Solid quarter of milestones at EG Group
EG Group has announced that they had a strong performance in the second quarter (Image source: EG Group)
EG Group announced that it had a positive second quarter and is successful in carrying out its plan to pay off and minimize its overall debt. The group is still planning to finalize the sale of a major part of its business in the UK and Ireland to Asda for an enterprise value of GBP 2.27 billion by the last quarter of 2023.
EG Group released a report on their trading activity from April to June 2023, where they stated they made $335m in EBITDA and earned $7,335m in revenue.
The group's earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 10% after considering certain factors, indicating an expansion in the foodservice and convenience retail industries.
The group's earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 4% due to oil inventory revaluations influenced by unstable oil prices in both Q2 2023 and the corresponding period the previous year, as indicated in the reports.
According to reports, the grocery and merchandise sectors of the company still had a strong performance and saw a rise of 4.2% in gross profit to a total of $362 million for the quarter.
The gross profit of the UK and Ireland and Continental Europe grew by 20 percent and 11 percent respectively during Q2. This was mainly due to the investment made in new sites across both regions. One such example was the introduction of 167 Asda On the Move conversion locations in the UK. These developments had a positive impact on the company's overall profit growth.
The Foodservice section of the company grew its gross profit to $211m, which is an increase of 18.4 per cent over the last quarter. This growth is due to the rise in sales and investment made in new site openings. However, there was a limitation in the growth of Foodservice gross margin due to rising food costs affected by inflation. Nevertheless, the company was able to achieve an 18 per cent increase in Foodservice gross profit, as there was an increase of 16 per cent in sales driven by the opening of new sites.
The fuel business did well in most parts of the world, but faced tough competition in the United States and had to deal with the negative effects of revaluing stocks. This all happened during a time of market swings in the second quarter of last year due to the conflict in Ukraine.
Zuber Issa, partner and co-CEO of EG Group, expressed satisfaction with the results of the company's operations during the second quarter. The performance was in agreement with the expected results, and the EBITDA, a measure of profitability, rose by 10% during this period. One of the highlights of the report was foodservice, which experienced an 18% increase in gross profit. This positive result reflects the group's investment in expanding its facilities, allowing more customers to enjoy its excellent services.
During the second quarter, the group made significant advancements in their plan to reduce their debt, which included selling their operations in the United Kingdom and Ireland to Asda, completing a sale and leaseback of 415 sites in the United States for $1.4 billion, and extending their term loans. These efforts aim to establish a strong and stable capital structure for the future. In the short term, the group's focus is on achieving a net leverage rate of less than 4.5 and handling any upcoming loan maturities at least 12 to 15 months prior to their due date.
We have many chances to expand our business in a natural way across all areas where we operate. Our established retail, foodservice, and fuel services are proven successes, and as we expand our reach into different locations and embrace sustainable energy options, our potential for growth is unmatched. I believe that our plan will keep benefiting everyone involved, and I want to express gratitude to all the people at EG for their devoted efforts.
The group's plan to decrease its debt saw them earn $43 million in April by getting rid of 26 non-essential Minit Mart sites located in the US. Following that sale, they also completed another transaction in May by selling and then leasing back properties to Realty Income in the US, which brought them net proceeds of around $1.4 billion.
The money obtained from selling and leasing back operations in the US, as well as selling EG UK&I, will go towards paying off senior secured debt. This will lead to a decrease of approximately 41% in the overall debt (or 43% of net debt).
After the end of the quarter on August 15th, the company decided to sell 63 of their convenience stores that are currently running under the Minit Mart and Certified Oil brand names.
The progress towards using different kinds of fuels offers a big chance for the Group, and they are still expanding their network of electric vehicle chargers. At present, they have about 500 chargers in roughly 160 locations across all their markets.
EG Group revealed that they had achieved their objective of amending and extending their terms loans in June 2023. This action was taken to tackle the imminent $6.1 billion term loan debt and involved postponing the maturity until February 2028. This development is a positive step towards securing a stable capital structure for the foreseeable future.