Ampol’s new CEO sets cracking pace

As a former CFO, Matt Halliday is heavily focused on the numbers that matter for shareholders. Ampol’s $300 million off-market buyback is the start of his plan to unlock value and avoid takeover by Couche-Tard.

Less than six months into the job of chief executive at fuel refining and marketing group Ampol, Matt Halliday is carving out a reputation as a shareholder-friendly CEO focused on capital and cost efficiency.

Halliday, who was interim CEO for three months before becoming CEO in June, gave the market exactly what it wanted at an investor day on Monday with a $300 million buyback and upgraded cost-cutting targets of $40 million in 2022.

The buyback is a function of Halliday’s skills in finding the appropriate structure for monetising Ampol’s retail fuel network. He did this through the creation of an unlisted property trust to own 203 retail fuel sites.

A 49 per cent interest in the trust was sold to a consortium comprised of Charter Hall and the Singapore government-controlled GIC for $682 million with net cash proceeds to Ampol of $635 million.

Halliday is churning about half the proceeds of the convenience store sale into an off-market buyback that will utilise $120 million of Ampol’s $750 million in franking credits.

To participate in the buy-back shareholders must be on the register by Friday of this week. A tender will be conducted between December 7 and January 21. The tender is expected to be oversubscribed.

Halliday is pursuing other measures to unlock value, including reviewing 100 non-core retail fuel sites and reviewing the Lytton oil refinery in Queensland.

Lytton could become an import terminal, as happened at Kurnell in Sydney under former CEO Julian Segal.

During an investor day presentation on Monday, Halliday said Ampol would further “review asset base operations to enhance capital effectiveness and drive cost efficiency” and “selectively pursue value accretive investments to strengthen infrastructure position”.

All this activity can be sheeted home to the failed proposed takeover of Ampol by Canadian convenience store group Couche-Tard, which walked away during the COVID-19 pandemic after offering $35.25 a share.

The prospect of Ampol being taken over and most likely broken into separate refining and convenience retail businesses has put pressure on Halliday to perform.

As a former chief financial officer, he is keen to show his command of the numbers and the opportunities to make the company more efficient.

On Monday he said Ampol was meeting the earnings targets laid out at last year’s investor day and then put out a new $40 million cost-cutting target for 2022.

He is committed to releasing more franking credits over time, “subject to the company’s capital allocation framework and business performance”.

Halliday tells Chanticleer the conversion of the Caltex network of retail fuel sites to Ampol branding will be “at scale” by the end of next year but refused to put out any targets. There are about 1900 sites in the Ampol network and so far 25 have been rebranded.

Huge opportunity
The rebranding will cost $150 million. A further $15 million will be spent on investment in increasing the Woolworths Metro stores in the Ampol network.

“This is a huge opportunity for us to invest in the fuel market with an iconic brand that resonates with Australians,” he says.

Halliday says the economics of convenience retail are increasingly positive because of the combination of rising sales, lower capital investment per store, lower labour costs per store and higher profit margins. This gives him the confidence to predict returns on investment of 15 per cent.

There are six Woolworths Metro stores in the network and Halliday says a further 20 to 30 will be added next year.

Halliday says he wants to see the full potential of the Ampol business unlocked, although he did not want to comment directly on the $35.25 share price as a benchmark for his performance.

Extracted from AFR

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