Viva Energy Group Limited

I would now like to hand the conference over to Mr. Scott Wyatt, Chief Executive Officer. Please go ahead.

Good morning and thank you all for joining us to discuss our 2025 full year results. With me on the call this morning is Carolyn Pettich, our Financial Officer and Jan Gray, our CEO of Convenience Mobility. Carolyn and I will share the group results and Jennifer will provide more commentary on our Convenience Chantel business. After a challenging first half, it's been encouraging to see the improvements in all parts of our business over the last rest of the year. From an operational standpoint, our performance has been solid. Our focus in improving safety culture within retail and maintaining strong discipline across the rest of our business has driven a year-on-year improvement in personal safety performance. This is a particularly good result given the level of construction and maintenance activity within our refining operations. Group sales were in line with last year, with commercial delivering another record year underpinned by growth in aviation, but with all segments performing well. Retail fuel sales were relatively strong, taking account of the impact of store closures to support conversion. While convenience sales continued to be impacted by illicit tobacco, gross margins increased slightly to 39% during the year. Refining margins rebounded during the final quarter, lifting LGRM to $9.50 per barrel for the year, supported by the start-up of ultra-low sulfur gasoline production from November. Second half EBITDA was $396 million, up 33% on the same period last year, contributing to group EBITDA of $701 million for the full year. We remain very focused on capital discipline with CapEx in line with guidance and actions underway to reduce gearing over the next two years now that the significant investment program at Geelong is completed. Overall, a strong finish to the year with the company providing a final dividend of $3.94 per share representing 60% of CNI and CNM impact. Attending to slide five, let me touch on some of the more significant achievements we delivered during 2025. During the first half of the year, we stood up an ERP with supporting systems and processes to operate our retail businesses independently from Coles and replace legacy point-of-sale systems in the Ready Express business. This was a major undertaking which has driven changes to the way we do things in just about every part of our business, but critical to allowing us to begin taking further steps to unify our OTR and Express businesses. This level of change has been significant, but this is now behind us, and we are increasingly focused on utilising new systems to improve execution of our retail offers and drive synergies. During the year, we opened 35 new OTR stores through a mix of new stores and conversions, predominantly in New South Wales and mostly over the second half of the year. This has also been a significant undertaking and there have been some challenges driven by the pace of rollout and the capability needed to support the new offer. That said, we've learned a great deal from this early work and will embed these into the full work program to improve execution and outcomes. The change in leadership through the second half of the year has been seamless with Gen bringing a strong focus on execution which is already translating into improving outcomes. Jen will continue to support Teresa Rendo when she joins us in a few months, and together they will drive momentum in the year ahead. You'll hear more from Jen shortly about our retail program. In our commercial business, we continue to drive a strong focus on organic growth and extending our capability into new markets. We now have a presence at 98 airfields across the country and marine barge operations in the three key markets of Melbourne, Sydney and Brisbane. commercial delivered another strong performance in both sales and earnings in 2025. As I mentioned earlier, we've now successfully completed a multi-year investment program at Geelong, bookended in 2025 with the five-yearly major turnaround maintenance program and the commissioning of the ultra-low sulfur gasoline project ahead of the fuel specification changes in December. This was completed on schedule and largely within budget, demonstrating the capability of the organization to undertake major projects. As we look to the year ahead on slide six, there are four overarching priorities which will be critical to driving growth into the future and are very much within our control. With major maintenance and upgrades behind us, our refinery is in a tremendous position to run hard, maximise cash for the next four years through to the next major maintenance cycle in 2030. Low refining margins continue to weigh on refining at the current time, but we remain positive about the environment ahead and encouraged by the negotiations with government to review the FSSP. As mentioned earlier, we are well placed to move forward with stronger momentum in delivering on our retail strategy. The implementation of independent convenience supply chains this year will improve supply chain efficiency, better leverage supply relationships and bring to an end the wholesale supply agreement with Coles. We will skew our conversion program to the second half of this year to give us some time for capability to be implemented and other improvements made, but continue to see the extension of OCR offer as a critical component of our long-term growth. Our commercial business continues to extend its track record of delivery consistent with reliable quality earnings. We extended our business into new markets last year and will continue to pursue organic investments to defend our business and build platforms for long-term growth. With the period of significant multi-year investment behind us, we are committed to reducing capex in the years ahead and improving the strength of the balance sheet without compromising our strategic growth plans. Carolyn will speak more about this later in the presentation. We'll now turn to discuss each of the businesses in more detail. I'll cover our energy businesses and Jen will talk to the retail business with Carolyn bringing it all together with group results and capital management. Our energy businesses as set out on slide eight and nine really do turn on our refining position at Geelong. our nationwide network of terminals and supply chain infrastructure, and our extensive downstream supply chains to support our commercial customers in every part of the country. We have an unrivalled and privileged position which we have continued to build and protect. As mentioned before, last year we entered the marine market in Brisbane, extending our barge operations to all major eastern seaboard ports in Australia, extended our aviation network, which is now approaching 100 airfields, and established the first bulk lubricants and grease import facility in the Pilbara. These are just great examples of how we continue to strengthen and grow our successful commercial businesses. Longer term, we see considerable opportunity to leverage our refining position at Geelong and deep customer relationships to produce and distribute lower carbon fuels. We have contributed to many successful trials over the last year, of these new energies evolve. Reading slide 10, you can see the commercial delivered. Another record year with sales lifting to 11.8 billion litres, driven by continued growth in aviation, but also supported by strong performances in all of the other business units. Earnings are largely in line with the last year, with sales growth offset by a lower overall margin mix, increased supply costs from new market entries, and general cost inflation. Refining as set out in slide 11 had a mixed year, with significant site-wide power outages in January and the impacts from planned maintenance in the third quarter impacting production, and with weak refining margins rebounding in the fourth quarter. I'm proud of the way we executed on the low sulfur gasoline project, which was completed and commissioned in October, with production starting in November. This was a very significant project for the site, and with this behind us, we're heading to 2026 unconstrained by project activity. Let me now hand over to Jen to talk in more detail about our convenience businesses.

Thanks, Scott. I'll start on slide 13 and 14 with a reminder of our retail strategy. The fuel and convenience sector has significant growth potential achieved by extending into a broader range of convenience categories, especially food and beverages aimed at people on the move. International formats set out this opportunity and some Australian players have made good progress. The OTR offer is widely regarded as the best convenience product in Australia. It's a proven offer that we intend to extend into the Ready Express network, which suffers from underinvestment and is operating low on its potential. This is a significant opportunity we see, and we are now well-placed to pursue this strategy with more momentum. Slides 14 and 15 set out our journey and the progress we've made. Last year, we completed the rebranding of our network to our standard brands, stood up systems and processes to end our transitional arrangements with Coles, and began to run our business in an integrated fashion. We fully acquired the Liberty Convenience business, opened 35 new OTR stores, and are in the process of standing up independent supply chains to support our various brands and offers. It was a tremendously busy year, and I'm proud of what the team's achieved. Since stepping into the CEO role, I've focused the team on the priorities ahead, strengthening our retail execution and lifting the capability of the organisation. Teresa will join us in the next few months and I'll continue to support her with our strategic agenda to build on the momentum we've established. Turning to our trading performance on slide 16. Trading conditions improved significantly through the year, with lower oil prices supporting fuel sales and strengthened fuel margins. Tobacco sales have stabilised, and we're beginning to see signs of growth in the rest of our convenience business, which is encouraging. With the impact of tobacco behind us and our organisation now ready to run, I'm confident about the year ahead and look forward to driving top-line growth and continuing the extension of the OTR offer through the Express Network. Slide 17 sets out our financial performance through FY25. The first part of the bridge sets out the uplift we have secured through the acquisition of Liberty Convenience, The transition of ATR's fuel supply to Beaver Energy improved cost reductions from exiting transitional service arrangements with Coles and efficiencies from consolidating retail operations. We have more opportunity to reduce costs and improve margins this year as we transition off the Coles product supply agreement and continue to improve in-store execution. The second part of the bridge sets out the underlying trading performance of the business. Illicit tobacco and general trading conditions were particularly challenging during the first half of the year. Conditions have since improved with the stabilisation of tobacco sales, strengthening of fuel margins and growth in non-tobacco sales and margins. EBITDA in the second half of 2025 was $123 million compared with $74 million in the first half and we are seeing this underlying strength continue into 2026 with typical seasonal variations. We delivered 35 new OTR stores last year, with 25 converted from Reviexpress. These conversions were predominantly delivered during the latter part of the year, with early signs generally positive. January ex-tobacco sales were up 10% on the same period last year, and our top 10 stores were up more than 30%. Guild sales are also lifting significantly, and much of this is not related to pricing, rather an uplift in performance from forecourt works completed and an improved customer offer. As we've laid after our first half results, there are some significant impediments that are holding back performance. These include poor supply chains outside of South Australia, removal of machine coffee, and the lack of flybys. The cumulative effect is significant enough that we have paused conversions so that we can overcome these issues, with conversions continuing in earnest in the second half of the year. The pace of the rollout is something we'll continue to assess as we build plans for 2027. Looking ahead, there are four key drives of growth that the team focused on. Improved retail execution is already driving results and I'll continue to ensure this is our primary focus so the base business performs well and better supports the extension of the OTR offer. We will finish the year with an independent supply chain that supports both OTR and express offers and allows us to exit the product supply agreement with Coles. This is an incredibly important project which will drive considerable synergies in 2027 and largely brings our integration activity to a close. From a customer perspective, the alignment here through your loyalty and digital offers will drive considerable value, improve marketing spend and efficiency, and improve conversion uplift. As mentioned earlier, we will open another 40 to 60 OTR stores this year, and I'm excited about finishing the year with real momentum in this program. Let me hand over to Carolyn to discuss our financial performance. Thank you, Jan. So turning to slide 21, Group EBITDA on a replacement cost basis was just over $701 million, down 6% year-on-year. About 2025, this reflected the peak year of retail integration and capital intensity across the group. Performance improved meaningfully in the second half, reflecting stabilisation in retail execution and operational momentum as major system transitions were implemented, as Jen mentioned. Underlying net profit after tax on a replacement cost basis was $184 million, reflecting the EBITDA outcome as well as high depreciation and finance costs following the recent acquisition of Liberty Convenience and a full year over OCR following its acquisition at the end of Q1 2024 and higher average debt levels during the year. 2025 significant items totaled $654 million pre-tax, the large majority of which was non-cash. The largest item was a non-cash impairment of $556 million relating to retail sites. This reflects site level assessments from an accounting standards perspective. There is no impairment at the convenience and mobility business level. It primarily relates to a reduction of the least right-of-use assets for certain sites during a period of softer trading conditions. It was calculated by applying earnings in line with FY25 performance which we regard as a low point in retail's earnings cycle, and then applying conservative growth rates before discounting the results in cash flows. Accounting standards require that the cash session does not incorporate future earnings, improvements, initiatives, or management actions of gen-type funds. As a result, this intent should not be interpreted as a reassessment of the long-term value or strategic rationale of retail business. We also incur $97.5 million of transition, integration and restructuring costs. Around $67 million relates to the implementation of replacement IT systems and platforms required to support an integrated operating model with a balance reflecting rationalisation of functions following our multiple acquisitions. These costs represent the final stages of a multi-year integration program and are expected to reduce from here. The last item to call out on this slide is $29 million of OTR prior period impacts. Following the integration of OTR finance into the VEBIS control environment, we identified that certain inventory costs had historically been capitalised when they should have instead been expensed. These items were required to be expensed in the FY2025 statutory financial statements. Now, as these costs related to prior reporting periods, they have been treated as significant items and are excluded from the FY25 underlying earnings. Of the $29 million, $18 million relates to pre-completion periods. We acknowledge that there was frustration that we did not provide FY2025 EBITDA guidance in the Q4 Rating Update. However, given the ongoing assessment of these items in conjunction with our auditor, we did not believe it was appropriate to provide guidance until the FY25 numbers were finalised. Attending to slide 22, Operating free cash flow of $542 million included $105 million of one-off costs, which largely corresponds to the transition, integration and restructuring activity I've mentioned. You can see the bridge from EBITDA to net free cash flow, the impact of capital expenditure on multi-year projects, the acquisition of liberty convenience under the investments category, as well as the integration costs we talked about. When we adjust for these items, underlying free cash flow is positive. Given we report on a pre-SSB16 basis, these data remains a good proxy for underlying operating cash flow generation. Now, on slide 23, I'll talk to CapEx. So 2025 was a peak CapEx period, as we've discussed before, as we completed the planned major turnaround at the Geelong Refinery and commissioned the ultra-low sulfur gasoline plant. Looking forward, we expect CapEx to moderate meaningfully. In 2026, we expect CapEx $400 million, depending on the pace of conversions, as Jen outlined earlier. This will support improving net cash flow and strengthening our balance sheet. And as you can see on slide 24, net debt closed the year at $2.1 billion, and gearing in respect of total net debt to EBITDA was three times, and we continue to target gearing towards two times by the end of FY27, and I'll provide more colour on this next. Meanwhile, term debt to EBITDA gearing reduced to 1.4 times within our target range of 1 to 1.5 times. And liquidity remains strong at approximately 0.9 billion. Slide 25 sets out our capital management framework and our priorities. We are focused on maintaining safe and reliable operations, a strong balance sheet and retaining dividends to shareholders in line with our policy. Additional cash flow can then be directed to growth projects and additional returns to investors after satisfying these three Our key priorities ahead are outlined on the slide and include lower capex in FY25 by approximately $100 to $150 million following the successful delivery of key projects at the refinery, improving networking capital with a particular focus on inventory as we stand up our new convenience supply chain, Improving earnings by reducing earnings volatility from the Geelong refinery following ongoing renegotiation of the FSSP Phase 1 and improving convenience mobility earnings through the various initiatives outlined earlier. Also, we've flagged that we're reviewing opportunities to divest surplus land. These initiatives will set us up for a strong balance sheet with management continuing to target gearing towards two times, as I mentioned earlier before, by the end of 2027. Moving to slide 26, the board has determined a final, fully-franked dividend of 3.94 cents per share, and this represents a payout ratio of 60% NPAT-RC from the convenience and mobility and commercial industrial segments in the second half. Consistent with our dividend policy, the E&I segment is assessed on a full-year basis. With E&I recording a net loss of $14.4 million at the NPAT level in FY25, Dividends for the full year represent 60% group net profit at the midpoint of our policy range between 50% and 70%. Final dividend will be paid on 31 March 2026 to shareholders on the register on 13 March 2026. Our dividend reinvestment plan remains active with 44% participation in the first half 2025 dividend. Eligible shareholders can reinvest their dividends directly into shares at a 1.5% discount. the dividend reimbursement plan continues not to be underwritten. I'll hand back to Scott to provide my take on the hours.