Viva Energy targets doubling of annual revenues from retail division within five years

Viva Energy plans to broaden its services and products, transitioning to a convenience business that sells fuel rather than the other way around, chief executive Scott Wyatt says.

Viva Energy has unveiled a target of doubling its annual revenues from its convenience and petrol station business, as it incorporates recent takeovers and moves to accelerate its transition from a pure-play fuel business to a broad retail and energy company.

The fuels retailer is moving to reshape its business as the global energy transition is expected to drive a number of Australians towards electric vehicles, a trend that uproots the traditional fuel business model.

To broaden the company, Viva recently completed the $300m acquisition of the Coles Express fuel and convenience retailing network, and is hoping to secure regulatory approval to close the acquisition of the 205-strong network of On the Run outlets from Peregrine Corporation’s OTR Group for $1.15bn.

Offering investors the first details of how it expects to profit from those acquisitions, Viva Energy chief executive Scott Wyatt said the company was targeting a doubling of annual earnings before interest, taxes, depreciation, and amortisation of more than $500m within the next five years from its convenience and mobility arm. Viva last year reported annual revenues of $224m from that division.

“Our aspiration is to double earnings over that period,” he said. “That is about us transitioning from a retail sales company to a genuine convenience retailer that happens to sell energy.”

Coles Express service stations are being rebranded to Reddy Express after Viva Energy’s takeover.

The company’s shares rose 7c to $2.96 on Thursday.

Viva is still awaiting approval from the Australian Consumer and Competition Commission for its acquisition of the OTR convenience stores, which it will then rollout across its network. Services will include restaurants, barista-made coffee and dog-wash facilities that Viva hopes will attract customers that will use its electric vehicle charging stations.

OTR generates more than 70 per cent of its earnings from non-fuel retailing.

Mr Wyatt said the broadening of Viva’s business would coincide with the rise of EVs, but demand for traditional energy would remain strong in the near future.

Viva has in recent years profited from soaring demand for fuel that has pushed up margins from the company’s refining business.

Australia’s refining capacity has been falling for more than a decade and the pandemic worsened the situation. It severely reduced the demand for jet fuel, cut the use of petrol and diesel, while driving down refining margins.

Their future was only secured in May 2021 when the federal government said it would pay Ampol and Viva Energy to keep producing amid heightened fears about Australia’s energy security.

Mr Wyatt said fundamentals would continue to provide a floor to margins. “We believe refining margins, on average, will be higher in the next 10 years than they were in the last 10 years simply because there’s still high global demand for fuels but the refining capacity has diminished.”

Originally published as Viva Energy targets doubling of annual revenues from retail division within five years