EG Group hails strength of foodservice business as first-quarter profits rise

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EG Group has hailed the growth of its foodservice business after delivering increased profits in the first quarter.

In a trading update for the three months to March 31, the petrol station business, owned by billionaire brothers Zuber and Mohsin Issa, reported a 5.8% increase in group EBITDA to $265m (£186.9m).

The main driver of growth for the business during the period was in foodservice with gross profits for that arm of EG Group soaring to $109m (£76.9m) – up from $45m year on year.

Group revenues for the period fell 7.1% to $5.3bn (£3.7bn), with fuel sales in particular affected by coronavirus restrictions curbing travel – down 5.3% to $415m (£292.8m).

EG Group’s grocery and merchandise gross profits also fell during the period, down 3.2% to $294m (£207.4m), although the business said recent trading showed “growth in most countries compared to [the] prior year”.

The business, which owns more than 6,000 petrol stations across Europe, the US and Australia, said it had opened net seven new sites during the period.

EG Group also said it expected to complete the £750m acquisition of the Asda forecourt business in the second half of the year, having divested 27 petrol stations following competition concerns from the Competition and Markets Authority.

The business also hailed its acquisition of food-to-go operator Leon, which it bought for £100m in April, as “a highly complementary addition” to the group’s portfolio.

Leon joins a number of other fast-food brands in the EG Group portfolio as it runs both Subway and Greggs stores on its petrol stations and bought the largest UK KFC franchise last year.

“EG expects to significantly increase Leon’s historic profitability, supported by the rollout of new sites across the EG portfolio and distribution of Leon’s FMCG products across the group’s convenience retail proposition,” the business said.

Group owners and founders the Issa brothers said: “We are pleased to report a resilient performance in Q1 2021, which is testament to the ongoing dedication of our colleagues around the world and underscores the benefits of our scale and diversified business model.

“At the same time, the group has continued to take significant and proactive steps forward in its longer-term development. This includes the recently announced acquisition of Leon Restaurants, along with the previously announced Asda Forecourts and OMV Germany acquisitions.

“These exciting transactions will further strengthen EG’s growth prospects in both fuel and non-fuel operations. Together they highlight the increasing breadth and scale of our portfolio and the continued growth of our foodservice operations, which are a key element of the group’s growth strategy.

“Looking ahead, assuming the continued easing of global Covid restrictions, we expect to see more positive trading conditions as we continue to provide an essential service to millions of customers in communities globally.

“Additionally, the continued strengthening of our board and leadership functions demonstrates the group’s commitment to implementing best practice in corporate governance and the importance we attribute to ESG, while helping us to deliver on the significant growth opportunities that lie ahead.”

The Issa brothers and TDR Capital last year agreed a £6.8bn deal to buy supermarket chain Asda from its US parent company Walmart.