EG Group IPO and shares guide

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• What is EG Group?
• How does EG Group make money?
• Is EG Group profitable?
• What is EG Group’s strategy?
• EG Group acquisitions history
• Who are EG Group’s competitors?
• Who are the directors of EG Group?
• When is the EG Group IPO?
• How much is EG Group worth?

What is EG Group?

EG Group is a British petrol station and fast food outlet operator. The company retails a range of fuels through brands Esso, BP and Shell, as well as non-fuel products through Starbucks, Subway, Greggs, KFC, Burger King and Carrefour.

Euro Garages was founded by two brothers, Mohsin Issa and Zuber Issa in 2001, with just a single petrol station in Bury, Manchester. Since then, it’s become one of the UK’s largest forecourt operators with over 5,900 sites across the UK, mainland Europe, the US and Australia.

In 2015, TDR Capital, a London-based investment firm, bought a minority stake in Euro Garages for £1.3 billion. Shortly after, Euro Garages merged with rival European Forecourt Retail Group (EFR) in 2016 – which owned 1100 retail sites in Benelux and France and were also in TDR’s portfolio.

How does EG Group make money?

EG Group has three primary sources of income: fuel stations, convenience retail stores and food-to-go (FTG). These income streams are divided as follows:

• Fuel: 49%
• Grocery and merchandise: 37%
• Foodservice: 9%

Through a series of acquisitions, EG Group has built a strong presence in the US market fuel and grocery market which now represents approximately half of EG Group’s earnings.

The owners of EG Group are also renowned for making money through the sale of bonds. By borrowing money from investors, EG Group has raised a substantial amount of capital, which it has used to fund most of its acquisitions. However, bonds have also put the company in a significant amount of debt.

Is EG Group profitable?

In short, no. While EG Group made more than €20 billion in revenue in 2019, with over €253 million in operating profit, it had a running loss of €82 million. This was as a result of its acquisition history, which had taken its net debt has risen from about €1.5 billion in 2017 to €8.1 billion at the end of 2019.

The impact of Covid-19 was felt throughout EG Group’s operations, with consumers reducing the amount of travel they were doing – impacting both fuel consumption and the footfall in service stations. However, a large portion of EG Group’s stores were considered ‘essential’ throughout lockdowns, which meant it was able to continue making sales and reduce the impact on its supply chain.

What is EG Group’s strategy?

EG Group’s strategy is divided by its three sources of income: fuel, convenience retail and food. However, all of its operations fall under a company-owned, company operated (‘COCO’) business model. This means that EG Group has control over everything from store infrastructure to customer service and pricing.

A large portion of EG Group’s strategy has been focused on growth through acquisitions, which have pushed the company into new geographical locations and different markets. The company has three broad goals:

1. Investing in the best locations that will deliver the most footfall
2. Providing the best consumer experience by developing controls over quality
3. Creating a stronger brand offering for its non-fuel amenities.

As an oil-dependent stock, there have been concerns how it will adjust its strategy to compensate for the shift toward renewables and a more sustainable future. But EG Group is increasing its non-fuel arm year-on-year. Eventually, it believes that over 70% of its revenue will come from its grocery, merchandise and food service activities. In 2019, these divisions contributed approximately 46% of revenue.  

EG Group has also started to invest into Environmental, Social and Governance (ESG) practices. So far, EG has invested £3.2 million in LED lighting for its estates, and £2.6 million on solar panels for its forecourts. EG Group has also partnered with Too Good to Go, a company that buys surplus food from restaurants and retailers, in an attempt to reduce the food waste it produces.

The company’s fast-paced growth has also raised concerns though. This came to a head when EG Group’s auditor Deloitte resigned over fears that the company’s controls weren’t keeping up with its expansion, and it didn’t have enough independent directors. To reassure bond investors, EG Group quickly replaced Deloitte with rival KPMG.

EG Group acquisitions history

In 2017, EG Group made its first acquisition of more than 1000 forecourt assets from Esso in Germany, and 77 Little Chef sites in the UK.

Then EG Group made more than $6 billion worth of acquisitions in 2018 and 2019 alone, in order to expand into Europe, the US and Australia. This included nearly 800 Kroger stores for $2.15 billion, 1200 Italian Esso sites, 540 Woolworths fuel sites in Australia for $1.72 billion and 225 Minit Mart sites in the US for $330 million.

In mid-2019, EG Group continued its expansion into the US with 54 Fastrac sites and 69 sites operated by Certified Oil, as well as a deal to buy Cumberland Farms.

In March 2020, EG Group acquired 145 KFC outlets throughout the UK and Ireland. Then in October, using funds from TDR, EG bought a majority stake in UK supermarket Asda, the Walmart Inc supermarket chain. The deal was worth £6.8 billion but would see Walmart retain a stake of up to 20% Asda and retain the same owners.

In February 2021, EG Group also announced it would take ownership of certain assets of Asda, including its petrol filling stations, car washes and ancillary land for £750 million.

As supermarkets experienced a significant boost in 2020 due to consumers spending more time at home amid lockdown measures, the move could be a good boost to EG Group earnings. However, Asda does have borrowing commitments worth about £4 billion.

Who are EG Group’s competitors?

EG Group’s main competitors are Sainsburys and Tesco in the UK, who also own a significant portion of forecourt business. As well as Quiktrip Corporation – a US-based convenience store company – Welcome Break and Texaco.

Who are the directors of EG Group?

According to EG Group accounts, there are just four board members: the Issa brothers and two TDR representatives. Mohsin and Zuber Issa own about 25% of EG Group each, while TDR own the remaining 50%.

In January 2021, EG Group named Stuart Rose – former chairman and CEO of Marks & Spencer – as non-executive chairman.

When is the EG Group IPO?

A spokesperson for EG previously confirmed that an initial public offering (IPO) would be on the cards for the company in the future. Estimates are that it will happen at some point in 2021, however no date has been confirmed.

The hiring of Stuart Rose also added further fuel to the IPO rumours.

How much is EG Group worth?

EG Group was valued at over $20 billion after a deal saw two Canadian pension funds – Alberta Investment Management Corporation (AIMCo) and PSP Investments – as well as the Abu Dhabi Investment Authority (ADIA) buying minority stakes.

How to trade EG Group shares

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