• Underlying EBITDA rose by 10% in Q2, reflecting growth across all business streams
• Successful allocation of an Amend and Extend of the Group’s term loans
• Completion of sale and leaseback in the US, reducing the Group’s reported leverage with proceeds being used to repay debt
• Divestment of EG UK&I operations to Asda on track to complete in Q4 2023
EG Group has delivered a ‘solid’ trading performance in line with expectations for the second quarter of 2023, according to co-founder and co-CEO Zuber Issa.
For the three months to June 30, he said underlying EBITDA increased by 10% – and particularly pleasing was the performance of foodservice, where gross profits increased by 18%.
”This was driven by an increase in sales, reflecting the positive impact of investment in new sites to bring the Group’s leading proposition to more customers,” he said.
“The Group continued to make good progress with its deleveraging strategy in Q2 – including announcing the sale of its UK & Ireland operations to Asda, concluding a $1.4bn sale and leaseback of 415 sites in the US, and a successfully Amend & Extend of its term loans – to put in place a sustainable long-term capital structure. In the near term, the Group remains committed to achieving a net leverage multiple of mid-four times and addressing its remaining near-term maturities no later than 12 to 15 months before maturity.
“There are multiple opportunities to grow the business organically in all our operating regions, and the continued roll out of our proven convenience retail, foodservice and fuel offering – alongside our geographic diversification and scale, and the evolution to alternative fuels – provides an unrivalled platform for further success. I am confident that our strategy will continue to deliver for all our stakeholders, and I would like to reiterate my thanks to all EG colleagues for their hard work and dedication.”
Also in the latest report EG said it had achieved key milestones with its deleveraging strategy – to repay and reduce its total debt – in the thre-month period. In April, the Group received net proceeds of $43m after completing the disposal of 26 non-core Minit Mart Sites in the US. On May 16, EG also completed a sale & leaseback (S&LB) transaction in the US with Realty Income – resulting in net proceeds of circa $1.4bn.
Additionally, as announced on May 30, the Group reported that it remains on track to complete the sale of the majority of its UK and Ireland business to Asda for an enterprise value of £2.27bn ($2.8bn) in the fourth quarter of 2023.
The cash proceeds from the US S&LB and sale of EG UK&I will be used to repay senior secured debt, which will result in a reduction in total debt of circa 41% (43% of net debt).
Post the quarter end on August 15, the Group agreed to sell 63 of its convenience stores – operating under the Minit Mart and Certified Oil banners.
The evolution to alternative fuels presents a major opportunity for the Group and it continues to roll out its EV charging network – currently operating circa 500 chargers across circa 160 sites in all its markets. The Group continues to explore partnership options to drive expansion and execute its long-term strategy.
The Group reported EBITDA of $335m, on revenues of $7,335m, with a 10% increase in EBITDA reflecting growth in foodservice and convenience retail. The impact of oil inventory revaluations, driven by oil price volatility across both Q2 2023 and the previous comparable quarter in 2022, led to a 4% decline in Group EBITDA on a reported basis.
At a Group level, the company reported that grocery and merchandise continued to perform well, with gross profit increasing by 4.2% for the quarter to $362m. In the UK&I and Continental Europe, gross profit increased by 20% and 11% on Q2, respectively, due to the positive impact of investment in new sites across both regions, including the rollout of Asda On the Move conversions to 167 in total in the UK.
The Group’s foodservice gross profit increased by 18.4% to $211m for the quarter, driven by strong sales growth and investment in new site openings. The continued impact of inflationary cost pressures on wholesale food cost prices restricted foodservice gross margin growth to 1.3%, though new site openings drove on 18% increase in foodservice gross profit, on sales up 16%.
Fuel saw a strong performance across the majority of regions, offset by competitive conditions in the US and adverse stock revaluations, against a backdrop of market volatility in Q2 last year driven by the war in Ukraine.
EG Group currently employs more than 50,000 colleagues working in over 6,600 sites across the UK&I, Europe, USA and Australia.