Top 1000: Diary of Applegreen's flotation

A sustained record of growth and a strong promise of more proved an enticing prospectfor investors when Applegreen went to the market last year, the founders recall


For Irish fuel group Applegreen, thoughts of bringing the company public in order to raise investment to accelerate growth first began to gain traction back in 2013.

“There was a number of possible routes,” chief executive Bob Etchingham recalls. “Bank debt was one, but we all know companies that did that during the boom times and lived to regret it. We were very conscious of the risks and limitations. You can take on a certain amount of debt, but you don’t want to overstretch your balance sheet.”

Private equity was another option for the company which Etchingham founded alongside chief operating officer Joe Barrett in 1992. Today, Applegreen has a fuel market share of around 14 per cent across 200 motorway service outlets in Ireland, the UK and US and it has an extensive retail offering on its forecourts, holding franchises for Subway, Costa Coffee, Burger King and Greggs, among others.

However, Etchingham says the private equity route also has its limitations. “The main issue is the short timeframe,” he says. “They’re in it for maybe five years and then want to maximise the cash from the business. That’s not always in the longterm interest of the company. We’ve been at this for almost 25 years and have a long-term horizon. For that reason it didn’t appeal. Going with the public markets was the most appropriate for us as we have a very capital intensive business, it’s property based and very steady and stable in terms of its cash flows.”

So, the founders opted to take the company public in an Initial Public Offering (IPO), and Applegreen was listed on the ESM (Dublin) and the AIM (London) in June last year at a share price of € 3.80. The offering was heavily oversubscribed, and more than 24 million shares were placed with the sale raising approximately € 70million for the company. Applegreen raised the funds to accelerate its growth in Ireland, the UK and the US.

“The priority was to structure the balance sheet with an appropriate mix of debt and equity that would facilitate the expansion of the estate over the coming years,” says chief operating officer Joe Barrett. “Oneof the benefits of going public was the improvement in the strength of our covenant with a much more conservative debt to equity ratio.”

Etchingham says the IPO also suited because it allowed existing shareholders to realise value, while open trading also provided an opportunity to incentivise employees and align them with the longer-term growth objectives of the business.

“We also felt that the transparency, corporate governance enhancements and increased profile that comes with being listed would benefit the business and give confidence to suppliers and other stakeholders to support its growth strategy,” he says.

Key to the company’s decision was careful planning. Etchingham explains that Applegreen started considering its funding options in 2012. “We spoke to a wide cross-section of people and engaged in a lot of ‘tyre kicking’ as we teased out the options,” he says. “It’s a delicate time as you have to strike a balance between canvassing opinion and getting advice without creating too much excitement or reading about it in the papers.”

Etchingham considered a senior listing on the main market of the Irish Stock Exchange but ultimately decided that the secondary markets were more appropriate for Applegreen’s size and funding requirements at the time. It also gave the company time to learn the ropes, Etchingham says. However, he is not ruling out a senior listing in the future.

The company took a dual approach to preparing for the IPO. It hired additional expertise and created a dedicated IPO team while a second team focused on

the day-to-day running of the business. “It is important not to get side-tracked. The focus must also be kept on moving the business forward,” Barrett says.

“One of the major preparatory building blocks was the restatement of the previous three years’ financial statements to IFRS from Irish GAAP,” he adds. “This project was completed in early 2015, well in advance of any decision on the IPO. We also ensured that we had a high level of quality in our financial information and documentation in preparation for a potential due diligence process.”

Barrett says having a well-managed, well-resourced process is central to overcoming the stresses an IPO brings. “Quality information is the key to ensuring the due diligence process runs smoothly,” he says.

Etchingham says the IPO “roadshow” process also demands real stamina. “You meet a lot of people to explain your business model and growth strategy and there are a lot of miles travelled. I can’t remember the exact number, but we probably told our story 30-40 times during the IPO period.”

IPOs can be a steep learning curve even for seasoned businessmen like Etchingham and Barrett. “We’re still in learning mode but a lot wiser than twelve months ago,” Etchingham says. “When you have outside investors you have to be careful of what you say publicly. You’re not as free as a private company. However, a lot of the disciplines the market imposes are healthy for a business in the longer term.”

Since its launch, Applegreen has grown strongly, driving up its share price in the process. “The IPO has been a very positive experience, market reaction to Applegreen has also been very positive and our share price has performed accordingly,” Barrett says. “My advice to a company considering an IPO is to ensure the project is sufficiently resourced and well planned. The importance of having competent third party advisers that fit the culture of your business cannot be overstated.”


2012: The process of considering how to fund

future expansion begins. Different funding

options considered.

2013: Initial Public Offering (IPO) emerges as

the funding frontrunner.

2014: Decision in favour of an

IPO made informally. Resources hired to create

a dedicated team to work on the IPO project.

2015: Goodbody and Arthur Cox appointed advisers in Dublin and Shore Capital in London. Applegreen opts to list on Irish Stock Exchange (ESM) and LSE (AIM).

June 19th 2015: Trading commences in Applegreen shares at a price of €3.80.

April 25th 2016: Applegreen shares close at € 4.70.