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Caltex to end franchises in huge overhaul

Petrina Berry  |  27 Feb 2018Text size  Decrease  Increase  |  
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BRISBANE - [AAP] Fuel retailer Caltex Australia (ASX: CTX) will spend up to $120 million in buying out its franchisees to have only company owned service stations by 2020.

Caltex made the announcement on Tuesday alongside its full-year profit result, that was largely in line with guidance, and after a two-year review into its convenience retail model.

Franchisees operate 433 sites and the company currently operates 314 sites, up from 152 sites a year ago.

"Caltex aims to transition all retail franchise sites to company operations by mid-2020," the company said in a statement.

Total costs of the store conversion are estimated to be around $100 million to $120 million over the next three years.

This includes money for franchisees who agree to a reduced tenure and acquisition of working capital and fixed assets.

The announcement follows allegations made in 2017 of underpayments to workers at Caltex franchise outlets.

Caltex said in February 2017 that a review of the franchise model confirmed it allowed franchisees to pay employees properly and draw a living wage.

In May 2017, the company set up a $20 million assistance fund for franchise employees who had not been paid their correct entitlements.

Caltex has rolled out 26 of its new format "The Foodary" pilot stores that offer healthy food on-the-go and convenient services like parcel pick-up and dry cleaning.

The fuel retailer's statutory full-year net profit has risen just one per cent to $619 million, however, its closely watched replacement cost operating profit (RCOP), which strips out the impact of crude oil price fluctuations, has risen 18.5 per cent on the prior year to $621 million.

The RCOP is roughly in line with Caltex's profit guidance of $600 million to $620 million.

Strong global oil crude prices and higher refiner margins fuelled a 19 per cent lift in Caltex Australia's annual revenue to $21.4 million.

Shares in Caltex were up 83 cents, or 2.4 per cent, to $35.82 by 1101 AEDT.

CALTEX MEETS ANNUAL PROFIT GUIDANCE:

* Net profit up 1pc to $619m

* RCOP up 18.5pc to $621m

* Revenue up 19pc to $21.4m

* Final dividend of 61 cents, fully franked, up from 52 cents

 

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is an AAP journalist.

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© 2020 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

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