EG Group makes progress on deleveraging and refinances all its 2025 maturities
EG Group, the Blackburn-based global food services and petrol forecourts operator, has reduced debt during the third quarter, in which it saw revenues and EBITDA both fall.
In the period to September 30, 2023, the group said it continued to deliver against its deleveraging strategy – to repay and reduce its total debt.
On October 31, 2023, EG completed the sale of the majority of its UK & Ireland business to Asda generating a cash consideration of $2.5bn. These proceeds have been used – together with the net proceeds from the recent sale and lease back transaction in the US and the $43m net proceeds from the non-core US asset disposal – to repay almost $4bn of the group’s debt and significantly reduce net leverage, in line with the previously announced financial policy and deleveraging strategy.
The group said it remains committed to further deleveraging and to achieve a net leverage in the mid four’s in the near to mid-term through a focus on free cash flow generation, organic earnings growth and further non-core asset disposals.
On November 13, the group agreed a deal to purchase Tesla’s latest ultra-fast charging units for evpoint, EG’s proprietary branded, ultra-fast electric vehicle charging proposition, across the UK and Europe.
This will further enhance the group’s evpoint roll out proposition, where the group has an ambition to roll-out up to 20,000 chargers across approximately 3,600 of its existing petrol filling stations, as well as third-party locations, over time.
The completion of the UK disposal to Asda enabled the group to meet the conditions required to complete the Amend and Extend of $1,714m of USD Term Loan, $1,402m-equivalent of EUR Term Loan, and $53m-equivalent of GBP Term Loan from February 2025 to February 2028, including new money of approximately $378m.
On November 27, 2023, EG Group completed the issue of $1.6bn equivalent of Senior Secured Notes, which mature in November 2028. The group has also secured an additional $500m of privately placed notes and a $200m equivalent bridging facility. These refinancing transactions will be used to repay the group’s existing facilities, addressing its remaining near-term 2025 maturities in full, and leaving only $59m remaining in 2026.
On an underlying basis, the group’s EBITDA declined by 18% to $345m in the third quarter, primarily due to the impact of lower fuel volumes and a competitive environment in the quarter, as well as comparisons with the exceptional fuel market conditions in Q3 of 2022. Group revenue was $7.608bn in Q3, compared with $8.060bn in the same period in 2022.
The Group continued to make good strategic progress in the quarter, delivering growth in gross profit across Grocery & Merchandise and Foodservice, demonstrating its proven and successful strategy. Continental Europe delivered a particularly strong performance in quarter three, reflecting increased investment in the region and the significant growth opportunity in the market.
At a group level, Grocery and Merchandise continues to perform well, with gross profit increasing by 2.8% for the quarter to $376m. In the UK&I and Continental Europe, Grocery and Merchandise gross profit for the quarter increased by 12.8% and five per cent year, respectively, due to higher sales and a strong focus on product mix and investment in new sites across both regions.
EG’s Foodservice gross profit increased by 24% to $221m for the quarter, boosted by increased sales activity and improved margins across UK&I and Continental Europe and driven by increased footfall, particularly across the Benelux region.
Zuber Issa and Mohsin Issa, co-founders and co-CEOs of EG Group, said: “We made significant progress in the quarter with our deleveraging strategy and putting in place a sustainable capital structure for the medium to long-term, following completing the sale of the majority of EG Group’s UK business to Asda on October 31, 2023.
“On 27 November, we achieved an important milestone by addressing all our remaining 2025 maturities through successfully completing our refinancing activities. These included the Amend & Extend of Term Loans from 2025 to 2028 – and issuing new Senior Secured Notes. We remain focused on deleveraging the business and driving earnings growth in the near term.
“We continued to deliver upon our key strategic priorities in Q3, including growing gross profit in our foodservice, and grocery and merchandise businesses. In particular, foodservice – which continues to represent a significant growth opportunity globally – delivered a standout performance with gross profit up 24% in Q3, driven by increased revenues, as customers responded positively to our evolving and compelling proposition.”
They added: “In the quarter, we also signed a ground-breaking deal with Tesla to purchase their latest ultra-fast charging units – demonstrating how we continue to progress our strategy on EVs and alternative fuels. The agreement will support the delivery of crucial EV infrastructure for drivers, building on the momentum of our rapidly-growing evpoint business – EG’s proprietary-branded ultra-fast vehicle charging proposition. We see a significant opportunity to deploy EV charging points across our diverse site network.
“As we enter the final weeks of the year, we would like to thank our colleagues for their continued commitment and dedication to EG. We remain focused on executing our proven and successful strategy to create multi-purpose convenience retail sites across our international estate.”
