Convenience store chain McColl's has confirmed it is in discussion with lenders to keep the business afloat.

The firm which has 1,100 managed convenience stores and newsagents has been hit by challenges relating to product availability and the effects of Covid on footfall.

Despite raising £30 million in September 2021, annual revenue for the business dropped by 11% to £1.1 billion. Debt increased from £89.6 million in 2020 to £97 million for 2021. Pre-tax profits of £20m for 2021 were down 31% on the previous year total of £29.1m.

Negotiations with a potential buyer of the business have collapsed, although there have been other approaches in regards to parts of the business.

McColls has linked up with supermarket chain Morrisons to create more than 200 Morrisons Daily stores.

Footfall slumped due to reports of the omicron variant in Christmas period. While demand has since picked up, revenues in the first quarter are behind expectations. The Group is starting to experience strengthening margins as impulse product sales recover, and has taken further mitigating actions, including a full review of pricing and costs.

Morrisons Daily stores are delivering like-for-like sales growth that is at least 20% better than comparable stores that haven't been converted.

The Morrisons Daily store conversion programme re-commenced in early February 2022, following a scheduled pause over the Christmas and New Year period.

The Group remains on track to complete 450 Morrisons Daily store conversions by the end of FY22, fundamentally reshaping the business into a 'more profitable and sustainable model' in the medium term.

Difficult market conditions mean the Board now expects FY22 adjusted profits to be slightly behind current market expectations, and net debt in the region of £100m at the end of FY22.