Around 50 service stations around Australia have been earmarked for “divestment” by Caltex as part of an ongoing commitment to restructure its business and move away from franchising.
Announcing its first half-year results to the ASX on Tuesday (27 August), Caltex said that its ongoing review of its retail network has so far “identified [around] 500 sites that will deliver strong returns and growth from an enhanced convenience offer and disciplined execution, and [around] 50 sites that have a higher and better alternative use and will be divested”.
These roughly 50 locations are “metropolitan freehold sites”, it said, which could achieve a higher value under alternative uses. Caltex said the sale of these locations will commence before the end of 2019.
The earmarked sale and potential closure of these service stations was identified as part of the company’s “Convenience Retail Strategy”, which also encompasses “the transition of retail sites to company operations”.
Around 500 service stations, collectively employing around 5,000 people, will be transitioned from franchise-owned to company-operated stores.
Caltex also said that it plans to roll out 63 Foodarys across its network, which aim to offer healthier food alternatives to the traditional snack foods offered by convenience retailers.
“Caltex is confident with the progression of its convenience retail strategy, and still anticipates it will deliver a meaningful growth opportunity,” the company said.
The announcement of the sales came as the company announced what its CEO and managing director Julian Segal described as a “disappointing overall” financial result, with group-wide earnings before interest and tax (EBIT) of $255 million — down on the $443 million recorded in the same half last year.
“Economic weakness, soft retail fuel margins, lower refining margins and outages have impacted our performance,” Mr Segal said.
“Fuels and Infrastructure continues to deliver underlying growth and reliable cash flows, and Convenience Retail has regained market share while remaining disciplined in a tough retail fuels market.”
He added: “We are responding to the tough conditions through a focus on capital discipline and by sustainably reducing our cost base. We are also progressing our retail strategy, leveraging learnings from our work to date and a review of our company-controlled network to ensure our offer is tailored to meet individual site and local area customer requirements.”
Caltex announced in February last year that it would exit its franchise model in a bid to boost growth.
The petrol and convenience retailer has faced a substantial rate of compliance failures among its franchise network — which the Fair Work Ombudsman last year put at 76 per cent — including one franchisee who was fined $100,000 in June 2018 for falsifying employment records.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.
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