Applegreen facing a 'material reduction' in profitability linked to Covid-19
The Applegreen Lusk Motorway Service Station on the M1 in North County Dublin, Picture Colin Keegan, Collins, Dublin.
Applegreen expects a “material reduction” in profitability in 2020, the scale of which will be dependent on how the Covid-19 situation develops.
The fuel-forecourt operator increased revenue significantly last year, rising 53% to €3.1 billion, with earnings before tax and interest rising 141% to €140.4 million.
Applegreen had 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 measures to contain the spread of the Covid-19 virus.
“We expect a material reduction in profitability for the current financial year,” the company said in its trading outlook.
“The scale of this will be dependent on how the situation develops and over what timeframe, together with the impact of any further measures taken by national governments to mitigate the disruption.
"Accordingly, whilst the group has not issued financial guidance for current and future years, previously published market expectations should be disregarded.”
To conserve cash and protect profitability, the company is deferring capital and maintenance spending.
The group has temporarily reduced headcount by more than 4,800 employees in both Ireland and the UK, from a total of approximately 11,500 employees.
It has also implemented a recruitment freeze and deferred executive director bonuses.
Commenting on the results yesterday, Davy Stockbrokers said the Applegreen management team is moving aggressively to take out cost and shore up liquidity as the economic impact of Covid-19 hits.
“Key to navigating this crisis will be managing the swing in the group’s negative €198m working capital position as demand falls in the coming months,” Davy said.
“The group currently has access to €141.5m gross cash and the potential to draw down an additional €158m.
"Assuming that current severe restrictions on movement don’t extend into the summer, Applegreen is well positioned to trade through this.
“Applegreen has a highly experienced management team that has already reacted at breakneck speed to the deteriorating backdrop.
“Under a scenario of severe restrictions remaining in place for two more months, then gradually normalising into the fourth quarter, the group is confident that it can successfully trade through this period.”
The Irish Examiner reported this week that filling stations in Ireland were experiencing a 40% drop in trade due to huge numbers of people self-isolating and working from home.
Michael Griffin, CEO of the Irish Petrol Retailers’ Association (IRPA) said their members were assessing the impact of a significant reduction in footfall in recent weeks.
