolution. This will
see us shifting our attention increasingly towards not only
growing the number of convenience stores we have, but
also expanding the range of products and services we
offer in our stores. In 2015, for example, we put a targeted
range of alcohol into 100 of our newsagents – a revenue-
enhancing step with a high return on a small investment.
James Lancaster
Chief executive
•
08 McColl’s Retail Group Annual Report and Accounts 2015
We are
proud to be
a leader in
neighbourhood
convenience
Evolving our stores
The way we are evolving our network of stores – to give
our customers every kind of convenience they need
on their doorstep – fits in well with the broader changes
going on in the market. The buzz phrase is omni-channel
shopping, where people are increasingly shopping in
many different places and topping up more frequently,
in person and online, rather than the old way of doing
one bulk shop from one big store once a fortnight or so.
This trend, as well as demographic changes, favours our
focus on neighbourhood convenience. We want to be
the store for everyone living within half a mile or so of our
shopfront – the one our customers can come to for the
things they need, and have the opportunity to work in
too, if they like.
Bringing convenience and food-to-go together
In particular, we are moving on from a typical convenience
store to one where the lines are blurred between
convenience and food-to-go. We want to bring the two
together in a new way for the UK’s neighbourhoods. So of
course we will continue to offer our customers milk, baked
beans, newspapers and other everyday items, but we will
also provide a great range of take-away food and drinks
throughout the day – from morning coffees to late-night
hot snacks.
Increasing our food-to-go offer
Coffee and sausage rolls in the morning, sandwiches
and fruit pots at lunchtime, hot snacks and ready meals
in the evening, fresh bread throughout the day are all
available in our convenience stores – if you want food-to-go
in your neighbourhood, we’re there for you. This was a big
focus for us in 2015. We now have a dedicated head
of our food-to-go business, supported by trained teams
and individuals across our stores. So we are putting a lot
of effort behind the all-important people side of driving
food-to-go sales. We are also investing in the necessary
equipment. Through 2015, we rolled out 33 large format
food-to-go modules across our stores and 115 smaller
modules, which represents a big step forward for the group.
We are getting good growth from our food-to-go business
– sales have significantly increased throughout the year
– and we will continue to make this a key focus of our
business into the future.
09
Strategic report Chief executive’s review continued
From a cup
of coffee to a
super Subway
sandwich –
food-to-go was
a big part of
our 2015 story
Total revenue growth
3.1%
4.1% 2014
2015
3.1%
2014 (52 weeks)
4.1%
2014
2013
2.9%
6.1%
Number of
convenience stores
893
+11.8% 2014
Food-to-go growth up
£4.5m
+30.9% 2014
10 McColl’s Retail Group Annual Report and Accounts 2015
Partnering with Subway
We also opened a Subway franchise in one of our stores
and as part of our strategy, we are running the franchise
ourselves, enabling us to integrate it fully in the store
and make the most of the enhanced food-to-go offer
this popular brand brings. One particularly welcome
advantage of partnering with Subway is that it helps to
bring into our stores a younger group of customers. The
launch of this addition to our food-to-go offer has been
a great success and we plan to introduce more Subway
franchises across our network.
Providing much-loved post office services
We acquired 72 new post offices in 2015 and now have 520
in our stores. We are the UK’s No.1 post office operator –
running more than the Post Office itself. Our modernisation
programme continued, with a further 23 existing post
offices being converted to the new format. Around 90%
of our post offices have now been modernised. We always
like to have a strong reason to be in a neighbourhood –
to be more than just a great local shop. Often that means
being the post office too; moreover, one which stays open
as long as our stores do – so you can pop in late at night
to post a package while topping up your shopping.
Offering a great range of neighbourhood
services and opportunities
Post offices are just one example of our commitment
to offering our customers an ever-greater range of
neighbourhood services. We deliver newspapers to around
130,000 homes, for example. No other business makes as
many paper deliveries, or creates as many opportunities
for young people to earn some well-deserved pocket
money. Moreover, with our commitment to offering local
people great career opportunities, that first job delivering
papers can turn into a part-time or permanent position
in-store and onwards and upwards to management.
Alongside paper deliveries, we provide many other
neighbourhood services such as lottery tickets, bill
payment, cash machines and internet collection and
return points – all just a short walk from where our
customers live.
Continuing our loyalty scheme
Our dedicated Plus card loyalty scheme is proving to be
a very successful way to thank our customers for shopping
with us and strengthening our bond with them. To date
we have nearly 450,000 loyalty card customers who now
regularly use their card in store to access the great offers
available to them.
Anticipating and responding
The market continues to be very competitive, with pressures
for all players – from food price deflation to rising costs such
as the increase in the National Minimum Wage and
introduction of the Living Wage. But as a long established
retail business with a very experienced leadership team
we are used to anticipating and actively managing the
challenges as well as seeing and capitalising on the
opportunities – this is part of what makes retail so
interesting and inspiring.
Our distinctive strengths
• We focus on convenience stores
within neighbourhoods
• We have a highly experienced
management team
• Our 18,956 colleagues
deliver high levels of friendly
customer service
• We have national scale and brand
awareness across the UK
• We offer a wide range of products
and services to local customers
• We directly manage and develop
our network of stores
• We invest in customer-facing
information systems and ongoing
improvements
Average customers
per week
4.6m
Average basket spend
£5.12
£4.97 2014
Number of colleagues
18,956
18,685 2014
Generating additional value from selling 100 newsagents
Although convenience is our focus, we have carried
on continuously reviewing our portfolio of newsagents.
As well as converting a further 45 newsagents to
convenience stores, we also announced in October 2015
that after reviewing our portfolio we had decided to sell
100 newsagents (subsequently 3 have been withdrawn
from sale). This sale will generate additional funds
to reinvest in acquiring and enhancing convenience
stores. This is an ongoing part of our neighbourhood
convenience strategy.
Controlling costs
We kept a sharp eye on costs across the business and
took a number of steps to control costs and improve
efficiency. This included reducing headcount at our
head office. We have industry-leading levels of stock loss.
We also continually monitor all our running costs, achieving
ongoing improvements in energy efficiency across our
stores for example.
Streamlining our regional management
In 2015 we streamlined our regional management, so that
we now have regional managers responsible for both the
convenience stores and newsagents in their region. This
was a natural change as the number of our convenience
stores grows and the number of newsagents decreases
progressively. It has helped us increase both efficiency
and control.
Managing our trading times
As part of our ongoing efficiency drive, we have been
managing our store trading times to make sure we stay
open the optimum number of hours in each individual
location. This store-by-store management is an example
of our commitment to actively manage the business to
achieve best results.
Looking ahead
As we look ahead to 2016 and beyond, for us it’s essentially
about continuing to execute our strategy with ever-greater
intensity and success. More focus on neighbourhood
convenience. More growth in our stores as we close in on
our 1,000 convenience stores target. More expansion and
enhancement of the products and services we offer to our
local and loyal customers. More chilled, fresh and food-to-
go options. More close cost control. More great jobs for
our current and future colleagues. More positive impact
on the neighbourhoods we live and work in. In short, more
McColl’s, as we continue to strive and excel at bringing the
very best convenience stores to the UK’s neighbourhoods.
Having led the business for over 40 years, I have seen it
change and develop a long way from its earliest days to
the strong and successful company it is today. As I prepare
to step down as chief executive and take up the role as
non-executive chairman, I am proud to say McColl’s is in
great shape and has an exciting future. I look forward to
the company I know and love forging ahead in bringing
ever-greater convenience to the UK’s neighbourhoods.
James Lancaster
Chief executive
11
Strategic report The year in review
A great year for
convenience
For a number of years now, our strategic focus
has been on growing our neighbourhood
convenience business. 2015 was a great year
for us in this respect, as we closed in on our
1,000-stores target and advanced the range of
products and services we offer through our stores.
February
We have had
11.5 million Plus card
swipes since the scheme
was launched
April
We rolled out our 100th
new food-to-go module
Number of food-to-go
modules rolled out
148
May
June
We converted our 150th
newsagent to the food
and wine format
We opened our 850th
convenience store
Number of convenience
stores open by the
end of the year
893
12 McColl’s Retail Group Annual Report and Accounts 2015
August
We improved the terms
of our existing borrowing
facility – taking advantage
of the opportunity to
reduce the costs and
extend the term
Reduction in interest rate
50
basis
points
September
We opened our 500th
post office
Number of post offices
opened to date
520
Strategic report
October
We launched our first
Subway franchise
– an instant success
We raised £195,000 to help
fund research into sudden
death in young adults
We announced the sale
of 100 newsagents to help
fund further convenience
store acquisitions
and development
November
Re-opening of Basildon
store after fire. Another
example of delivering
for a local community
13
There for the Triangle
We’ve been serving the Basildon
Triangle community for many years
– our original store was part of the
parade of shops that opened there
back in 1976. Over time, we’ve built
up a lot of loyalty with local residents
and we’re proud to be a popular part
of the neighbourhood.
But on 3 January 2013 disaster struck
when a fire completely burned out
the parade, forcing all the shops to
close. We were very keen to open up
for our customers as quickly as
possible. Working closely with local
residents and the council, we opened
a temporary unit in September 2013
offering the majority of the products
and services our neighbours had
relied on us for.
Through 2015 we built the new
permanent store, complete with a
modernised post office and a great
new range of chilled food and
groceries. The Mayor of Basildon
officially opened the new store on
20 November 2015 – a great start
for the latest chapter in our Basildon
Triangle story.
The development
looks fantastic
and is a vast
improvement
on the previous
parade
Councillor Stuart Sullivan,
the council’s cabinet
member for resources
14 McColl’s Retail Group Annual Report and Accounts 2015
Strategic Report
Looking after
our customers
15
Strategic report Market overview
Making the most
of our strength in
convenience
We continue to focus ever more
intently on the UK’s growing
convenience sector – providing
access to great products and
services to a growing number of
neighbourhoods while capitalising
on our position as the country’s
leading newsagent.
Convenience continues to grow
The convenience sector continues to grow. It accounts
for an increasingly significant proportion of the UK grocery
market, with sales of £37.7bn in 2015 comprising 21.2%
of market share, compared to £26.2bn in 2008 (a 18.9%
market share). This represents a compound annualised
growth rate of 5.3%, compared to a 3.5% increase for
the grocery market as a whole. In 2015 the convenience
channel was over four times the size of online in the
grocery market.
Convenience sales value
(£billion) 2008–2020
2020F
2019F
2018F
2017F
2016F
2015
2014
2013
2012
£44.1
£42.9
£41.7
£40.3
3.2%
annual
growth
£38.7
£37.7
£35.8
£34.1
£32.5
2011
£31.0
2010 £29.5
2009
£27.8
2008
£26.2
The convenience channel has seen another year of
growth, up 5.1% year-on-year. This growth is in line with that
of the previous year. Against a backdrop of a total grocery
market which is growing at around +2%, the convenience
channel continues to outperform.
Source: IGD research, years to April
We are
leading the
way in bringing
ever-greater
convenience
to the UK’s
neighbourhoods
16 McColl’s Retail Group Annual Report and Accounts 2015
The Institute of Grocery Distribution (IGD) forecasts that the
UK convenience sector will grow at an average of 3.2% per
annum over the next five years, generating sales of £44bn
and accounting for 22% of the grocery market by 2020.
Changing lifestyles favour convenience
The growth in convenience is driven by changing
lifestyles, notably:
• people opting for less frequent big shops and more
frequent small shops such as top-ups, meals-for-tonight,
food-to-go and fresh food for the next few days;
• households as a whole wanting to shop for value
and waste less food;
Shoppers who do a
top up every week
85%
+5% year on year
Source: him! research & consulting
Shoppers who don’t
do a ‘main weekly
or monthly shop’
30%Source: him! research & consulting
Value of UK convenience
(£billion)
£37.7bn
+5.1% 2014
Source: IGD 2015 statistics
Modern shopper lifestyles are
affecting the way we shop
Employment
status
Technology
Ageing
population
Shrinking
house
sizes
Longer
working
hours
Shopper
behaviour
More
single
dwellers
Lengthy
commutes
Greater
discretionary
spend
Busy
lifestyles
Source: him! research & consulting
• the increasing number of single households in the UK;
• the ageing population;
• the growth in the female working population;
• increasing working hours resulting in less time
to shop; and
• an improvement in convenience stores in terms
of quality and new products and services such
as internet collections and returns.
The convenience players
There are a number of different players in the convenience
sector: multiples (owned and managed networks of
convenience stores such as ours and those of the
supermarket groups), symbols (networks of self-employed
operators that share the same name above the door,
such as Nisa or Spar), independents, petrol forecourts
and co-operatives.
We are the second largest multiple convenience store
operator in the UK, owning and managing a network
of 893 convenience stores.
17
Strategic report Market overview continued
Convenience stores by segment
(2010–2015)
48,811
47,899
47,567
47,527
47,896
48,523
2,437
2,852
8,463
14,199
2,471
2,825
8,329
2,562
3,029
7,953
2,637
3,318
7,537
2,680
3,772
7,641
2,765
4,173
7,655
14,131
14,786
15,209
15,173
15,423
20,860
20,143
19,237
18,826
18,630
18,507
Greater competition and consolidation
As the popularity of convenience stores increases so does
the competition. As a result, the market is consolidating,
with the number of symbols, multiples and co-operative
stores increasing by 12.6% since 2009. In 2015 these groups
accounted for 71.7% of convenience sector sales.
Multiples account for 21.8% of sector sales. According
to the Institute for Grocery Distribution, the number of
multiples increased from 2,812 to 4,173 between 2009 and
2015, the largest percentage increase of all the players
over this period.
Market pressures
The market remains challenging for all players, with
the broad trends of continued pressure on customers’
disposable income, price-driven competition, decreasing
food prices and rising costs, for example through increases
in the National Minimum Wage. However, our focus on
growing our premium convenience business – and the
range of products and services we offer – provides the
right response to these challenges.
Number of UK convenience stores (2015)
48,523
47,896 2014
31.8%
15.8%
8.6%
5.7%
38.1%
s
4
l
T
e
c
1
s
2 , 3
o
7 s t o r e
2 M c C o l
3
4
’ s
8 0 2 s t o r e s
Sainsbury’s
672 stores
M Local
140 stores
2010
2011
2012
2013
2014
2015
Independents
Symbols
Forecourts
Multiples
Co-ops
Multiples have experienced the fastest growth in store numbers over the last 12 months,
increasing by 10.6% (+401 stores). Although representing the largest increase in store
numbers, multiples still account for fewer than 1 in 10 stores. Co-operatives and symbol
groups have grown store numbers by 3.2% and 1.6% respectively.
Source: IGD 2015 statistics
18 McColl’s Retail Group Annual Report and Accounts 2015
Non-affiliated
independents – 18,507
Groups of 10 or fewer convenience
stores under the same ownership
Symbol groups – 15,423
All independent and multiple retailers
that are affiliated to a symbol group
Forecourts – 7,655
Forecourt multiples (company
owned stores of 10 or more in
number, which are operated by
oil companies or supermarkets),
Forecourt dealers (dealer-owned
and operated stores which are filling
station based, not operated by oil
companies or supermarkets)
and joint ventures between oil
companies and supermarkets
Convenience
multiples – 4,173
Retailers with 10+ convenience stores
with no symbol group affiliation at
retailer level (though some may be
members of buying groups). May form
part of wider multi-format retailers e.g.
M&S, Sainsbury’s, Tesco
Co-operatives – 2,765
Sales from convenience stores from
the 19 active trading societies
Source: IGD 2015 statistics
Top-up shopping and food for now and later
are big value generators
Shoppers topping up and people looking to buy food for
now and later tend to spend more. They are also key in
driving the value growth in our sector. That’s good for our
neighbourhood convenience-focussed business.
Building on our distinctive neighbourhood
convenience offer
With our long-held focus on convenience and our
experience in running and developing a strong network
of neighbourhood stores, we are well placed to make the
most of the growth opportunities in UK convenience.
A valuable platform for growth
Our network of newsagents has provided us with a
valuable platform for growth. The newsagent sector
is highly fragmented, with a few large players such as
ourselves and many smaller, independent operators.
We capitalise on our strength in newsagents to generate
revenue and cash for the group, meet the needs of
neighbourhoods across the UK and provide a great
foundation for our focus on growth in convenience.
Since 2011, we have been converting a number of
our newsagents to food and wine convenience stores,
enabling us to offer a wider range of products and services
to neighbourhoods and, in turn, boosting our revenue
and profit. In 2015, we converted a further 45 newsagents
in this way, bringing the total number of conversions to
date to 180.
Our network of managed convenience stores is unlike any
other. We have neighbourhood stores at the heart of where
people live, rather than on the high streets near where
people work or with purely passing trade. Moreover, our
stores offer local people excellent everyday products and
services at great value provided by friendly staff who are
always happy to help, and often live nearby themselves.
So in terms of both where they are, what they offer and the
part they play locally – our neighbourhood convenience
stores stand out.
Building on this distinctive offer, we aim to continue
increasing our convenience stores from 893 at the financial
year end to 1,000 by the end of 2016 through acquisitions
of new stores, mainly independents and symbols, and
ongoing conversions of our newsagents. At the same time
we will progressively expand the range and quality of
products and services we offer neighbourhoods across
the UK through our network of stores on their doorstep.
Top-up and evening meal shoppers
have highest trip spend
(Average spend on shop items (£))
Food for now and food for later
will continue to drive the value
growth in our market
(Mission value to convenience sector)
Top-up (planned)
Meal for tonight
£8.73
£8.42
Newsagent
£5.91
Services
£5.47
Top-up (distress)
£5.33
Food-to-go
£4.66
Drink-to-go
£3.18
Source: him! research & consulting
£16.1bn
£4.8bn
£1.8bn
£19.6bn
£7.8bn
£2.6bn
2013
2014
2015
2016
2017
2018
2019
2020
Top-up
Food-to-go
Meal for tonight
Source: IGD 2015 statistics
19
Strategic report Our strategy and business model
Our business
model
Our goal is to strengthen and extend our position as a
leading UK neighbourhood retailer through our strategy
focussed on growing our convenience store business.
To implement our strategy we have a simple business model
that puts the neighbourhood at the heart of everything we do:
A well-managed and
efficient supply chain
A small number of carefully selected
suppliers and distributors
Supplying our growing retail
network across the UK
Delivering great products
and services at the heart
of the neighbourhood
McColl’s
Premium
convenience
stores
McColl’s
Standard
convenience
stores
McColl’s
Food and
wine stores
Martin’s/
RS McColl
Newsagents
Fresh and
chilled food
Bill payments
Post offices
Subway
Internet
collections
Newspaper
delivery
The heart
of the
neighbourhood
Everyday
groceries
Lotto
Plus card
PayPoint
Food-to-go
Tobacco
Beers, wines
and spirits
Bringing value to
all our stakeholders
Shareholders
Customers
Colleagues
Communities
Partners
20 McColl’s Retail Group Annual Report and Accounts 2015
Our progress
against our strategy
We have five key strategic priorities:
Priority
Description
network of
convenience
stores
1 Extend our
2 Focus on our
customers
and brand
We acquire new stores and
convert our newsagents to
convenience stores by
adding a range of
groceries and alcohol and
extending opening hours.
We get close to our
customers and do
everything we can to
understand and meet
their everyday needs.
We give our customers
great, friendly service.
We seek to build loyalty and
the strength of our brands
and reputation in the
neighbourhoods we serve.
Progress in 2015
• We acquired 60 stores in 2015.
• We converted 45 newsagents into food and
• We upgraded a further 100 stores to include
wine stores.
a focussed alcohol offer.
• We continued to build on our dedicated Plus card
loyalty scheme for our customers and have nearly
450,000 customers actively using the scheme.
• We upgraded a further 12 convenience stores to
our bright, modern format as well as applying it to
all acquisitions and food and wine conversions.
3 Expand our
range of
products
and services
We offer an ever-greater
range of products and
services to meet the
everyday needs of
neighbourhoods
across the UK.
and 115 smaller modules.
• We rolled out 33 large format food-to-go modules
• We opened our first Subway franchise.
• We modernised a further 23 of our post offices;
over 90% of our 520 post offices are now in
the modern format.
• We streamlined our regional management.
• We rationalised head office roles.
• We continued to monitor and reduce energy costs.
Risk factors
• Business strategy
• Finance and
treasury
• Business strategy
• Competition
• Customer
proposition
• Economy
• Regulation
• Business strategy
• Competition
• Customer
proposition
• Economy
• Regulation
• Supply chain
• Business strategy
• Information
technology
• Operational
cost base
• Supply chain
operational
efficiency
4 Ensure
5 Make the most
of being at the
heart of the
neighbourhood
We focus on maximising
operational efficiency
across our network of
directly owned and
managed stores. We
achieve this in a number
of ways, including highly
effective EPoS systems,
close communication
between head office,
the stores and area and
regional managers, strong
relationships with suppliers
and the dedication of our
outstanding colleagues
across the group.
We seek to play an
ever-bigger and more
positive role in the
neighbourhoods we
serve. From raising funds
to support local good
causes to employing
local people and giving
them rewarding career
paths – we make the most
of every opportunity to play
a great long term role in
the UK’s neighbourhoods.
• In the period we had 175 active apprenticeships,
delivered approximately 6,000 hours of new starter
induction training and 413 colleagues completed
the Managing Our Business programme to
transition them to becoming store managers.
• For the third year running, we raised money to
help research into sudden death in young adults
through our group-wide Halloween fundraising
initiative, raising £195,000. We also raised money
for good causes across our neighbourhoods
through the Make A Difference Locally campaign
and the now UK-wide 5p charge on plastic bags.
• Business strategy
• Competition
• Customer
proposition
• Regulation
21
Strategic report Our key performance indicators
Our key
performance
indicators
We use six key performance indicators (KPIs) to monitor the
performance of the group. We will keep KPIs under review to ensure
they remain appropriate and are linked to remuneration policy.
We show how we performed against our current KPIs below:
Revenue1
£932.2m
+3.1% 2014
2015
2014 (52 weeks’ trading)
2014
2013
932.2
904.4
922.4
869.4
Like-for-like sales2
-1.9%
-2.6 ppts 2014
Adjusted EBITDA3
£37.7m
+3.1% 2014
2015
2014
2013
-1.9
2015
0.7
2.2
2014 (52 weeks’ trading)
2014
2013
37.7
36.6
37.3
34.2
Total revenue grew by 3.1%, adjusted
for the 53 week period in 2014,
reflecting additional sales from our
increasing number of stores and our
increasing focus on convenience
within those stores.
Like-for-like sales decreased by 1.9%,
a combination of the relatively low
decrease of 0.6% across our growing
network of premium convenience
stores and food and wine stores, and
a 4.0% decrease across our standard
convenience and newsagents.
Adjusted EBITDA increased by 3.1%,
adjusted for the 53 week period
in 2014.
Convenience stores4
Earnings per share5
Underlying operating profit6
893
+11.8% 2014
2015
2014
2013
15.9p
+1.9% 2014
893
799
707
2015
2014
2013
15.9
15.6
12.6
£24.0m
-0.4% 2014
2015
2014 (52 weeks’ trading)
2014
2013
24.0
24.1
24.6
22.4
The number of our convenience stores
increased by 94 in 2015 (2014: 92) to
893 (2014: 799). This growth came from
a combination of acquiring new stores
and converting newsagents.
Earnings per share increased by 1.9%.
Underlying operating profit for the
period decreased by 0.4%, adjusted
for the 53 week period in 2014.
1. Total sales for all stores – see note 2 on page 82 for the definition of revenue.
4. The number of convenience stores owned at the end of each financial period.
2. Like-for-like sales from stores that have traded throughout the current and prior periods,
and includes VAT but excludes sales of fuel, lottery, mobile phone top-up and gift cards.
5. Earnings per share is stated before exceptional items. Details of the calculation
of earnings per share can be found in note 11 on page 94.
3. Details of adjusted EBITDA can be found on page 91.
6. Underlying operating profit is operating profit before exceptional items and property
gains and losses.
22 McColl’s Retail Group Annual Report and Accounts 2015
Financial review
A strong track
record of sales
and profit growth
In 2015 we delivered our fifth
consecutive year of sales and
adjusted EBITDA growth, capitalising
on our convenience focussed
strategy to generate returns for
our shareholders.
Revenue
I am pleased to report that our full year revenue grew
to £932.2m (2014: £922.4m), an increase of 3.1% having
adjusted for the impact of the 53rd week in the prior period.
This performance, supported by our acquisition and
conversion programme, was achieved in spite of continuing
strong headwinds in the retail sector in particular within
food. Full year like-for-like (LFL) sales were down by 1.9%,
however, in the final quarters of the year we delivered an
improving LFL trend. Additionally, our premium convenience
and food and wine stores, the prioritised focus of our recent
investment, were only slightly down by 0.6% LFL.
Gross profit
Gross profit margins improved year on year by 20 basis
points, from 24.2% in 2014 to 24.4% in 2015. This increase
reflects the more profitable mix of sales in convenience,
as these stores become an increasing proportion of our
portfolio. This improvement is set against a backdrop of
competition in the sector and price deflation across a
number of staple categories. Total gross profit grew to
£227.5m (2014: £222.8m), an increase of 4.1%, adjusting
for the 53rd week.
Operating profit
Operating profit increased by £1.6m, from £22.0m in 2014
to £23.6m in 2015. Operating profit before exceptional
items decreased by £1.2m to £24.3m (2014: £25.5m);
however, adjusting for the 53rd week and property gains
and losses, underlying performance remained broadly
flat. Although profit improvement was achieved through
growing total revenues and improving gross margin,
administrative expenses, before exceptional costs,
increased as a percentage of revenue to 24.3% (2014:
24.2%). Whilst costs continue to be tightly managed
across all business areas, the increase reflects the
higher cost structure in convenience stores.
Other operating income before exceptional income
reduced from £25.7m in 2014 to £23.6m in 2015, reflecting
the additional week’s trading in 2014 and £0.7m lower profit
on asset disposals.
23
Jonathan Miller FCA
Chief financial officer
•
Gross profit
margins
improved
year on year
by 20 basis
points
Strategic report Financial review continued
Profit on
ordinary
activities
before taxation
increased by
almost 70%
Net finance costs
£2.5m
£6.2m 2014
Dividend
10.2p
8.5p 2014
24 McColl’s Retail Group Annual Report and Accounts 2015
Exceptional costs in the period were £0.6m, which related
to a first half programme of restructuring, undertaken in
order to reduce future administrative overheads.
Net finance costs
As previously reported, we were able to substantially
reduce our finance costs following our IPO in February
2014. In 2015 we saw a full year of these benefits, with net
finance costs reducing to £2.5m (2014: £6.2m). During the
course of 2015 we also entered into an improved working
capital facility, improving the margin paid by at least 50
basis points.
Profit before tax
Profit on ordinary activities before taxation increased to
£21.1m (2014: £12.6m), reflecting the significant exceptional
costs incurred in 2014 and reduced finance costs.
Excluding exceptional items, profit before tax increased
by £2.5m or 12.9% year on year.
Taxation
The tax charge for the period increased to £5.0m
(2014: £2.7m), representing an effective tax rate of 23.7%
(2014: 21.6%) compared to the statutory rate for the period
of 20.3%. This included a £0.7m deferred tax adjustment
in respect of prior periods, without which the effective
tax rate is 20.4%.
Earnings per share
Basic earnings per share increased to 15.4 pence
(2014: 10.2 pence). Adjusted earnings per share, stated
before exceptional items and the prior year deferred tax
adjustment, increased to 16.5 pence (2014: 15.6 pence).
Dividends
I am pleased to confirm that the board has
recommended a final dividend of 6.8 pence per
share (2014: 6.8 pence), in line with our dividend
policy. The total dividend for the period will therefore
be 10.2 pence per share (2014: 8.5 pence).
Balance sheet
Following another year of profitable growth, total
shareholders’ funds at the end of the period increased
by £8.8m to £126.0m (2014: £117.2m).
The book value of goodwill and other intangibles, property,
plant and equipment increased by £8.1m to £210.3m (2014:
£202.2m), driven by our programme of capital investment.
Current assets at the end of the period increased to
£99.9m (2014: £87.3m). This was principally due to increased
stockholding as sales grew and mix changed, alongside
increased cash balances and the reclassification of 97
newsagents as assets held for sale. The cash generated
from the disposal of these newsagents will be used to further
invest in new stores to support our growth in convenience.
Our current liabilities increased to £135.8m (2014: £116.9m),
reflecting higher trade and other payables, due to the
impact of the 53rd week in 2014 reducing the prior
year-end position.
Non-current liabilities reduced to £58.3m (2014: £61.9m),
as we continued to reduce our borrowings and improve
our gearing post IPO.
Pensions
We continue to operate two defined benefit pension
schemes, both of which are closed to future accrual.
The combined surplus in the two schemes improved
by £4.8m to £6.1m (2014: £1.3m combined surplus).
Following the latest actuarial valuation of the schemes in
2013, agreement was reached with the trustees as to the
future contribution level, which was set at £1.5m per
annum, increasing annually by inflation. The next actuarial
review is due in 2016.
Cash flow and net debt
We continued to generate strong operational cash flows.
Net cash provided by operating activities for the period
increased by over 25% to £43.5m (2014: £34.6m). This
improvement was driven by increased pre-tax profits and
a net cash inflow from working capital.
Adjusted EBITDA increased by £0.4m to £37.7m (2014:
£37.3m). There was a working capital inflow in the period
of £10.5m (2014: £2.3m outflow), as we reversed the
impacts of the 53rd week in the prior year. This meant
that the prior period included additional cash outflows,
for example, 13 monthly payroll payments. The combined
impact of these effects on working capital in the prior year
was an outflow of £11.7m.
Net capital expenditure increased by £3.4m to £22.7m
(2014: £19.3m). This reflects our continued programme
of investment, predominantly relating to acquisitions
and store developments. In the period we added 60
premium convenience stores, completed 45 food and
wine conversions and delivered approximately 150 store
food-to-go upgrades.
Net finance expense of £2.5m was £1.7m lower than the
prior year, due to the lower cost capital structure post IPO.
The interim and final dividends paid in the period
totalled £10.7m.
Net debt at the end of the period improved to £31.6m
(2014: £37.4m), representing 0.8 times adjusted EBITDA.
Debt refinancing
During the period, the group entered into an improved
£85.0m working capital facility. This improved facility not only
extended the term, which now runs through until August
2020, but it also saw a reduction in the cost of borrowing by
at least 50 basis points. At the end of the period drawings
against this facility were £44.5m (2014: £46.0m).
Overall, I remain confident that we are in a
strong financial position and have sufficient
funding in place to deliver our strategy to
profitably grow our convenience business.
We have a great track record of growing
sales and profits and will continue to work
hard to maintain this progression.
Jonathan Miller FCA
Chief financial officer
Combined pension surplus
£6.1m
£1.3m 2014
Net debt
£31.6m
£37.4m 2014
25
Strategic report Corporate responsibility
Being a good
neighbour
We are at the heart of many different
neighbourhoods across the UK
and are committed to playing our
part responsibly.
From providing everyday access to great products and
services to offering flexible job opportunities, from doing
the right thing for the environment to donating to local
charities – we actively seek to make a real long-term
difference to the people and communities we live and
work with.
This is essentially about being a good neighbour –
a neighbour you like having close by and can rely
on to be there for you.
Communities
Raising money at Halloween
It’s a tradition now at McColl’s – every Halloween for the
past three years the whole group gets into the spirit of raising
money for a great cause: research into sudden death in
young adults. Every week in the UK, 12 apparently fit and
healthy young people die suddenly from undiagnosed
heart conditions. In 80% of cases, there are no signs or
symptoms. Colleagues and customers across the group
took part in a range of fundraising events and made in-store
donations over Halloween. This year we raised over £195,000
for St George’s, University of London, to help fund research.
Making A Difference Locally
We continue to take part in the Making A Difference
Locally (MADL) campaign. The money raised goes to local
good causes chosen by each store’s manager and their
customers – so it stays in the neighbourhood.
Turning plastic bags into charity funds
We continue to raise charity funds through the mandatory
5p charge on plastic bags. Since the extension of this rule
in October 2015 to include the whole of the UK, we have
been able to raise even more money for good causes.
We are currently set to raise around £600,000 a year in
this way. So far, we have donated over £66,000 to St
George’s, University of London, and over £68,000 to
various local causes.
26 McColl’s Retail Group Annual Report and Accounts 2015
We actively
seek to
make a real
long-term
difference
Environment
As part of our commitment to being a responsible
neighbourhood business, we aim to act in a sustainable
way, through efficiency, recycling and compliance.
Improving energy efficiency
We have an ongoing commitment to improving our
energy efficiency. Take fridges, our biggest energy user.
By fitting glass doors to our new refrigeration, we save
about 30% of the energy costs – which is good both for
our bottom line and the environment. In addition, all new
stores have energy saving LED lighting. Other initiatives
include removing surplus or particularly inefficient
equipment from our stores; undertaking measures such
as last man out switches; and photocells that switch
lighting on and off when areas aren’t used. Many of our
stores have live energy monitors, so we can see how much
energy each stores uses in real time and actively manage
them accordingly.
In 2015 we reduced our like-for-like energy consumption by
a further 1.1%, building on reductions of 1.6% in 2014 and
5.6% in 2013. This is all the more impressive given that we’ve
increased our chilled space – all of which requires energy.
Recycling packaging
Through our arrangements with our two key distributors
we recycle plastic and cardboard used in our business.
The same lorries that arrive with products leave with plastic
and cardboard, so no additional miles are involved – it’s a
neat energy-efficient way to recycle packaging. So far, we
have recycled well over 1,500 tonnes of waste.
Colleagues
Making all the difference
Just as we are at the heart of the UK’s neighbourhoods,
so our colleagues are at the heart of our business.
Their commitment, friendliness and professionalism
make all the difference. We invest in recruiting, retaining
and developing great people, many of them from the
local communities we serve. For example, we delivered
approximately 6,000 hours of new starter induction
training in this year alone. Also, the vast majority of our
colleagues live a short distance from the stores they
work in, so we are all bound together in the same
shared neighbourhood enterprise.
Colleagues (full-time)
6,356
6,690 2014
Total number of colleagues
18,956
18,685 2014
CO2 emissions (tonnes)
54,609
56,131 2014
27
Strategic report Corporate responsibility continued
Developing people
We are committed to equal opportunities for colleagues
at all levels.
To help embed and build on our friendly professional
way of working, we have an induction programme for
our store-based colleagues. It includes modules on, for
example, fresh foods in response to the ongoing growth
and developments in our convenience business.
We also run an academy for area managers and a
vibrant apprenticeship programme. Currently we have
175 apprentices across the group and offer a range of
retail-based qualifications to other colleagues.
We also run a very successful onwards and upwards
development programme for our colleagues, focusing on
some of the key roles within the business. Many of today’s
store managers started out with us on a paper round or as
sales assistants, underlining the career opportunities we
provide and the role we play for local people.
Rewarding people
We offer a range of benefits for colleagues as well as
flexible working opportunities. Through our employee
handbook for example, we ensure everyone across the
group understands what’s available to them as well as
what is expected of them. It’s all part of our desire to foster
a strong and enjoyable high-performing retail business.
Store colleagues (gender)
Male
Female
36%
64%
Senior managers (gender)
Male
Female 14%
86%
Directors (gender)
Male
Female
60%
40%
Length of service (years)
70%
0-5
5-10
10-20 9%
20+ 3%
18%
1
We are a
UK business
2
We support
good causes
Our responsible
approach has
five pillars
From our roots in the business
established by our chief
executive James Lancaster
in 1973, we have grown to
become one of the UK’s
largest neighbourhood
retailers across the country.
We support a variety of
local, regional and national
good causes and charities
– from raising money across
the group for research into
sudden death in young
adults to donating to local
football teams.
28 McColl’s Retail Group Annual Report and Accounts 2015
Recognising people
We like to recognise the outstanding contributions of our
people. One of the ways we do this is through rewarding
long service each year. Many of our colleagues have been
with us for many years – we’re proud to have such a high
level of loyalty. In 2015 we gave our Lifetime Achievement
Award to John Walter, who has worked for us for over 40
years, starting out as a paperboy back in 1975 and working
his way up to senior management.
We also hold annual Store Of The Year Awards to recognise
exceptional contributions from across our network. 2015’s
Overall Store of the Year Winner went to Michael Elliott’s
store in Birch Hill, Bracknell. The judges were impressed
by how Michael led his store to a year of profitable,
sustainable growth.
Reflecting our ever-more intensive focus on food-to-go
across McColl’s, in 2015 we introduced a 10-week incentive
across 7 food-to-go categories, awarding prizes to the
winning store managers.
Human rights
We treat people in line with internationally proclaimed
human rights principles. The group does not have a
specific human rights policy; however, a number of policies
are in place that demonstrate effective management of
human rights issues in the business.
Health and safety
We continue to demonstrate our commitment to health
and safety across the group.
Through our health and safety committee, strategy and
forums, we take a consistent and collaborative approach
to creating a safe place for our employees and customers.
In 2015, staff safety was a key focus. We invested in staff
safety technology across key locations. We also worked
closely with insurers, brokers and local authorities to
advance our risk management, for example by increasing
proactive risk management in stores. By improving the level
of compliance across our business we saw a downturn in
employee liability claims. In addition, we began to use
technology to record risk assessments and incidents, to
improve due diligence and enable us to react to incidents
quickly. All these initiatives are managed and monitored
through a health and safety governance group of
executives and senior management.
3
We are a
sustainable retailer
4
We offer
local services
5
We employ
local people
We are committed to
achieving good environmental
practice and strive to make
a positive impact. To this end
we aim to use materials and
energy efficiently, recycle
wherever possible, minimise
waste and ensure we comply
with environmental legislation.
We offer a variety of
essential everyday services
to local communities –
from post offices to internet
collections and returns, from
delivering newspapers to
food-to-go.
We employ and seek
to develop the skills and
potential of local people.
29
Strategic report Principal risks
How we identify, assess
and manage risk
We are committed to good corporate governance. To this end, we follow
a sound risk management process closely aligned to our strategy.
Principal risks
Risk
Business strategy
If the board either adopts
the wrong strategy or fails to
communicate or implement
its strategies effectively, our
aims may not be met and
the business may suffer.
Competition
Customer proposition
Economy
We operate in a competitive
and currently deflationary
market and compete with
a wide variety of retailers
locally and nationally. Failure
to maintain market share
could affect our performance
and profitability.
Our customers’ shopping
habits are influenced by
broader factors and if we fail
to keep our proposition aligned
with their expectations they
may choose to shop elsewhere
and our revenues could suffer.
All our revenue is derived
from the UK. The continued
challenging economic
environment could reduce
our customers’ income and
therefore affect our revenues.
Link to strategy
1. Extend our network
of convenience stores
2. Focus on our customers
and brand
3. Expand our range of
products and services
4. Ensure operational
efficiency
5. Make the most of being
at the heart of the
neighbourhood
2. Focus on our customers
and brand
3. Expand our range of
products and services
5. Make the most of being
at the heart of the
neighbourhood
2. Focus on our customers
and brand
3. Expand our range of
products and services
5. Make the most of being
at the heart of the
neighbourhood
2. Focus on our customers
and brand
3. Expand our range of
products and services
Mitigation
• Strategic development is led
by the chief executive and
senior management and
scrutinised by the board.
• Strategy is communicated
via numerous channels.
• Implementation plans are
aligned to our strategic
targets and monitored
closely by the board.
• Competition is monitored
and our flexible model
enables the business to
be adapted accordingly.
• Customer trends are
continually reviewed.
• We work closely with
suppliers to develop and
enhance our offering.
• Regular product reviews
ensure customer needs
and wants are met.
• We have a customer
focussed loyalty scheme.
• We have a promotional
programme to deliver
great value.
• We offer both value
products and premium
brands, which lowers our
exposure to a reduction
in discretionary spend.
• Our wide range of
locations means we do
not rely on any one site
or geographical area.
• We have a broad
product and services
category offering.
Risk change in year
Increased
Maintained
Decreased
30 McColl’s Retail Group Annual Report and Accounts 2015
Principal risks
Risk
Financial and treasury
The main financial risks are the
availability of short and long
term funding to meet business
needs and fluctuations in
interest rates.
Information technology
Operational cost base
Regulation
Supply chain
We depend on the reliability
and capability of key
information systems and
technology. A major incident
or prolonged performance
issues with store or head
office systems could adversely
affect the business.
We have a relatively high
cost base, consisting primarily
of employee, property rental
and energy costs. Increases
in these costs without a
corresponding increase in
revenues could adversely
impact our profitability.
We operate in an environment
governed by strict regulations
to ensure the safety and
protection of customers,
colleagues, shareholders
and other stakeholders. These
regulations include alcohol
licensing, employment, health
and safety, data protection and
the rules of the Stock Exchange.
We rely on a small number of
key distributors and may be
adversely affected by changes
in supplier dynamics and
interruptions in supply.
Link to strategy
1. Extend our network
of convenience stores
4. Ensure operational efficiency
4. Ensure operational efficiency
2. Focus on our customers
and brand
3. Expand our range of
products and services
5. Make the most of being
at the heart of the
neighbourhood
3. Expand our range of
products and services
4. Ensure operational efficiency
Mitigation
• We have a committed £85m
working capital facility
available until August 2020.
• Our treasury department
forecasts and manages
funding requirements.
• The board approves budgets
and business plans.
• Our risks associated with
financial instruments are
disclosed in note 25 on
pages 102 to 105.
• All business critical systems
are well established and are
supported by an appropriate
disaster recovery strategy
designed to ensure the
continuity of the business.
• Regular testing is performed
to ensure data is well
controlled and protected.
• We operate a flexible staff
model aligned to revenue
levels.
• Property management is a
key function with regular
review processes in place.
• We minimise energy costs by
combining energy efficiency
initiatives and forward
purchasing.
• We have clear accountability
for compliance with all areas
of regulation.
• Our policies and procedures
are designed to meet all
relevant laws and regulations.
• We train colleagues to be
able to do their job whilst
complying with all relevant
rules and regulations.
• We have a health and safety
compliance steering group.
• Our distribution partners
are carefully selected and
maintain their own
contingency planning.
• We monitor supplier
performance including
service level agreements
and hold regular reviews and
discussions with key players.
The strategic report set out on pages 1-33 has been approved by the board and signed on its behalf by
Jonathan Miller
Director and chief financial officer
1 March 2016
31
Strategic report Making a
difference in our
neighbourhoods
32 McColl’s Retail Group Annual Report and Accounts 2015
It’s important as
a retailer to be at
the heart of the
neighbourhood,
providing a great
service to the
community
David Thomas,
Chief operating officer
Strategic Report
Good for Malton
On 26 May 2015 we acquired a
store in Malton. It had been running
for a number of years and was
situated in what is, for us, a classic
neighbourhood location – serving
a mix of around 900 households
and passing trade. We quickly set
about improving the store for the
local community. We extended
trading by 30 hours a week.
We made the cash machine free
for withdrawals. We began offering
a broad range of fresh and chilled
food. We modernised the store layout.
In short, we transformed it into a
great example of a McColl’s
neighbourhood convenience
store. The response from the local
community has been fantastic, and
the increase in store sales has been
great too. It’s a fine example of
a McColl’s truth: what’s good for
the neighbourhood is good for
our business.
33
Strategic report Board of directors
Board of directors’
biographies
The board of directors is currently comprised of a non-executive
interim chairman, three executive directors and one independent
non-executive director.
Sharon Brown
Interim chairman*•†
Current directorships: Sharon Brown was appointed
as an independent non-executive director on
7 February 2014. Following the resignation of John
Coleman as chairman of the board, Sharon was
appointed as interim chairman on 2 October 2015.
Sharon is a non-executive director and audit committee
chairman of Fidelity Special Values PLC, F&C Capital
and Income Investment Trust plc and a director of
Farm Park Limited and Delight Delicatessen Limited.
Expertise and experience: Sharon is a management
accountant and has extensive financial experience,
gained whilst finance director and company secretary
of Dobbies Garden Centres Limited between 1998 and
2013. She also held a senior financial position within the
retail division of John Menzies plc from 1991 to 1998.
She is and has been audit committee chairman of
a number of companies.
34 McColl’s Retail Group Annual Report and Accounts 2015
James Lancaster
Chief executive†
Current appointment: James Lancaster established
the group in 1973, becoming group managing
director in 1984, chief executive officer in 1990 and
then chairman and chief executive in 1995. He was
appointed chairman and chief executive of the listed
holding company on 3 February 2014. Post IPO, James
stepped down as chairman on 22 July 2014 to focus
on his role as chief executive. As stated at IPO, James
plans to step down as chief executive in 2016, once
a successor has been identified. Due to James’
extensive experience and retail knowledge, the
nomination committee, after consulting with
significant shareholders, recommended to the
board that James be appointed as non-executive
company chairman upon his resignation as chief
executive, which the board duly approved.
Expertise and experience: James has over 40 years’
of experience in the business and under his direction
McColl’s has grown to be a leading neighbourhood
retailer and a true convenience store business with a
strong market position in the UK. James successfully
co-led a management buyout of the business in 1995,
a secondary buyout in 2005, numerous acquisitions
and the IPO in 2014.
Jonathan Miller
Chief financial officer
Current appointment: Jonathan joined the group
in 1991 working initially as financial director of vending
operations and subsequently in group finance. He
was appointed finance director of the group’s retail
businesses in 1998 and chief financial officer in 2004.
Jonathan was appointed chief financial officer of the
listed holding company on 3 February 2014. He is the
board member responsible for environmental social
governance issues as well as human resources,
including health and safety.
Expertise and experience: Jonathan has extensive
experience of financial operations in a retail environment,
as well as a broad knowledge across the business having
managed the store development, human resources and
information technology teams for a number of years.
He has significant corporate finance experience and
has successfully co-led the group through a number of
corporate transactions including the IPO in 2014. Jonathan
qualified as a chartered accountant with Deloitte.
Georgina Harvey
Independent non-executive director*•†
Current directorships: Georgina Harvey was
appointed as an independent non-executive director
on 7 February 2014. Georgina is also an independent
non-executive director of William Hill PLC and Big
Yellow Group PLC.
Expertise and experience: Georgina started her
media career at Express Newspapers plc where she
was appointed advertising director in 1994. She joined
IPC Media Limited in 1995 and went on to form IPC
Advertising in 1998, where she was managing director.
Between 2005 and 2012, Georgina was managing
director, regionals division and a member of the
executive committee of Trinity Mirror.
David Thomas
Chief operating officer
Current appointment: David Thomas joined the group
in 1998, initially as regional manager for convenience.
He was appointed operations general manager in 2000
and operations director in 2005. David was appointed
chief operating officer of the listed holding company
on 22 July 2014.
Expertise and experience: David has extensive
retail experience and has spent most of his career
in operational roles within the supermarket and
convenience sector. His retail career began at Iceland
Foods where he was instrumental in the company’s new
store opening programme and the conversion of Bejam
stores to the Iceland trading format. He then progressed
to Southern Co-operative as operations manager and
was responsible for developing their supermarkets into
a modern convenience format.
* Remuneration committee member
• Audit committee member
† Nomination committee member
35
Governance Directors’ report
Directors’
report
The directors have pleasure in
submitting their annual report and
audited consolidated financial
statements for the period ended
29 November 2015.
McColl’s Retail Group plc (the “company” or “McColl’s”,
or “group”) is a public company limited by shares; it was
incorporated in England and Wales. The company’s
registered number is 08783477. Its shares are listed within
the premium sector of the main market of the London Stock
Exchange. The McColl’s group has been operating for over
40 years. The principal activities of the group are described
in the strategic report on pages 1 to 33.
Directors
The directors who held office during the year are shown
on pages 34 and 35 together with their biographies.
In addition, John Coleman served as the chairman
of the company and nomination committee and as
a member of the audit and remuneration committee
until 2 October 2015.
Share capital
Details of the share capital from 1 December 2014
to 29 November 2015 are shown in note 26 of the
financial statements.
The nominal value of the total issued ordinary share
capital of the company throughout the year was
£104,712.04, being divided into 104,712,042 fully paid
ordinary shares of £0.001 each.
The rights attached to the shares can be summarised
as follows:
• 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 company;
• Each ordinary share ranks equally in the right to receive
a relative proportion of shares on the event of a
capitalisation of reserves;
• The group has an Employee Benefit Trust (EBT) for
the benefit of employees and former employees of
the group. Currently the EBT holds no ordinary shares
in the company.
Restrictions on transfers of securities
As at 29 November 2015, the ordinary shares are freely
transferable with the following specific exception:
The directors and employee shareholders, in accordance
with the underwriting agreement, are prohibited from
selling their shares for 365 days after the date of admission
and for the following 12 month period after the expiry of the
prohibited period, only to dispose of their shares through
the company’s broker Numis so as to maintain an orderly
market. As at 1 March 2016 the exemption disclosed
has lapsed.
However, in compliance with the company’s share
dealing code, the directors, designated employees
and their connected persons require approval to deal
in the company’s shares. There are no restrictions on the
transfer, or limitations on the holding of ordinary shares.
The company is not aware of any other agreements
between shareholders that may result in restrictions
on the transfer of securities or voting rights.
Amendment to the company’s articles of association
The company may alter its articles of association
(“articles”) by special resolution passed at a general
meeting of the company.
Substantial shareholdings
Information on major interests in shares provided to
the company under the Disclosure and Transparency
Rules (DTR) of the UK Listing Authority is published via a
Regulatory Information Service and on the company’s
website at www.mccolls.co.uk.
As at year end and as of 1 March 2016 (being the last
practical day before printing) the company has been
notified of the interests given on page 37 which
represented 3% or more of the ordinary shares of the
company. This information was correct at the date of
notification. It should be noted that these holdings may
have changed since notified to the company. However,
notification of any change is not required until the next
applicable threshold is crossed.
Board balance and composition
At the beginning of the financial year, the board of
directors was comprised of 6 board members. Excluding
the chairman (who was independent on appointment),
2 were independent non-executives and 2 were female
board members. As at 29 November 2015 the board has
5 members. Excluding the interim chairman (who was
independent on appointment and female) 1 director is a
female independent non-executive. Since the beginning
of the financial year on 1 December 2014, the following
changes have been made to the board:
36 McColl’s Retail Group Annual Report and Accounts 2015
• On 2 October 2015, John Coleman resigned as an
independent non-executive director and chairman
of the board and Sharon Brown was appointed as
interim chairman.
• In addition, on 2 October 2015, John Coleman
resigned as the chairman of the nomination committee
and was replaced by Sharon Brown on 6 October 2015.
He also ceased being a member of the audit and
remuneration committees.
Directors’ interests
Although the directors are not required to hold shares
in the company under the articles or under their letters
of appointment or service agreements, all of the directors
do hold shares in the company and details of their
shareholdings can be found in the directors’
remuneration report on page 67.
Directors’ indemnities and insurance
As is standard practice for listed companies, the company
has granted third party indemnity to each of its directors
against any liability that attaches to them in defending
proceedings brought against them to the fullest extent
permitted under English law. In addition the company
has in place directors’ and officers’ indemnity insurance
and specific public offering and securities insurance,
which commenced on 28 February 2014 with a 6 year
run-off period.
Appointment and replacement of directors
The rules regarding the appointment and replacement
of directors are contained in the company’s articles.
These state that any person willing to act as a director
may be appointed by ordinary resolution of the company’s
shareholders. In addition, the board may appoint any
person willing to act as a director, but they may hold office
only until the next annual general meeting (AGM) and
then shall be eligible for election. The company must have
not less than two directors.
Board composition
(as at 29 November 2015)
20%
20%
Interim chairman
Executive directors
Independent
non-executive directors
60%
Under the articles each director is required to retire from
office at the third AGM after the AGM at which he or she
was last elected or re-elected although he or she may
be re-elected by ordinary resolution if eligible and willing.
As the company is outside of the FTSE 350 the company
is not obliged to comply with provision B.7 relating to the
annual re-election of directors. However, the directors
wish to be transparent in all their dealings and accordingly,
all of the directors will submit themselves for annual
re-election by the shareholders at the AGM. The company
is therefore in complying with this provision of the code.
The company may by special resolution remove any
director before the expiration of his or her period of office
or may, by ordinary resolution, remove a director where
special notice has been given and the necessary statutory
procedures are complied with.
Details of the independent non-executive directors’ letters
of appointment are given on page 45 under Role of the
independent non-executive directors. The executive
directors have service contracts under which 12 months’
notice is required from either party.
Substantial shareholdings
The substantial shareholdings in the table below represent those interests notified to the company in accordance
with the DTR of the UK Listing Authority, which may have changed since notification to the company.
Shareholder
James Lancaster1
Jonathan Miller1
FIL Limited2
Premier Fund Managers Limited3
Aberforth Partners LLP2
Miton Asset Management Limited3
Laxey Partners Limited3
Henderson Global Investors Limited3
As at 29 November 2015
As at 1 March 2016 (last practical printing date)
Number of
shares held
11,399,500
11,399,500
10,467,853
6,127,500
5,376,800
4,852,592
3,900,000
3,297,718
Percentage
10.9%
10.9%
10.0%
5.9%
5.1%
4.7%
3.7%
3.2%
Number of
shares held
11,399,500
11,399,500
6,254,385
5,090,000
5,376,800
4,852,592
4,267,360
3,297,718
Percentage
10.9%
10.9%
6.0%
4.9%
5.1%
4.7%
4.1%
3.2%
1. The ordinary shares held by James Lancaster and Jonathan Miller include shares held beneficially via various individual holdings of connected persons
(as defined in sections 252 to 255 of the Companies Act 2006).
2. Held indirectly.
3. Held directly.
37
Governance Directors’ report continued
Powers of directors
The general powers of the directors are set out in article
94 of the company’s articles (the “articles”). This provides
that the business of the company shall be managed by the
board which may exercise all the powers of the company,
subject to any limitations imposed by applicable legislation
or the articles. The general powers of the directors are also
limited by any directions given by special resolution of the
shareholders of the company which are applicable on the
date that any power is exercised.
Compensation for loss of office
The company does not have arrangements with any
director that would provide compensation for loss of
office or employment resulting from a takeover, except
that provisions of the company’s share plans may cause
options and awards granted under such plans to vest on
a takeover. Further information is provided in the directors’
remuneration report on page 65.
Employee engagement
The group employs 18,956 employees and had 6,356
full time equivalents at the period end.
The group actively involves its employees in the business
and ensures that they are engaged in matters impacting
them. This includes consulting with employees or their
representatives on a regular basis so that the views of
employees are understood by the management and can
be taken into account in making decisions which are likely
to affect their interests. This is primarily achieved via senior
management meetings and briefings.
Employees are also made aware of the financial and
economic factors affecting the performance of the group
via newsletters and briefings by management. The group
encourages the involvement of employees in the group’s
performance through operation of a bonus scheme which
applies to 133 employees and provides an incentive to
the employees.
The group provides its employees with a variety of
opportunities to learn new skills that will help them to
develop and be successful in their careers. This includes
using a combination of video learning, distance learning
modules, on-the-job coaching and some classroom based
workshops where applicable. In addition all employees
receive induction training when they commence
employment with the group.
For those employees wishing to progress, we operate
the “Onward and Upward” development programme
focussing on some of the key roles within the business.
Each individual is provided with a tailored training plan
based on their current job knowledge and skills set to
help them achieve their career goals.
The group also works in partnership with Skillnet, a national
provider of vocational qualifications, offering opportunities
to all eligible colleagues to gain retail based qualifications
whilst working in their current role.
The directors recognise the importance of ensuring the
highest standards of health and safety are maintained for
employees, customers and others who may be affected
by the activities of the business.
The group is committed to being an equal opportunities
employer and aims to treat individuals fairly and not to
discriminate on the basis of sex, race, ethnic origin,
disability or on any other basis. The company’s policy
and procedures are designed to provide for full and
fair consideration and selection, including disabled
applicants, to ensure they are properly trained to perform
safely and effectively and to provide career opportunities
that allow them to fulfil their potential. Where an employee
becomes disabled in the course of their employment the
group will actively seek to retain them wherever possible by
making adjustments to their work content and environment
or by retraining them to undertake new roles.
Directors’ statement of disclosure
of information to auditors
Having made the requisite enquiries, the directors in office
at the date of this annual report and accounts have
each confirmed that, so far as they are aware, there is no
relevant audit information (as defined by Section 418 of the
Companies Act 2006) of which the group’s auditors are
unaware, and each of the directors has taken all the steps
he/she ought to have taken as a director to make himself/
herself aware of any relevant audit information and to
establish that the group’s auditors are aware of that
information. This confirmation is given and should be
interpreted in accordance with the provisions of Section
418 of the Companies Act 2006.
External auditors
Deloitte LLP have given their independent report on the
financial statements to the shareholders of the company
on pages 72 – 77.
Annual general meeting (AGM)
The board welcome the opportunity to meet with
shareholders at the AGM which will be held on 19 April
2016 at 2.00pm at the registered office: McColl’s House,
Ashwells Road, Brentwood, Essex CM15 9ST.
38 McColl’s Retail Group Annual Report and Accounts 2015
Dividend
The board targets a progressive dividend policy to reflect
the cash flow generation and earnings potential of the
group. Assuming that there are sufficient distributable
reserves available at the time, the board will normally
distribute a dividend of approximately 60% of the group’s
annual reported profits before exceptional gains and after
tax. The board intends that the company will pay an
interim and a final dividend in the approximate proportions
one-third and two-thirds respectively of the total expected
annual dividend.
Authority to allot shares
The company was granted a general authority by its
shareholders at the 2015 AGM to allot shares up to an
aggregate nominal amount of £34,904. The company
also received authority to allot shares for cash on a non
pre-emptive basis up to a maximum nominal amount of
£34,904. As at the date of this report, no shares have been
issued under these authorities. These authorities will expire
at the conclusion of the 2016 AGM unless revoked, varied
or renewed prior to that meeting. Resolutions will be
proposed at the 2016 AGM to renew these authorities.
The directors have proposed a final dividend of 6.8
pence per share, amounting to £7.1m, which is subject
to shareholder approval at the AGM. Provided shareholder
approval is received the final dividend will be paid on
31 May 2016 to those shareholders on the register at the
close of business on 29 April 2016.
Reappointment of auditors
The board confirms that Deloitte LLP was originally
appointed to the group in 2006 (when it was a private
limited group), and last rotated the audit partner during
the year ended 30 November 2014. The board also
recognises that under the terms of the Code, a FTSE 350
company should tender the external audit contract at
least every 10 years.
As the company is outside of the FTSE 350 the company
is not obliged to comply with provision C3.7 of the code,
relating to the tendering of the external auditor every
10 years. The board also recognises the commercial
advantages of tendering the audit regularly. However,
the relevant audit period only commenced upon listing
on the London Stock Exchange, which was in February
2014. Accordingly, the company has until 2024 to tender
the external audit. The auditors Deloitte LLP have indicated
their willingness to continue as the company’s auditors
and accordingly, a resolution to reappoint Deloitte LLP
as auditors of the company and the group will be
proposed at the 2016 AGM.
Authority for the company to purchase its own shares
The company was granted authority by its shareholders
at the 2015 AGM to purchase up to 10,471,204 of its
ordinary shares. As at the date of this report, no ordinary
shares have been purchased under this authority and,
therefore, the company may purchase up to 10,471,204
ordinary shares under its existing authority. This authority
will expire at the conclusion of the 2016 AGM unless
revoked, varied or renewed prior to that meeting.
A resolution will be proposed at the 2016 AGM that
the company be authorised to purchase up to
approximately 10% of its ordinary shares at the directors’
discretion. If the resolution is passed, the new authority
will replace the existing authority and will lapse at the
conclusion of the 2017 AGM.
Financial risk management
The group manages its risks to ensure that the group’s
performance is not adversely affected by its exposure
to financial risks resulting from its operation and sources
of finance. Financial risk management objectives and
policies, including information on financial risks that
materially impact the group can be found in note 25
of the group financial statements.
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 financial position
of the group, its cash flows and liquidity position are set out
in the financial statements section on pages 78 to 113.
Furthermore, note 25, page 102 to the consolidated
financial statements includes the group’s objectives
and policies for managing its capital, its financial risk
management objectives, details of its financial instruments
and its exposure to credit and liquidity risk.
39
Governance Directors’ report continued
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 company announced it had signed
an amended £85.0m revolving credit facility plus a £15.0m
accordion option expiring in August 2020. The group has
net current liabilities of £35.8m 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 29 November 2015
£44.5m 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. The directors
have made this assessment after consideration of the
company’s budgeted cash flows and related assumptions
and in accordance with the Guidance on Risk
Management, Internal Control and Related Financial
and Business Reporting published by the UK Financial
Reporting Council in September 2014.
Viability statement
In accordance with provision C.2.2 of the 2014 revision
of the UK Corporate Governance Code, the directors
have assessed the prospects of the group over a longer
period than the 12 months required by the ‘going concern’
provision. The directors have assessed the viability of the
group over a three year period through to 2018 which
coincides with the group’s strategic review period.
This assessment has considered the potential impact
of the principal risks on the business model, future
performance and liquidity over the period. In making
this statement the directors have considered the resilience
of the group under varying market conditions together
with the effectiveness of any mitigating actions. As already
described in the statement of going concern, as part of
this assessment the directors have taken account of the
group’s revolving credit facility with accordion option
which runs through to August 2020, strong track record
of operational cash inflow and forward dividend cover.
Additionally, the directors have reviewed the expected
impact of government and legislative changes in
particular the National Minimum and Living Wage,
alongside the key financial ratios over the period e.g.
EBITDA, operating profit, fixed charge cover and
indebtedness. Finally it is noted that even in the event
of a very severe impact on the business through continued
food deflation and cost inflation, the business could
reduce or suspend acquisitions activity, re-assess the
dividend pay-outs and accelerate the newsagent
disposal programme.
Based on this assessment, the directors have a reasonable
expectation that the group will have sufficient resources to
continue in operation and meet its liabilities as they fall due
over the period to November 2018.
40 McColl’s Retail Group Annual Report and Accounts 2015
Post year-end events
Between 30 November 2015 and the date of this report
there have been no material events.
Future developments within the group
The strategic report contains details of likely future
developments within the group.
Political donations
The group did not make any political donations during
the period (2014: £nil).
Charitable donations
The group donates 4p (net of VAT) from every carrier bag
sale to specific charities in England, Scotland and Wales.
In the period, the following donations were made:
Region
Charity name and number
Donation amount
England* N/A
Scotland
Wales
Ronald McDonald House £7,636.51
£3,857.09
Hope House/Tyhafan
Nil
* The scheme began on 5 October 2015. The group collected £66,496.12 from
5 October 2015 to 29 November 2015 and a donation was made in December 2015.
In total, the company raised £330,000 for local and
national causes.
Listing rules
The following table provides cross-references to where the
relevant required information by Listing Rule 9.8.4R for the
period is disclosed.
Section Listing rule requirement
Location
Not applicable
Not applicable
Directors’ remuneration
report on page 57
Not applicable
1
2
4
5
6
7
8
9
10
11
12
13
14
Interest capitalised
Publication of unaudited
financial information
Details of long term
incentive schemes
Waiver of emoluments
by a director
Waiver of future
emoluments by a director
Non pre-emptive issues
of equity for cash
Item (7) in relation to major
subsidiary undertakings
Parent participant in placing
by a listed subsidiary
Contracts of significance
Provision of services by a
controlling shareholder
Shareholder waivers of
dividends
Shareholder waivers of
future dividends
Agreements with
controlling shareholder
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Greenhouse gas emissions
The group is required to measure and report direct and
indirect greenhouse gas (GHG) emissions pursuant to the
Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013. This is the second GHG
emissions report in line with UK mandatory reporting
requirements set out by the Department for Environment,
Food and Rural Affairs (DEFRA) and we have therefore
expressed the report alongside the ‘base year’ of 2014
for comparison. The mandatory requirement is for the
disclosure of the scope 1 and 2 emissions only. These are
direct emissions such as heating, vehicle fuel and indirect
emissions such as purchased electricity. The group’s total
GHG footprint in line with Section 7 at the Companies Act
(Strategic Report and Directors’ Report) Regulations 2013
is shown in the table below.
Emissions data for period 1 December 2014
to 29 November 2015
2014 (Base year)
Scope 1
Fuel combustion (natural gas, vehicle
fuels and other fuels)
Refrigerants
Scope 2
Purchased electricity
Total
Intensity – CO2(e) tonnes per £100,000
of revenue
2015
Scope 1
Fuel combustion (natural gas, vehicle
fuels and other fuels)
Refrigerants
Scope 2
Purchased electricity
Total
Intensity – CO2(e) tonnes per £100,000
of revenue
Tonnes CO2(e)
2,125
2,122
4,247
51,884
56,131
6.1
Tonnes CO2(e)
1,931
2,733
4,664
49,945
54,609
5.9
• The group has reported on all the measured emissions
sources required under the Companies Act 2006 (Strategic
Report and Directors’ Reports) Regulations 2013;
• The group has used the guidance as set out in DEFRA’s
Environmental Reporting Guidelines, including
mandatory greenhouse gas emissions reporting
guidance, dated June 2013;
• Emission factors are based upon UK Government
conversion factors for Company Reporting 2015. The
electricity emissions are based upon the reduced
emission factor for electricity in 2015 reflecting the
UK’s increasing use of renewable energy in the overall
electricity grid mix;
• The group has engaged a consultancy firm, BDO LLP,
to oversee the collection of data and provide guidance
on complying with appropriate regulations. The figures
disclosed above for 2015 and the methodology used
to collate the information have been reviewed and
approved by BDO LLP;
• For electricity, gas and other fuels, consumption
data has been extracted from billing information from
1 December 2014 to the date of the last bill received for
each type of supply. Therefore some extrapolation has
been required in order to calculate the full 52 week
consumption figure;
• Petrol and fuel data has been collated from information
received from the group’s fleet management consultant;
• Refrigerant data has been calculated by reference to
individual items of equipment and then extrapolating
this based on an estimated level of equipment within
each property used by the group; and
• An amendment has been made to the previously
reported 2014 base figure to correct the inclusion of 237
tonnes CO2(e) of gas emissions in the Scope 2 rather
than Scope 1 emissions in 2014. This does not affect the
overall reported CO2(e) figure for 2014.
The strategic report, the directors’ report and the directors’
remuneration report were approved by the board.
Approved by the board and signed on its behalf:
Jonathan Miller
Director and chief financial officer
1 March 2016
41
Governance
Corporate governance report
Corporate
governance report
It is the opinion of the board that the company has been
compliant with the provisions of the code throughout the
year with the following exceptions:
• The code recommends that a chairman should be
independent upon appointment and a chief executive
should not go on to be chairman of the same company
(code A.3.1). In the statement made on 26 November
2015, the board announced that once James Lancaster
steps down as chief executive he will be appointed to
the position of non-executive chairman of the company.
Upon this appointment, the company will be in breach
of this provision; however, in line with the code, major
shareholders have been consulted and they are
supportive of James’ appointment as chairman
until April 2017, given his extensive retail experience.
• The code recommends that the board should appoint
one of the independent non-executive directors to the
position of senior independent director (the “SID”) (code
A.4.1). During the 2014/15 period, the company did not
appoint a SID. The board considered the role of the SID
in light of the composition and requirements of the
board and the needs of shareholders and decided that
at this time such a position was unnecessary. The board
will continue to consider whether the position of SID
would benefit the board and shareholders and keep
under review.
Following John Coleman’s resignation on 2 October 2015
and the board’s announcement on 26 November 2015
of James Lancaster’s intention to step down as chief
executive officer and to be appointed chairman until the
AGM in 2017, the company is not currently in compliance
with the following provisions:
• Code A.4.2 – The code recommends that the chairman
should hold meetings with the non-executive directors
without the executives present and the non-executive
directors should meet without the chairman present at
least annually to appraise the chairman’s performance.
• Code B.1.2 – The code recommends that at least half
the board, excluding the chairman, should comprise
independent non-executive directors and that a smaller
company should have at least two independent
non-executive directors.
• Code B.2.1 – The code recommends that there
should be a nomination committee which should
lead the process for board appointments and make
recommendations to the board regarding appointments
and which comprises of a majority of independent
non-executive directors.
Chairman’s letter
Dear shareholder
Since the beginning of the
company’s financial year on
1 December 2014, the board has
adopted compliance with the
UK Corporate Governance Code
2014 (the “code”) published by
the Financial Reporting Council
for reporting periods after
October 2014.*
* www.frc.org.uk/Our-Work/Publications/Corporate-Governance/
UK-Corporate-Governance-Code-2014.pdf
42 McColl’s Retail Group Annual Report and Accounts 2015
• Code B.6.3 – The code recommends that the non-
executive directors should evaluate the performance
of the chairman taking into account the views of the
executive directors.
• Code C.3.1 – The code recommends that the board
should form an audit committee of at least three, or
in the case of smaller companies, two independent
non-executive directors and that at least one member
has recent relevant experience. In smaller companies
the company chairman may be a member of, but not
chair, the committee if he or she was considered
independent on appointment as chairman.
• Code D.2.1 – The code also recommends that the
board establish a remuneration committee of at least
three, or in the case of smaller companies, two
independent non-executive directors.
Accordingly, the company has commenced the
recruitment of a new chief executive officer and
independent non-executive director. It is the company’s
intention that during the current financial year this
recruitment will be completed upon which the company
will then comply with the above code provisions.
The board is committed to excellent corporate
governance. The changes we are making to the board
will enhance our compliance and, I believe, will help the
company grow.
Yours sincerely
Sharon Brown
Interim chairman
The board
is committed
to excellent
corporate
governance
43
Governance Corporate governance report continued
Role of the board
The board is responsible for the effective oversight of the
company. It also agrees the strategic direction that will
achieve the long term success of the company and deliver
shareholder value. The board takes the lead in areas such
as strategy, financial policy and making sure we maintain
a robust system of internal controls.
Each year, the board meets to set annual objectives
for the business in line with the current group strategy.
The board monitors the achievement of the company’s
objectives through board reports which include updates
from the group chief executive, chief financial officer, chief
operating officer and other key personnel. The board has
a rolling annual agenda of items that are to be considered
by the board and this agenda is continually updated to
include any topical matters that arise.
Matters reserved for the board
The board has approved matters reserved for its own
consideration which details the board’s role and purpose
to ensure that it fully discharges its responsibilities. At least
annually, the board undertakes a review of its matters
reserved for the board to ensure it is in line with best
practice, the code and other regulatory requirements.
The board is responsible for a number of matters including:
strategy; financial items; internal control; third party
contracts; material legal and pension matters; shareholder
communication; and senior group appointments.
Board committees
The board delegates specific responsibilities to committees
so that the board can operate effectively and efficiently
and give the right level of attention and consideration to
relevant matters. The board has established the following
committees: audit, nomination and remuneration. A report
from each committee is set out on pages 48 to 69. The role
and responsibilities of each board committee are set out
in formal terms of reference which are determined by the
board. The chair of each committee reports to the board
after each committee meeting on the matters discussed
and minutes of each meeting are provided to the board
for information. The terms of reference of the committees
are available at www.mccolls.co.uk/investor.aspx. Capita
Company Secretarial Services Limited serves as secretary
to these committees.
The board has also delegated to the chief executive officer
the responsibility for implementing the group’s business
model and for the day-to-day operational management
of the group. The chief executive officer is supported in
carrying out his responsibilities by the chief financial officer,
chief operating officer and the operations board.
The board meets at regular intervals and has met 5
times during the period since 1 December 2014. The
directors’ attendance at board and committee meetings
during the period is given below. The board chairman
and committee chairman are supported by the company
secretary in running these meetings. The directors are
Board meetings and other activities
February 2015 – February 2016
17 December 2014
Remuneration
committee
2 March 2015
Sub board call
23 July 2015
Board meeting,
audit committee
25 November 2015
Board meeting,
nomination committee,
remuneration committee,
audit committee
18 February 2015
Board meeting, nomination
committee, remuneration
committee, audit committee
19 April 2015
Board meeting and AGM
6 October 2015
Board meeting
Number of meetings held
James Lancaster
David Thomas
Jonathan Miller
Sharon Brown
Georgina Harvey
John Coleman*
Main
board
Audit
committee
Nomination
committee
Remuneration
committee
5
5
5
5
5
5
3
3
N/A
N/A
N/A
3
3
2
2
2
N/A
N/A
2
2
1
3
N/A
N/A
N/A
3
3
2
* John Coleman resigned on 2 October 2015 and therefore was only entitled to attend 3 board meetings, 2 audit committees, 1 nomination committee and 2 remuneration committees.
44 McColl’s Retail Group Annual Report and Accounts 2015
encouraged to challenge and constructively comment
on matters presented to the board. In addition the directors
have ongoing dialogue on a variety of issues between
board meetings.
The executive directors are invited to attend the relevant
audit, nomination and remuneration committees although
they do not have a vote with the exception of James
Lancaster who is a member and can vote at the
nomination committee.
Division of responsibilities
Role of the chairman and chief executive
Within McColl’s there is a clear division between the
respective responsibilities of the interim chairman of
the board and the chief executive officer. The interim
chairman is Sharon Brown who is responsible for setting
the board agenda and leading the board’s discussions
and decision-making. The interim chairman promotes a
culture of openness and debate by facilitating the effective
contribution of the independent non-executive director
in particular and ensuring constructive relations between
executive directors and the independent non-executive
director. The chief executive officer is James Lancaster
who, through delegation from the board, is responsible
for leading the group’s operating performance and
day-to-day management. This separation of responsibilities
between the chairman and the chief executive officer,
coupled with the schedule of reserved matters described
above, ensures that no individual has unfettered powers
of decision-making.
Role of the non-executive directors
The interim chairman and independent non-executive
director have a broad range of skills and experience
which assists both in formulating the company’s strategy
and in providing constructive challenge and support to
the executive directors. Both the interim chairman and
independent non-executive director are regarded by
the company as independent within the meaning
defined in the code and are free from any business or
other relationship which could materially interfere with
the exercise of their independent judgement. The interim
chairman and the independent non-executive director
have letters of appointment setting out their duties and the
level of commitment expected. The interim chairman and
independent non-executive director were appointed for an
initial 3 year term with typical tenure expected to be 2 x 3
year terms but they may be invited by the board to serve
an additional term, subject to re-election by shareholders.
They are expected to commit approximately 15-20 days
per annum to their role.
Directors’ induction and professional development
The company has in place an induction programme for
new directors to provide them with a full, formal and tailored
introduction on joining the board, which ensures that they
attain sufficient knowledge of the company to discharge
their responsibilities effectively. The programme includes
meeting with senior management and advisers. The board
calendar is planned to ensure that directors are briefed
on a wide range of topics, including updates on financial
and corporate governance and regulatory matters.
All directors are also given the opportunity to visit the
group’s stores and discuss aspects of the business with
employees as well as internal briefings.
All directors have access to the advice and services of
the company secretary who is responsible to the board for
ensuring the board procedures are complied with and that
directors have access to independent and professional
advice at the company’s expense, where they judge this to
be necessary to discharge their responsibilities as directors.
Conflicts of interest
Directors have a statutory duty to avoid situations in which
they have or may have interests that conflict with those of
the company, unless that conflict is first authorised by the
directors. This includes potential conflicts that may arise
when a director takes up a position with another company.
The company’s articles allow the board to authorise such
potential conflicts, and there is in place a procedure to
deal with any actual or potential conflict of interest. Should
a director become aware that they, or their connected
parties, have an interest in an existing or proposed
transaction with the company, they should notify the
board. The board deals with each appointment on its
individual merit and takes into consideration all the
relevant circumstances.
Board evaluation
The effectiveness and performance of the board is
vital to the company’s continuing success. An internal
evaluation of the performance of the board and its
committees was carried out during the year. An evaluation
of the interim chairman’s performance was considered
unnecessary as Sharon Brown only took up the position
of interim chairman in October 2015. The process of
evaluating the performance was led by the interim
chairman. A tailored, high-level questionnaire was
distributed for the directors and feedback was given
to the interim chairman. This was structured to provide
directors with an opportunity to consider and express
their views about:
• The performance of the board and its committees,
including how the directors work together as a
whole; and
• The balance of skills, experience, independence
and knowledge of the directors.
45
Governance Corporate governance report continued
The responses to the evaluation of the board and its
committees were assessed by the interim chairman and
then considered by the board. The results of the evaluation
indicated that the board is working coherently and that
there are no significant concerns among the present
directors about its effectiveness.
Some actions were agreed as a result of the exercise
and these will be progressed over the coming year.
These included:
• Focus on strategic issues;
• Providing independent non-executive directors with the
opportunity to have more direct contact with the senior
management team through, for example, organised site
visits in order to deepen their knowledge of the group’s
business and culture; and
• Having further industry presentations to the board from
external sources in order to enable directors to gain a
broader perspective on the market.
The performance of individual directors was evaluated by
the interim chairman, with input from the other directors
and no material issues were identified.
Effectiveness of internal controls and risk management
The board has responsibility for establishing and
maintaining the group’s system of risk management and
internal control to safeguard shareholders’ investments
and the group’s assets and for reviewing the effectiveness
of this system. Such a system is designed to manage rather
than eliminate the risk of failure to achieve business
objectives and can provide only reasonable and not
absolute assurance against material misstatement or loss.
An ongoing process has been established for identifying,
evaluating and managing risks faced by the group, which
enable the board to make a robust assessment of the
principal risk facing the business. This process, which
complies with the requirements of the code, has been
in place for the full financial year and up to the date the
financial statements were approved and accords with
the guidance issued by the Financial Reporting Council
in September 2014 on “Risk Management, Internal Control
and Related Financial and Business Reporting”. The board
acknowledges that it is responsible for the company’s
systems of internal control and risk management and
for reviewing their effectiveness. Internal controls are
designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can provide
only reasonable and not absolute assurance against
material misstatement or loss. The board confirms that,
through the activities of the audit committee, it has
monitored the effectiveness of the company’s systems
of internal control and risk management to ensure
corrective action is taken when appropriate. During the
year, the board considered the nature and extent of the
risks it was willing to take to achieve its strategic goals and
reviewed the existing internal statement of risk appetite.
The board recognises that effective risk management
is essential to the long term success of the business
and it requires an appropriate risk governance structure,
together with the appropriate culture to facilitate the
desired values and behaviours being embedded at
all levels within the business.
The operations board has established a risk register
which is reviewed regularly by the audit committee.
The risk register enables the operations board to identify,
evaluate and manage risks faced by the group on an
ongoing basis, both at an operational and strategic level.
The risk identification and mitigation processes have been
designed to be responsive to likelihood of occurrence.
Appropriate action is taken to manage and mitigate
risks identified and is reported to the board via the audit
committee and the chief financial officer.
The directors have identified the principal risks and
uncertainties facing the group, many of which are
considered key to the successful implementation of
strategy and long term growth. The key risks, and how
they are mitigated, are described on pages 30 and 31.
Financial and business reporting process
The board recognises its duty to ensure that the annual
report and accounts, taken as a whole, are fair, balanced
and understandable and provide the information necessary
for shareholders to assess the performance, strategy and
business model of the company. In addition to the annual
report the company also ensures that other price-sensitive
reports and other information is published externally.
The group has a thorough assurance process in place
in respect of the preparation, verification and approval
of periodic financial reports.
46 McColl’s Retail Group Annual Report and Accounts 2015
This process includes:
• the involvement of qualified, professional employees
with an appropriate level of experience (both in group
finance and throughout the business);
• formal sign-offs from appropriate business segment
senior executives;
• comprehensive review and, where appropriate,
challenge from appropriate group senior executives
and executive directors;
• a transparent process to ensure full disclosure of
information to the external auditors;
• oversight by the group’s audit committee, involving
(amongst other duties):
– a detailed review of key financial reporting
judgements which have been discussed by
management;
– review and, where appropriate, challenge
on matters including:
– the consistency of, and any changes to,
significant accounting policies and practices
during the year;
– significant adjustments resulting from
an external audit;
– the viability statement assumptions; and
– the going concern assumption.
• The above process, and the review by the audit
committee of a comprehensive note that sets out
the details of the preparation, internal verification
and approval process for the annual report and
accounts, provides comfort to the board that the annual
report and accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the company’s
performance, business model and strategy.
Anti-fraud, bribery and corruption
The group aims to promote honest and ethical conduct.
To support this, it has in place an anti-bribery policy,
which applies to all employees and prohibits:
• the offering, promising or giving of an advantage, and
• the requesting, agreeing to receive or accepting of
an advantage in any form to any person or company
by anyone acting on its behalf.
Whistleblowing
Details of the company’s whistleblowing policy can
be found on page 51 of the audit committee report.
Relations with shareholders
Responsibility for shareholder relations rests with the interim
chairman and chief executive officer. They ensure that
there is effective communication with shareholders on
matters such as governance and strategy, and are
responsible for ensuring that the board understands
the views of major shareholders.
The board aims to present a balanced and clear view
of the group’s performance in its communications with
shareholders and believes that being transparent in
describing how we see the market and the prospects for
the business to be extremely important. We communicate
with shareholders in a number of different ways. The formal
reporting of our full and half year results together with the
related presentations, is accompanied by group calls
and one-to-one meetings with institutional investors.
The full and half-year reporting are followed by investor
meetings in a variety of locations where we have
institutional shareholders. We also regularly meet with
existing and prospective shareholders to update them
on our latest performance or to introduce them to the
company and where appropriate arrange a visit to the
business to give analysts and major shareholders a better
understanding of how we manage our business. These
visits and meetings are principally undertaken by the chief
executive officer, chief financial officer and chief operating
officer with any relevant material being uploaded to the
corporate website, so being available to all shareholders.
The board receives regular updates on the views of
its shareholders through regular reporting based on
information from the registrar and its brokers, which is
an agenda item for all board meetings. In addition,
the independent non-executives are available to meet
shareholders if they wish to raise issues separately from
the arrangements as described above.
The group’s website (www.mccolls.co.uk/investor.aspx)
contains all the latest announcements, press releases
and published financial information including the
annual report. The notice of the AGM will be distributed
to shareholders at least 20 working days before the
meeting and is also available from the website.
The company will propose all resolutions on a poll, as
this allows for the vote of shareholders not present in
person or by proxy to be counted and therefore provide
more accurate representation of shareholders’ votes.
Approved by the board and signed on its behalf:
Jonathan Miller
Director and chief financial officer
47
Governance Corporate governance report continued
Nomination
committee report
As indicated at IPO and given James’ extensive retail
knowledge, the committee, following consultation with
key shareholders, recommended to the board that James
be appointed non-executive chairman once his CEO
successor is appointed. It was agreed that James would
not stand for re-election at the AGM in 2017. The committee
approved the appointment of executive search consultant
the Miles Partnership to identify candidates to fill the
CEO vacancy and the Inzito Partnership (which has no
connection to the company) to identify candidates for
the independent non-executive director vacancy.
The committee also reviewed the time spent of the
independent directors and the committee’s terms
of reference.
The committee concluded that the independent non-
executive directors were expected to spend around 20
days on company business and that the updated terms of
reference accurately reflect the processes of the committee.
Committee evaluation
The committee members undertook a committee
evaluation led by the chairman and concluded that the
committee had performed its role effectively.
Board diversity
The committee supports diversity, accepting the
advantages that come from having diverse viewpoints
and the influence in decision-making. It is the aim of the
committee to always consider the benefits that arise from
a diverse board when making board appointments.
The committee does not judge it appropriate to introduce
a quota system to enhance diversity in all of its forms to
the board; the company’s recruitment and appointment
strategy is based on the merits of the candidates. Currently
40% of the board is comprised of female directors.
Diversity, including gender diversity, is practised throughout
the business and the committee continues to follow a
policy of appointing talented people at every level to
enhance the business’ performance. This will enable the
business to achieve the group’s own strategic objectives.
Approved by the nomination committee and signed
on its behalf:
Sharon Brown
Interim chairman and nomination committee chairman
Composition of the committee
The members of the committee during the financial
year were:
John Coleman as chairman until 2 October 2015; Sharon
Brown who succeeded John Coleman as nomination
committee chairman from 2 October 2015; James
Lancaster; and Georgina Harvey.
There have been no further changes in the membership
of the committee since the year end.
Under the committee’s terms of reference the committee
will normally meet not less than twice a year when
appropriate. After each committee meeting, the chairman
reports to the board on the main items discussed.
The role and duties of the nomination committee
The nomination committee’s main responsibilities are
to evaluate the structure, size and composition (including
the skills, knowledge, experience and diversity) required of
the board and the committees; to give full consideration to
succession planning of directors and other senior executives
and to assist with the selection process of new executive
and non-executive directors including the chairman.
The committee’s terms of reference explains the committee’s
role and responsibilities and can be found on the
company’s website at www.mccolls.co.uk/investor.aspx
Main activities during 2015
At the nomination committee in February the committee
principally considered the draft nomination committee
report within the company’s first annual report and
accounts, and the nomination of the directors for election
at the company’s first AGM. Consideration was given
to the skills, experience and added value each director
contributed to the business. Accordingly, all directors
were recommended to the board for election by
the shareholders.
In October the board considered the role of chairman
following the resignation of John Coleman, and agreed
to appoint Sharon Brown as interim chairman.
In November the committee met to discuss and consider
the following vacancies:
• Chairman – following John Coleman’s resignation,
Sharon Brown having been appointed interim chairman;
• CEO – the recruitment of a new CEO given James
Lancaster’s intention to step down as CEO as disclosed
at Initial Public Offering; and
• Non-executive director – the desire to recruit an
additional independent non-executive director.
The committee debated the skills and experience required
to fulfil these roles and the additional areas of knowledge
or experience which would be advantageous to the
business going forward.
48 McColl’s Retail Group Annual Report and Accounts 2015
Audit
committee report
Chairman’s introduction
I am pleased to present the formal report
of the audit committee to shareholders.
The primary responsibilities of the committee are to ensure
the integrity of the company’s financial reporting and the
appropriateness of the risk management processes and
internal controls. This report details how we carry out this
role and the key areas of focus since my last report to you.
The work of the committee is supported by information
provided by senior management, the external auditors and
advisors and, on behalf of the committee, I would like to
thank them for their ongoing support and commitment.
Sharon Brown
Interim chairman and audit committee chairman
Committee composition and meetings
The members of the committee during the period were:
Sharon Brown, as chairman, and Georgina Harvey.
John Coleman was a member of the committee until
2 October 2015.
All members of the committee are considered
independent by the board. The committee considers
that collectively the members have appropriate recent
and relevant financial experience to fully discharge their
responsibilities, with Sharon Brown being a member of
the Chartered Institute of Management Accountants.
There have been no changes in the membership of the
committee since the period end.
In accordance with the committee’s terms of reference,
the committee has met 3 times during the year, at the
appropriate times in the financial reporting and audit
cycle. After each committee meeting, the chairman
reports to the board on the main items discussed.
The committee chairman has also met privately with
the external auditor to provide them with an opportunity
to discuss any issues without management present.
The executive directors, other senior managers and the
audit partner from the external auditor attend committee
meetings by invitation.
The performance of the committee was evaluated as
part of the board evaluation process.
Role and responsibilities of the audit committee
The committee’s terms of reference explains the
committee’s role and responsibilities and can be found on
the company website at www.mccolls.co.uk/investor.aspx.
The principal activities carried out during the year were:
• Financial reporting – the committee reviewed and
assessed the company’s financial reports to ensure they
were fair, balanced and understandable. The committee
also considered the implications of new accounting
standards, regulatory changes, significant accounting
issues and the appropriateness of the accounting
policies adopted.
49
Governance Corporate governance report continued
• Internal and external audits – the committee
evaluated the scope of the external audit plan and
the subsequent outcome of this work. The committee
also assessed whether an internal audit function
was necessary. The internal control framework to be
followed by employees is communicated by line
management, training and manuals, and the routine
internal control activities are performed by the finance
team. The retail support centre includes a team of stock
compliance auditors, who conduct visits at least once
a year to each store to analyse the stock and review
the compliance with company policies and practices.
The committee concluded that an internal audit
function was not currently appropriate but this
would be kept under review.
• Risk and internal control – the committee evaluated the
key risks facing the company and the adequacy and
effectiveness of mitigating internal controls and risk
management processes. A number of policies and
procedures were reviewed and strengthened during
the year.
• External auditor – The committee considered the
performance, independence (in particular when
considering provision of additional services by the auditor),
fees and suitability of re-election of Deloitte LLP as auditor.
Management have confirmed that they were not aware
of any material misstatements within the annual report and
the external auditors have reported that they found no
material misstatements in the course of their work.
Main activities
February
Reviewed the company’s annual report and preliminary announcement for the period ended
30 November 2014 and going concern statement;
Reviewed the auditor’s fees for the period ended 30 November 2014;
Assessed compliance with the code;
Recommended a potential final dividend;
Recommended the auditor’s re-election at the 2015 AGM; and
Reviewed the committee’s constitution and terms of reference.
July
Reviewed the company’s half year report, including interim dividend and going concern statement;
November
Reviewed the risk register; and
Reviewed the following company policies and handbooks:
• Whistleblowing policy
• Health and safety policy
• Colleague handbook
• ‘Trading legally and ethically’ workbook
• Human resources policies.
Reviewed the company’s internal annual report planning document and the auditor’s planning report
including areas of significant risk;
Approved the audit fees;
Reviewed the following company policies:
• the company’s accounting policies
• employment of former employees of the external auditor
• supply of non-audit services by the external auditor
Reviewed internal financial controls, internal control and risk management systems and consideration
of the need for internal control function;
Assessed the company’s compliance with whistleblowing and anti-bribery and corruption
regulations; and
Reviewed the committee’s constitution and terms of reference.
50 McColl’s Retail Group Annual Report and Accounts 2015
Significant accounting judgements and uncertainties considered by the committee during the year
Summarised below are the most significant issues considered by the committee in respect of these financial statements
and how these issues were addressed.
Significant audit risk
Action taken by committee
Supplier income
Goodwill impairment
Property provisions
Revenue recognition
The committee received a report from the company on the process of calculating supplier
income, the controls in place in this area and the level of income which required some
estimation. The external auditors reported on their testing of the income and the
appropriateness of the assumptions made. The committee concurred with management’s
assessment and judgements in establishing the level of income for the year.
The committee received a report from the company which detailed the key judgements
in the process for assessing goodwill impairment across the 3 cash-generating units.
This included forecasts of future cash flows. The committee also received a report from
the external auditors of their testing of the calculations. The committee considered the
calculation process and the reasonableness of the assumptions made, and concluded
that the cash flows supported the level of goodwill reflected in the financial statements.
The committee assessed the reasonableness of the property provisions in respect of closed
branches, onerous leases and future dilapidations expenses. Property provisions were also
tested and reported on by the external auditors. The committee agreed with the judgements
made in establishing the level of property provisions required.
The committee reviewed the methodology and controls relating to revenue recognition,
including an external report from the auditors. They were satisfied that the correct accounting
treatment has been adopted and consistently applied in the financial statements.
Relationship with the independent auditor
Deloitte LLP has been the group’s auditor since 2006 and
Sukie Kooner has been the audit partner since 2014. In line
with professional guidelines, each partner can serve for up
to 5 years. Under new UK Competition and Market Authority
regulations, companies within the FTSE 350 for accounting
periods beginning on 1 January 2015, must after 5 years
of appointing the auditors advise (a) when they intend to
undertake a competitive tender process and (b) why this
period is the best interests of the shareholders. Furthermore
the external audit must be tendered at least every ten years
and it is anticipated that the auditor will change every 20
years. The rules mean that the company, having been listed
on the London Stock Exchange from 28 February 2014, will
need to retender the external audit before 2024. Although
the company is outside the FTSE 350, it will comply with the
Competition Market Authority regulations for the accounting
period commencing on or after 30 November 2015.
The continued appointment of Deloitte LLP is considered
by the audit committee each year, taking into account
relevant guidance and best practice and considering
the independence and effectiveness of the external
audit process.
As part of the review of auditor independence and
effectiveness, Deloitte LLP have confirmed to the committee
that they are independent of the company and have
complied with relevant auditing standards.
The company has a policy relating to the Supply of Non-Audit
Services by the external auditor to ensure that the auditor’s
independence is not impaired. The policy prohibits certain
services and limits the level of non-audit services payable to
the auditors. Any services in excess of this limit require prior
approval from the audit committee. For the current year
the other non-audit services amounted to £178,000 which
included £150,000 relating to the debt refinancing. The
debt refinancing work was put out to tender and the audit
committee is satisfied that it was appropriate for Deloitte
LLP to be appointed and that, given it was performed
by a functionally separate team, it did not impair their
independence or objectivity.
In assessing Deloitte’s performance and the effectiveness
of the audit process, the committee took into account:
• The fulfilment by the auditor of the agreed audit plan;
• The report issued by the auditor on the audit of the
annual report and financial statements;
• The robustness of the audit process; and
• The quality of people and service provided by Deloitte.
The committee is therefore satisfied with the independence
and performance of Deloitte LLP and has recommended
their reappointment for a further year.
Whistleblowing
In compliance with the Public Interest Disclosure Act 1998,
the group has a policy and formal procedures to ensure
that colleagues can confidentially raise concerns about
possible improprieties by others. The purpose of the
whistleblowing policy is to protect employees who make
disclosures about certain matters of concern, provided
these disclosures are made in accordance with the
provisions of the act. The committee is responsible for
ensuring that employees are able to raise any concerns,
in confidence, regarding any possible improprieties in
financial reporting or other matters. The committee reviewed
the company’s formal whistleblowing policy (which was
revised during the year) and how this operated in practice.
During the year under review the company received
10 notifications from the whistleblowing telephone line.
All issues were investigated and resolved by senior
management and reported to the committee.
Approved by the audit committee and signed on its behalf:
Sharon Brown
Interim chairman and audit committee chairman
51
Governance Remuneration report
Remuneration report
Dear shareholder
I am pleased to present the second directors’
remuneration report since the company’s incorporation
and listing on the London Stock Exchange, for the financial
period ended 29 November 2015. This report has been
prepared in accordance with the Large and Medium-sized
Companies and Group (Accounts and Reports)
Regulations 2013, as amended and the principles
of the UK Corporate Governance Code.
In 2015 we continued to grow and perform well with
revenue growing by 3.1% to £932.2m. Our focus on
neighbourhood convenience gained momentum as we
moved closer to reaching our target of 1,000 convenience
stores by the end of 2016. To this end, we acquired an
additional 60 convenience stores and converted a further
45 of our newsagents to food and wine stores – bringing
the period-end number of convenience stores to 893.
As well as increasing our number of convenience stores,
we also expanded the range of products and services
our stores offer. In particular, we focussed on strengthening
our food-to-go offer – notably by rolling out 148 new
food-to-go modules across our stores and opening
our first Subway franchise.
However, despite good performance in 2015, operating
profit did not meet the stretching targets set by the
committee for the annual bonus. Therefore no
annual bonus awards have been earned for the
period under review.
During the year, John Coleman stepped down from
his position as chairman, in order to focus on new
opportunities. Sharon Brown, independent non-executive
director, was appointed interim chairman. The fee for the
interim chairman was set at £115,000 from October 2015,
in line with the previous chairman’s fee.
In November 2015 the company announced that, as
planned, James Lancaster would step down from his
position as chief executive once a successor has been
identified. James will take over as non-executive chairman
until the AGM in April 2017. The search for a chief executive is
in progress, as is a search to appoint a further independent
non-executive director, to support the growth of the business
and in line with best practice.
During 2015, the committee implemented the
remuneration policy approved by shareholders at our
AGM on 17 April 2015. Executive directors will receive
no salary increase for 2016, whilst increases will be made
across the wider employee population to reflect statutory
increases to the National Minimum Wage, and the
introduction of the National Living Wage. The committee
continues to set stretching annual operating profit targets
and strategic objectives linked to the priorities of the
business which include growing basket spend in
The information provided in this part of the
directors’ remuneration report is not subject
to audit.
52 McColl’s Retail Group Annual Report and Accounts 2015
The committee
continues
to set stretching
targets and
objectives linked
to the priorities of
the business
convenience and increasing the number of convenience
stores to 1,000 in operation by 31 December 2016. No
element of the bonus will be awarded unless at least
threshold operating profit is achieved.
During 2016 we will make a second grant under the LTIP,
which was introduced and approved by shareholders
at the 2015 AGM. The LTIP will continue to vest based 70%
on EPS and 30% on TSR, measured on a relative basis
against the combined constituents of the FTSE All Share
General Retailers Index and the FTSE All Share Food & Drug
Retailers Index. The committee continues to believe that
this combination of measures will help reinforce delivery
of the company’s growth plans. For the EPS element of the
2016 LTIP awards, 25% will vest for 3-year cumulative EPS
of 52.5p and will vest in full for EPS of 60.1p. The committee
considers that this will provide executives with an
appropriately challenging and meaningful incentive
to drive performance which, at the same time, delivers
a level of financial performance which supports internal
and external expectations. The LTIP has a 3-year
performance period; and an additional 2-year holding
period for executive directors only will then apply to
any shares that vest.
The committee has presented the remuneration report
in line with 2013 regulations governing the disclosure and
approval of directors’ remuneration. At our annual general
meeting, which will be held on 19 April 2016, the second
section of this report, the annual report on remuneration,
which details the implementation of our policy, will be
subject to an advisory vote. The first section, the policy
report, is unchanged (other than minor changes to
improve clarity), is not due to be submitted for a vote,
having already been approved by shareholders at the
17 April 2015 AGM.
Finally, I would like to thank my colleagues on the
committee for their support during 2015 and to all
employees for their hard work. I would also like to thank
shareholders for their support at the AGM in 2015 on the
resolution to approve the remuneration policy and
annual report on remuneration.
Yours sincerely
Georgina Harvey
Chairman of the remuneration committee
53
Governance Remuneration report continued
Remuneration
at a glance
The following is a summary of the key
components of executive directors’
remuneration and their single figure
total remuneration.
Key components of executive directors’ remuneration
Fixed pay
Base salary
To attract and retain talent of the right
calibre and with the ability to
contribute to strategy, by ensuring
base salaries are competitive in
the relevant talent market.
Pension
Provide post-retirement benefits for
participants in a cost-efficient manner.
Variable pay
Annual bonus
Aims to focus executives on achieving
stretching profit targets and delivering
the strategic business priorities for the
financial period.
Long term incentive plan (LTIP)
Aligns the interests of executives with
shareholders in growing the value of
the business over the long term.
Other arrangements
Shareholding guidelines
To align directors’ interests with the
long term interests of shareholders.
Non-executive directors’ fees
To reflect the time commitment in
preparing for and attending meetings,
the duties and responsibilities of the
role and the contribution expected
from the non-executive directors.
Benefits
To provide competitive benefits for
each role.
Single figure for total remuneration of executive directors
£000
James Lancaster
Jonathan Miller
David Thomas
Salary
2015
594
321
276
2014
594
315
168
Pension
benefit
Taxable
benefits
Single-year
variable
Multiple-year
variable
2015
188
99
41
2014
188
98
25
2015
2014
2015
2014
2015
2014
58
45
23
56
36
19
–
–
–
–
–
–
–
–
–
2,361
2,173
225
Total
2015
840
465
340
2014
3,199
2,622
437
These figures are described in more detail on page 63.
54 McColl’s Retail Group Annual Report and Accounts 2015
Directors’ remuneration policy
This section describes the group’s remuneration policy for
directors which was approved at the AGM on 17 April 2015
and applies for up to 3 years from that date.
The policy for executive director remuneration is to provide
a competitive package of fixed and variable pay that will
enable the group to attract, motivate and retain executives
with the right skills and experience, and will link executive
pay to shareholder interests and the company’s long
term success.
The fixed component of each executive’s remuneration
package comprises salary, pension and benefits. The
variable component may comprise an annual bonus and
eligibility to participate in a long term incentive plan (LTIP).
The majority of the bonus is linked to annual profit
performance, although an element may be linked
to strategic performance measures that will help drive
the group’s growth. The group adopted an LTIP when
the company listed on 28 February 2014 that provides
the opportunity to earn shares based on 3-year
performance. Each element of remuneration is
designed to target a specific aim of the remuneration
policy and to help further align the interests of
executives with those of shareholders.
Policy table
The key components of executive directors’ remuneration
are as follows:
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Fixed pay
Base salary
To attract and retain
talent of the right calibre
and with the ability to
contribute to strategy, by
ensuring base salaries are
competitive in the relevant
talent market.
Fixed pay
Pension
Provide post-retirement
benefits for participants in
a cost-efficient manner.
Individual and group
performance is taken into
account when determining
appropriate salaries.
Base salaries are reviewed
annually, with reference
to individual performance,
experience, market
competitiveness, salary
increases across the
group and the position
holder’s experience,
competence and criticality
to the performance of
the business.
Any increases are generally
effective from 1 December.
Executive directors’ salary
increases will normally be
in line with those for the
wider employee population.
However, larger changes to
salary may be made where
there is a change in role or
responsibilities or a
significant market
misalignment.
None.
The current chief executive
and chief financial officer
receive a salary supplement
in lieu of pension. The chief
operating officer is, and any
new appointee would be,
eligible to participate in the
group’s defined contribution
scheme (or any
replacement scheme) or to
receive a salary supplement
in lieu of pension provision.
Pension contributions
vary based on individual
circumstances. Pension
benefits will be capped at
20% of salary, excluding
legacy arrangements for
the current chief executive
and chief financial officer.
Further details are set out
on page 65.
55
Governance Remuneration report continued
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Fixed pay continued
Benefits
To provide competitive
benefits for each role.
Variable pay
Annual bonus
Aims to focus executives
on achieving stretching
profit targets and
delivering the strategic
business priorities
for the financial period.
Benefits currently
include the provision of
car or car allowance, fuel,
private medical insurance
and life assurance.
Reasonable relocation,
travel and subsistence
allowances and other
benefits may be provided
based on individual
circumstances.
Performance measures
and targets are set prior
to or shortly after the start
of the financial period.
At the end of the
financial period, the
remuneration committee
will determine the extent
to which the targets
have been achieved.
Awards are delivered
in cash.
The committee
has discretion to
reduce the bonus in
the event of serious
financial misstatement
or gross misconduct.
In extreme cases of
gross misconduct, the
committee may claw
back annual bonus
payments previously made.
There is no overall
maximum value set on
benefits. They are set at
a level that is comparable
to market practice.
The committee retains
the discretion to amend
benefits in exceptional
circumstances or in
circumstances where
factors outside of the
group’s control have
materially changed
(e.g. increases in
insurance premiums).
The maximum bonus
opportunity for executive
directors will be up to
100% of salary.
For the 2016 financial
period the maximum bonus
opportunity will be set at
75% of salary.
Up to 40% of maximum
will vest for target
performance. The
committee may award
up to 10% of maximum
for threshold performance.
80% of the award for
2016 will be based on
achievement of group
operating profit, of
which none will vest
below threshold.
20% of the award for
2016 will be based on
achievement of strategic
performance measures,
of which none will vest
until the operating profit
threshold is achieved.
None.
The majority of the annual
bonus will be based on
achievement of a stretching
profit target. The remainder
will be based on strategic
performance measures,
selected annually by the
remuneration committee to
reflect other key performance
indicators for the year ahead.
Details on the measures used
during the period under review
are set out on page 64.
The committee has discretion
to adjust the formulaic bonus
outcome downwards (or
upwards with shareholder
consultation) within the limits
of the plan, to ensure
alignment of pay with the
underlying performance
of the business.
56 McColl’s Retail Group Annual Report and Accounts 2015
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Long-term incentive
plan (LTIP)
Aligns the interests
of executives with
shareholders in growing
the value of the business
over the long term.
Awards may be made
up to a maximum of
150% of salary in normal
circumstances and up
to 250% in exceptional
circumstances.
For the 2016 financial period
executive directors’ awards
will be up to 50% of salary.
The award size is reviewed
in advance of grant.
The plan provides
for annual awards of
performance shares
to eligible participants.
Vesting is based on 3-year
performance. Executive
directors’ vested shares will
be subject to an additional
2-year holding period
before being released
to participants.
The committee has
discretion to reduce
any unvested long-term
incentive awards (including
those in a holding period),
or to vary the opportunities
for future awards, in
case of serious financial
misstatement or gross
misconduct. In extreme
cases of gross misconduct,
the committee may claw
back vested long-term
incentive awards.
Participants are eligible
to receive cash or shares
equal to the value of
dividends that would have
been paid over the vesting
period on shares that vest.
Awards will vest on achievement
of financial performance
measures, measured over
a 3-year performance period,
to include both EPS and TSR.
EPS will receive a weighting
in the LTIP of at least 50%.
For the 2016 financial period the
weightings on EPS and TSR will
be 70% and 30% respectively.
TSR will be measured on
a relative basis against
a relevant peer group.
Other measures may be
considered in future years
to help capture the strategic
goals of the business and may
be used in conjunction with
these metrics.
Nothing will vest below
threshold. 25% of each element
will vest for achievement of
threshold performance under
each metric, then increase
on a straight-line basis to full
vesting for achieving
stretch performance.
The committee has discretion
to adjust the formulaic LTIP
award downwards (or upwards
with shareholder consultation),
within the limits of the plan, to
ensure alignment of pay with
the underlying performance
of the business.
Further details of awards
to be made during the
upcoming financial period
are set out on pages 64
and 65.
Other arrangements
Shareholding guidelines
To align directors’ interests
with the long-term interests
of shareholders.
Executive directors are
required to build up
and retain a minimum
shareholding in the
company at least equal
to base salary, and are
required to retain at least
50% of shares vesting (after
tax) under the LTIP until the
shareholding guideline has
been met.
n/a
n/a
57
Governance Remuneration report continued
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Other arrangements
continued
Non-executive
directors’ fees
To reflect the time
commitment in
preparing for and
attending meetings,
the duties and
responsibilities of the
role and the contribution
expected from the non-
executive directors.
None.
All-inclusive annual fee
for chairman.
Annual base fee for
non-executive directors.
Additional fees paid to
the chairmen of board
committees.
Non-executive directors
do not participate in any
incentive schemes, nor
do they receive any pension
or benefits (other than
nominal travel expenses).
Any increases to non-
executive director fees will
be considered as a result
of the outcome of a review
process and taking into
account wider market
factors, e.g. inflation. There
is no prescribed individual
maximum fee.
Further details are set
out on page 65.
This policy is unchanged in substance since approval
at the AGM on 17 April 2015. Other than minor text
changes to ensure this policy remains clear for the reader,
a few other minor changes have been made to provide
additional clarity. These include:
• an updated statement on page 62 regarding the
committee’s approach to shareholder consultation;
• updated scenario charts on page 59; and
• additional clarity on the treatment of incentives
on a change of control on page 61.
Performance measure selection and approach
to target setting
Profit is considered to be the best measure of the group’s
annual performance and will continue to determine the
majority of the annual bonus. This will be supplemented
by an element based on strategic performance measures,
selected annually to reflect the group’s key strategic
priorities for the financial period ahead.
EPS is considered to be the best measure of the group’s
bottom line financial performance over the longer term
and will determine the vesting for at least 50% of the overall
LTIP award. TSR will also be captured to further align the
interests of LTIP participants with those of shareholders.
Annual bonus targets will be selected prior to or shortly
after the start of the financial period. Profit targets will
be calibrated with reference to the group’s budget for
the upcoming financial period and the group’s profit for
the prior financial period. No element of the strategic
performance measures will begin to pay out until the
profit element starts to vest. Strategic performance
measures will be selected to reflect the most important
strategic goals for the upcoming financial period.
Threshold and stretch performance levels under the
EPS element of the LTIP will be set prior to the start of
the 3-year performance period. The remuneration
committee aims to set stretching but achievable
targets, taking account of a range of reference points,
including broker forecasts and the group’s strategic plan.
Performance targets for 2016 awards are detailed
on page 64. The element linked to TSR will vest based
on 3-year TSR compared to a peer group comprising
the constituents of the FTSE All Share General Retailers
Index and the FTSE All Share Food & Drug Retailers Index.
Threshold vesting for the TSR element will be set at median
ranking and stretch will be set at upper quartile. This range
is in line with market practice for other listed companies
and is expected to capture the range of good to excellent
performance for the group.
Differences in remuneration policy operated
for other employees
Senior management’s remuneration has the same
components as set out in the policy, being base salary,
annual bonus, pension, life assurance and benefit
provision. They may also be invited to participate in the
LTIP or alternatively the company’s share option plan.
Annual bonus arrangements have the same structure
and pay-out arrangements but are based on specific
key performance indicators relevant to each job function.
The maximum award varies according to seniority.
All employees receive a basic salary and all eligible
employees are automatically enrolled into a pension
scheme. Store managers participate in a bonus scheme
that targets specific key performance indicators for
their store.
58 McColl’s Retail Group Annual Report and Accounts 2015
Other
In addition to the above elements of remuneration, any commitment made prior to, but due to be fulfilled after, the
approval and implementation of the policy detailed in this report will be honoured.
Performance scenarios
The graphs below provide estimates of the potential future reward opportunities for executive directors, and the potential
split between the different elements of remuneration under three different performance scenarios; ‘Minimum’, ‘Target’
and ‘Maximum’.
Executive director remuneration (£000s)
£1,583
19%
28%
53%
£1,092
7%
16%
77%
£840
100%
Fixed pay
Annual bonus
Long-term incentive plan
£893
19%
28%
54%
£619
7%
16%
77%
£475
100%
£340
100%
£458
8%
18%
74%
£686
20%
30%
50%
Minimum
Target
Maximum
Minimum
Target
Maximum
Minimum
Target
Maximum
James Lancaster
Jonathan Miller
David Thomas
As announced in November 2015, James Lancaster will step down from his position as chief executive in 2016, and take
over as non-executive chairman until the AGM in April 2017, after which his remuneration will be set to be appropriate for
this position. The illustration for James Lancaster is provided on the basis of a full year as CEO, and does not reflect the
actual remuneration he will receive in 2016. The potential reward opportunities illustrated are based on the policy
approved at the annual general meeting on 17 April 2015, applied to the base salaries in force at 1 December 2015.
The projected value of LTIP amounts excludes the impact of share price movement or dividend accrual. The assumptions
made in illustrating potential reward opportunities are shown in the table below:
Performance scenario
Fixed pay
Annual bonus
LTIP
Minimum
Salary as at most recent review date.
Target
Maximum
Salary supplements in lieu of pension
contributions of 31.6% and 31% of salary
for the chief executive and chief financial
officer respectively, and a pension
contribution of 15% of salary for the
chief operating officer.
Benefits as for the most recent
financial period.
No annual bonus
payable.
On target annual
bonus payable
(40% of maximum).
Maximum annual
bonus payable for
2016 (75% of salary).
Threshold not achieved
(0%).
Performance warrants
threshold vesting for
2015 (25% of maximum).
Performance warrants
full vesting for 2016
(50% of salary).
59
Governance Remuneration report continued
Approach to remuneration for new director appointments
In the cases of hiring or appointing a new executive director, the remuneration committee may make use of all the
existing components of remuneration, as follows:
Component
Base salary
Pension
Benefits
Annual bonus
LTIP
Approach
Maximum opportunity
The base salaries of new appointees will be determined
based on the experience and skills of the individual,
relevant market data and their current basic salary.
New appointees will be entitled to participate in the group’s
defined contribution scheme (or any replacement scheme)
or to receive a salary supplement in lieu of pension
contributions.
New appointees will be eligible to receive benefits in line
with the policy which may include (but are not limited to)
the provision of a company car or car allowance, fuel,
private medical insurance and life assurance.
The structure described in the policy table will apply to new
appointees with the relevant maximum being pro-rated to
reflect the proportion of employment over the year.
20% of base salary.
100% of base salary.
New appointees will be granted awards under the LTIP
on similar terms as other executives, as described in the
policy table.
150% of base salary (250% in
exceptional circumstances).
In determining appropriate remuneration for a new
director, the committee will take into consideration all
relevant factors to ensure that arrangements are in the
best interests of the group and its shareholders. The
committee may make an award in respect of a new
appointment to ‘buy out’ incentive arrangements forfeited
on leaving a previous employer, using Listing Rule 9.4.2 R if
necessary. In doing so, the committee will take account
of relevant factors including any performance conditions
attached to these awards, the likelihood of those
conditions being met and the proportion of the vesting
period remaining. The fair value of any buyout will not
exceed that of the award being forgone.
In cases of appointing a new executive director by way
of internal promotion, the approach will be consistent with
the policy for external appointees detailed above. Where
an individual has contractual commitments made prior to
their promotion to executive director level, the group will
continue to honour these arrangements. Incentive
opportunities for below board employees are no higher
than for executive directors, but measures may vary.
In recruiting a new non-executive director, the
remuneration committee will use the policy as set
out in the table on page 58.
Service contracts and exit payment policy
Non-executive directors
The current chairman and non-executive directors were
appointed as directors on 7 February 2014. Their letters of
appointment set out the terms of their appointment and
are available for inspection at the company’s registered
office and at the annual general meeting. They are not
eligible to participate in the annual bonus or any equity
schemes, nor do they receive any additional pension or
benefits (other than travel expenses directly incurred in the
performance of their role) on top of the fees disclosed on
page 65. Non-executive directors have a notice period of
one month and receive no compensation on termination.
Executive directors
On 24 February 2014, each of the executive directors,
James Lancaster, Jonathan Miller and David Thomas
entered into a service agreement with the company.
Each of the agreements are terminable by the relevant
executive directors or the company on not less than 12
months’ prior written notice. The executive directors may
be put on garden leave during their notice period, and
the company can elect to terminate their employment by
making a payment in lieu of notice equivalent to up to 12
months’ basic salary and benefits (although it should be
noted that each of the executive directors can terminate
their respective service agreements by giving 12 months’
prior written notice to the company). Executive director
service contracts are available for inspection at the
registered office and at the annual general meeting.
60 McColl’s Retail Group Annual Report and Accounts 2015
James Lancaster and Jonathan Miller’s pension
arrangements were reviewed in 2008 upon closure of
the group’s defined benefit pension schemes to future
accrual. They now receive a salary supplement in lieu of
their previous defined benefit arrangements representing
the actuarial valuation of the defined benefit forgone.
This is kept under review by the committee. Pension
arrangements for other executives are in line with the
remuneration policy set out on page 55.
The committee acknowledges that executive directors
may be invited to become independent non-executive
directors of other quoted companies which have no
business relationship with the company and that these
duties can broaden their experience and knowledge
to the benefit of the company.
Executive directors are permitted to accept such
appointments with the prior approval of the chairman.
Approval will only be given where the appointment does
not present a conflict of interest with the group’s activities
and the wider exposure gained will be beneficial to the
development of the individual. Where fees are payable
in respect of such appointments, these would be retained
by the executive director.
The employment of each executive director is terminable
with immediate effect without notice in certain
circumstances, including where such executive director
commits any act of serious misconduct, commits any
material or persistent breach of any of the terms or
conditions of his service agreement, has a bankruptcy
order made against him, is convicted of any criminal
offence, commits any act which constitutes an offence
under the Bribery Act 2010, is disqualified from acting as a
director, acts in any way which may bring the company or
any member of the group into disrepute or discredit, fails to
comply with any policy of the company or any member of
the group which has been communicated to him, enters
into any transaction which constitutes an offence for the
purposes of Part V of the Criminal Justice Act 1993 or which
constitutes market abuse for the purposes of Part VIII of the
Financial Services and Markets Act, or commits any
material breach of his duties as a director.
The company’s policy on termination payments is to
consider the circumstances on a case-by-case basis,
taking into account the executive’s contractual terms,
the circumstances of termination and any duty to mitigate.
The table below summarises how incentives are typically
treated in different circumstances:
Reason for leaving
Timing of vesting
Calculation of vesting/payment
Bonus
Summary dismissal, resignation
Awards lapse.
Not applicable.1
Good leaver2
Normally at year end.
Change of control
On change of control,
or shortly thereafter.
The annual bonus plan for the period under review
would normally have performance measured to the end
of the financial period. In exceptional circumstances, the
committee may bring forward the date of award to the
termination date and base it on performance over the
period to termination. Awards will normally be pro-rated
for time unless the committee determines otherwise.
The annual bonus plan for the period under review
would normally be paid immediately and be based on
pro-rata performance to date, with committee discretion
to treat otherwise.
LTIP
Summary dismissal, resignation
Awards lapse.
Not applicable.
Good leaver2
In line with the vesting
schedule at grant.
Change of control
On change of control.
Unvested LTIP shares are normally prorated for
performance to the end of the performance period. In
exceptional circumstances, the committee may bring
forward the vesting date to the termination date and vest
on performance over the period to termination. Awards
will normally be pro-rated for time unless the committee
determines otherwise.
Unvested LTIP shares are normally prorated for
performance to the date of change of control and paid
immediately. Awards will normally be pro-rated for time
unless the committee determines otherwise.
1. Under the current chief executive and chief financial officer contracts, they are eligible to receive a pro-rata bonus payment upon termination of employment for any reason
excluding summary dismissal. The current chief operating officer’s contract and any future executive director contracts will be operated in line with the above policy.
2. Under the 2014 LTIP, ‘good leaver’ is defined as a participant ceasing to be employed by the group by reason of death, injury, ill health, redundancy, retirement with the consent of the
group, the company of employment ceasing to be a member of the group or any other reason that the committee determines in its absolute discretion (excluding summary dismissal
or resignation to join a competitor).
61
Governance Remuneration report continued
Consideration of employment conditions
elsewhere in group
The committee takes into account the general basic
salary increase being offered to employees elsewhere
in the group when annually reviewing the salary increases
and remuneration for the executive directors. Employees
have not been consulted in respect of the design of the
group’s senior executive remuneration policy.
Consideration of shareholder views
The committee considers shareholder feedback
carefully when reviewing remuneration and regularly
reviews the remuneration policy in the context of key
institutional shareholder guidelines and best practice.
It is the committee’s policy to consult with significant major
shareholders prior to making any major changes to its
executive remuneration structure. Details of shareholder
consultations carried out during the year are included
on page 67.
Annual report on remuneration
Remuneration committee membership and advisers
The remuneration committee was established as part
of the governance processes adopted by the company,
following admission to the London Stock Exchange on
28 February 2014. The remuneration committee consists
of two independent non-executive directors, Georgina
Harvey (committee chair) and Sharon Brown (interim
company chairman from 2 October 2015). John Coleman
was also a member of the committee until he stepped
down from the board on 2 October 2015. The remuneration
committee meets not less than twice a year and at such
other times as required. During the 2015 financial year,
the remuneration committee held 5 scheduled meetings.
The chief executive and chief financial officer, and the
committee’s independent advisers, Kepler, a brand of
Mercer (Kepler), attend committee meetings by invitation.
After committee meetings, the chairman reports to
the board.
The remuneration committee has responsibility for the
determination of the terms and conditions of employment,
remuneration and benefits of the chairman and members
of the board, including pension rights and any
compensation payments, and recommending and
monitoring the level and structure of remuneration for
senior managers and the implementation of share
option or other performance-related schemes.
The committee’s principal external advisers are Kepler,
who were appointed by the committee and attend
committee meetings from time to time, and who also
provide remuneration advice to the group. Kepler were
appointed independent advisers to the remuneration
committee through a competitive tender process in 2014
and fees for advice provided to the remuneration
committee were £36,229 for the financial period under
review. Fees covered support in drafting the directors’
remuneration report, benchmarking of senior
management team remuneration and of chairman
fees, attendance at remuneration committee meetings
including advice on remuneration policy, shareholder
consultation, long term incentive target-setting and trends
in executive remuneration, and TSR performance reporting.
Kepler do not provide any other services to the group and
the committee is satisfied that they provide independent
and objective remuneration advice to the company.
Kepler is a signatory to the Code of Conduct for
Remuneration Consultants in the UK, details of which
can be found on the Remuneration Consultants Group’s
website at www.remunerationconsultantsgroup.com.
Committee activities
During 2015, the committee met to consider the following
remuneration matters:
• Latest developments in corporate governance
of relevance to the committee;
• Review and approval of the remuneration report;
• Shareholder consultation on remuneration proposals
in advance of the annual general meeting;
• Review of performance and adjudicating annual
bonus payments for 2014;
• Final review and approval of the remuneration
policy that was put to vote at the 2015 annual
general meeting;
• Setting of incentive targets for both the 2015 annual
bonus and 2015 LTIP awards, and approving LTIP and
CSOP award allocations by participant;
• Oversight of group-wide remuneration and wage
increases, including the impact of implementing
the National Living Wage and gender pay
reporting proposals;
• Review of executive director salary levels;
• Review of EPS targets for 2016 LTIP awards;
• Review of policy for directors’ expenses; and
• Review of remuneration committee performance,
constitution and terms of reference.
62 McColl’s Retail Group Annual Report and Accounts 2015
The information provided in this part of the directors’ remuneration report is subject to audit.
Single figure for total remuneration of executive directors
The table below sets out a single figure for the total remuneration received by each executive director employed by the
company for the period ended 29 November 2015 and the prior period:
Salary
Pension
benefit
Taxable
benefits1
Single-year
variable2
Multiple-year
variable3
£000
James Lancaster
Jonathan Miller
David Thomas4
2015
594
321
276
2014
594
315
168
2015
188
99
41
2014
188
98
25
2015
2014
2015
2014
2015
2014
58
45
23
56
36
19
–
–
–
–
–
–
–
–
–
2,361
2,173
225
Total
2015
840
465
340
2014
3,199
2,622
437
1. Taxable benefits include car or car allowance, of £36k, £30k, and £10k to James Lancaster, Jonathan Miller, and David Thomas respectively for 2015 (£34k, £22k, and £9k for 2014), fuel
allowance of £7k, £7k, and £5k for 2015 (£7k, £7k, and £5k for 2014), healthcare of £13k, £8k,and £9k for 2015 (£12k, £7k, and £5k for 2014), and other benefits of £2k for James Lancaster
in 2015 and 2014.
2. Annual bonus paid for performance over the relevant financial period. Annual bonus payable in cash.
3. The LTIP was introduced in 2015 under which awards will begin to vest, subject to achievement of stretching performance conditions, in 2018. No long term incentives were due to vest
during 2015. As disclosed in last year’s report, a share-based payment arose in 2014 relating to shares allocated prior to the IPO for nil consideration, in which unallocated employee
shares held in an employee benefit trust were allocated to employee shareholders pro rata to their existing holdings. Awards of 1,132,299, 1,132,299, and 117,584 shares were made to
James Lancaster, Jonathan Miller, and David Thomas respectively at the share price of £1.91 upon IPO. A further 104,050 and 5,339 shares were allocated to James Lancaster and
Jonathan Miller prior to the IPO at nil cost in connection with the conversion of preference shares held by them into ordinary shares. The company met employer’s national insurance
contributions on the value of such shares at the IPO offer price.
4. David Thomas changed role on 22 July 2014.
Single figure for total remuneration for non-executive directors
The table below sets out a single figure for the total remuneration received by each non-executive director for the period
ended 29 November 2015. All the current non-executive directors were appointed by the company on 7 February 2014.
£000
John Coleman1
Sharon Brown2
Georgina Harvey
Total fee
Taxable benefits
Total
2015
106
61
50
2014
2015
2014
50
42
38
0
2
0
0
0
0
2015
106
63
50
2014
50
42
38
1. John Coleman stepped down from the Board on 2 October 2015 and, as such, fees for 2015 cover the financial year to this date.
2. Sharon Brown was appointed as interim chairman on 2 October 2015. Taxable benefits include nominal travel expenses to and from company meetings.
Basic annual salary
Base salaries are reviewed annually, with any changes normally effective from 1 December, with reference to individual
performance, experience, market competitiveness and salary increases across the group.
Salaries paid to the executive directors and senior executives were reviewed by the committee, taking into account the
competitiveness of total remuneration in comparison to comparable roles at listed retail companies of a broadly similar
size and other listed organisations of a similar size.
Following the review for 2016, the committee determined that the executives’ salaries would be unchanged at £594,224,
£331,207 and £276,000 for the chief executive, chief financial officer and chief operating officer, respectively. The
average salary increase awarded across the wider employee population was c.3.5% for the 2015 financial period.
Executive director
James Lancaster
Jonathan Miller
David Thomas
1 December 2015
29 November 2015
1 December 2014
% change for 2016
£594,224
£331,207
£276,000
£594,224
£331,207¹
£276,000
£594,224
£315,381
£276,000
0%
0%
0%
1. Jonathan Miller’s salary was increased to £331,207 on 1 August 2015 at the same time as the general pay review at the group’s head office.
63
Governance
Remuneration report continued
Annual bonus
The group operates an annual performance related bonus scheme for a number of senior executives including
executive directors.
For the 2015 financial period, annual bonuses for the executive directors were based 80% on operating profit and
20% on 3 key strategic performance measures being: like-for-like sales, the number of convenience stores, and
expanding the range of products and services. For the operating profit element of the 2015 annual bonus no vesting
will occur below target. At target 40% of the profit element of the bonus will be awarded. Annual bonus payments will
then increase on a straight-line basis between 40% of maximum and full vesting for achievement of 110% of target.
For the strategic performance element of the bonus, no awards will vest prior to the attainment of target operating
profit. The targets, and achievement against them, were as follows:
Vesting
(% of maximum)
0%
0%
0%
-1.9%
893
Measure
Operating profit before bonus, profit on
asset disposals and exceptional items
Like-for-like sales
Weighting
Target
80%
£25.0m
Stretch
£27.4m
Achievement
£24.0m
Positive
Number of convenience stores
20%
900 by 31 December 2015
Expanding range of products
and services
‘Food-to-go’ roll-out
Achieved
100%
Total
0%
(profit target
not met)
As a result of the operating profit target not being
achieved, the whole of the annual bonus lapsed in
2015. The 2016 annual bonus will be based on the
same structure as in 2015, with 80% based on operating
profit and 20% on strategic performance measures
including 1,000 convenience stores by 31 December 2016
and growing basket spend in convenience. The targets for
the other performance metrics are not being disclosed at
present for reasons of commercial sensitivity, but will be
disclosed retrospectively in the next annual report on
remuneration, subject to the information no longer
being commercially sensitive.
For the operating profit element of the 2016 annual
bonus, no vesting will occur below threshold being 95%
of target. Annual bonus payments will then increase
on a straight-line basis to target when 40% of the profit
element of the bonus will be awarded. Annual bonus
payments will then increase on a straight-line basis
between 40% of maximum and full vesting for achievement
of 110% of target. For the strategic performance element
of the bonus, no awards will vest prior to the attainment
of threshold operating profit.
The committee has discretion to adjust the formulaic
bonus outcome downwards, or upwards with shareholder
consultation, within the plan limits, to ensure alignment
of pay with the underlying performance of the business.
The committee may also reduce future annual bonus
opportunities in light of material misstatement or gross
misconduct. In extreme cases of gross misconduct, the
committee may claw back annual bonus payments
previously made.
Long term incentive plan (LTIP)
Prior to approval of the LTIP outlined in the director’s
remuneration policy above, no long-term incentive
plan had been in operation. In 2016, it is expected that
executive directors will be granted shares equivalent to
50% of salary under the LTIP. These shares will vest on EPS
and TSR performance over a 3-year period, as follows:
70% based on cumulative earnings per share, measured
over 3 financial years:
Cumulative earnings per share for
financial years 2016/2017/2018
60.1p or above
Between 52.5p
and 60.1p
Below 52.5p
% of the EPS element
of the award which
can be exercised
100%
Straight-line vesting
between 25% and 100%
0%
30% based on relative total shareholder return relative
to the constituents of the FTSE All Share General Retailers
Index and the FTSE All Share Food & Drugs Retailers Index,
measured over 3 financial years.
Relative TSR ranking
Upper quartile or above
Between median
and upper quartile
Below median
% of the TSR element
of the award which
can be exercised
100%
Straight-line vesting
between 25% and 100%
0%
64 McColl’s Retail Group Annual Report and Accounts 2015
In addition, for LTIP awards to become exercisable the committee must be satisfied that the formulaic LTIP outcome is a
genuine reflection of the underlying performance of the business. The committee has discretion to adjust the formulaic
LTIP outcome downwards, or upwards with shareholder consultation, within the plan limits.
An additional holding period of 2 years will apply to vested shares from the end of the performance period.
The committee has discretion to claw back any unvested long term incentive awards, or to vary the opportunities
for future awards, in case of serious financial misstatement or gross misconduct. In extreme cases of gross misconduct,
the committee may claw back vested long term incentive awards. The group has undertaken a fair valuation of its
share-based payment transactions, specifically the LTIP and CSOP, using IFRS 2. The results of the valuation were deemed
to be immaterial and therefore the IFRS 2 disclosures have been omitted.
Awards made under the LTIP and any other share-based schemes (the CSOP) will not exceed the Investment
Association’s guideline on dilution of 10% in aggregate over a 10-year rolling period.
The 2015 LTIP grants to executive directors are outlined below:
Executive director
James Lancaster
Jonathan Miller
David Thomas
Date of
grant
17 August 2015
17 August 2015
17 August 2015
Number of
shares
200,751
111,894
93,243
1. Based on grant date share price of 149.25 pence.
Face
value
(£000)
£2971
£1661
£1381
Face value
(% salary)
Vesting for
minimum
performance
(% of maximum)
End of
performance
period
50%1
50%1
50%1
25%2 26 November 2017
25%2 26 November 2017
25%2 26 November 2017
2. 2015 LTIP performance conditions are as outlined above for 2016 awards, except EPS performance range is 55.9 pence to 61.5 pence.
Executive directors’ pension arrangements
The current chief executive and the chief financial officer
receive a salary supplement in lieu of pension. For the
period ending 29 November 2015, this salary supplement
was equal to 31.6% of salary for James Lancaster, and 31%
for Jonathan Miller. The current chief operating officer
participates in the group’s defined contribution scheme for
which the company contributes 15% of salary. For the
period ending 27 November 2016, executive directors’
pensions will be unchanged.
Payments for loss of office
Martyn Aguss resigned from the company on 22 July 2014
and ceased to be an executive director effective 30 July
2014. In light of this, he was contractually entitled to receive
salary and benefits for the period of 12 months’ notice, for
which he has been on garden leave, as disclosed in last
year’s remuneration report. This totalled £259,263 in 2015,
including £198,975 in lieu of salary, £33,568 pension and
£26,721 benefits (comprising car allowance of £11,612,
fuel allowance of £5,425 and healthcare of £9,684).
Non-executive director fees
For the 2016 financial period, the base fee for non-
executive directors will remain at £45,000 p.a., with an
additional fee of £5,000 p.a. paid to the chairmen of
the remuneration and audit committees. Following the
appointment of Sharon Brown as interim chairman on
2 October 2015, the committee agreed a temporary
additional fee of £65,000 p.a. from 2 October 2015 for the
period she serves as interim chairman (actual amount to
be pro-rated).
65
Governance Distribution statement
The following chart shows for the current and preceding
financial period the actual expenditure and percentage
change in total remuneration paid to or receivable by
employees and distributions to shareholders.
2014 financial period
2015 financial period
-0.5%
£133m
£132m
+20%
£8.9m
£10.7m
Employee
remuneration
Distributions to
shareholders
The group paid an interim dividend of 3.4 pence per share
and the board has recommended a final dividend of
6.8 pence per share subject to approval by shareholders at
the annual general meeting, representing a total payment
of £10.7m for 2015. Distributions to shareholders for 2014
reflect the part-year from listing to 30 November 2014.
Statement of shareholder voting
The following table shows the results of the binding vote on
the remuneration policy and advisory vote on the 2014
annual report on remuneration at the 17 April 2015 annual
general meeting.
Remuneration report continued
Historical performance graph –
Value of £100 invested at listing (£)
110
100
90
80
70
60
50
40
30
20
10
0
McColl’s
FTSE All Share Index
FTSE All Share Food & Drug Retailers
Feb
2014
Jan
2015
Nov
2015
Payments to previous directors
Except for the above payments for loss of office, no further
payments were made to previous directors during the
financial period under review.
The information in this part of the annual report on
remuneration is not subject to audit.
Historical performance graph and chief executive single
figure of remuneration
The graph above shows the total shareholder return of the
group and the FTSE All Share Index and the FTSE All Share
Food & Drug Retailers Index since listing. The FTSE All Share
Index is chosen as it is a broad market index of which the
group is a member, and the FTSE All Share Food and Drug
Retailers Index is chosen to illustrate performance relative
to sector comparators.
James Lancaster
Single figure of remuneration (£000)
Annual bonus outcome (% of max)
LTIP vesting (% of max)
2013
2014
2015
834 3,199
0%
0%
n/a
n/a
840
0%
n/a
Increase in chief executive’s remuneration
The table below sets out the percentage increase in the
remuneration of the chief executive and the average
increase across all employees excluding the board
between the years 2014 and 2015.
Chief executive annual cash
2015
2014
Increase
Salary
Pension benefit
Taxable benefits
Annual variable
£594,224 £594,224
£187,776 £187,776
£55,635
Nil
£57,872
Nil
0.0%
0.0%
4.0%
0.0%
Average
increase
across all
employees
3.5%
0%
2.4%
0%
66 McColl’s Retail Group Annual Report and Accounts 2015
Remuneration policy
2014 annual report on remuneration
For
Against
Number
83.9m
83.9m
%
Number
98.2%
98.0%
1.5m
1.7m
%
1.8%
2.0%
Withheld
Number
0.24m
0.01m
Shareholder consultation
Given the strong support at the 2015 annual general meeting, and as no significant changes to the executive director
remuneration structure were considered for 2016, there was no formal consultation with shareholders. Whilst we received
strong support at the 2015 annual general meeting and no significant changes to the remuneration structure were
considered for 2016, we wrote to our top shareholders in early 2016 advising them how we intend to implement our
remuneration policy for the year ahead. As disclosed in last year’s report the committee also consulted with shareholders
in advance of the 2015 annual general meeting regarding the proposed remuneration policy for executive directors, and
the majority of shareholders consulted were broadly supportive of the proposals, as reflected in the voting outcome above.
Directors’ shareholdings and interest in shares
The executive directors each own significant shareholdings in the company. The committee sets shareholding guidelines
which require executive directors to maintain, over time, a personal shareholding in the company of at least equivalent
to one times salary.
Shares held
Options held
Owned
outright
Unvested
and subject
to deferral
Unvested
and
subject to
performance
Vested but
not exercised
Unvested
and subject
to continued
employment
Current
shareholding
(% of salary
/fee1)
Share-
holding
requirement
(% of salary
/fee)
Guideline
met?
11,399,500
11,399,500
1,183,792
–
–
–
200,751
111,894
93,243
31,413
17,471
10,471
n/a
n/a
n/a
n/a
n/a
n/a
–
–
–
n/a
n/a
n/a
–
–
–
2,724%
5,048%
609%
n/a
n/a
n/a
42%
22%
30%
100%
100%
100%
n/a
n/a
n/a
Yes
Yes
Yes
n/a
n/a
n/a
Director
Executive directors
James Lancaster2
Jonathan Miller2
David Thomas
Non-executive directors
John Coleman3
Sharon Brown
Georgina Harvey
1. Based on closing share price of £1.42 and prevailing salary or fees (including committee fees) on 29 November 2015.
2. The ordinary shares held by James Lancaster and Jonathan Miller include shares held beneficially via various individual holdings and holdings of connected persons.
3. John Coleman stepped down from the board on 2 October 2015. Shareholding and fees are as at this date.
There have been no changes in the directors’ interests in the shares issued or options granted by the company between the end of the period and the date of this report.
Approved by the remuneration committee and signed on its behalf:
Georgina Harvey
Chairman of the remuneration committee
67
Governance Remuneration report continued
Statement
of directors’
responsibilities
The directors are responsible for
preparing the annual report and the
financial statements in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the group financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and Article 4 of the IAS Regulation and have chosen
to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the
directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of
affairs of the company and of the profit or loss of the
company for that period.
In preparing the parent company financial statements,
the directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether applicable UK Accounting Standards
have been followed, subject to any material departures
disclosed and explained in the financial statements;
and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
company will continue in business.
In preparing the group financial statements, International
Accounting Standard 1 requires that directors:
• properly select and apply accounting policies;
• present information including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
• provide additional disclosures when compliance with
the specific requirements in IFRSs are insufficient to
enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance; and
• make an assessment of the company’s ability to
continue as a going concern.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
68 McColl’s Retail Group Annual Report and Accounts 2015
Directors’ responsibility statement
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
James Lancaster
Chief executive
1 March 2016
Jonathan Miller
Chief financial officer
1 March 2016
69
Governance Success with Subway
On 28 October 2015 our increasing
focus on food-to-go took a new turn
with the opening of our first Subway
franchise in our Tamworth petrol
forecourt store. We integrated it
neatly into our existing store and are
running it directly ourselves, like every
aspect of all our stores. It proved to
be an instant hit, generating strong
sales in its first week of operation.
Good news for our partner Subway,
and good news for us – so much so,
we are planning to introduce more
Subways into our stores over the
next few years. A great brand that
appeals to our neighbourhood
customers, particularly the 18-25 year
olds we are keen to encourage into
our stores – Subway is an exciting
addition to our fast-growing
food-to-go offer.
It’s a complementary
offer to what we
have in store.
Food-to-go is
the right way
for the future
James Lancaster,
Chief Executive
70 McColl’s Retail Group Annual Report and Accounts 2015
Governance
Delivering
the best
71
Independent auditor’s report to the members
of McColl’s Retail Group plc
Opinion on financial statements
of McColl’s Retail Group plc
Separate opinion in relation
to IFRSs as issued by the IASB
In our opinion:
• the financial statements give a true and fair view of the state of the group’s
and of the parent company’s affairs as at 29 November 2015 and of the
group’s profit for the 52 week period then ended;
• the group financial statements have been properly prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union;
• the parent company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice;
and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the group
financial statements, Article 4 of the IAS Regulation.
The financial statements comprise the consolidated income statement,
the consolidated statement of comprehensive income, the consolidated
and company balance sheets, the consolidated cash flow statement,
the consolidated statement of changes in equity and the related notes
1 to 31 for the consolidated financial statements and the related notes 1c
to 9c in the parent company financial statements. The financial reporting
framework that has been applied in the preparation of the group financial
statements is applicable law and IFRSs as adopted by the European Union.
The financial reporting framework that has been applied in the preparation
of the parent company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
As explained in note 1 to the group financial statements, in addition
to complying with its legal obligation to apply IFRSs as adopted by the
European Union, the group has also applied IFRSs as issued by the
International Accounting Standards Board (IASB).
In our opinion the group financial statements comply with IFRSs as issued
by the IASB.
72 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements Going concern and the directors’
assessment of the principal risks
that would threaten the solvency
or liquidity of the group
As required by the Listing Rules we have reviewed the directors’ statement
regarding the appropriateness of the going concern basis of accounting
contained within note 1 to the financial statements and the directors’
statement on the longer term viability of the group contained within the
directors’ report on page 40.
We have nothing material to add or draw attention to in relation to:
• the directors’ confirmation on page 68 that they have carried out a robust
assessment of the principal risks facing the group, including those that
would threaten its business model, future performance, solvency or liquidity;
• the disclosures on pages 30 – 31 that describe those risks and explain how
they are being managed or mitigated;
• the directors’ statement in note 1 to the financial statements about whether
they considered it appropriate to adopt the going concern basis
of accounting in preparing them and their identification of any material
uncertainties to the group’s ability to continue to do so over a period of at
least 12 months from the date of approval of the financial statements;
• the directors’ explanation on page 40 as to how they have assessed the
prospects of the group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the group will be able to continue
in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Independence
Our assessment of risks
of material misstatement
We agreed with the directors’ adoption of the going concern basis of
accounting and we did not identify any such material uncertainties. However,
because not all future events or conditions can be predicted, this statement
is not a guarantee as to the group’s ability to continue as a going concern.
We are required to comply with the Financial Reporting Council’s
Ethical Standards for Auditors and we confirm that we are independent
of the group and we have fulfilled our other ethical responsibilities
in accordance with those standards. We also confirm we have not provided
any of the prohibited non-audit services referred to in those standards.
The assessed risks of material misstatement described below are those that
had the greatest effect on our group audit strategy, the allocation of
resources in the audit and directing the efforts of the engagement team.
73
Financial statements Independent auditor’s report to the members
of McColl’s Retail Group plc continued
How the scope of our audit responded to the risk
Our audit procedures included, but were not limited to:
• Evaluating the design and implementation of controls in place over
supplier income and understanding of the commercial process via
meetings with the finance and trading teams and reviewing for new
or unusual agreements.
• For a statistical sample of supplier income agreements we understood
the contract terms and recalculated the expected supplier income
by comparing the amounts used in the calculations to actual purchases
in the year taken from system-generated reports for which we gained
assurance over their validity and completeness through IT controls testing.
• Performing analytical work on supplier income trends across suppliers and
product categories investigating any unexpected variances.
• Assessing the recoverability of a sample of accrued supplier income which
was evaluated by agreement to subsequent invoicing and cash receipts,
or in the cases where these have yet to be settled, performing alternative
procedures such as tracing to third party documentation.
• Inspecting a sample of post year-end credit notes for evidence of refunds
or of invoiced amounts not being valid.
For each of the property provisions:
• We evaluated the design and implementation of controls in place over
the provision calculations.
• We obtained management’s calculations and selected statistical samples
of individual properties where we recalculated the provision by testing
and challenging the inputs, assumptions and discount rate used and
corroborated to supporting external evidence including, but not limited
to, lease contracts and dilapidation schedules issued by landlords.
• We performed sensitivity analysis on the key inputs applied to assess
whether a reasonable fluctuation in these would change the provision
by a material level.
• We reviewed the list of branches that had been closed during the period
to assess the completeness of the provision.
Risk
Supplier income
Supplier income is generated
from a number of commercial
agreements with suppliers including
incentives, rebates and discounts.
This represents a deduction to cost
of sales which in the current year
was material to the group financial
statements. There are a large number
of individual arrangements which can
be complex in nature. Contracts span
the end of the reporting period
meaning that estimates and
judgements are necessary to
calculate the amounts receivable
under the terms of the contracts.
See cost of sales accounting policy
in note 2 to the financial statements.
Property provisions
The group has an extensive and
diverse property portfolio, including
both leasehold and freehold
property across the UK. As a result,
there are several technically complex
areas and judgemental aspects to
consider when accounting for
property and leases across the
group, including:
• provisions for closed branches
and onerous leases on vacant
or part vacant properties. These
represent future expenditure
comprising of the rental payable
under the lease agreement which
is not recoverable from sub-letting
the property and an estimate of
ongoing service costs; and
• provisions for dilapidations
expenses.
These provisions are £2.9m and
£1.5m respectively and they include
judgements around future cash
flows related to the properties and
the completeness of the related
provisions. See provisions
accounting policy in note 2
to the financial statements.
74 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements Risk
How the scope of our audit responded to the risk
Goodwill impairment
The goodwill value of £144m is
supported by forecasts of future cash
flows of the businesses. There are
inherent risks within these cash flow
forecasts due to the uncertainties as
a result of changing industry and
economic conditions and the
resulting judgements required. The
group holds a significant value of
goodwill which has been generated
through acquisitions of businesses,
individual and groups of stores.
See goodwill impairment accounting
policy in note 2 and note 12 to the
financial statements.
Revenue recognition
Revenue is generated through
transactions via the EPoS system
which are settled in cash or by credit
card. Results for each store are
reported weekly through branch
weekly returns. There are significant
manual adjustments between these
branch weekly returns and the
financial statements which could be
vulnerable to manipulation.
See revenue accounting policy in
note 2 to the financial statements.
We evaluated management’s goodwill impairment calculations and have
challenged their calculations by:
• Recalculating the discount rates applied to future cash flows, working
with our internal valuation specialists to assess the appropriateness of
the underlying calculations and assumptions; we have benchmarked
the resulting discount rates against other companies operating in the
retail sector.
• Comparing the assumed growth rates and forecasted cash flows against
recent trading activity, historic trends and our understanding of the future
prospects of the business to identify whether these scenarios could give rise
to further impairment, including challenging the completeness of costs in
forecasted cash flows.
• Performing sensitivity analysis on the inputs applied (including discount
rates and growth rates) to assess whether a reasonably possible change
in assumptions could result in an impairment.
For revenue recognition we:
• Have evaluated the design and implementation of controls around the
revenue cycle including using our IT specialist team to test the automated
controls over the EPoS system.
• Understood the nature of the adjustments between the branch weekly
returns and the financial statements and investigated and challenged a
sample of these, agreeing these back to appropriate supporting evidence.
Last year our report included stock provisioning which is not included in our report this year on the basis that we
no longer assess this as having a significant risk of material misstatement.
The description of risks above should be read in conjunction with the significant issues considered by the audit
committee discussed on pages 49 to 51.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
75
Financial statements Independent auditor’s report to the members
of McColl’s Retail Group plc continued
Our application of materiality
An overview of the scope
of our audit
Opinion on other matters prescribed
by the Companies Act 2006
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality
both in planning the scope of our audit work and in evaluating the results of
our work.
We determined materiality for the group to be £1,100,000 (2014: £994,870),
which is approximately 5.1% (2014: 5.2%) of adjusted profit before tax, and 0.9%
(2014: 0.9%) of equity. Profit before tax has been normalised by adjusting for
exceptional items (relating to restructuring costs of £625,000 as described in
note 5 to the financial statements). We believe this is an appropriate basis for
materiality as it reflects recurring performance.
We agreed with the audit committee that we would report to the committee all
audit differences in excess of £50,000 as well as differences below that threshold
that, in our view, warranted reporting on qualitative grounds. We also report to
the audit committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
The group’s business consists of a collection of retail stores and operates as a
single operating segment, entirely within the UK, as defined in note 4 to the
financial statements. The financial results of the group are aggregated at a
consolidated level without the need for consolidation adjustments to account
for eliminations between group statutory companies. Therefore we identify only
one reporting component being the group itself, which includes the parent
company audit (which we audit to a lower materiality level), on which we
perform our audit using a single audit team.
In our opinion:
• the part of the directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006; and
• the information given in the strategic report and the directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements.
Matters on which we are required to report by exception
Adequacy of explanations
received and accounting records
Directors’ remuneration
Corporate governance statement
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• we have not received all the information and explanations we require for our
audit; or
• adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters.
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors’ remuneration have not been made or the part
of the directors’ remuneration report to be audited is not in agreement with
the accounting records and returns. We have nothing to report arising from
these matters.
Under the Listing Rules we are also required to review the part of the corporate
governance statement relating to the company’s compliance with certain
provisions of the UK Corporate Governance Code. We have nothing to report
arising from our review.
76 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements Matters on which we are required to report by exception (continued)
Our duty to read other information
in the annual report
Respective responsibilities
of directors and auditor
Scope of the audit of the
financial statements
Under International Standards on Auditing (UK and Ireland), we are required
to report to you if, in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the group acquired in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
directors’ statement that they consider the annual report is fair, balanced and
understandable and whether the annual report appropriately discloses those
matters that we communicated to the audit committee which we consider
should have been disclosed. We confirm that we have not identified any such
inconsistencies or misleading statements.
As explained more fully in the directors’ responsibilities statement, the directors
are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). We also
comply with International Standard on Quality Control 1 (UK and Ireland).
Our audit methodology and tools aim to ensure that our quality control
procedures are effective, understood and applied. Our quality controls and
systems include our dedicated professional standards review team and
independent partner reviews.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members
those matters we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we
have formed.
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the accounting policies
are appropriate to the group’s and the parent company’s circumstances and
have been consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial
and non-financial information in the annual report to identify material
inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Sukhbinder Kooner (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
1 March 2016
77
Financial statements Consolidated income statement
52 week period ended 29 November 2015
Revenue
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Finance expense
Finance income
Net finance costs
Profit on ordinary activities
before taxation
Tax on profit on ordinary
activities
Profit on ordinary activities
after taxation
52 weeks ended 29 November 2015
53 weeks ended 30 November 2014
Before
exceptional
items
£’000
Exceptional
items
(note 5)
£’000
After
exceptional
items
£’000
Before
exceptional
items
£’000
Exceptional
items
(note 5)
£’000
After
exceptional
items
£’000
932,227
(704,693)
227,534
(226,882)
23,619
24,271
(2,700)
165
(2,535)
–
–
–
(625)
–
(625)
932,227
(704,693)
922,420
(699,647)
227,534
222,773
–
–
–
922,420
(699,647)
222,773
(227,507)
23,619
(223,045)
25,749
(10,187)
6,743
(233,232)
32,492
23,646
25,477
(3,444)
22,033
–
–
–
(2,700)
165
(2,535)
(6,351)
121
(6,230)
(3,166)
–
(3,166)
(9,517)
121
(9,396)
Notes
4
6
6
8
21,736
(625)
21,111
19,247
(6,610)
12,637
9
(5,141)
127
(5,014)
(4,018)
1,288
(2,730)
16,595
(498)
16,097
15,229
(5,322)
9,907
Earnings per share
11
15.9p
15.4p
15.6p
10.2p
Consolidated statement of comprehensive income
52 week period ended 29 November 2015
Profit for the period
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
16,097
9,907
Notes
Items of other comprehensive income that will not be reclassified to profit or loss:
Actuarial gain recognised on pension scheme
30
4,000
631
UK deferred tax attributed to actuarial gain:
Arising from the origination of and reversal of current and deferred
tax differences
Arising from changes in the tax rate
Other comprehensive income for the period
Total comprehensive income for the period
9
9
(720)
26
3,306
19,403
(138)
–
493
10,400
78 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements
Consolidated balance sheet
29 November 2015
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments
Pension scheme surplus
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Total current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Corporation tax
Liabilities associated with assets held for sale
Total current liabilities
Net current liabilities
Non-current liabilities
Borrowings
Other payables
Provisions
Deferred tax liabilities
Net pension liability
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Equity share capital
Share premium account
Retained earnings
29 November
2015
£’000
30 November
2014
£’000
Notes
12
12
13
14
30
16
17
18
13
19
23
13
21
20
23
24
30
26
26
144,013
1,903
64,361
18
9,806
220,101
51,311
28,538
14,531
5,550
99,930
137,112
2,039
63,063
18
6,504
208,736
45,757
30,117
11,396
–
87,270
320,031
296,006
(125,371)
(2,210)
(2,519)
(5,662)
(112,586)
(2,285)
(2,023)
–
(135,762)
(116,894)
(35,832)
(29,624)
(43,212)
(3,139)
(2,238)
(6,031)
(3,684)
(44,852)
(3,922)
(3,194)
(4,701)
(5,200)
(58,304)
(61,869)
(194,066)
(178,763)
125,965
117,243
105
47,836
78,024
105
47,836
69,302
125,965
117,243
These financial statements of McColl’s Retail Group plc, registered number 08783477, were approved and authorised
for issue by the board of directors on 1 March 2016.
Signed on behalf of the board of directors
Jonathan Miller
Director
79
Financial statements Consolidated statement of changes in equity
52 week period ended 29 November 2015
Called up
share capital
£’000
Share
premium
£’000
Own shares
£’000
Retained
earnings
£’000
Balance at 24 November 2013
Profit for the period
Credit for share-based payments
Dividends paid
Issue of share capital
Actuarial gain recognised in the pension scheme
Balance at 30 November 2014
Profit for the period
Actuarial gain recognised on pension scheme
Total comprehensive income for the period
Dividends paid
75
–
–
–
30
–
105
–
–
–
–
734
–
–
–
47,102
–
47,836
–
–
–
–
Balance at 29 November 2015
105
47,836
(45)
–
–
–
45
–
–
–
–
–
–
–
Consolidated cash flow statement
52 week period ended 29 November 2015
Total
£’000
55,914
9,907
5,532
(1,780)
47,177
493
55,150
9,907
5,532
(1,780)
–
493
69,302
117,243
16,097
3,306
19,403
(10,681)
16,097
3,306
19,403
(10,681)
78,024
125,965
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
43,522
34,615
Notes
28
15
28
10
8
(17,593)
7,940
(14,239)
165
(15,188)
11,317
(16,827)
121
(23,727)
(20,577)
(1,500)
(1,658)
–
(140)
–
(10,681)
(2,503)
(178)
(109,414)
(2,276)
46,000
(4,099)
49,802
(1,780)
(4,186)
(177)
(16,660)
(26,130)
3,135
11,396
14,531
(12,092)
23,488
11,396
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of businesses, net of cash acquired
Finance income
Net cash used in investing activities
Cash flows from financing activities
Repayment of loans
Repayment of hire purchase loans
New loans received
Issue costs
Proceeds on issue of shares
Dividends paid
Finance expense
Hire purchase interest paid
Net cash used in financing activities
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
80 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements Notes to the financial statements
52 week period ended 29 November 2015
1. Basis of preparation
The group financial statements for 2015 consolidate the financial statements of McColl’s Retail Group plc
(the “company”) and all its subsidiary undertakings (together, “the group”) drawn up to 29 November 2015.
The group’s accounting period covers the 52 weeks ended 29 November 2015. The comparative period covered
the 53 weeks ended 30 November 2014. Acquisitions are accounted for under the acquisition method of accounting.
The group financial statements have been prepared 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 group’s going concern position is set
out in the directors’ report section on page 39.
The consolidated financial information is presented in sterling, the group’s functional currency, and has been
rounded to the nearest thousand (£’000).
The preparation of financial information in compliance with adopted IFRS requires the use of certain critical
judgements, estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial information and the reported amounts of revenues and expenses during the reporting period. It also
requires group management to exercise judgement in applying the group’s accounting policies.
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. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial information are disclosed in note 3.
Basis of measurement
The consolidated financial information has been prepared on a historical cost basis, except for the following items
(refer to individual accounting policies for details):
• Derivative financial instruments – fair value through profit or loss; and
• Net defined benefit pension asset or liability – actuarial basis.
Basis of consolidation
The group financial statements incorporate the financial statements of the company and entities controlled by
the company (its subsidiaries) made up to 29 November 2015. Control is achieved where the company has the
power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the period are included in the consolidated Income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by the group. All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the
date of acquisition.
Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired, including separately
identifiable intangible assets, is recognised as goodwill. Any discount on acquisition, i.e., where the cost of acquisition
is below the fair values of the identifiable net assets acquired, is credited to the income statement in the period
of acquisition.
Adoption of new and revised standards
In the current financial period, the group has applied for the first time:
IFRS 2 ‘Share-based Payment’
IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’. (See note 13 on pages 96 and 97 for full details.)
IFRS 10 ‘Consolidated Financial Statements’,
IFRS 11 ‘Joint Arrangements’
IFRS 12 ‘Disclosure of Interests in Other Entities’
IAS 27 (2011) ‘Separate Financial Statements’
IAS 28 (2011) ‘Investments in Associates and Joint Ventures’; and
Amendments to IFRS 10, IFRS 12 and IAS 27 ‘Investment Entities’
81
Financial statements Notes to the financial statements continued
52 week period ended 29 November 2015
1. Basis of preparation (continued)
New standards in issue but not yet effective
At the date of authorisation of these financial statements, the following standards and interpretations, which have not
been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been
adopted by the EU).
IFRS 9 ‘Financial Instruments’
IFRS 15 ‘Revenue’
IFRS 16 ‘Leases’
Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’
Amendments to IAS 36 ‘Recoverable Amount Disclosures for Non-Financial Assets’
Amendments to IAS 39 ‘Novation of Derivatives and Continuation of Hedge Accounting’
IFRIC Interpretation 21 ‘Levies’
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.
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.
2. Significant accounting policies
Revenue
Revenue represents the amounts receivable for goods and services sold through retail outlets in the period which
fall within the group’s principal activities, stated net of value added tax. Revenue is shown net of returns. Revenue
is recognised when the significant risks and rewards of goods and services have been passed to the buyer and can
be measured reliably.
Commission from the sale of lottery tickets and electronic phone top-ups is recognised net within turnover, when
transactions deriving commissions are completed, as the group acts as an agent.
In the opinion of the directors, the group engages in one principal area of activity, that of operators of convenience
and newsagent stores. Turnover is derived entirely from the United Kingdom.
Cost of sales
Cost of sales consists of all direct costs to the point of sale including warehouse and transportation costs. Supplier
incentives, rebates and discounts are recognised as a credit to cost of sales in the period in which the stock to which
the discounts apply is sold. The accrued value at the reporting date is included in prepayments and accrued income.
Other operating income
Post Office, rental income and ATM commissions are recognised in the consolidated income statement when the
services to which they relate are earned.
Goodwill
Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value of the group’s
share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is recognised as an
asset on the group’s balance sheet in the year in which it arises. Goodwill is not amortised but is tested for impairment
at least annually and is stated at cost less any provision for impairment. Any impairment is recognised in the income
statement and is not subsequently reversed.
For the purposes of impairment testing, goodwill is allocated to each of the group’s cash-generating units expected to
benefit from the synergies of the combination. Cash-generating units (CGU) to which goodwill has been allocated are
tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the
recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on
the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed
in a subsequent period.
82 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss
on disposal.
See note 12 on pages 94 to 95 for further details of cash-generating units and impairment testing.
Computer software within intangible assets
Computer software is stated at cost less accumulated amortisation and any provision for impairment. Externally
acquired computer software and software licences are capitalised and amortised on a straight-line basis over
their useful economic lives of 5 to 8 years and are included within other intangible assets. Costs relating to
development of computer software for internal use do not meet the recognition criteria of IAS 38 Intangible
Assets and are recognised as an expense as incurred.
Property, plant and equipment
Tangible fixed assets are stated at cost, net of accumulated depreciation and any provision for impairment.
Cost includes the original purchase price of the asset and the costs incurred attributable to bringing the asset
to its working condition for intended use.
Depreciation is provided so as to write off the cost of tangible fixed assets less their estimated residual values on
a straight-line basis over the expected useful economic lives of the assets concerned. Principal rates used for this
purpose are:
Land and buildings
Depreciation of land and buildings is charged as follows:
Freehold (including land where it is not separately identifiable)
Long leaseholds improvements
Land (if separately identifiable)
Short leaseholds improvements:
– Shops
– Other
Leasehold premiums
– 50 years
– 50 years
– nil
– 10 years or remaining lease term if less
– term of the lease
– the unexpired portion of the lease
Motor vehicles, fixtures and equipment
Depreciation of motor vehicles, fixtures and equipment is charged as follows:
– Motor vehicles
– Computer equipment
– Furniture and fittings
– 4 years
– between 5 and 8 years
– between 5 and 10 years
Gains and losses on disposal of any fixed assets are determined by comparing proceeds with the asset’s carrying
amount and are recognised within operating profit.
Fixed asset impairments
At each reporting date, the group reviews the carrying amounts of its property, plant and equipment and intangible
assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset, which is the higher of its fair value less costs to
sell and its value in use, is estimated in order to determine the extent of the impairment loss. Where the asset does not
generate cash flows that are independent from other assets, the group estimates the recoverable amount of the
cash-generating unit (CGU) to which the asset belongs. For property, plant and equipment and intangible assets
excluding goodwill, the CGU is deemed to be each trading store. Any resulting impairment is charged to
administrative expenses.
Assets classified as held for sale
Non-current assets are classified as held for sale only if available for immediate sale in their present condition, a sale
is highly probable and expected to be completed within one period from the date of classification. Such assets are
measured at the lower of the carrying amount and fair value less costs to sell and are not depreciated or amortised.
Leased assets
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of
ownership to the group. All other leases are classified as operating leases. For property leases, the land and building
elements are treated separately to determine the appropriate lease classification.
83
Financial statements 2. Significant accounting policies (continued)
Finance leases/hire purchase contracts
Assets funded through finance leases or hire purchase contracts are capitalised as property, plant and equipment
and depreciated over their estimated useful lives or the lease term, whichever is shorter. The amount capitalised is the
lower of the fair value of the asset or the present value of the minimum lease payments during the lease term at the
inception of the lease. The resulting lease obligations are included in liabilities net of finance charges. Finance costs
on finance leases are charged directly to the income statement so as to produce a constant periodic rate of interest.
Operating leases
Assets leased under operating leases are not recorded on the balance sheet. Rental payments are charged directly
to the income statement on a straight-line basis over the lease term.
Sale and leaseback
A sale and leaseback transaction is one where a vendor sells an asset and immediately reacquires the use of that
asset by entering into a lease with the buyer. The accounting treatment of the sale and leaseback depends upon the
substance of the transaction and whether or not the sale was made at the asset’s fair value. For sale and operating
leasebacks, generally the assets are sold at fair value, and accordingly the profit or loss from the sale is recognised
immediately in the income statement.
Following initial recognition, the lease treatment is consistent with those principles described above.
Lease incentives
Lease incentives primarily include up-front cash payments or rent-free periods. Lease incentives are capitalised and
spread over the period of the lease term.
Leases with predetermined fixed rental increases
Where a lease has predetermined fixed rental increases, these rental increases are accounted for on a straight-line
basis over the term of the lease.
Operating lease income
Operating lease income consists of rentals from sub-tenant agreements and is recognised as earned.
Inventories
Inventories consist of goods for resale and are stated at the lower of cost and net realisable value. Cost is calculated
using a retail method which for each category of stock reduces the net selling price by the attributable average gross
margin. Net realisable value is the price at which the stocks can be realised in the normal course of business, net of
selling and distribution costs. Provision is made for obsolete, slow-moving or defective items where appropriate.
Financial instruments
Financial assets
The group classifies its financial assets into one of the categories discussed below, depending on the purpose for
which the asset was acquired. The group has not classified any of its financial assets as held to maturity.
Receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise principally from the group’s trading operations (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest
rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on
the part of the counterparty or default or significant delay in payment) that the group will be unable to collect all
of the amounts due under the terms receivable, the amount of such a provision being the difference between the
net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.
For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with
the loss being recognised within administrative expenses in the consolidated income statement. On confirmation
that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the
associated provision.
The group’s receivables comprise trade and other receivables and cash and cash equivalents in the group
balance sheet.
84 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid
investments with original maturities of three months or less, and – for the purpose of the statement of cash flows – bank
overdrafts. When drawn, bank overdrafts are shown within borrowings in current liabilities in the group balance sheet.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or
where the group has transferred substantially all risks and rewards of ownership.
Financial liabilities
The group classifies its financial liabilities into one category:
Other financial liabilities
Other financial liabilities include:
• Interest-bearing bank loans and overdrafts – these are recorded initially at fair value, which is generally the proceeds
received, net of direct issue costs. Subsequently, these liabilities are held at amortised cost using the effective interest
method. Finance charges, including premiums payable on settlement or redemption and direct issue costs are
accounted for on an accrual basis in the income statement using the effective interest method and are added to
the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Where
existing debt is refinanced with the same lender it is treated as an extinguishment of the original debt and a new
financial liability if the modified terms are substantially different from the previous terms.
• Trade payables and other short term monetary liabilities which are initially recognised at fair value and subsequently
at amortised cost using the effective interest method.
Fair value estimation
The methods and assumptions applied in determining the fair values of financial assets and financial liabilities are
disclosed in note 25.
Derivative financial instruments
The only derivative financial instruments that the group enters into are interest rate swaps. The purpose of these
transactions is to manage the interest rate risk arising from the group’s operations and sources of finance.
The group does not hold derivative financial instruments for speculative purposes.
All derivative financial instruments are initially measured at fair value on the contract date and are also measured at
fair value at subsequent reporting dates.
Changes in the fair value of derivative financial instruments, including interest rate swaps (unless qualifying as cash
flow hedge accounting) are recognised in the income statement as finance income or costs as they arise.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the
asset and settle the liability simultaneously.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
Share-based payment arrangements
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting period, based on the group’s estimate
of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting
period, the group revises its estimate of the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognised in the profit and loss account.
85
Financial statements 2. Significant accounting policies (continued)
Taxation
Current taxation
Current tax is provided at amounts expected to be paid using the tax rates and laws that have been enacted or
substantively enacted at the balance sheet date. Current tax is charged or credited to the income statement, except
when it relates to items charged to equity or other comprehensive income, in which case the current tax is also dealt
with in equity or other comprehensive income respectively.
Deferred taxation
Deferred tax is accounted for on the basis of temporary differences arising from differences between the tax base and
accounting base of assets and liabilities.
Deferred tax is recognised for all temporary differences, except to the extent where a deferred tax liability arises from
the initial recognition of goodwill or from the initial recognition of an asset or a liability in a transaction that is not a
business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. It is
determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date
and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability
is settled.
Deferred tax assets are recognised only to the extent that the directors consider that, on the basis of all available
evidence, it is probable that there will be suitable future taxable profits from which the future reversal of the underlying
differences can be deducted.
Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited
directly to equity or other comprehensive income, in which case the deferred tax is also dealt with in equity or other
comprehensive income respectively.
Provisions
The group recognises provisions for liabilities of uncertain timing or amounts, including those for onerous leases,
leasehold dilapidations and legal disputes. Provisions are recognised when there is a present legal or constructive
obligation as a result of a past event, for which it is probable that an outflow of economic benefit will be required to
settle the obligation, and where the amount of the obligation can be reliably estimated. Provisions are measured at
the present value of the best estimate of expenditures expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognised as interest expense.
Onerous contracts/leases
Provisions for onerous leases, measured net of expected sub-let rental income, are recognised when the leased
property becomes vacant and is no longer used in the operations of the business.
Dilapidations
Provisions for dilapidations and similar contractual property costs are recognised on a lease-by-lease basis when the
need for expenditure has been identified, being the point at which the likely expenditure can be reliably estimated.
Pensions
The group operates two defined benefit pension schemes in addition to several defined contribution schemes,
which require contributions to be made to separately administered funds.
Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the income statement in the year to which
they relate.
86 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Defined benefit schemes
Defined benefit scheme surpluses and deficits are measured at:
• The fair value of plan assets at the reporting date; less
• Scheme liabilities calculated using the projected unit credit method discounted to its present value using yields
available on high quality corporate bonds that have maturity dates approximating to the terms of the liabilities; plus
• Unrecognised past service costs; less
• The effect of minimum funding requirements agreed with scheme trustees.
A surplus is recognised where the group has an unconditional right to the economic benefits in the form of future
contribution reductions or refunds.
Any difference between the expected return on assets and that actually achieved, and any changes in the liabilities
over the year due to changes in assumptions or experience within the scheme, are recognised in other
comprehensive income in the period in which they arise.
Costs are recognised separately as operating and finance costs in the income statement. Operating costs comprise
the current service cost, any income or expense on settlements or curtailments and past service costs where the
benefits have vested.
Past service costs are recognised directly in income unless the changes to the pension scheme are conditional on
the employees remaining in service for a specified period of time. In this case, the past service costs are amortised
on a straight-line basis over the vesting period.
Finance items comprise the interest on scheme liabilities and the expected return on scheme assets.
Further information on pensions is disclosed in note 30.
3. Critical accounting judgements and key sources of estimation uncertainty
In the application of the group’s accounting policies, which are described in note 2, the directors are required to
make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately
below), that the directors have made in the process of applying the group’s accounting policies and that have
the most significant effect on the amounts recognised in financial statements.
Supplier income
Supplier income is generated from commercial agreements with suppliers including incentives, rebates and
discounts. Agreements are typically for the calendar year so are not concurrent with the financial reporting period.
Judgement is required as to the level of income which should be accrued for in relation to achieving pre-set trading
targets in the final month of the calendar year. Changes in the assumptions used would not have a significant effect
on the group statement of comprehensive income.
Cash-generating units (CGUs)
The group determines CGUs for the purpose of goodwill impairment based on the way it manages the business.
Judgement is required to ensure this assessment is appropriate and in line with IAS 36. This is expanded on in
note 12 on pages 94 and 95.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are discussed below.
87
Financial statements 3. Critical accounting judgements and key sources of estimation uncertainty (continued)
Goodwill impairment
The group is required to test, on an annual basis, whether goodwill has suffered any impairment based on the
recoverable amount of its cash-generating units (CGUs). The recoverable amount is determined based on value in
use calculations. The use of this method requires the estimation of future cash flows and the determination of a pre-tax
discount rate in order to calculate the present value of the cash flows. More information including carrying values is
included in note 12 on pages 94 to 95.
Impairment of tangible and intangible assets
Financial and non-financial assets are subject to impairment reviews based on whether current or future events and
circumstances suggest that their recoverable amount may be less than their carrying value.
Recoverable amount is based on the higher of the value in use and fair value less costs to sell. Value in use is
calculated from expected future cash flows using suitable discount rates and includes management assumptions and
estimates of future performance. Fair values for individual trading stores are based on a multiple of its average weekly
sales performance.
Details of the accounting policy on the impairment of tangible and intangible assets, excluding goodwill, are provided
in note 2 on page 83.
Pensions
The costs, assets and liabilities of the defined benefit pension schemes operated by the group are determined using
methods relying on actuarial estimates and assumptions, including rates of increase in pensionable salaries and
pensions, expected returns on scheme assets, life expectancies and discount rates. Details of the key assumptions
are set out in note 30. The group takes advice from independent actuaries relating to the appropriateness of the
assumptions and the recognition of any surplus. Changes in the assumptions used may have a significant effect
on the group statement of comprehensive income and the group balance sheet.
Provisions
Provisions have been made for onerous leases and dilapidations. These provisions are estimates, in particular the
assumptions relating to market rents and vacant periods, and the actual costs and timing of future cash flows are
dependent on future events. Any difference between expectations and the actual future liability will be accounted
for in the period when such determination is made. Details of provisions are set out in note 23.
4. 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.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker, as required by IFRS 8. 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
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
932,227
922,420
2,693
20,926
23,619
3,253
29,239
32,492
165
121
956,011
955,033
Sale of goods
Property rental income (note 6)
Other operating income (note 6)
Investment revenue (note 8)
Total revenue as defined in IAS 18
88 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 5. Exceptional items
Due to their significance or one-off nature, certain items have been classified as exceptional as follows:
Redundancy and restructuring costs1
Costs associated with IPO included within administrative expenses2
Share-based payments included within administrative expenses3
Property related costs included within administrative expenses4
Post office costs included within administrative expenses5
Post office income included within other operating income5
Unamortised financing costs included in finance expense6
Tax effect7
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
625
–
–
–
–
–
–
–
625
(127)
498
–
1,823
5,532
2,440
392
(6,743)
3,444
3,166
6,610
(1,288)
5,322
1 Redundancy and restructuring costs
During the 52 weeks ended 29 November 2015 one-off employee related costs associated with the field operations
and head office re-structure totalled £625,000.
2 Costs associated with IPO
During the 53 weeks ended 30 November 2014 one-off IPO costs of £4,539,000 were incurred of which £1,823,000
was charged to the income statement and £2,716,000 was charged to the share premium account as being
directly related to the issue of new shares.
3 Share-based payments
During the 53 weeks ended 30 November 2014 share-based payments totalling £5,532,000 were made by way
of an allocation of shares to employees prior to the IPO for nil consideration.
4 Property related costs
During the 53 week period ended 30 November 2014 a provision of £2,440,000 was made for the onerous lease
relating to the group’s former head office. The provision was made to recognise an expected shortfall in rental
income compared with rent payable and other property related costs.
5 Post office income
During the 53 weeks ended 30 November 2014 the group received £6,743,000 income from the Post Office in relation
to an agreement to convert 191 of the group’s existing post offices to a new local format. The group incurred costs of
£392,000 associated with the conversions.
6 Unamoritised financing costs included in finance expenses
On 4 March 2014 the group completed an early debt refinancing which resulted in the write-off of £3,166,000 of
unamortised financing costs.
7 Tax effect of exceptional items
The tax effect of the exceptional items is a credit of £127,000 (2014: credit £1,288,000).
89
Financial statements 6. Operating profit
a) Operating profit is stated after charging/(crediting):
Depreciation of property, plant and equipment (note 13)
Amortisation of software (note 12)
Impairment of property, plant and equipment/(reversal of impairment losses) (note 13)
Goodwill impairment (gain)/losses (note 12)
Goodwill impairment correction to prior period (note 12)
Cost of inventories recognised as an expense
Write-downs of inventories recognised as an expense
Operating lease payments
– property
– plant and machinery
The analysis of the auditors remuneration is as follows:
Audit of company
Audit of subsidiaries
Total audit
Audit related assurance services (including interim review)
Other assurance services
Total assurance services
Tax compliance services
Tax advisory services
Total services relating to taxation
Services related to corporate finance transactions not covered above1
Other non-audit services not covered above
Total other non-audit services
Total non-audit services
Total fees
1. Corporate finance transactions were one-off and subject to a tendering process.
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
12,922
756
180
(322)
–
723,489
7,810
11,989
687
519
382
(631)
721,432
6,624
31,206
–
30,642
9
20
154
174
37
–
37
59
–
59
150
28
178
274
448
20
154
174
48
–
48
50
51
101
175
36
211
360
534
90 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 b) Other operating income:
Other operating income
Rental income
Profit on disposal of fixed assets
Negative goodwill on acquisitions
Total other operating income
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
20,489
2,693
437
–
23,619
28,074
3,253
1,099
66
32,492
Other operating income includes income from the operation of sub-post offices, rental income and commission
earned from ATMs.
c) Adjusted EBITDA
Operating profit before exceptional items
Depreciation and amortisation
Impairment of property, plant and equipment (note 13)
Goodwill impairment losses (note 12)
Goodwill impairment correction to prior period (note 12)
Profit on disposal of fixed assets
Negative goodwill on acquisitions
7. Employee benefits
Wages and salaries
Social security costs
Other pension costs
The employee benefits cost excludes directors’ emoluments.
Average number of employees:
Retailing
Central administration
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
24,271
13,678
180
–
–
(437)
–
37,692
25,477
12,676
519
382
(631)
(1,099)
(66)
37,258
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
122,144
5,461
1,028
128,633
117,753
5,196
1,001
123,950
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
18,638
318
18,956
18,360
325
18,685
91
Financial statements 8. Net finance costs
Finance expense
Bank loans and overdrafts
Hire purchase interest
Unwinding of the discount included in provisions
Amortisation of issue costs
Loss on fair value movement on interest rate swap
Other
Total finance expense
Finance income
Interest receivable
Other
Total finance income
Net finance costs
9. Taxation
Income statement
Current tax:
Current tax on profit for the period
Adjustments in respect of prior periods
Deferred tax:
Origination and reversal of temporary differences
Associated with pension deficit
Arising from change in tax rate
Adjustments in respect of prior periods
Income tax expense for the period
Other comprehensive income
Deferred tax in respect of actuarial valuation of retirement benefits
Arising from change in rate of tax
92 McColl’s Retail Group Annual Report and Accounts 2015
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
(2,192)
(178)
(19)
(296)
–
(15)
(2,700)
165
–
165
(5,280)
(177)
(187)
(3,820)
(34)
(19)
(9,517)
112
9
121
(2,535)
(9,396)
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
4,556
10
4,566
3,400
(59)
3,341
(13)
163
(444)
742
448
(715)
178
–
(74)
(611)
5,014
2,730
720
(26)
694
138
–
138
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 The tax charge for the period can be reconciled to accounting profit as follows:
Profit before tax
Profit before tax multiplied by the blended applicable corporation tax rate for 2015 of 20.34%
(2014: 21.67%)
Disallowed expenses and non-taxable income
Adjustments in respect of prior years
Arising from change in rate of tax
Total tax expense
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
21,111
12,637
4,294
412
752
(444)
5,014
2,738
125
(133)
–
2,730
Included within the adjustments in respect of prior periods is a one-off prior period adjustment for deferred tax
of £712,000. Excluding the one-off adjustment the effective tax rate is 20.4%.
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 and 18% 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.
10. Dividends
The board has recommended a final dividend of 6.8 pence per share (2014: 6.8 pence), totalling £7,120,000 (2014:
£7,120,000), subject to shareholder approval at the annual general meeting to be held on 19 April 2016. The final
dividend will be paid on 31 May 2016 to those shareholders on the register at the close of business on 29 April 2016.
The payment of this dividend will not have any tax consequences for the group. The interim dividend, declared and
paid, was 3.4 pence per share (2014: 1.7 pence), totalling £3,560,000 (2014: £1,780,000).
93
Financial statements 11. Earnings per share
Basic weighted average number of shares
Dilutive effect of warrant shares issued
Diluted weighted average number of shares
Profit attributable to ordinary shareholders (£’000)
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share:
Profit attributable to ordinary shareholders
Exceptional items (note 5)
Tax effect of adjustments (note 5)
Profit after tax and before exceptional items
Prior year deferred tax adjustment (note 9)
Adjusted profit after tax and before exceptional items
Adjusted earnings per share (pre tax adjustment)
Adjusted earnings per share (post tax adjustment)
12. Intangible assets
Cost
At 24 November 2013
Additions
Deferred tax asset movement
Disposals
At 30 November 2014
Additions
Fair value adjustment to goodwill
Disposals
Transferred to assets held for sale
At 29 November 2015
Accumulated amortisation and impairment
At 24 November 2013
Provision
Impairment losses
Correction to prior year impairment charge
Disposals
At 30 November 2014
Provision
Impairment of disposals
Transferred to assets held for sale
At 29 November 2015
Net book value
As of 30 November 2014
As of 29 November 2015
94 McColl’s Retail Group Annual Report and Accounts 2015
52 weeks
ended
29 November
2015
53 weeks
ended
30 November
2014
104,712,042
–
97,432,203
356,129
104,712,042
97,788,332
16,097
9,907
15.4p
15.4p
10.2p
10.1p
16,097
625
(127)
16,595
712
9,907
6,610
(1,288)
15,229
–
17,307
15,229
15.9p
16.5p
15.6p
–
Goodwill
£’000
Total
£’000
135,935
6,235
56
(558)
141,668
8,711
(1,276)
(349)
(1,223)
140,437
6,820
56
(559)
146,754
9,331
(1,276)
(349)
(1,223)
Other
intangible
assets
£’000
4,502
585
–
(1)
5,086
620
–
–
–
5,706
147,531
153,237
2,361
687
–
–
(1)
3,047
756
–
–
5,582
–
382
(631)
(777)
4,556
–
(322)
(716)
7,943
687
382
(631)
(778)
7,603
756
(322)
(716)
3,803
3,518
7,321
2,039
137,112
139,151
1,903
144,013
145,916
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 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:
CGU1
CGU2
CGU3
Transferred to assets held for sale
The three groups are as follows:
29 November
2015
£’000
30 November
2014
£’000
24 November
2013
£’000
95,628
6,500
42,392
(507)
95,476
6,525
35,111
–
94,725
6,369
29,259
–
144,013
137,112
130,353
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 2016 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 11.9% (2014: 10.0%).
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 there are no reasonably possible changes
in any key assumptions that would cause the carrying amount of goodwill to exceed the value in use.
95
Financial statements 13. Property, plant and equipment
Cost
At 24 November 2013
Acquisitions
Additions
Disposals
At 30 November 2014
Acquisitions
Additions
Transferred to assets held for sale
Disposals
At 29 November 2015
Accumulated depreciation
At 24 November 2013
Charge
Impairment losses
Disposals
At 30 November 2014
Charge
Impairment losses
Transferred to assets held for sale
Disposals
At 29 November 2015
Net book value
As of 30 November 2014
As of 29 November 2015
Land and
buildings
£’000
Plant and
machinery
£’000
Total
£’000
20,386
8,100
6,625
(10,186)
24,925
4,731
5,699
(3,655)
(5,285)
66,203
1,146
8,760
(895)
75,214
936
9,970
–
(1,591)
86,589
9,246
15,385
(11,081)
100,139
5,667
15,669
(3,655)
(6,876)
26,415
84,529
110,944
3,973
2,553
–
(44)
6,482
3,162
–
(2,277)
(52)
21,239
9,436
519
(600)
30,594
9,760
180
–
(1,266)
25,212
11,989
519
(644)
37,076
12,922
180
(2,277)
(1,318)
7,315
39,268
46,583
18,443
44,620
63,063
19,100
45,261
64,361
The net book value of tangible fixed assets includes an amount of £3,421,000 (2014: £3,947,000) in respect of assets
held under finance leases and hire purchase contracts. The related depreciation charge on these assets for the
period was £1,668,000 (2014: £1,726,000). They all relate to plant and machinery. See note 2 on page 83 for details
of impairment review and assumptions.
Assets held for sale
Following a review of its portfolio of stores, the group has decided to sell 100 of its newsagents (subsequently 3 have
been withdrawn from sale). We continue to focus on the strategy of developing and expanding the convenience
business and have identified these stores as not being part of our long term planning.
There are now 97 stores involved which are being marketed individually to purchasers with the fair value of the stores
ranging between £10,000 and £80,000. It is expected that in total these stores will be sold for no less than their net
asset value and their closure is expected to be earnings neutral in 2016.
The group have 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 97 individual assets held for sale, these have been disclosed
in aggregate.
96 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Assets relating to the properties for sale
Liabilities associated with assets held for sale
Goodwill (note 12)
Tangible fixed assets (note 13)
Inventory (note 16)
Trade and other receivables (note 17)
Assets of the businesses classified as held for sale
Trade and other payables (note 19)
Net assets of the businesses classified as held for sale
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
5,550
(5,662)
–
–
52 weeks
ended
29 November
2015
£’000
507
1,378
2,192
1,473
5,550
5,662
(112)
97
Financial statements
14. Investments
Investments at cost
29 November
2015
£’000
30 November
2014
£’000
18
18
The following information relates to all subsidiary undertakings of the group during the period.
*100% held by a subsidiary undertaking shown below.
Name of company
A Harris Limited *
Birrell Limited *
Bracklands Limited *
Charnwait Management Limited *
Clark Retail Limited*
Dillons Stores Limited *
Farthingmist Limited *
Forbouys Limited *
Forbouys Services Limited*
Hargreaves Vending Limited *
ISS Limited *
Key Food Stores Limited *
Lavells Limited *
Lewis Meeson Limited *
Marshell Group Limited *
Martin CTN Group Limited *
Martin McColl Limited *
Martin McColl Group Limited *
Martin McColl Retail Group Limited
Martin Retail Group Limited *
Martin the Newsagent Limited *
NSS Newsagents Limited *
NSS Newsagents Retail Limited *
Price Smasher Limited *
RS McColl (UK) Limited *
Smile Holdings Limited *
Smile Property Limited *
Smile Stores Limited *
Thistledove Limited *
TM Coffee Limited *
TM Group Limited *
TM Group Holdings Limited *
TM Pension Trustees Limited *
TM Retail Limited *
TM Vending Limited *
Tog Limited *
Trent Leisure Limited *
Trimley Stores Limited *
Country of registration
(or incorporation)
and operation
Scotland
Scotland
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Holding
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Proportion
of voting
rights and
shares held
Nature
of business
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Dormant
Dormant
Property Co
Retailing
Retailing
Retailing
Dormant
Dormant
Dormant
Corporate activities
Dormant
Intermediate Holding Co
Dormant
Dormant
Corporate activities
Dormant
Retailing
Dormant
Intermediate Holding Co
Retailing
Dormant
Dormant
Dormant
Intermediate Holding Co
Dormant
Intermediate Holding Co
Dormant
Retailing
Intermediate Holding Co
Dormant
Dormant
Predecessor Holding Co
Dormant
Dormant
Corporate Activities
Intermediate Holding Co
Dormant
Dormant
98 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 15. Business combinations
During the period, the group made 60 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:
Tangible fixed assets (note 13)
Inventory
Goodwill (net of negative goodwill) (note 12)
Deferred tax liability
Deferred tax asset
Cash consideration
16. Inventories
Goods for resale
Transferred to assets held for sale (note 13)
17. Trade and other receivables
Trade receivables
Supplier rebates
Prepayments and accrued income
Other receivables
Transferred to assets held for sale (note 13)
Ageing of past due but not impaired receivables
Trade receivables
31 – 60 days
61 – 90 days
91 – 120 days
Supplier rebates receivable
31 – 60 days
61 – 90 days
91 – 120 days
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
5,667
1,169
7,591
(260)
72
9,246
1,412
6,225
(557)
501
14,239
16,827
29 November
2015
£’000
30 November
2014
£’000
53,503
(2,192)
51,311
45,757
–
45,757
29 November
2015
£’000
30 November
2014
£’000
2,971
17,148
5,207
4,685
(1,473)
28,538
3,060
16,705
5,561
4,791
–
30,117
29 November
2015
£’000
30 November
2014
£’000
392
151
397
940
1,444
150
19
1,613
424
142
323
889
1,483
231
186
1,900
99
Financial statements 18. Cash and cash equivalents
Cash and cash equivalents
19. Trade and other payables
Trade payables
Other taxation and social security
Other payables
Amounts due under hire purchase obligations
Accrued interest
Accruals
Deferred income
Holiday pay accrual
Transferred to assets held for sale (note 13)
29 November
2015
£’000
30 November
2014
£’000
14,531
11,396
29 November
2015
£’000
30 November
2014
£’000
99,206
4,888
2,417
1,137
193
19,894
2,368
930
(5,662)
85,348
3,494
3,125
2,185
213
14,323
2,987
911
–
125,371
112,586
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
For most suppliers no interest is charged on the trade payables for the first 30 days from the date of the invoice.
Thereafter, interest is charged on the outstanding balances at various interest rates. The group has financial risk
management policies in place to ensure that all payables are paid within the pre-agreed credit terms.
The directors consider that the carrying amount of trade payables approximates to their fair value.
20. Non-current liabilities – other payables
Other payables
Amounts due under hire purchase obligations
21. Borrowings
Details of loans and credit facilities are as follows:
Amounts falling due:
In more than two years but not more than five years
Total borrowings
Less: unamortised issue costs
Less: current borrowings (net of amortised issue costs)
Non-current borrowings
29 November
2015
£’000
30 November
2014
£’000
1,382
1,757
3,139
2,198
1,724
3,922
29 November
2015
£’000
30 November
2014
£’000
44,500
46,000
44,500
(1,288)
43,212
–
43,212
46,000
(1,148)
44,852
–
44,852
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.
On 15 August 2015 the group completed and signed an amended £85m revolving credit facility and a £15m
accordion facility for the group. This facility amends the group’s existing £85m plus £15m accordion facilities which
were due to expire in July 2018. The new facility will be in place until August 2020 at margins of 1.5% above LIBOR.
The current facility drawn as at 29 November 2015 is £44,500,000.
100 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Details of loans and hire purchase obligations repayable within 2 to 5 years are as follows:
Revolving facility available until 31 August 2020 at 1.5% above LIBOR
Hire purchase obligations
22. Net debt
Cash at bank and in hand
Loans due:
In more than two years but not more than five years
Total borrowings
Less: unamortised issue costs
Amounts due under hire purchase obligations
Net debt
23. Provisions
At 30 November 2014
Utilised during the period
Unwinding of the discount included in provisions
Additional provision
Released
At 29 November 2015
Included in current liabilities
Included in non-current liabilities
29 November
2015
£’000
30 November
2014
£’000
44,500
1,127
45,627
46,000
836
46,836
29 November
2015
£’000
30 November
2014
£’000
14,531
11,396
(44,500)
(46,000)
(44,500)
1,288
(43,212)
(2,894)
(46,000)
1,148
(44,852)
(3,909)
(46,106)
(48,761)
(31,575)
(37,365)
Dilapidations
£’000
1,474
(348)
5
792
(410)
Onerous
contracts
£’000
4,005
(511)
14
145
(718)
1,513
2,935
1,513
–
1,513
697
2,238
2,935
Total
£’000
5,479
(859)
19
937
(1,128)
4,448
2,210
2,238
4,448
Dilapidations
The provision includes estimates for certain properties for which the extent of the dilapidation has not been
established. It is expected that most of these costs will be incurred in the next 5 years.
Onerous contracts
A provision is recognised for the rent due less estimated rent receivable until the anticipated disposal of a vacant
property. The periods of vacant property commitments range from 1 to 10 years. In addition, provision has been made
for excess rent over market rent on one leasehold property as part of fair value assessments made on acquisition.
Judgement is used for certain properties in respect of how long the property will remain vacant. The level of uncertainty
associated with the use of estimates is not considered to be significant.
101
Financial statements 24. Deferred tax liabilities
Deferred tax movements are as follows:
At 24 November 2013
(54)
1,709
4,600
(832)
–
(306)
5,117
Pension
deficit/
surplus
£’000
Fixed
assets
£’000
Rolled-over
capital
gains
£’000
Goodwill
£’000
Freehold
property
£’000
Other
temporary
differences
£’000
Total
£’000
Arising on acquisition
Charge/(credit) to income
statement (note 9)
Charge/(credit) to other
comprehensive income (note 9)
At 30 November 2014
Arising on acquisition (note 15)
Charge/(credit) to income
statement (note 9)
Charge/(credit) to other
comprehensive income (note 9)
At 29 November 2015
–
–
178
(355)
–
138
262
–
–
16
–
(501)
557
86
–
(557)
–
–
1,354
4,616
(1,247)
–
–
(72)
260
163
(527)
(428)
1,410
(260)
694
1,119
–
827
–
4,188
–
91
–
–
–
22
–
56
(610)
138
(284)
4,701
–
90
–
188
448
694
(194)
6,031
Deferred tax has arisen owing to accelerated capital allowances, business combinations, pension deficit/surplus and
other temporary differences and also in respect of the taxable gains arising on the disposal of intangible fixed assets
where the gains have been rolled into replacement assets.
Deferred tax at 29 November 2015 has been measured at 18% (2014: 20%) being the tax rate substantively enacted
at the balance sheet date expected to be effective for future periods.
25. Financial instruments and risk management
Derivatives and other financial instruments
The group’s principal financial instruments comprise loans, cash and short term deposits together with interest rate
derivatives. The main purpose of these financial instruments is to raise finance for the group’s operations. The group
has various other financial instruments such as trade and other receivables and trade and other payables that arise
directly from its operations.
The main risks arising from the group’s financial instruments are interest rate risk and liquidity risk. The board reviews
and agrees policies for managing each of these risks and they are summarised below. There have been no substantive
changes in the group’s exposure to financial instrument risks or its objectives, policies and processes for managing and
measuring those risks during the periods in this report unless otherwise stated.
On 15 August 2015 the group completed and signed an amended £85m revolving credit facility and a £15m
accordion facility for the group. This facility amends the group’s existing £85m plus £15m accordion facilities which
were due to expire in July 2018. The new facility will be in place until August 2020 at margins of 1.5% above LIBOR.
The current facility drawn as at 29 November 2015 is £44,500,000.
Interest rate risk
The group is exposed to interest rate risk from its use of interest bearing financial instruments. This is a market risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates. There are no
financial instruments held at level 1, 2 or 3 fair value.
Floating rate financial liabilities on which interest is paid bear interest at rates based on 1 month LIBOR. It is the
group’s policy to consider the need for interest rate hedging on an ongoing basis. No interest rate hedging is
currently in place.
102 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Interest rate risk profile of financial liabilities and assets
The interest rate profile of the financial liabilities of the group as at 29 November 2015 was as follows:
Fixed rate
financial
liabilities
£’000
Floating rate
financial
liabilities
£’000
Financial
liabilities on
which no
interest
is paid
£’000
Total
£’000
Financial liabilities
2,628
44,766
126,584
173,978
The floating rate financial liabilities comprise a sterling denominated working capital facility and hire purchase
borrowings.
The interest rate profile of the financial liabilities of the group as at 30 November 2014 was as follows:
Financial liabilities
2,405
47,504
109,105
159,014
The interest rate profile of the financial assets of the group as at 29 November 2015 was as follows:
Fixed rate
financial
liabilities
£’000
Floating rate
financial
liabilities
£’000
Financial
liabilities on
which no
interest
is paid
£’000
Total
£’000
Financial assets
Floating rate
financial
assets
£’000
Financial
assets on
which no
interest
is paid
£’000
Total
£’000
–
38,641
38,641
The interest rate profile of the financial assets of the group as at 30 November 2014 was as follows:
Financial assets
Floating rate
financial
assets
£’000
Financial
assets on
which no
interest
is paid
£’000
Total
£’000
–
35,970
35,970
If interest rates had been 0.5% higher during the period ended 29 November 2015, with all other variables held
constant, the post tax profit for the period would have been approximately £237,000 lower (2014: £282,000 lower)
as a result of higher interest expense.
Liquidity risk
Liquidity risk arises from the group’s management of working capital and the finance charges on its debt instruments
and repayments of principal. It is the risk that the group will encounter difficulty in meeting its financial obligations as
they fall due.
The group’s objective is to maintain a balance between continuity of funding and flexibility through the use of
overdrafts and credit facilities to ensure that it will always have sufficient cash to allow it to meet its liabilities when they
become due.
103
Financial statements 25. Financial instruments and risk management (continued)
Maturity of financial liabilities
The maturity profile of the group’s financial liabilities based on the remaining period at the balance sheet date to the
contractual maturity date, was as follows:
Up to 3 months or on demand
In 3 – 12 months
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years
29 November
2015
£’000
30 November
2014
£’000
125,486
852
1,289
46,351
–
107,485
1,607
1,591
48,331
–
173,978
159,014
The disclosures above are the contractual undiscounted cash flows and exclude unamortised finance costs.
Borrowing facilities
The group had certain borrowing facilities available to it for general working capital requirements of which
£44,500,000 had been drawn at 29 November 2015 (30 November 2014: £46,000,000).
Credit risk
Given the nature of the group’s operations, credit risk is not considered significant and arises mainly from cash
deposits held with banks and financial institutions which have a good credit rating. Credit risk also arises from trade
and other receivables which comprise amounts due from credit card institutions and rebates due from suppliers.
Set out below is a comparison by category of carrying values and fair values of all the group’s financial assets and
financial liabilities:
Financial liabilities
At amortised cost
Trade and other short term payables
Hire purchase borrowings
Long term borrowings
Long term payables
Financial assets
Other investments carried at cost
Classified as loans and receivables
Short term receivables
Cash and short term deposits
At 29 November 2015
At 30 November 2014
Carrying
value
£’000
Fair
value
£’000
Carrying
value
£’000
Fair
value
£’000
(125,202)
(2,894)
(44,500)
(1,382)
(125,202)
(2,894)
(44,500)
(1,382)
(106,907)
(3,909)
(46,000)
(2,198)
(106,907)
(3,909)
(46,000)
(2,198)
(173,978)
(173,978)
(159,014)
(159,014)
18
18
18
18
24,092
14,531
24,092
14,531
38,641
38,641
24,556
11,396
35,970
24,556
11,396
35,970
104 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Capital disclosures
The group’s objectives when maintaining capital are to safeguard the entity’s ability to continue as a going concern
and to provide an adequate return to shareholders. Capital comprises the group’s equity i.e. share capital including
share premium and retained earnings, excluding pension asset and liability.
The group’s net debt to capital ratio is as follows:
Net debt (as per note 22)
Total equity (as defined above)
Debt to capital ratio
26. Authorised, issued and fully paid share capital
Issued ordinary shares of £0.001 at 30 November 2014
Issued ordinary shares of £0.001 at 29 November 2015
29 November
2015
£’000
30 November
2014
£’000
31,575
37,365
120,486
115,939
0.3
0.3
Number
of shares
104,712,042
104,712,042
Share
capital
£’000
105
105
Share
premium
£’000
47,836
47,836
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.
27. Leases and commitments
Operating leases
The group leases various properties and equipment under non-cancellable operating leases. The terms of the property
leases vary, although they tend to be with rent reviews every 3 to 5 years and many have break clauses.
The total future value of minimum lease rentals payable is as follows:
Land and buildings
Within 1 year
Within 1 to 5 years
After 5 years
29 November
2015
£’000
30 November
2014
£’000
25,633
67,513
66,537
26,154
69,019
60,937
159,683
156,110
As set out in note 6 property rental income earned during the year was £2,693,000 (2014: £3,253,000). All operating
lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee
does not have an option to purchase the property at the expiry of the lease period.
At the balance sheet date, the group had contracted with tenants for the following future minimum lease payments:
Within 1 year
Within 1 to 5 years
After 5 years
29 November
2015
£’000
30 November
2014
£’000
442
994
339
1,775
631
1,238
518
2,387
105
Financial statements 27. Leases and commitments (continued)
Finance leases
The group acquires the majority of its motor vehicles and computer equipment under hire purchase agreements and
such assets are generally classified as finance leases.
Future lease payments are due as follows:
Minimum lease payments payable
Not later than one year
Later than one year and not later than five years
Less future interest
29 November
2015
£’000
30 November
2014
£’000
1,293
1,888
3,181
(287)
2,894
2,320
1,814
4,134
(225)
3,909
Capital commitments
The group has capital commitments of £275,000 as at 29 November 2015 (30 November 2014: £235,000).
28. Notes to the cash flow statement
Profit for the period
Income and expenses not affecting operating cash flows
Depreciation and amortisation
Impairment losses
Income tax
Finance expense
Finance income
Share-based payment charge
Profit on disposal of fixed assets
Negative goodwill
Changes in operating assets and liabilities (including assets held for sale)
Decrease in trade receivables
Decrease in other receivables
Increase in inventory
Increase/(decrease) in trade payables
Increase/(decrease) in other payables
Decrease in pensions
Increase in provisions
Cash generated by operations
Income taxes paid
Net cash provided by operating activities
52 weeks
ended
29 November
2015
£’000
53 weeks
ended
30 November
2014
£’000
16,097
9,907
13,678
180
5,014
2,700
(165)
–
(437)
–
37,067
89
15
(6,581)
13,857
4,649
(1,784)
280
47,592
(4,070)
43,522
12,676
270
2,730
9,517
(121)
5,532
(1,099)
(66)
39,346
53
2,669
(121)
(3,431)
(1,726)
(1,383)
1,635
37,042
(2,427)
34,615
106 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 Analysis of net debt
Cash and cash equivalent
Borrowings
Amounts due under hire purchase obligations
At
30 November
2014
£’000
11,396
(44,852)
(3,909)
(37,365)
Cash
flow
£’000
3,135
1,500
1,015
5,650
Other
non-cash
movements
£’000
At
29 November
2015
£’000
–
140
–
140
14,531
(43,212)
(2,894)
(31,575)
29. Contingent liabilities
The group did not have any material contingent liabilities at 29 November 2015 or 30 November 2014.
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.
30. Retirement benefit schemes
The group accounts for pensions in accordance with IAS 19 revised.
The group operates two defined benefit pension schemes in the UK, the TM Group pension scheme and the
TM pension plan, in addition to several defined contribution schemes which require contributions to be made
to separately administered funds. Pension costs for defined contribution schemes were £1,356,000 in 2015
(2014: £1,042,000).
The two defined benefit pension schemes are subject to the UK regulatory framework for pensions, including the
Scheme Specific Funding requirements. The schemes are operated under trust and, as such, the trustees of the
schemes are responsible for operating the schemes and they have a statutory responsibility to act in accordance
with the trust deed and rules, in the best interest of the beneficiaries of the schemes, and UK legislation (including
Trust law).
The nature of the schemes exposes the group to the risk of paying unanticipated additional contributions to the
schemes in times of adverse experience. The most financially significant risks are likely to be:
• Members living for longer than expected;
• Higher than expected actual inflation;
• Lower than expected investment returns; and
• The risk that movements in the value of the schemes’ liabilities are not met by corresponding movements in the value
of the schemes’ assets.
The sensitivity analysis disclosed is intended to provide an indication on the impact on the value of the schemes’
liabilities of the risks highlighted.
Full actuarial valuations of the 2 defined benefit pension schemes are carried out in accordance with legislative
requirements. The last full valuations of the schemes were carried out at 31 March 2013.
Contributions to the schemes are made in accordance with the advice of independent qualified actuaries on the
basis of valuations. The figures for this financial information have been based, in accordance with IAS 19 revised,
on valuations using the projected unit method.
The contributions made in respect of the accounting period were £1,515,000 in 2015 (2014: £1,376,000). As at 29
November 2015 contributions of £nil (2014: £126,000) due in respect of the current reporting period had not been
paid over to the schemes.
107
Financial statements 30. Retirement benefit schemes (continued)
The agreed contribution level for future years following the latest actuarial valuation of the schemes, is £1,533,000 per
annum increased annually by price inflation. This will be subject to annual review and at the next actuarial valuation
the contribution level will be reassessed.
Both defined benefits schemes ceased accrual on 1 July 2008 and now have no active members. Both schemes are
closed to new entrants.
The disclosures are based upon the valuation of the schemes which were carried out as at 31 March 2013, updated to
29 November 2015 by qualified independent actuaries. The main assumptions when valuing the assets and liabilities
of the schemes under IAS 19 revised are as follows:
RPI inflation
CPI inflation
Rate of increase in pensionable salaries
Rate of increase to pensions in payment:
5% LPI
2.5% LPI
Discount rate
Group pension schemes
29 November
2015
%pa
30 November
2014
%pa
3.00
2.00
n/a
2.95
2.10
3.55
2.95
1.95
n/a
2.90
2.10
3.50
The long term expected return on assets has been set with reference to current market yields on government and
corporate bonds, and expected outperformance of equities and property. The overall expected return on assets
reflects the relative weighting of different asset classes held by the scheme.
None of the group’s own financial instruments or property, either held or occupied by the group, are held as assets
within either schemes.
Demographic assumptions
29 November 2015
TM Group
pension
scheme
TM
pension
plan
86.9
88.9
89.3
90.5
86.2
88.4
87.0
88.7
89.4
90.3
86.3
88.1
30 November 2014
TM Group
pension
scheme
TM
pension
plan
86.8
88.9
89.2
90.5
86.1
88.3
86.9
88.6
89.2
90.2
86.2
88.1
– male
– female
– male
– female
– male
– female
– male
– female
– male
– female
– male
– female
Life expectancy of a pensioner aged 65
Life expectancy at age 65 for someone aged 45
Life expectancy at age 45 for someone aged 45
Life expectancy of a pensioner aged 65
Life expectancy at age 65 for someone aged 45
Life expectancy at age 45 for someone aged 45
108 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 TM Group pension scheme
Notes to the balance sheet
Fair value of scheme assets
Present value of funded scheme obligations
Net pension asset
Notes to the income statement
Current service cost including administration expenses
Net interest on defined benefit asset
Total included in ‘staff costs’
Notes to the statement of comprehensive income (SCI)
Return on assets excluding amounts included in net interest
Losses due to changes in demographic assumptions
Gains/(losses) due to changes in financial assumptions
Gains due to plan experience
Less accrued contributions
Total recognised in SCI
Recognition of defined benefit obligation
Opening defined benefit obligation
Administration costs
Interest cost on defined benefit obligation
Losses due to changes in demographic assumptions
(Gains)/losses due to changes in financial assumptions
Gains due to plan experience
Benefits paid including expenses
Closing defined benefit obligation
29 November
2015
£’000
30 November
2014
£’000
83,285
(73,479)
82,076
(75,572)
9,806
6,504
29 November
2015
£’000
30 November
2014
£’000
244
(232)
12
237
(197)
40
29 November
2015
£’000
30 November
2014
£’000
1,984
–
222
655
2,861
–
2,861
7,114
(480)
(5,510)
480
1,604
(38)
1,566
29 November
2015
£’000
30 November
2014
£’000
75,572
244
2,578
–
(222)
(655)
(4,038)
72,084
237
2,958
480
5,510
(480)
(5,217)
73,479
75,572
109
Financial statements 30. Retirement benefit schemes (continued)
Reconciliation of fair value of scheme assets
Opening fair value of scheme assets
Interest income on scheme assets
Employer contributions
Return on assets excluding amounts included in net interest
Benefits paid including expenses
Closing fair value of scheme assets
29 November
2015
£’000
30 November
2014
£’000
82,076
2,810
453
1,984
(4,038)
76,652
3,155
372
7,114
(5,217)
83,285
82,076
The group expects to contribute £459,000 to the TM Group pension scheme in the period ended 27 November 2016.
The major categories of scheme assets as a percentage of total scheme assets are as follows:
Equity securities
Debt securities – Corporate
Debt securities – Government
Real estate
Cash and cash equivalents
29 November
2015
29 November
2015
30 November
2014
30 November
2014
14,917
43,577
20,169
4,035
587
17.9%
52.3%
24.2%
4.9%
0.7%
83,285
100.0%
15,829
44,270
17,814
3,723
440
82,076
19.3%
53.9%
21.7%
4.5%
0.6%
100.0%
Policy for recognising actuarial gains and losses
The group recognises actuarial gains and losses immediately in the statement of comprehensive income.
Sensitivity analysis – TM Group pension scheme
Change in assumptions compared with 29 November 2015 actuarial assumptions
0.5% decrease in discount rate
1 year increase in member life expectation
0.5% decrease in inflation
Change in assumptions compared with 30 November 2014 actuarial assumptions
0.5% decrease in discount rate
1 year increase in member life expectation
0.5% decrease in inflation
Change in
actuarial
value of
liabilities on
29 November
2015
£’000
5,014
2,204
(2,069)
Change in
actuarial
value of
liabilities on
30 November
2014
£’000
5,377
2,267
(2,275)
The sensitivities disclosed are calculated using approximate methods taking into account the weighted average
duration of the scheme’s liabilities (13 years). This is the same approach as in previous years.
110 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 TM pension plan
Notes to the balance sheet
Fair value of plan assets
Present value of funded plan obligations
Net pension liability
Notes to the income statement
Current service cost including administration expenses
Net interest on defined benefit liability
Total included in ‘staff costs’
Notes to the statement of comprehensive income (SCI)
Return on assets excluding amounts included in net interest
Losses due to changes in demographic assumptions
Gains/(losses) due to changes in financial assumptions
Gains due to plan experience
Add/(less) accrued contributions
Total recognised in SCI
Recognition of defined benefit obligation
Opening defined benefit obligation
Administration costs
Interest cost on defined benefit obligation
Losses due to changes in demographic assumptions
(Gains)/losses due to changes in financial assumptions
Gains due to plan experience
Benefits paid including expenses
Closing defined benefit obligation
29 November
2015
£’000
30 November
2014
£’000
43,701
(47,385)
43,502
(48,702)
(3,684)
(5,200)
29 November
2015
£’000
30 November
2014
£’000
424
171
595
258
190
448
29 November
2015
£’000
30 November
2014
£’000
308
–
72
759
1,139
–
1,139
2,540
(619)
(3,262)
427
(914)
(21)
(935)
29 November
2015
£’000
30 November
2014
£’000
48,702
424
1,665
–
(72)
(669)
(2,665)
45,728
258
1,893
619
3,262
(427)
(2,631)
47,385
48,702
111
Financial statements 30. Retirement benefit schemes (continued)
Reconciliation of fair value of plan assets
Opening fair value of plan assets
Interest income on plan assets
Employer contributions
Return on assets excluding amounts included in net interest
Benefits paid including expenses
Closing fair value of plan assets
29 November
2015
£’000
30 November
2014
£’000
43,502
1,494
1,062
308
(2,665)
40,886
1,703
1,004
2,540
(2,631)
43,701
43,502
The group expects to contribute £1,074,000 to the TM pension plan in the period ended 27 November 2016.
The major categories of plan assets as a percentage of total plan assets are as follows:
Equity securities
Debt securities – Corporate
Debt securities – Government
Real estate
Cash and cash equivalents
29 November
2015
29 November
2015
30 November
2014
30 November
2014
19,956
14,801
4,715
4,035
194
45.7%
33.9%
10.8%
9.2%
0.4%
43,701
100.0%
19,624
17,073
3,015
3,723
67
43,502
45.1%
39.2%
6.9%
8.6%
0.2%
100.0%
Policy for recognising actuarial gains and losses
The group recognises actuarial gains and losses immediately in the statement of comprehensive income.
Sensitivity analysis – TM pension plan
Change in assumptions compared with 29 November 2015 actuarial assumptions
0.5% decrease in discount rate
1 year increase in member life expectation
0.5% decrease in inflation
Change in assumptions compared with 24 November 2014 actuarial assumptions
0.5% decrease in discount rate
1 year increase in member life expectation
0.5% decrease in inflation
Change in
actuarial
value of
liabilities on
29 November
2015
£’000
3,576
1,419
(2,251)
Change in
actuarial
value of
liabilities on
30 November
2014
£’000
3,813
1,461
(2,417)
The sensitivities disclosed are calculated using approximate methods taking into account the weighted average
duration of the plan’s liabilities (14 years). This is the same approach as in previous years.
112 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the financial statements continued52 week period ended 29 November 2015 31. Related party transactions
Only the directors and senior managers are deemed to be key management personnel. It is the board which has
responsibility for planning, directing and controlling the activities of the group. All transactions 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 IAS 24 related party disclosures.
Short term employee benefits
Compensation for loss of office
Share-based payments
29 November
2015
£’000
30 November
2014
£’000
1,862
259
–
2,121
2,816
282
5,513
8,611
There were no material transactions or balances between the group and its key management personnel or members
of their close family.
113
Financial statements Company balance sheet
29 November 2015
Non-current assets
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Total current liabilities
Net assets
Shareholders’ equity
Equity share capital
Share premium account
Retained earnings
29 November
2015
£’000
30 November
2014
£’000
Notes
3c
4c
5c
6c
7c
7c
8c
77
77
77
77
63,374
–
63,374
63,451
–
–
53,465
8,220
61,685
61,762
(5,866)
(5,866)
63,451
55,896
105
47,836
15,510
63,451
105
47,836
7,955
55,896
These financial statements of McColl’s Retail Group plc, registered number 08783477, were approved and authorised
for issue by the board of directors on 1 March 2016.
Signed on behalf of the board of directors
Jonathan Miller
Director
114 McColl’s Retail Group Annual Report and Accounts 2015
Financial statements Notes to the company financial statements
52 week period ended 29 November 2015
1c. Basis of preparation
The company’s financial period is the period from 1 December 2014 to 29 November 2015.
After making enquiries, the directors have a reasonable expectation that the company has adequate resources to
continue in operational existence for the foreseeable future. The directors have considered the company forecasts
and projections, taking account of reasonably possible changes in trading performance and the current economic
uncertainty, and are satisfied that the company should be able to operate within the level of its current facilities.
Accordingly, they have adopted the going concern basis in preparing the financial statements.
The company has taken advantage of the exemption contained in Section 408(4) of the Companies Act 2006 from
presenting its own profit and loss account. The company made a profit after tax of £18,236,000 (2014: £4,600,000).
The company has taken advantage of the exemptions in FRS 1 – ‘Cash flow statements’ and has not prepared a cash
flow statement.
Accounting policies have been applied consistently throughout the periods.
The company has not disclosed transactions with related parties that are part of the Martin McColl Retail Limited
(formerly McColl’s Retail Group Limited) group of companies, which are wholly owned, as permitted by FRS 8
‘Related Parties’.
2c. Significant accounting policies
Investments
Fixed asset investments are shown at cost less provision for impairment.
Taxation
Current tax is provided at amounts expected to be paid using the tax rates and laws that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less
tax in the future have occurred at the balance sheet date.
Deferred tax assets are recognised only to the extent that the directors consider that, on the basis of all available
evidence, it is more likely than not that there will be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which
timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
3c. Investments
Shares in subsidiaries
Cost
Investments
29 November
2015
£’000
30 November
2014
£’000
77
77
The carrying value of the investment in subsidiary undertakings has been reviewed at 29 November 2015 and no
impairment charge is required.
115
Financial statements 3c. Investments (continued)
The following information relates to all subsidiary undertakings of the group during the period.
Name of company
A Harris Limited *
Birrell Limited *
Bracklands Limited *
Charnwait Management Limited *
Clark Retail Limited *
Dillons Stores Limited *
Farthingmist Limited *
Forbouys Limited *
Forbouys Services Limited *
Hargreaves Vending Limited *
ISS Limited *
Key Food Stores Limited *
Lavells Limited *
Lewis Meeson Limited *
Marshell Group Limited *
Martin CTN Group Limited *
Martin McColl Limited *
Martin McColl Group Limited *
Martin McColl Retail Group Limited
Martin Retail Group Limited *
Martin the Newsagent Limited *
NSS Newsagents Limited *
NSS Newsagents Retail Limited *
Price Smasher Limited *
RS McColl (UK) Limited *
Smile Holdings Limited *
Smile Property Limited *
Smile Stores Limited *
Thistledove Limited *
TM Coffee Limited *
TM Group Limited *
TM Group Holdings Limited *
TM Pension Trustees Limited *
TM Retail Limited *
TM Vending Limited *
Tog Limited *
Trent Leisure Limited *
Trimley Stores Limited *
Country of registration
(or incorporation)
and operation
Scotland
Scotland
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Holding
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Proportion
of voting
rights and
shares held Nature of business
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Dormant
Dormant
Property Co
Retailing
Retailing
Retailing
Dormant
Dormant
Dormant
Corporate activities
Dormant
Intermediate Holding Co
Dormant
Dormant
Corporate activities
Dormant
Retailing
Dormant
Intermediate Holding Co
Retailing
Dormant
Dormant
Dormant
Intermediate Holding Co
Dormant
Intermediate Holding Co
Dormant
Retailing
Intermediate Holding Co
Dormant
Dormant
Predecessor Holding Co
Dormant
Dormant
Corporate Activities
Intermediate Holding Co
Dormant
Dormant
*All held by a subsidiary undertaking unless stated.
116 McColl’s Retail Group Annual Report and Accounts 2015
Financial statementsNotes to the company financial statements continued52 week period ended 29 November 2015 Notes to the company financial statements
52 week period ended 29 November 2015
4c. Trade and other receivables
Amounts owed by group undertakings
5c. Cash and cash equivalents
Cash at bank
6c. Trade and other payables
Amounts owed to group undertakings
7c. Authorised, issued and fully paid share capital
Issued ordinary shares of £0.001 each at 30 November 2014
and 29 November 2015
29 November
2015
£’000
30 November
2014
£’000
63,374
53,465
29 November
2015
£’000
30 November
2014
£’000
–
8,220
29 November
2015
£’000
30 November
2014
£’000
–
5,866
Number
of shares
Share
capital
£’000
Share
premium
£’000
104,712,042
105
47,836
Reorganisation of ultimate parent company
On 7 February 2014, McColl’s Retail Group plc replaced Martin McColl Retail Limited (formerly McColl’s Retail Group
Limited) as the ultimate parent company and Martin McColl Retail Limited (formally McColl’s Retail Group Limited)
became a wholly owned subsidiary of McColl’s Retail Group plc, the entity listed on the London Stock Exchange.
8c. Reconciliation of shareholders’ funds and movement on reserves
As at 30 November 2014
Profit for the period
Dividends paid
As at 29 November 2015
Called up
share capital
£’000
105
–
–
Share
premium
account
£’000
47,836
–
–
Profit
and loss
account
£’000
7,955
18,236
(10,681)
Total
£’000
55,896
18,236
(10,681)
105
47,836
15,510
63,451
As at 29 November 2015, the distributable reserves were £15.5m.
9c. Dividends
The board has recommended a final dividend of 6.8 pence per share (2014: 6.8 pence), totalling £7,120,000, subject
to shareholder approval at the annual general meeting to be held on 19 April 2016. The final dividend will be paid
on 31 May 2016 to those shareholders on the register at the close of business on 29 April 2016. The payment of this
dividend will not have any tax consequences for the company. The interim dividend, declared and paid, was
3.4 pence per share (2014: 1.7 pence), totalling £3,560,000.
Following the publication of FRS 100 Application of Financial Reporting Requirements by the Financial Reporting
Council, McColl’s Retail Group plc is required to change its accounting framework for its entity financial statements
(currently prepared under UK GAAP) for its financial year commencing 1 January 2015. The board considers that it
is in the best interests of the group for McColl’s Retail Group plc to adopt FRS 101 Reduced Disclosure Framework.
It is emphasised that this will involve no reduction in disclosures from those in the current UK GAAP financial statements
for the parent company entity.
A shareholder or shareholders holding in aggregate 5% or more of the total allotted shares in McColl’s Retail Group plc
may serve objections to the use of the disclosure exemptions, in writing, to the company’s registered office (McColl’s
House, Ashwells Road, Brentwood, Essex CM15 9ST) not later than 19 April 2016.
The group’s consolidated financial statements will continue to be prepared in accordance with International Financial
Reporting Standards as adopted by the European Union.
117
Financial statements Contacts, addresses and
shareholder information
Contacts and
addresses
Company registration number
08783477
Head office
McColl’s Retail Group plc
McColl’s House
Ashwells Road
Brentwood
Essex
CM15 9ST
Telephone: 01277 372916
Email: fclass@mccolls.co.uk
ISIN: GB00BJ3VW957
www.mccolls.co.uk/investor
Shareholder
information
Corporate broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Legal advisors
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Independent auditors
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Company secretary
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
118 McColl’s Retail Group Annual Report and Accounts 2015
Registrar
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone 0871 664 0300
(or from outside the UK: +44 208 639 3399).
Calls to this number cost 12p per minute plus network
extras. Lines are open Monday – Friday, 9.00am – 5.30pm
(excluding UK public holidays).
Web portal: www.capitashareportal.com
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McColl’s Retail Group plc
McColl’s House
Ashwells Road
Brentwood
Essex
CM15 9ST
T: 01277 372916
www.mccolls.co.uk