The collapse of McColl’s Retail Group and subsidiary companies (McColl’s) into administration earlier this year did not come as a surprise to most observers and participants in the UK convenience store sector.
It was widely reported that the Group had been experiencing trading difficulties for some time resulting in significant impact on profits and shares. At the same time, various rescue attempts were not at levels that would provide a return to shareholders following discussion with lenders and banks that included Barclays.
In terms of numbers, the following provides some context to the case;
The primary reasons for the difficulties that the Group faced were identified as customer dissatisfaction, resulting from supply chain issues and product availability together with the impact of Covid-19.
We received instructions on 3rd May 2022 from PwC, in their capacity as proposed administrators, to provide a valuation of the Group’s fixtures, fittings and other equipment with a deadline of 5th May 2022 for reporting.
Correspondence received from McColl’s management included an asset register comprising 84,000 line entries for the retail and IT related assets throughout the estate to include chiller displays, racking and in-store display shelving, Point of Sale Equipment, IT, CCTV systems etc together with other supporting documentation. We dedicated a team comprising colleagues John Boorman, Andrew Bibby and myself to review and model the assets by sub-section classifications for valuation purposes and were able to respond within the timeline set.
Typically, assets within a retail environment tend to have a high capital installation value compared to market value in a shut-down scenario and this view was confirmed from the various site visits that we carried out to benchmark the McColl’s equipment.
The initial challenge for the valuer is to identify the entries on an asset register that should be included in a market based valuation on both In and Ex situ bases before applying modelling profiles based on asset type, age, and cost with limited information in terms of specification from the asset register and other company supplied information.
Our involvement followed a period in which PwC and advisors had been marketing the business as for sale. However, the increasing level of indebtedness and complex trading nature of McColl’s meant that extra funding to support the business was not forthcoming from the incumbent lenders, and by 9th May 2022, the Group’s directors had submitted a NOI to appoint administrators.
The marketing process for McColl’s had resulted in 2 ‘front-runners’ emerging as potential buyers for the business, specifically Morrisons and forecourt operator EG Group with the former seizing control of the business, for which it was both a supplier / major creditor and had re-branded 250 stores under the ‘Morrisons Daily’ banner, for a consideration of £182 million on completion.
In addition to the retail and IT asset valuation, we also provided a valuation of the 3: freehold and 14: long leasehold properties of the business via my colleague Jon Cookson and our Real Estate team, again within a limited time period to meet the deadline required.
The successful sale of McColl’s resulted in TUPE of all 16,000 employees by Morrisons and an immediate commitment to pay lenders in full.
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