Mccoll's Retail Share Discussion Threads

[loganair] 31/7/2018 11:07

Personally I would put MCLS goodwill at no more than £50mln.

It seems to me by putting such a high value on goodwill companies are just trying to say they are worth far more then they're really worth and therefore much of the value put on goodwill is just a con.

[schway] 31/7/2018 10:49

Accounting standards positively encourage overpayment for acquisitions as goodwill can be carried on the balance sheet unhindered by writing it off until the cracks get too big too hide. See Travis Perkins reults today.

In the case of MCLS, market cap £180m, goodwill £250m, PAT for H1 £1.4m. Discuss.

[ed 123] 30/7/2018 17:30

Yes, that results from overpaying for the acquisition.

[loganair] 30/7/2018 17:00

How many times does one company take over another, then with in a year having to substantially write down the goodwill portion of the company they took over.

[ed 123] 30/7/2018 16:31

Ok, no problem, Loganair. :-)

As you'll no doubt know, the calculation of goodwill uses some assumptions, which of course rely on judgements. So, there isn't a single, correct answer. Notwithstanding that, the calculation has to appear fair and reasonable to the external auditor. So, I guess you must think that some of the assumptions are overly generous.

Anyway I don't see goodwill as being of much importance. I only addressed it in response to our friend's outlandish claim. The fact is that when a business is trading to expectations (ie. trading well), the amount of goodwill will not need writing down and so, in a normal context, goodwill is not of any great interest.

[loganair] 30/7/2018 15:58

Ed - I'm not saying that goodwill on the books is worthless, I'm saying that most companies put goodwill as too high a value on their books.

[ed 123] 30/7/2018 15:30

Well, yes, if a company goes bust and isn't sold on as a going concern, its goodwill will be zero. Its tangible assets may be valued below book too, for that matter.

To say, though, that McColls' goodwill, as reported in its latest accounts, is worthless is clearly wrong ..... unless you think the entire McColls Group cannot be sold for an amount in excess of its net tangible assets.

Net tangible assets are negative here, around minus £100 million. So Schway's statement about McColls' goodwill being worthless is so obviously wrong ... and hence mischievous, imo. It doesn't make any sense to say that a business with positive earnings (adjusted ebitda of £44 million in McColls' case) has a negative value - hence goodwill or some equivalent is a necessary inclusion in a company's accounts to make them fair and reasonable.

[loganair] 30/7/2018 15:06

Personally I think goodwill is valued to high on the books of most companies as when companies go bust this goodwill is not worth a thing.

[ed 123] 30/7/2018 14:54

I'd be a bit cautious about the motivation of Schway, who has posted a grand total of just 3 messages on ADVFN, knocking three different shares.

For the few who may not understand goodwill, it will not be "worthless"; it is a figure calculated by the directors, revisited each year and checked by the external auditors. It represents the value of the business in excess of the value of its tangible assets. With the purchase of the 298 Co-op stores the value of McColls' goodwill will naturally have increased.

Then there's "financing itself through its suppliers". McColls added 298 Co-op stores and so it will fill these with produce bought on normal commercial terms. Therefore the value of the produce in these stores adds to the trade payables in McColls' accounts. Nothing sinister, just normal practice for a retail business.

I could add my own negative but that concerns the story presented by the Board. I suspect the trading update of February 2018 could have given some earlier warning of the extent of costs and disruption caused by the P and H administration.

Assuming the accounts and Board's narrative have been written honestly, there should be a recovery in second half performance. Then y/e 30 Nov 2019, hopefully clear of adjustables, should show what the enlarged and newly supplied business can do.

With the increasing proportion of sales in the groceries category, the continuing bolt-on buying of independents, and the anticipated growth in the convenience store sector as a venue for shoppers, McColls should have a positive future. There has been a lot of change in the McColls' business in a short period of time. Imo, management are making the right moves. The business needs a little time for the changes to bed in and to clear itself of most of the exceptional costs.

No promises, of course, but it has a fair chance of success, imho.

[loganair] 30/7/2018 13:28

The richest man in Estonia bought a nearly 10% stake in McColl's a year ago paying around 275p per share and he said at that price he saw a great deal of value in McColl's

[schway] 30/7/2018 10:35

Huge amounts of worthless goodwill on the balance sheet, and it seems to be financing itself through its suppliers of + £30m in the half.

[pj fozzie] 26/7/2018 10:56

And the weakness in price continues - disappointing. May top up my holding before it goes ex div - I still think this is good for the long term. A couple of weeks to make up my mind. If dividend is safe, which looks reasonable, then we're currently at a yield of just over 6%.

Cheers,
PJ

[loganair] 23/7/2018 19:25

Retail analyst Nick Bubb said: “The share price is over 20% down this year and it [fell] further after the belated admission from management that the supply disruption to its stores has gone on for longer than could reasonably have been expected.”

[loganair] 23/7/2018 19:24

AJ Bell investment director Russ Mould said that, more worrying than McColl's supply chain disruptions, is the drop in margins due to cutting prices in order to stay competitive.

'The timing of margin weakness isn't ideal,' he said.

'McColl's is currently in the process of spending money on refurbishment. It really needs to keep driving up like-for-likes sales in order to support the business.

'Investors will want reassurance that it is only experiencing short term pains and that the strategic developments in the business will result in longer term gains.'

[loganair] 23/7/2018 19:20

Liberum Capital today reaffirms its buy investment rating on Mccoll's Retail Group and cut its price target to 200p (from 300p).

Numis today reaffirms its add investment rating on Mccoll's Retail Group and cut its price target to 235p (from 290p).

[ptgint] 23/7/2018 15:05

Reaction today seems a bit overdone to me and Safeway roll-out seems to be going well. Think I'll hold but DYOR.

[neilyb675] 23/7/2018 13:30

Hold for me

[pj fozzie] 23/7/2018 11:45

Not much to excite in today's results. At least div looks OK. Am concerned that profit is being inflated by flogging off property - clearly not a long term fix.

Hmm - Top up on the drop? Just hold? Or sell? What to do....

Prob still hold for now.
Cheers,
PJ

[neilyb675] 01/6/2018 12:24

Nice divi received today😆

[loganair] 22/5/2018 12:16

McColl’s roll-out of the new Safeway brand from Morrisons is well underway. Last week we (IGD) visited a number of McColls's stores in Hertfordshire to review progress and see how the range is being executed.

Focus on fresh:

The Safeway brand has had the biggest impact on McColl’s fresh categories. The retailer benefits from Morrisons vertically integrated supply chain which enables it to deliver quality private label products at value prices, boosting McColl’s chilled, produce, meat, dairy and ready meal ranges.

Expanded ranges:

McColl’s deal with Morrisons allows the retailer to offer customers a wider range of private label products across more categories. In ambient, the Safeway products from Morrisons provide two benefits to McColl's. Firstly, lower price points are possible through this value private label offering than with previous ranges, and secondly the wider range of private label products available enables McColl’s to range a private label product for the first time in some categories. For example, McColl’s shoppers can now buy a private label microwave rice product, at 89p.

Exclusive to McColl’s:

Announced last year, the launch of the Safeway range follows extensive product development and testing by Morrisons to create a high-quality offer that is relevant for convenience stores. The relaunch forms part of Morrisons plan to grow its wholesale business and support its growing franchise operations in the convenience channel. McColl’s will have exclusive access to the brand for 12 months.

Currently, 400 McColl’s stores have the Safeway brand, almost a quarter of the retailer’s estate. Another 300 former Palmer & Harvey supplied stores stock ambient Safeway branded products.

[ed 123] 20/4/2018 16:24

You're not the first to say that but thank you, anyway.

Back on-topic, Tesco led the recent rise, with Sainsbury and Morrisons lifted in its wake. In the absence of anything else, I'd guess that McColls is following the sector rise.

[neilyb675] 20/4/2018 16:03

Beautiful 😎

[ed 123] 20/4/2018 15:43

Popular today, up 11p at 247p.

Has it been tipped somewhere?

[loganair] 30/3/2018 23:17

My the end of this year, most of McColl's stores will be supplied by Morrison's through the reintroduction of the Safeway brand.

It seems reasonable to me, with out to huge a financial out lay, Morrison's could become a major convenience store player if they bought out McColl's and called the stores Safeway in a similar way that Tesco's has 'One Stop Shop'.