QuickView: Disciplined control of costs
In a challenging food retail environment, McColl’s has delivered solid H1 results and reiterated guidance for the year. What strikes us as most impressive in these results is, yet again, the company’s strong focus on cost control. Administrative costs are well under control despite a significant store conversion programme, coupled with the acquisition of new stores and added services. We believe the long-standing management has a good growth strategy in place, and with more of the estate being converted to better-performing formats, like-for-like sales should pick up over time. Hence updated consensus forecasts post the interim results look too low in our view. Valued at a steep discount to the sector and as a main player in the growing UK convenience market, we consider the high dividend yield of 6.2% an added bonus.McColls Retail Group is a neighbourhood retailer, with an estate of 1,611 managed convenience stores and newsagents. As of Nov 26 2017, Co. operated 1,279 McColl's branded convenience stores as well as 332 newsagents branded Martin's across the U.K., except in Scotland where it operated under its brand, RS McColl. Co. is engaged as an operator of convenience and newsagent stores.
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