APGN.L Regulatory News (APGN)

24 March 2020

Applegreen plc

COVID-19 Update

Applegreen plc ('Applegreen' or the 'Group'), the roadside convenience retailer, today provides an update in light of the recent developments regarding COVID-19.

2019 results

The Group expects to release its preliminary 2019 results as scheduled on Friday, 27 March 2020 and will provide a detailed briefing on its 2019 results and current trading at this time.

Group profitability for FY19 will be in line with consensus which was driven by solid like-for-like growth across the business, particularly in non-fuel.

Current trading and COVID-19

Applegreen has traded strongly and in line with management expectations for the first 10 weeks of 2020. However, footfall and volumes have been impacted in the last two weeks as governments and customers take increasing measures to contain the spread of the virus.

Currently, all of our stores remain open and we are working hard to protect the health and safety of our people as well as provide an essential service in the communities in which we operate. We have implemented an extensive range of measures to safeguard our people and communities across our three regions. The Group's supply chain has remained fully operational and its strong customer service levels have been maintained.

Given the ongoing uncertainty, we are unable to quantify the impact of COVID-19 on our financial and trading performance at this stage, however we expect a material reduction to profitability for the current financial year. The scale is dependent on how the situation develops and over what timeframe, and the impact of further measures taken by the governments in the markets in which we operate.

Short term actions to conserve cash

In response to this unprecedented and uncertain environment, the Group is taking a number of actions to protect profitability and conserve cash:

§ Deferring development capital expenditure;

§ Reducing operating cost base;

§ Tight management of working capital, including stock levels;

§ Implementation of a recruitment freeze;

§ Deferring executive director bonuses;

§ Availing of newly introduced government relief measures; and

§ Opening negotiations with landlords on rental holidays.

In addition to the above, in order to preserve liquidity, the Board has decided not to recommend a final dividend in relation to 2019 at its forthcoming AGM. Our banks remain supportive and we will update the market more fully in the preliminary results statement.

Outlook

Applegreen is fundamentally a resilient business which operates in an industry which provides an essential service to the community. The Group has a strong management team in place with an excellent track record of delivery and the capability to respond and adapt quickly to changing market conditions.

Whilst the current crisis presents multiple challenges, the Board remains confident in the strategy over the longer term and believes the Group will be well positioned to benefit from the normalisation in trade across the three regions.

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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 food becoming 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, combined 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.

In the US, we have established a footprint in three regions which is a strategic step in growing our presence as a recognised operator of large Service Area sites on strategic road networks.

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.