Viva Energy (ASX:VEA)
Current Share Price: $2.63 | Target Price: $2.97 | April 2025
Investor Profile Snapshot
INCOME: ★★★ 70% | VALUE: ★★★ 75% | GROWTH: ★★★ 82% | QUALITY: ★★★ 65% | THEMATIC: ★★★ 77%
Note: This report provides analysis and commentary based on public information and is not intended as investment advice. Investors should conduct their own research and consult with financial advisors before making investment decisions.
Executive Summary
Viva Energy Group (VEA) is undergoing a strategic transformation from a traditional fuel retailer to an integrated convenience retail business through its significant acquisitions of OTR Group (completed March 2024) and Liberty Convenience (completed March 2025). Despite a challenging operating environment characterized by cost-of-living pressures and illicit tobacco trade impacts, the company delivered modest growth in FY2024 with EBITDA (RC) increasing 5.0% to $748.6 million, though NPAT (RC) declined 20.1% to $254.2 million, reflecting higher finance costs from increased debt levels following acquisitions.
The 1Q2025 operating update confirms the company is on track to meet its 1H2025 guidance, with the combined Convenience & Mobility (C&M) and Commercial & Industrial (C&I) segments expected to deliver EBITDA (RC) between $270-330 million. Management has provided greater visibility on synergy realization, with tangible progress on key initiatives including the successful rebranding of the OTR network from BP to Shell (reducing supply costs by $20 million annually), establishing systems to exit the Coles Transitional Services Agreement by end-April 2025 ($20 million annual benefit), and accelerating the consolidation of OTR and Express operations ($20 million annual reduction in above-store costs).
The company's performance shows significant divergence across business segments, with C&M showing signs of recovery as retail fuel margins strengthened in March and non-tobacco convenience sales grew 0.5% with stable gross margins of 38.2%. C&I sales declined 6.0% due to adverse weather events affecting mining markets and reduced sales into lower-margin wholesale markets, though this was largely offset by margin growth. Energy & Infrastructure faced continued challenges with the Geelong Refining Margin at US$7.9/BBL (34.2% below 1Q2024), impacted by the site-wide shutdown in January and higher energy costs.
Looking ahead, the company has confirmed its store conversion program is on track, with approximately 10 conversions commencing in 2Q2025 and an agreement reached with Dexus Convenience Retail REIT for a flagship conversion on one of Australia's busiest highways. The Liberty Convenience acquisition was completed on March 31, 2025, and is expected to contribute $20-25 million to C&M EBITDA in FY2025. Management maintains that previously announced synergies and cost reduction initiatives will deliver approximately $80 million of benefits in 2H2025, supporting earnings improvement as the year progresses. Our base case DCF valuation of $2.97 per share suggests 13% upside to the current price of $2.63, with a wide scenario range ($1.94-$3.99) highlighting the execution dependency of the investment thesis.
Financial Highlights
| Key Metrics | FY2024 | FY2023 | YoY Change |
|---|---|---|---|
| Revenue | $30,142.0m | $26,741.1m | +12.7% |
| Gross profit (RC) | $3,449.4m | $2,606.8m | +32.3% |
| EBITDA (RC) | $748.6m | $712.8m | +5.0% |
| NPAT (RC) | $254.2m | $318.2m | -20.1% |
| NPAT (HC) | ($76.3m) | $3.8m | -2,107.9% |
| Operating cash flow | $605.6m | $678.6m | -10.8% |
| Free cash flow (Underlying) | $135.1m | $199.0m | -32.1% |
| C&M EBITDA (RC) | $231.2m | $232.2m | -0.4% |
| C&I EBITDA (RC) | $469.9m | $447.5m | +5.0% |
| E&I EBITDA (RC) | $94.3m | $65.4m | +44.2% |
| EPS (RC) | 16.1 cents | 20.7 cents | -22.2% |
| Dividend per share | 10.6 cents | 15.6 cents | -32.1% |
| Net debt | $1,793.5m | $380.0m | +372.0% |
Financial Forecasts
| Income Statement ($m) | FY24A | FY25E | FY26E | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|---|
| Revenue | 30,142.0 | 31,250.0 | 32,500.0 | 33,800.0 | 34,800.0 | 35,700.0 |
| Growth (%) | 12.7% | 3.7% | 4.0% | 4.0% | 3.0% | 2.6% |
| EBITDA (RC) | 748.6 | 790.0 | 900.0 | 950.0 | 1,000.0 | 1,050.0 |
| EBITDA Margin (%) | 2.5% | 2.5% | 2.8% | 2.8% | 2.9% | 2.9% |
| Depreciation | 244.2 | 530.0 | 550.0 | 575.0 | 590.0 | 605.0 |
| EBIT (RC) | 504.8 | 260.0 | 350.0 | 375.0 | 410.0 | 445.0 |
| EBIT Margin (%) | 1.7% | 0.8% | 1.1% | 1.1% | 1.2% | 1.2% |
| Net Profit (RC) | 254.2 | 173.5 | 245.0 | 262.5 | 287.0 | 311.5 |
| EPS (cents) | 16.1 | 10.9 | 15.3 | 16.4 | 17.9 | 19.5 |
Cash Flow & Balance Sheet
| Key Metrics | FY24A | FY25E | FY26E | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|---|
| Operating Cash Flow | 605.6 | 748.0 | 865.0 | 915.0 | 957.0 | 990.0 |
| Capital Expenditure | 588.1 | 500.0 | 465.0 | 460.0 | 450.0 | 450.0 |
| Capex/Revenue (%) | 2.0% | 1.6% | 1.4% | 1.4% | 1.3% | 1.3% |
| Free Cash Flow | -981.4 | 248.0 | 400.0 | 455.0 | 507.0 | 540.0 |
| Dividends | 216.1 | 120.6 | 171.5 | 183.8 | 200.9 | 218.1 |
| Dividend Payout (%) | 66.0% | 69.5% | 70.0% | 70.0% | 70.0% | 70.0% |
| Net Debt | 1,793.5 | 1,880.0 | 1,650.0 | 1,450.0 | 1,220.0 | 990.0 |
| Net Debt/EBITDA | 2.4x | 2.4x | 1.8x | 1.5x | 1.2x | 0.9x |
Operational KPIs
| Key Metrics | FY24A | FY25E | FY26E | FY27E | FY28E | FY29E |
|---|---|---|---|---|---|---|
| Total Fuel Sales Volumes (ML) | 16,797 | 17,300 | 17,600 | 17,800 | 18,000 | 18,200 |
| C&M EBITDA ($m) | 231.2 | 300.0 | 340.0 | 380.0 | 410.0 | 440.0 |
| C&I EBITDA ($m) | 469.9 | 490.0 | 510.0 | 530.0 | 545.0 | 560.0 |
| E&I EBITDA ($m) | 94.3 | 70.0 | 105.0 | 115.0 | 120.0 | 125.0 |
| Store Conversions (cumulative) | 4 | 50 | 150 | 250 | 350 | 450 |
| Convenience Gross Margin (%) | 38.2% | 39.0% | 40.0% | 41.0% | 41.5% | 42.0% |
| Geelong Refining Margin (US$/bbl) | 8.7 | 8.0 | 9.5 | 9.0 | 9.0 | 8.5 |
Key Outlook Points
- 1H2025 EBITDA guidance of $270-330 million for combined Convenience & Mobility and Commercial & Industrial segments confirmed on track
- Liberty Convenience acquisition completed March 31, 2025, expected to contribute $20-25 million to C&M EBITDA in FY2025
- Store conversion program advancing with approximately 10 conversions commencing in 2Q2025, primarily focused on New South Wales remodels within existing rooflines
- Targeted $30 million of C&M synergies in 2H2025, representing a $60 million annualized run-rate by year-end, supported by tangible progress on key initiatives
- Combined synergies and cost reduction initiatives expected to deliver approximately $80 million of benefits in 2H2025
- Ultra Low Sulphur Gasoline (ULSG) upgrade at Geelong Refinery proceeding on schedule, with transition to ULSG supply from August 2025
- Geelong Refinery planned maintenance in 3Q2025 expected to impact earnings by approximately $40 million
Valuation Summary
Our base case valuation of $2.97 per share represents 13% upside to the current price. This valuation is derived using a weighted average of three complementary methodologies: discounted cash flow, multiple-based analysis, and precedent transactions.
| Methodology | Implied Price Per Share |
|---|---|
| DCF - Base Case | $2.97 |
| DCF - Bull Case | $3.99 |
| DCF - Bear Case | $1.94 |
| EV/EBITDA Multiple - NTM (7.0x) | $2.26 |
| P/E Multiple - NTM (15.0x) | $1.65 |
| PEG Ratio (P/E to Growth) | $1.65 |
| Precedent Transactions (8.0x EBITDA) | $2.74 |
| Implied Valuation Range | $2.20 - $3.40 |
| Current Share Price | $2.63 |
| Up/Downside to Base Case | +13% |
Key explicit assumptions in our base case include:
- Revenue growth of 3.8% in FY2025, moderating to 2.5% by FY2029, driven by Liberty acquisition and OTR integration
- EBITDA margins expanding from 2.5% in FY2024 to 3.0% by FY2029, capturing $90 million in annual synergies
- Capital expenditure of $500 million in FY2025, declining gradually to $450 million annually
- Successful execution of store conversion program with improving returns over time
- Moderate improvement in Geelong Refining Margin from FY2026 onwards
- WACC of 8.5% with 2.5% terminal growth rate (resulting in 6.8x terminal EV/EBITDA multiple)
Analysis Summary
Based on our valuation analysis and assessment of Viva Energy's strategic positioning, the data suggests moderate share price appreciation potential, with our model indicating a fair value of $2.97 per share (13% upside).
Key factors supporting this view include:
- Transformative acquisition strategy establishing the largest convenience and fuel network in Australia
- Clear synergy targets with tangible progress on key initiatives already demonstrated
- Store conversion program showing promising early results with 30-60% gross margin improvement
- Strong Commercial & Industrial segment providing stable earnings foundation
- Strategic position of Geelong Refinery with government support via Fuel Security Services Payment
However, investors should consider key risks including:
- Integration execution challenges with simultaneous acquisitions
- Elevated debt levels following strategic acquisitions
- Retail market headwinds including cost-of-living pressures and illicit tobacco trade
- Refining margin volatility and operational reliability challenges
- Competitive intensity in the Australian fuel and convenience retail market
Viva Energy's transformation journey presents a moderate investment opportunity at current valuation levels, with the relatively modest market premium to current price reflecting caution regarding integration execution and the timeline for realizing full benefits from the company's strategic initiatives. Our analysis suggests successful execution of the convenience retail transformation and synergy realization would provide meaningful upside, while the diversified business model offers some downside protection.
Key Tailwinds
Convenience Retail Transformation: The conversion of Express stores to the higher-margin OTR format represents a significant growth opportunity, with early results showing gross margin improvements of 30-60% on non-tobacco sales. This transformation aligns with global trends toward fuel retailers expanding their convenience offerings to offset the long-term structural decline in traditional fuel demand. Management expects to add between 40 and 60 OTR stores to the network in FY2025, building toward a capability to support approximately 100 conversions per annum. The OTR format's proven higher-margin profile (convenience contribution per site of approximately $0.5M vs. $0.1M for Express) creates substantial upside potential as the conversion program scales. Additionally, the pending acquisition of Liberty Convenience (92 sites expected to complete in March 2025) provides further opportunities for format optimization and network expansion, particularly in regional markets where Liberty has demonstrated 9% sales growth driven by its discount proposition.
Synergy Realization: Management has targeted over $90 million in annual synergies from the OTR Group integration by end-2026, with specific levers identified including: transitioning fuel supply to Viva Energy; exiting transitional services from Coles Group; rationalizing supplier terms for convenience purchasing; and integrating Express and OTR operations to reduce combined overheads. The acceleration of approximately $30 million of these synergies into 2H2025 demonstrates confidence in early integration progress and provides a near-term earnings catalyst. These synergy targets are supported by management's track record in successfully integrating the Coles Express acquisition, and the company's control of the entire supply chain provides additional optimization opportunities that competitors without refining or wholesale capabilities may lack. The complementary $50 million cost reduction program across the Group in 2H2025 further enhances the potential margin improvement trajectory.
Commercial & Industrial Resilience: The C&I segment has demonstrated exceptional resilience, delivering record EBITDA of $469.9 million (+5.0%) in FY2024, marking its fourth consecutive year of earnings growth. This performance was driven by 5.2% volume growth to 11,735ML, with particularly strong demand across Aviation, Resources, Agriculture, and Defence sectors. The segment benefited from new contract wins, including the Defence contract secured in 2H2023, and the integration of OTR's wholesale fuels business into Liberty Rural from 2Q2024. This consistent performance provides earnings stability and cash flow to support the company's transformation investments. The C&I segment's long-term supply agreements with major commercial customers create visibility on future revenue streams, while its sector diversification provides natural hedging against industry-specific downturns.
Strategic Refining Position: The Geelong Refinery provides Viva Energy with a strategic advantage as one of only two remaining refineries in Australia, contributing to national fuel security and earning government support through the Fuel Security Services Payment ($25.1 million received in 3Q2024). The refinery's operational performance improved significantly in FY2024, with EBITDA increasing 44.2% to $94.3 million driven by higher throughput (refining intake increased 26.9% to 40.1MBBLs) and improved operational performance following major maintenance work in 2023. The refinery provides strategic optionality in product sourcing and pricing, supporting both retail and commercial segments with supply chain integration that independent retailers cannot match. The company's investments in the Ultra-Low Sulfur Gasoline (ULSG) project and the 90ML Strategic Storage Facility further enhance this strategic position while ensuring regulatory compliance.
Industry Consolidation Benefits: Viva Energy has emerged as a leading consolidator in the Australian fuel and convenience retail market, establishing the largest network following its strategic acquisitions. This scale provides procurement advantages, shared infrastructure benefits, and increased bargaining power with suppliers. The company's comprehensive geographic coverage creates network effects for loyalty programs and fleet customers, while its diverse retail formats (from premium OTR to discount Liberty) allow targeted positioning across different market segments and geographies. The consolidation strategy positions Viva Energy to effectively compete against both integrated players like Ampol and convenience specialists like 7-Eleven, with potential for further selective acquisitions as the market continues to evolve.
Key Headwinds
Integration Execution Risk: Viva Energy faces significant execution challenges in simultaneously integrating multiple retail acquisitions while maintaining operational performance. The company has targeted over $90 million in annual synergies from the OTR integration by end-2026, requiring successful coordination across multiple workstreams: fuel supply transition, exiting transitional service agreements, purchasing benefits, and overhead rationalization. Initial progress has been slower than expected, with only four Express stores converted to the OTR format despite ambitious targets, and management acknowledging delays due to "lengthy town planning processes." While early conversion results show promise with 30-60% gross margin improvement in three stores, one site is underperforming, suggesting potential variability in outcomes. The integration timeline is further complicated by the pending Liberty Convenience acquisition (expected March 2025), which will add 92 sites requiring management attention and potentially diverting resources from the OTR integration.
Elevated Debt Levels: The company's acquisition strategy has significantly transformed the balance sheet, with net debt rising to $1.79 billion from $380 million in the previous year. While management maintains this is within their target range of 1.0-1.5× term debt to EBITDA, the increased leverage reduces financial flexibility and heightens vulnerability to operating performance volatility. Interest expenses have increased substantially, contributing to the 20.1% decline in RCOP NPAT despite EBITDA growth. The ongoing store conversion program ($1.6 million per store) and maintenance capital requirements will maintain pressure on free cash flow generation in the near term, potentially delaying deleveraging progress. While the company has no immediate refinancing needs, the elevated debt position could constrain future strategic opportunities or necessitate equity raising should integration benefits materialize more slowly than anticipated.
Retail Market Challenges: The Convenience & Mobility segment faces significant external pressures, with management highlighting cost-of-living impacts on consumer spending and the illicit tobacco trade causing material disruption. Tobacco sales declined 17% on a same-store basis, disproportionately affecting OTR stores in South Australia. These external factors directly impact the segment most central to Viva Energy's strategic transformation. Same-store fuel volumes declined 5%, reflecting both economic pressures and the gradual structural shift toward greater fuel efficiency and electric vehicles. The retail fuel margin environment has remained challenging into early 2025, further pressuring segment profitability. Management has limited mitigation options beyond product mix adjustment and value positioning, creating dependency on macroeconomic improvement to drive consumer recovery.
Refining Volatility: Despite improved performance in FY2024, the Energy & Infrastructure segment faces inherent volatility from global refining margin fluctuations and operational reliability challenges. The Geelong Refining Margin declined 11.2% to US$8.7/BBL in FY2024, and management has disclosed specific operational headwinds for 2025, including a $20 million impact from the January refinery shutdown following a power interruption and an estimated $40 million impact from planned maintenance in 3Q2025. This volatility introduces earnings uncertainty in an otherwise stable business model, with refining margins influenced by global oil prices, product demand patterns, and geopolitical factors beyond management control. While the government's Fuel Security Services Payment mechanism provides some downside protection, the program's long-term certainty remains subject to political considerations.
Competitive Intensity: The Australian fuel and convenience retail market is highly competitive, with major players including Ampol, BP, EG Group, and 7-Eleven pursuing similar convenience-led strategies. This competitive landscape creates pressure on both fuel margins and convenience offerings, requiring ongoing investment in store experiences, product ranges, and loyalty programs to maintain differentiation. The convenience segment faces competition not only from other fuel retailers but also from quick-service restaurants, supermarket convenience formats, and dedicated convenience chains. Viva Energy must balance premium positioning in OTR locations with value offerings elsewhere in the network to address diverse consumer preferences across different geographies and demographics. While the substantial scale achieved through acquisitions provides competitive advantages, the accompanying integration complexity and high debt levels could potentially constrain flexibility in responding to competitive actions in the near term.
Competitor Analysis
| Competitor | Competitive Positioning |
|---|---|
| Ampol Limited | Integrated fuel supply chain; Strong brand recognition; Foodary convenience format; Owns Lytton refinery; International operations in NZ and US; Refining margin volatility; Integration challenges with EG acquisition; 20-25% of fuel market; 1,900 sites (including dealer sites); Main direct competitor with similar integrated model and international expansion |
| BP Australia | Global supply chain advantages; BP Ultimate premium fuels; Strong loyalty program; BP Pulse EV charging network; Limited local refining capacity after Kwinana closure; Smaller convenience footprint; 15-20% of fuel market; Stable; Global player with premium positioning and advanced energy transition initiatives |
| EG Group | Strong grocery tie-ins and loyalty benefits; Modern store formats; International expertise; Recent entrant still building scale; No local refining capacity; Higher debt levels; 5-10% of fuel market; Growing; European operator focused on convenience-led strategy |
| 7-Eleven | Leading convenience expertise; Strong private label offering; Digital innovation; Established loyalty program; Limited geographic coverage for fuel; No refining capacity; Primarily east coast presence; Market leader in convenience-only sites; Growing in convenience; Convenience specialist with fuel as secondary offering |
Key Project Status
| Project | Status | Strategic Importance |
|---|---|---|
| OTR Integration | On Track | Successfully rebranded network from BP to Shell (saving $20M p.a.); established systems to exit Coles TSA by end-April ($20M p.a. benefit); accelerated OTR/Express operations consolidation ($20M p.a. savings); $30M synergies in 2H2025 ($60M run-rate by year-end) |
| Store Conversion Program | Progressing | Approximately 10 conversions commencing in 2Q2025; focused on NSW remodels (within existing rooflines); $1.5M average capex per store; agreement with Dexus for flagship landlord-funded conversion; targeting 40-60 stores in FY2025 |
| Liberty Convenience Acquisition | Completed | Acquisition of remaining 50% interest completed March 31, 2025; expected to contribute $20-25M to C&M EBITDA in FY2025; expands network to 982 sites (676 Express, 214 OTR, 92 Liberty) |
| Cost Reduction Program | On Track | $50M savings target for FY2025 (primarily 2H); focused on discretionary spend reduction, store operating cost optimization, support function rationalization; approximately half ($25M) expected to be sustainable long-term |
| Ultra-Low Sulfur Gasoline (ULSG) | On Schedule | Confirmed to be proceeding on schedule; transitioning to ULSG supply from August 2025; retail site compliance by December 15, 2025 deadline |
Balance Sheet & Financial Position
| Balance Sheet ($M) | FY2024 | YoY |
|---|---|---|
| Total assets | $12,125.3 | +33.5% |
| Total liabilities | $10,229.9 | +44.7% |
| Net assets/Total equity | $1,895.4 | -5.7% |
| Net debt | $1,793.5 | +372.0% |
| Working capital | ($223.3M) | -429.4% |
| Property, plant and equipment | $2,646.1 | +27.4% |
| Right-of-use assets | $3,069.0 | +51.8% |
| Intangible assets | $1,604.2 | +201.7% |
| Investment in associates | $23.8 | +35.2% |
| Lease liability | $3,585.4 | +46.7% |
| Net tangible asset per share | $0.18 | -81.3% |
| Cash Flow ($M) | FY2024 | YoY |
|---|---|---|
| Operating cash flow before capital expenditure | $556.1 | -25.2% |
| Net cash flows from operating activities | $605.6 | -10.8% |
| Capital expenditure | $588.1 | +19.4% |
| Free cash flow before financing, tax and dividends | ($981.4) | -3,185.5% |
| Dividends paid | $216.1 | -35.8% |
| Net cash flow | ($22.8) | +69.6% |
| Underlying Free Cash Flow | $135.1 | -32.1% |
Viva Energy's balance sheet underwent significant transformation in FY2024, primarily reflecting the acquisition of OTR Group in March 2024. Total assets increased 33.5% to $12,125.3 million, with substantial growth in right-of-use assets (+51.8% to $3,069.0 million) and intangible assets (+201.7% to $1,604.2 million) from the retail acquisitions. The recent completion of the Liberty Convenience acquisition on March 31, 2025, will further impact the balance sheet in 1Q2025, though with a more modest effect given its smaller scale (92 sites) and the company's existing 50% ownership interest.
The capital structure shows materially higher leverage, with total liabilities increasing 44.7% to $10,229.9 million and net debt rising 372.0% to $1,793.5 million. Lease liabilities expanded 46.7% to $3,585.4 million, reflecting the addition of OTR's leased store network. Net assets decreased 5.7% to $1,895.4 million, while net tangible asset per share declined 81.3% to $0.18, highlighting the significant goodwill and intangible asset components of recent acquisitions. Working capital deteriorated from a positive $67.8 million to a negative $223.3 million, reflecting inventory management challenges and increased payables in the transition period.
Strategic Initiatives Status
| Initiative | Status | Strategic Importance |
|---|---|---|
| OTR Integration | On Track | Successfully rebranded network from BP to Shell (saving $20M p.a.); established systems to exit Coles TSA by end-April ($20M p.a. benefit); accelerated OTR/Express operations consolidation ($20M p.a. savings); $30M synergies in 2H2025 ($60M run-rate by year-end) |
| Store Conversion Program | Progressing | Approximately 10 conversions commencing in 2Q2025; focused on NSW remodels (within existing rooflines); $1.5M average capex per store; agreement with Dexus for flagship landlord-funded conversion; targeting 40-60 stores in FY2025 |
| Liberty Convenience Acquisition | Completed | Acquisition of remaining 50% interest completed March 31, 2025; expected to contribute $20-25M to C&M EBITDA in FY2025; expands network to 982 sites (676 Express, 214 OTR, 92 Liberty) |
| Cost Reduction Program | On Track | $50M savings target for FY2025 (primarily 2H); focused on discretionary spend reduction, store operating cost optimization, support function rationalization; approximately half ($25M) expected to be sustainable long-term |
| Ultra-Low Sulfur Gasoline (ULSG) | On Schedule | Confirmed to be proceeding on schedule; transitioning to ULSG supply from August 2025; retail site compliance by December 15, 2025 deadline |
Viva Energy is making demonstrable progress on its strategic initiatives, with the 1Q2025 operating update providing greater visibility on implementation timelines and financial impacts. The OTR Group integration shows tangible achievements, with management successfully completing three key milestones: rebranding the OTR network from BP to Shell (reducing supply costs by $20 million annually), establishing systems to exit the Coles Transitional Services Agreement by end-April 2025 ($20 million annual benefit), and accelerating the consolidation of OTR and Express operations ($20 million annual reduction in above-store costs). These specific actions support the targeted $30 million of C&M synergies in 2H2025 ($60 million annualized run-rate by year-end), providing confidence in the company's ability to deliver the full $90 million-plus of annualized earnings uplift by end-FY2026.
Segment Performance
| Segment | FY2024 EBITDA | FY2023 EBITDA | YoY Change | Key Performance Drivers |
|---|---|---|---|---|
| Convenience & Mobility (C&M) | $231.2m | $232.2m | -0.4% | Flat performance despite challenging retail conditions; tobacco sales impacted by illicit trade (-17% same-store); OTR acquisition showing early promise; fuel margins strengthening in March 2025; 1Q25 fuel sales +1.1%, non-tobacco sales +0.5%; Liberty completed March 31 |
| Commercial & Industrial (C&I) | $469.9m | $447.5m | +5.0% | Record EBITDA with strong growth across Aviation, Resources, Agriculture and Defence segments; new contract wins delivering value; integration of OTR's wholesale fuels business; 1Q25 showed sales decline of 6.0% due to adverse weather in mining regions, offset by margin growth |
| Energy & Infrastructure (E&I) | $94.3m | $65.4m | +44.2% | Improved performance with higher throughput (40.1MBBLs, +26.9%) despite lower GRM (US$8.7/BBL, −11.2%); received $25.1M government support via FSSP; 1Q25 impacted by January shutdown with GRM at US$7.9/BBL (−34.2%); ULSG project confirmed on schedule |
| Corporate | ($46.8m) | ($32.3m) | +44.9% | Increased costs from acquisitions and integration activities |
| Total Group | $748.6m | $712.8m | +5.0% | Modest growth amid transformation; 1Q25 total fuel sales -4.2% to 4,114ML; on track for 1H25 EBITDA guidance of $270-330M for C&M and C&I combined |
The Convenience & Mobility segment delivered flat EBITDA performance (-0.4%) despite challenging retail conditions, with convenience sales declining 4.1% primarily due to tobacco sales deterioration (-17% same-store) amid illicit trade impacts. While total fuel volumes increased marginally (+0.5%), same-store volumes declined 5%, reflecting cost-of-living pressures on consumers. The segment is undergoing significant transformation following the OTR acquisition in March 2024, with initial store conversions showing promising results - three of four converted stores demonstrating 30-60% gross margin improvement on non-tobacco sales. Management expects to add 40-60 OTR stores in FY2025 through conversions and new sites, targeting synergies exceeding $90 million annually by end-2026, though store conversion timelines have been slower than anticipated due to planning approval delays.
The Commercial & Industrial segment stands as the company's strongest performer, delivering record EBITDA of $469.9 million (+5.0%) in FY2024, marking its fourth consecutive year of earnings growth. This performance was driven by 5.2% volume growth to 11,735ML, with particularly strong demand across Aviation, Resources, Agriculture, and Defence sectors. The segment benefited from new contract wins, including the Defence contract secured in 2H2023, and the integration of OTR's wholesale fuels business into Liberty Rural from 2Q2024. C&I has demonstrated resilience to economic pressures, maintaining its position as the dominant earnings contributor at 62.8% of Group EBITDA.
Discussion