APGN.L Regulatory News (APGN)

13 May 2020

Applegreen plc

Applegreen plc agrees extended RCF to provide greater liquidity flexibility

Applegreen plc (the "Group"), the roadside convenience retailer, has successfully completed a process to access additional facilities and secure its liquidity for the likely duration of the COVID 19 crisis.

The Group has converted €52.5m of the accordion facility in its existing Applegreen plc banking facilities into its Revolving Credit Facility, which represents an increase to the committed funding available for the remaining term through to October 2023. Applegreen plc's lenders have also agreed to substantially relax or remove covenant conditions for the tests arising in each quarter up to and including June 2021. There have been no other changes to the terms or cost of this multi-currency facility. We thank our relationship banks to the Applegreen plc banking group for their continued strong support for the Group, and the confidence they have demonstrated in our business model during these unprecedented times. We continue to work constructively with the lenders of the Welcome Break banking facilities and expect to reach a similar conclusion shortly.

Whilst it is important to have additional headroom in our facilities, we do not anticipate drawing down these additional facilities. We reiterate our view that we have sufficient cash to get us through this cycle based on a scenario where movement continues to be severely restricted to the end of May with the expectation that restrictions will then ease gradually before normalising in Q4. We also expect to have adequate existing cash resources to trade through a downside scenario where the recovery period is more prolonged, to the end of 2021.

All our sites have remained open and current trading levels are ahead of our baseline assumptions for Q2 while the reduction in our working capital levels are consistent with our expectations. We also note that the recent easing of movement restrictions in each of our markets has resulted in increased traffic volumes.

The Welcome Break estate has been the most heavily impacted by the crisis and, as anticipated in our scenario modelling, has experienced a higher rate of cash burn as the UK emerges from lockdown. We are anticipating a gradual recovery in volumes and are in the process of re-opening some of our food offers to meet that increased demand. The core Applegreen estate in the Republic of Ireland, UK and US is performing ahead of our original assumptions at the outset of the pandemic, and we expect to be cash positive from June onwards as working capital levels start to rebuild.

The Group continues to focus on cost reduction and, in addition to the extensive measures previously announced, the Board has agreed to reduce the base salaries for Executive Directors by circa 20% from 1st April 2020 for a period of three months. The Group has also implemented graduated salary cost reductions on a temporary basis for support staff across the organisation.

Our priority remains the welfare of our colleagues and customers. We closely monitor government guidance in all the countries in which we operate in order to ensure the safety of our colleagues around the world as we continue to provide the essential service to the communities we serve.

About Applegreen

Applegreen plc is a high growth roadside convenience retail business operating in Ireland, the United Kingdom and North America. The growth pillars of the business are based on growing food to become the dominant profit stream and therefore reducing the dependency on fuel, partnering with premium food-to-go brands and focusing on value accretive acquisitions.

The Applegreen brand is based on competitive fuel pricing that drives in-store footfall with an innovative food and beverage offer focussed on our customers' needs. Improving the customer journey to inspire loyalty is central to what we do, ensuring we provide a smooth and enjoyable experience.

We are committed to driving shareholder value by deploying the best operational practices, a cost optimisation focus, coupled with disciplined capital allocation.

Combined with organic growth from existing sites, our growth strategy is focused on establishing a presence in new markets by developing traditional fuel forecourts with a branded food offer and, when significant scale has been achieved, entering the larger service areas on strategic road networks and enhancing the more resilient non-fuel contribution. The final stage involves vertical integration of the supply chain or fuel distribution. Applegreen is at different stages of this lifecycle in its three markets.

Applegreen is the number one Motorway Service Area Operator (MSA) in the Republic of Ireland and the number two Motorway Service Area Operator in the United Kingdom. MSA sites are strategic infrastructure assets that have high barriers to entry due to long development lead times and government legislation. There will be increased focus on MSA growth in these regions.

We have now established a large Petrol Filling Station (PFS) footprint in the US and our aim is to expand our presence as a recognised operator of large Service Area sites on strategic road networks in that market.

The management team has a strong track record of delivery and the talent pipeline will underpin our expansion in the three markets.

As at December 2019, the business operated 556 forecourt sites and employed c.11,798 people.