MPK Garages plans acquisitions despite transaction cost hit

MPK Garages has fallen into the red with a reported operating loss of more than £100,000, after being hit with transaction costs from owner Shanti Majithia’s exit from the business.

The independent forecourt operator raised £14m in March 2016 when equity investor Business Growth Fund stumped up £7m alongside £7m in debt from HSBC.

Around 30% of it was given to company founder Majithia when he left in October 2016 as part of the recapitalisation of the business, leaving about £10m.

According to the latest accounts filed at Companies House, MPK said the money would fund “the growth of the company by the acquisition of further petrol forecourt sites”.

However, the £267,194 transaction costs incurred from the deal were “solely” blamed for an operating loss of £120,170 for the year ending 28 February 2017.

The figure for the 12 months is a 139% fall on the previous year’s profit of £301,887.

Turnover did rise 11% to £64m for the period, but pre-tax profits tumbled £422,057 to a loss of £120,170.

MPK, which operates 29 petrol stations under the Texaco and Gulf brands, said its “underlying financial performance” had been “strong during the year” as gross profit rose 18% to £4.7m.

The company has bought a total of four petrol stations in Nottingham, Leicestershire, Durham and Derbyshire since Majithia’s departure.

With “funds remaining”, MPK is “pursuing further acquisitions” as part of a growth strategy to expand the business to “35 to 40 filling stations within the next couple of years”, according to financial director Graham Holyland.

“The market for stations is very competitive and there are a number of private equity-backed large independent groups and they are keen to grow - so prices for petrol stations are pretty hard and there is fierce competition,” he said.

“But we have quite a clear criteria for the type of station we want to acquire and the fact we have acquired four in the last few months shows we are having success with that strategy.”

As well as purchasing new stations, MPK is using the influx of cash to redevelop existing sites, with planning permission granted for one station and a further four awaiting consent.

Holyland said he expected gross profit to continue to grow in the next 12 months.

“I don’t think profitability will hugely increase as we are carrying costs and additional management to facilitate that growth, but you will see an expanding business certainly producing large financial returns in the medium term,” he said.