Applegreen’s revenues fall by a quarter but hopes for bounce back next year

Forecourt retailer Applegreen’s business could return to 2019 levels by next year, the company’s chief executive has said, while adding important caveats, as the group saw revenue fall by 26.6 per cent in the first six months of this year.

Chief executive Bob Etchingham told The Irish Times that the company believes is has a "good chance" of returning to 2019 levels of business in 2021. He added, however, that "everything you say has to come with a health warning".

“We are planning on recognising that there will be some... public health measures that are going to impact our business, and we are providing for those in our forecast. They’re unwelcome but not unexpected.”

His comments came after interim results for the company showed revenues dropped to €1.1 billion in the first six months of this year, as compared with €1.5 billion the year before. The group recorded a loss of €26 million as against a profit of €7.4 million during the same period in 2019.

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Applegreen’s group adjusted earnings before interest, tax, deprecation, and amortisation (Ebitda) of €25.3 million was down from €58.9 million in the first six months of 2019. The board said it was not recommending the payment of an interim dividend.

The company, which operated 559 sites including 69 motorway service area sites at the end of June, undertook a number of actions to combat the effects of the Covid-19 pandemic, including the deferral of tax payments, a reduction in its headcount and a renegotiation on leases.

Mr Etchingham noted that the vast majority of the company’s landlords worked with them, with most of the arrangements on rent reductions made to the end of this calendar year.

The company also announced it is part of Empire State Thruway Partners, which has been awarded and signed a conditional 33-year lease for 27 motorway service areas on the New York State Thruway. The terms of the deal have yet to be finalised.

Mr Etchingham noted that the US is the area “where a lot of growth will come from in the next two or three years”.

Net debt

Applegreen’s net debt stood at €550.7 million at the end of June, about 5.2 times Ebitda. Chief financial officer Niall Dolan told The Irish Times this was not a level the company was comfortable with, and intended to get leverage down to 2.5 times.

Sales volumes fell to 57 per cent of the prior year period in April during the peak of the lockdown, improving to 29 per cent of the prior year in June.

The group said it traded “strongly and in line with management expectations” for the first 10 weeks of 2020. However, footfall and volumes were severely impacted from mid-March as governments and customers took measures to contain the spread of the Covid-19 virus.

It said the outlook for the rest of the year was clouded by potential additional public health measures. “However we look forward to the future with growing confidence whilst cognisant of the risks that may still impact the business in the future,” it said.

“Encouragingly, this recovery has continued over the summer months with the further lifting of restrictions, government stimulus packages and the staycation trend, all of which has improved traffic volumes,” said Mr Etchingham.