The Viva Energy Group Ltd (ASX: VEA) share price is on watch this morning after it announced its results for the year ended 31 December as well as an off-market buyback.
At the time of writing, Viva Energy shares are trading 3.66% higher at $1.96 apiece.
Viva Energy results
Viva Energy's results were in line with previous guidance. Underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) was $644.5 million in FY19, down from $774.6 million in FY18, but towards the top half of the guidance range of $625 million – $655 million.
Underlying net profit after tax (NPAT) fell to $135.8 million from $231.5 million in FY18, just within the guidance range of $135 million – $165 million. Viva reported that retail fuel margins in FY19 were negatively impacted by oil price volatility and sustained periods of heightened competition in the market. Retail fuel margins did, however, recover in Q4FY19.
A final dividend of 2.6 cents per share (fully franked) was declared bringing the full-year dividend to 4.7 cents per share. This represents a payout ratio of 60% of distributable NPAT.
During 2019, the downstream market saw a number of changes including changes in ownership of fuel and convenience stores and the renegotiation of Viva Energy's agreements with Coles. Changes in crude oil flows as a result of regional conflict and trade barriers led to periods of volatility in oil prices and refining margins.
CEO Scott Wyatt said, "in the face of these significant developments we are very pleased with the underlying performance of the business and progress on our strategic objectives."
Buyback
Viva intends to return $680 million to shareholders via a share buyback. The funds were obtained from the divestment by Viva Energy of its 35.5% stake in Viva Energy Reit Ltd (ASX: VVR). Viva Energy shares soared 11.2% last week following the news of the sale, closing out the week at $1.89. The sale is expected to settle this week.
The divestment followed a strategic review of Viva Energy's equity holding in the REIT. Viva Energy completed the IPO of the Viva Energy REIT in 2016, retaining a 40% holding which reduced over time to 35.5% due to subsequent capital raisings by the REIT. Since its inception, the Viva Energy REIT has performed strongly, growing its portfolio of service station assets from 425 to 469.
Viva Energy has a network of over 1260 service stations, 440 of which are held under long term leases with the Viva Energy REIT. As the major tenant of the REIT, Viva Energy has a strong relationship with it and lease arrangements provide Viva Energy with long-term security of tenure in relation to leased sites.
