Fuel forecourt retailer Applegreen has received a number of deal pitches to ramp up its fledgling US business after recently agreeing to buy into 42 sites in South Carolina, according to the company's new chief financial officer.
Speaking after Applegreen reported a 20 per cent increase in first-half gross profit, Niall Dolan said the company has appeared on “more radars” since agreeing to buy the trade and certain assets of the Brandi Group in the US two months ago in a partnership with American property firm Getty Realty.
The deal, due to close later this year, will see Getty buy the underlying 42 properties for $70.1 million and lease them to Applegreen, which is committing just $5.4 million for the trading business.
“The number of opportunities we see has grown by virtue of the Brandi deal,” said Mr Dolan, who was promoted internally to the finance chief role in July. “However, we continue to be judicious in assessing these.”
Applegreen chief executive Bob Etchingham founded the business 25 years ago with one station in Ballyfermot in west Dublin before floating it on the stock market in June 2015 following an initial public offering (IPO) in which it raised €92 million. The company's network grew by 32 sites during the first half of this year to 275 by the end of June.
The company entered the UK market in 2008 and made its first foray into the US market in 2014, where it initially opened two sites on Long Island. As of June the company had 166 sites in Ireland, spanning dealer-owned filling stations to its own motor service areas – 85 in the UK and 24 in the US.
Mr Etchingham said that its gradual approach to the US market, “very experienced and talented management team” and background in food and retail relationships, including brands such as Burger King, make it a strong potential partner for real-estate and private-equity firms looking to buy forecourt sites in the US.
“For the short term, at least, we do see ourselves going for Brandi-type capital-light deals with partners in the US,” Mr Etchingham said.
Gross profit rise
The group’s first-half gross profit rose to €82.2 million from €68.5 million for the same period last year, helped by a rebound in fuel margins as oil prices eased back during the period.
Speaking separately in a call with analysts on Tuesday, Mr Etchingham said consumption in the UK has been affected as economic growth had become “anaemic”, while inflation had also hit spending power and confidence.
However, Applegreen said that overall profits in the UK, which accounted for 28 per cent of the group’s first-half gross earnings, benefited from improving fuel margins. Mr Etchingham said the Irish business, which made up 69 per cent of gross profit, saw its store and food sales helped, particularly by a recovering economy, employment and signs that “construction is starting to pick up”.
Like-for-like growth in food and store sales in the first half of the year across the group rose 10 per cent, while the company declared a maiden interim dividend of 0.6 cent per share, which will cost the group €500,000.
“We now have a good platform for growth in each of our three markets and are well-positioned for the seasonally important second half of the year,” said Mr Etchingham. “Overall, we remain confident in the prospects for the business in 2017.”
