aannual Report and Financial Statements 2015 is for...

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1 aannual Report and Financial Statements 2015 is for...

2 achievement From humble beginnings Applegreen has developed as a leader in the forecourt sector in the Republic of Ireland and the UK. No.1 MSA operator in the Republic of Ireland Significant and growing presence in the UK Over 2,900 staff Continued evolution of mix of gross profit strong cash conversion

3 Applegreen plc Annual Report and Financial Statements Contents Strategic Report Corporate Governance Information Financial Statements Strategic Report About us 2 Highlights 3 Our Story 5 Business Model 11 Growth Strategy 13 Chairman s Statement 15 Chief Executive s Review 19 Corporate Social Responsibility 27 Financial review 31 Corporate Governance Board of Directors and Senior Management 38 Directors Report 40 Statement of Directors Responsibilities 48 Financial Statements Independent Auditor s Report 49 Consolidated Income Statement 51 Consolidated Statement of Comprehensive Income 52 Consolidated Statement of Financial Position 53 Company Statement of Financial Position 54 Consolidated Statement of Changes in Equity 55 Company Statement of Changes in Equity 56 Consolidated Statement of Cash Flows 57 Company Statement of Cash Flows 58 Notes to the Consolidated Financial Statements 59 Information Directors and Other Information 99

4 2 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report About us Established in 1992, Applegreen is a major petrol forecourt retailer in the Republic of Ireland with a growing presence in the United Kingdom and a small presence in the USA. The business employs c. 2,900 people, and operates over 200 forecourt sites across the Republic of Ireland, the UK, and the USA. Applegreen is the number one motorway service area operator in the Republic of Ireland where it has a motor fuel market share of c.14%. The Group operates a distinctive retail led business model focused on offering low fuel prices always to drive footfall and aims to provide a premium food and hot beverage offering in all its sites. Applegreen has a number of strategic partnerships with international brands including Burger King, Subway, Costa Coffee, Lavazza, Chopstix and Greggs. The business also has its own food offer through the Bakewell and acafé brands. Applegreen s growth strategy is focused on acquiring and developing new sites in the markets in which it operates and on upgrading and rebranding existing sites. Based on its successful strategy the business has delivered very strong growth in particular recording a Compound Annual Growth Rate ( CAGR ) of 19.8% in adjusted EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) over the last four years.

5 Applegreen plc Annual Report and Financial Statements Strategic Report Highlights Strategic Report Corporate Governance Revenue Growth 15.1% CAGR 709m 795m 937m 1,081m Adjusted EBITDA Growth 19.8% CAGR 28.9m 23.0m 18.3m 16.8m Financial Statements Information m 200 Food & Store Gross Profit Growth 23.5% CAGR 46.6m 57.9m Site Growth 28.2% CAGR m

6 4 Annual Report and Financial Statements 2015 Applegreen plc ability We have expanded our estate further to 200 sites at 31 December ROI PFS 77 stations UK PFS 60 stations Service Areas 25 stations Dealer 33 stations USA 5 stations

7 Applegreen plc Annual Report and Financial Statements Strategic Report Our Story Information Strategic Report Corporate Governance Financial Statements The Group was founded in 1992 by Robert Etchingham (Chief Executive Officer) following the acquisition of its first site in Ballyfermot, Dublin and Mr Etchingham was joined in the business a year later by Joseph Barrett (Chief Operating Officer). Together they have led the growth and development of the business in the intervening period. While the initial years of the Group saw gradual growth (with the number of sites increasing to 24 by the end of 2005), from the outset there was a focus on the development of the retail proposition and the establishment of a quality food offering on its forecourt sites.

8 6 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Our Story (continued) The Applegreen brand was successfully launched in 2005 and the Group has subsequently expanded at a rapid rate. Site numbers reached 75 by the end of 2010 and 200 by 31 December Aside from the acquisition of 12 sites in the United Kingdom from the Co-operative Group Limited in 2013 and the development of the Service Area sites, the growth in the Group s site numbers has predominately been as a result of single site or small acquisitions Stations Petrogas launches the Applegreen brand Stations Open first forecourt in UK Stations Distribution Centre opens Stations Open 6 Motorway Service Areas (MSA) Outsource transaction processing to EXL in India Stations Launch loyalty card programme

9 Applegreen plc Annual Report and Financial Statements Stations Complete refinance of business Acquire 4 MSA sites in NI Stations Fuel card and dealer offering launched Open 2 sites in the USA Stations Completed successful IPO Strategic Report Corporate Governance Financial Statements Information Stations 157,000 loyalty card holders If the sausage rolls we sold in 2015 were placed end to end it would reach the height of Mount Everest. Our sales of foot long Subs in 2015 would stretch from Dublin to Galway sales of coffee reached 4 million cups or 52 tonnes of coffee beans - the weight of 10 fuel tankers.

10 8 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Our Story (continued) The approximate location of the Group s sites at 31 December 2015 in both the Republic of Ireland and the UK are shown opposite. The Group has three different site categories: Service Area Sites Motorway Service Areas ( MSA ) are the Group s largest sites that, alongside the retail proposition, operate three or more food and beverage offerings from a combination of its own food brands of Bakewell and acafé and international brands including Costa Coffee, Burger King and Subway. The food offering expanded to include Lavazza, Chopstix and Greggs during In addition, the Group operates Other Service Area sites, which are not located on motorways. These are large sites, typically brown/green field developments, close to heavily trafficked or urban routes that have a big plot size and ample parking.the sites contain high end stores with an attractive ambience. They have a relevant retail offering with Applegreen brand produce and a limited chilled/ambient grocery offering alongside a cafe environment with one to three food and beverage offerings. As at 31 December 2015, the Group operated a total of 25 Service Area Sites (including ten MSA sites), of which 23 were located in the Republic of Ireland and 2 in the UK. Six of our MSA sites are operated under 25 year licences from the Republic of Ireland government. Petrol Filling Stations ( PFS ) As at 31 December 2015, the Group operated 142 sites categorised as Petrol Filling Stations (77 in the Republic of Ireland, 60 in the United Kingdom and five in Long Island, United States). Just under half of the Group s current PFS estate is operated under the Applegreen brand name. Applegreen branded sites have received significant investment, in particular with a high quality food proposition based around its own food brands, Bakewell and acafé, and/or an international brand such as Subway. The retail proposition is built to reflect the local demographic. Dealers In early 2014 the Group launched its own dealer business, which is focused on providing fuel to independent operators. In these dealer sites, the canopy and pumps on the forecourt are branded Applegreen while the non-fuel revenue remains under the control of the operator of the site. At 31 December 2015, there were 33 dealer sites

11 Applegreen plc Annual Report and Financial Statements Corporate Governance Strategic Report The business employs c. 2,900 people, and operates 200 forecourt sites across the UK, Ireland and the US. Financial Statements Information Galway Dublin Limerick Cork PFS Sites at 31 December 2015 Service Areas Sites at 31 December 2015

12 10 Annual Report and Financial Statements 2015 Applegreen plc attentive a mix of own and international brands tailored to meet the needs of our customers

13 Applegreen plc Annual Report and Financial Statements Strategic Report Our Business Model Strategic Report Corporate Governance Information Financial Statements Applegreen operates a distinctive retail led business model which has been built around a very clear value proposition and by being attentive to the needs of our customers. It contains the following key features: Low Fuel Prices Always price promise Applegreen aims to offer the lowest fuel prices in each locality in which it operates, which drives fuel volumes and footfall to its retail and food and beverage offering; Better Value Always in shop The Group s retail proposition aims to provide strong value to its customers particularly through its Better Value Always offers. In Ireland this is supported by its own distribution centre; and Quality food and beverage offering Applegreen aims to provide a premium food and hot beverage offering at all its sites. This is delivered through both Applegreen own brand products combined in a number of locations with international brands such as Subway, Costa Coffee, Burger King and more recently Lavazza, Chopstix and Greggs.

14 12 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Our Business Model (continued) The Group has a number of key strengths that facilitate the successful roll out of the business model throughout the estate: A strong entrepreneurial culture in the business. A strong and compelling Applegreen brand generating high levels of customer loyalty. A strong heritage in food developed over many years operating both own brand and internationally branded food concessions. A distribution capability whereby the majority of non-fuel products in Ireland are supplied through our own distribution centre.

15 Applegreen plc Annual Report and Financial Statements Strategic Report Our Growth Strategy Applegreen is committed to expanding its estate across each of the territories in which we operate and our growth strategy encompasses four main pillars: Strategic Report Corporate Governance Financial Statements Information Upgrade and rebrand existing network At 31 December 2015, 65% of the PFS estate in ROI and 28% of the PFS estate in the UK were branded as Applegreen sites (the Group s premium brand). On completion of the acquisition of a new PFS site, the site is typically rebranded on the forecourt canopy as a low fuel prices always site requiring minimal capital expenditure ( capex ). If it is appropriate and practicable at a site and if it meets the Group s minimum return hurdle rates, the Group will invest in upgrading and rebranding the location to its premium Applegreen brand. There is an ongoing programme of investment in the estate that will continue across each territory. Expand the PFS estate in ROI and increase the rate of expansion in UK Applegreen plans to accelerate the expansion of its estate in the Republic of Ireland and the UK in terms of geography and sites. The Group has dedicated personnel in both territories whose sole focus is on the identification of potential sites to be added to the estate. Opportunities are developed from the Group s existing network of contacts as well as brokers and intermediaries operating in the sector. Development of Service Area Sites in ROI and UK Applegreen plans to develop further Service Area Sites in the Republic of Ireland and the UK. The Group s dedicated site identification capability, explained above, is complemented by an in-house new site development team (again focused on each territory). They develop and progress applications with local governmental and regulatory authorities and directly deliver the construction programme Other growth areas The Group will consider making larger acquisitions of groups of sites as and where they become available and if they are in the best interests of the Group. In addition, Applegreen has established a small presence in Long Island, in the north east of the United States. While the north east of the United States is not currently a focus for significant expansion, the Directors believe that by establishing this small presence now, it will provide the Group with a potential platform for expansion over the medium term.

16 14 Annual Report and Financial Statements 2015 Applegreen plc acknowledge I would like to thank the entire management and staff of Applegreen for their continued hard work and energy over the past year

17 Applegreen plc Annual Report and Financial Statements Strategic Report Chairman s Statement Information Strategic Report Corporate Governance Financial Statements I am delighted to introduce the annual report and financial statements of Applegreen plc for the financial year ended 31 December The year marked another milestone in the development of the Applegreen story as the Group completed a very successful Initial Public Offering ( IPO ) on both the ESM market of the Irish Stock Exchange and the AIM market of the London Stock Exchange, raising net proceeds of 66.3m. This listing has given the business the platform to continue with its ambitious expansion programme across each of its target markets.

18 16 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Chairman s Statement (continued) Development 2015 has seen a continued growth in the size of the estate with a further 48 sites added during the course of the year and a total capital expenditure investment of 58.8m. The combination of these new sites coming on stream together with strong growth performance from our existing outlets has resulted in Adjusted EBITDA increasing by 25.7% to 28.9m. This performance reflects the strength of the Applegreen business model, the improvements in macro-economic conditions and the dedication of all our staff. I continue to be impressed by the very clear focus that exists at all levels of the business on the core proposition that makes Applegreen the most distinctive convenience retail offering in the forecourt sector. Board There were a number of changes to the Board of Applegreen in May In addition to my own appointment as Chairman, I would also like to welcome Howard Millar who joined the Board as a Non-Executive Director. I would like to thank each member of the Board for their commitment during the year and I look forward to continuing to work with them for the benefit of the Group in the coming year. Management and employees On behalf of the Board, I would also like to take this opportunity to thank the entire management and staff of Applegreen for their continued hard work and energy over the past year. It has been a very busy and challenging year as we continue to grow the business and our success is underpinned by the dedication and commitment of all these people. Outlook Notwithstanding some wider uncertainties impacting on global markets, the fundamentals underlying our business model remain strong. We see a strong pipeline of opportunities in our chosen markets further supported by positive macro-economic trends. We expect to be able to continue to deliver on our growth strategy in 2016 which, together with continued focus on evolving our business model, should allow us to deliver growth in profits in the coming year. Daniel Kitchen Chairman 11 April has seen a continued growth in the size of the estate with a further 48 sites added during the course of the year and a total capital expenditure investment of 58.8m.

19 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report

20 18 Annual Report and Financial Statements 2015 Applegreen plc ambition At Applegreen, we have spent many years refining and evolving our retail offering, focusing on growing our estate and building the structures that will facilitate sustainable growth into the future.

21 Applegreen plc Annual Report and Financial Statements Strategic Report Chief Executive s Review Strategic Report Information Financial Statements Corporate Governance While 2014 was a year when we started to fully exploit the potential within the business following a sustained period of recessionary headwinds, 2015 has been a year in which we outlined the scale of our ambition for the Applegreen business. We have spent many years evolving and refining our retail offer, focusing on growing our estate and building the structures that will facilitate sustainable growth into the future. This has been achieved while maintaining strong financial discipline and a focus on our three key financial metrics EBITDA growth, Return on Capital Employed and Cash Conversion. That discipline has allowed us build a strong track record of growth against the back drop of capital constraints. On 19 June 2015, the Group completed a very successful Initial Public Offering ( IPO ) by taking a dual listing on both the AIM and ESM markets which raised net proceeds of 66.3m for the business. This development represents a point of departure for our business by giving us access to capital markets, transforming our balance sheet and providing a platform from which we can pursue our ambitious growth strategy into the future.

22 20 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Chief Executive s Review (continued) The recent growth in site numbers and the geographic split of gross profit is as follows: Site Numbers 200 Gross Profit Republic of Ireland UK PFS Service Areas Dealer 2 USA Republic of Ireland UK USA 1% 24% 19% 1% 28% 71% % % Financial Highlights 2015 saw good levels of growth and profitability across all our business lines and geographies. This resulted from a combination of the continued expansion of our estate, ongoing investment in upgrade and rebranding activities, strong like for like growth and diligent cost control. The main highlights were as follows: Record level of turnover at over 1 billion 30.3% increase in gross profit (26.5% in constant currency) Adjusted EBITDA increased by 25.7% to 28.9m in the year from 23.0m in 2014 Further expansion of the estate which has grown to 200 sites at 31 December 2015 with a further 48 sites added in the year. Continued investment in the development of the estate with total capital expenditure of 58.8m Return on Capital Employed (Adjusted) of 24.2% Cash conversion (Adjusted) of 129.4% and a net debt position at 31 December 2015 of 4.7m

23 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report

24 22 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Chief Executive s Review (continued) 2015 Operating Highlights Under the leadership of Chief Operations Officer, Joe Barrett, the retail team successfully grew like for like sales of non-fuel products on a constant currency basis by 4.6% during new company operated sites began trading during 2015 comprising seven new Service Areas and 16 new PFS s. In addition a total of 27 existing sites were upgraded and rebranded in this period, usually incorporating enhanced food offers. Gross profit on food continued to improve and the penetration of food as a proportion of gross profit grew strongly. Particular emphasis was placed on coffee sales in 2015 resulting in strong growth which has continued into Further initiatives are planned and underway to enhance the contribution from this important category. Under the leadership of Chief Operations Officer Joe Barrett the retail team successfully grew like for like sales of non fuel products on a constant currency basis by 4.6% This food and beverage focus has seen us develop partnerships with international brands Burger King, Costa Coffee and Subway. In 2015 we further extended this range of relationships by adding Chopstix, Lavazza and Greggs to our portfolio of food offerings. These brands complement our own Bakewell and acafé offers and give us the flexibility to tailor a food offering to suit each location, time of day and customer types. We had 81 branded food offers throughout the estate at 31 December Our highly regarded Management Development Programme continues to attract a steady flow of new recruits for the organisation and ensures a pipeline of new talent into the retail community. This has been assisted by the appointment in 2015 of an Organisation Development Manager to identify new talent from both within and outside the company. The Republic of Ireland ( ROI ) continues to be our core market and contributed 71% of our total gross profit in It was another year of strong activity with five new Service Areas opened including one new MSA in Kilkenny on the M9. We also added seven new PFS s to the estate and rebranded a further 10 existing sites.

25 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report The new Dealer and Fuel Card business lines that commenced in ROI in 2014 reached breakeven and made a small but growing contribution in A total of 25 new dealer PFS s were signed up and these categories will continue to grow in The United Kingdom ( UK ) continues to be a significant area of focus for our future expansion and we are now concentrating more resources on the identification and development of opportunities in this region. Our UK operations have grown relatively quickly and now accounts for 28% of our total gross profit. The UK team is led by Michael O Loughlin and is based in Ampthill in Bedfordshire. During the year the UK team acquired and opened seven new PFS s in what was a very competitive market for site acquisitions, with considerable price pressure evident. We also rebranded seven of our existing UK stations and upgraded one station to a Service Area with two new branded food offers. We also opened the first Motorway Service Area in Northern Ireland in 2015 at Templepatrick, north of Belfast, on the M2 motorway. This has traded very successfully and we will continue to roll out our Service Area offer in NI and the rest of the UK in future years. The USA remains a small part of our business but a market from which we continue to harvest important learnings and one which may provide expansion opportunities in the medium term. We opened three new PFS facilities in Long Island which took our total site numbers to five, of which three were rebranded as Applegreen stores during the year.

26 24 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Chief Executive s Review (continued) Network Development Highlights The Network Development division is led by Eugene Moore and comprises two main areas of activity. Firstly there is a team involved in identifying, appraising and acquiring new outlets whether existing stations or green field opportunities. The other element of the team is involved in the project management of new builds on greenfield sites and the redevelopment of existing sites. We were extremely active in both of these areas in 2015 with a record level of capital expenditure on investment and new site acquisitions of 58.8m. In particular we continued to invest heavily in the Service Area site category which is comprised of our larger facilities that are situated on motorways or other busy national routes with 26.4m deployed during the year. We also invested 8.8m in smaller Petrol Filling Station acquisitions and 7.0m on rebranding and upgrading sites to the Applegreen standard. We currently enjoy a good pipeline of opportunities and have a busy programme of upgrades and redevelopments. Our People We are fortunate to have a loyal and committed workforce in Applegreen whose skills, expertise and passion have helped fuel the growth of the business over the years. I would like to take this opportunity to thank all of our employees for their hard work and dedication to the Group and I look forward to continuing to work with you all as we set out on the next chapter of the Applegreen story.

27 Applegreen plc Annual Report and Financial Statements Corporate Governance Strategic Report Outlook 2015 has been a year of transformation for the business we have delivered strong financial results on all our key metrics and our IPO significantly enhanced the balance sheet of the business. We continue to see good opportunities for expansion from our two main markets, both greenfield developments and bolt on acquisitions. Since the year end we have added seven further PFS sites and four Service Areas including the opening of our largest MSA facility to date on the M1 south of Belfast. In addition, we opened two new dealer sites. Consumer sentiment is positive, particularly in Ireland, and our robust business model should see us benefit from these positive underlying economic trends. Financial Statements Information This has given us a positive start to the year and gives us confidence in our ability to deliver on our growth targets for Robert Etchingham Chief Executive Officer 11 April 2016 I would like to take this opportunity to thank all of our employees for their hard work and dedication to the Group and I look forward to continuing to work with you all as we set out on the next chapter of the Applegreen story.

28 26 Annual Report and Financial Statements 2015 Applegreen plc appreciate You buy, we give. Every time you make a store or food purchase in Ireland, we donate 1c/1p to the Applegreen Charitable Fund

29 Applegreen plc Annual Report and Financial Statements Strategic Report Corporate Social Responsibility Information Financial Statements Strategic Report Corporate Governance Corporate Social Responsibility is an important part of Applegreen s business and something we take very seriously. We are proud of the work we are doing with our communities and our nominated charities. The Applegreen Charitable Fund was launched in December 2009 and over 1 million has since been raised for its partnership charities. The 1 cent campaign donates one cent from every store and food purchase made in Applegreen stores to the Applegreen Charitable Fund, with no additional cost to the customer. The money raised is then split between the nominated charity partners. Customers can track the money raised on the Applegreen plc website (applegreenstores.com).

30 28 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Corporate Social Responsibility (continued) The Applegreen Charity Committee was formed with representatives from head office, sites and all levels of the Group, working on a voluntary basis. The Charity Committee co-ordinates fundraising events such as marathons, sponsored walks and cycles as well as the Applegreen Annual Charity function to raise additional funds. CMRF Crumlin CMRF Crumlin is the fundraising body for Our Lady s Children s Hospital, Crumlin and The National Children s Research Centre. The Applegreen Charitable Fund donated almost 400,000 in funding towards the refurbishment of its Radiology Department. To date, the Charitable Fund has raised a total of 1.24m of which 0.83m came directly from the 1 cent campaign, 0.19m from donation boxes located in the stores and 0.21m from local, national and corporate events. Charity partners Having previously worked with GOAL, LauraLynn Children s Hospice, Jack & Jill Children s Foundation and Console, our Charity Committee selected CMRF Crumlin and Anam Cara as the charity partners for 2014 and The charity partners selected for 2016 and 2017 are Barnardos, Debra Ireland, ISPCC Childline and Northern Ireland Children s Hospice. We would like to say a massive thank you to Applegreen for the significant part you have played in transforming the Radiology Department of Our Lady s Children s Hospital, Crumlin. We are overwhelmed with the final figure of 378,752. With your help we have been able to ensure we deliver on our mission to give every sick child every chance. Joe Quinsey, CMRF Crumlin CEO

31 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report Anam Cara Anam Cara is a bereavement support group for parents. The Applegreen Charitable Fund donated funds towards their support services and information packs for distribution at support groups, hospitals and clinics. Thanks to Applegreen, Anam Cara in 2014/15 was able to directly support over 3,500 bereaved parents and their families, while producing new and important resources for newly bereaved parents and those who support them. Sharon Vard, Anam Cara CEO

32 30 Annual Report and Financial Statements 2015 Applegreen plc accountable We increased adjusted EBITDA by 26% and achieved a return on average capital employed of 24%

33 Applegreen plc Annual Report and Financial Statements Strategic Report Financial Review Information Strategic Report Corporate Governance Financial Statements 2015 was another year of strong growth for Applegreen. We increased adjusted EBITDA by 25.7% driven by a combination of the addition of new sites and the programme of re-branding and upgrade activities to the existing estate. The IPO was a key milestone in the Group s development and we raised 66.3m (net of expenses) to provide funds for the development of the business.

34 32 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Financial Review (continued) Results Summary m m Growth % Revenue 1, % Gross Profit % Adjusted EBITDA* % Depreciation, amortisation and impairment % Net Finance Expense % Adjusted Profit before Tax* % * Adjusted for share based payment expense 2.6 million (2014: 0.3 million) and other non-recurring charges 1.1 million (2014: net non-recurring credits 0.5 million). See note 5 in the financial statements. Revenue grew by 15.4% driven by the expansion in the network and good like for like growth in non-fuel sales although this was offset somewhat by the reduction in fuel price. The new sites, together with the impact of site rebrands and upgrades, resulted in an increase in gross profit of 30.3% and strong growth in adjusted EBITDA and adjusted PBT by 25.7% and 22.1% respectively. Depreciation, amortisation and impairments grew by 2.7m reflecting the growth in capital expenditure which facilitated the expansion of the Group. Net finance expense reflects a combination of a reduced interest charge on 2014 offset by the foreign exchange loss recorded on the retranslation of the Sterling element of the loan facility. Analysis by Segment and Geography m m Growth % Fuel Revenue % Food Revenue % Store Revenue % Total Revenue 1, % Fuel Gross Profit % Food Gross Profit % Store Gross Profit % Total Gross Profit % Gross profit represents the most important metric for the Group in particular as fuel price changes can have a disproportionate impact on revenues. Gross profit from fuel increased by 26.6% during the year reflecting volume growth driven, primarily, by new openings. While there was considerable volatility in oil prices during the year, this had a very limited impact on fuel margin as price changes were quickly passed through to consumers. Food revenues and gross profit have increased by 45.5% and 49.2% respectively reflecting the growth in the estate and the increasing penetration from rebrand and upgrade activity. The development in food reflects the core strategic focus on our capability in this category. Store revenues and gross profit have increased by 20.4% and 20.0%, respectively year on year as result of the addition of new sites to the network. Revenue Gross Profit m m Growth % m m Growth % ROI % % UK % % USA % % TOTAL 1, % % Growth was fairly evenly spread across each of our main territories of the Republic of Ireland and the UK. Gross profit growth was stronger in the UK reflecting the increased penetration of food resulting from the development of the new Motorway Service Area in Northern Ireland.

35 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report

36 34 Annual Report and Financial Statements 2015 Applegreen plc Strategic Report Financial Review (continued) EBITDA* development Adjusted EBITDA for the Group increased by 25.7% to 28.9m from 23.0m in the prior year. The direct contribution from new sites which opened in either 2015 or 2014 increased by 8.4m and a further 3.9m was earned from our existing network of sites. Administration expenses increased by 6.4m on This mainly reflects the additional resources recruited to support the growth and development of the business in late 2014 and early The rate of growth in administrative expense was significantly lower in the second six months of the year (6.4) 28.9 * Adjusted for share based payment expense and a number of non-recurring items including, in 2014, profit on sale and leaseback of a property 2014 Adj. EBITDA Site EBITDA New Stores Site EBITDA Like For Like Admin Exps 2015 Adj. EBITDA Cashflow m m Profit Before Tax Non - cash Adjustments Working Capital Movement Taxes Paid (2.9) (2.8) Cash flows from Operating Activities Capital Expenditure (54.8) (37.9) IPO Proceeds Capital Contributions / Option Proceeds Long-Term Borrowings (7.0) 11.4 Net Finance Leasing (1.3) (1.3) Net Interest Paid (2.1) (1.9) Redemption of Share Capital (1.9) 0.0 Cash Flows from Financing Activities Net increase in cash and cash equivalents 34.6 (3.3) Opening Cash & Cash Equivalents Exchange Gains/(losses) Closing Cash & Cash Equivalents Cash Conversion 129.4% 136.3% 2015 represented another year of strong cash generation by the business. The strong EBITDA recorded by the Group was augmented by cash inflow of 8.5m from our expanded negative working capital resulting from the increased volumes traded.

37 Applegreen plc Annual Report and Financial Statements Corporate Governance Strategic Report Balance Sheet 31-Dec Dec-14 m m Non-Current Assets Current Assets Current Liabilities (113.4) (92.2) Working Capital (73.8) (64.7) Financial Statements Information Cash and Cash Equivalents Total Debt Non Current Liabilities (54.0) (60.8) (10.3) (6.0) Net Assets Share Capital & Share Premium Capital Reserves (62.3) (65.4) Retained Earnings Equity ROCE (Adjusted) 24.2% 34.3% Fixed assets increase reflects capital expenditure incurred during the year of almost 59m, almost half of which related to the development of Service Areas. Return on average capital employed amounted to 24.2% for the year down from 34.3% for The reduction reflects the fact that c.30% of the development spend was on sites that will contribute to profitability in subsequent years. Net debt at year end amounted to 4.7m leaving the Group with significant capacity to fund its future development plans. Paul Lynch Chief Financial Officer 11 April 2016

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39 Applegreen plc Annual Report and Financial Statements Information Financial Statements Corporate Governance Strategic Report

40 38 Annual Report and Financial Statements 2015 Applegreen plc Corporate Governance Board of Directors and Senior Management Board of Directors Daniel Kitchen, Independent Non-Executive Chairman (aged 63) Daniel Kitchen was appointed to the Board in May He is currently the non-executive chairman of Workspace Group plc and Hibernia REIT plc, a non-executive director of LXB Retail Properties plc and a director of the Irish Takeover Panel. Previously, he was finance director of Green Property plc from 1994 to 2002, Deputy CEO of Heron International from 2003 to 2008 and the Irish Government-appointed chairman of Irish Nationwide Building Society from 2009 to Mr. Kitchen was appointed to the Board on 27 May Robert Etchingham, Chief Executive Officer (aged 62) Robert Etchingham founded the Group in 1992 after working for Esso in the Republic of Ireland and the UK for over 10 years. Mr. Etchingham has over 30 years experience in the retail fuel market and founded the Group with a clear strategic vision of the Group s position in the market. He has led the rapid growth in the Group s site numbers in recent years, capitalising on the opportunities presented during the recession in the Republic of Ireland and the UK. He has a Masters Degree in Economics from University College Dublin. Mr. Etchingham was appointed to the Board on 19 November Joseph Barrett, Chief Operating Officer (aged 49) Joseph Barrett joined the Group in its second year of operation with a strong background in retail and fast moving consumer goods having worked for Tesco and John West Foods. Mr. Barrett has over 20 years experience in the retail industry and has a key responsibility for management and developing the Group s retail and food offerings. Mr. Barrett has been instrumental in developing the Group s partnerships with its international food brand partners. He has a B.Comm. and MBA from University College Dublin. Mr. Barrett was appointed to the Board on 19 November Paul Lynch, Chief Financial Officer (aged 49) Paul Lynch was appointed Chief Financial Officer of the Group in July Mr. Lynch qualified as a chartered accountant with Arthur Andersen in 1990, after which followed a wide-ranging career in corporate finance and senior management across a number of industry sectors. He was a director of Heiton Group plc for seven years, from 2000 to 2007, initially as head of corporate development and subsequently as Managing Director of its Retail Division. Mr. Lynch has served as chief executive of large scale businesses in the retail, manufacturing, waste management and facility services sectors and he has led and concluded over 20 M&A transactions across diverse industries and jurisdictions. Mr. Lynch was appointed to the Board on 19 August Brian Geraghty, Independent Non-Executive Director (aged 50) Brian Geraghty is a chartered accountant (fellow of Chartered Accountants Ireland) and has been a senior partner in Phelan Prescott & Company, a long established Dublin accounting firm, since He is currently a director of Get Cover & Company and QYouTV International as well as a founding director of The Little Museum of Dublin. Mr. Geraghty was appointed to the Board on 19 August 2014.

41 Applegreen plc Annual Report and Financial Statements Corporate Governance Strategic Report Howard Millar, Independent Non-Executive Director (aged 54) Howard Millar served in several senior financial roles in Ryanair over a 23 year period between 1992 and 2014, and was Deputy Chief Executive and Chief Financial Officer from 1 January 2003 to 31 December He was invited to join the board of directors of Ryanair after stepping down as a full-time executive. He has also joined the advisory Board of Irelandia Aviation, a private company which is a shareholder in Viva Aerobus in Mexico, and Viva Colombia in Colombia. Mr. Millar was appointed the Chairman of BDO Chartered Accountants (Ireland) in March He is also a board member of ASL Airlines, a Dublin based private company that operates 120 aircraft in the cargo and contract leasing business, and recently launched Fly Safair, a low cost airline in South Africa. Howard graduated from Trinity College, Dublin and was awarded a B.Sc Mgmt (Hons) and is a Fellow of the Institute of Chartered Certified Accountants. Financial Statements Information Mr. Millar was appointed to the Board on 27 May Martin Southgate, Independent Non-Executive Director (aged 61) Martin Southgate is a graduate in Economics & Business Studies and holds a post Graduate Diploma in Marketing Studies. He has spent over 35 years in the consumer goods sector and has a wealth of international business experience having held numerous General Management positions worldwide. Prior to his retirement in 2013, Mr. Southgate was Managing Director of JTI UK from 2011 to He is currently a Board Director and trustee of Gallaher Pension Limited, a member of the Advisory Counsel of the London Philharmonic Orchestra and mentors small businesses in strategy and commercial development. Mr. Southgate was appointed to the Board on 11 February Senior Management Michael O Loughlin, Managing Director UK (aged 48) Michael O Loughlin joined the Group in 1997 and having led the Irish operations moved to the UK in Since then he has led the development of Applegreen operations in that market where we operated 62 sites at 31 December Eugene Moore, Development Director (aged 48) Eugene Moore joined the Group in 2011 having previously served as a Director of Bennett Construction. Mr Moore has also previously served as non-executive director of the NRA. He leads the Group s development activity and is responsible for the Group s in-house construction team responsible for the recently opened Service Area Sites.

42 40 Annual Report and Financial Statements 2015 Applegreen plc Corporate Governance Directors Report The directors present their annual report together with the audited group financial statements of Applegreen plc for the year ended 31 December On 19 June 2015, Applegreen plc was admitted to trading on the Alternative Investment Market (AIM) of the London Stock Exchange and the Enterprise Securities Market (ESM) of the Irish Stock Exchange. Principal activities and business review Applegreen plc is a petrol forecourt retailer in the Republic of Ireland and the United Kingdom. From an operational base of 64 sites at the end of 2009, the Group has grown to 200 sites as at 31 December 2015, across the Republic of Ireland (133 sites), United Kingdom (62 sites) and in Long Island, United States (5 sites). It also operates a number of motorway service areas in the Republic of Ireland. The Group operates a distinctive retail led business model which is built around the following key features: Low Fuel Prices Always price promise Better Value Always in shop High quality food and beverage offering The directors are pleased with the performance of the Group during the year and a comprehensive review of the performance of the Group is included in the Chief Executive s Review and the Financial Review. Subsidiary and Associated Undertakings A list of the Company s principal subsidiaries and associates is set out in Note 27 of the financial statements. Principal risks and uncertainties The directors consider the principal risks and uncertainties facing the Group to be as follows: Risk Impact Mitigation Strategic / Commercial Economic uncertainties Uncertainties and challenging conditions in the economies in which the Group conducts business may adversely impact the Group s business, results of operations and financial condition. The Group monitors these risks and actively manages its business to ensure minimal disruption to its operations. Competitor activity Consumer preference The Group operates in a highly competitive market, with competitors drawn from local and very large scale multi-national corporations. Actions taken by the Group s competitors (including but not limited to, opening forecourt sites adjacent to existing Group forecourt sites and competing aggressively on price), as well as actions taken in response by the Group (for example, responding to price competition), could place pressure on its margins and profitability. Increasing consumer preferences for alternative motor fuels, or improvements in fuel efficiency, could adversely impact the business. The Group monitors changes in the market including competitor activity. The Group monitors industry trends and technological advances. Brand awareness Acquisitions Due diligence The Group s operating results depend on the reputation and awareness of the Applegreen brand. The Group faces competition for new sites and it may not be successful in identifying or acquiring sites that meet its criteria. The Group s due diligence may not identify all risks and liabilities in respect of an acquisition. The Group actively manages its brand and designs a marketing strategy to maximise brand awareness and continue to build brand equity. The Group has skilled and experienced personnel who are focused on acquiring new sites. All acquisitions must meet stringent financial criteria and be approved by an Investment Committee and, for significant acquisitions, by the Board. The Group utilises a mix of external consultants and in-house resources to perform due diligence to a high standard.

43 Applegreen plc Annual Report and Financial Statements Corporate Governance Strategic Report Risk Impact Mitigation Operational Regulation and compliance The Group operates in a highly regulated sector and is reliant on licences in order to carry on certain of its activities. Environmental laws may expose the Group to the risk of substantial costs and liabilities, in particular in relation to the Group s storage and dispensing of hydrocarbon fuels. The Group monitors closely all changes to such regulation and legislation. It also operates a system on all of its sites which monitors wet stock at all times ensuring any risk of contamination is minimised. Financial Statements Information Performance of upgrades Brand partners Upgrade, refurbishment or redevelopment projects may suffer delays, may not be completed or may fail to achieve expected results. The Group s branded food and beverage offerings are delivered through franchise agreements with brand partners including Burger King, Costa Coffee, Subway, Chopstix, Lavazza and Greggs. A decision by any of those brand partners to terminate an agreement may negatively impact the business. All upgrades are thoroughly assessed and must be approved by an Investment Committee. The Group endeavours to establish relationships with major brand partners with a strong track record and maintain good relationships with those brand partners. Growth management Information technology networks and computer systems The Group has experienced a period of substantial growth in its business. As the scale of its operation grows, the Group will have to grow existing management resources and develop systems to ensure that it has the appropriate management structure, operating assets, financial systems, control environment and workforce required to meet the demands of its expanding business. The Group is reliant on the proper functioning of its information technology networks and computer systems, including but not limited to its point-ofsale system. There is a risk that such technology or systems could fail or be subject to disruption. The Group continues to add to its senior management structure and to develop junior talent to ensure that it has the organisational capacity to manage the Group as it grows. The Group continually monitors the performance and robustness of its IT systems and suppliers to ensure business critical processes are safeguarded as far as practicably possible.

44 42 Annual Report and Financial Statements 2015 Applegreen plc Corporate Governance Directors Report (continued) Risk Impact Mitigation Financial Foreign currency risk The Group is exposed to foreign currency exchange rate fluctuations. This risk is mitigated as, in each territory, the majority of revenues and costs are in the same currency. The Group also manages its borrowings where practical and cost effective, to partially hedge this foreign currency net investment in the UK operations. Hedging is done using currency borrowings in the same currency as the assets held by the operations using the borrowings. Please see note 23 to the financial statements for further details in respect of the Group s financial risk management policies. Liquidity risk The Group is leveraged and is subject to restrictive debt covenants that could restrict its ability to finance its future operations and capital needs and to pursue future business opportunities and activities. Failure to satisfy obligations under its existing financing arrangements and/or any future financing arrangements would give rise to enforcement risk and/or could require the Group to re-finance its borrowings. The Group treasury department manages liquidity risk by monitoring its covenants and ensuring there is sufficient headroom available so that any breach is avoided. Please see note 23 to the financial statements for further details in respect of the Group s financial risk management policies. Insurance risk Litigation risk The Group may suffer losses in excess of insurance proceeds, if any, or from uninsurable events. There exists the potential for litigation to be brought against the Group by any party with which it does business, from time to time. The Group monitors its potential risks to ensure it has appropriate insurance coverage. The Group monitors these risks and actively manages its business to ensure compliance with relevant laws and regulations. The Group s operations also expose it to a variety of other financial risks that include market rate risk, credit risk, liquidity risk and interest rate risk. Please see note 23 to the financial statements for further details in respect of the Group s financial risk management policies. The directors take such actions as they deem appropriate to minimise the Group s exposure to identified risks and are satisfied that effective systems, processes and expertise are in place to effectively manage the Group s business risk environment.