Liberum cuts target price on McColl's following profit warning

Liberum dropped its target price on McColl's to 100p from its previous 150p mark after McColl's fourth-quarter update outlined continued supply chain disruptions that, "unfortunately", led the broker to lower its adjusted EBITDA forecasts by 22%-24%.

The broker highlighted the collapse of Palmer and Harvey and the group's transition to Morrisons supply as causing much of McColl's troubles in 2018.

Liberum, which maintained its 'hold' rating on McColl's, said the supply woes had also resulted in operational disruptions, a slower than planned roll-out of its Safeway ranges and some delay in buying negotiations.

When discussing the numbers, Liberum said: "FY18E net debt is a beat reflecting good working capital management and greater sale and leaseback proceeds than we anticipated. There is no guidance on the full year dividend at this stage, but we prudently lower our forecasts broadly in line with our EBITDA cuts."

McColl's shares tumbled in early trade after it issued a profit warning due to disruption from the collapse of wholesaler Palmer & Harvey.

The company said it now expects earnings before interest, taxes, depreciation and amortisation of £35m for FY18 compared to a previous estimate of £44m. The company said that in the last 12 months, following the collapse of Palmer & Harvey, it has experienced "significant" supply chain disruption and has needed to accelerate the rollout of Morrisons supply to 1,300 of its stores.

"The speed of this transition has created significant challenges and severely disrupted our plans for the launch of Safeway," it said.

"We are extremely grateful for Morrisons’ support during this period, and whilst the transition is now complete, we are continuing to experience a number of challenges. We are working together to address these issues and to develop an optimal range and promotional offer for the future."