Viva Energy Group Limited

Thank you for standing by and welcome to the Viva Energy Australia full year 2020 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phones, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the ask a question box. I would now like to hand the conference over to Mr. Scott Wyatt. Chief Executive Officer. Please go ahead.

Good afternoon and thank you all for joining us today as we discuss VEVA Energy's financial year 2020 full year results. My name is Scott Wyatt, the Chief Executive Officer of VEVA Energy and on the call with me today is Yvonne Bisray, our Chief Financial Officer. We're heading into 2021 having successfully navigated one of the most challenging years in VEVA Energy's history. The results I will be presenting today reflect how well our organisation has worked together in 2020 to respond to the challenges presented by COVID-19 and an extremely difficult refining environment. In the early stages of 2020, we were quick to implement effective COVID-straight operating procedures and adapt the supply chain to respond to rapidly changing demand. Throughout the year we have demonstrated a strong financial discipline, entering the crisis in a strong net cash position following the divestment of our stake in Viva Energy REIT and maintaining good control of both cost and capital expenditure. As we end 2021 I believe we are extremely well positioned for recovery and growth with high performing retail businesses, a robust commercial break-flying business and good progress with the Federal Government on the long term fuel security package. also provide more long-term opportunities and we're very excited about the future for that particular part of our business. I'm very proud to say that during 2020 the company maintained its strong focus on safety despite the challenges of the COVID environment and the significant work involved in completing major maintenance work on a residual catalytic cracking unit. During 2020 we achieved a 20% reduction in the number of recordable injuries compared to 2019. At the same time, we undertook proactive and effective safety measures to protect employees and their families from exposure to COVID-19. In terms of sales and production performance, I'm also pleased to report that we were able to successfully adapt to the changing and challenging market conditions. While total demand for transport fell 15% over 2019, we achieved growth in diesel sales, improved our premium fuel penetration and maintained total market share. Our refinery production rates were naturally reduced as a result of the decision to bring forward and extend our major maintenance program and our team at the refinery successfully adjusted the production mix to adapt to significant changes in market demand and the refining margin environment. The highlight result for me in 2020 is the strong online performance in the non-refining business, our retail and commercial businesses, which increased by more than 16% to $614.5 million This was driven by strong vehicle sales, improved retail fuel margins compared with 2019 and a robust performance in our broader commercial specialty businesses. Group results were of course heavily impacted by COVID-19 and global weakness in the refining sector, which for our refining business report a $95 million loss and taking the company to a net profit after tax loss of nearly $36 million for the year. I am however particularly pleased, given that environment, that we are able to return nearly $650 million to shareholders through a mix of dividends, capital management and still finish the year with a low cap of just over $100 million. I think we are extremely well positioned to recover and pursue growth as life returns to this market. In terms of our progress on our strategic priorities, Beaver Energy is a company fairly focused on the future and despite the challenges last year, we have made significant progress on a number of strategic priorities that I believe will set us up for growth in 2021 and beyond. Active management of retail pricing and customer campaigns delivered an exceptional result in our retail business, while continuing our strategy to recover share in our core retail channels. We also continue to close gaps in our retail networks which now exceeds over 1,300 service stations right across the country. While it was an extremely challenging year for refining, we have taken significant steps to improving the long-term sustainability of this part of our business by working closely with the Federal Government to develop a framework which I believe supports the long-term viability of the refining sector. The interim production plan in place provides welcome support during 2021. and we remain optimistic about finding a long-term solution in respect of the fuel security package. We maintain a strong capital management discipline throughout 2020, divesting our non-core shareholding in Waypoint Reef and returning the bulk of these proceeds to shareholders via capital return and special dividends. We aim to return the remaining $100 million once the long-term outlook for the refinery is clearer. Of course we also announced our vision to establish an energy hub at Geelong and we've made serious progress with our consortium partners of the development of the proposed gas terminal project. This project and others aims to leverage our position at Geelong and our capability and will generally support our development of new energy opportunities. Let me now hand over to Javad who will discuss our team financials in some more detail. Thanks Scott.

I'll kick off on slide 11. There are really two parts to our results for 2020. Despite a really challenging year for Australia, our retail, fuels and marketing non-refining business performed extremely well. As Scott said, up 16.5% on 2019 to an underlying EBITDA of $614.5 million. The standouts here were really retail and supply corporate and overheads, with commercial impacted by aviation demand for the majority of the year. I'll cover each of these in a bit more detail as I go through the pack. As you know, refining was the part of our business that was really challenged by the pandemic and the impact on regional refining margins. EBITDA moved into a loss position for the year of $95.1 million. Overall, underlying impact recorded a loss of $35.5 million for the year, down from a profit of $135.8 million in 2019. While distributable impact for the second half recorded a $1.5 million loss, the first half recorded an impact profit of $24.3 million. Turning to slide 12, the bridge on this slide sets out the material impacts for the year at a group level. The integration of Liberty and Westside delivered $22 million of benefit. An overall margin improvement of $129 million was driven by retail. more than offsetting the volume loss in this part of the business. You can see that the single biggest impact by far has been regional refining margins, impacting the result by $178 million. COVID-related disruption on a net basis impacted the business by nearly $100 million, with overall volume and production losses collectively resulting in another $178 million impact. This was partially offset by an early focus on cost control and lower supply chain costs to manage the impact of the disruption, combined with the receipt of some JobKeeper support. On slide 13, retail underlying EBITDA of $670 million showed just how resilient this part of the business can be, despite the demand disruption that we saw. Retail margins recovered by $124 million from a low base in 2019. more than offsetting the volume impacts during the year, and it's been pleasing to see Alliance volumes recovering after the worst of the COVID-19 impacts in the first half of 2020. Our decision to acquire the remaining 50% of the Liberty regional and west side businesses delivered a benefit of $22 million for the year. We also added 38 new stores for the Shell and Liberty branded network during 2020, taking our total network to more than 1,300 stores. Slide 14, in commercial, underlying EBITDA of $238 million was down, primarily as a result of the aviation impacts. Border closures and lockdowns pushed down aviation sales volumes by $67 million, which is marginally offset by the receipt of some job keeper support in this part of our business. A focus on cost and the diversified nature of our broader commercial business meant that outside aviation results held up fairly well. Early and active management of customer credit meant we were able to successfully manage bad debts, such that we did not experience any material impacts. Slide 15 sets out the magnitude of the impact to our refining business. Refining was heavily impacted by the decline in both domestic and global oil demands. Underlying EBITDA was a $95 million loss driven directly by regional refining margins at $178 and lower refining production of $69 million to manage the impact of COVID-19 restrictions. Again, a strong focus on costs and the receipt of some JobKeeper support marginally offset these impacts. The actions taken to maintain production and bring forward major maintenance helped to mitigate losses, and we've seen some small improvements in Geelong refining margins since returning to full production in November 2020. On slide 16, and overheads consists of our integrated supply chain of terminals, facilities, depots, pipelines and distribution assets located right across Australia, as well as site maintenance costs and all our head office and corporate costs. As I mentioned earlier, we acted quickly on costs early in the year and combined with lower supply chain costs delivered a significant reduction in operating expenses. reducing the cost of this segment from $333 million in 2019 to $295 million for 2020. Slide 17 sets out our cash flow bridge. Working capital reduced by $97 million, partially offsetting the net inventory loss of $257 million. And when adding back the impacts of the sale of the Waypoint REIT state, and associated capital management, the underlying free cash flow of the business was $87 million. The positive underlying free cash flow was driven by a focus on cost, both operating and, more importantly, capital expenditure, despite the lower underlying impact. Slide 18 sets out the movement in the balance sheet of net debt. The impact of net inventory loss during the year was partially offset by a release of working capital that I mentioned earlier. And after accounting for the $100 million of remaining proceeds from the Waypoint REIT sell-down, our balance sheet remains strong with relatively low net debt and plenty of headroom in our US $700 million debt facility. Slide 19 sets out our capital expenditure for 2020 and the guidance for 2021. Strong focus on managing capital expenditure during 2020. Helps manage cash flow and maintain a strong balance sheet position. with capital expenditure of $159 million for the year relative to our original guidance of $250 to $300 million. Group capital expenditure for 2021 is forecast to be in the range of $185 to $210 million, returning to a level that's more consistent with historical levels in the business. The refining major maintenance scheduled for 2021 is the HFA unit, which was originally part of the planned 2020 turnaround works and deferred to 2021. Finally, on slide 20, significant one-off impacts included the $179 million gain relating to the sale of the Waypoint REIT stake. The underlying impact RC loss of $35.9 million is in line with the guidance update provided to the market in December and translates to a distributable impact of $22.8 million for the year. In line with past practice, we've referred to distributable MPAT when considering the payment of the dividend for the period and with the distributable MPAT loss of $1.5 million in the second half of 2020, there will be no final dividend for the six months ended 31 December 2020. I am pleased to report that despite the challenging 2020, the company returned $595 million for shareholders throughout the year. Consisting of a $15.5 million first half dividend, a $115 million special dividend, a $415 million capital return and $50 million on market buyback. This is a key priority for the company to return to a positive distributable impact for the first half of 2021. And now I'll hand back to Scott to take you through our focus on the recovery now.