Caltex Australia Ltd (ASX: CTX) shares jumped 4% on Tuesday following the release of the company’s 2017 financial report.
Caltex Australia is known for the popular fuel and convenience stores. The $9.5 billion company also operates in the petroleum industry, buying, refining and distributing fuel products.
On Tuesday, Caltex Australia filed its full-year financial results with the ASX, showing:
- Revenue of $21.4 billion, up 19%
- Profit of $619 million, up 1%
- Replacement Cost Operating Profit (RCOP) of $621 million, up 19%
- A final dividend of 61 cents per share, fully franked (what are franking credits?)
- Caltex will transition all stores away from a franchise network model by mid-2020
The Lytton Refinery, based just outside Brisbane, is Caltex’s leading refinery operation. The Lytton Refinery operated as a separate business unit to the fuel and retail network. In 2017, Lytton produced a 21% increase in revenue with a 50% rise in profit before taxes and interest costs (also known as EBIT).
Caltex Australia’s other business is Supply and Marketing, which includes the company-owned stores, franchises and co-branded outlets. It reported a 3.3% rise in EBIT with revenue up 25%.
Moving forward, Caltex Australia’s business will be divided into two new units:
- Fuels & Infrastructure, including Supply, business to business, refining and Infrastructure
- Convenience Retail, including petrol and convenience sales
Following a two-year operational review and an increase in its number of company-owned service stations, Caltex Australia plans to take control of its franchise stores by mid-2020 in a bid to control the customer experience and new format of its stores.
“The operating model review determined that controlling our core business is the best way to achieve our retail growth objectives,” Caltex Australia’s ASX media release read.
Of its 810 stores, 314 are company-owned. This is up from just 152 on 31 December 2016.
Caltex estimates the costs to transition the company’s operations will be between $100 million and $120 million over the next three years. However, it expects a $120 million to $150 million EBIT improvement from the Convenience Retail business within five years.
“Franchising has been an integral part of growing the retail business,” the company noted. “Caltex appreciates that this is a significant decision and it will affect many of our franchisees. Caltex will work with our franchisees to manage the impact of this change, including by offering franchisees transition support and offering employment to all franchisee employees.”
Caltex Australia shares were trading 4.8% higher at $36.69 on Tuesday.
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